Dive Brief:
- Helen of Troy, the parent company of brands like Vicks and Hydro Flask, encountered near-term disruption during an automation technology integration at its new distribution center in Tennessee, according to a July 9 earnings call.
- The hiccup created “unexpected challenges” that impacted the company’s fulfillment of small retail customer and direct-to-consumer orders for brands like Oxo and Hydro Flask, CEO Noel Geoffroy said. The issues are expected to subside by the end of the company’s next fiscal quarter.
- "Our team in Tennessee is working diligently with our suppliers to address the remaining issues and we have seen our shipping throughput progressively improved during June and early July," the CEO told analysts.
Dive Insight:
Helen of Troy lost revenue in the first quarter of fiscal 2025 due to the integration issue, which involved Curlsmith’s enterprise resource planning system at its Tennessee distribution center, CFO Brian Grass told analysts. Helen of Troy initially acquired the hair care company in April 2022.
Grass added that the “automation startup issues are only impacting a limited subset of OXO and Hydro Flask orders that rely on the highest level of automation, but unfortunately, the impact is enough to have a meaningful effect on our results for the first half of fiscal '25.”
It is unclear how Helen of Troy is working with suppliers to alleviate the issue, and the company did not respond to a request for comment ahead of publication.
The Gallaway, Tennessee, facility, which opened in fiscal 2024, is part of the company’s larger Project Pegasus restructuring plan to generate $26 million to $30 million in savings in fiscal 2025. As part of the supply chain overhaul portion of the plan, Helen of Troy cut 18% of SKUs last year to help offset rising costs, reduce inventory and simplify its operations.
"We have made good progress on the cost of goods sold workstreams, implementing multiple projects that reduce costs and simplify our supplier base,” Geoffroy said. “We have also made good progress on our distribution center optimization by reducing our footprint by four.”
During an April 2023 earnings call, Geoffroy said that its Tennessee distribution center enabled Helen of Troy to begin simplifying its U.S. distribution footprint, with the company leaving some ancillary facilities; however she did not mention which were closed. “We expect the new Tennessee distribution facility to progressively take on a larger concentration of our volume throughout fiscal 2024.”
The new distribution center was intended to “bring significant new scale and service capabilities that will set us up for years to come,” Geoffroy said in an April 24 earnings call. Service capabilities at the facility include greater capacity to handle inline customization and personalization for direct-to-consumer Hydro Flask orders, per an October 2023 earnings call.
