Hain Celestial (HAIN) Stock Pummeled on Earnings Delay, Accounting Concerns

Shares of The Hain Celestial Group Inc. (HAIN) were trading down -14.90 or -27.90 percent to $38.50 per share in Tuesday’s premarket after the company announced late yesterday that it was delaying the release of fourth quarter and full year earnings due to accounting irregularities. Hain Celestial stock closed at $53.40, down -1.95 or -3.52 percent in Monday’s regular trading session.

Stock Analysis

Founded in 1993, Lake Success, New York based Hain Celestial Group Inc. is a major organic and natural products food and personal care company operating in North America, Europe and India.
The company’s focus is in beverages, food and snacks, personal care and specialty products. A partial list of Hain Celestial’s well known brands include: Celestial Seasonings, Rice Dream, Soy Dream, Arrowhead Mills, Garden of Eatin, Breadshop, Earth’s Best, Linda McCartney Foods, MaraNatha, Nile Spice, Spectrum Naturals, Westbrae Natural, FreeBird, Avalon Natural Products, Alba Botanica, Queen Helene and Shaman Earthly Organics.

In a press release issued yesterday after the market close, Hain Celestial said that during the company’s current fourth quarter, Hain had identified concessions awarded to certain U.S. distributors. The company says that it needs to evaluate whether the revenue associated with those concessions was correctly accounted for in the correct period and will conduct an evaluation of the company’s internal control over financial reporting.

Hain had previously recognized revenue associated with the sale of products to specific distributors at the time those products were shipped to the distributors. The company said that it needs to evaluate whether the revenue derived from those concessions should have been instead recognized when the products sell through the distributor to the end customers.

Hain noted that any potential changes to the recognition and timing of revenue related to these transactions should not have an impact on the total amount of revenue ultimately recognized by Hain and does not reflect on the validity of those transactions with respect to those distributors. Due to the accounting irregularities, Hain will delay the timely filing of the company’s Annual Report on Form 10-K for its fiscal year ended on June 30th, 2016.

Instead, the company expects to file a Form 12b-25 with the SEC that grants an automatic 15-day extension to the filing deadline of Form 10-K.  Hain said that there were no assurances that the company would complete the preparation and filing of the Form 10-K within the extension period.

Hain did not name the distributors in question in its press release, however, according to the company’s latest 10-K filing, its biggest customers have been United Natural Foods (UNFI) and Wal-Mart Stores (WMT). The company ended its press release saying that, “the Company does not expect to achieve its previously announced guidance for fiscal year 2016.”

Despite Hain stock’s sharp selloff in this morning’s premarket, the company appears to be relatively healthy and profitable. Hain stock will open a few points over its yearly low and could present a buying opportunity in the near term.

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Published on Aug 16, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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