What led to Helen of Troy Limited (NASDAQ: HELE) stock rise

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Helen of Troy Limited (NASDAQ: HELE) stock rose over 6.2% in the pre-market session of January 9th, 2020 (Source: Google finance) after the company posted better than expected earnings for the third quarter of FY 20. The Adjusted income from continuing operations rose 25.2%, to $79.1 million compared to $63.2 million.

HELE in the third quarter of FY 20 has reported the adjusted earnings per share of $3.12, beating the analysts’ estimates for the adjusted earnings per share of $2.51, according to  Zacks Investment Research. The company had reported the adjusted revenue growth of 10.1 percent to  $474.7 million in the third quarter of FY 20 mainly due to 10.7% rise in core business mainly due to growth in consolidated online sales, an increase in brick and mortar sales in the Housewares segment, higher international sales, and an increase in sales in the appliance category in the Beauty segment. However, these factors were partially offset due to a slight core business decline in the Health & Home segment, the unfavorable impact from foreign currency fluctuations of approximately 0.5%, and a fall in the personal care category within the Beauty segment.

Meanwhile, recently the company has signed an agreement to acquire Drybar Products LLC, which includes the Drybar trademark and other intellectual property assets associated with Drybar’s products, as well as certain related production assets and working capital. The total purchase consideration is projected to be about $255 million in cash The deal is projected to close by January 31, 2020, and the company expects Drybar will be immediately accretive to key measures and anticipate ending fiscal 2020 with a low leverage ratio. Concurrently with the closing of the transaction, the company will enter into a relationship with Drybar Holdings, LLC, which is the owner and longtime operator of the highly successful and growing fleet of Drybar salons. They will license the newly acquired Drybar brand and their continued management of all Drybar salons. Further, the company anticipates the transaction to be even more accretive to the Beauty segment on comparable operating measures. Due to the company’s strong cash flow generation in the second half of the fiscal year, the company expects to end fiscal 2020 with a post-acquisition pro forma debt/adjusted EBITDA ratio just slightly above the pre-acquisition debt/adjusted EBITDA ratio the company had reported at the end of the second quarter ended August 31, 2019.

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