Dive Brief:
- Consumer products supplier Helen of Troy has cut 18% of its product portfolio, part of the Hydro Flask and Osprey owner’s plan to overhaul its supply chain and offset rising costs.
- COO and incoming CEO Noel Geoffroy said in an earnings call last Thursday that the SKU rationalization will allow the company to simplify its supply chain and “reduce inventory of less profitable and less productive items.”
- The cuts are part of a restructuring plan known as Project Pegasus. Beyond slashing SKUs, Helen of Troy is cutting approximately 10% of its global workforce and will optimize its operational footprint by shifting more volume to a new Tennessee distribution center.
Dive Insight:
Helen of Troy, which also owns brands such as Oxo and Vicks, is slashing inventory levels and restructuring operations as it grapples with declining orders amid widespread glut in the retail sector.
The company rid itself of inventory at a level that “exceeded our expectations,” Geoffroy said, noting that Helen of Troy is in a better position to pay down debt and accelerate plans to optimize its operational footprint.
Many of the SKU cuts were concentrated in the health and wellness category, which has seen lower demand with the easing of COVID-19 cases. The supplier is also expecting a $35 million year-over-year sales decline from the bankruptcy of Bed Bath & Beyond.
As the company continues to shed inventory, it’s finding more opportunities to consolidate its distribution footprint. Helen of Troy recently completed a 2 million-square-foot facility with automation capabilities in Tennessee to produce products for Oxo, Hydro Flask and other home goods brands.
“Because of its size, its expected efficiency and its substantial new capabilities, it provides an opportunity to reduce other parts of our distribution center footprint,” said CEO Julien Mininberg, who is set to retire in February 2024.
Helen of Troy has “already exited some ancillary facilities,” according to Geoffroy, and the Tennessee distribution center is expected to take on a larger concentration of volume throughout fiscal year 2024.
Helen of Troy aims to generate $20 million in savings in fiscal year 2024 through Project Pegasus. Lower freight and commodity costs could lead to additional savings.
“We acted quickly and well beyond the belt tightening exercise,” said Mininberg. “We did this to improve efficiency and address the impacts from the major macro trends of inflation, higher interest rates and historic levels of retailer inventory rebalancing that challenged fiscal 2023.”
