Hain Celestial has downgraded its sales and profits forecasts for 2024 as the owner of Ella’s Kitchen, Covent Garden and Sun-Pat continues with its turnaround strategy.
Shares in the US group tanked in pre-trading on the Nasdaq as investors reacted to the news, falling 9% to $10.23. The stock has lost almost half its value in the past 12 months as trading underwhelmed.
Today, Hain reported organic net sales nudged 0.2% higher year on year to $454.1m (£359.4m) in the second quarter to 31 December 2023, with the increase helped by positive currency changes.
The group said the performance represented an improvement on the 2.9% sales decrease in the first quarter.
Adjusted EBITDA in Q2 came in at $47.1m (£37.3m), down from $49.8m a year ago, while it sank to a net loss of $13.5m from a $11m profit in the same period of 2022/23.
In its domestic North American market, revenues fell 5.2% to $267.7m in the period, with organic sales down 4.8% thanks to challenges in the baby formula category and difficulties in snacking as it shifted promotional strategies and optimised the channel mix.
Internationally, where the UK is the group’s biggest market by far, sales rose 8.5% year on year to $186.4m, with Hain benefiting from currency tailwinds and growth in meal prep and beverages.
However, Hain revised its 2023/24 guidance figures downwards to organic growth of 1%, compared with previous expectations of 2%-4% of growth.
The group said the change reflected a reduction in the expected benefits from currency translation for the year.
Adjusted EBITDA guidance was also shifted slightly lower, from between $155m and $165m, to between $155m and $160m.
CEO Wendy Davidson said she was “pleased” with the continued progress the group was making on key pillars of its Hain Reimagined strategy.
She added the turnaround plan was “generating fuel through working capital management and productivity savings, driving growth through channel expansion and building our organisational capabilities to scale our brands, expand our margins, and transform our business for sustained performance.
“We are positioned to return to overall growth in the back half of the year, despite the challenging macroeconomic environment.”
Hain launched the new restructuring strategy in September last year, unveiling a new group logo and targeting annual savings of $130m-$150m by the 2027 financial year.
However, the plan has seen a number of casualties at Ella’s Kitchen, one of its fastest-growing UK brands. Almost the entire management team has left the babyfood brand since the plan was announced, with Hain parachuting in Tim Collins – its vice president and general manager for baby & kids and meal preparation in North America – as the new boss.
“We are making early progress against Hain Reimagined, especially in the delivery of fuel as planned in this foundational year of the restructure program,” added CFO Lee Boyce today.
“We have accelerated some of the initiatives outlined in the Focus pillar, primarily portfolio and channel mix improvements. This is expected to create near-term revenue headwind as we rationalise lower-margin SKUs and sales.
“As a result, we believe it is prudent to take a more conservative view of the balance of fiscal 2024. In addition, we expect less of a tailwind from foreign exchange than when we initially provided guidance in August.
“Considering these factors as well as performance year-to-date, we are adjusting our guidance for the full year.”