Q3 2025 Helen of Troy Ltd Earnings Call
It will follow the formal presentation, if anyone should require operator assistance. Please press star zero on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded it is now my pleasure to introduce Sabrina Mckee Senior Vice President of business development and Investor Relations. Thank you you may begin.
Speaker Change: Thank you operator, good morning, everyone happy new year and welcome to Helen of Troy's third quarter fiscal 2025 earnings conference call. The agenda for the call. This morning is as follows I will begin with a brief discussion of forward looking statements. These new wells you fought the company's CEO will comment on business performance and then provide some perspective on <unk>.
Speaker Change: Current trends then Mr. Brian grass, the company's CFO will review the financials in more detail and discuss our outlook. Following this we will open up the call for Q&A.
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.
Speaker Change: We're looking statements are 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 maybe calculated differently than the non-GAAP financial information disclosed by other parties.
Speaker Change: The company cautions listeners not to place undue reliance on forward looking statements or non-GAAP information.
Speaker Change: Before I turn the call over to Michelle for 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 vice growing to the bottom of the homepage the earning.
Speaker Change: This release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP based measures I.
Michelle: I will now turn the conference call over to Michelle floor.
Michelle: Thank you Sabrina happy new year, everyone and thank you for joining us today.
Michelle: We are pleased with our third quarter results that are within the outlook range. We provided in October despite continued cautious consumer spending on discretionary purchases.
Michelle: Weak cough cold and flu season globally. We are also pleased that our Tennessee distribution facility is running us design handling the volume of our heaviest quarter well. We continue to anticipate we will achieve our forecasted labor efficiency by fiscal year end.
Michelle: We also made further progress during the quarter on our fiscal 'twenty five efforts to reset to revitalize our brands with improved results, particularly in our home and outdoor portfolio.
Michelle: Tiger This remains on track with lower year over year product and commodity costs, having a positive impact on our gross profit margin and providing critical fuel for reinvestment in our brands and business.
Michelle: We also see continued progress on our long term strategic initiatives.
Michelle: As you May recall, one of those strategic priorities with the formation of the North American regional market organizations or N E. R. M O, which in addition to our international Arnaud is intended to make our brands more available where the shopper shops through incremental distribution gains.
Michelle: During the quarter, we continued to benefit from a meaningful net distribution games one in the first half of fiscal 'twenty five and further expand the distribution in the third quarter.
Michelle: Fiscal year to date, we have grown our U S weighted distribution by 11% year over year.
Michelle: We have also gained a meaningful distribution internationally through a combination of new channels and new distributor partnerships.
Michelle: Another strategic initiative, we have made Crocker phone is use of data and analytics across all facets of our business.
Michelle: For example, we continue to use our marketing mix modeling data to prioritize investment opportunities across our brand portfolio and also to select the marketing tactics, where we see the best ROI potential.
Michelle: These efforts contributed to market share growth in multiple categories with seven of our key categories growing or maintaining share. This fiscal year through November and our U S measured channel and improved P O S and share across multiple must win markets internationally.
Michelle: Another important long term strategic initiative is to refine and shape our portfolio with a focus on maximizing profitable growth.
Michelle: Subsequent to the end of the third quarter, we announced the closing of our acquisition of evolve in June we are very excited to add olive in June for our portfolio of leading brands and to welcome. The passionate associates visionary leadership teams to the Helen of Troy family. All of in June is an excellent fit with our goal of continuing better together M&A those strategically.
Michelle: And financially the brand complements our existing beauty portfolio and broadens us beyond the hair category, adding a high growth and high margin consumables business that is immediately accretive to Helen of Troy.
Michelle: All of the Jews innovative driven performance highly relevant vision of democratizing nail care for everyone Award winning products and unique consumer engagement model are impressive and inspiring.
Michelle: Most recently they were awarded beauty in 'twenty 'twenty four breakthrough beauty brand in math and they introduced a new gel Polish platform in the third quarter that it's outperforming our expectations.
Michelle: As we mentioned previously the olive in June management team and associates will continue to drive throughput strategy and operation of the business working with the support of pellets, whereas leadership to fully realize the brand's potential.
Michelle: We see significant growth potential in all of it in June as the team continues to build on the brand's strength and consumer obsession and breakthrough commercial and product innovation. In addition to leveraging Helen of Troy capabilities to help expand availability with increased distribution.
Michelle: We will continue to consistently evaluate our brand portfolio and remain disciplined in our approach to shaping it through both acquisition and potential divestiture to position the company for long term success and growth.
Michelle: With acquisitions, we will continue to look for brands that have strong global growth potential are financially accretive and meet our better together criteria.
Michelle: Now, let's turn to third quarter performance across our portfolio.
Michelle: So I'm gonna outdoor performed very well with growth in all three brands and wellness Braun Vicks remain leaders in their respective categories, even as those categories have been impacted by a weak cough cold and flu season.
Michelle: In beauty, we know there is more work to be done, but we did make further progress with focused actions to improve the fundamentals of the beauty business and its friends.
Michelle: International was again, a highlight of the quarter with sales growth of seven 5%, primarily driven by strength in home and outdoor.
Michelle: Starting with home and outdoor.
Michelle: For OXXO growth was driven by distribution gains and continued shelf productivity at Walmart as well as higher international sales driven by growth in India and locked down.
Michelle: In October OXXO expansion at Walmart continued across kitchen, and organization, notably with the introduction of our pop food storage line and over 2000 Walmart stores.
In beauty, we know there is more work to be done, but we did make further progress with the focused actions to improve that.
Michelle: In November oxo Tot began in approximately 354 tests at Walmart, It's early days, but we're seeing positive momentum and are excited at this expansion opportunity for our well regarded topline.
Michelle: So continued strong Walmart sales momentum into the holidays with significant sales growth versus the same period, a year ago, driven by continued brand momentum and the expanded distribution oxo.
Michelle: <unk> also gained additional distribution in the grocery channel.
In the U S. Also continues to grow with leading market share of fiscal year to date in the key categories, including kitchen utensils with a category that normalize post COVID-19 imposed retailer shifts from specialty some math and dry food storage, where the category has been hindered by consumers cautious spending.
Michelle: As mentioned last quarter, we recently launched our oxo grew rapidly where coffee maker building on the strength of our coffee line and offered an affordable options for great tasting hot coffee or cold brew concentrates in less than five minutes.
Michelle: The rapid brewer is performing very well the strong Peel out and was recently the number one new release from coffee machines on Amazon during the important Thanksgiving shopping week.
Michelle: We received exciting on social media coverage as award winning and highly respected coffee Influencer and believes the Morgan aircraft hosted a favorable and informative video review of the oxo grew rapid grower on their Youtube channel Master the strong engagement.
Michelle: Oxo also continues to serve the consumer and trend right ways with the introduction of ceramic coated metal bakeware in November just ahead of Thanksgiving.
Michelle: Turning to hydro flask, we are pleased with the brand's top and momentum during the quarter, reflecting our focus on revitalizing the brand through innovation distribution and marketing.
Michelle: Growth in the quarter was driven by initial distribution gains at target and a new essential hydration, Tumblr and bottles that offering at Costco.
Very well the strong POF and was recently the number one new release from coffee machines on Amazon during the important Thanksgiving shopping week.
Michelle: International sales were also strong fueled by distribution expansion in EMEA, APAC and Latam as we continue to leverage opportunities to draft off both osprey in Austin strength and create stronger distributor partnerships.
We received exciting earn social media coverage as award winning and highly respected coffee Influencer Barista Morgan Accra hosted a favorable and informative video review of the October at a rapid grower on their Youtube channel Master the strong engagement.
Michelle: Hydro flask e-commerce over deliver driven by stronger than forecasted P. O S that lifted post labor day replenishment and stronger than forecasted performance on Prime day with hydro flask, achieving the number one best seller ranking within water bottles during the event.
Oxo also continues to serve the consumer and trend right ways with the introduction of ceramic coated metal bakeware in November just ahead of Thanksgiving.
Michelle: Hydro flask continues to win additional shelf space with more permanent placement in both the housewares and sporting goods section of target early in the fourth quarter and is extending its presence in Canada.
Turning to hydro flask, we are pleased with the brands toughest momentum during the quarter, reflecting our focus on revitalizing the brand through innovation distribution and marketing.
Growth in the quarter was driven by initial distribution gains at target and a new essential hydration, Tumblr and bottles that offering at Costco.
Michelle: The brand also continues to drive engagement through relevant social media content, highlighting its popular seasonal offerings for the holidays, such as first a color waves gifts that and personalization options and its sponsorship of the Charlie ex CX swept tour.
International sales were also strong fueled by distribution expansion in EMEA, APAC and Latam as we continue to leverage opportunities to draft off both osprey in Austin strength and create stronger distributor partnership.
Michelle: We also took the opportunity to remind our consumers of hydro flask long standing commitment to provide them with top quality products supported by for example, the rigorous testing of our three lead ruthless flex that flip flopped straw cap and the chubb cap, but across our various bottles and toddlers.
Hydro flask ecommerce over deliver driven by stronger than forecasted P. O S that lifted post labor day replenishment and stronger than forecasted performance on Prime day with hydro flask, achieving the number one best seller ranking within water bottles during the event.
Speaker Change: Osprey continues its momentum and everyday packs the daylight fall 'twenty 'twenty four travelodge has been very successful helping drive a double digit sales increase for the daylight longer daylight expandable travel pack has been a top online seller since launched and is receiving strong Amazon reviews.
Hydro flask continues to win additional shelf space with more permanent placement in both the housewares in sporting goods section of target early in the fourth quarter and is extending its presence in Canada.
The brand also continues to drive engagement through relevant social media content, highlighting its popular seasonal offerings for the holidays, such as first a color waves gifts that and personalization options and its sponsorship of the Charlie Exeat swept tour.
Michelle: The brand also did well internationally with growth across all regions.
Speaker Change: We were honored that Oxford was included in fact company's list of brands that matter 'twenty 'twenty four for the brand's commitment to sustainability through its use of recycled content and the main body fabric of 98% of the textile products connecting people of all sizes with the outdoors with its extended fit collection and for the brand support of local commute.
We also took the opportunity to remind our consumers of hydro flask long standing commitment to provide them with top quality products supported by for example, the rigorous testing of our three lead ruthless flex that slid a flex straw cap and the chubb cap that fit across our various bottles tumblers.
Michelle: Steve.
Michelle: During the quarter, we also successfully integrated osprey into our ERP system, and our distribution network in the U S and Europe.
Osprey continues its momentum and everyday packs the daylight fall 'twenty 'twenty four travel launch it's been very successful helping drive a double digit sales increase for the daylight longer daylight expandable traveled pack has been a top online seller since launched and is receiving strong Amazon reviewed.
Michelle: I am pleased to share that we went live with its integration with minimal issue and has been successfully shipping our osprey b to b and direct to consumer business from these facilities.
Michelle: This is an example of our focus on elevating our operational discipline I'm pleased with the team's strong planning and execution of this important integration.
The brand also did well internationally with growth across all regions.
Michelle: Now turning to beauty and wellness.
We were honored that offered was included in fact company's list of brands that matter 'twenty 'twenty four for the brand's commitment to sustainability through its use of recycled content and the main body fabric of 98% of the textile products connecting people of all sizes with the outdoors with its extended sick collection and for the brand support of local commute.
Michelle: For beauty many of the key trends, we spoke about last quarter continued in the third quarter with P. O S softness across our portfolio.
Looking at the categories.
Michelle: We're all growth for both hair appliances and hair liquid is moderating.
Michelle: In hair appliances, we continue to see a bifurcation with demand stronger for high end appliances at price points above $100.
Steve.
During the quarter, we also successfully integrated osprey into our ERP system, and our distribution network in the U S and Europe.
Michelle: Despite category softness in the below 100 price point appliances, Revlon gained momentum at mass and online, reflecting our value reframing and strong activations for holiday.
I am pleased to share that we went live with its integration with minimal issues and had been successfully shipping are off pretty b to b and direct to consumer business from these facilities.
Michelle: The Revlon holiday pallets and Walmart from early October through December feature the volume out of her and route booster and drove significant year on year growth.
This is an example of our focus on elevating our operational discipline I'm pleased with the team's strong planning and execution of this important integration.
Michelle: The Revlon volume either remains the number one selling item in units within the airplanes category.
Now turning to beauty and wellness.
Michelle: Drive our launched three new holiday kit and a new triple shot interchangeable blow dry brush, which continues to climb in sales and popularity of Amazon and Sephora is one of the brands pop tool to use.
For beauty many of the key trends, we spoke about last quarter continued in the third quarter with P. O S softness across our portfolio.
Looking at the categories.
We're all growth for both hair appliances and hair left with is moderating.
Michelle: Looking forward, we believe we have some promising innovation on the appliance side to help bring some news and momentum back to the spread.
In hair appliances, we continue to see a bifurcation with demand stronger for high end appliances at price points above $100.
Michelle: Chris Smith is benefiting from our incremental growth investments across both innovation and marketing.
Despite category softness in the below 100 price point appliances, Revlon gained momentum at mass and online, reflecting our value reframing and strong activations for holiday.
Michelle: At the beginning of the quarter, we launched shaken shine a revolutionary CRO refreshing. This that is ideal for extending your wash day look it has quickly become one across the top selling product.
The Revlon holiday pallets and Walmart from early October through December feature of the volume out of her and route booster and drove significant year on year growth.
Michelle: Our data driven marketing insight tells us that the awareness campaigns. We ran ahead of black Friday have their intended impact.
The Revlon volume either remains the number one selling item in units within the airplanes category.
Michelle: E T C was up significantly and we saw the biggest lift in new consumers to the brand that we have seen in the last year.
Drive our launched three new holiday kit and a new triple shot interchangeable blow dry brush, which continues to climb in sales and popularity of Amazon and Sephora as one of the brands top tool to use.
Michelle: The consumer retention is a strength driven by product efficacy and instructional content. We're excited to see our increased focus on top of funnel marketing bearing fruit to increase brand awareness.
Looking forward, we believe we have some promising innovation on the appliance side to help bring some news and momentum back to the spread.
Michelle: Turning to our wellness business.
Michelle: As discussed last quarter, we gained new or expanded distribution on Braun thermometer at Cvs, Costco, and Walmart, which are all contributing to positive Pos trends for the brand.
Earl Smith is benefiting from our incremental growth investments across the innovation and marketing.
At the beginning of the quarter, we launched shaken shine a revolutionary CRO refreshing. This that is ideal for it and then your wash day look it has quickly become one across the top selling product.
Michelle: Offsetting this has been a weak cough cold and flu season.
Michelle: It indicates the through November U S illness rates are down below the slow start we saw same time last year and at the lowest level in the past eight years, excluding the COVID-19 anomaly year of 'twenty 'twenty to 2021.
Our data driven marketing insights tells us that the awareness campaigns. We ran ahead of Black Friday had their intended impact.
E T C was up significantly and we saw the biggest lift in new consumers to the brand that we have seen in the last year.
Michelle: Illness rates are similarly, low in Europe and APAC.
Michelle: Subsequent to quarter end data through December 21st sure.
The consumer retention is a strength driven by product efficacy and instructional content. We're excited to see our increased focus on top of funnel marketing bearing fruit to increase brand awareness.
Michelle: Cause illness rates have remained below the prior year and well below historic averages.
Michelle: Well this is contributing to overall softness in the humidifier patient in thermometry categories, Vicks and Braun have maintained their leading market shares.
Turning to our wellness business.
As discussed last quarter, we gained new or expanded distribution on Braun thermometer at Cvs, Costco, and Walmart, which are all contributing to positive Pos trends for the brand.
Michelle: This remains by far the number one brand in Rx humidifier patients and Braun Vicks remain the number one and number two brands, respectively, and the thermometry category.
Michelle: And water filtration pure continues to grow share with strong P. O L and is gaining share in pitcher system as the brand continues to highlight the relevant value reframing message the pure can save over $75 per month versus bottled water.
Obviously, that's been a weak cough cold and flu season.
It indicates the through November U S illness rates are down below the slow start we saw same time last year and at the lowest level in the past eight years, excluding the COVID-19 anomaly year of 'twenty 'twenty to 2021.
Michelle: The brand team also quickly put activation in market to leverage the renewed focus on cleaner drinking water highlighted by the government's directives for local municipalities to identify and replace led type over the coming decade.
Illness rates are similarly, low in Europe and APAC.
Subsequent to quarter end data through December 21st sure.
The illness rates have remained below the prior year and well below historic averages.
As the number one selling lever do think filter brand pure launched an initiative to educate consumers to help them access to water.
Well this is contributing to overall softness in the humidifier patient in thermometry categories, Vicks and Braun have maintained their leading market shares.
Michelle: The campaign included educational resources available on a pure web site and a 25000 dollar donation to the waterfall. The research foundation to support education and access to water testing kits for schools in need nationwide.
This remains by far the number one brand in Rx humidifier patients and Braun Vicks remain the number one and number two brands, respectively, and the thermometry category.
And water filtration pure continues to grow share with strong T O L and is gaining share in pitcher system.
Michelle: Great examples of leveraging our leading products with relevant and timely commercial activation.
The brand continues to highlight the relevant value reframing message the pure can save over $75 per month versus bottled water.
Michelle: In summary, we remain focused on executing our strategic initiatives, while we continue to navigate the challenging and evolving consumer environment.
The brand team also quickly put activation in market to leverage the renewed focus on cleaner drinking water highlighted by the government's directives for local municipalities to identify and replace led type over the coming decade.
Michelle: Since we last reported earnings three large retailers have filed for bankruptcy, including the container store, which is a meaningful customer for OXXO.
Michelle: We also continue to see the widely reported bifurcation in spending between higher income and lower income households.
As the number one selling lever do think filter brand pure launched an initiative to educate consumers to help them access.
Michelle: Wow holiday spending overall up year over year is driven by higher income consumers purchasing higher priced item, while lower income consumers continue to struggle prioritizing necessities over discretionary goods.
Sure.
The campaign included educational resources available on a pure web site and a 25000 dollar donation to the water quality Research Foundation to support education and access to water testing kits for schools need nationwide.
Michelle: We are flexing our portfolio and go to market execution to meet our consumers, where they are with relevant product assortment and brand messaging.
Great examples of leveraging our leading products with relevant and timely commercial activation.
Michelle: As we discussed we are on a journey to reset and revitalize our brands.
In summary, we remain focused on executing our strategic initiatives, while we continue to navigate the challenging and evolving consumer environment.
Michelle: Faced some headwinds in the third quarter from the macro factors I just mentioned, we continue to make progress on our initiatives and the data tells us our investments are bearing fruit. We believe we're building a stronger more collaborative data driven and disciplined Helen of Troy that is better positioned to maximize the potential of our brands globally.
Since we last reported earnings three large retailers have filed for bankruptcy, including the container store, which is a meaningful customer for OXXO.
We also continue to see the widely reported bifurcation in spending between higher income and lower income households.
Michelle: Lastly, before I turn it over to Brian I want to give thanks to everyone at Helen of Troy for being part of why we have earned two important recognition, including a significant jump and ranking to number 16, and the 'twenty 'twenty four healthiest 100 workplaces in America, which recognizes people first organization to prioritize the well being.
Wow holiday spending overall up year over year is driven by higher income consumers purchasing higher priced item, while lower income consumers continue to struggle prioritizing necessities of or discretionary goods.
We are flexing our portfolio and go to market execution to meet our consumers, where they are with relevant product assortment and brand messaging.
<unk> of their associate population and for the third year in a row recognition by Newsweek as one of America's most responsible companies 2025.
As we discussed we are on a journey to reset and revitalize our brands. Despite some headwinds in the third quarter from the macro factors I. Just mentioned, we continue to make progress on our initiatives and the data tells us our investments are bearing fruit.
Brian Grass: Now I will turn it over to Brian.
Brian Grass: Thank you Noel and good morning, everyone.
Brian Grass: I'm pleased to report results that were within the outlook range for net sales and adjusted EPS. We provide the news in October despite the weaker than expected winter and illness season.
We believe we are building a stronger more collaborative data driven and disciplined Helen of Troy is better positioned to maximize the potential of our brands globally.
Brian Grass: We also increased our gross profit and adjusted operating margins, even as we continued to invest in our business for long term health.
Lastly, before I turn it over to Brian I want to give thanks to everyone at Helen of Troy for being part of why we have earned two important recognition, including a significant jump and ranking to number 16, and the 'twenty 'twenty four healthiest 100 workplaces in America, which recognizes people first organization prioritize the wellbeing.
During the quarter growth investment for both product innovation and marketing support.
Brian Grass: Creased, approximately 140 basis points year over year.
Speaker Change: Okay. Walt mentioned, we were beginning to see the benefits of that growth investment in terms of market share improvement for many of our key brands.
Speaker Change: After the end of the quarter on December 16th we announced the closing of the all of them in June acquisition.
Of their associate population and for the third year in a row recognition by Newsweek as one of America's most responsible companies 2025 now.
All of them in June represents a great addition to our portfolio and is immediately accretive to our revenue growth rate.
Now I will turn it over to Brian.
Thank you Noel and good morning, everyone.
Speaker Change: Most profit margin adjusted EBITDA margin adjusted EPS, and our expected ongoing adjusted EPS growth rate.
I'm pleased to report results that were within the outlook range for net sales and adjusted EPS. We provided in October despite the weaker than expected winter and illness season.
Speaker Change: We borrowed a principal amount of $235 million on our revolver to pay the initial cash consideration of $229 4 million net of cash acquired.
We also increased our gross profit and adjusted operating margins, even as we continue to invest in our business for long term health.
As of December 16th 2024, inclusive of these borrowings now swapped in the aggregate amount of $550 million or 56% of our outstanding floating rate debt.
During the quarter growth investment for both product innovation and marketing support.
Approximately 140 basis points year over year.
Speaker Change: So an average fixed sofa rate of three 9% through February 2026.
Okay. Walt mentioned, we are beginning to see the benefits of that growth investment in terms of market share improvement for many of our key brands.
Speaker Change: Our pro forma net leverage ratio was three times at the time of closing.
That's the end of the quarter on December 16th we announced the closing of the all within June acquisition.
I'll now move onto a more detailed discussion of our third quarter results.
All of them in June represents a great addition to our portfolio and is immediately accretive to our revenue growth rate.
Speaker Change: Consolidated net sales declined three 4%.
Speaker Change: The ultimate home and outdoor segment increased four 3% driven by growth in all three brands and strength in international.
Profit margin adjusted EBITDA margin adjusted EPS, and our expected ongoing adjusted EPS growth rate.
Speaker Change: This was more than offset by a decline in beauty and wellness.
We borrowed a principal amount of $235 million on our revolver to pay the initial cash consideration of $229 4 million net of cash acquired.
Speaker Change: It was unfavorably impacted by weaker than expected winter illness season during the quarter.
Speaker Change: I will further discuss later in my remarks.
As of December 16th 2024 inclusive of these borrowings we now swapped in the aggregate amount of $550 million.
Speaker Change: Consolidated gross profit margin increased 90 basis points to 48, 9%.
Speaker Change: The increase was primarily due to favorable inventory obsolescence expense year over year.
56% of our outstanding floating rate debt.
Speaker Change: And lower commodity and product costs, partly driven by project initiatives.
So an average fixed sofa rate of three 9% through February 2026.
Our pro forma net leverage ratio was three times at the time of closing.
Speaker Change: GAAP operating margin for the quarter was 14, 2% compared to 19, 5% in the same period last year.
I'll now move onto a more detailed discussion of our third quarter results.
Speaker Change: Which benefited from a gain on the sale of our El Paso facility of $34 2 million or 620 basis points.
Consolidated net sales declined three 4%.
And our home and outdoor segment increased four 3% driven by growth in all three brands and strength in international.
Speaker Change: On an adjusted basis operating margin increased 30 basis points 16, 6%.
This was more than offset by a decline in beauty and wellness, which was unfavorably impacted by weaker than expected winter illness season during the quarter.
Speaker Change: The increase was primarily driven by lower annual incentive compensation expense.
Speaker Change: Favorable inventory obsolescence expense year over year, and lower commodity and product costs, partly driven by project Pegasus.
I will further discuss later in my remarks.
Consolidated gross profit margin increased 90 basis points to 48, 9%.
Speaker Change: These factors were partially offset by the incremental growth investments of approximately 140 basis points I referred to earlier in.
The increase was primarily due to favorable inventory obsolescence expense year over year.
And the impact of unfavorable operating leverage.
And lower commodity and product costs, partly driven by project Pegasus initiatives.
Speaker Change: On a second basis home and outdoor adjusted operating margin increased to 150 basis points to 18, 4%.
GAAP operating margin for the quarter was 14, 2% compared to 19, 5% in the same period last year.
Speaker Change: By favorable inventory obsolescence expense year over year.
<unk> benefited from a gain on the sale of our El Paso facility of $34 2 million or 620 basis points.
Speaker Change: Lower annual incentive compensation expense and lower commodity and product costs.
Speaker Change: These factors were partially offset by incremental growth investment.
On an adjusted basis operating margin increased 30 basis points 16, 6%.
Speaker Change: Adjusted operating margin for beauty and wellness declined 100 basis points to 15%, primarily due to incremental growth investments and the impact of unfavorable operating leverage.
The increase was primarily driven by lower annual incentive compensation expense.
Favorable inventory obsolescence expense year over year.
Speaker Change: These factors were partially offset by lower annual incentive compensation expense lower outbound freight lower commodity and product costs.
Lower commodity and product costs, partly driven by project Pegasus.
These factors were partially offset by the incremental growth investments of approximately 140 basis points I referred to earlier in.
Speaker Change: And favorable inventory obsolescence expense year over year.
Speaker Change: Our tax rate in the third quarter was 21, 4% compared to 19, 5% last year.
And the impact of unfavorable operating leverage.
On a second basis home and outdoor adjusted operating margin increased 150 basis points to 18, 4%.
Speaker Change: The year over year increase was primarily due to the impact of Barbados tax legislation enacted during the first quarter of fiscal 'twenty five.
Driven by favorable inventory obsolescence expense year over year.
Speaker Change: Really offset by the comparative impact of higher tax expense recognized on the gain on the sale of El Paso facility in the same period last year.
Lower annual incentive compensation expense and lower commodity and product costs.
These factors were partially offset by incremental growth investments.
Speaker Change: Net income was $49 6 million or $2.17 per share.
Adjusted operating margin for beauty and wellness declined 100 basis points to 15%, primarily due to incremental growth investments and the impact of unfavorable operating leverage.
Speaker Change: non-GAAP adjusted EPS was $2 67 per share, reflecting lower adjusted operating income in beauty and wellness and a higher adjusted effective tax rate.
These factors were partially offset by lower annual incentive compensation expense lower outbound freight lower commodity and product costs.
Speaker Change: Partially offset by higher adjusted operating income and home and outdoor.
Speaker Change: Our interest expense and lower diluted shares outstanding.
And favorable inventory obsolescence expense year over year.
Speaker Change: We ended the third quarter with total debt of $734 million.
Our tax rate in the third quarter was 21, 4% compared to 19, 5% last year.
Speaker Change: Sequential increase of $21 million compared to the second quarter.
The year over year increase was primarily due to the impact of Barbados tax legislation enacted during the first quarter of fiscal 'twenty five.
Speaker Change: This reflects higher inventory levels due to the impact of a weaker than expected illness season.
Speaker Change: Strategy to build targeted inventory levels to capture potential demand.
Partially offset by the comparative impact of higher tax expense recognized on the gain on the sale of deal parcel facility in the same period last year.
Speaker Change: Antigua for potential tariff impacts for production, we were transitioning out of China in the near term.
Net income was $49 6 million or $2.17 per share.
Speaker Change: We also hold more cash on the balance sheet due to the timing of customer payments received at the end of the quarter.
non-GAAP adjusted EPS was $2 67 per share.
Speaker Change: Our net leverage ratio was 235 times roughly in line with the end of the second quarter.
The lower adjusted operating income in beauty and wellness and a higher adjusted effective tax rate.
Speaker Change: Turning now to our outlook for fiscal 'twenty five we are updating our expectations for consolidated net sales adjusted EPS adjusted EBITDA fell by segment free cash flow and ending net leverage ratio.
Actually offset by higher adjusted operating income and home and outdoor lower interest expense and lower diluted shares outstanding.
We ended the third quarter with total debt of 734 million, a sequential increase of $21 million compared to the second quarter.
Speaker Change: There are two key changes from our prior outlook. These included unfavorable revision to our wellness revenue outlook to reflect our expectation that the global illness season will be well below historical averages.
This reflects higher inventory levels due to the impact of a weaker than expected illness season.
And our strategy to build targeted inventory levels to capture potential demand.
Speaker Change: And the incremental contribution from the all of the June acquisition.
Speaker Change: In terms of the impact of illness, we came into the fiscal year, assuming an average cough cold flu season.
And to defer potential tariff impacts for production, we were transitioning out of China in the near term.
Speaker Change: Excluding the Covid anomaly year of 2000 22021.
We also hold more cash on the balance sheet due to the timing of customer payments received at the end of the quarter.
Speaker Change: Filling this incident incidents through December is that an eight year low we are now assuming the season will be well below historical averages for the full year.
Our net leverage ratio was 235 times roughly in line with the end of the second quarter.
Turning now to our outlook for fiscal 'twenty five we are updating our expectations for consolidated net sales adjusted EPS adjusted EBITDA fell by segment.
Speaker Change: This adversely impacted our third quarter net sales by approximately approximately $10 million and we estimate the unfavorable impact of the $15 million to $20 million in the fourth quarter.
Free cash flow and ending net leverage ratio.
While there is a possibility that illness incidents could increase we do not expect retailers to place meaningful incremental replenishment orders because we are now roughly midway through the season.
There are two key changes from our prior outlook.
<unk> unfavorable revision to our wellness revenue outlook to reflect our expectation that the global illness season will be well below historical averages.
Speaker Change: Our outlook now includes an expected incremental net sales contribution in the range of $17 million to $18 million and adjusted EPS in the range of five cents to seven cents from the all the June acquisition for the partial period from the date of transaction closing on December 16th.
And the incremental contribution from the all of the June acquisition.
In terms of the impact of the illness, we came into the fiscal year, assuming an average cough cold flu season.
Excluding the Covid anomaly year of 2000, 22021 U S illness incidents incidents through December is that an eight year low we are now assuming the season will be well below historical averages for the full year.
Speaker Change: The end of fiscal 'twenty five.
Speaker Change: All are in tune outlook reflects a slower time of year and the typical operating cycle after the holiday selling season.
Speaker Change: We now expect net sales between 1.888 billion and $1 913 billion, which implies a decline of five 8% to four 6% and.
This adversely impacted our third quarter net sales by approximately approximately $10 million.
We estimate the unfavorable impact of the $15 million to $20 million in the fourth quarter.
Speaker Change: And reflects the two key changes I just discussed as well as the previously disclosed unfavorable impact of approximately $5 million due to shipping disruptions from the automation startup issues at our Tennessee distribution facility.
While there is a possibility that illness incidents could increase we do not expect retailers to place meaningful incremental replenishment orders because we are now roughly midway through the season.
Our outlook now includes an expected incremental net sales contribution in the range of $17 million to $18 million and adjusted EPS in the range of five to seven cents from the all the June acquisition.
Speaker Change: The impact of the cross Smith ERP integration challenges of approximately $3 million in the first quarter.
Speaker Change: In terms of our net sales outlook by segment, we now expect the home and outdoor declined <unk>, 7% to growth of <unk>, 6%.
The partial period from the date of transaction closing on December 16th through the end of fiscal 'twenty five.
Speaker Change: Which continues to include the unfavorable impact of shipping disruption at our Tennessee distribution facility, a $5 million during the first quarter.
All of the June outlook reflects a slower time of year and the typical operating cycle after the holiday selling season.
Speaker Change: And our beauty and wellness decline of 10, 3% to 9%, which.
We now expect net sales between $1 88, 8 billion and $1 913 billion, which implies a decline of five 8% to four 6%.
Speaker Change: Which continues to include a year over year headwind of approximately 1% related to the exploration of an out license relationship and.
Speaker Change: And now includes a revised expectation for an illness season, well below historical averages as well as the incremental contribution from the all of the June acquisition.
And reflects the two key changes I just discussed as well as the previously disclosed unfavorable impact of approximately $5 million due to shipping disruptions from the automation startup issues at our Tennessee distribution facility.
Speaker Change: We now expect GAAP EPS of $4 60 to $5.02 for the full year.
And the impact of the Kroll Smith ERP integration challenges of approximately $3 million in the first quarter.
Speaker Change: non-GAAP adjusted EPS in the range of $7 15 to $7.40.
In terms of our net sales outlook by segment, we now expect the home and outdoor declined <unk>, 7% to growth of <unk>, 6%.
Speaker Change: Which includes estimated accretion of five to seven cents from all of in June acquisition with a parcel post closing period and our fourth quarter.
Which continues to include the unfavorable impact of shipping disruption at our Tennessee distribution facility, a $5 million during the first quarter.
Speaker Change: We now expect full year, adjusted EBITDA of $292 million to $295 million, which includes an estimated contribution in the range of $3 million to $4 million from all of the June acquisition.
And our beauty and wellness decline of 10, 3% to 9%, which.
Which continues to include a year over year headwind of approximately 1% related to the exploration of an out license relationship and.
Speaker Change: Our adjusted EBITDA outlook implies margin compression of approximately 130 to 140 basis points year over year.
And now includes a revised expectation for an illness season, well below historical averages as well as the incremental contribution from the all of the June acquisition.
Speaker Change: With approximately 50 basis points coming from the automation startup issues at our distribution facility.
Speaker Change: Yes.
We now expect GAAP EPS of $4 60 to $5.02 for the full year.
Speaker Change: We continue to make incremental investments into product innovation and marketing for the long term health of our business we.
non-GAAP adjusted EPS in the range of $7 15 to.
We are preserving the year over year dollar increase from growth investment spending.
The $7.40.
Speaker Change: Styled translates to a range of 120 to 130 basis points as a percentage of sales.
Which includes estimated accretion of five to seven cents from all of in June acquisition with a parcel post closing period and our fourth quarter.
Speaker Change: With respect to project Pegasus as Manuel mentioned, we remain on track with our savings targets and cadence and expect that restructuring charges will be largely completed in fiscal 'twenty five.
We now expect full year, adjusted EBITDA of $292 million to $295 million, which includes an estimated contribution in the range of $3 million to $4 million from all of the June acquisition.
Speaker Change: We now expect full year interest expense of approximately $50 million to $52 million, which includes the impact of additional debt borrowed for the olive in June acquisition.
Our adjusted EBITDA outlook implies margin compression of approximately 130 to 140 basis points year over year.
Speaker Change: The interest rate swaps executed in the third quarter.
With approximately 50 basis points coming from the automation startup issues at our distribution facility.
Speaker Change: Recent interest rate decreases made by the federal reserve.
Speaker Change: We expect a GAAP effective tax rate range of 25, 8% to 27, 6% for the full fiscal year.
We continue to make incremental investments into product innovation and marketing for the long term health of our business.
And a non-GAAP adjusted effective tax rate range of 18, 6% to 19, 4%.
We are preserving the year over year dollar increase in growth investment spending.
That translates to a range of 120 to 130 basis points as a percentage of sales.
Speaker Change: We now expect capital and tangible asset expenditures of between 33, and 36 million for fiscal 'twenty, five which includes remaining equipment and technology of $12 million to $13 million associated with our Tennessee distribution facility.
With respect to project Pegasus as Manuel mentioned, we remain on track with our savings targets and cadence and expect that restructuring charges will be largely completed in fiscal 'twenty five.
Speaker Change: We now expect free cash flow in the range of a 145 million to $155 million.
We now expect full year interest expense of approximately $50 million to $52 million, which includes the impact of additional debt borrowed for law in June acquisition.
Speaker Change: Next key changes from our previous outlook.
Speaker Change: The lower overall revenue and weaker illness season is expected to unfavorably impact our full year cash flow results compared to our prior expectation.
The interest rate swaps executed in the third quarter.
And recent interest rate decreases made by the federal reserve.
Speaker Change: We also began to further build strategic inventory levels in advance of potential tariffs as I mentioned earlier, which was not included in our previous outlook.
We expect a GAAP effective tax rate range of 25, 8% to 27, 6% for the full fiscal year.
And a non-GAAP adjusted effective tax rate range of 18, 6% to 19, 4%.
Speaker Change: We now expect net leverage ratio as defined in our credit agreement to be between $2 85, and $2 seven five times by the end of fiscal 'twenty five.
We now expect capital and tangible asset expenditures of between 33, and 36 million for fiscal 'twenty, five which includes remaining equipment and technology of 12% to $13 million associated with our Tennessee distribution facility.
Speaker Change: In closing, we've seen progress in our efforts to reset and revitalize our business in fiscal 'twenty five while ensuring that we are set up for success in the future.
Speaker Change: As we look forward to fiscal 'twenty six we believe that many of our investments and initiatives are beginning to bear fruit.
We now expect free cash flow in the range of a 145 million to $155 million.
Speaker Change: Automation system at our Tennessee distribution facility is now fully functional and we expect to realize significant efficiency gains and scale for years to come.
<unk> key changes from our previous outlook.
The lower overall revenue and weaker illness season is expected to unfavorably impact our full year cash flow results compared to our prior expectation.
Speaker Change: We improved our portfolio with the completion of the all of the June acquisition. After the end of the quarter, which we believe will be an accretive growth contributor to beauty and wellness. While we continue to work on improving the fundamentals of the core business.
We also began to further build strategic inventory levels in advance of potential tariffs as I mentioned earlier, which was not included in our previous outlook.
Speaker Change: We've enhanced key processes that we believe will unlock greater working capital efficiency and we'll look for opportunities to further optimize our balance sheet quickly paid off debt and consider consider further accretive capital deployment.
We now expect net leverage ratio as defined in our credit agreement to be between $2 85, and $2 seven five times by the end of fiscal 'twenty five.
In closing, we've seen progress in our efforts to reset and revitalize our business in fiscal 'twenty five while ensuring that we are set up for success in the future.
Our initiatives to diversify our supplier base outside of China is making solid progress with more opportunities on the horizon.
As we look forward to fiscal 'twenty six we believe that many of our investments and initiatives are beginning to bear fruit.
Speaker Change: We generated significant investments you all with Pegasus and are now focused on optimizing our investments to achieve maximum returns and productivity going forward.
Automation system at our Tennessee distribution facility is now fully functional and we expect to realize significant efficiency gains and scale for years to come.
Speaker Change: Finally, we intend to build on the momentum of Pegasus with the next phase of ongoing productivity initiatives and system enhancements, great. Further investments you will offset potential tariff impacts and drive earnings accretion.
We improved our portfolio with the completion of the all of the June acquisition. After the end of the quarter, which we believe will be an accretive growth contributor the beauty and wellness, while we continue to work on improving the fundamentals of the core business.
Speaker Change: And with that I'll turn it back to the operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would 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 he would like to remove your question from the queue.
We've enhanced key processes that we believe will unlock greater working capital efficiency and we will look for opportunities to further optimize our balance sheet quickly paid off debt and consider consider further accretive capital deployment.
Our initiatives to diversify our supplier base outside of China is making solid progress with more opportunities on the horizon.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys and the interest of time. Please limit yourself to one question. One follow up question and then re queue for additional questions. One moment, while we poll for questions.
We generated significant investments you all with Pegasus and are now focused on optimizing our investments to achieve maximum returns and productivity going forward.
Finally, we intend to build on the momentum of Pegasus with the next phase of ongoing productivity initiatives and system enhancements create further investments your offset potential tariff impacts and drive earnings accretion.
Speaker Change: Our first question is from Bob <unk> with CJS Securities. Please proceed.
Bob: Good morning, and happy new year.
Speaker Change: Happy new year bump up.
And with that I'll turn it back to the operator.
Speaker Change: Yeah. So I wanted to start with iron giant with distribution center, obviously, congrats on getting the kind of headwinds behind you here could you remind us of the kind of benefits now that you expect you know what benefit should you get how long does that take and how does the one Jay acquisition impact your distribution centers.
Thank you we will now be conducting a question and answer session.
I'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 he would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys and the interest of time. Please limit yourself to one question. One follow up question and then re queue for additional questions. One moment, while we poll for questions.
Speaker Change: And iron try and in particular if at all.
Speaker Change: Thanks, Bob I'll start and then I'll ask Brian to build from there.
Speaker Change: Overall as you know, we've the iron giant or Tennessee distribution Center has been a major investment and a big project for us for some time and we're excited about the capability that it provides a and a myriad of ways. Both in full case volume for the home and outdoor business, which we've been shipping out of T. M. D C.
Our first question is from Bob <unk> with CJS Securities. Please proceed.
Good morning, and happy new year.
Happy new year bump up.
Speaker Change: For quite some time very well and then also in kind of the lesson pool case or direct to consumer business for home and outdoor as well. So that you know that what was that last piece that was with the automation that was kind of coming up towards the end of it with the last piece of the distribution facility, we have to get working that we struggled with it.
Yeah. So I wanted to start with iron giant with distribution center, obviously, congrats on getting the kind of headwinds behind you here could you remind us of the kind of benefits now that you expect you know what benefit should you get how long does that take and how does the O N J acquisition impact your distribution centers.
Speaker Change: One really pleased with the team's efforts to get that working particularly during this this really busy holiday period, and we were able to accomplish that.
And you know in their iron try and in particular if at all.
Thanks, Bob I'll start and then I'll ask Brian to build from there.
Quite nicely.
Overall as you know with the iron giant or Tennessee distribution Center has been a major investment and a big project for us.
Speaker Change: You know I think at this point when it comes to olive in June and how it will impact of that acquisition.
For some time and we're excited about the capability that it provides and a myriad of ways. Both in full case volume for the home and outdoor business, which we've been shipping out of T. N D. C for quite some time very well and then also in kind of the less than full case or direct to consumer business.
Speaker Change: As we talked about when we made the acquisition, we haven't assumed that and yet you know I think over time, we probably will in Canberra and some productivity to their direct to consumer business have been pretty substantial direct to consumer business, but we are not currently assuming that we are currently assuming that we're going to operate all of in June.
Our home and outdoor as well so that you know that what was that last piece that was was the automation that was kind of coming up towards the end. It was the last piece of the distribution facility. We have to get working that we struggled with in quarter. One really pleased with the team's efforts to get that working particularly during this this really busy holiday period and we.
Speaker Change: They are.
Speaker Change: <unk> as a standalone and then look for those kinds of opportunities over time, so I would say that that will be.
Speaker Change: Upside if you will when when we get to that to that point Bryan do you want to build.
Brian Grass: Yeah, I would add by saying the benefit the vision for the benefit from higher giant is similar to what we laid out it remains the same actually from what we laid out in the Investor day materials, It's just been delayed a bit by that.
We were able to accomplish that.
Mike quite nicely.
At this point when it comes to olive in June and how it will impact of that acquisition.
As we talked about when we made the acquisition we haven't assumed that in yet you know I think over time, we probably will and can bring some productivity to their direct to consumer business have been pretty substantial direct to consumer business, but we are not currently assuming that we are currently assuming that we're going to operate out in June.
Brian Grass: Automation challenges that we had and had to get through so in in those materials, we kind of called out our distribution.
Distribution costs as a percentage of sales being in the five plus percent range in the vision after we do.
Brian Grass: Iron giant to peak efficiency and make the other distribution.
They are.
<unk> as a standalone and then look for those kinds of opportunities over time, so I would say that that will be.
Brian Grass: Moves that we have planned is that we do.
Brian Grass: A rate of more like in the mid threes, 3% three.
Outside if you will when when we get to that to that point Bryan do you want to build.
Brian Grass: Three 5% ish as a percentage of sales over time. So we still think we're on track to achieve that benefit. It's just taken a little bit longer as we have to get through the last speed bump that we had and then just a little bit on all of them in June.
Bryan: Yeah, I would add by saying the benefit the vision for the benefit from higher giant is similar to what we laid out.
Bryan: It remains the same actually from what we laid out in the Investor day materials, It's just been delayed a bit by that.
Brian Grass: If you compare our cost of doing distribution to what Theyre currently occurring there is a pretty big opportunity there will be a.
Bryan: Automation challenges that we had and had to get through so in those materials, we kind of called out are.
Brian Grass: Careful to.
Brian Grass: Pursued that opportunity and I think we're starting.
Bryan: Distribution costs as a percentage of sales being in the five plus percent range in the vision. After we do get iron giant to peak efficiency and make the other distribution.
Brian Grass: The partnerships of.
Brian Grass: Doing less less less is more kind of thing, but as Noel said.
Brian Grass: We see meaningful opportunity there.
Brian Grass: Hum asthma efficiency and squeeze out some more accretion, which we have not factored.
Bryan: Moves that we have planned is that we go.
Bryan: A rate of more like in the mid threes, 3% three.
Brian Grass: Factored into any of our.
Brian Grass: Pro forma estimates or forecast so it would be upside going forward.
Bryan: Three 5% ish as a percentage of sales over time. So we still think we're on track to achieve that benefit. It's just taken a little bit longer as we had to get through the last speed bump that we had and then just a little bit on all of them in June.
Brian Grass: Okay Super Thanks for all those details and then.
Brian Grass: That's my follow up next question.
Brian Grass: You touched on this briefly as it relates to tariffs, but how do you plan for tariffs when you don't know what they're going to be your or how theyre going to be and things like that you mentioned some inventory maybe you can elaborate there, but just give us your latest thoughts on how you guys go about planning and this was like a macro question for everyone. It's not specific to you but for an event that may.
Bryan: Got.
Bryan: If you compare our cost of doing distribution to what Theyre currently occurring there is a pretty big opportunity there will be a.
Bryan: Careful too.
Bryan: Pursued that opportunity and I think we're starting.
Brian Grass: You may not happen at a magnitude that you know could be considerably different and all that kind of stuff.
Speaker Change: The partnerships of doing less less less is more kind of thing, but as Noel said.
Speaker Change: Yeah. Thanks, Bob I'll I'll start briefly and then turn it over to Brian, but you know I think I would just echo what you. What you said you know I think.
Bryan: We see meaningful opportunity there.
Asthma efficiency and squeeze out some more accretion, which we have not.
There are changing them.
Bryan: Factored into any of our.
Brian Grass: Changing story right now on what that's going to look like and what.
Pro forma estimates or forecast so it would be upside going forward.
Brian Grass: What areas and what products are you know the tariffs may or may not be effective on what's the magnitude of the tariffs would be whether the tariffs would be targeted on only china or more broadly than that.
Bryan: Okay Super Thanks for all those details and then.
Bryan: As my follow up next question.
Bryan: You touched on this briefly as it relates to tariffs, but how do you plan for tariffs when you don't know what they're going to be your or how they're gonna be and things like that you mentioned some inventory maybe you can elaborate there, but just give us your latest thoughts on how you guys go about planning and this was like a macro question for everyone. It's not specific to you but for an event that may.
Brian Grass: So you know the inauguration is literally days away. So I think we'll get some more clarity once president elect Trump is in office and we know exactly where he's going that said, we do believe that diversification is a smart move for us and that's what we are pursuing.
Bryan: Or may not happen at a magnitude that you know could be considerably different and all that kind of stuff.
Brian Grass: And I'll, let Bryan kind of touch on where we are in some of those levers Brian.
Speaker Change: Yeah. Thanks, Bob.
I'll start briefly and then turn it over to Brian, but I think I would just echo what you said I think there are changing them.
Bryan: Yeah, I think what what Noel ended with there is the key point, what we tried to do is ask ourselves. The question of does it make sense to make the change even without tariffs. So that we're not in a position where we regret transitions are changes that we made and tariffs don't come to be.
Speaker Change: Changing story right now on what Thats going to look like and what you know.
Speaker Change: What areas and what products are you know the tariffs may or may not be effective on what's the magnitude of the tariffs would be whether the tariffs would be targeted on only china or more broadly than that.
And these particular categories. So that's kind of our North Star is is it's a broader concept in our mind, which is diversification.
Speaker Change: So you know.
Speaker Change: The inauguration is literally days away. So I think we'll get some more clarity once.
Bryan: Outside of China, not being so concentrated that's really the theme that we're using.
Speaker Change: President elect Trump is in office, and we know exactly where he's going that said, we do believe that diversification is a smart move for us and not what we are pursuing and I'll, let Bryan kind of touch on where we are in some of those levers Brian.
Bryan: To make our choices and in every case, where we're looking at making a transition out of China asking ourselves. The question of does it make sense, even if tariffs don't come to be so it is a difficult algorithm to solve when you don't know where it's totally going recent reports have said that it may be more focused on <unk>.
Speaker Change: Yes, I think what what Noel ended with there is the key point, what we tried to do is ask ourselves. The question of does it make sense to make the change even without tariffs. So that we're not in a position where we regret transitions are changes that we made in tariffs don't come to.
Bryan: Items certain sectors deemed critical to national or economic security, which were probably exclude a lot of our categories. But there are reports that are contrary to that we just think the level of diversification that we're pursuing makes sense either way.
Speaker Change: And these particular categories. So that's kind of our north star is.
Speaker Change: Okay, great. Thanks, so much.
Speaker Change: Our next question is from Peter Grom with UBS. Please proceed.
Speaker Change: It's a broader concept in our mind, which is diversification.
Speaker Change: Inside of China, not being so concentrated that's really the theme that we're using to make our choices and in every case, where we're looking at making a transition out of China asking ourselves. The question of does it make sense, even if tariffs don't come to be so it is a difficult algorithm to solve when you don't know.
Thanks, operator, and good morning, everyone, a happy new year, and hope you're doing well.
Speaker Change: Two for me and I guess I just wanted to start on kind of the fourth quarter I love to just get some perspective on kind of the underlying drivers for from a topline perspective, it seems like a pretty wide range right now.
Speaker Change: Call. It two months to go here. So can you maybe just walk us through your underlying assumptions a bit more what would put you at the high end versus the lower end and I guess it doesn't really sound like there's a lot of room for that <unk>.
Speaker Change: No. We're it's totally going recent reports have said it.
Speaker Change: May be more focused on the items certain sectors deemed critical to national or economic security, which were probably exclude a lot of our categories. But there are reports that are contrary to that.
Speaker Change: $15 million to $20 million headwind from lower illness to change. So just kind of curious what the key variables, we should be watching over the next couple of months or.
Speaker Change: We just think the level of diversification that we're pursuing make sense either way.
Peter Grom: Hi, Peter Happy New year, Thanks for joining in.
Speaker Change: Okay, great. Thanks, so much.
Speaker Change: You know what I would say you know.
Speaker Change: Our next question is from Peter Grom with UBS. Please proceed.
Speaker Change: What I see in the fourth quarter is continued strength in home and out to work.
Peter Grom: Thanks, operator, and good morning, everyone, a happy new year, and hope you're doing well.
Speaker Change: You know, we I'm pleased with the progress that we're making there we're seeing we saw growth in the third quarter on all three brands.
Peter Grom: Two for me and I guess I just wanted to start on kind of the fourth quarter.
Peter Grom: I love to just get some perspective on kind of the underlying drivers for from a topline perspective, it seems like a pretty wide range with you.
Speaker Change: Seeing some sequential improvement on hydro flask, we're seeing share growth on OXXO and its two key categories kitchen utensils and dry food storage Osprey also continues to be strong across all regions and nice share growth and its extended travel and everyday lifestyle.
Peter Grom: So call. It two months to go here. So can you maybe just walk us through the underlying assumptions a bit more what would put you at the high end versus the lower end and I guess it doesn't really sound like there's a lot of room for that $15 million to $20 million headwind from lower illness to change. So I'm just kind of curious what the key variables, we should be watching over the next couple of months or.
And so I <unk>.
Speaker Change: Look to see continued.
Speaker Change: Improvement and continued progress along those lines and and home and outdoor on the beauty and wellness side you touched on it.
Peter Grom: Hi, Peter Happy New year, Thanks for joining in.
Speaker Change: <unk> very low low ball illness that we're seeing.
Peter Grom: But I would say.
Peter Grom: What I see in the fourth quarter is continued strength in home and out to work.
Speaker Change: It is really impacting our wellness.
Peter Grom: We I'm pleased with the progress that we're making there we're seeing we saw growth in the third quarter on all three brands.
Speaker Change: Business, we do have strong brand positions Vicks Braun vicks in Rx, Humidifiers, and broad index and thermometers or both.
Peter Grom: Seeing some sequential improvement on hydro flask, we're seeing share growth on OXXO and its two key categories kitchen utensils and dry food storage Osprey also continues to be strong across all regions and in nice share growth and its extended.
Speaker Change: You know gaining share and maintained very strong positions, but the categories are just way down based on kind of that you're left with the exception of that Covid here and similarly, low seasons in EMEA and APAC and so that's really the biggest driver in the change in our outlook for the.
Peter Grom: Travel and everyday lifestyle packs.
Peter Grom: And so I.
Speaker Change: Fourth quarter is there we have baked in softer performance on on beauty and I would say what we saw in the third quarter was in line with what we forecasted and so I feel like we forecasted where our business is on beauty.
Peter Grom: Look to see continued.
Improvement and continued progress along those lines and and home and outdoor on the beauty and wellness side you touched on at the very low global illness that we're seeing is really impacting our wellness.
Speaker Change: The real driver of the change here is is the illness season, Brian any anything you'd like to add.
Peter Grom: Business, we do have strong brand positions Vicks Braun vicks, and our estimate of fires and then broadens and thermometers or both.
Brian Grass: No I would just say that the environment continues to be a pretty highly variable and and you know there's there's customers the bars that are.
Peter Grom: Gaining share and maintained very strong position that the categories are just way down based on kind of that you're left with the exception of that Covid here.
Brian Grass: Doing better and there's other customers that are not doing as well and.
Brian Grass: That variability.
Kind of with the consumer and the retailers as part of the explanation as to why the range might be a little bit wider than you were expecting.
Peter Grom: And similarly, low seasons in EMEA and APAC and so that's really the biggest driver in the change in our outlook.
Brian Grass: Makes sense, Okay, and then just I guess just looking ahead here.
Peter Grom: For the fourth quarter is there we have baked in softer performance on on beauty and I would say what we saw in the third quarter was in line with what we forecasted and so I feel like we forecasted where our business is on beauty.
She has been reset and revitalize but kind of where are we in that process and I'm I'm just going back to the targets outlined at the Investor Day, I mean, do you think those targets are or growth rates.
Peter Grom: The real driver of the change here is is the illness season, Brian any anything you'd like to add.
Brian Grass: Outlined or are still achievable at this point in time and if so when do you kind of expect we could see that and I guess, what I'm really trying to get out is should we anticipate in fiscal 'twenty since being another year of this kind of continued resetting to revitalize and kind of growth below those long term out.
Speaker Change: No I would just say that the environment continues to be a pretty highly variable and and you know there's there's customers the bars that are.
So that long term algorithm or do you think it's plausible that we can kind of approach those targets as we look out for next year I know, there's a lot of a lot of moving pieces and we'll get more color in April but just anything we should be kind of thinking about as we sit here today as it relates to 'twenty six.
Peter Grom: Doing better and there are some of your customers that are not doing as well and.
Peter Grom: That variability kind of with the consumer and the retailers as part of the explanation as to why the range might be a little bit wider than you were expecting.
Yeah, Peter what I would say right now as you know that the long term targets that we have out there and we havent, we havent revised them now.
Peter Grom: Makes sense, Okay, and then just.
Peter Grom: I guess just looking ahead here.
Brian Grass: Also ended your question you know we're in the midst of our budgeting process right now and we'll be sharing our outlook for fiscal 'twenty effect in late April. So you know that would be the moment I think that will.
Peter Grom: This year has been reset and revitalize but kind of where are we in that process.
Peter Grom: Just going back to the targets outlined at the Investor Day, I mean, do you think those targets are growth rates outlined or are still achievable at this point in time and if so when do you kind of expect we could see that and I guess, what I'm really trying to get a should we anticipate fiscal 2000 seats being another year of this kind of continued resetting revitalizing kind of growth.
Brian Grass: We'll be able to provide a lot more color on what we're seeing in fiscal 'twenty.
Brian Grass: You know I think I continue.
Brian Grass: Just coming out tomorrow I feel like it is.
Brian Grass: Moving in the right direction International's moving in the right direction.
Peter Grom: A lot of those long term out below that long term algorithm or do you think it's plausible that we can kind of approach those targets as we look out for next year I know, there's a lot of a lot of moving pieces and we'll get more color in April but just anything we should be kind of thinking about as we sit here today as it relates to 'twenty six.
I think you know wellness.
Brian Grass: Underlying stability, but a lot of our brands or sub.
Brian Grass: Subject to these seasonal you know, whether it's illness season, and our other other events that that can swing.
Brian Grass: That are harder for us to control or predict if you will and then the beauty business. We've got more work to do and I think we're making some progress we've got some I would say green shoots on that less than 100 dollar hair appliances Revlon performance in math is solid could be better but solid where.
Peter Grom: Yeah, Peter what I would say right now as you know.
Peter Grom: Long term targets that we have out there and we havent, we havent revised them now.
Peter Grom: He also ended your question you know we're in the midst of our budgeting process right now and we'll be sharing our outlook for fiscal 'twenty second late April so that would be the moment I think that will.
Brian Grass: We really have some room for improvement is on those appliances over $100 for a lot of the growth is and that's still a work in progress. So that's sort of how I'm seeing the portfolio and where we are in the journey overall and I think we can give you more perspective on how we see that shaping up numerically and.
Peter Grom: We will be able to provide a lot more color on what we're seeing in fiscal 'twenty.
Peter Grom: You know I think.
Peter Grom: I continue as I, just said coming out tomorrow. If you like is moving in the right direction International's moving in the right direction.
Peter Grom: Wellness.
Peter Grom: Underlying stability, but a lot of our brands are subject to these seasonal you know, whether it's illness season and our other other events that.
Brian Grass: And longer term as we come in and late April Brian anything you would add.
Brian Grass: Perfectly said.
Speaker Change: Well, thanks, so much I'll pass it on.
Peter Grom: That can swing that are harder for us to control or predict if you will and then the beauty business. We've got more work to do and I think we're making some progress we've got some I would say green shoots on that less than 100 dollar hair appliances.
Speaker Change: Thanks Peter.
Brian Grass: [laughter].
Brian Grass: Our next question is from where Apache spark with Oppenheimer and company. Please proceed.
Speaker Change: And thanks for taking my questions. So just going back to some of the distribution gains youre seeing oxo hydro flask et cetera, just wanted to get a sense of how the velocities are performing at the new distribution about your winter.
Peter Grom: Revlon performance in math is solid could be better, but solid where we really have some room for improvement is on those appliances over $100 for a lot of the growth is and that's still a work in progress. So that's sort of how I'm seeing the portfolio and where we are in the journey.
Brian Grass: I will pass happy New Yorkers to hear your point.
So distribution game.
Brian Grass: Clearly in the home and outdoor we've gotten some major distribution gains and they're into into retailers, who represent significant category volume. So the potential with that kind of distribution gains. It just spanned our household penetration or velocity or market share are really significant.
Peter Grom: Overall.
Peter Grom: And I think we can give you more perspective on how we see that shaping up numerically and and longer term as we come in late April Brian anything you would add.
Peter Grom: Perfectly said.
Speaker Change: Yeah, I'll kind of talk to maybe oxo and hydro flask because it's two examples that are at a bit of a different point and where we are OXXO kitchen utensils as you know and Walmart has been in distribution, a little bit longer and we've got more perspective, and more data that can inform us there and what we see is double digit household penetration expansion for us.
Peter Grom: Well, thanks, so much I'll pass it on thanks.
Speaker Change: Thanks Peter.
Peter Grom: [laughter].
Speaker Change: Our next question is from Ritesh Park with Oppenheimer and company. Please proceed.
Ritesh Park: Good morning, and thanks for taking my questions. So just going back to some of the distribution gains youre seeing oxo hydro flask et cetera, just wanted to get a sense of how the velocities are performing at the new distribution about you're winning.
Brian Grass: Since we made that move so that.
Brian Grass: That tells us that it is meaningfully expanding the footprint of the brands because Walmart share the kitchen utensil category is pretty significant so we're reaching a much broader audience of consumers by being in distribution at Walmart. The velocity has been quite strong there we see overall market share growth since we've expanded.
Ritesh Park: I will pass happy new year and great to hear your point.
So distribution game.
Ritesh Park: Clearly in home and outdoor we've gotten some major distribution gains and they're into into retailers, who represent significant category volume. So the potential with that kind of distribution gains. It just stand our household penetration or velocity or market share are really significant and I'll kind of talk to maybe oxo and hydro flask because.
Brian Grass: It into Walmart and all of that strong performance is gaining mm is earning the brand kind of more opportunities to expand into other OXXO category, but as I mentioned in my remarks top containers have gone into the home organization.
Ritesh Park: Two examples that are at a bit of a different point and where we are OXXO kitchen utensils as you know in Walmart.
Brian Grass: Part of Walmart, we've got a top tax going et cetera. So all of that is exactly what I want to see when we think about expanding distribution on the hydro flask side I would say.
Ritesh Park: <unk> been in distribution, a little bit longer. So we've got more perspective, and more data that can inform us there and what we see is double digit household penetration expansion for offset since we made that move so that tells us that it is meaningfully expanding the footprint of the brands because Walmart share the kitchen utensil category, it's pretty significant.
Brian Grass: It's a little bit too early to tell.
Brian Grass: And what we're doing there what we do know is in the insulated beverage category.
Category is growing and customers like target and Costco because as we think about how that category is evolving from sports enthusiasts into more women and Gen Z consumers et cetera, They shop, a lot with the <unk>.
Ritesh Park: So we're reaching.
Ritesh Park: Much broader.
Ritesh Park: Audience of consumers by being in distribution at Walmart the velocity has been quite strong there we see overall market share growth since we've expanded into Walmart and all of that strong performance is gaining earning the brand kind of more opportunities to expand into other OXXO category as I mentioned in my remarks top container.
At those customers and so we know that's where the cabinet you know the categories growing there or is it declining or flat and kind of the historic sports and outdoor channel. So similar to OXXO. It. It's the right place for the brand to be because that's where the category is.
That's gone into the home organization.
Brian Grass: Our distribution for hydro flask and target a very initial we had some off shelf placement, we expect to get broader placement in fact.
Ritesh Park: Walmart, we've got a top tax going et cetera. So all of that is exactly what I want to see when we think about expanding distribution on the hydro flask side I would say.
Brian Grass: Shipping now if you will and home and the sporting goods. So I think we'll have a lot more perspective, a few months down the line once that takes hold and we see what the velocity is doing I would say on Costco, we have a little bit more data I think I mentioned this last quarter that the initial program did show strong velocity such that Kaka order.
Ritesh Park: It's a little bit too early to tell.
Ritesh Park: And what we're doing there what we do know is in the insulated beverage category.
The category is growing and customers like target and Costco because as we think about how that category is evolving from sports enthusiasts into more women and Gen Z consumers et cetera, They shop a lot.
<unk> Ah replenish that beyond what we initially forecasted for the for.
Ritesh Park: At those customers and so we know that's where the category. The category is growing there its declining or flat and kind of the historic sports and outdoor channel. So similar to OXXO. It. It's the right place for the brand to be because that's what the category is.
The double pack that we had in Cosco.
Brian Grass: So that's kind of that's kind of how I would characterize the performance of the distribution.
Brian Grass: Great and my one follow up question is just on the olive into your acquisition.
Ritesh Park: Our distribution for hydro flask and target a very initial we have some off shelf placement, we expect to get broader placement in fact.
Brian Grass: Brian gave the accretion benefit for this year is there a way to help us quantify what the carriers benefit into next year.
Brian Grass: And I guess for Q1, Q2 and Q3, presumably.
Ritesh Park: Shipping now if you will and home and sporting goods. So I think we'll have a lot more perspective, a few months down the line once that takes hold and we see what the velocity is doing I would say on Costco, we have a little bit more data I think I mentioned this last quarter that the initial program did showed strong velocity such that copco or.
Brian Grass: Yeah, without providing specific guidance, which which we're not doing yet I think you could get somewhat of an idea from the accretion of based on what we gave you in Q4 I think you'd have to account for the fact that that's a partial period of about 70 days.
Brian Grass: And that it's also a softer period in their operating cycle post the holiday selling season.
Ritesh Park: Third our replenishment and beyond what we initially forecasted for the for the double pack that we had and Cosco.
Brian Grass: Transaction closed on the 17th.
Brian Grass: He didn't get any benefit of holiday selling in our results those those those sales all occurred prior to the closing date.
Ritesh Park: So that's kind of that's kind of how I would characterize the performance of the distribution.
Brian Grass: The other thing I think you'd have to factor in as they're growing quickly. So if theyre focused on etfs you'd have to factor in some level of Etfs accretion growth throughout next fiscal year.
Speaker Change: Great and my one follow up question is just on the olive into your acquisition.
Speaker Change: Brian gave the accretion benefit for this year is there a way to help us quantify what the carriers benefit into next year.
Brian Grass: So that's how I would try to get your arms around the level of accretion.
Speaker Change: And I guess for Q1, Q2 and Q3, presumably.
Speaker Change: Yeah, without providing specific guidance, which we're not doing yet I think you can get somewhat of an idea from the accretion of based on what we gave you in Q4 I think you'd have to account for the fact that that's a partial period of about 70 days and that it's also a softer period in their operating cycle post the holiday sell.
Brian Grass: With respect to kind of EPS I'll call it.
Brian Grass: And then as we implied in our announcement adjusted EBIT margin is north of 20% before any synergies and as we talked about there's likely synergies with respect to distribution and other areas.
Brian Grass: And so that is positive and our gross profit margin is between 60 and 70%.
Speaker Change: <unk> season.
Speaker Change: Transaction closed on the 17th.
Brian Grass: We'd really like so that's how I kind of would think about accretion without getting into specific guidance for next year, which were not prepared to do.
Speaker Change: Didn't get any benefit of holiday selling in our results those those those sales all occurred prior to the closing date.
Brian Grass: Okay, great. Thank you for all the color of hospital.
Speaker Change: The other thing I think you'd have to factor in as they're growing quickly. So if theyre focused on etfs you'd have to factor in some level of Etfs accretion growth throughout next fiscal year.
Speaker Change: Our next question is from Olivia Tong with Raymond James. Please proceed.
Olivia Tong: Great. Thanks, Good morning, and happy New year I'm just.
Speaker Change: So that's how I would try to get your arms around the level of accretion.
Speaker Change: First a few points of clarification.
Speaker Change: In terms of the bifurcation between high end versus low to mid end consumer is that worsening in your view or is your point that it continues to be a headwind and then secondly, you talked about a few trends last quarter that seemed quite encouraging returned to replacement cycle and home the shelf space gains rock, So innovation hydro flask and touch on a couple of things today as well as you.
Speaker Change: With respect to kind of EPS I'll call it.
Speaker Change: And then as we implied in our announcement adjusted EBIT margin is north of 20% before any synergies and as we talked about there's likely synergies with respect to distribution and other areas.
Speaker Change: So that's positive and our gross profit margin is between 60 and 70%.
Speaker Change: Continue to rebuild some of these businesses is there opportunity in your view for shell to be a net positive over the next 12 months or do things like weaker cough cold the container store bankruptcies and things like that sort of push the sales inflection out even further as we think about fiscal 'twenty six thank you.
Speaker Change: We'd really like so that's how I kind of would think about accretion without getting into specific guidance for next year, which we're not prepared to do.
Speaker Change: Okay, great. Thank you for all the color of hospital.
Olivia Tong: Hey, Olivia.
Our next question is from Olivia Tong with Raymond James. Please proceed.
Olivia Tong: Thanks for joining us I would say from a macro consumer standpoint.
Olivia Tong: Great. Thanks, good morning, and happy new year.
Olivia Tong: I would I would largely say, it's a continuation although you know I mean, they things are always shifting as you did.
Speaker Change: First a few points of clarification.
In terms of the bifurcation between high end versus low to mid end consumer is that worsening in your view or is your point that it continues to be a headwind and then secondly, you talked about a few trends last quarter that seemed quite encouraging returns when replacement cycle in home the shelf space gains rock show innovation Hydro flask and touch on a couple of things today as well as you.
Olivia Tong: Look at some of the.
Olivia Tong: Macro data out there there was a rebound in consumer confidence that wasn't really sustained in December as the index kind of drop back to the middle of the range the expectations in that kind of that consume our short term outlook for income business and labor.
Speaker Change: Continue to rebuild some of these businesses is there opportunity in your view for something to be a net positive over the next 12 months or do things like weaker cough cold.
Olivia Tong: Went down quite a bit.
Olivia Tong: And in December So I think you know there there's some data out there that the consumer is definitely still concerned I'm cautious and as mentioned I think that's particularly most of what we see in our business and what I think is reported widely is that.
Speaker Change: Or sort of bankruptcies and things like that sort of pushed the sales inflection out even further as we think about fiscal 'twenty six thank you.
Speaker Change: Hey, Olivia.
Olivia Tong: Thanks for joining us I would say from a macro consumer standpoint.
Olivia Tong: That middle to lower income consumer that is feeling that pressure then those the higher income consumer is a bit insulated from that so.
Speaker Change: Hum.
Largely say, it's a continuation although you know I mean these things are always shifting as you can.
Speaker Change: Look at some of the.
Olivia Tong: Absolutely the same as what we've been seeing although some of the more recent reports would indicate that December maybe was a little bit worse in the consumers' mindset, and then where we were trending prior to December.
Speaker Change: Macro data out there there was a rebound in consumer confidence that wasn't really sustained in December as the index kind of drop back to the middle of the range the expectations in that kind of that consumer short term outlook for income business and labor.
Olivia Tong: Then your second question I think was around.
Speaker Change: Went down quite a bit.
Olivia Tong: Some of the positive and then some of the headwinds I think you know.
Speaker Change: In December so I think you know there is some data out there that the consumer is definitely still concerned.
Olivia Tong: Yeah, I I do see some positive.
Olivia Tong: Some positive tailwind for us with the distribution gains that I talked about a couple of them with oxo and hydro flask in particular, where we're gaining meaningful placement and important retailers from a category perspective.
Speaker Change: Cautious and I mentioned I think that's particularly most of what we see in our business and what I think is reported widely is it's that middle to lower income consumer that is feeling that pressure and that is the higher income consumer is a bit insulated from that so.
Olivia Tong: You know one of the key strategies that we have the b and win where the shopper shops, if you're not in a retailer where the category is quite developed that's GAAP and so that's been a real focus for us in the North American RMS to close those gaps in some of the ones. We've talked about today are meaning.
Speaker Change: Roughly the same as what we've been seeing although some of the more recent reports would indicate that December maybe was a little bit worse in the consumers' mindset, and then where we were trending prior to December.
One so I think that's a real positive and we'll continue to be a tailwind if our responsibility to continue to bring the right assortment the right promotions the right programming so that the velocities perform once we're in those retailers so that we see that.
Speaker Change: And then your second question I think was around.
Speaker Change: Some of the positive and then some of the headwinds I think you know.
Speaker Change: Yeah, I do see some positive.
Olivia Tong: Continued up to this board I think when it.
Speaker Change: Some positive tailwind for us with the distribution gains that I talked about a couple of them with oxo and hydro flask in particular, where we're gaining meaningful placement and important retailers from a category perspective, one of the key strategies that we have the b and win where the shopper shops.
Olivia Tong: Comes to the wellness part of the portfolio. We do have businesses that are susceptible to to be honest season, and you know those things kind of ebb and flow typically at the beginning of each fiscal year, we assume an average season, it's difficult to really do anything other than that and then you know it.
Speaker Change: If you're not in a retailer where the category is quite developed.
Olivia Tong: There is as it does year on year on year. This year happens to be kind of an eight year low for that.
Speaker Change: That's GAAP and so that's that.
Speaker Change: That's been a real focus for assets in the North American RMS to close those gaps in some of the ones. We've talked about today are a meaningful one so I think that's a real positive and we'll continue to be a tailwind if our responsibility to continue to bring the right assortment the right promotions the right programming so that the velocities perform once we're in there.
Olivia Tong: As we think about next year I don't see why we Wouldnt again assume an average season, that's kind of how we start every fiscal year as we as we go into it and then on beauty, we have more work to do as I said I see a few places where we're beginning to make improvement I talked about this last quarter, we did chain.
Speaker Change: As retailers, so that we see that kind of continue to be scored I think when it.
Olivia Tong: <unk> leadership in the beauty and wellness business unit and that that new leaders really digging in across the portfolio and we've got some new innovation coming at the higher end appliances on dry bar that we're enthusiastic about so I see some things coming and some work happening that I anticipate.
Speaker Change: It comes to the wellness part of the portfolio. We do have businesses that are susceptible to to be honest season, and those things kind of ebb and flow typically at the beginning of each fiscal year, we assume an average season, it's difficult to really do anything other than that and then you know it.
Olivia Tong: <unk> improved the performance, but it doesn't happen overnight.
Speaker Change: Barry.
Speaker Change: As it does year on year on year. This year happens to be kind of an eight year low.
Olivia Tong: Alright, thanks for all the detail I appreciate it.
Olivia Tong: Yeah. Thanks Olivia.
Speaker Change: For that.
Speaker Change: We think about next year I don't see why we Wouldnt again assume an average season, that's kind of how we start every fiscal year as we as we go into it and then on beauty.
Speaker Change: Our next question is from Susan Anderson with Canaccord Genuity. Please proceed.
Susan Anderson: Hi, good morning, Thanks for taking my question.
Speaker Change: I guess, maybe just a follow up on the beauty segment.
More work to do as I said I see a few places where we're beginning to make improvement I talked about this last quarter, we did change.
Speaker Change: It does look ways you mentioned some strength there I guess was that across both drive our anchor met and then I think maybe you've got more fee with dry bar in retailers did that flow through in the quarter and I guess how is that performing.
Speaker Change: Changed leadership in the beauty and wellness business unit and that that new leaders really digging in across the portfolio. We've got some new innovation coming at the higher end appliances on dry bar that we're enthusiastic about so I see.
Speaker Change: Hi, Suzanna, thanks for joining us.
Speaker Change: Just stay on her liquids Karl Smith continues to be a you know a good strong steady performer.
Speaker Change: Some things coming and some work happening that I anticipate should improve the performance, but it doesn't happen overnight.
It is a leading brand in the textured hair segment continues to do well as I mentioned in my remarks, we did lean into.
Speaker Change: Alright, thanks for all the detail I appreciate it yeah.
Olivia Tong: I think the Olivia.
Speaker Change: Yeah.
Karl Smith, with some incremental investment leading into the holiday season.
Speaker Change: Our next question is from Susan Anderson with Canaccord Genuity. Please proceed.
Speaker Change: That did well for US you know, it's a brand that has really strong consumer retention based on product efficacy are really strong consumer education.
Susan Anderson: Hi, good morning, Thanks for taking my question.
Susan Anderson: I guess, maybe just a follow up on the <unk> segment.
Susan Anderson: It does look ways you mentioned some strength there I guess was that across both drive our anchor math and then I think maybe you've got more fee with dry bar in retailers did that flow through in the quarter and I guess how is that performing.
Speaker Change: I'm speaking from personal experience currently hair.
Speaker Change: There's a bit of a journey and so it's helpful. When brands like Karl Smith, you know really show consumers, how do you use products and how to achieve certain styles in and it's a strength across that and so as we put more money behind the brand we see them, we see it respond positively so I I I feel like Karl Smith continues to perform well.
Susan Anderson: Hi, Susan Thanks for joining us.
Speaker Change: Just stay on her liquids Karl Smith continues to be a you know.
Speaker Change: Well I'm drive our liquids I would say, we've got pockets of strong performance and drive our big Bro I've mentioned that I think I mentioned that last quarter is.
Susan Anderson: A good strong steady performer.
Susan Anderson: It is a leading brand in the textured hair segment continues to do well as I mentioned in my remarks, we did lean into Karl Smith with some incremental investment a leading into the holiday season that that did well for US you know, it's a brand that has really strong consumer retention based on product efficacy.
Speaker Change: As a relatively new.
Speaker Change: Collection on dry bar that focuses on thickening that has continued to perform very well for us up significantly.
Speaker Change: And doing well I would also say that drive our liquid glass collection is a after broadening the portfolio of that that that's performing well for us. So I think there are pockets certain sub segments within the drive our liquids that are doing well I'd like the whole portfolio to kind of ryzen and I've talked about this before.
Susan Anderson: Our really strong consumer education.
Susan Anderson: I'm speaking from personal experience currently here.
Susan Anderson: Bit of a journey and so it's helpful. When brands like Karl Smith really show consumers, how do you use products and how to achieve certain styles and it's a strength across that and so as we put more money behind the brand we see them, we see it respond positively so I I feel like Karl Smith continues to perform well.
Speaker Change: For that synergy between tools and liquids I think has a unique position for driver and something that the team continues to work on especially as we bring out more news on tools I think that that kind of double regimen play is is where drive arc and can really shine.
Drive our liquids I would say, we've got pockets of strong performance and drive our big Bro I've mentioned that I think I mentioned that last quarter.
Susan Anderson: It's a relatively new.
Speaker Change: Okay, Great and then just one follow up question on inventory and it looked like it was up in the quarter. Just curious the drivers there and then just inventory at retail is Wow do you feel like there are any areas that are over inventoried or are you guys feeling pretty good about inventory at retail.
Susan Anderson: Collection on dry bar that focuses on thickening that has continued to perform very well for us up significantly.
Susan Anderson: And doing well I would also say that drive our liquid glass collection is after broadening the portfolio of that back.
Speaker Change: Brian I'll, let you touch on our inventory and then I can I can touch on retailer inventory for it.
Susan Anderson: That's performing well for us so I think there are pockets certain sub segments within the drive our liquids that are doing well I'd like the whole portfolio to kind of ryzen and I've talked about this before that synergy between tools and liquids I think there's a unique position for dry barring something that the team continues to work on especially as we bring out more.
Speaker Change: Sure.
Speaker Change: Yes, our inventory is higher and it's it's higher than we were expecting at this point in the year and they're kind of to two primary factors driving that one is we had made a decision to kind of lean in in some areas, where where we thought we had you know demand opportunities one of them.
Susan Anderson: News on tools I think that that kind of double regimen play is is where drive arc can really shine.
Speaker Change: This is in thermometry, where we built our strategic inventory to serve that market for a variety of reasons.
Speaker Change: Okay, Great and then just one follow up question on inventory and it looked like it was up in the quarter. Just curious the drivers there and then just inventory at retail as well do you feel like there are any areas that are over inventoried or are you guys feeling pretty good about inventory at retail.
Speaker Change: And with the weaker cough cold flu season.
Speaker Change: To end up with higher inventory at this point in the year.
And I would expect it to carry through the remainder of the year because most likely the season is this largely done from a retailer replenishment order perspective. So that's one factor. The other factor is you know.
Susan Anderson: Okay.
Speaker Change: Brian I'll, let you touch on our inventory and then I can I can touch on retailer inventory for them.
Susan Anderson: Sure Yes.
Speaker Change: In conjunction with our tariff strategy in.
Susan Anderson: Yes, our inventory is higher and it's it's higher than we were expecting at this point in the year and in their kind of to two primary factors driving that one is we had made a decision to kind of lean in in some areas, where where we thought we had demand opportunities one of them.
Speaker Change: In cases, where we have line of sight to make our supplier transition out of China, but could use more time managing those transitions, we did make the decision and have begun to execute.
The acquisition or the build of more inventory levels.
Susan Anderson: As in Thermometry, where we built our strategic inventory to serve that market.
Which buys us more time before a potential impact so that we can make the supplier transitions and minimize the impact before the transition is made so we did that is the change from from our previous outlook as well as the impact of the cough cold flu season.
Susan Anderson: For a variety of reasons.
Susan Anderson: And with the weaker cough cold flu season.
Susan Anderson: To end up with higher inventory at this point in the year.
Susan Anderson: And I would expect it to carry through the remainder of the year because most likely the season is this largely done from a retailer replenishment order perspective. So that's one factor. The other factor is you know in.
Speaker Change: On inventory levels as we close the year, so I would call those the two primary drivers with respect to inventory.
Brian Grass: And then Susan I'd say on the retailer side from a retailer inventory standpoint, I'm, probably not surprising based on what we've talked about on the weak illness season wellness is where we see some retailer inventory build due to that weakness.
Susan Anderson: In conjunction with our tariff strategy in.
Susan Anderson: In cases, where we have line of sight to make a supplier transition out of China, but could use more time managing those transitions, we did make the decision and have begun to execute.
So that's you know as Brian said I think in his prepared remarks, even if illness season accelerates in the next couple of months you know.
Susan Anderson: The acquisition of the build of more inventory levels.
Brian Grass: They've got a lot of inventory on hand, we have plenty of inventory as he also just that so if it really spiked and retailers starting to replenish we are ready to service it but I would say at this point their inventory levels are high on the wellness side I think in other parts of our business you know re.
Susan Anderson: Which buys us more time before a potential impact so that we can make the supplier transitions and minimize the impact before the transition is made so we did that is the change from from our previous outlook as well as the impact of the cough cold flu season.
Brian Grass: Taylors continue to kind of react to the pressured consumer as I talked about earlier. They do continue to use sort of some of these just in time inventory replenishment strategies.
Susan Anderson: On inventory levels as we close the year, so I would call those the two primary drivers with respect to inventory.
Susan Anderson: And then Susan I would say on the retailer side from a retailer inventory standpoint, I'm, probably not surprising based on what we've talked about on the weak illness season wellness is where we see some retailer inventory build due to that weakness.
Brian Grass: Sometimes we will see some shifts that happen based on that.
But the place that probably has the highest.
Brian Grass: Inventory right now from our category standpoint, as wellness disease illness season.
Speaker Change: As Brian said I think in his prepared remarks, even if illness season accelerates in the next couple of months.
Brian Grass: Okay, great. Thanks, so much probably can tell its good luck okay.
Brian Grass: Yeah.
Speaker Change: You know they've got a lot of inventory on hand, we have plenty of inventory as he also just that though if it really spiked and retailers starting to replenish we are ready to service it but I would say at this point their inventory levels are high on.
Speaker Change: With no further questions in the queue I would like to turn the conference back over to management for closing remarks.
Speaker Change: Thank you everyone for joining us today and for your continued interest in Helen of Troy, We really look forward to speaking with many of you. This week as well as next week at the ICR conference in the virtual P. J S conference. Thanks, everyone and have a great day.
Speaker Change: On the wellness side I think in other parts of our business.
Speaker Change: Retailers continue to kind of react to the pressured consumer as I talked about earlier. They do continue to use sort of some of these just in time inventory replenishment strategies.
Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Yeah.
Speaker Change: So sometimes.
Speaker Change: We'll see some shifts that happen based on that but the place that probably has the highest inventory right now from our category standpoint, as wellness disease illness season.
Speaker Change: Okay, great. Thanks, so much for all the details good luck okay.
Speaker Change: With no further questions in the queue I would like to turn the conference back over to management for closing remarks.
Speaker Change: Thank you everyone for joining us today and for your continued interest in Helen of Troy, We really look forward to speaking with many of you. This week as well as next week at the ICR conference in the virtual P. J S conference. Thanks, everyone and have a great day.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].