Shares of home goods and wellness products company Helen of Troy (HELE -10.31%) plunged 10.4% on Monday. The company, which has encountered severe headwinds in recent months — including an earnings report that underwhelmed and uncertainty over tariffs — abruptly announced after market close last Friday that its CEO was moving on.
While some CEO departure announcements are greeted with an appreciation in a struggling stock on hopes of a turnaround, apparently, the market took Helen of Troy’s announcement as a sign things may be worse under the surface.
No permanent successor yet in place
Late Friday afternoon, Helen of Troy announced that CEO Noel Geoffroy was stepping down as CEO, “effective immediately.” Of note, Geoffroy had only been CEO for one year, assuming the role in March 2024.
The “effective immediately” seems to imply a sudden and harsh decision. That may cause investors to worry that there are bigger problems under the surface.
The company did announce that it was promoting CFO Brian Grass to the CEO role, but only on an interim basis, as the board conducts a search for the company’s next CEO. While Grass was CFO from 2014 to 2021 and then again since 2023, it appears the appointment of a long-tenured executive didn’t quell investor uncertainty.
Helen of Troy has plunged 58% so far this year. While the company actually beat revenue expectations last quarter slightly, its adjusted (non-GAAP) EPS fell short of estimates. Furthermore, revenue declined 0.7% overall, and this is in spite of the December 2024 acquisition of Olive & June. On an organic basis, the revenue declines were an even worse 4.9%. Investors might also be worrying about the fact that the Olive & June acquisition increased the company’s debt by $235 million, which would be an added burden in a recessionary scenario.
Image source: Getty Images.
Helen of Troy in limbo
While earnings underwhelmed last month, it was really the prospect of tariffs that accounted for the bulk of the stock’s decline. Helen of Troy manufactures its household products in China, Vietnam, and Mexico, so it will have to either adapt to the new tariff regime, whenever that is settled, or hope the tariffs fall away as trade deals are struck.
While investors don’t know what’s behind the CEO’s resignation, the sudden nature of the decision and lack of preparation for a replacement understandably has investors on edge. Even at just 5.5 times expected 2025 adjusted earnings, Helen of Troy’s declining top-line and debt load make it a risky choice; perhaps a value trap.
Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.