Q1 2025 Helen of Troy Ltd Earnings Call
Operator: Greetings, and welcome to the Helen of Troy Ltd. First Quarter Fiscal 2025 Earnings Call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the Helen of Troy Limited first quarter fiscal 2025 earnings call.
Speaker Change: At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Operator: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Sabrina McKee, Senior Vice President of Investor Relations and Business Development for Helen of Troy Ltd. Thank you.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Ms. Sabrina Mckee Senior Vice President of Investor Relations and business development for Helen of Troy Limited. Thank you you may begin.
Sabrina Mckee: You may begin. Thank you, operator. Good morning everyone, and welcome to Helen of Troy's first quarter fiscal 2025 earnings call. The agenda for the call this morning is as follows. I will begin with a brief discussion of forward-looking statements. Ms. Noel Geoffroy, the company's CEO, will comment on business performance and then provide some perspective on current trends and our strategy for the remainder of the fiscal year. Then Mr. Brian Grass, the company's CFO, will review the financials in more detail and discuss our revised outlook.
Sabrina Mckee: Thank you operator, good morning, everyone and welcome to Helen of Troy's first quarter fiscal 2025 earnings call. The agenda for the call. This morning is as follows.
Speaker Change: We will begin with a brief discussion of forward looking statements Miss your wells, you'll fly the company's CEO will comment on business performance and then provide some perspective on current trends and our strategy for the remainder of the fiscal year then Mr. Brian grass the company's CFO will review the financials in more detail and discuss our revised outlook.
Sabrina Mckee: Following this, we will open up the call for Q&A. This conference call may contain certain forward-looking statements that are based on management's current expectations with respect to future events or financial performance. Generally, the words anticipate, believe, expect, and other similar words are words identifying forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from actual results. This conference call may also include information that may be considered non-GAAP financial information. These non-GAAP measures are not an alternative to GAAP financial information and may be calculated differently than the non-GAAP financial information disclosed by other parties.
Sabrina Mckee: Following this we will open up the call for Q&A.
Sabrina Mckee: The company cautions listeners not to place undue reliance on forward-looking statements or non-GAAP information. Before I turn the call over to Ms. Geoffroy, I would like to inform all interested parties that a copy of today's earnings release and related investment deck have been posted to the company's website at www. HelenOfTroy.com and can be found by navigating to the Investor Relations section of the site or by scrolling to the bottom of the homepage. The earnings release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP-based investments. I will now turn the conference call over to Mr. Fox. Thank you, Sabrina.
Speaker Change: This conference call may contain certain forward looking statements that are based on management's current expectation with respect to future events or financial performance generally the words anticipates believes expects and other similar words or words identifying forward looking statements forward looking statements.
Speaker Change: Subject to a number of risks and uncertainties that could cause anticipated results to differ materially from the actual results.
Speaker Change: This conference call May also include information that may be considered non-GAAP financial information. These non-GAAP measures are not an alternative to GAAP financial information and may be calculated differently than the non-GAAP financial information disclosed by other parties. The company cautions listeners not to place undue reliance on forward looking.
Speaker Change: Statements or non-GAAP information.
Speaker Change: Before I turn the call over to MS. You fly I would like to inform all interested parties that a copy of today's earnings release and related investment deck has been posted to the company's website at www Dot Helen of Troy Dot com and can be found by navigating to the Investor Relations section of the site or by scrolling to the bottom of the homepage.
Speaker Change: The earnings release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP based measures.
Speaker Change: I will now turn the conference call over to Michele Buck.
Michele Buck: Thank you Sabrina Hello, everyone and thank you for joining us today.
Noel M. Geoffroy: Hello, everyone, and thank you for joining us today. The results we reported this morning are disappointing and not reflective of the measurable progress we've made on key initiatives or of the opportunities I believe we have ahead of us. Net sales and adjusted diluted EPS came in below our expectations, with current trends setting up a challenging backdrop for the remainder of the fiscal year. As a result, we see fiscal 25 as a time to reset and revitalize our business.
Michele Buck: The results we reported this morning, our disappointing and not reflective of the measurable progress. We've made on key initiatives or are the opportunities I believe we have ahead of us.
Michele Buck: Net sales and adjusted diluted EPS came in below our expectations with current trends setting up a challenging backdrop for the remainder of the fiscal year.
Michele Buck: As a result, we see fiscal 'twenty five as a time to reset and revitalize our business.
Noel M. Geoffroy: We continue to believe that our strategies are the right ones to deliver sustainable and profitable growth. However, the additional work and time needed to reset and revitalize means delaying our delivery of the long-term financial strategy we aspire to.
Michele Buck: We continue to believe that our strategies are the right one to deliver sustainable and profitable growth. However, the additional work and time needed to reset and revitalized means delaying our delivery of the long term financial algorithm, we aspire to.
Noel M. Geoffroy: The first quarter has revealed realities about the business and our company that have been a call to action for me, our global leadership team, and the entire organization. While we have made important progress against Project Pegasus and our strategic initiatives, macro factors have worsened since we last spoke, and we have more data and insight on the health of our brands and the business. These factors have put a heightened focus on the work we must do in some key areas.
Michele Buck: The first quarter has revealed reality is about the business and our company that's been a call to action for me are global leadership team and the entire organization.
Michele Buck: While we have made important progress against project Pegasus and our strategic initiatives macro factors have worsened since we last spoke and we have more data and insight on the health of our brands in the business.
Michele Buck: These factors have put heightened focus on the work we must do in some key areas.
Noel M. Geoffroy: I will walk you through the insights we've gained, the actions we are taking in response, and evidence of the progress we are making, all of which give me confidence we are making the right choices for the long-term health of our brands and sustained shareholder value creation. First, let me level the playing field with what has and has not changed. I will start with what has not changed. Our commitment to our purpose, vision, and values has never been stronger, and our goal of fostering a winning culture anchored in the four A's of accountability, agility, taking action, and accelerating growth remains steadfast.
I will walk you through the insights we've gained the actions we are taking in response and evidence of the progress we are making all of which gives me confidence we are making the right choices for the long term health of our brands and sustained shareholder value creation.
Michele Buck: First let me level set with what has and has not changed.
Michele Buck: I will start with what has not changed our commitment to our purpose vision and values has never been stronger and our goal of fostering a winning culture anchored in the four A's of accountability agility, taking action and accelerating growth remains steadfast.
Noel M. Geoffroy: We are committed to the strategic choices we spoke to you about last October, growing our portfolio through consumer obsession, being and winning where our shoppers shop, fully leveraging our scale and assets, and embracing next-level data and analytics in everything we do. As a House of Brands, we are proud of the diversity of our portfolio and the strong consumer following that our brands have across the home, outdoor, beauty, and wellness categories.
Michele Buck: We are committed to the strategic choices, we spoke to you about last October.
Michele Buck: Boeing our portfolio through consumer obsession being in winning where our shoppers shop fully leveraging our scale in assets and embracing next level data and analytics and everything we do.
Michele Buck: As a house of brands, we are proud of the diversity of our portfolio and a strong consumer following that our brands have across the home outdoor beauty and wellness categories.
Noel M. Geoffroy: Our imperative is to revitalize our brands with stronger marketing, innovation, and execution. We are investing in the capabilities we need to successfully deliver our strategy over the planned period and well beyond. We are committed to investing in next-level data analytics and capabilities to improve our effectiveness and productivity across the enterprise. Lastly, we continue to work smarter. Project Pegasus has been instrumental in further solidifying our transformation from a holding company into a true global operating company, enabling us to work more efficiently and effectively across the organization.
Michele Buck: Our imperative is to revitalize our brands with stronger marketing innovation and execution.
Michele Buck: We are investing in the capabilities, we need to successfully deliver our strategy over the plan period and well beyond.
Michele Buck: We are committed to investing in next level data analytics and capabilities to improve our effectiveness and productivity across the enterprise.
Michele Buck: Lastly, we continue to work smarter project Pegasus has been instrumental in further solidifying our transformation from a holding company into a true global operating company, enabling us to work more efficiently and effectively across the organization.
Noel M. Geoffroy: Our organization has embraced the changes and continues to learn new processes and new ways of collaborating. The savings generated from the changes are being reinvested back into our brands, which we expect to refuel the value creation flywheel. Now let's discuss what has changed or been exacerbated in the first quarter. As has been widely reported, the macro environment and the health of consumers and retailers have worsened. Consumers are even more financially stretched and are even further prioritizing essentials over discretionary items.
Our organization has embraced the changes and continues to learn new processes and new ways of collaborating the savings.
Michele Buck: Generation from the changes are being reinvested back into our brands, which we expect to refuel the value creation flywheel.
Michele Buck: Now, let's discuss what has changed or been exacerbated in the first quarter.
Michele Buck: As has been widely reported the macro environment and the health of consumers and retailers has worsened.
Consumers are even more financially stretched and are even further prioritizing essentials over discretionary items.
Michele Buck: Specific to our business, we have seen some areas become more challenged over the last three months.
Noel M. Geoffroy: Specific to our business, we have seen some areas become more challenged over the last three months. For example, an unexpected slowdown in the global outdoor category impacted sales of our packs and accessories. There was also more pressure on the specialty beauty channel and mass beauty overall, especially in beauty tools under $100. Also, more discretionary household items like dry food storage continue to trend down.
Michele Buck: For example, an unexpected slowdown in the global outdoor category impacted sales of our packs and accessories.
Michele Buck: There was also more pressure on the specialty beauty channel and mass beauty overall, especially in beauty tools under $100.
Michele Buck: Also more discretionary household items like dry food storage continue to trend down.
Noel M. Geoffroy: We've heard broadly from mass retail that traffic overall is slower throughout the country and promotional pressure is increasing. In reaction to these dynamics, retailers are managing inventories more closely to account for the slowdown, and some are implementing new systems to allow for just-in-time inventory management. All of this exposes us to more volatility and less visibility into order volumes and timing.
Michele Buck: We've heard broadly from mass retail that traffic overall is slower throughout the country and promotional pressure is increasing and.
Michele Buck: In reaction to these dynamics retailers are managing inventories more closely to account for the slowdown and some are implementing new systems to allow for just in time inventory management.
Michele Buck: All of this exposes us to more volatility and less visibility into order volumes and timing.
Unknown Executive: We are also recognizing the impact of the COVID pandemic hat on our business. The industry has had to deal with massive changes in consumption patterns and consumer behavior. There were supply chain issues over stocking, inventory clear out and in explosion and e-commerce. All of this has led to general uncertainty around what a post-COVID environment looks like for many consumer categories, including many of ours, from wellness to kitchen tools to home organization. Also, since 2020, categories such as insulated beverage, prestige, beauty tools and liquids, air purification, and travel have become increasingly competitive. As we settled into a more normalized world, we have realized that while consumers were still responding positively to our brand, the COVID volatility had massed some underlying weakness in our brand health.
Noel M. Geoffroy: We are also recognizing the impact that the COVID pandemic had on our business. The industry has had to deal with massive changes in consumption patterns and consumer behavior. There were supply chain issues, overstocking, inventory clearouts, and an explosion in e-commerce. All of this has led to general uncertainty around what a post-COVID environment looks like for many consumer categories, including many of ours, from wellness to kitchen tools to home organization. Also, since 2020, categories such as insulated beverages, prestige beauty tools and liquids, air purification, and travel have become increasingly competitive.
Michele Buck: We are also recognizing the impact that the Covid pandemic had on our business.
Michele Buck: The industry is how to deal with massive changes in consumption patterns and consumer behavior, there were supply chain issues overstocking inventory clear out and an explosion in e-commerce.
Michele Buck: All of this has led to general uncertainty around what a post COVID-19 environment looks like for many consumer categories, including many of ours from wellness to kitchen tools to home organization.
Michele Buck: Also since 2020 categories, such as insulated beverage prestige beauty tools and liquids air purification and travel have become increasingly competitive.
As we settled into a more normalized world, we've realized that while consumers were still responding positively to our brands. The COVID-19 volatility had masked some underlying weakness in our brand health.
Noel M. Geoffroy: As we settled into a more normalized world, we realized that while consumers were still responding positively to our brands, the COVID volatility had masked some underlying weakness in our brand health. My assessment is that we previously underinvested in our brand building fundamentals and marketing. This is why one of my first actions as COO was to initiate Project Pegasus to create fuel and focus to revitalize our brand. We are taking actions to address this underinvestment by prioritizing strong brand building fundamentals and continuing to increase our marketing and innovation spend.
Julien Mininberg: My assessment is that we previously underinvested in our brand building fundamentals in marketing. This is why one of my first actions as COO was to initiate Project Pegasus to create fuel and focus to revitalize our brands. We are taking actions to address this underinvestment by prioritizing strong brand building fundamentals and continuing to increase our marketing and innovation spend.
My assessment is that we previously underinvested in our brand building fundamentals in marketing. This is why one of my first actions as COO was to initiate project Pegasus to create fuel and focus to revitalize our brands. We are taking actions to address this underinvestment by prioritizing strong brand building.
Fundamentals and continuing to increase our marketing and innovation spend.
Noel M. Geoffroy: However, it has become clear that the path to sustainable brand growth will take longer than we originally anticipated. I spoke earlier about the need to invest in our infrastructure and core capabilities to support the growth we are targeting. Our new distribution center in Tennessee is one of these necessary investments. While this facility brings us next-level technology and capacity that will serve us for years to come, we have encountered some near-term disruption as we go live with the last phase of automation.
Julien Mininberg: However, it has become clear that the path to sustainable brand growth will take longer than we originally anticipated. I spoke earlier about the need to invest in our infrastructure and core capabilities to support the growth we are targeting. Our new distribution center in Tennessee is one of these necessary investments. While this facility brings us next level technology in capacity that will serve us for years to come, we have encountered some near-term disruption as we go live with the last phase of automation. Some implementation hiccups are always expected, but the final phase of startup, which utilizes the highest level of technology and automation, has created some unexpected challenges affecting our fulfillment of small retail customer and direct to consumer orders for Oxo and Hydroflask.
Michele Buck: However, it has become clear that the path to sustainable brand growth will take longer than we originally anticipated.
Michele Buck: I spoke earlier about the need to invest in our infrastructure and core capabilities to support the growth we are targeting.
Michele Buck: Our new distribution center in Tennessee is one of these necessary investments.
Michele Buck: While this facility brings us next level technology and capacity that will serve us for years to come we have encountered some near term disruption as we go live with the last phase of automation.
Noel M. Geoffroy: Some implementation hiccups are always expected, but the final phase of startup, which utilizes the highest level of technology and automation, has created some unexpected challenges affecting our fulfillment of small retail customer and direct-to-consumer orders for OXO and Hydroflask. These challenges have impacted us in three ways: lost revenue, delayed productivity savings, and additional costs. The resulting shipping backlog was a factor that drove our net sales miss in the quarter, while the delayed savings and incremental costs to manually work around the system issues and address root causes hurt our profitability.
Michele Buck: Some implementation hiccups are always expected, but the final phase of startup, which utilizes the highest level of technology and automation has created some unexpected challenges affecting our fulfillment of small retail customer and direct to consumer orders for oxo and hydro flask.
Julien R. Mininberg: These challenges have impacted us in three ways: lost revenue, delayed productivity savings, and additional cost. The resulting shipping backlog with the factor that drove our net sales myths in the quarter, while the delayed savings and incremental cost and manually work around the system issues and address root causes hurt our profitability. Although these sorts of growing pains are disappointing, upgrading our processes and systems to state-of-the-art capabilities is critical and continues to be the right strategic choice. 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.
Michele Buck: These challenges have impacted us in three ways lost revenue delayed productivity savings and additional costs.
Michele Buck: The resulting shipping backlog with a factor that drove our net sales miss in the quarter, while the delayed savings in incremental cost to manually work around the system issues and address root causes hurt our profitability.
Noel M. Geoffroy: Although these sorts of growing pains are disappointing, upgrading our processes and systems to state-of-the-art capabilities is critical and continues to be the right strategic choice. Our team in Tennessee is working diligently with our suppliers to address the remaining issues, and we have seen our shipping throughput progressively improve during June and early July. I would like to turn now to the actions we are taking to address these issues and maximize our opportunities.
Although these sorts of growing pains are disappointing upgrading our processes and systems to state of the art capabilities is critical and continues to be the right strategic choice.
Michele Buck: 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.
Michele Buck: I would like to turn now to the actions we are taking to address these issues and maximize our opportunities.
Julien Mininberg: I would like to turn out to the actions we are taking to address these issues and maximize our opportunities. Everything starts with our brands, so let's begin there. Beginning in fiscal 24, we refocused on the health of our brands and invested in elevating our brand building fundamentals by developing and implementing a hell and avoid brand building framework across our entire marketing organization. This entailed a rigorous approach to quantitatively define and segment the market, selecting who we are serving and clarifying what our brand stands for.
Noel M. Geoffroy: Everything starts with our brands, so let's begin there. Beginning in fiscal 24, we refocused on the health of our brands and invested in elevating our brand building fundamentals by developing and implementing a Helen of Troy brand building framework across our entire marketing organization. This entailed a rigorous approach to quantitatively define and segment the market, select who we are serving, and clarify what our brands stand for.
Michele Buck: Everything starts with our brand so let's begin there.
Michele Buck: Beginning in fiscal 'twenty four we refocused on the health of our brands and invested in elevating our brand building fundamentals by developing and implementing a Helen of Troy brand building framework across our entire marketing organization.
This entailed a rigorous approach to quantitatively define and segment the market selecting who we're serving and clarifying what our brands stand for.
Noel M. Geoffroy: All our marketing content, activation, and innovation will be grounded in these revitalized, data-centric brand strategies. It takes time to do this rigorous upfront work and then activate it to rebuild brand relevance and the innovation pipeline needed to gain momentum and drive consistent revenue and share growth. We are encouraged that eight of our key categories are growing share this fiscal year through May, and five others showed share trend improvement in May in our U.S. measured channels.
Michele Buck: All our marketing content activation and innovation will be grounded in these revitalized data centric brand strategies.
Michele Buck: It takes time to do this rigorous upfront work and then activate to rebuild brand relevance and the innovation pipeline needed to gain momentum and drive consistent revenue and share growth.
Michele Buck: We are encouraged that eight of our key categories are growing share. This fiscal year through may and five others showed share trend improvement in may and our U S. Measured channels. However, we know we are still in the early stages and there is more work to be done.
Noel M. Geoffroy: However, we know we are still in the early stages, and there is more work to be done. Let me share a couple of examples of our progress. Hydro Flask has embraced the shift in the category with new on-trend content that depicts young people in a range of activities extending beyond our traditional positioning. We have launched new designs that appeal to more consumers, such as the popular Sugar Crush line with a waterfall of pastel colors and the two-tone ombre design, which both tap into the fashion sense of our target consumer. We also have the timely limited edition USA water bottles for Americans to use as they cheer on our athletes this summer.
Michele Buck: Let me share a couple of examples of our progress.
Michele Buck: Hydro flask has embraced the shift in the category with new Entre and content that depicts young people in a range of activities extending beyond our traditional positioning.
Michele Buck: We have launched new designs that appeal to more consumers such as the popular sugar crush line with a waterfall of pastel colors and the two tone hombre design that both tap into the fashion sense of our target consumer.
Michele Buck: We also have the timely limited edition USA water bottles for Americans to use as they cheer on our athletes this summer.
Noel M. Geoffroy: In addition, we launched a new loyalty rewards program called House of Hydro that allows consumers to earn points that can be used to purchase products on our website. I encourage you to visit HydroClass.com to see the changes in our range and our content. Another example is OXXO's recent launch of silicone reusable bags, available in many sizes and colors. These bags solve the consumer's need to keep food fresh at home and on the go in a planet-friendly way. They are differentiated from the competition by a seamless design that easily flips inside out for effortless cleaning. They are also microwave, oven, dishwasher, and freezer safe for maximum versatility.
Michele Buck: In addition, we launched our new loyalty rewards program called house of Hydro that allows consumers to earn points that can be used to purchase products on our website.
Michele Buck: I encourage you to visit hydro flask dot com to see the change in our range and our content.
Michele Buck: Another example is <unk> recent launch of silicone reusable bags available in many sizes and colors. These.
Michele Buck: These bag solve the consumers need to keep food fresh at home and on the go and our planet friendly way. They are differentiated from the competition by a seamless design that easily flips inside out for effortless cleaning. They are also microwave oven dishwasher and freezer save for maximum versatility.
Noel M. Geoffroy: OXO is also standing out with its coffee line, earning Wirecutter recognition for its 9 Cup Coffee Maker and Cold Brew Coffee Maker in 2023 and now its Conical Burr Coffee Grinder in 2024. I will now shift for a moment and focus on what we are doing at an organizational level to support and build up our brand. The hiring of our first-ever Global Chief Marketing Officer in mid-fiscal 24 and the related investment in our Centralized Marketing Center of Excellence, or COE, has increased our marketing capabilities exponentially. This COE is comprised of 16 subject matter experts bringing critical skills to the company, including business intelligence, category and consumer insight, experience planning, and digital strategy, and, of critical importance, data and analytics.
OXXO is also standing out with its coffee line, earning wire cutter recognition for its nine Cup Coffeemaker and cold Brew coffee maker in 2023, and now it's Conoco Burr coffee grinder in 2024.
Michele Buck: I will now shift for a moment and focus on what we are doing at an organizational level to support and build up our brands the.
Michele Buck: The hiring of our first ever global Chief marketing officer in mid fiscal 'twenty, four and the related investment in our centralized marketing center of excellence or Coa has increased our marketing capabilities exponentially. This Coa is comprised of 16 subject matter experts, bringing critical skills to the company <unk>.
Michele Buck: <unk> business intelligence category and consumer insights.
Michele Buck: Experienced planning and digital strategy and of critical importance data and analytics.
Noel M. Geoffroy: We now have a clear and consistent view of our category and brand performance, including the underlying drivers and the ROI on our spending by brand and by marketing tactic. This will enable us to more accurately assess the landscape and our brand health and to invest more strategically. To that end, we recently concluded our first ever marketing mix analytics study that provided detailed ROI data.
We now have a clear and consistent view of our category and brand performance, including the underlying drivers and the ROI on our spending by brand and by marketing tactic there.
Michele Buck: This will enable us to more accurately assess the landscape and our brand health and to invest more strategically.
Michele Buck: To that end, we recently concluded our first ever marketing mix analytics study that provided detailed ROI data. This inside is already helping to inform our portfolio and brand level resource allocation.
Noel M. Geoffroy: This insight is already helping to inform our portfolio and brand level resource allocation. We will leverage this data to improve our ROI and to enhance our full funnel activation plans to ensure we are connecting with our consumers throughout their product and brand journey. As it relates to efficiencies, our COE has helped us refine our mix of agency partners to ensure we bring best-in-class creativity and maximize our working media investment. This refinement has not only enhanced our capabilities but also reduced the number of agencies we work with, resulting in a significant reduction in our non-working spending.
We will leverage this data to improve our ROI and to enhance our full funnel activation plans to ensure we are connecting with our consumers throughout their product and brand journeys.
Michele Buck: As it relates to efficiencies our Coa has helped us refine our mix of agency partners to ensure we bring best in class creativity and maximize our working media investment this refinement not only enhanced our capabilities, but also reduce the number of agencies, we worked with resulting in a significant reduction in our non working spending.
Noel M. Geoffroy: I spoke to you last quarter about sales and marketing team success, identifying and capturing incremental distribution so that our brands are available where our shoppers shop. Recently, we welcomed a new head of our North American Regional Market Organization to provide further leadership to drive the implementation of joint customer business plans and sales capabilities, including our new distribution strategy. I've previously shared that we expanded the OXO Softworks Kitchen Gadget set at Walmart following a successful test.
Michele Buck: I spoke to you last quarter about sales and marketing teams success, identifying and capturing incremental distribution. So that our brands are available where our shoppers shop.
Recently, we welcomed our new head of our North American regional market organization should provide further leadership to drive the implementation of joint customer business plans and sales capabilities, including our new distribution strategies.
Michele Buck: Previously shared that we expanded the oxo softworks kitchen gadget fat at Walmart following a successful test.
Noel M. Geoffroy: As of June, OXO Softworks gadgets are in 3200 doors, and I'm pleased to report that our expansion is performing well, exceeding both our and the customers' expectations. Walmart shoppers appreciate the value of OXO's high-quality and universal design and kitchen tools, with items like our iconic peeler performing in the top ten.
Michele Buck: As of June Oxo Softworks gadgets are in 3200 doors and I am pleased to report that our expansion is performing well exceeding both our and our customers' expectations. Walmart shoppers appreciate the value of OXXO is high quality and universal design and kitchen tool with items like our iconic pillar performing in the top.
Michele Buck: 10.
Noel M. Geoffroy: Examples of new distribution include Braun and Vicks expansion in key drug and mask customers, Drybar tools and liquid expansion across various North American retailers, Curlsmith test in Sephora brick and mortar, and Hydroflask broadening presence in premium grocery customers and beyond. At the brand level, with our consolidation of the beauty business to Central Boston, we have brought in 65 new team members with extensive beauty and consumer products experience. I have been to the beauty and wellness offices several times over the past couple of months, and I can tell you the team is energized and ready to revitalize our brands and pipelines.
Michele Buck: Examples of new distribution include Braun Vicks expansion in key drug and mass customers drive our tools and liquid expansion across various north American retailers.
Michele Buck: Smith test in Sephora brick and mortar and hydro flask broadening presence in premium grocery customers and beyond.
Michele Buck: At the brand level with our consolidation of the beauty business to Central Boston, We have brought in 65, new team members with extensive beauty and consumer products experience.
Speaker Change: I've been in the beauty and wellness offices several times over the past couple of months and I can tell you. The team is energized and ready to revitalize our brands and pipeline.
Noel M. Geoffroy: This team's bold ideas can be seen in our upcoming new Drybar marketing campaign and our product innovation pipeline, as evidenced by the recent launch of Drybar Liquid Glass High Gloss Smoothing Blowout Cream, promising consumers up to 72 hours of smooth. This innovation delivers right at the heart of our sharpened brand promise of your best blowout and is in line with recent consumer trends for glossy hair, especially when used as a regimen with our dry bar tools.
Speaker Change: This team's bold ideas can be seen in our upcoming new drive our marketing campaign, and our product innovation pipeline as evidenced by the recent launch of drive our liquid glass high gloss smoothing blowout cream promising consumers up to 72 hours of smooth.
Speaker Change: This innovation delivers right at the heart of our sharpened brand promise of your best blowout and in line with recent consumer trends for glossy hair, especially when used as a regimen with our drive our tools.
Noel M. Geoffroy: Moving on to the business segment's first quarter market performance, I would like to call out a few bright spots for our brand. In Home and Outdoor, despite the earlier mentioned softness in the Global Packs and Accessories categories, Osprey continues to gain share in technical packs, where it remains the leading brand. Consumers choose Osprey over the competition for its technical prowess in carry, fit, durability, and its use of sustainable materials.
Speaker Change: Moving on to the business segments first quarter market performance I would like to call out a few bright spots for our brands.
Speaker Change: And home and outdoor despite the earlier mentioned softness in the global packs and accessories categories.
Speaker Change: <unk> continues to gain share in technical packs, where it remains the leading brand.
Speaker Change: <unk> choose osprey over the competition for its technical prowess, and Carrie fit durability and its use of sustainable materials.
Noel M. Geoffroy: The spring introduction of our Escapist on Bike collection was well received and gained immediate traction with bike and outdoor media outlets like Gear Junkie, Bicycle Retailer, and Bike Rumor. Also, recent additions to our extended FIT collection generated standout engagement on social media in the quarter. Hydro Flask, while performing below our expectations in the US, grew in all major international markets. This is the direct result of stronger collaboration between our teams, as Hydroclass leverages the experience of the international sales team to open up new opportunities.
Speaker Change: The spring introduction of our escaped us on by collection was well received and gained immediate traction with bike and outdoor media outlets like gear junkie bicycle retailer and bike rumor.
Speaker Change: Also recent additions to our extended fit collection generated standout engagement on social media in the quarter.
Speaker Change: Hydro flask, while performing below our expectations in the U S grew in all major international markets.
Speaker Change: This is the direct result of stronger collaboration between our teams is hydro flask leverages the experience of the international sales team to open up new opportunities.
Noel M. Geoffroy: We expect this expanded distribution internationally, coupled with the previously mentioned distribution gains and new designs in North America, to benefit us in the latter half of this fiscal year. Turning to OXO, the brand retains its number one share of kitchen utensils, and we see signs that the category is stabilized. We expect our leading market share, along with OXO's award-winning product design and innovation, to benefit us as we continue to expand distribution in current categories and relevant adjacent sectors. For beauty and wellness, Drybar expanded its retail presence in Canada, launching in 140 Shoppers Drug Mart locations as well as online in the first quarter.
Speaker Change: We expect this expanded distribution internationally, coupled with the previously mentioned distribution gains at new designs in North America to benefit us in the latter half of this fiscal year.
Speaker Change: Turning to OXXO the brand retains its number one share in kitchen utensils, and we see signs that the category is stabilizing we expect our leading market share along with OXXO Award winning product design and innovation to benefit us as we continue to expand distribution and current categories and relevant adjacencies.
Speaker Change: In beauty and wellness drive our expanded its retail presence in Canada launching in 140 shoppers drug Mart locations as well as online in the first quarter.
Noel M. Geoffroy: The previously mentioned bold new Dry Bar campaign launching later this month is a great example of what I mean when I say we are elevating our marketing game. For wellness, Year-to-Date Pure and our Vicks and Braun thermometers have gained market share. Braun and Vicks will see an expanded presence in the drug and mass channels beginning in the second quarter, ramping up more in the second half of Fiscal 25.
The previously mentioned bold new drive our campaign launching later this month is a great example of what I mean, when I say, we are elevating our marketing game.
Speaker Change: For wellness year to date, pure and our Vicks and Braun thermometers have gained market share.
Brian Index will see an expanded presence in the drug and mass channels beginning in the second quarter ramping up more in the second half of fiscal 'twenty five.
Noel M. Geoffroy: And finally, despite the delayed savings related to our Tennessee Distribution Center, Project Pegasus continues to move forward. We have made good progress on the cost of goods sold workstreams, implementing multiple projects that reduce costs and simplify our supplier base. We have also made good progress on our distribution center optimization by reducing our footprint by four.
Speaker Change: And finally, despite the delayed savings related to our Tennessee distribution Center project Pegasus continues to move forward. We have made good progress on the cost of goods sold work streams implementing multiple projects that reduce costs and simplify our supplier base. We have also made good progress on our distribution center opt.
Speaker Change: Limitation by reducing our footprint by four.
Noel M. Geoffroy: In closing, when I spoke to you almost three months ago as I was stepping into the CEO role, I could not have anticipated I would be sitting here today delivering this message. As I've discussed, the quarter has revealed some realities about our business and our company that we have acknowledged and are addressing. Even with these challenges, I want to reiterate that we remain committed to our strategic choices to deliver sustainable and profitable growth in the long term. I can assure you that the organization has never been more focused and committed to addressing our challenges with speed and agility.
Speaker Change: In closing when I spoke to you almost three months ago as I was stepping into the CEO role I cannot anticipate I would be sitting here today delivering this message.
Speaker Change: As I have discussed the quarter has revealed some reality is about our business and our company that we have acknowledged and are addressing.
Speaker Change: Even with these challenges I want to reiterate that we remain committed to our strategic choices to deliver sustainable and profitable growth long term.
Speaker Change: I can assure you the organization has never been more focused and committed to addressing our challenges with speed and agility.
Noel M. Geoffroy: We are committed to the actions needed to reset and revitalize our brands, embrace next-level data and analytics, be and win where the shopper shops, and fully leverage our new distribution network capability. Our success will be driven by the passion and dedication of our exceptional people who remain committed to our purpose, vision, and values. We can, and we will do better. Now, I will turn it over to Brian. Thank you, Noel. Good morning, everyone.
Speaker Change: We are committed to the actions needed to reset and revitalize our brands embrace next level data and analytics.
Speaker Change: And win where the shopper shops, and fully leverage our new distribution network capability.
Speaker Change: Our success will be driven by the passion and dedication of our exceptional people who remain committed to our purpose vision and values, we can and we will do better.
Speaker Change: Now I will turn it over to Brian.
Brian L. Grass: I'll start by echoing Noel's comments regarding the disappointment in our first quarter performance and the revision to our full year outlook. New headwinds emerged in the first quarter, and some existing headwinds became more pronounced since we spoke to you last. These include a combination of executional challenges, a global outdoor slowdown, increased promotional activity, softer and more variable retail replenishment, and greater macro pressure and uncertainty. Many of these became more pronounced towards the end of the first quarter, and some continue to evolve.
Brian: Thank you Noel.
Brian: Good morning, everyone.
Brian: I'll start by echoing Noel's comments regarding the disappointment of our first quarter performance and the revision to our full year outlook.
Brian: New headwinds emerged in the first quarter and some existing headwinds became more pronounced since we spoke to you last.
Brian: These include a combination of execution challenges our global outdoor slowdown.
Increased promotional activity.
Brian: Software and more variable retail replenishment.
In greater macro pressure and uncertainty.
Brian: Many of these became more pronounced towards the end of the first quarter and some continue to evolve.
Brian L. Grass: Our first quarter adjusted EPS results include an adverse impact of approximately $0.50 from unexpected factors that we believe will be largely transitory by the end of the second quarter. This includes the shipping disruption and additional costs from the automation startup issues in our Tennessee distribution facility. Lost revenue from the Curlsmith ERP system integration challenges and an unexpected spike in health insurance and product liability costs. We also faced higher tax expense from Barbados tax reform, which became immediately effective in the first quarter.
Brian: Our first quarter adjusted EPS results include an adverse impact of approximately 50.
Brian: From unexpected factors that we believe will be largely transitory by the end of the second quarter.
Brian: This includes the shipping disruption and additional costs from the automation startup issues no, Tennessee distribution facility.
Brian: Lost revenue from the <unk> ERP system integration challenges.
Brian: And an unexpected spike in health insurance and product liability costs.
Brian: We also faced higher tax expense from Barbados, Barbados tax reform, which became immediately effective in the first quarter.
Brian L. Grass: We believe we are now past the Curlsmith ERP integration challenges, and we expect to largely overcome the automation startup issues in our distribution facility by the end of the second quarter. It's important to note that the automation startup issues are only impacting a limited subset of OXO and Hydroflask 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.
Speaker Change: We believe we are now past accrual Smith ERP integration challenges, we expect to largely overcome the automation startup issues in our distribution facility by the end of the second quarter.
Speaker Change: It's important to note that the automation startup issues are only impacting a limited subset of oxo and hydro flask orders.
Speaker Change: 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 'twenty five.
Brian L. Grass: In response to this backdrop, we are adjusting our cost structure in a thoughtful way that preserves our planned growth investment for the year. We are taking actions to realize between $30 and $40 million of additional pre-tax profit improvement in Fiscal 25 to partially offset the impact of expected revenue decreases, lower operating leverage, the more promotional environment we now see for the remainder of the year, and our outlook for a less favorable sales mix than we expected as we entered the year.
Speaker Change: In response to this backdrop, we are adjusting our cost structure in a thoughtful way.
<unk> for planned growth investment for the year.
Speaker Change: We are taking actions to realize between 30% and $40 million of additional pre tax profit improvement in fiscal 'twenty five partially offset the impact of expected revenue decrease lower operating leverage the more promotional environment. We now see for the remainder of the year and.
Speaker Change: Our outlook for a less favorable sales mix than we expected as we entered the year.
Brian L. Grass: I'll now move on to a more detailed discussion of our first quarter results. Consolidated net sales declined 12.2%, driven by a decline in sales of hair appliances, prestige hair care products, humidifiers, and beauty and wellness, and a decline in home and outdoor, driven by lower replenishment orders from retail customers and a global slowdown in outdoor.
Speaker Change: I'll now move onto a more detailed discussion of our first quarter results.
Speaker Change: Consolidated net sales declined 12, 2% driven by a decline in sales of hair appliances, prestige hair care products, and humidifiers and beauty and wellness.
Speaker Change: And a decline in home and outdoor driven by lower replenishment orders from retail customers and a global slowdown in outdoor.
Brian L. Grass: Last quarter, we called out pockets of higher inventory in outdoor channels, which has led to a broader and more pronounced category slowdown this quarter. System executional challenges accounted for approximately $8 million of the consolidated net sales decline between the automation startup issues in our Tennessee distribution facility and the integration of Curlsmith into our ERP system. These factors were partially offset by international growth and higher sales of fans in beauty and wellness.
Speaker Change: Last quarter, we called out pockets of higher inventory and outdoor channels, which has led to a broader and more pronounced category slowdown this quarter.
Speaker Change: So some execution challenges accounted for approximately $8 million of the consolidated net sales decline.
The automation startup issues in our Tennessee distribution facility and the integration of Charles Smith into our ERP system.
Speaker Change: These factors were partially offset by international growth and higher sales of fans in beauty and wellness.
Brian L. Grass: We were able to expand gross profit margin by 330 basis points to 48.7% compared to 45.4% the same period last year. The year-over-year improvement was driven by a favorable segment mix with a higher percentage of home and outdoor sales. Lower Commodity and Product Costs Driven by the Pegasus Initiative and favorable inventory obsolescence expense year over year. However, these factors were partially offset by a less favorable product mix within the segment, a less favorable customer mix within home and outdoor, and Higher Sales Solutions from Trade Discount and Promotional Allowance Programs in Beauty and Wellness.
Speaker Change: We were able to expand gross profit margins by 330 basis points to 48, 7%.
Speaker Change: Compared to 45, 4% the same period last year.
Speaker Change: The year over year improvement was driven by a favorable segment mix with a higher percentage of home and outdoor sales.
Speaker Change: Lower commodity in product costs, driven by Pegasus initiatives.
Speaker Change: And favorable inventory obsolescence expense year over year.
Speaker Change: These factors were partially offset by a less favorable product mix within the segments.
Speaker Change: A less favorable customer customer mix within home and outdoor and.
Speaker Change: And a higher sales and higher sales dilution from trade discount promotional allowance programs and beauty and wellness.
Brian L. Grass: GAAP operating margin for the quarter was 7.4% compared to 8.6% in the same period last year. On an adjusted basis, operating margin decreased 360 basis points to 10.3%. The decrease was primarily driven by planned incremental marketing expense of $290 basis points and a 120 basis point estimated impact from additional costs associated with the automation startup issues I referred to earlier. The margin decrease also included higher sales dilution from trade discount promotional allowance programs, increased depreciation, unfavorable health insurance and product liability expense, less favorable mix within the segments, and lower operating leverage.
Speaker Change: GAAP operating margin for the quarter was seven 4% compared to eight 6% the same period last year.
Speaker Change: On an adjusted basis operating margin decreased 360 basis points to 10, 3%.
Speaker Change: The decrease was primarily driven by planned incremental marketing expense of 290 basis points.
Speaker Change: And a 120 basis point estimated impact from additional costs associated with automation startup issues I referred to earlier.
The margin decrease also included higher sales dilution from trade discount promotional allowance programs.
Speaker Change: Increased depreciation unfavorable health insurance and product liability expense.
Speaker Change: Less favorable mix within the segments and lower operating leverage.
Brian L. Grass: These factors were partially offset by a favorable overall segment mix with a higher percentage of home and outdoor sales, lower commodity and product costs driven by Pegasus initiatives, and favorable inventory obsolescence expense year over year. On a segment basis, Home and Outdoor Adjusted Operating Margin decreased 520 basis points to 10.6 percent.
Speaker Change: These factors were partially offset by a favorable overall segment mix with a higher percentage of home and outdoor sales.
Speaker Change: Lower commodity in product costs, driven by Pegasus initiatives and.
Speaker Change: And favorable inventory obsolescence expense year over year.
Speaker Change: On a segment basis home and outdoor adjusted operating margin decreased 520 basis points to 10, 6% driven by planned incremental marketing expense the additional costs at our Tennessee distribution Center.
Brian L. Grass: This was driven by planned incremental marketing expense, additional costs at our Tennessee Distribution Center, higher depreciation, lower operating leverage, and a less favorable mix. However, these factors were partially offset by lower commodity and product costs. Adjusted Operating Margin for Beauty and Wellness decreased 240 basis points to 10%, driven by planned incremental marketing expense, a less favorable product mix, higher sales dilution from trade discount promotional allowance programs, and lower operating leverage. These factors were partially offset by lower commodity and product costs and favorable inventory obsolescence expense year over year. Our tax rate in the first quarter was 66.1%, compared to 15.5% last year.
Speaker Change: Higher depreciation lower operating leverage and a less favorable mix.
Speaker Change: These factors were partially offset by lower commodity and product costs.
Adjusted operating margin for beauty and wellness decreased 240 basis points to 10%.
Speaker Change: Driven by planned incremental marketing expense, a less favorable product mix.
Speaker Change: Higher sales dilution from trade discount promotional allowance programs and lower operating leverage.
Speaker Change: These factors were partially offset by lower commodity and product costs and favorable inventory obsolescence expense year over year.
Speaker Change: Tax rate in the first quarter was 66, 1% compared to 15, 5% last year.
Brian L. Grass: The year-over-year increase is primarily due to new Barbados tax legislation enacted during the first quarter of Fiscal 25, which resulted in a discrete tax charge of $6 million to revalue deferred tax liabilities, as well as an increase in our ongoing income tax expense due to the change in tax rate. While we were aware of the longer-term potential of Barbados enacting a tax change, we did not expect legislation to be enacted with immediate effect, as tax legislation is rarely introduced in this manner.
Speaker Change: The year over year increase was primarily due to Barbados tax legislation enacted during the first quarter of fiscal 'twenty, five which resulted in a discrete tax charge of $6 million to revalue deferred tax liabilities.
Speaker Change: As well as an increase in our ongoing income tax expense due to the change in tax rate.
Speaker Change: While we were aware of the longer term potential of Barbados enacting a tax change we did not expect legislation to be enacted with immediate effect was touched as tax legislation is rarely introduced in this manner.
Brian L. Grass: In response to the global minimum tax changes, we have been developing and implementing various phases of our overall tax planning strategy, and we expect that the Barbados tax change will not have a meaningful impact on us beyond Fiscal 25. Net income was $6.2 million, or $0.26 per diluted share. Non-GAAP-adjusted diluted EPS was $0.99 per share, reflecting lower adjusted operating income and an increase in the adjusted effective income tax rate, partially offset by a decrease in interest expense.
Speaker Change: In response to the global minimum tax changes, we have been developing and implementing various phases of our overall tax planning strategy. We expect that the Barbados tax change will not have a meaningful impact on us beyond fiscal 'twenty five.
Speaker Change: Net income was $6 2 million or <unk> 26 per diluted share.
Speaker Change: non-GAAP adjusted diluted EPS was <unk> 99 per share, reflecting lower adjusted operating income and an increase in the adjusted effective income tax rate.
Speaker Change: Partially offset by a decrease in interest expense.
Brian L. Grass: We continue to generate solid cash flow, with cash from operations of $25.3 million and free cash flow of $16.2 million. The year-over-year decline in cash flow is largely due to some strategic inventory build to take advantage of opportunities we see in our peak selling season. We ended the quarter with total debt of $748 million, a sequential increase of $83 million compared to the fourth quarter of fiscal 24 due to the repurchase of $100 million of our stock in the quarter. Our net leverage ratio was 2.37 times compared to two times at the end of fiscal 24.
Speaker Change: We continue to generate solid cash flow.
Speaker Change: With cash from operations of $25 3 million and free cash flow of $16 2 million.
Speaker Change: The year over year decline in cash flow was largely due to some strategic inventory build to take advantage of opportunities we see in our peak selling season.
Speaker Change: We ended the quarter with total debt of 748 million, a sequential increase of $83 million compared to the fourth quarter of fiscal 'twenty four due to the repurchase of $100 million of our stock in the quarter.
Speaker Change: Our net leverage ratio was 237 times compared to two times at the end of fiscal 'twenty four.
Brian L. Grass: Now I would like to discuss our revised outlook for fiscal 25. We have taken a hard look at the internal challenges that impacted our business in the first quarter as well as the more pronounced external trends to re-establish what we believe are attainable objectives. We expect to resolve the remainder of the automation issues at our Tennessee Distribution Center by the end of the second quarter, leading to better volume throughput, lower costs, and greater operating efficiency.
Speaker Change: Now I would like to discuss our revised outlook for fiscal 'twenty five.
Speaker Change: We've taken a hard look at the internal challenges that impacted our business in the first quarter as.
Speaker Change: As well as the more pronounced external trends to reestablish what we believe are obtainable objectives.
Speaker Change: We expect to resolve the remainder of the automation issues at our Tennessee distribution center by the end of the second quarter.
Leading to better volume throughput lower cost and greater operating efficiency.
Brian L. Grass: Our outlook now reflects the expected impact of our executional challenges as well as our view of increased macro uncertainty, an increasingly stretched consumer, a more promotional environment, and retailers even more closely managing their inventories. We now expect net sales between $1.885 billion and $1.935 billion in fiscal 2025, which implies a decline of 6% to 3.5%. This includes a full year estimated impact to net sales of approximately $13 million due to shipping disruption from the automation startup issues at our Tennessee distribution facility and the Curlsmith ERP Integration Challenge.
Speaker Change: Our outlook now reflects the expected impact of our execution challenges as well as our view of increased macro uncertainty.
Speaker Change: And increasingly stretched consumer or.
A more promotional environment.
Speaker Change: And retailers, even more closely managing their inventories.
Speaker Change: We now expect net sales between 188 5 billion at 193 5 billion in fiscal 'twenty, five which implies a decline of 6% to three 5%.
Speaker Change: This includes a full year estimated impact to net sales of approximately $13 million due to shipping disruption from the automation startup issues at our Tennessee distribution facility and.
Speaker Change: And the cross Smith ERP integration challenges.
Brian L. Grass: In terms of our net sales outlook by segment, we now expect a home and outdoor decline of 3% to 1% and a beauty and wellness decline of 8% to 5%, which continues to include a year-over-year headwind of approximately 1% related to the expiration of an out-licensed relationship with respect to one of our wellness brands. We now expect absolute EPS of $4.69 to $5.45 for the full year and non-GAAP adjusted diluted EPS in the range of $7 to $7.50, which implies an adjusted diluted EPS decline of 21.4% to 15.8%.
Speaker Change: In terms of our net sales outlook by segment, we now expect a home and outdoor decline of 3% to 1%.
Speaker Change: And the beauty and wellness decline of 8% to 5%.
Speaker Change: <unk> continues to include a year over year headwind of approximately 1% related to the exploration of an out license relationship with respect to one of our wellness brands.
Speaker Change: We now expect GAAP diluted EPS of $4 69.
Speaker Change: To $5 45 for the full year.
Speaker Change: And non-GAAP adjusted diluted EPS in the range of $7 to $7 50.
Speaker Change: Which implies an adjusted diluted EPS declined 21, 4% to 15, 8%.
Brian L. Grass: We now expect full-year adjusted EBITDA margin to compress by approximately 150 to 160 basis points year-over-year, with approximately 60 basis points coming from the automation startup issues at our Tennessee Distribution Facility. We continue to expect benefits from Pegasus and other gross profit improvements to be reinvested for growth. While external factors have become more challenging than originally expected, we remain focused on the long-term health of our business and our brand and continue to plan for a year-over-year increase in growth investment spending of roughly 100 basis points.
Speaker Change: We now expect full year adjusted EBITDA margin to compress by approximately 150 to 160 basis points year over year.
Speaker Change: With approximately 60 basis points coming from the automation startup issues at our Tennessee distribution facility.
Speaker Change: We continue to expect benefits from Pegasus and other gross profit improvements to be reinvested for growth.
Speaker Change: While external factors have become more challenging than originally expected we remain focused on the long term health of our business and our brands and continue to plan for a year over year over year increase in growth investments spending of roughly 100 basis points.
Brian L. Grass: Our Adjusted EBITDA Outlook continues to include a year-over-year headwind of approximately 50 basis points from the expiration of the out-license relationship referred to earlier. Additionally, we now expect some gross margin compression from our view of a more promotional environment and a less favorable sales mix.
Speaker Change: Our adjusted EBITDA outlook continues to include a year over year headwind of approximately 50 basis points from the exploration of the out license relationship referred to earlier.
Speaker Change: We now expect some gross margin compression from our view of a more promotional environment and a less favorable sales mix.
Brian L. Grass: However, we still expect to expand gross margin year over year due to Project Pegasus. Finally, we anticipate lower operating leverage from the decline in revenue, which we expect to be more than offset by the additional profit improvement actions I referred to earlier. In terms of Project Pegasus, we are maintaining the cost savings, cadence, and restructuring cost estimates that we discussed in our April call and which are outlined in our earnings release. We now expect a GAAP-adjusted tax rate range of 27.3% to 29.5% for the full fiscal year and a non-GAAP adjusted tax rate range of 20.7% to 21.3%.
Speaker Change: However, we still expect to expand gross margin year over year due to project Pegasus.
Speaker Change: Finally, we anticipate lower operating leverage from the decline in revenue, which we expect to be more than offset by the additional profit improvement actions I referred to earlier.
Speaker Change: In terms of project Pegasus, we are maintaining the cost savings cadence and restructuring cost estimates that we discussed in our April call and which are outlined in our earnings release.
Speaker Change: We now expect a GAAP effective tax rate range of 27, 3% to 29, 5% for the full fiscal year and our non-GAAP adjusted tax rate range of 27% to 21, 3%, we expect capital an intangible asset expenditures of between 30% and 35 million.
Brian L. Grass: We expect capital and intangible asset expenditures of between $30 and $35 million for Fiscal 25, which includes remaining equipment and technology of approximately $9 million associated with our Tennessee distribution facility. We now expect free cash flow in the range of $220 to $240 million, which implies a free cash flow yield of 10.8% to 11.8% using Friday's closing share price, and adjusted EBITDA in the range of $287 to $297 million. The net leverage ratio, as defined in our credit agreement, is now expected to be between 1.6 times and 1.5 times by the end of fiscal 25.
Speaker Change: For fiscal 'twenty, five which includes remaining equipment and technology of approximately $9 million associated with our Tennessee distribution facility.
Speaker Change: We now expect free cash flow in the range of $220 million to $240 million, which implies a free cash flow yield of 10, 8% to 11, 8% using Fridays closing share price.
Speaker Change: And adjusted EBITDA in the range of $287 million to $297 million.
Speaker Change: Net leverage ratio as defined in our credit agreement is now expected to be between one six times and one five times by the end of fiscal 'twenty five.
Brian L. Grass: In terms of the quarterly cadence of fails, we now expect a decline of 7% to 4% in the second quarter of Fiscal 25, and a decline of 2.5% to growth of 1% in the second half of the year. We expect a decline in adjusted diluted EPS of 45% to 35% in the second quarter, and a decline of 3% to growth of 3% in the second half of the year. Finally, our outlook does not include the estimated impact of a potential divestiture.
Speaker Change: In terms of the quarterly cadence of sales, we now expect a decline of 7% to 4% in the second quarter of fiscal 'twenty five.
Speaker Change: And a decline of two 5% to growth of 1% in the second half of the year.
Speaker Change: We expect a decline in adjusted diluted EPS of <unk>, 45% to 35% in the second quarter and.
Speaker Change: And a decline of 3% to growth of 3% in the second half of the year.
Speaker Change: Finally, our outlook does not include an estimated impact of a potential divestiture.
Brian L. Grass: We have continued to advance in our process but have extended our timeline as there have been new entrants and we are prioritizing value over speed. We have a small team that is largely dedicated to the effort, so we believe the risk of distraction is minimal. We believe M&A requires discipline, and if our value expectations are not met, we will not transact. We have improved the business significantly over the last couple of years, and its dilutive impact on our growth rate and margin has been minimized.
Speaker Change: We have continued to advance our process, but have extended our timeline has there been new entrants and we are prioritizing value over speed.
Speaker Change: We have a small team that is largely dedicated to the effort. So we believe the risk of distraction is minimal.
Speaker Change: We believe M&A requires discipline and if our value expectations are not met we will not transact.
Speaker Change: We have improved the business significantly over the last couple of years, and it's dilutive impact to our growth rate and margin has been minimized.
Brian L. Grass: While we are disappointed with the start of Fiscal 25 and its implications for the full year, we intend to use it as an opportunity to reset and revitalize our business. As Noel mentioned, we see underlying improvement in many aspects of our business, but it is clear that it will take longer than originally expected to produce the long-term growth algorithm in our strategic plan. However, I continue to see proof points that we are on the right path.
Speaker Change: While we are disappointed with the start of fiscal 'twenty five and its implications for the full year, we intend to use it as an opportunity to reset and revitalize our business.
Speaker Change: As Noel mentioned, we see underlying improvement in many aspects of our business, but it is clear that it will take longer than originally expected to produce long term growth algorithm and our strategic plan.
Speaker Change: I continue to see proof points that we're on the right path.
Brian L. Grass: We now have a much stronger brand building capability and culture within the company. We've generated savings to fuel a step-level increase in brand and innovation investment. We're better leveraging data to invest that spend more efficiently and strategically. And we are investing in state-of-the-art infrastructure that is critical for future success. I'm more convinced than ever that these foundational improvements are positioning us to deliver reliable long-term growth and sustained shareholder value creation. And with that, I'll turn it back to the operator.
Speaker Change: We now have a much stronger brand building capability and culture within the company, we generated savings to fuel a step level increase in brand and innovation investment.
We're better leveraging data to invest that spend more efficiently and strategically and we are investing in state of the art infrastructure that is critical for our future success.
Speaker Change: I'm more convinced than ever that these foundational improvements are positioning us to deliver reliable long term growth and sustained shareholder value creation.
And with that I'll turn it back to the operator.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.
Speaker Change: Thank you at this time, we'll be conducting a question and answer session.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2. In the interest of time, we ask that you each keep to one question and one follow-up and invite you to requeue for additional questions. Thank you. Our first question comes from the line of Rupesh Parikh with Oppenheimer & Co.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants.
Speaker Change: Using speaker equipment, it may be necessary to pick up your handset before pressing the star keys and.
Speaker Change: In the interest of time, we ask that you each keep to one question and one follow up and invite you to re queue for additional questions. Thank you.
Speaker Change: Our first question comes from the line of robust print with Oppenheimer and company. Please proceed with your question.
Rupesh Dhinoj Parikh: Please proceed with your question. Good morning, and thanks for taking my question. So, I just wanted to go back to your quarterly cadence back half of the year commentary. So, I just want to get a sense of what's driving that confidence in being able to drive top and bottom line improvement in the back half of the year. It just appears, you know, some of the challenges on the macro consumer front and the competitive side could continue into the back half of the year. So, maybe some more granularity. The top line drivers that drive that improvement are also some of the key drivers of the bottom line. Hey, Rupesh. It's Brian.
Speaker Change: Good morning, and thanks for taking my question. So I just wanted to go back to your quarterly cadence back half of your commentary I just wanted to get a sense of what's driving our confidence of being able to drive the top and bottom line improvement in the back half of the year.
Speaker Change: It appears some of the challenges on a macro consumer front and deposit side could continue to back out from here. So maybe some more granularity in terms of the top line drivers that drive that improvement also some some some of the key drivers of the Bottomline improvement. Thank you.
Brian L. Grass: I can start, and Noel may want to build. I'd say our outlook reflects what we believe is a conservative view of point of sale trends. And what we did was really assume that those remain constant for the remainder of the year. But our most recent trends are better than what we assumed, and share has improved across many categories through May, as Noel has discussed. We also reflected the visibility that we have into promotions, order replenishment with our retailers, and any other factors we have visibility to do with our retailers into our outlook.
Brian: Hey, refresh its Brian I can start and neuro may want to build I would say our outlook reflects what we believe is a conservative view of point of sale trends.
Brian: And what we did is really assume that those remain constant for the remainder of the year.
Speaker Change: Our most recent trends are better than what we assumed in share has improved across many categories through may as <unk> has discussed.
Speaker Change: We also reflected visibility that we have into promotions order replenishment with our retailers.
Speaker Change: And any other factors, we have visibility to with our with our retailers into our outlook.
Brian L. Grass: As mentioned, we assume that Crowell Smith integration issues are now behind us, and that shipping disruption in our Tennessee distribution facility would continue through Q2. Any incremental revenue layered on that base is really from tangible building blocks that we have a clear line of sight to. So that would be new innovation.
Speaker Change: As mentioned, we assume that Kroll Smith integration issues are now behind us and that shipping disruption in our Tennessee distribution facility would continue through Q2.
Speaker Change: Then any incremental ton of revenue layered on that base is really from tangible building blocks that we have clear line of sight too.
Speaker Change: So that would be new innovation, and we take a conservative view on new innovation because.
Brian L. Grass: And we take a conservative view on new innovation because it's a new product and sometimes those take time to get traction. So we look at that conservatively, new distribution that we have line of sight to, and then marketing investment that we're making and retained in our outlook, and the return that we assume on that is based on data and analytics that we feel comfortable with. So that's kind of the..., top line, view.
Speaker Change: It's a new product and sometimes those take time to get traction. So we look at that conservatively new distribution that we have line of sight too and then marketing investment that we're making and retained in our outlook.
Speaker Change: And the return that we assume on that is based on data and analytics that we feel comfortable with so that's kind of the top line.
Speaker Change: Our view and then with respect to <unk>.
Brian L. Grass: And then with respect to margin, you know, we have a bridge in our investor deck that you may have seen that will talk about kind of the puts and takes that we did assume with respect to margin. And, you know, we did take into account the more promotional environment that we're recently seeing. We're also seeing, you know, a less favorable mix than what we expected as we went into the year. So we factored that in and assumed it for the remainder of the year. It continues to reflect the impact of the outlicensed expiration. And, importantly, we intentionally made our cost structure decisions in a way that preserves the growth investment target that we had going into the year.
Speaker Change: Margin.
Speaker Change: We have a bridge in our.
Speaker Change: In our Investor deck that you may have seen that that we'll talk about kind of the puts and takes that we did assume with respect to margin and we did take into account more promotional environment that were recently seen we're also seeing a less favorable mix than what we expected as we were going into.
Speaker Change: For the year, so we factored that in and assumed that for the remainder of the year.
Speaker Change: Continues to reflect the impact of the licensed exploration and then importantly, we intentionally made our cost structure decisions in a way that preserves the growth investment.
Brian L. Grass: So our intent is to continue to invest in brand health for the long term, and so we retained our growth investment for the remainder of the year as a percentage of sales. And then we factored in what we think is a very conservative view of the incremental iron giant cost. With respect to margin, Pegasus, no change, as you probably saw in the earnings release, and so we think we'll continue to get those benefits.
Speaker Change: Target that we had going into the year. So our intent is to continue to invest in the brand health for the long term and so we've retained our growth investment.
Speaker Change: The remainder of the year as a percentage of sales and then we factored in what we think is a very conservative view of the incremental iron giant costs up with respect to margin.
Speaker Change: <unk> no changes you probably saw in the earnings release and so we think we will continue to get those benefits and then importantly, we adjusted our cost structure and identified cost improvement.
Brian L. Grass: And then importantly, we adjusted our cost structure and identified cost improvement or profit improvement actions of $20 to $30 million that we're using to offset operating leverage, offset the incremental iron giant costs, and allow us to preserve the growth investment spending. So those are the puts and takes in both revenue and earnings or margin, and I believe we've tried very hard to have a conservative view on all aspects. The only call I would make, Rupesh, is just that we, again, as Brian outlined, in all the different pieces and parts, we really tried to work here as we got all of this information data in during the first quarter to reestablish what we believe are attainable objectives for the remainder of the year across both the top and bottom lines.
Speaker Change: Our profit improvement actions of $20 million to $30 million that we're using to.
Speaker Change: Offset operating leverage offset the incremental iron giant cost.
Speaker Change: And.
Speaker Change: Allow us to preserve the growth investment spending so those are the puts and takes in both revenue and.
Speaker Change: Earnings or margin and I believe we've tried very hard to have a conservative view on all aspects.
Brian: I would make for passes is just that we again as Brian outlined and all the different different pieces and parts. We've really tried to work here as we got all of this information data and in the first quarter to reestablish what we believe are obtainable objectives for the remainder of the year across both the top and bottom line.
And then my quick follow up question is there any granularity in terms of updated gross margin expectations. I know last time, I think you guys expected or implied a little over 100 basis points I don't know if theres anything more granular you can provide.
Brian L. Grass: And then my quick follow-up question, is there any granularity in terms of the updated gross margin expectation? I know last time, I think you guys expected or implied a little over 100 basis points. More granularity you can provide. Yeah, what I said in my prepared remarks, and I'm trying to stay away from, you know, giving you any specific targets other than adjusted EBITDA margin and adjusted operating income. But what I said in my prepared remarks is that we do expect some compression from the more promotional environment and the, you know, slightly less favorable mix, but we still expect to expand gross profit margin for the full year. Okay, great. Thank you. I'll pass this time.
Speaker Change: Yes, what I said in my prepared remarks Tonight, and I'm trying to stay away from.
Speaker Change: Giving you any specific targets other than adjusted EBITDA margin and adjusted operating income, but what I said in my prepared remarks is we do expect some compression from the more promotional environment in the slightly less favorable mix, but we still expect to expand gross profit margin for the full year.
Speaker Change: Okay, great. Thank you I'll pass it along.
Operator: Thank you. Our next question comes from the line of Linda Bolton-Weiser with D.A. Davidson.
Speaker Change: Thank you. Our next question comes from the line of Linda Bolton Weiser with D. A Davidson. Please proceed with your question.
Linda Ann Bolton: Please proceed with your question. Yes, hi. I sort of get the feeling that there's a little bit of a peeling back of the onion in terms of discovering, I guess, maybe things that were not as expected within the company. So I guess.
Speaker Change: Yes, hi.
Speaker Change: So I sort of get the feeling that there is a little bit of a peeling back the onion in terms of.
Discovering I guess may be things that were not as expected within.
Speaker Change: Within the company. So I guess I'm wondering like do you feel that there's been some holding back of information by some of the operating people in the company.
Linda Ann Bolton: I'm wondering, like, do you feel that there's been some holding back of information by some of the operating people in the company? Do you feel like you need, maybe, to bring in a chief operating officer to help manage all these moving pieces? Um, I'm afraid that there are more shoes to drop in terms of realizing that there are some other issues because we've seen a couple quarters now where things have emerged. Maybe you could just kind of explain, like, kind of internally what's going on communication-wise across the divisions and how, Noel, I guess how you feel about what's going on. Thank you. Yeah, thanks, Linda.
Speaker Change: Do you feel like you need maybe to bring in a chief operating officer to help manage all of these moving pieces.
I, just like I'm afraid I'm afraid that theres more shoes to drop you know in terms of real realizing that there's some other issues because we've seen a couple of quarters now where things have emerged.
Speaker Change: So maybe you could just kind of explain like kind of internally, what's going on communication wise across the divisions.
Speaker Change: And then how how Noel I guess, how you feel about what's going on thank you.
Noel M. Geoffroy: And I appreciate the spirit of the question. And I would say, you know, the biggest thing I would say in this quarter is a real emphasis on data and analytics as the basis for our strategy and the basis for our decision making. And that is new.
Speaker Change: I think for that.
Speaker Change: Appreciate the spirit of the question and I would say.
The biggest thing I would say in this quarter is is a real emphasis on data and analytics as the basis for our strategy and a basis for our decision, making and that is new it's more of a new muscle for the company.
Noel M. Geoffroy: It's more of a new muscle for the company. I talked about my prepared remarks bringing in a lot of new subject matter experts from a marketing COE standpoint, and data and analytics, business intelligence, the rigor behind our brand building frameworks, etc., were all a part of that.
<unk> talked about in my prepared remarks, bringing in a lot of new subject matter experts from a marketing standpoint in data and analytics business intelligence rigor behind our brand building frameworks et cetera.
Noel M. Geoffroy: And I would say during the quarter, several of those data points came together that allowed me to really get further under the hood on our brand health. And that was a combination of the, you know, the quantitative data associated with the brand building framework. But also importantly, we got the marketing mix model regression data in this quarter, and it's a powerful wake-up call, I think not only for me to get that data and insight, but also for the full organization. We had an organization of folks, and you've covered the company for a long time, who enjoyed strong growth during the pandemic. And so their mindset was one of brand health.
Speaker Change: We're all a part of that and I would say during the quarter. Several of those data points came together that allowed me to really get further under the Hood on our brand health and.
Speaker Change: That was a combination of the quantitative data associated with the brand building the framework, but also importantly, we got the marketing Thats models regression data and this quarter and it is a powerful wakeup call I think not only for me to get that data and insight, but also for the full organization, we had an organization of Suez and.
Speaker Change: <unk> covered the company for a long time, who enjoyed strong growth during the pandemic and so their mindset was in one of brand health and I think as we've gotten some of this data and we recognize there are some things that the pandemic mass and brand health underlying brand health issues.
Noel M. Geoffroy: And I think as we've gotten some of this data, and we've recognized, there are some things that the pandemic masks and brand health underlying brand health issues that it masks and also some of the underinvestment that we had, you know, previously on the business. So I think the new data and that data-based approach to things and the insights that that brings is allowing us to bring more clarity across the organization of where we are, what we are, and acknowledge what we need to work on, and now focus on the actions that we need to take and the momentum moving forward across the organization.
That that math and also some of the underinvestment that that we have.
Speaker Change: <unk> had previously on the business. So I think the new data and that data based approach to things and the insights that that brings.
Speaker Change: It's allowing us to bring more clarity across the organization of where we are what I can acknowledge what we need to work on and are focused on the actions that we need to taken the momentum moving forward across the organization I would say as I look specifically at the marketing mix data a few things you know a few things.
Noel M. Geoffroy: I would say, as I look specifically at the marketing mix data, a few things come out of that for me. One is, I'm actually very encouraged to see positive ROI on media investment across most of our brands and most of our tactics. So that tells me we have room to optimize further. And we've built that into our year to go, as Brian outlined.
Speaker Change: <unk> come out of that for me one of.
Brian: I'm actually generally very encouraged to see positive ROI on our media investment across most of our brands in most of our tactics. So that tells me we have room to optimize further and we've built that into our year to go as Brian outlined we also see there's further room to invest so we've not reached saturation.
Brian: <unk>, which is why we worked so hard in a year to go to preserve.
Noel M. Geoffroy: We also see there's further room to invest. So we've not reached saturation, which is why we worked so hard in our year to go to preserve the incremental growth investment that we have built into the P&L because that's going to be really key for us. But it also showed us some underlying brand health weaknesses that were slowing our progress and not allowing us to make as much headway as quickly as we might have anticipated before.
Brian: The incremental growth investments that we haven't built into the P&L, because that's going to be really key for us, but it also showed us on underlying brand health weakness.
Brian: Slowing our progress and not allowing us to make as much headway as quickly as we might have anticipated before we do have a lot of positive building block that we've talked about in the past we've got incremental distribution. We've gained some theres some.
Brian: Slide in the Investor deck that you can see online that shows tangibly, what we've gained and we've got more to come in the back half of the year.
Noel M. Geoffroy: We do have a lot of positive building blocks that we've talked about in the past. We've got the incremental distribution, we've gained some, there's some, a slide in the investor deck that you can see online, but that shows tangibly what we've gained. And we've got more to come in the back half of the year.
Noel M. Geoffroy: But we've also got some other areas of weakness that we've got to address in order to get the full portfolio turned back to a growth posture. So that's what I would say in terms of the brands and their health. I think some of the other areas that came up, you know, probably the biggest one was the Tennessee Distribution Center. And, you know, this was, as we've talked about for quite some time, a very significant, state-of-the-art new distribution facility, most of which is operating very, very well and started operating, you know, back in fiscal 24. This last piece of phase-up is where the most complex part of automation has come in.
Brian: But we've also got some other areas of weakness that we've got to address in order to get the full portfolio turned back to a growth posture.
Brian: That's what I would say in terms of kind of the brands and the brand health I think some of the other areas that came up.
Brian: Probably the biggest one is the Tennessee distribution center. This was as we've talked about for quite some time, a very significant state of the art new distribution facility most of which is operating very very well and started operating back in fiscal 'twenty for this last piece of phase up is where the most complex part of automation has come in.
Brian: And that's where kind of mid May we reached.
Brian: We uncovered some challenges with the systems and the automation there the team's working really diligently and powering through now shipping the business, but we still have some route paused work on some of the systems to get that last piece.
Brian: The distributions on our operating plan.
Noel M. Geoffroy: And that's where, kind of, mid-May we reached. We uncovered some challenges with the systems and the automation there. The team's working really diligently and powering through now shipping the business, but we still have some root cause work on some of the systems to get that last piece of the distribution center operating. So that's a little bit of a perspective of where my head is. Okay, and then my second question is, And just to have a better understanding, like maybe a breakdown somehow more of the 12% sales decline in the quarter, because you said the execution issues were only 8 million, that's only about 2% of the decline. Your POS and track channels are actually running flattish, an easy prior year comparison. So in tracked channels, that should be worse than your non-tracked channel.
Brian: That's a little bit of a perspective of where where my head is.
Speaker Change: Okay and then my second question is.
Speaker Change: Just to have a better understanding like maybe a breakdown somehow more of the 12% sales decline in the quarter. Because you said the execution issues were only 8 million that's only about 2% decline your P. O S. In tracked channels is is actually running flattish against easy prior year comparison, so in <unk>.
Speaker Change: Track channels that should be worse than your non tracked channels. So your P. O. S is I don't know do you have a sense for what you're all channels. Pos is in the quarter or what it was I mean was it up was it down you know, but even if it was down 5% or.
Linda Ann Bolton: So your POS is, I don't know, do you have a sense for what your all-channel POS was for the quarter or what it was? I mean, was it up, was it down? You know, but even if it was down 5%, or, you know, it just seems like your 12% sales decline is far exceeding what your POS is. So, is the rest of all that just inventory reductions at retail? Is that the plug that is the difference between your POS and your sales performance? Thanks.
Speaker Change: It just seems like your 12% sales decline is far exceeding what your POS says so is the rest of all of that just the inventory reductions at retail is that the the plug that is the difference between your Pos and your sales performance.
Speaker Change: <unk>.
Brian L. Grass: Yeah, so, as we look at our Q1 revenue shortfall, there's a piece of it that's the executional challenges with both Curlsmith and TNDC, and that's about 1.7 percentage points of the decline that we saw in the quarter. The other areas, a big one for us, was the global outdoor slowdown. We talked last quarter about pockets of retailer inventory there. It manifested itself in a slowdown, so an area that had been much stronger has slowed down. There's not a lot of that, probably in the measured channels that you're looking at.
Speaker Change: Yeah. So I mean, as we look at our Q1 revenue shortfall. There were there was a piece of it that the execution challenges with both Karl Smith and T. N D C and that that's about one seven percentage points of the decline that we saw in the quarter. The other areas are big one for US was the global outdoor slowdown that was we.
Speaker Change: Last quarter about some pockets of retailer inventory there it manifested into a slowdown so an area that had been much stronger has have slowed down there's not a lot of that probably in the measured channels that youre looking out outdoor tends to be outside of I think what what you track and that that was a big change for us in the quarter.
Brian L. Grass: Outdoor tends to be outside of, I think, what you track, and that was a big change for us in the quarter. I would say we did, as we called out, see softer and more variable retailer replenishment, so that impacted kind of the sales for the quarter that you're not going to see in the POS from an ordering pattern standpoint. Those are probably the biggest drivers, Brian.
Speaker Change: I would say we did as we called out these softer and more variable retail retailer replenishment.
Speaker Change: So that impacted the sales for the quarter that youre not going to see in the Pos.
Speaker Change: From a from an ordering pattern standpoint.
Brian: Those are probably the biggest drivers Brian while on promotional activity to which is a reduction to sales. It's a sales dilution. So that's something that also you wouldn't see in the Pos data that youre looking at and we try and have a very complete view, we can't get data on all channels and all.
Brian L. Grass: Well, and promotional activity, too, which is a reduction in sales. It's a sales dilution, so that's something that you wouldn't see in the POS data that you're looking at, and we try and have a very complete view. We can't get data on all channels and all categories, but to your question about whether we have a complete view, we attempt very hard and buy a lot of data to get the most complete view possible.
Brian: All categories, but to your question about do we have a complete view, we attempt very hard and buy a lot of data to get the most complete view possible. Yeah. We've increased our view I would say from a data and analytics standpoint, our view across point of sale.
Noel M. Geoffroy: Yeah, we've increased our view, I would say from a data and analytics standpoint of our view across point of sale and across our categories. I will say, you know, as we've looked at June, we've seen some more favorable trends than what we saw in May. And as Brian mentioned, our assumption was that we would stay where we were for the remainder of the year on where we were in May. June was a bit more positive than what we were seeing through May. Okay, thank you.
Brian: Crossover category.
Speaker Change: I will say as we've looked at June we've seen some more favorable trends than what we found that as Brian mentioned, our assumption was.
Speaker Change: We would stay where we were for the remainder of the year on where we were in May June was with a bit more positive than what we were seeing through that.
Speaker Change: Okay. Thank you.
Operator: Thank you. Our next question comes from Bob Labick with CGS Securities. Please proceed with your question. Good morning.
Thank you. Our next question comes from the line of Bob <unk> with CJS Securities. Please proceed with your question.
Speaker Change: Good morning, I, just wanted to kind of follow up on the last points.
Robert James Labick: I just want to kind of follow up on the last points you made there. Thank you. And this hasn't really been typical for Helen of Troy, so I guess what's impacting or what impacted your visibility and what... fastermacro.com kind of prior visibility that we thought were an illusion. How should we think about your visibility and what impact... specifically this quarter and last quarter's guide. Yeah, I would say, you know, there are some things that got worse, some things that, you know, back when we talked to you in April, we knew had gotten worse.
Speaker Change: Once you made there and.
Speaker Change: The question I cannot.
Speaker Change: Later answer yet is kind of what happened to that visibility.
Robert James Labick: You gave initial guidance in kind of late April so two thirds of the way through the quarter, but then Q1 was obviously more difficult than expected, even with that and it hasn't really been typical for Helen of Troy. So I guess, what's impacting or what impacted your visibility and what can be done to change and restore.
Speaker Change: Or was it just.
Faster.
Speaker Change: Rowan.
Speaker Change: Kind of priority visibility that we thought was.
Speaker Change: Or an illusion how should we think about your your visibility on what impacted.
Speaker Change: Specifically this quarters.
Speaker Change: Last quarter's guidance to now.
Robert James Labick: That would be things like, you know, some of the macro areas, the weakening consumer, higher promotional activity, some of the retailer replenishment, got worse as the quarter went on. The global outdoor slowdown that I just mentioned, that was, you know, more pronounced as the quarter went on. Linda used a phrase, "peeling back the onion."
Speaker Change: Yeah, I would say you know there are some things that got worse. Some things that you know back when we talked to you in April we knew but got worse that would be things like some of the macro areas the weakening consumer higher promotional activity from the retailer replenishment and got worse as the core.
Speaker Change: <unk> went on the global outdoor slowdown that I, just mentioned that that was more pronounced as the quarter went on.
Speaker Change: As I mentioned earlier, the marketing mix model data was something that we got in the quarter that gave us kind of Linda.
Linda use the phrase peeling back the young and it allowed us to Peel back the onion, a bit more and really understand what was going on on some of our base businesses. What we didn't know at all.
Noel M. Geoffroy: It allowed us to peel back the onion a bit more and really understand what was going on in some of our base businesses. What we didn't know at all, Bob, when we talked to you in April were some of the TNDC issues, the distribution center issues. Those arose in mid-May, so it was quite late in the quarter that those came to fruition.
Bob: Bob when we talked to you in April where some of the TNT see issues at the distribution center issues. Those arose in mid May So they were quite late in the quarter and that those came to fruition and then on the bottom line side. A couple of things that came at the end of the quarter was the unexpected rise or spike in our health insurance cost product liability costs.
Noel M. Geoffroy: And then on the bottom line side, a couple of things that came at the end of the quarter were the unexpected rise or spike in our health insurance costs, product liability costs, and then the very sudden enactment of the Barbados tax reform. So those would be the things that I would say we, certain things we had some visibility into, but they were worse than what we were anticipating, and then some others that truly were very, very late in the quarter developments. Yeah, I had a little bother.
Bob: And then the very sudden enacted enactment of the Barbados tax reform, so those would be the things that.
Bob: But I would say we.
Bob: Certain things, we had some visibility to but they were worse than what we were anticipating and then some others that truly were.
Bob: Very very late in the quarter developments.
Bob: Yeah.
Speaker Change: Is that a little Bob if you just try and work backwards from the 12, 2% decline.
Brian L. Grass: If you just try and walk backwards from the twelve point two percent decline, you know, the system challenges get you close to 10. And then from there, to look at the range that we had provided, I would say that for me, the biggest surprise was really the acceleration of the outdoor slowdown. That was something we were not expecting.
Speaker Change: The system challenges gets you close to 10, and then from there to look at the range that we had provided I would say that for me. The biggest surprise was really the acceleration of the outdoor slowdown that was something we were not expecting osprey was growing osprey was gaining share by the.
Brian L. Grass: Osprey was growing; Osprey was gaining share. By the way, it continues to gain share. The category is down, but it's gaining share as the category declines. And then we did see a fairly sudden and abrupt adjustment in order patterns with two key retailers. So those were big adjustments that we were not expecting.
It continues to gain share the category is down, but it's gaining share as the category declines and then we did see a fairly sudden and abrupt adjustment in order patterns with with two key retailers. So.
Speaker Change: Those were big adjustments that we were not expecting and then we had not been seen promotional activity very much up until very recently towards the end of the quarter started to see that amp up fairly significantly. So for me, it's kind of those three big things that kind of gets you from 10, 10%.
Brian L. Grass: And then we had not been seeing promotional activity very much up until very recently, towards the end of the quarter, starting to see that amp up fairly significantly. So for me, it's kind of those three big things that kind of get you from 10% down to the outlook that we provided. Okay, thanks. And then maybe just help us level set because there's so many moving parts. What is the underlying... from your categories right now, what do you expect? here?
Speaker Change: Down to the outlook that we provided.
Speaker Change: Okay. Thanks, and then maybe just help us level set because theres. So many moving parts what.
Speaker Change: Is the underlying demand from your categories right now what do you expect it to be this year and what do you expect it to be over a medium term period.
Noel M. Geoffroy: Yeah, you know, I would say as I look across our categories, we have a lot, and they're all in various stages. I think, you know, we've got some categories that are performing fairly well; insulated beverage, high-end hair tools, prestige liquids, and hair continue to perform well as a total category. I would say kitchen utensils, as I mentioned in my remarks, are stabilizing.
Speaker Change: Yeah, you know I would say as I look across our categories. We have a lot in there. They are all in various various different stages I think we've got some categories that are performing.
Speaker Change: Fairly well insulated beverage.
Speaker Change: Hi inherent tools.
Speaker Change: Plus these liquids and hair continued to perform well as a total category I would say kitchen utensils as I mentioned in my remarks are stabilizing.
Noel M. Geoffroy: You know, I think, kind of coming off of the pandemic, that's a category now that's stabilizing. On the flip side, dry food storage is declining. You know, that's one that I think really hit a peak during the pandemic. It's been coming down since then, and it's actually taken an even more dramatic negative turn more recently as consumers are tightening and not spending as much on discretionary items. Outdoor had been, as Brian just mentioned, performing quite well from a PAC standpoint, from a travel standpoint.
Speaker Change: I think kind of coming off of the pandemic, that's a category that stabilizing on the flip side the dry.
Speaker Change: Food storage is is declining that's one that I think really had a spike during the pandemic, it's been coming down since then and it's actually taken an even more dramatic negative turn more recently as consumers are tightening and not spending as much on discretionary items.
Brian: Outdoor had been as Brian just mentioned had been performing quite well from a pack standpoint, a travel standpoint, that's also come down.
Noel M. Geoffroy: That's also come down in the recent quarter somewhat unexpectedly, although it has been a really strong performer for us. So that's what I would say overall from a category standpoint. I would say as we look at our performance in those categories, as I mentioned in my remarks, May saw some more positive green shoots. We grew share in eight of our categories, some of which are healthy categories, some of which are maybe less healthy categories. But we grew share, for example, in thermometers on both Braun and Zix. Grew up sharing kitchen utensils on OXXO.
Brian: In the recent quarter somewhat unexpectedly that has been a really strong performer for us so that you know that.
Brian: That's what I would say overall from a category standpoint, I would say is as we look at our performance in those categories. As I mentioned in my remarks May may saw some some more positive green shoots we grew share in eight of our categories. Some of which are healthy categories. Some of which are maybe less healthy categories, but.
Speaker Change: <unk> grew share for example in thermometers on both Brian and Vicky.
Brian: Grew share in kitchen utensils on OXXO as Brian mentioned, we grew share in tech packs with osprey, Despite the decline in that category as well as some other adjacent categories.
Noel M. Geoffroy: As Brian mentioned, we grew share in tech packs with Osprey despite the decline in that category, as well as some other adjacent categories in Osprey as we've extended that brand. We grew share in insulated travelers on Hydro Flask in a fiscal year to date through May. So we're starting to see some positive momentum there. We would also say there were some share trend improvements in May in areas like hair appliances, insulated beverage wear in total, travel packs, those kinds of areas.
Brian: Osprey as we've extended that brand we grew share in insulated travelers on hydro flask.
Brian: In our fiscal year to date through May So we're starting to see some some positive momentum. There. We would also say some share trend improvements in may and areas like hair appliance insulated beverage ware in total.
Brian: <unk> those kinds of areas so.
Brian: There's kind of puts and takes in various areas, but I would say overall I was encouraged by some of the positive momentum in our share performance and in May we saw how long way to go a lot of work to do but I was encouraged by the progress and just to clarify Bob Gwin Noelle refers to me that's data that we'll get in June.
Noel M. Geoffroy: So there's kind of a put and take in various areas, but I would say overall, I was encouraged by some of the positive momentum in our share performance in May. We still have a long way to go, a lot of work to do, but I was encouraged by the progress. And just to clarify, Bob, when Noelle refers to May, that's data that we'll get in June or later, and that's not what we use for our outlook.
Brian L. Grass: So our outlook would have had an earlier view of point of sale trends, demand, category, all the shares, all those things. And so one of the questions I answered earlier, the conservatism, we feel like we've taken a conservative point of view of all those trends from an earlier point that we saw kind of in May. But what Noelle's referring to is the data through May that we got after that, which has improved in many aspects. Okay, I think I understand that. Thanks very much.
Speaker Change: <unk> or later and that's not what we used to.
Speaker Change: For our outlook. So our outlook would have had an earlier view of point of sale trends demand category and all the share all those things and so too.
Speaker Change: One of the questions I answered earlier the conservatism, we feel like we've we've taken a conservative point of view of all of those trends from an earlier point.
Speaker Change: That we saw kind of in may, but what <unk>, referring to is the data is telling me that we got after that which has improved in many aspects.
Speaker Change: Okay.
Speaker Change: Thanks very much.
Operator: Thank you. Our next question comes from the line of Olivia Tong with Raymond James. Please proceed with your question. Great, thanks. Good morning.
Speaker Change: Thank you. Our next question comes from the line of Olivia Tong with Raymond James. Please proceed with your question.
Olivia Tong Cheang: I'm just following up on share performance. You know, as we go into sort of the fall reset period, how should we think about not necessarily share moves, you know, share moves, but the risk that there is going to be less space, you know, less shelf space for the categories that, Yeah, you know, I would say, Olivia, we continue to have a strong strategy of being when we're the shopper shops, as part of our strategic plan. And that that has been a focus. We've successfully gained new distribution across many different customers and channels already. And we've got more lined up in the year to go period.
Olivia Tong Cheang: Great. Thanks, good morning.
I was just following up on share performance.
Speaker Change: As we go into sort of the fall reset period, possibly talk about not necessary.
Olivia Tong Cheang: Sure.
Sir moves but.
Olivia Tong Cheang: That there is going to be less.
Less space less shelf space to other categories that you're in.
Noel M. Geoffroy: So I see us successfully using data and analytics, bringing, you know, bringing a good perspective on our brands and broadening the presence of our brands and retailers. So I think overall, that's going to be a positive thing for our portfolio. And for our brands, there are pockets and places where we've lost some ground in places, maybe, you know, we've lost a couple of items that aren't performing as well, or shelf presence or placement, you know, might have gone down.
Speaker Change: Yeah, I would say.
Speaker Change: Yeah, we can.
Speaker Change: Continued to have a strong strategy of being win where the shopper shops.
Speaker Change: As part of our strategic plan and that that has been a focus.
Speaker Change: Successfully gained new distribution across many different customers and channels already and we've got more lined up in the year ago period, So I E.
Speaker Change: Successfully using data and analytics, bringing bringing good perspective on our brand and broadening the presence of our brands and retailers. So.
Speaker Change: I think overall, that's going to be a positive for our portfolio and for our brands.
Speaker Change: There are pockets in places, where we've lost some ground in places maybe we've lost a couple of items that aren't performing as well or shelf.
Speaker Change: <unk>, our placement might've gone down and is there some of the factors that come into something underlying brand health issues and part of what we need to really focus on is strengthening the core brands. So that we maintain all the facings all the eye level placement all of those things that really helped ensure that the brand is <unk>.
Noel M. Geoffroy: And those are some of the factors that come into some of the underlying brand health issues. And part of what we need to really focus on is strengthening the core brand so that we maintain all the facings, all the, you know, the eye-level placement, all of those things that really help ensure that the brand is physically available and front and center on the shelf.
Speaker Change: Really available in front and center on the shelf.
Olivia Tong Cheang: And then maybe I want to pivot this discussion a little bit to a couple of line items, one being the hair category, because you mentioned the greatest pressures on tools under $100. Can you talk about the order of magnitude, you know, of sales versus your expectations at the low end versus the high end, if you could, you know, kind of give us an idea of the order of magnitude of the differences there? Yeah, I would say, you know, we've been for several quarters now, but the, you know, kind of energy in the category has been at the high end of hair tools. At the low end, there's, you know, that that's where the pressured consumer is kind of not making purchases of discretionary items like new hair tools. And so we're seeing more pressure there.
Speaker Change: Got it and then maybe.
Speaker Change: I want to pivot the discussion a little bit.
Speaker Change: To to a couple line items one being the.
Speaker Change: The hair category.
Speaker Change: Mentioned the greatest pressures on tools under $100 can you talk about order of magnitude.
All of them.
Speaker Change: Parsons our expectations at the low end.
Speaker Change: Versus the high end, if you kind of give us an idea of order of magnitude of some of the differences there.
Noel M. Geoffroy: I will say, you know, we do still have a strong presence there as we look at the filled-out shelf stuff that we have in mass retailers, for example, of what I would call kind of more opening, good items, basic hair dryers, basic curling irons, basic straighteners, etc. We're performing well there from a share standpoint, but the category overall at under $100 is more depressed as consumers in that, you know, shopping that range are looking to spend their money more on the essentials and less on discretionary items. The energy in the category is more at the high end; we play not at the very high end that the category is traded at, but we do have a dry bar in that area.
Speaker Change: Yeah, I would say.
Speaker Change: For.
Speaker Change: Several quarters now that the kind of the energy and the category has been at the high end of hair tools I would say at the low end.
Speaker Change: There is.
Speaker Change: That's where the pressure in consumer is kind of not not making purchases of discretionary items like new hair tools and so we're seeing more pressure there I will say.
Speaker Change: We do still have a strong presence there as we look at the build out shelf stuff that we have in mass retailers for example.
I would call kind of more opening good items basic hair dryers basic curling irons basic straighteners et cetera, we're performing well there from a share standpoint, but the category overall at that under $100 is is more depressed as consumers in that shop.
Speaker Change: <unk> that range are looking to spend their money more on the essentials and less on the discretionary items the energy and the category is more at the high end we play.
Noel M. Geoffroy: And that's an area, quite frankly, I want us to play, you know, stronger in the future. And that's, you know, part of the brand building framework work was really to get after: Who is our target there? What are our points of difference?
Speaker Change: At the very high end.
Speaker Change: But the category has traded up but we do have dry bar in that area and Thats an area quite frankly, I want us to play a stronger in the future and that's part of the brand building framework work was really to get after.
Noel M. Geoffroy: And how can we play even more successfully at that higher end where the category is performing well? I think Regimen is going to be a key to that. We're one of the few brands that offer both liquids and tools.
Speaker Change: Who was our target there what our points of difference in how can we play even more successfully at that higher end, where the category is it's performing well I think regimen is going to be a key to that we're one of the few brands that offer both liquids and tools.
Noel M. Geoffroy: I talked about Hot Rollers last time. That's doing well for us. We've launched Liquid Glass on Drybar, and it's having a positive impact on our Drybar Liquids portfolio when used in combination with some of our Drybar tools.
Speaker Change: I talked about hot rollers last time about doing well for us we've launched liquid glass on dry bar.
Speaker Change: A positive impact on our drive our liquids portfolio when used in combination with some of our dry power tools, you really get that perfect at home blowout that our consumers looking for so those are some of the initiatives and angles that we need to continue to push in order to perform more strongly where the category action is in that higher end.
Noel M. Geoffroy: You really get that perfect at-home blowout that our consumer is looking for. So those are some of the initiatives and angles that we need to continue to push in order to perform more strongly where the category action is in that higher end. Got it. So it's fair to assume that you're doing better in hair at Ulta versus Walmart, I assume.
Speaker Change: <unk>.
Speaker Change: Got it so fair to assume that you're doing better inherent altera versus Walmart right now.
Olivia Tong Cheang: I would say that our performance at Walmart on the entry-level tools is strong. The category overall is not as strong as consumers are changing there, but our performance with Revlon tools in particular at Walmart from a share perspective is good. The category is less strong. Where the category is stronger is in that higher price range. Got it. That's very helpful. This last question, two for me.
Speaker Change: I would say that our performance at Walmart at the on the entry level tools is strong the category overall isn't performing.
Speaker Change: Not as strong as consumers are changing their but our performance with revlon tools in particular at Walmart from a share perspective is good the category has lifted when a category is stronger than that at higher price price range.
Brian L. Grass: One on shipping and logistics, and just thinking through the potential for higher tariffs. First, on shipping and logistics, can you talk about whether the higher shipping costs, you know, Red Sea avoidance, things like that, are embedded into the revised outlook? And then on the manufacturing exposure, just thinking through the potential that we'll have higher tariffs, what percentage of your products are made in China? And how difficult would it be to diversify your manufacturing footprint if that was a logical choice, should tariffs go higher?
Speaker Change: Got it that's very helpful.
Speaker Change: Last question too.
Speaker Change: Two for me, one on shipping and logistics and just thinking through the potential for higher tariffs first on on shipping logistics can you talk about your whether that higher shipping costs. You know rents are you buying and things like that are embedded into the revised outlook.
Speaker Change: And then on the manufacturing.
Speaker Change: Those are just thinking through the potential that will have higher tariffs what percentage of your products are made in China, and how difficult would it be to diversify your manufacturing footprint if that made.
Speaker Change: If that was a logical choice should tariffs go higher thank you.
Brian L. Grass: Thanks. So, Olivia, thanks for the question. With respect to shipping costs, we are contracted for a very high percentage of our costs, and so we feel good. And we purposely don't contract 100% so we can have some level of flexibility to take advantage of opportunistic pricing. But, you know, somewhere near 80% is contracted into next fiscal year. So we feel good about that and the protection that that provides. With respect to tariffs, I would say, look, there's no way to perfectly protect ourselves. We manufacture about 79% of our goods in Asia, and about 15% of that is outside of China. You know, the difference there is what we would be dealing with with respect to tariff exposure.
Speaker Change: So Olivia thanks for the question on with respect to shipping costs. We are contracted for a very high percentage of our cost and so we feel good and we purposely.
Speaker Change: Contracts are 100%. So we can have some level of flexibility to take advantage of of opportunistic pricing, but somewhere near 80% is contracted into next fiscal year. So we feel good about that and the protection that that provides.
Speaker Change: With respect to tariffs I would say look theres no way to perfectly protect ourselves.
Speaker Change: Ourselves, we manufacture about 79% of our goods in Asia and about 15% of that is outside of China and so that's that.
Speaker Change: The difference there is what we would be dealing with with respect to our tariff exposure. We are currently working on several significant projects with our suppliers to move production into areas outside of China that are still in the Asia region and right now that that.
Brian L. Grass: We are currently working on several significant projects with our suppliers to move production into areas outside of China that are still in the Asia region. And right now, that seems like the best strategy to diversify the supply base and reduce potential exposure to tariffs. We also have North America sourcing that, you know, we were taking action there as a strategic initiative that has proven to be, you know, not as successful as I would say the Asian areas outside of China.
Speaker Change: It seems like the best strategy to diversify the supply base and reduce exposure potential exposure to tariffs. We also have North America sourcing that that we were we were taking action. There is a strategic initiative that one has proven out to be.
Speaker Change: Not as successful as I would say the the Asia areas outside of China that that's proving to be a more successful strategy and that's one that we're leaning into and like I said, we have several projects underway to move production. There. So hopefully that gives you a sense.
Brian L. Grass: That's proving to be a more successful strategy, and that's one that we're leaning into. And like I said, we have several projects underway to move production there. So hopefully, that gives you a sense. Thank you very much.
Speaker Change: Very clear thank you very much.
Operator: Thank you. Our next question comes from the line of Peter Grom with UBS. Please proceed with your question. Thanks, Operator, and good morning, everyone.
Speaker Change: Thank you. Our next question comes from the line of Peter Grom with UBS. Please proceed with your question.
Peter K. Grom: So, I wanted to take a step back and kind of think about the long-term strategy in the context of what you're learning both internally and externally right now, and, you know, maybe going back to the commentary on previous questions. Maybe, just to start, do you still feel that these targets are achievable? And then, Brian, I think you mentioned that it could take longer to achieve these targets. Any thoughts on when that may happen?
Peter K. Grom: Thanks, operator, and good morning, everyone. So I wanted to take a step back in time.
Speaker Change: You have to think about the long term strategy in the context of what Youre alignment, both internally and externally right now and maybe going back to my commentary into prior questions. Maybe just to start you still feel like these targets are achievable and then Brian I think you mentioned that it could take longer to achieve these targets just any thoughts on when that may happen.
Peter K. Grom: I mean, is this more of a one-year reset, or do you think these internal and external changes could make returning to the targets outlined back in October a multi-year process? So, Peter, just to clarify, when you say these targets, I think you're referring to the long-term Elevate for Growth strategic plan targets. Is that correct?
Speaker Change: More of a one year reset or do you think kind of these internal external tax changes could.
Speaker Change: Could make returning to the targets outlined back in October a multiyear process.
Peter K. Grom: So Peter just to clarify when you say these targets I think youre, referring to the long term elevate for growth strategic plan targets is that correct.
Peter K. Grom: Correct Okay.
Noel M. Geoffroy: Correct. Okay, yes, I mean, look. I think we, at this point in time, that's, you know, what we're working towards. I think we have to assess, obviously, how the environment progresses for the remainder of this year. We do see this, as we mentioned, as a reset and revitalized year. And we are making an investment where, you know, over the next two years, we will have increased our growth investment by over forty million dollars. And I'll point out that it was very back half weighted in fiscal twenty four. And it's going to be very, you know, front end weighted in fiscal twenty five.
Speaker Change: Okay, Yes, I mean look I think we at this point in time.
Speaker Change: What we're working towards I think we have to assess obviously, how the environment progresses further remainder of this year. We do see this is as we mentioned a reset and revitalize our year and we are making investment were over over two years, we will have it.
Speaker Change: Increased our growth investment by over $40 million and ill point out that it was very back half weighted in fiscal 'twenty, four and it's going to be very.
Speaker Change: Front end weighted in fiscal 'twenty five and so.
Noel M. Geoffroy: And so, you know, we feel like we are making the right choices for the long-term health of the business. And with that level of investment, new distribution, new innovation, we feel like that gives us a lot of tangible building blocks to get on the path toward Elevate for Growth. And so, yes, we have to see how the rest of the year plays out, how the environment plays out, but I would say at this point in time, that's still very much our vision. I don't know if you want to add anything.
Speaker Change: We feel like we are making the right choices for the long term health of the business and with that level of investment.
Speaker Change: New distribution, new innovation, we feel like that gives us a lot of tangible building blocks to get on the path towards elevate for growth.
Speaker Change: And so yes, we have to see how the rest of the year plays out how the environment plays out, but I would say at this point in time, that's still very much revision I don't know if you want to add.
Noel M. Geoffroy: No, I agree. I mean, you know, the only thing I would build on is, as I've gotten the marketing mix modeling data and seen fairly positive ROIs across our portfolio, across the tactics with opportunity to optimize, with opportunity to continue to invest smarter and strategically, that only bolsters my confidence that that's the right path forward for us. We've got to get our core brands growing consistently, and the data actually shows that that will work with the right continued fueling and the right kind of brand fundamentals in place. Okay, that's really helpful.
Speaker Change: Add anything no I agree.
Speaker Change: The only thing I would build on it.
Speaker Change: As I've gotten the marketing mix modeling data and seen fairly positive rois across our portfolio across the tactics with opportunity to optimize with opportunities to continue to invest smarter and strategically.
Speaker Change: That only bolsters my confidence that that's the right path forward for US we've got to get our core brands growing consistently.
Speaker Change: And the data actually shows that that that will work with with the right continued fueling and the right kind of brand fundamentals in place.
Peter K. Grom: And then maybe, you know, two quick follow-ups just on the outdoor decline. So maybe just talk about the channel more broadly. A lot of the commentary seems to be concentrated in packs rather than, you know, weakness across the entire channel.
Speaker Change: Okay. That's really helpful. And then just maybe two quick follow ups just on the outdoor declines can you maybe just talk about the channel more broadly a lot of the commentary seems to be concentrated in box rather than weakness across the entire channel so but I'm not sure. If that's a fair read or not and then on Hydro Flask. You mentioned you were disappointed with North America performance.
Speaker Change: Mickey could you unpack that a bit more or is that a function of category softness or you're seeing share losses versus.
Speaker Change: Some of the brands in the category. Thanks.
Peter K. Grom: So, but I'm not sure if that's a fair read or not. And then on HydroFlask, you mentioned you were disappointed with North America performance. Maybe you could unpack that a bit more?
Speaker Change: Yeah, So I would say on outdoor we're seeing a slowdown overall in outdoor our outdoor retailers in general R. R.
Speaker Change: Slowed down and they're managing their inventory accordingly.
Noel M. Geoffroy: Is that a function of category softness? Are you seeing share losses versus some of the brands in the category? Thanks. Yeah, so I would say on outdoor, we're seeing a slowdown overall in outdoor; our outdoor retailers, in general, have slowed down, and they're managing their inventories accordingly. So, for us, the main, you know, the major impact is on our pack business because that's where our, you know, predominant outdoor is.
Speaker Change: For us the main the major impact is if our on our Pac business.
Speaker Change: That's where our predominant outdoor is a little bit on hydro flask and as we know and I'll pivot to answer. The second question is the insulated beverage Ware category has broadened while beyond the kind of an outdoor consumer lens too.
Noel M. Geoffroy: A little bit on the hydroflask, but as we know, and I'll pivot to the answer to the second question, the insulated beverageware category has broadened well beyond kind of an outdoor consumer lens to, you know, a much broader consumer base.
Speaker Change: A much broader consumer base. So while it has it has impacted somewhat by outdoor it's actually much much broader than that now.
Noel M. Geoffroy: So while it has, it is impacted somewhat by outdoor, it's actually much, much broader than that now. And then, on the hydroflask, my disappointment in North America is that it has become a big competitive category. And, you know, I think hydroflask has now really embraced the shift of where this category has gone. And I think that's really evident in a lot of the new designs that we see.
Speaker Change: And then I would say on hydro flask my disappointment in North America is.
Speaker Change: It has the Tama.
Speaker Change: Big competitive category and I think.
Speaker Change: Hydro flask has now.
Speaker Change: Embraced the shift of where this category has gone and I think that's really evident in a lot of the new designs that we see if you look at our website you look at our content you look the designs that we have out there from the <unk> to the sugar crash.
Noel M. Geoffroy: If you look at our website, you look at our content, you look at the designs we have out there, from the Ombre to the Sugar Crush to the, you know, USA Limited Edition; we just launched a new Happy Days Floral Limited Edition, etc. These are very, very different-looking designs than you would have seen from hydroflask, you know, probably even six months ago, where everything was more of an earthy tone and, you know, very focused on hiking and outdoor activities.
Speaker Change: To the USA Limited edition, we just launched a new happy days floral limited edition et cetera. These are very very different looking.
Noel M. Geoffroy: Now it's a much broader view of where the category is, and we're seeing positive traction from that. As I mentioned, we're now growing share in the Tumblr section.
Speaker Change: Designs than you would have seen from hydro flask, probably six months ago, where everything was more of an earthy tone and very focused on hiking in outdoor activities now it's a much broader view of where the category is.
Noel M. Geoffroy: And in May, we're starting to see a share trend uptick across the entire insulated beverage category. And, you know, I think we'll continue to see that momentum, and we'll continue to see a broadened distribution footprint that's going to help us get back on track for the spring. Great. Thanks so much. I'll pass it on.
Speaker Change: And we're seeing positive traction from that as I mentioned, we're now growing share and the Tumblr section and in May we're starting to see a share trend uptick across the entire insulated beverage category.
Speaker Change: I think we'll continue to see that momentum and will continue to see a broad distribution footprint, that's going to it's going to help us get back on track for this brand.
Speaker Change: Great. Thanks, so much I'll pass it on.
Operator: Thank you. Our next question comes from the line of Susan Anderson with Canaccord Genuity. Hi, good morning.
Speaker Change: Thank you. Our next question comes from the line of Susan Anderson with Canaccord Genuity. Please proceed with your question.
Susan Kay Anderson: Thanks for taking my question and giving all the details today. I guess maybe just to follow up on the consumer softness that you saw in the quarter. I guess I'm wondering if you're expecting that to improve in the back half based on the guidance, or is it really just those other external factors improving? And then maybe just talk about, you know, kind of what you're expecting for the second quarter for demand as well.
Hi, Good morning, Thanks for taking my question and all the detail today.
Susan Kay Anderson: I guess, maybe just to follow up on the consumer softness softness that you saw in the quarter I guess.
Susan Kay Anderson: I'm wondering if you're expecting that to improve in the back half based on the guidance or is it really just those other external factors improving.
Susan Kay Anderson: And then maybe just talk about you know kind of what you're expecting for second quarter for demand as well.
Susan Kay Anderson: Thanks. Thanks, Susan. No, I would say, as Brian outlined earlier, what we did when we put together this outlook was assume the point of sale trends that we were seeing kind of through, you know, call it mid May timing, and that those would, you know, continue through the rest of the year. And those were, you know, difficult trends.
Susan Kay Anderson: Thanks, Susan No I would say as Brian outlined earlier, what we did when we put together this outlook as we assumed at the point of sale trends that we're seeing kind of through call. It mid may timing and that that would.
Susan Kay Anderson: Continue through the rest of the year and those those were.
Susan Kay Anderson: Difficult trends and I would say.
Noel M. Geoffroy: And I would say, you know, as we've now got a little bit more data through June, we're seeing actually more positive trends in June than what we used for our outlook. So I would say, you know, we were not factoring in a measurably improved consumer outlook. Actually, we were assuming that the POS trends that were challenging in the first quarter would continue throughout the balance of the year. Susan, the only point I would add is that in the second half of the year, we'll start to see some easier compares. We did not assume any improvement in the trend, even though the comparisons will be easier in the second half of the year.
Susan Kay Anderson: As we've now got a little bit more data through June we're seeing actually more positive trends in June and what we used for for our outlook. So I would say we were not factoring in a measurably improved consumer outlook actually you are assuming that the Pos trends.
Susan Kay Anderson: That were challenging in the first quarter continued throughout the balance of the year.
Speaker Change: Susan the only point I would add is in the second half of the year, we'll start to lap. Some easier compares we did not assume any improvement in trend, even though the comparisons will be easier in the second half of the year. So hopefully that gives you a little bit of perspective in terms of our attempt to have a can.
Brian L. Grass: So hopefully, that gives you a little bit of perspective in terms of our attempt to have a conservative view with respect to this outlook. So we assumed that the trends that were pretty unfavorable in mid-May and said that those would remain constant for the entire year, so no improvement, even though the comparison in the second half of the year will get significantly easier. Okay, got it.
Speaker Change: <unk> view with respect to this outlook. So we've assumed that the trends that were pretty unfavorable mid may.
Speaker Change: And said that those would remain constant for the entire year So no improvement.
Speaker Change: Even though the comparison in the second half of the year will get significantly easier.
Susan Kay Anderson: Yeah, that's helpful. And then maybe just in beauty, a follow-up there, you talked about softer consumer demand, I believe in both tools and liquids now, which is the first time I think I've heard you guys talk about it in liquids. So, you know, it seemed like last quarter was silver, and the category was strong. And Noel, I think you mentioned too that, you know, hair liquids is still a pretty strong industry.
Speaker Change: Okay got it yeah that's helpful.
And then maybe just in beauty a follow up there you talked about softer consumer demand I believe that both tools and liquids now, which that's the first time I think I've heard you guys talk about it in liquid. So you know it seemed like last quarter. It was still right in the category with strong and while I think you mentioned to you that you know her liquids it still.
Susan Kay Anderson: So I'm curious, I guess, how much of the softness you're seeing is industry-wide versus maybe some other share losses with your brands there. And then just on Curlsmith, when do you expect those disruptions to be fixed?
Speaker Change: A pretty strong industry. So I'm curious I guess, how much of the softness youre seeing industry wide versus maybe some other share losses with your brands. There and then just on Karl Smith I guess when do you expect the disruption to be tax. Thanks.
Noel M. Geoffroy: Thanks. Yeah, when I look at Hair Liquids, the category in Prestige Liquids is still pretty strong. It's maybe a little less strong than it once was, but it's still, you know, it still has some growth to it. The Curlsmith issue that you just mentioned at the end did adversely impact us. We had a stronger June than we did in the first quarter as we put those behind us.
Speaker Change: Yeah, when I look at her liquids the category in prestige liquids is still pretty strong, it's maybe a little less strong than it once was but it's still it's still has some growth to it the CRO Smith issue that you just mentioned at the end did adversely impact us.
Speaker Change: A stronger June.
Speaker Change: Then than we did.
Speaker Change: Our first quarter as we put those behind US we do believe those are now behind us on Karl Smith.
Noel M. Geoffroy: We do believe those are now behind us on Curlsmith. Drybar, I would say from a liquid standpoint, we've had some wins and some losses from a retailer standpoint. The new innovation in liquid glass is doing well for us. Very, very strong ratings on Ulta.com for the blowout cream that I mentioned, and the finishing serum that's showing some positive halo effects on the business. So I think, you know, starting to see some positive results there on Drybar, but probably not as strong overall performance on Drybar as I'd like to see us. And I think some of the new innovation will help us trend in a better direction there.
Speaker Change: Dry bar I would say from a liquid standpoint, we've had some some wins and some losses.
Speaker Change: From a retailer standpoint, the new innovation on liquid glass is doing well for us very very strong ratings on ultra dot com for the blowout cream that I mentioned, the finishing theorem.
Speaker Change: That's showing some positive handle on the business.
Speaker Change: So I think starting to see some positive there on drive ARPA.
Speaker Change: Probably not as strong overall performance on dry bars, I'd like to see us and I think.
Speaker Change: Some of the new innovation will help us trend in a better direction there.
Susan Anderson: Okay, great.
Noel M. Geoffroy: Okay, great. Thanks so much. Good luck to the rest of you. Thanks, Susan. Thank you. Ladies and gentlemen, we've come to the end of our time allotted for questions. I'll now turn the floor back to Ms. Jedlock for any final comments. Thank you all for joining us today. I know we covered a lot this morning, but I hope as you leave the call, we've been able to articulate how committed we are to the choices that we've made and that the entire organization is very focused on achieving the financial objectives that we outlined for you today. Thanks very much. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Okay, great. Thanks, so much good luck the rest of the year.
Unknown Executive: Thanks so much.
Unknown Executive: Good luck, the rest of you. Thanks, Susan.
Susan Kay Anderson: Thanks, Susan.
Unknown Executive: Thank you.
Speaker Change: Thank you ladies and gentlemen.
Lisa: Lisa, we come to the end of our time allowed for questions.
Speaker Change: Come to the end of our time allowed for questions I'll now turn the floor back to Ms. Shaffer for any final comments.
Julien Mininberg: I'll turn the floor back to Mrs. Edlock for any final comments. Thank you all for joining us today. I know we covered a lot this morning, but I hope as you leave the call, we've been able to articulate how committed we are to the choices that we've made and that the entire organization is very focused on achieving the financial objectives that we outline for you today.
Ms. Shaffer: Thank you all for joining us today I know, we covered a lot. This morning, but I hope as you leave the call we've been able to articulate how committed we are to the choices that we've made and that the entire organization is very focused on achieving the financial objectives that we outlined for you today, thanks very much.
Unknown Executive: Thanks very much.
Unknown Executive: Thank you.
Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.
Unknown Executive: This concludes today's conference call. You may disconnect your lines at this time.
Unknown Executive: Thank you for your particular.