Q1 2026 Helen of Troy Ltd Earnings Call
Operator: Greetings. Welcome to Helen of Troy Ltd's first quarter 2026 earnings call.
Breathing smoking to how they try and limited first quarter 2026 earnings call. At this time, all participants are in a listen only mode.
Operator: At this time, all participants are in a listen-only mode.
Operator: A question and answer session will follow the formal process. If anyone should require operator assistance, please press star zero on your telephone.
Ritchie: Question and answer session will follow the formal piece and teach and if anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce and Ritchie and his director of Investor Relations. Thank you you may begin thank.
Operator: As a reminder, this conference is being recorded. It is now my pleasure.
Rukunis: and Rukunis, Director of Investor Relations. Thank you. Thank you, Operator.
Speaker Change: Thank you operator, good morning, everyone welcome to Helen of Troy's first quarter fiscal 'twenty six earnings conference call before I review, our agenda with you I'd like to welcome back Jack Johnston, our former SVP of Investor Relations and business development. He has temporarily rejoined the company, while we conduct a search for a more permanent replacement for this role.
Rukunis: Good morning, everyone. Welcome to Helen of Troy's first quarter Fiscal 26 Earnings Conference Call.
Rukunis: Before I review our agenda with you, I'd like to welcome back Jack Janssen, our former SVP of Investor Relations and Business Development. He's temporarily rejoined the company while we conduct a search for a more permanent replacement for this role.
Rukunis: The agenda for the call this morning is as follows.
Speaker Change: The agenda for this morning is as follows I will begin with a brief discussion of forward looking statements Mr. Brian grass, the company's interim CEO, who will provide his thoughts on the company's current operations and key priorities for fiscal 'twenty six.
Rukunis: I will begin with a brief discussion of forward-looking statements.
Brian Grass: Mr. Brian Grass, the company's interim CEO, will provide his thoughts on the company's current operations and key priorities for Fiscal 26. Tracy Shireman, our interim CFO, will then provide an update on our tariff mitigation strategies, give an overview of our financial performance in the first quarter, and provide commentary on our expectations for the second quarter of Fiscal 26.
Speaker Change: Tracy Sherman our interim CFO will then provide an update on our tariff mitigation strategies give an overview of our financial performance in the first quarter and provide commentary on our expectations the second quarter of fiscal 'twenty six.
Rukunis: Following our prepared remarks, we will open up the call for Q&A.
Speaker Change: Following our prepared remarks, we will open up the call for Q&A.
Rukunis: This conference call may contain certain forward-looking statements that are based on management's current expectations with respect to future events or financial performance. Generally, the words anticipate, believes, expects, and other similar words are words identifying forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from the actual results.
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.
Speaker Change: The words anticipate 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 result.
Rukunis: This conference call may also include information that may be considered non-GAAP financial information. These non-GAAP measures are not an alternative to GAAP financial information and may be calculated differently than the non-GAAP financial information disclosed by other companies. The company cautions listeners not to place undue reliance on forward-looking statements or non-GAAP information.
Speaker Change: This conference call May also include information that may be considered non-GAAP financial information.
Speaker Change: non-GAAP measures are not an alternative to GAAP financial information and maybe calculated differently than the non-GAAP financial information disclosed by other companies.
Speaker Change: The company cautions listeners not to place undue reliance on forward looking statements or non-GAAP information.
Rukunis: Before I turn the call over to Mr. Grass, I would like to inform all interested parties that the copy of today's earnings release and investor relations presentation has been posted to our website at HelenOfTroy.com and can be found on the investor relations section of the site or by scrolling to the bottom of the homepage. The earnings release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP-based measures.
Speaker Change: Before I turn the call over to Mr. Grass I would like to inform all interested parties that a copy of today's earnings release and Investor Relations presentation. That's been posted to our website at Helen of Troy Dot Com and can be found on the Investor Relations section of the site will be squarely into the bottom of the homepage. The earnings release contains tables there.
Speaker Change: A reconciling non-GAAP financial measures to their corresponding GAAP based measures.
Brian Grass: I will now turn the conference call over to Mr. Grass. Good morning, everyone. And thank you for joining us.
Grass: I will now turn the conference call over to Mr. Grass.
Grass: Good morning, everyone and thank you for joining us I want to start by welcoming Jack Janssen back to the team.
Brian Grass: I want to start by welcoming Jack Janssen back to the team. For those that may not know, before his retirement in 2024, Jack had been with the company for almost 25 years, with over 10 years in investor relations and business development. It's great to have him filling in as we transition to a new leader in this role.
Grass: For those that May not know before his retirement in 2024, Jack had been with the company for almost 25 years with over 10 years in Investor Relations and business development.
Grass: Great to have them filling in as we transition to a new leader in this role.
Brian Grass: I also want to welcome Tracy back to the company. I'm grateful for our partnership as we navigate CEO change, tariffs, and an uncertain macro environment. Leadership transitions bring fresh perspective, opportunity, and urgency.
Grass: I also want to welcome Tracey back to the company I'm Grateful for our partnership as we navigate CEO change tariffs and an uncertain macro environment.
Speaker Change: Leadership transitions bring fresh perspective opportunity and urgency it's been just over two months since Tracy nice stepped into our interim roles.
Brian Grass: It's been just over two months since Tracy and I stepped into our interim roles. We feel fortunate to step into these roles with a deep understanding of our business.
Speaker Change: We feel fortunate to step into these roles with a deep understanding of our business, but we intentionally spent much of the last 60 days listening closely to our key stakeholders, especially our associates.
Brian Grass: But we intentionally spent much of the last 60 days listening closely to our key stakeholders, especially our associates.
Brian Grass: The message we heard was that our people are hungry to win. Our associates care deeply about our brands, our purpose, and each other. Through our conversations, we heard enthusiastic feedback and candid ideas on where we can do better.
Speaker Change: The message we heard was that our people are hungry to win.
Speaker Change: Our associates care deeply about our brands our purpose and each other.
Through our conversations we heard enthusiastic feedback and candid ideas on where we can do better.
Brian Grass: There's a clear sense of urgency and readiness to drive the company forward. What also became clear is that to win in today's environment, we must get back to fundamentals and move with greater speed. Candidly, we lost some of that along the way.
Speaker Change: Theres, a clear sense of urgency and readiness to drive the company forward.
Speaker Change: But also became clear is that to win in today's environment, we must get back to fundamentals and move with greater speed Candy.
Speaker Change: Candidly, we lost some of that along the way.
Brian Grass: It became too matrixed, too slow, and at times disconnected from each other and the marketplace. We made our company too complicated and lost focus on what made our businesses great.
Speaker Change: It became two matrix to slow and at times disconnected from each other in the marketplace.
Speaker Change: We made our company too complicated and lost focus on what made our business is great.
Brian Grass: I own that as leader. Now time to simplify, refocus, and accelerate.
Speaker Change: I own that as leader now.
Speaker Change: Now turning to simplify refocus and accelerate.
Brian Grass: With all that in mind, we are focusing on five key priorities to rebuild our platform for profitable growth. 1.
Speaker Change: With all that in mind, we are focusing on five key priorities to rebuild our platform for profitable growth.
Brian Grass: Restoring confidence within the organization in meeting our external commitments to key stakeholders. We're strengthening connections with consumers, retail partners, investors, and associates and are focused on rebuilding the adaptability needed to deliver on our commitments in a dynamic environment. to improving our go-to-market effectiveness and simplifying how we operate. We're taking deliberate steps to further reduce costs and simplify our business. That means making tough choices, rationalizing and sharpening our spend, and enabling greater accountability and ownership. As we drive efficiencies, we're forming a leaner, more agile organization that is much better connected commercially and can better capitalize on incremental opportunities.
Speaker Change: One restoring confidence within the organization and meeting our external commitments to key stakeholders.
Speaker Change: We're strengthening connections with consumers retail partners investors and associates and are focused on rebuilding the adaptability needed to deliver on our commitments in a dynamic environment.
Speaker Change: Two improving our go to market effectiveness and simplifying how we operate.
Speaker Change: We're taking deliberate steps to further reduce costs and simplify our business.
Speaker Change: It means making tough choices rationalizing and sharpening, our stand and enabling greater accountability and ownership.
Speaker Change: As we drive efficiencies, we're forming a leaner more agile organization that is much better connected commercially and can better capitalize on incremental opportunities.
Brian Grass: 3. Refocusing on innovation for more product-driven growth while optimizing our marketing investment. We intend to leverage consumer insights to reconnect with the consumer and our markets and allocate more investment to build a deeper pipeline of breakthrough innovation that is new to the market and solves real consumer pain points.
Speaker Change: Three refocusing on innovation for more for more product driven growth, while optimizing our marketing investment.
Speaker Change: We intend to leverage consumer insights to reconnect with the consumer and our markets.
And allocate more investment to build a deeper pipeline of breakthrough innovation that is new to the market and solves real consumer pain points.
Brian Grass: The Drybar All-Inclusive Styler we just soft-launched is a good example of this kind of innovation. We will also seek to capture shorter-term opportunities with new product features and enhancements, form factors, usage occasions, collaborations, kits and bundles, colors, and finishes. In addition, we will work to accelerate time to market for innovation already in development. Finally, we're sharpening our marketing investment to make it punch above its weight by focusing on the highest returns, channels and tactics, driving more earned media, optimizing our paid funnel mix, producing assets more cost effectively, and continually refining based on our measured performance.
Speaker Change: The drive our all inclusive styler, we just soft launched it was a good example of this kind of innovation.
Speaker Change: We will also seek to capture shorter term opportunities with new product features and enhancements form factors usage occasions collaborations kits and bundles colors and finishes.
Speaker Change: In addition, we will work to accelerate time to market for innovation already in development.
Speaker Change: Finally, we're sharpening our marketing investment to make it punches above its weight by focusing on the highest returns channels and tactics.
Speaker Change: Driving more earned media optimizing our paid funnel mix producing assets more cost effectively and continually refining based on a measured performance.
Brian Grass: for focusing on the fundamentals and fully leveraging the unique strengths of our brands. Focusing on the fundamentals means doing fewer things and doing those things better. Returning to core strengths and executing with excellence. We created unnecessary sprawl and became scattered in terms of priority. We also became a little too homogenized across our brands and lost some of what made our brands great.
Speaker Change: Or focusing on the fundamentals and fully leveraging the unique unique strengths of our brands.
Speaker Change: Focusing on the fundamentals means doing fewer things and doing those things better.
Speaker Change: Returning to core strengths and executing with excellence.
Speaker Change: We created unnecessary sprawl and became scattered in terms of priorities.
Speaker Change: We also became a little too homogenized across our brands and lost some of what made our brands great.
Brian Grass: Going forward, we'll put the brands first and unlock the power that comes from their unique strengths.
Speaker Change: Going forward, we will put the brand's first and unlock the power of that comes from their unique strengths.
Brian Grass: Five, reinvigorating our culture with resilience and an owner's mindset. We've lost some of our cultural strength along the way, which we are making a concerted effort to reinvigorate. We're enabling our teams to be ownership driven, to move forward quickly and deliver with purpose. That mindset is a force multiplier for performance and a critical driver of our future success.
Speaker Change: Five reinvigorating, our culture with resilience and an owner's mindset.
Speaker Change: We've lost some of our cultural strength, along the way, which we are making a concerted effort to reinvigorate.
Speaker Change: We're enabling our teams to be ownership driven to move forward quickly and deliver with purpose.
Speaker Change: That mindset as a force multiplier for performance and a critical driver of our future success.
Brian Grass: We know this journey won't be a straight line, the macro environment remains uncertain with geopolitical friction, economic uncertainty, shifting consumer behavior, and global trade disruption.
Speaker Change: We know this journey won't be a straight line the macro environment remains uncertain, the geopolitical friction economic uncertainty shifting consumer behavior and global trade disruption.
Brian Grass: But I'm confident that we are building a stronger, more resilient Helen of Troy. One that is better prepared to navigate change and capitalize on opportunity.
Speaker Change: But I'm confident that we are building a stronger more resilient Helen of Troy, one that is better prepared to navigate change and capitalize on opportunity.
Brian Grass: I intend to reinvigorate a renewed culture focusing on performance, execution, and consistent long-term value-creating results.
Speaker Change: I intend to reinvigorate our renewed culture, focusing on performance execution and consistent long term value creating results.
Brian Grass: Moving on to the quarter, our Q1 results were well below our expectations. Tariff-related disruption on our shipments was greater than we originally expected in April. There are three tariff related impacts making up approximately eight percentage points of the 10.8% consolidated revenue decline.
Speaker Change: Moving on to the quarter, our Q1 results were well below our expectations.
Speaker Change: Europe related disruption on our shipments was greater than we originally expected in April.
Speaker Change: There are three tariff related impacts, making up approximately eight percentage points of the 10.8% consolidated revenue decline.
Brian Grass: 1.
Brian Grass: Cancellation of direct import orders from China in response to higher tariffs. 2.
Speaker Change: One cancellation of direct import orders from China in response to higher tariffs.
Brian Grass: Tariff-related pull-forward of orders into the 4th quarter of Fiscal 25, leading to elevated inventory and lower replenishment in the 1st quarter of Fiscal 26, which we expect to continue into the 2nd quarter as demand continues to soften. 3.
Speaker Change: Two tariff related pull forward of orders into the fourth quarter of fiscal 'twenty, five leading to elevated inventory and lower replenishment in the first quarter of fiscal 'twenty, six which we expect to continue into the second quarter as demand continues to soften.
Brian Grass: China softness driven by a shift from cross-border e-commerce to localized distribution models and increased competition from domestic sellers driven by government subsidies. In addition to tariff-related impacts, we also saw weeks of supply adjustment at certain key retailers as shifting consumer demand curves are being reflected in retailers' inventory management practices. Finally, we're seeing clear evidence of the consumer trading down with average price compression of 3 to 4% in our U.S. business, which impacted first quarter revenue and profitability. You may have seen other companies recently calling out trade-down behavior, including the dollar stores, which are a beneficiary of this trend.
Speaker Change: And three China softness driven by a shift from cross border E Commerce, the localized distribution models and increased competition from domestic sellers driven by government subsidies.
In addition to the tariff related impacts. We also saw weeks of supply adjustment at certain key retailers shifting consumer demand curves are being reflected in retailers' inventory management practices.
Speaker Change: Finally, we're seeing clear evidence of the consumer trading down with average price compression of 3% to 4% in our U S business.
Speaker Change: Which impacted first quarter revenue and profitability.
Speaker Change: You may have seen other companies recently, calling out trade down behavior, including the dollar stores, which are a beneficiary of this trend.
Brian Grass: Tracy will take you through second quarter revenue in more detail, and you can also refer to the investor presentation on our website for an illustration of tariff-related and other revenue impacts by segment and in total. Despite the headwinds, we are encouraged by the underlying improvements we are seeing in our business. Highlights include U.S. point-of-sale unit growth in 8 out of our 11 key brands in the first quarter. Point of sale dollar growth in U.S. mass of 4.4%. Strong category growth in key categories such as Prestige Hair Liquids, Air Purifiers, and Thermometry. BTC revenue growth of 9% year over year.
Speaker Change: Tracy will take you through second quarter revenue in more detail and you can also refer to the investor presentation on our website for an illustration of tariff related and other revenue impacts by segment and in total.
Speaker Change: Despite the headwinds we are encouraged by underlying improvements we're seeing in our business.
Speaker Change: Highlights include U S point of sale unit growth in eight out of our 11 key brands in the first quarter.
Speaker Change: Point of sale dollar growth in U S mass a 4.4%.
Speaker Change: Strong category growth in key categories, such as prestige hair liquids air Purifiers in thermometry.
Speaker Change: DTC revenue growth of 9% year over year.
Brian Grass: Osprey revenue growth of 3.7% and point-of-sale growth of 3.8%, driven in part by the success of our expansion into categories outside of technical PACs. Pearl Smith revenue growth of 17%. All of in June, revenue and profitability that continues to exceed expectations. and strong free cash flow of $45 million compared to $16 million in the same period last year.
Speaker Change: Osprey revenue growth of three 7% and point of sale growth of three 8% driven in part by the success of our expansion into categories outside of technical packs.
Speaker Change: <unk> revenue growth of 17%.
Speaker Change: All of them in June revenue and profitability that continues to exceed expectations.
Speaker Change: And strong free cash flow of 45 million compared to $16 million in the same period last year.
Brian Grass: We believe these are indicative examples of improving fundamentals in the company, but we acknowledge that we need to deliver this kind of strength much more consistently across the portfolio.
Speaker Change: We believe these are indicative examples of improving fundamentals in the company, but we acknowledge that we need to deliver this kind of strength much more consistently across the portfolio.
Brian Grass: Turning to our business segments, the decrease in home and outdoor net sales was primarily driven by tariff-related impacts, which we believe are largely transitory over time but are expected to persist into the second quarter. Turning to OXO, brand fundamentals remain strong as OXO gained share and extended its leadership in kitchen utensils in the quarter. Our Twist and Stack food storage line, launched in January, has been highly praised by consumers for quality, versatility, and thoughtful design. Hydroflask remains one of the category's most loved brands, as consumers continue to shift from tumblers back to back toward traditional bottles, where hydroflask has been historically strong.
Speaker Change: Turning to our business segments, the decrease in home and outdoor net sales was primarily driven by tariff related impacts.
Speaker Change: Which we believe are largely transitory over time, but are expected to persist into the second quarter.
Speaker Change: Turning to OXXO brand fundamentals remained strong as OXXO gain share and extended its leadership in kitchen utensils in the quarter.
Speaker Change: Twist and snack food storage line launched in January has been highly praised by consumers for quality versatility and thoughtful design.
Speaker Change: Hydro flask remains one of the categories. Most loved brands as consumers continue to shift from tumblers back to back towards traditional bottles or hydro flask has been historically strong.
Brian Grass: On the innovation front, the MicroHydro, a 6.7 oz insulated bottle, soft launched via DTC and Whole Foods, has been an early winner, with one of our brick-and-mortar buyers recently saying, I love seeing customers come up to the displays completely smitten with the product on site. Consumers are responding enthusiastically to its functional but fashionable size. So much so we continue to chase demand on our DTC platform. More to come as we lean further into this initial success.
Speaker Change: On the innovation front, the micro hydro a $6 seven ounce insulated bottle soft launched the D T C and whole foods.
Speaker Change: And early winter with one of our brick and mortar buyers recently, saying I love seeing customers come up to the displays completely smitten with the product on site.
Speaker Change: Consumers are responding enthusiastically to its functional but fashionable size. So much. So we continue to chase demand on our DTC platform.
Speaker Change: More to come as we as we lean further into this initial success.
Brian Grass: Hydro Flats International Business also grew, driven by expanded distribution in the Asia-Pacific region and Canada. As mentioned, Osprey posted nice growth, benefiting from expanded distribution, category stabilization, and robust DTC performance.
Speaker Change: Hydro Flask International business also grew driven by expanded distribution in the Asia Pacific Region and Canada.
Speaker Change: As mentioned Osprey posted nice growth benefiting from expanded distribution category stabilization and robust D. T C performance.
Brian Grass: While the broader U.S. technical pack market remains challenged, Osprey continues to lead, holding the number one market share, three times the size of the next national brand. Osprey again gained share in the Kid Carrier Pack category and also received two major accolades this quarter. The Scarab 18 was named Best Hydration Pack for Hiking. and the Atmos HE50 won Best Multi-Day Hiking Pack in the Men's Journal 2025 Outdoor Awards.
Speaker Change: While the broader U S technical pack market remains challenged.
Speaker Change: Sprague continues to lead holding the number one market share three times the size of the next national brand.
Speaker Change: Osprey again gained share in the Kid carrier pack category and also received two major accolades this quarter.
Speaker Change: The scare of 18 was named best Hydration pack for hiking.
Speaker Change: And the Atmos AG 51, best multi day hiking pack in the men's journal 2025 outdoor awards.
Brian Grass: Turning now to our beauty and wellness business. Overall, the segment sales decline was driven primarily by similar direct import cancellations, tariff related pull forward by retailers in the fourth quarter of last year. and Softer Point of Sale Internationally, driven in part by cascading impacts of trade policy in the China market.
Speaker Change: Turning now to our beauty and wellness business overall the segment sales decline was driven primarily by similar direct import cancellations.
Speaker Change: Tariff related pull forward by retailers in the fourth quarter of last year.
Speaker Change: Softer point of sale internationally, driven in part by cascading impacts of trade policy and the China market.
Brian Grass: In beauty, Revlon is gaining share in the below $100 category, with its value positioning resonating strongly in the current environment. In the above $100 category, we're excited about the initial soft launch success of the Driver All-Inclusive Styler, which is an 8-in-1 multi-styler that provides more functionality and styling options than the competition, but is more affordably priced. The All-Inclusive has gained strong traction with influencers and online. We are now rolling into an exclusive brick-and-mortar hard launch at Ulta, which you will begin to see in store at the end of July. As mentioned, CurlSmith grew in the quarter, driven by new liquid innovations, including a fragrance-free line, a detox shampoo, and a multi-benefit CurlShield heat protectant cream.
Speaker Change: In beauty Revlon is gaining share in the below 100 dollar category with its value positioning resonating strongly in the current environment.
Speaker Change: In the above 100 dollar category. We're excited about the initial soft launch success of the drive our all inclusive styler, which is an eight one multi styler that provides more functionality and styling options than the competition, but it's more affordably priced.
Speaker Change: The all inclusive has gained strong traction with Influencers and online.
Speaker Change: We are now rolling into an exclusive brick and mortar hard launch at Ulta, which you will begin to see in store at the end of July.
Speaker Change: As mentioned cross Smith grew in the quarter, driven by new liquid innovations, including a fragrance free line of Detox shampoo and a multi benefit Karl showed he protecting crane.
Brian Grass: CurlSmith also launched an innovative new tool that the Frizzion Curl Reviving Wand, designed for enhanced styling to refresh, enhance and define curls with less heat. It comes with interchangeable barrels to match varying consumer curl patterns and has been well received by consumers and retailers.
Speaker Change: Karl Smith also launched an innovative new tool that the Frisian curl reviving want designed for enhanced styling to refresh enhance and define curls with less heat.
Speaker Change: It comes with interchangeable barrels match varying consumer curl patterns and has been well received by consumers and retailers.
Brian Grass: Olive in June continued its momentum, growing much faster than the overall nail category at its brick and mortar customers. and recently launching on Amazon at the end of the first quarter. The brand continues to distinguish itself within the industry. For the second year in a row, Olive & June has been named to Fast Company's Most Innovative Companies, gaining recognition for its innovative gel polish system that was launched last October and gives consumers the ability to produce salon-quality nails at home. This coveted honor is the definitive recognition of organizations not just keeping up, but setting the pace for transforming industries and shaping society.
Speaker Change: All are in June continued its momentum growing much faster than the overall nail category at its brick and mortar customers.
Speaker Change: And recently launching on Amazon at the end of the first quarter.
Speaker Change: The brand continues to distinguish itself within the industry for the second year in a row all of in June has been named to fast company's most innovative companies gaining recognition for its innovative gel Polish system that was launched last October it gives consumers the ability to produce so salon quality nails at home.
Speaker Change: This covenant on Earth, the definitive recognition of organizations, not just keeping up but setting the pace for transforming industries and shaping society.
Brian Grass: In wellness, our business was primarily impacted by lower international sales, largely driven by China, where geopolitical trade tensions and government subsidies are pushing the Chinese consumer toward domestic goods. We also saw a week close to the illness season in the Asia Pacific region.
Speaker Change: And wellness our business was primarily impacted by lower international sales largely driven by China.
Speaker Change: Oh political trade tensions and government subsidies are pushing the Chinese consumer toward domestic goods.
Speaker Change: We also saw a weak close to the illness season in the Asia Pacific region.
Brian Grass: A highlight of the quarter was the launch of the Pure Slim line at Walmart and select grocery stores at the end of May. We expect additional distribution to roll out over the summer. The Pure Slim Pitcher is an 8-cup pitcher system available in multiple colors, large enough to quench a sizable thirst, yet compact enough to fit in a mini fridge.
Speaker Change: A highlight of the quarter was the launch of the pure Slim line at Walmart and select grocery stores at the end of May.
Speaker Change: We expect additional distribution to rollout over the summer.
Speaker Change: Pure Slim pictures in a cup a cup pitcher system available in multiple colors large enough sequential sizable first get compact enough to fit in the mini fridge.
Brian Grass: Domestically, Braun benefited from both category growth and market share gains across the brick and mortar and online channels fiscal year to date. This was strengthened by new distribution in Walmart and CVS, as well as strong performance on Amazon. During the quarter, we also secured new brawn distribution for blood pressure monitors at Walmart.
Speaker Change: Domestically, Brian benefitted from both category growth and market share gains across the brick and mortar and online channels fiscal year to date.
Speaker Change: This was strengthened by new distribution in Walmart and Cvs as well as strong performance on Amazon.
Speaker Change: During the quarter, we also secured new Braun distribution for blood pressure monitors at Walmart.
Brian Grass: Additionally, our new Vicks VapoSteam Lavender Scent launched on Amazon and will hit shelves at Walmart and other select retailers later this summer, just in time for the upcoming cough, cold and flu season. When used with a humidifier or vaporizer, FIX® VapoSteam® Lavender releases a lavender-scented medicated mist that helps calm the impulse to cough, promoting a restful night's sleep.
Speaker Change: Additionally, our new Vicks vapor steam lavender scent launched on Amazon It will hit shelves at Walmart and other select retailers later this summer.
Speaker Change: Just in time for the upcoming cough cold and flu season.
Speaker Change: When used with the humidifier or vaporizer fixed paper steam lavender releases, 11th or Senate medicated missed that helps calm the impulse to cough promoting or Russ Russel night sleep.
Brian Grass: Moving on to our outlook, we're providing an outlook for the second quarter of fiscal 26, but not the full year, given the uncertainty related to still evolving tariffs and their potential impact on both revenue and cost. As mentioned, we expect tariff-related disruption on our revenue to persist into the second quarter. We believe the disruption is largely transitory, but will require more certainty with respect to global trade policy in order to stabilize. As we saw from the U.S. administration's trade announcements on Monday, there is still a lot of uncertainty that will need to play out. We also believe that the inflationary impacts from higher tariffs have not yet been fully realized by the consumer, which could create further pressure on our results in the second half of the year.
Speaker Change: Moving onto our outlook, we are providing an outlook for the second quarter of fiscal 'twenty, six but not the full year, given the uncertainty related to still evolving tariffs and their potential impact on both revenue and cost.
Speaker Change: As mentioned, we expect tariff related disruption on our revenue to persist into the second quarter.
Speaker Change: We believe the disruption is largely transitory, but will require more certainty with respect to global trade policy in order to stabilize.
Speaker Change: As we saw from the U S administration's trade announcements on Monday, there is still a lot of uncertainty that will need to play out.
Speaker Change: We also believe that the inflationary impacts from higher tariffs have not yet been fully realized by the consumer.
Speaker Change: Which could create further pressure on our results in the second half of the year.
Brian Grass: We are providing some information on our investor presentation to give some directional perspective on puts and takes for the first and second halves of the year. In the meantime, we're focused on improving our fundamentals, adapting to a dynamic environment, controlling the things we can control, and delivering on our commitment.
Speaker Change: We're providing some information on our investor presentation to give some directional perspective on puts and takes for the first and second halves of the year.
Speaker Change: In the meantime, we're focused on improving our fundamentals adapting to a dynamic environment controlling the things, we can control and delivering on our commitments.
Brian Grass: We look forward to updating you on the progress of our five key initiatives to rebuild our platform for profitable growth.
Speaker Change: We look forward to updating you on the progress of our five key initiatives to rebuild our platform for profitable growth.
Tracy Shireman: With that, I'll pass the call to Tracy to provide more detail on our financial results and outlook for the second quarter. Thank you, Brian. And good morning, everyone. Thank you for joining us.
Speaker Change: With that I'll pass the call to Tracey to provide more detail on our financial results and the outlook for the second quarter.
Tracey: Thank you, Brian and good morning, everyone. Thank.
Tracey: Thank you for joining us I'm excited for the opportunity to come back to Helen of Troy Once again, alongside the dedicated and talented team and I'm energized by the opportunity I see ahead for the company.
Tracy Shireman: I'm excited for the opportunity to come back to Helen of Troy and work once again alongside a dedicated and talented team.
Tracy Shireman: And I'm energized by the opportunity I see ahead for the company.
Tracy Shireman: Just a bit of my background on me.
Tracey: It's a bit of my background on me I started my career in public accounting with KPMG over 30 years ago before joining Barton, Inc, where he held roles and internal audit and corporate finance.
Tracy Shireman: I started my career in public accounting with KPMG over 30 years ago before joining Borden Inc., where I held roles in internal audit and corporate finance. I joined OXO when the business operated under Whirl Kitchen and remained through its acquisition by Helen of Troy in 2004, holding leadership roles across finance, supply chain, and operations. Over the years, I have had the opportunity to help lead the acquisition and integration of several brands within our portfolio.
Speaker Change: I joined OXXO when the business operated under World kitchen, and remain through its acquisition by <unk> in 2000 and for.
Speaker Change: Holding leadership roles across finance supply chain and operation.
Speaker Change: Over the years I've had the opportunity to help lead the acquisition integration of several brands within our portfolio.
Tracy Shireman: Experiences that have given me a deep understanding of the business, both strategically and operationally, and supported the organization's continued growth and transformation. Most recently, I served as Senior Vice President of Finance and Operations for the Home and Outdoors segment.
Speaker Change: Variances that have given me a deep understanding of the business, both strategically and operationally.
Speaker Change: And supported the organization's continued growth and transformation.
Speaker Change: Most recently he served as senior Vice President of Finance and operations at home and outdoor segment.
Tracy Shireman: Like Brian, Helen of Troy has shaped much of my professional journey, and I'm fortunate to step into this role with a deep understanding of the business, a passion for these brands, and a love for the people behind them.
Speaker Change: Brian Helen of Troy has shifted much of my professional journey and I'm fortunate to step into this role with a deep understanding of the business.
Speaker Change: Passion for these brands and a love for the people behind that.
Tracy Shireman: Our first quarter proved to be a particularly challenging one with sales and profitability below our expectations. As Brian mentioned, being focused and disciplined will be key as we move forward.
Speaker Change: Our first quarter proved to be a particularly challenging one.
Speaker Change: With sales and profitability below our expectation.
Speaker Change: As Brian mentioned, staying focused and disciplined will be key as we move forward.
Tracy Shireman: His message is a great reminder of the mindset we need to bring every day, thinking like owners and keeping our customers at the center of what we do. By staying true to what matters, we're positioning ourselves to deliver on our commitment.
Speaker Change: His message is a great reminder of the mindset, we need to bring every day.
Speaker Change: Like on Earth, and keeping our customers at the center of what we did.
Speaker Change: By staying true to what matters, we're positioning herself she had to deliver on our commitments.
Tracy Shireman: In my first two months back, I can not only see, but also truly feel a renewed sense of focus and optimism across the organization.
Speaker Change: In my first two months back I cannot only see but also truly feel every new sense of focus and optimism across the organization.
Tracy Shireman: During the quarter, we made significant progress on the tariff mitigation plans we outlined on our fourth quarter call. We continue to build out our internal Southeast Asia sourcing capabilities to accelerate supplier transitions out of China, leveraging our longstanding strategic partnership. And in many cases, we are dual sourcing our production and making capital investments to replicate legacy China production.
Speaker Change: During the quarter, we made significant progress on the tariff mitigation plans, we outlined on our fourth quarter call.
Speaker Change: We continue to build out our internal south East Asia sourcing capabilities to accelerate supplier transitions out of China, leveraging our long standing strategic partnership.
Speaker Change: And in many cases, their dual sourcing or production and making capital investments to replicate legacy China protection.
Tracy Shireman: In addition, we have implemented strategic price increases that will take effect near the end of summer. As we mentioned in April, we purchased additional inventory in advance of the incremental 145% PARIKH implementation to limit our exposure. After the temporary pause is implemented, we resume targeted inventory purchases. While the impact on our cost of goods was minimal, we layered approximately $14 million of direct tariff costs into our ending inventory.
Speaker Change: In addition, we have implemented strategic price increases that will take effect or the unnecessary.
Speaker Change: As we mentioned in April we purchased additional inventory in advance of the incremental 145% tariff implementation. So when they are exposure.
Speaker Change: After the temporary pause is implemented we've as you know in a targeted inventory purchases.
Speaker Change: While the impact on our cost of goods was minimal we layered approximately 14 million a direct tariff costs into our ending inventory.
Tracy Shireman: As we move forward, we're approaching our inventory buys with a thoughtful approach and expectation of measured consumer demand in the short to immediate term as inflation continues to shape spending behavior.
Speaker Change: As we move forward, we're approaching our inventory buys, but the thoughtful approach and expectation isn't that huge consumer demand in the short to immediate term as inflation continues to shape spending behavior.
Tracy Shireman: Please refer to the investor presentation on our website for a complete summary of the tariff mitigation actions we are taking. On our April earnings call, we highlighted some planned cost reduction measures in light of the proposed tariff at that time. Following the temporary tariff suspension, we adjusted our cash preservation measures but remained disciplined in our approach given continuous tariff uncertainty.
Speaker Change: Please refer to the Investor presentation on our website for a complete summary of the tariff mitigation actions we are taking.
Speaker Change: On our April earnings call, we highlighted some planned cost reduction measures in light of the proposed tariffs at that time.
Speaker Change: Following the temporary tariff suspension.
Speaker Change: Adjusted or cash preservation measures.
Speaker Change: And disciplined in our approach given continued tariff uncertainty.
Tracy Shireman: Our current cost reduction measures include the following. Suspension of non-critical projects in capital expenditures except those supporting supplier diversification in dual sourcing projects. Reduction of personnel costs and extended pause on most projects and travel spend. Prioritization of marketing, promotion, and product development investments with the highest return. And lastly, we have taken actions to improve working capital efficiencies and balance sheet productivity.
Speaker Change: Our current cost reduction measures include the following.
Speaker Change: Suspension of noncritical projects and capital expenditure, except those supporting supplier diversification and dual sourcing projects.
Speaker Change: Reduction of personnel costs and extended pause and those projects can travel spend.
Speaker Change: [noise] prioritization of marketing promotion and product investments with the highest returns.
Speaker Change: And lastly, we have taken actions to improve working capital efficiency and balance sheet productivity.
Tracy Shireman: Through the combination of these cost reduction measures and the tariff mitigation actions I just mentioned, the company now believes it can reduce the net tariff impact on operating income to less than $15 million based on tariffs currently in place.
Speaker Change: It's a combination of these cost reduction measures and the tariff mitigation actions I just mentioned.
Speaker Change: Company now believes it can reduce the net tariff impact on operating income, but less than $15 million based on tariffs currently in place.
Tracy Shireman: Please refer to the investor presentation on our website for a summary of the gross unmitigated impact of tariffs at current rates, the amount we believe we can mitigate or offset, and the net remaining impact on operating income for fiscal 26. Turning now to our first quarter results, consolidated net sales decreased 10.8%. Excluding the impact from Olive in June, organic net sales decreased by 17.3%. To provide a little color around the revenue decline, approximately 45% of the organic revenue decline was driven by tariff-related trade disruption. This primarily reflects three facts. The pause or cancellation of China direct import orders in response to increased tariff rates and trade policy uncertainty.
Speaker Change: Please refer to the Investor presentation on our website for a summary of the gross unmitigated impact of tariffs at current rates and that we believe we can mitigate or offset and the net remaining impact on operating income for fiscal 'twenty six.
Speaker Change: Turning now to our first quarter results consolidated net sales decreased 10, 8%.
Speaker Change: Excluding the impact from Allison, Yeah, organic net sales decreased by 17, 3%.
Speaker Change: Can you provide a little color around the revenue declined approximately 45% and the organic revenue decline was driven by tariff related trade disruption.
Speaker Change: This primarily reflects three factors.
Speaker Change: The pause or cancellation of China direct import orders in response to increased tariff rates and trade policy uncertainty.
Tracy Shireman: A slowdown in retail orders following pull-forward activity in the fourth quarter of fiscal 2025. and evolving dynamics in the China market, including a shift towards localized fulfillment models and heightened competition from domestic sellers benefiting from government subsidies. We believe these impacts are largely transitory, but we do expect them to linger into the second quarter. The remaining decline reflects broader demand softness across our categories, even if several of our brands gained or maintained share. This category softness is driven by shifting consumer behavior, including trade down to value price points, and prioritizing essential categories amid concerns about future pricing pressures and broader economic uncertainty.
Speaker Change: A slowdown retailer orders following pull forward activity in the fourth quarter of fiscal 2025.
Speaker Change: And the evolving dynamics in the China market, including a shift towards localized fulfillment model and heightened competition from domestic sellers benefiting from government subsidies.
Speaker Change: We believe these impacts are largely transitory, but we do expect them to linger into the second quarter.
Speaker Change: The remaining decline reflects broader demand softness across our categories, even as several of our brands gained or maintained share.
Speaker Change: This category softness driven by shifting consumer behavior, including trade down to value price points.
Speaker Change: And prioritizing central categories, and it concerns about future pricing pressures and broader economic uncertainty.
Tracy Shireman: If these trends impacted purchase volumes, retailers also adjusted their inventory levels. In addition, we also saw slower replenishment in the Asia-Pacific region due to a milder cough, cold, and flu season. These impacts were partially offset by favorable year-over-year comparisons, including prior year shipping disruptions at our Tennessee distribution facility and the integration challenges from curl. Now, shifting to a closer look at our segment performance, I'll begin with home and outdoor, where net sales declined 10.3%, with approximately 6.7 percentage points of the decline driven by tariff-related disruption. This included direct import cancellations within the club channel, as well as what we believe to be tariff related pull forward activity at the end of fiscal 2025 and our home category.
Speaker Change: If these trends impacted purchase volumes retailers also adjusted their inventory levels.
Speaker Change: In addition, we also saw lower replenishment in the Asia Pacific region, due to a milder cough cold and flu season.
Speaker Change: These impacts were partially offset by favorable year over year comparisons, including prior year shipping disruptions at our Tennessee distribution facility and the integration challenges from crossing it.
Speaker Change: Now shifting to a closer look at our segment performance I'll begin with home and outdoor where net sales declined 10, 3% with approximately $6 seven percentage points of the decline driven by tariff related disruption.
Speaker Change: This include a direct import cancellations within the club channel as well as long as what we believe to be tariff related pull forward activity at the end of fiscal 2025, and our home category.
Tracy Shireman: The remaining decline reflects broader demand softness in the home and insulated beverage ware category, retailer inventory adjustments in response to the softness, and net distribution declines within our beverage ware and the outdoor channel. These headwinds were partially offset by the favorable comparison to prior year shipping disruptions at our Tennessee Distribution Facility, as well as strong domestic demand for technical packs. Turning to our beauty and wellness business, net sales declined 11.3%, with approximately 9.7 percentage points of a decline driven by tariff related disruption. This included direct import cancellations, as well as decline in international thermometry sales driven by software POS trends, partially impacted by the cascading effects of trade policy in the China market.
Speaker Change: The remaining decline reflects broader demand softness in the home and insulated beverage bottle category.
Speaker Change: Tailored inventory adjustments in response to the softness and that distribution declines within our beverage ware and the outdoor channel.
Speaker Change: These headwinds were partially offset by the favorable comparison to prior year shipping disruptions at Tennessee distribution facility as well as strong domestic demand for technical path.
Speaker Change: Turning to our beauty and wellness business net sales declined 11, 3% with approximately $9 seven percentage points other declined driven by tariff related disruption.
Speaker Change: This include a direct import cancellations as well as decline in international monitor sales driven by softer P. O S trends, partially impacted by the cascading effect of trade policy in the China market.
Tracy Shireman: The remaining decline reflects broader demand softness in the fans, hair appliances, and prestige hair care categories, along with retailer inventory adjustments in response to softer demands, and a weaker illness season in the Asia-Pacific region. These headwinds were partially offset by incremental revenue from Olive in June of $26.8 million and the integration challenges from CurlSmith in the prior year period. Consolidated gross profit margin decreased 160 basis points to 47.1%, primarily due to increased consumer shift toward lower price alternatives, which pressured margins, as well as elevated retail trade expense in response to a more competitive retail environment.
Speaker Change: The remaining decline reflects broader demand softness in the fine hair appliances, and prestige hair care category, along with retailer inventory adjustments in response to softer demand and a weaker illness season in the Asia Pacific region.
Speaker Change: These headwinds were partially offset by incremental revenue from olive in Jan of $26 8 million and the integration challenges from Christmas and the prior year period.
Speaker Change: Consolidated gross profit margin decreased 160 basis points to 47, 1%, primarily due to increased consumer shift towards lower price alternatives, which pressured margins as well as elevated retail trade expense in response to more and more competitive retail environment.
Tracy Shireman: Mergent was further pressured by the comparative impact of favorable inventory obsolescence expense in the prior year period and a less favorable brand mix within home and outdoor. These factors were partially offset by the favorable impact of the acquisition of All in June within Beauty and Wellness and lower commodity and product costs partially driven by Project Pegasus initiative. SG&A ratio increased 420 basis points primarily due to incremental growth investment of approximately 240 basis points. CEO of Succession Costs of approximately 100 basis points. Higher outbound freight costs resulting from modest rate increases in channel shift mix. The impact of the Olive and June acquisition and the impact of unfavorable operating leverage.
Speaker Change: Margin was further pressured by the comparative impact of favorable inventory obsolescence expense in the prior year period, and a less favorable brand mix within home and outdoor.
Speaker Change: These factors were partially offset by the favorable impact of the acquisition of Alan's young within beauty and wellness and lower commodity and product costs, partially driven by profit project I guess this initiative.
Speaker Change: SG&A ratio increased 420 basis points, primarily due to incremental growth investments of approximately 240 basis points.
Speaker Change: CEO succession costs of approximately 100 basis points.
Speaker Change: Higher outbound freight cost, resulting from modest rate increases and channel mix.
Speaker Change: The impact of the olive NGL acquisition and the impact of unfavorable operating leverage.
Tracy Shireman: Our SG&E ratio is typically higher in the first quarter as it's our lowest revenue period of the year. However, the greater-than-expected revenue decline outpaced our spending reductions' further elevated ratio.
Speaker Change: Our SG&A ratio is typically higher in the first quarter is our lowest revenue period of the year.
Speaker Change: However, the greater than expected revenue decline outpaced our spending reductions further elevated ratio.
Tracy Shireman: GAAP operating loss for the quarter was $407 million, primarily due to a $414 million of non-cash government charges incurred primarily due to the sustained decline in our stock price and the lower gross profit margin and higher SG&A rate I just mentioned. On an adjusted basis, operating margin decreased 600 basis points to 4.3%. The decrease was primarily driven by consumer trade-down behavior. 240 basis points of incremental growth investment, higher retail trade expense, higher outbound freight costs, a less favorable brand mix within home and outdoor, comparative impact of favorable inventory obsolescence expense in the prior year, and the impact of unfavorable operating leverage.
Speaker Change: GAAP operating loss for the quarter was 407 million, primarily due to a 414 million of noncash impairment charges.
Speaker Change: Incurred primarily due to the sustained decline in our stock price and the lower gross profit margin and higher SG&A rate I just mentioned.
Speaker Change: On an adjusted basis operating margin decreased 600 basis points to four 3%.
Speaker Change: The decrease was primarily driven by consumer trade down behavior.
Speaker Change: 240 basis points of incremental growth investment.
Speaker Change: Retail trade expense.
Speaker Change: Outbound freight costs.
Speaker Change: Less favorable brand mix within home and outdoor <unk>.
Comparative impact of favorable inventory obsolescence expense in the prior year.
Speaker Change: And the impact of unfavorable operating leverage.
Tracy Shireman: These factors were partially offset by the contribution from Olive and June and lower commodity and product costs primarily driven by our Project Pegasus initiative. On a segment basis, adjusted operating margin declined to 5% for home and outdoor and to 3.7% for beauty and wellness, which benefited from the contribution of Olive and June. Income tax expense was $30.2 million compared to $12.1 million for the same period last year, primarily due to the timing of the accounting for the tax impact of the impairment charge in the quarter. Non-GAAP Adjusted EPS was $0.41 compared to $0.99 in the same period last year.
Speaker Change: These factors were partially offset by the contribution from olive and Jan lower commodity and product costs, primarily driven by a project how does this initiative.
Speaker Change: On a segment basis adjusted operating margin declined by declined two 5% for home and outdoor and to three 7% for beauty and wellness.
Speaker Change: <unk> benefited from the contribution of all of them in June.
Speaker Change: Income tax expense was $30 2 million compared to $12 1 million for the same period last year, primarily due to the timing of the accounting for the tax impact of the impairment charge in the quarter.
Speaker Change: non-GAAP adjusted EPS was <unk> 41, compared to 99 cents in the same period last year.
Tracy Shireman: This year we are decreased primarily due to lower adjusted operating income and higher interest expense. Turning to our inventory balance, we ended the quarter at $484 million, or approximately $40 million higher than the same period last year. including inventory related to the Olive in June acquisition and $14 million of tariff-related costs that layered into inventory, our ending inventory was largely flat year-over-year.
Speaker Change: This year over year decrease was primarily due to lower adjusted operating income and higher interest expense.
Speaker Change: Turning to our inventory balance we ended the quarter at 484 million or approximately $40 million higher than the same period last year.
Speaker Change: Excluding inventory related to the olive in June acquisition, and 14 million of tariff related costs that layered in to inventory, our ending inventory was largely flat year over year. However.
Tracy Shireman: However, we are not satisfied with our current levels and have worked underway to improve our inventory position and terms in the second half of the year.
Speaker Change: However, we are not satisfied with our current levels and it worked underway to improve our inventory position and turns in the second half of the year.
Tracy Shireman: Turning to our debt and liquidity position, we ended the first quarter with total debt of $871 million, a sequential decrease of $46 million compared to the fourth quarter of Fiscal 25. During the quarter, we borrowed $250 million under our delayed draw-term loan facility and utilized the proceeds to repay debt outstanding under our revolving credit facility. The borrowing availability on our revolving credit facility is $605 million and the limitation on our ability to borrow based on our leverage ratio is $346.7 million. Our net leverage ratio was just over 3.1 times at the end of the first quarter as compared to three times at the end of fiscal 25.
Speaker Change: Turning to our debt and liquidity position. We ended the first quarter with total debt of 871 million a sequential decrease of $46 million compared to the fourth quarter of fiscal 'twenty five.
Speaker Change: During the quarter, we borrowed 250 million under our delayed draw term loan facility and utilized the proceeds to repay debt outstanding under our revolving credit facility.
Speaker Change: The borrowing availability on our credit on our revolving credit facility of $605 million.
Speaker Change: And the limitation on our ability to borrow based on our leverage ratio is $346 7 million.
Speaker Change: Net leverage ratio was just over three one times at the end of the first quarter as compared to three times at the end of fiscal 'twenty five.
Tracy Shireman: With cash flow preservation measures I mentioned earlier, we expect continued improvement in our financial position and liquidity, driven by positive free cash flow in the second half of the fiscal year.
Speaker Change: With cash flow preservation measures I mentioned earlier, we expect continued improvement in our financial position and liquidity driven by positive free cash flow in the second half of the fiscal year.
Tracy Shireman: However, we do expect second quarter free cash flow to be negatively impacted by lower sales in the first quarter, higher tariff costs, and timing-related working capital movement.
Speaker Change: However, we do expect second quarter free cash flow to be negatively impacted by lower sales in the first quarter higher tariff costs and timing related working capital movements.
Tracy Shireman: Now, I'd like to turn to our outlook. The evolving trade disruption, ongoing uncertainty, and the potential impact on inflation, consumer confidence, and consumer spending in our discretionary categories make longer-term forecasting challenging.
Speaker Change: Now I'd like to turn to our outlook.
Speaker Change: The evolving trade disruption ongoing uncertainty and the potential impact on inflation.
Speaker Change: Your confidence and consumer spending in our discretionary categories like longer term forecasting challenging.
Tracy Shireman: As such, we are not providing an outlook for the full fiscal year at this time.
Speaker Change: As such we are not providing an outlook for the first for the full fiscal year at this time.
Tracy Shireman: However, we are providing outlook for our fiscal second quarter. Consistent with what we experienced in the first quarter, we expect continued tariff-related trade disruptions, including paused or reduced direct import orders due to tariff uncertainty, as well as lower international sales driven by shifting market dynamics in China. Demand softness is also expected to persist, driven by ongoing consumer pricing pressure. In response to these trends, we anticipate that retailers will remain cautious in their ordering patterns as they manage inventory levels and continue to adjust for elevated inventory on select brands following first quarter. We expect these impacts to be partially offset by incremental revenue from the Olive and June acquisition.
Speaker Change: However, we are providing outlook for our fiscal second quarter.
Speaker Change: Let's start with what we experienced in the first quarter, we expect continued tariff related trade disruption.
Speaker Change: Clothing pause or reduce direct import orders due to tariff uncertainty.
Speaker Change: As well as lower international sales driven by shifting market dynamics in China.
Speaker Change: Demand softness is also expected to persist driven by ongoing consumer pricing pressures.
Speaker Change: In response to these trends, we anticipate that retailers will remain cautious in their ordering patterns as they manage inventory levels and continue to adjust for elevated inventory and select brands following first quarter.
Speaker Change: We expect these impacts to be partially offset by incremental revenue from the all hinging on acquisition.
Tracy Shireman: We expect next sales between $408 million and $432 million in the second quarter of Fiscal 26, which implies a decline of 14% to 9%. In terms of our net sales outlook by segment, we expect a home and outdoor decline of 16.5% to 11.5% and a beauty and wellness decline of 11.3% to 6.1%, which includes an expected incremental net sales contribution of $26 million to $27 million from all of in June. We expect consolidated, adjusted, diluted EPS in the range of $0.45 to $0.60. Our Adjusted EPS Outlook includes expected margin compression due to the impact of a more promotional environment, consumer trade-down behavior, less favorable mix, higher direct tariff-related costs, and unfavorable operating leverage, partially offset by lower commodity and product costs driven by our Project Pegasus initiative.
Speaker Change: We expect net sales between 408 and 432 million in the second quarter of fiscal 'twenty six which.
Speaker Change: Which implies a decline of 14% to 9%.
Speaker Change: In terms of our net sales outlook by segment, we expect our home and outdoor decline of $16 five to 11, 5%.
And the beauty and wellness decline of 11.3 to six 1% which included.
Speaker Change: And expected incremental net sales contribution of $26 million to $27 million from olive in June.
Speaker Change: We expect consolidated adjusted diluted EPS in the range of 45 to 60.
Speaker Change: Our adjusted EPS outlook includes expected margin compression due to the impact of a more promotional environment consumer trade down behavior.
Speaker Change: Favorable mix.
Speaker Change: Higher direct tariff related costs and unfavorable operating leverage partially offset by lower commodity and product cost driven by our project I guess this initiative.
Tracy Shireman: In response to our unfavorable operating leverage, we are taking actions to reduce spending and expect to normalize our SG&E ratio to approximately 37% to 38% for the remaining three quarters of the fiscal year. We anticipate a more pronounced improvement in the second half, supported by our seasonal revenue patterns, easing tariff-related trade disruptions, and the impact of our price increases to retail on our SG&A ratio. In terms of our tax rate in the second quarter, we expect our adjusted effective tax rate to range from 29 to 31%, which excludes the timing of the accounting for the tax impact of the impairment charge taken in the first quarter.
Speaker Change: In response to unfavorable operating leverage we are taking actions to reduce spending and expect to normalize our SG&A ratio to approximately 37%, 38% for the remaining three quarters of the fiscal year.
Speaker Change: We anticipate a more pronounced improvement in the second half supported by our seasonal revenue patterns easing tariff related trade disruptions and the impact of our price increases to retail on our SG&A ratio.
Speaker Change: In terms of our tax rate in the second quarter, we expect our adjusted effective tax rate to range from 29% to 30%, 31%, which excludes the timing of the accounting for the tax impact of the impairment charge taken in the first quarter.
Tracy Shireman: Inventory levels are expected to increase to approximately $510 million to $520 million at the end of the second quarter, or roughly $40 million to $50 million above the same period last year. This increase is primarily driven by seasonal inventory builds, the impact of the Olive and June acquisition, and approximately $35 million in tariff-related costs capitalized into inventory, partially offset by lower levels of excess and obsolete inventory. Looking at the full fiscal year based on tariffs currently in place, current inventory levels, and consumer demand trends, we continue to expect that the vast majority of direct tariff costs will impact the second half of our fiscal year, which is largely aligned with our planned price increases.
Inventory levels are expected to increase to approximately $510 million to $520 million at the end of setting second quarter, roughly $40 million to $50 million above the same period last year.
Speaker Change: This increase is primarily driven by seasonal inventory builds.
Speaker Change: The impact of the Arlington June acquisition, and approximately $35 million in tariff related costs capitalized into inventory, partially offset by lower levels in excess and obsolete inventory.
Speaker Change: Looking at the full fiscal year based on tariffs currently in place current inventory levels and consumer demand trends. We continue to expect that the vast majority of direct tariff costs will impact the second half of our fiscal year, which is largely aligns with our planned price increases.
Tracy Shireman: If consumer demand begins to slow, the weighted impact will be pushed out even further. As mentioned previously, we believe diversification and dual sourcing will allow us to mitigate supply chain risk now and in the future, but we do expect incremental operating expenses and capital expending in fiscal 26 as a result. We continue to believe that the majority of the diversification benefits won't be realized until the end of Fiscal 26 or early Fiscal 27, while some of the direct care impacts will begin to be realized sooner. We now estimate that our diversification efforts will reduce our ongoing exposure to timed tariffs on U.S.
Speaker Change: If consumer demand against the slow the weighted impact will be pushed out even further.
Speaker Change: As mentioned previously we believe diversification and dual sourcing will allow us to mitigate supply chain risks now and in the future, but we do expect incremental operating expenses and capital spending in fiscal 'twenty six as a result.
Speaker Change: We continue to believe that the majority of the diversification benefits won't be realized until the end of fiscal 'twenty six early fiscal 'twenty seven well some of the direct tariff impacts will begin to be realized sooner.
Speaker Change: We now estimate that our diversification efforts will reduce our ongoing because those are two times tariffs on U S imports to approximately 25% of cost of goods sold by the end of fiscal 'twenty six.
Tracy Shireman: imports to approximately 25% of cost of goods sold by the end of Fiscal 26. Our estimated end-of-year exposure increased from 20% to 25% since our last earnings call, primarily due to updated timing for the Southeast Asia transition and revisions to our inventory strategy, which was originally developed under the assumption of 145% tariff. With tariffs now at 30% and pricing actions underway, retailers remain focused on inline goods to avoid shelf disruption, prompting a corresponding change in our sourcing approach. Looking ahead to Fiscal 27, we expect continued progress to further reduce our exposure to China tariffs on U.S.
Speaker Change: Our estimated end of your exposure increased from 20% to 25% since our last earnings call.
Speaker Change: Primarily due to updated timing for that South East Asia transition and revisions to our inventory strategy, which was originally developed under the assumption of 145% tariff.
Speaker Change: With tariffs now at 30% and pricing actions underway retailers remain focused on inland goods to avoid shelf disruptions, prompting a corresponding change in our sourcing approach.
Speaker Change: Looking ahead to fiscal 'twenty seven we expect continued progress to further reduce our exposure to China tariffs on U S imports to approximately 15%.
Tracy Shireman: imports to approximately 15%. In parallel, we continue to expect that over 40% of our U.S.-bound purchases sourced from China will be dual-sourced and available from other regions by the end of Fiscal 26. increasing to over 60% by the end of fiscal 27, positioning us to operate with greater control, flexibility, and an increasingly dynamic global environment.
Speaker Change: In parallel we continue to expect that over 40% of our U S bound purchases source in China will be dual sourced and available from other regions by the end of fiscal 'twenty six.
Speaker Change: Increasing to over 60% by the end of fiscal 'twenty, seven positioning us to operate with greater control flexibility.
Speaker Change: Recently dynamic global environment.
Tracy Shireman: We have an updated slide in our investor presentation that illustrates the estimated composition of our ongoing purchasing exposure by the end of Fiscal 26 and Fiscal 27 as compared to Fiscal 25.
Speaker Change: We have an updated slide in our investor presentation that illustrates the estimated composition of our ongoing purchasing exposure by the end of fiscal 'twenty six in fiscal 'twenty seven as compared to fiscal 'twenty five.
Tracy Shireman: As we wrap up, I want to leave you with a few key takeaways.
Speaker Change: As we wrap up I want to leave you with a few key takeaways.
Tracy Shireman: First, I believe we are well positioned to navigate the macroeconomic environment and emerge stronger with the following clear priorities in place. Accelerating Supply Chain Diversification Outside of China. Executing targeted pricing strategies.
Speaker Change: I believe we are well positioned to navigate the macro economic environment and emerge stronger with the following clear priorities in place.
Speaker Change: Or any supply chain diversification outside of China.
Speaker Change: Executing targeted pricing strategies.
Tracy Shireman: Maintaining cost and cash discipline and preserving balance sheet strength.
Speaker Change: Maintaining cost and cash discipline and purpose of preserving balance sheet strength.
Tracy Shireman: Second, we are taking clear actions to simplify how we work, sharpen how we invest, and strengthen our connections with consumers, retail partners, and each other. Third, we continue to focus on delivering high-quality, purpose-built products that not only meet real consumer needs, but are also both functional and accessible in today's value-driven landscape. And finally, we are building on the strength of our diverse portfolio of brands that resonate deeply with consumers and stand for quality, performance, and trust.
Speaker Change: Second we are taking clear actions to simplify how we work sharpen how we invest and strengthen our connection with consumers and retail partners and each other.
Speaker Change: Third we continue to focus on delivering high quality purpose built products that not only meet real consumer need that are also both functional and accessible and todays value driven landscape.
Speaker Change: And finally, we are building on the strength of our diverse portfolio of brands that resonate deeply with consumers and stand for quality performance and trust.
Rukunis: And with that, I will turn it back over to the operator for Q&A. Thank you.
Speaker Change: And with that I will turn it back over to the operator for Q&A.
Speaker Change: Thank you we will now be conducting a question and answer session.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: 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 may be necessary to pick up your handset before pressing the star keys.
Operator: For a participant choosing speaker equipment, it may be necessary to pick up your handset before pressing the star We ask that you please ask one question and one follow-up question and re-queue for any additional questions.
Speaker Change: We ask that you. Please ask one question and one follow up question and re queue for any additional questions. One moment, while we poll for questions.
Rupesh Parikh: One moment while we poll for questions. Our first question is from Rupesh Parikh with Oppenheimer and Company.
Refresh Perique: Our first question is from refresh Perique with Oppenheimer and company. Please proceed.
Rupesh Parikh: Please.
Rupesh Parikh: Good morning, and thanks for taking my question. So I just wanted to go back to your commentary on pricing. We'd love to hear your plans from a pricing perspective, just more color and categories you're taking price in, and then just how you're thinking about elasticity, just given we are in a weaker environment. Thank you.
Good morning, and thanks for taking my question. So I just wanted to go back to your commentary on pricing would love to hear your plan from a pricing perspective, just more color on categories, you're taking pricing and then just how you're thinking about your law says he's just given we are in a weaker environment. Thank you.
Brian Grass: Yeah, I can start and then maybe Tracy can build Rupesh. So in this is indicated on one of the slides in the investor deck, we did put a lot of content in the investor deck this quarter. There's a lot of nuance and puts and takes to explain, so hopefully it's helpful. Implementing and have them ready to go and essentially lined up with the retailers to implement an average price increase across our portfolio in the range of $7 to $10 billion. And if you look on an individual product basis, that ranges from zero, because there's items we're not taking price on, to as high as 15% on an individual item.
Speaker Change: Yeah, I can start and then maybe Tracy can build compassion. So and this is indicated on one of the slides in the investor deck, We did put a lot of content in the investor deck this quarter as well.
Speaker Change: There's you know a lot of nuance and puts and takes to explain so hopefully that's helpful. We are.
Speaker Change: Implementing and have them ready to go in and essentially lined up with the retailers to implement <unk>.
Speaker Change: Average and average price increase across our portfolio of in the range of 7% to 10%.
Speaker Change: And if you look on an individual product basis that ranges from zero, because theres items, we're not taking price on to as high as 15% on an individual item. So that's kind of the breadth and the scope of the price increases.
Brian Grass: So that's kind of the breadth and the scope of the price. that we have lined up.
Speaker Change: That we have lined up and then I'm sorry, what was the second part of the question just really your thought you lost a few times.
Brian Grass: And then, I'm sorry, what was the second part of the question? Just relate that elasticity is higher than your elasticity. Yeah, it's a very good question because I think it's sometimes not considered and it is a big consideration. We have tried to be very conservative with respect to the elasticity assumptions that we're making. is a conservative and drives the economy.
Speaker Change: Yes. It is a very good question, because I think it's sometimes not.
Speaker Change: Considered in and it is a big consideration we have tried to be very conservative with respect to the elasticity assumptions that we're making.
Speaker Change: Because of the reason you said, which is it's a difficult environment and so.
Speaker Change: No I I know that Theres, a little bit of 145% tariff you could offset $50 million to $60 million of the impact and then at 30% tariff. We're still seeing unmitigated. We have you know less than $15 million that math doesn't necessarily square up one of the reasons for that is we are making conservative elasticity.
Speaker Change: Assumptions are with respect to our price increases.
Speaker Change: Yeah, right and then my I guess my start up Yep.
Tracy Shireman: I guess my, I'm sorry, guys. Yep. Now, I was just going to layer on that, you know, when we look at our pricing, it's very selected by brand. It's really based... you know, where that brand is in the category, whether it's a central or more of a discretionary item. And then also, you know, And overall, like Brian said, you know, we are taking pricing and Great.
Speaker Change: Yes.
Speaker Change: I was just going to layer on that you know when we look at our pricing. It's very selected by brand. It's really based on you know.
Speaker Change: Where that brand is in the category, whether its central or more of a discretionary item and then also you know that the country of origin and you know probably Brian said, you know, we are taking pricing and making sure that we align with where we think that the category has been aligned and market them to make sure that we're in the right in the right spot.
Speaker Change: The sweet spot of pricing.
Tracy Shireman: And then my follow-up question is just for Q2 specifically, any more color you can provide in terms of the interplay between this gross margin and SG&A? Yeah, for Q2, what I would say if you compare it to Q1, will probably be a little bit worse, maybe by like 40 bits. So, you know, last year we had a lot of inventory cleanup, working to the warehouse. We also have a favorable headwind, or a tailwind for Pegasus coming in Q2, so we do see some improvement in Q2 versus Q1. And then in terms of our SG&A ratio, so we were elevated in Q1, we were on 45% of revenue.
Speaker Change: Right and then my follow up question is just just for Q2, specifically any more color you can provide in truth the interplay between gross margin and as you know.
Speaker Change: Yeah for Q2, what I would say if you compare it to Q1 will probably be a little bit worse, maybe by like 40 bps to 50 bps better.
Speaker Change: Then the first quarter, but year over year, we're going to see improvement. So now last year, we had a lot of inventory cleanup work into the warehouse, we have to have a favorable headwind or tailwind for packages coming in Q2. So we do see some improvement in Q2 versus Q1 versus prior year.
Speaker Change: And then in terms of our SG&A ratio. So we were elevated in Q1, we were around 45% of our revenue that is going to come down right. Now we're kind of in the 40 to 41 ish range, but as we implement our cost reduction measures will level out to about 39% in the back half.
Tracy Shireman: That is going to come down. Right now, we're kind of in the 40 to 41-ish range, but as we implement our cost reduction measures, we'll level out to about.
Tracy Shireman: And I'll just build on that, you know, there's likely going to be a question about growth investment spending as we move forward. Our point of view, at least in the short term, is, you know, that there was a point in time we were trying to get to 9% of net sales, and we had achieved that, as at the end of last year, about 8% of net sales. The vision, at least in the short term, is to not pursue the 9%, but likely to keep our growth investment flat with revenue, especially, you know, in the environment we're in and the decline in revenue, there's too much fixed cost leverage that gets lost if you're trying to grow that.
Speaker Change: And I'll just build on that with you.
Speaker Change: There's likely going to be question about gross investment spending as we move forward our our point of view at least in the short term is that there was a point in time, we were trying to get to 9% of net sales and we did we had achieved that as at the end of last year about 8% of net sales.
Speaker Change: The vision at least in the short term is to not pursue the 9%, but likely to keep our gross investment flat with revenue, especially you know when the environment. We're in and the decline in revenue there's too much fixed cost leverage that gets lost if you're if you're trying to grow that and we really think we can we can make our growth investments spur.
Tracy Shireman: And we really think we can make our growth investment spending punch above its weight and still achieve the same revenue results, but spend the money more effectively. So that's it.
Speaker Change: <unk> punch above its weight and still achieve the same revenue results, but spend the money more effectively so that's what we're working on there.
Rupesh Parikh: Great. Thank you for all the color.
Speaker Change: Great. Thank you for all the color of basketball.
Rupesh Parikh: I'll pass it along.
Peter Grom: Our next question is from Peter Grom with UBS.
Speaker Change: Our next question is from Peter Grom with UBS. Please proceed.
Peter Grom: Thanks, operator.
Peter Grom: Good morning, everyone. Hope you're doing well.
Peter Grom: Thanks, operator, good morning, everyone hope you're doing well this maybe a hard question to answer, but I guess, what I'm trying to understand is how we should be thinking about the long term earnings power of the business just in the context of what we're seeing right. You look at first quarter reformer and second quarter guidance, you know earnings are going to be down quite substantially.
Peter Grom: This may be a hard question to answer, but I guess what I'm trying to understand is how we should be thinking about the long term earnings power, you know, of the business, just in the context of what we're seeing, right? As we look at first quarter performance, second quarter guidance, you know, earnings are going to be down quite substantially. And I guess what I'm really trying to understand is how much of this is really a timing mismatch between the cost and the headwinds versus the mitigation versus how much of this is kind of now, you know, ongoing in the base.
Peter Grom: And I guess, what I'm really trying to understand is how much of this is really a timing mismatch between the costs and the headwinds versus the mitigation versus how much of this is kind of now you know are ongoing.
Peter Grom: Ongoing in the base I get it's a broad based question a lot of moving pieces, but just any thoughts in terms of how investors should think about that as we look out over the next call. It one to two years yeah.
Brian Grass: I get it's a broad based question, a lot of moving pieces, but just any thoughts in terms of how investors should think about that as we look out over the next, call it, you know, one to two years.
Brian Grass: Yeah, no, actually, Peter, I think it's a great question. I'm glad you asked it because I did want to address it. So we called out, let me just start by referring to, you know, some of the big exogenous impacts that we experienced in Q1 and we expect in Q3. And a big part of that is the direct import business, which we did call out in April, but we acknowledged that it turned out to be much more significant than we expected. Only about two weeks between the tariff announcements and our Q4 earnings, so there was not a lot of time to understand all the cascading impacts in the size.
Peter Grom: Yeah, no actually Peter.
Speaker Change: So I think it's a great question I'm glad you asked it because I did want to address it. So we called out let me just start by rich.
Speaker Change: Referring to you know some of the big exogenous impacts that we experienced in Q1 and we expect in Q2.
Speaker Change: And a big part of that is the direct import business, which we did call out in April, but we acknowledge that it turned out to be much more significant than we expected there was.
Speaker Change: Only about two weeks between the tariff announcements in our Q4 earnings. So there was not a lot of time to understand all the cascading impact and the size of them.
Brian Grass: And while we're not giving guidance for the full year, I would just so we can be grounded in some We believe the existing consensus estimate for the full year is not. However, as you mentioned, the cadence of the results between the first half and the second half is off versus our point of view. And the reason for that is the consensus estimates were developed with the assumption of 145% China tariffs, not 30%. With 30% tariffs, the tariff mitigation plan is much, much different. We can mitigate much more of the impact with pricing. which we do have teed up to become effective in the second half of the year.
Speaker Change: And while we're not giving guidance for the full year I would just so we can be grounded in something we believe the existing consensus estimate for the full year is not unreasonable. However, as you mentioned the cadence of the results between the first half and the second half is off versus our point of view.
Speaker Change: And in the part of the reason for that is the consensus estimates were developed with the assumption of 145%, China tariffs not 30% tariffs.
Speaker Change: With 30% tariffs the tariff mitigation plan is much much different we can mitigate much more of the impact with pricing actions, which we do have teed up to become effective in the second half of the year the.
Brian Grass: The majority, by far, of our net unmitigated tariff impact will fall into Q2. because there's no pricing action in place to offer. Quarterly net unmitigated turf impact in Q3 and Q4 will be much less. Even though, as we mentioned to Rupesh, we believe we're making conservative estimates with respect to demand elasticity and loss of volume. I just point on this, we don't think it's correct to take Q1 results, Q2 outlook, and then add it to the existing consensus to try and get an estimate for the full year.
Speaker Change: The majority by far of our net mitigated unmitigated tariff impact will fall into Q2, because there's no pricing action in place to offset the impact the quarterly net unmitigated tariff impact in Q3, and Q4 will be much less even though as we mentioned to repass, we believe we're making conservative estimates with respect.
Speaker Change: To demand elasticity and loss of volume.
Speaker Change: I just you know point on this we don't think it's correct to take Q1 results Q2 outlook and then added to the existing consensus to try and get an estimate for the full year. So that the the whole cadence of the year has kind of shifted you know versus maybe original expectations to what we expect now and it's really become.
Brian Grass: So the whole cadence of the year has kind of shifted versus maybe original expectations to what we expect now, and it's really because of the change in the size of the tariffs, and then the changes in our mitigation plan as a result. And then the much heavier weight in terms of mitigation coming from price. And what we try to do is make this at least somewhat helpful in terms of understanding the puts and takes. If you look at slide 14, you're going to see the first half of the year with a much heavier weight of headwinds and a much lower weight of tailwinds, and then it really flips in the second half of the year where we have a much heavier weight of tailwinds and then a much lower weight of headwinds.
Speaker Change: Cause of the change in you know the size of the tariffs and then the changes in our mitigation plan as a result, and then much heavier weight in terms of mitigation coming from price increases than they were previously and what we tried to do is make this.
Speaker Change: At least somewhat helpful. In terms of understanding the puts and takes if you look at slide 14, you can see the first half of the year with a much heavier weight of headwinds and a much lower weight of tailwind and then it really flips in the second half of the year, where we have a much heavier weight of tailwind.
Speaker Change: And then a much lower weight of headwinds so I'll stop there and see if that was helpful and if theres any follow ups. Let me no no. That's that was super helpful. I guess just to play it back if consensus is and you know I'm looking at Bloomberg It seems like it's roughly in.
Peter Grom: So I'll stop there and see if that was helpful, and if there's any follow-ups, let me know. No, that was super helpful. I guess just to play it back, if consensus is in the – I'm looking at Bloomberg, it seems like it's roughly in the $5 range. If you kind of back that out, that would imply in the second half, despite all this moving pieces, you would expect earnings to be kind of flat to down modestly versus what we're seeing right now. Is that kind of the right take? And then as we think about the run rate moving forward, that would imply some substantial recovery, at least in the first half of fiscal 27.
Speaker Change: And the $5 range, if you kind of back that out that would imply in the second half. Despite all those moving pieces you would expect earnings being kind of flat to down modestly versus what we're seeing right. Now is that kind of the right take and then as we think about the run rate moving forward that would imply some substantial recovery at least in the first half of fiscal 'twenty seven.
Peter Grom: Yeah, I think it's still net down to get to that point. But okay, definitely improvement. I mean, so yes, I think you're in the ballpark of what would need to be true in the second half of the year to make consensus estimates reasonable, it would require improvement, which we are expecting. But But I don't think it has to get all the way to Okay, and then I guess just on that point, I mean, how much of that is with it going to that slide, you know, just hearing your thoughts there, how much of that is within your kind of control versus how much of that is predicated on you know, maybe, you know, the category is getting better.
Speaker Change: Yeah, I think it's still net down to get to that point, but okay definitely improvements I mean, so yes, I think you're in the ballpark of.
Speaker Change: What would need to be true in the second half of the year to to make consensus estimates reasonable it would require improvement, which we are expecting.
Speaker Change: But I don't think it has to get all the way to flat.
Speaker Change: Okay, and then I guess just on that point I mean, how much of that is what's it going to that slide you know just hearing your thoughts there how much of that is within your kind of control versus how much of that is predicated on you.
Speaker Change: You know maybe you know the category is getting better and it could be good or good or bad right. Maybe you were making very conservative assumptions and if things do get better from a demand perspective that would be upside, but just be curious how you're thinking about the things that are that are not within your control as it is.
Brian Grass: And it could be good or, you know, good or bad, right? Maybe you're making very, you know, conservative assumptions. And if things do get better, from a demand perspective, that would be upside. But just be curious, you know, how you're thinking about the things that are that are not within your control as we look as you talk about that back half? Yeah, I think it's a great question. I mean, I think the price increases, you know, to some extent, are in our control, and they are set with the retailers. Now, the question is, what's the consumer going to do in response?
Did you talk about that back half.
Speaker Change: Yeah, I think it's great question I mean, I think the price increases you know to some extent are in our control and they are set with the retailers now. The question is what's the consumer going to do in response in and that's where we've tried to make conservative elasticity assumptions.
Brian Grass: And that's where we've tried to make conservative elasticity Then, you know, we're making an assumption that that retail inventory has to stabilize at some point. There's been a lot of kind of pull. and then you know, lack of replacement orders, and we definitely saw that in Q1, and we think we're going to see it in Q2. That has to stabilize at some point and so we've assumed that it will in the second half of the year. The direct-import ordering, I mean, I think that has to stabilize at some point as well. There's product that retailers are just very ingrained buying on a direct import basis.
Speaker Change: You know, we're making an assumption that that retail inventory has to stabilize at some point theres been a lot of kind of pool.
Speaker Change: A pull forward and then you know a lack of replenishment orders and we definitely saw that in Q1, and we think we're going to see it in Q2 that has to stabilize in some at some point and so we would assume that it will in the second half of the year. The direct import ordering I mean, you know like.
Speaker Change: I think that has to stabilize at some point as well there's product that retailers are just very ingrained in buying on a direct import basis and they haven't had a lot of time to adjust to buying it on a different kind of basis and what I really think theyre doing is theyre waiting to see what's the level of price.
Brian Grass: And they haven't had a lot of time to adjust to buying it on a different kind of basis. And what I really think they're doing is they're waiting to see what's the level of price increase that we give them at retail, and then they can arbitrage. They can see the price increase at retail through normal replenishment, and then they can arbitrage that against buying on direct import. And in most cases, I think they're going to pick buying on a replenishment basis because, you know, direct import is going to have 30% tariff. In many cases, our price increases are not fully covered.
Speaker Change: Greece that we give them at retail and then they can arbitrage. They can see the price increase at retail through normal replenishment and then they can arbitrage that against buying on direct import and in most cases, I think they're going to pick buying on a replenishment basis, because you know direct imports going to have 30% tariff in many cases our pre.
Speaker Change: This increases are not fully cover I don't see many cases in some cases, our price increases are not fully covering the tariff impact and so they can arbitrage and pick the one that's more beneficial to them. So I think they're waiting for that to play out for them. This business to come back into the fold and be stabilized.
Brian Grass: I don't say many cases. In some cases, our price increases are not fully covering the tariff impact, and so they can arbitrage and pick the one that's more beneficial to them. So I think they're waiting for that to play out, for then this business to come back into the fold and be stabilized. More assumptions that you have to make is regarding cough-cold-flu season. We're assuming normal, which would be an improvement over what we've seen kind of in the last two years. We do have distribution gains that are kind of in place and just need to be executed again.
Speaker Change: More assumptions that you have to make is regarding cough cold flu season worse is assuming normal which would be an improvement over what we've seen kind of in the last two years. We do have distribution gains that are kind of in place and just need to be executed against so that's you know that's positive and if youre looking at year over year compare.
Brian Grass: So that's If you're looking at year-over-year, we have some challenges with our Osprey integration last year that comparison gets more favorable because we don't have those same challenges now. From a profitability perspective, we expect improvement. and Susan Anderson, Robert Labick, Linda Bolton, Rupesh Parikh, Sabrina McKee, Noel Geoffroy, So that's kind of a lot. related to the tailwinds that were Great. Thanks so much.
Speaker Change: And we had some challenges with their osprey Osprey integration last year that comparison gets more favorable because we don't have those same challenges now you know from a profitability perspective, we expect improvement.
Speaker Change: Through greater efficiency from our distribution facility, which is now kind of ramping up to peak efficiency levels. All of in June we expect their results to continue to accelerate so increasing sales and increasing EPS as time goes and then you know we.
Speaker Change: Hopefully you saw that we generated strong cash flow in the quarter and we expect to do that in the second half of the year, which will allow us to pay.
Speaker Change: Pay down debt and interest expense, so that's kind of a walk.
Speaker Change: Related to the tailwind that we're assuming for the second half.
Speaker Change: Great. Thanks, so much I'll pass it on.
Peter Grom: I'll pass it on.
Olivia Tong: Our next question is from Olivia Tong with Raymond James. Great, thanks. Good morning, everybody. I want to first follow up on, you know, your comments around retail distribution gains, which you say on slide 14. And if you could just talk about what categories, and I would assume that that's a net number. Are there anywhere, as you think about the fall resets, where you saw self-paced consolidation, de-stocking of your brands? And just give a little bit more color there.
Speaker Change: Our next question is from Olivia Tong with Raymond James. Please proceed.
Olivia Tong: Great. Thanks, Good morning, everybody I wanted to first follow up on your comment around retail distribution gains what did you say on slide 14, and if you could just talk about what categories and I would say that that's a net number or are there any where if you think about the fall resets where you saw.
Speaker Change: Self-abasement holidays and Destocking.
Olivia Tong: Of your brand and just give a little bit more color there.
Olivia Tong: Sorry Olivia, I didn't hear the first part of your question, could you repeat that? Sure. My question was just around your comment around retail distribution gains that should benefit the second half, given, you know, that would suggest that consensus is probably off by about a dollar. So just, you know, in terms of the retail distribution gains, I assume that's a net number. Could you talk about where you made gains? And if there were any areas where you did lose any self?
Olivia Tong: Sorry, Olivia I E. I didn't hear the first part of your question could you sorry.
Olivia Tong: Sure. My question was just around your comment around retail distribution gains that should benefit the second half given you know that would suggest that consensus is probably off by about a dollar. So just you know in terms of the retail distribution gains I assume that's a net number could you talk about where you made gains and if there were.
Olivia Tong: Any areas, where you didn't lose any shelf space.
Olivia Tong: Yeah, I'll start with that one. Hi, Olivia. I would say in terms of our distribution gains, we are expanding distribution in Walmart within our blood pressure monitors, so that's a nice. In addition, we are expanding both Hydro Flask and Osprey and our EMEA. So we are looking at, you know, new distribution, partnering with new strategic partners, so there is a lot of acceleration and a lot of in-market activity happening behind those two brands. In terms of, it is a net distribution, so in terms of things that are tail or headwinds for us, we For Hydroplas, we reduced the footprint within our outdoor segment, so there's a little bit of a decline there, as well as some adjustments.
Olivia Tong: Yeah, I'll start with that one hi, Livia like me can I would say in terms of our distribution gains. So we are expanding distribution in Walmart with within our blood pressure monitors. So that's a nice that a tailwind for us in addition.
Olivia Tong: We are expanding both hydro flask and osprey in our EMEA and Asia Pacific region, and so we're looking at you know new distribution partner with new strategic partners. So there's a lot of acceleration there are a lot of end market activity happening behind those two brands in terms of Ah It isn't that distributions in terms of things that are tell or.
Olivia Tong: Headwinds for us we for hydro flask, we reduce that footprint within our outdoor segment. So there was a little bit of a decline there as well as some adjusted retail levels within the beauty appliance category.
Brian Grass: We've also got additional distribution related to thermometry as well. So yeah, it's a net number. You know, we think it's real, it's kind of already in place. And you know, there's a heavier weight that there's, there's emerging white or not emerging, but there's white space and international that we're really looking to take advantage of and be a big driver as we go forward. So that's got it. It's helpful.
Olivia Tong: I just builds we were also got additional distribution related to thermometry as well. So yeah. It is a net number you know we think it's real it's kind of already in place and you know theres a heavier weight that there's there's emerging white are not emerging but there is white space in international, but we're really looking to.
Olivia Tong: Take advantage of and be a big driver as we go forward. So that's a big component.
Speaker Change: Got it that's helpful and then I'm not sure you can answer this question, but if you could talk about a little bit about the CEO search process, where you guys stand I don't know if I'm and if there's any comment that you can make but are you do you think about you know sort of the profile of your next leader how how is that.
Brian Grass: And then I'm not sure you can answer this question. But if you could talk about a little bit about the CEO search process, where you guys stand, I don't know if there's any comment that you can make. But as you think about, you know, sort of the profile of your next leader, how is the board? How's the board thinking about it? Yeah, I can't, as you said, speak too much to it because I'm not, you know, of course I'm involved to a certain degree, but they're really leading the search and at this stage of the process, they're The bulk of the interacting with the candidates that they have in front of them You know, there'll be a point time likely later where it's you know, management is a little bit more involved.
Olivia Tong: Board How's the board thinking about that.
Olivia Tong: Yeah, I can't as you said speak too much to it because I'm not you know of course I am involved to a certain degree, but they're really leading the search and at this stage of the process, they're doing the bulk of the interacting with the candidates that they have in front of them you know there'll be a point in time.
Olivia Tong: Likely later, where it's you know management is a little bit more involved but at this point.
Brian Grass: But at this point You know, they're the ones leading it. And you know, they're really looking for someone who With deep experience in terms of brand building, growth is very much something that we want to get back to. They're looking for somebody, even though we're not in the best position currently with respect to results and getting back to growth, but someone that believes in the growth potential of the business and the brands and can really help us drive that and move that forward.
Olivia Tong: You know they are the ones, leading it and you know, they're really looking for someone who.
Olivia Tong: With deep experience in terms of brand building you know growth growth is very much something that we want to get back to the you know theyre looking for somebody even though we're not you know in the best position currently with respect to results in getting back to growth, but someone that belief.
Olivia Tong: And the growth potential of the business and the brands.
Olivia Tong: And can really help us drive that moved that forward I'll just say this what I can speak to is what we're doing in the meantime, we're doing in the meantime is not standing still and and you might have heard from my prepared remarks, I have a little bit of a different philosophy than than maybe what we had previously in terms of.
Brian Grass: I'll just say this, what I can speak to is what we're doing in the meantime, what we're doing in the meantime is not standing still, and you might have heard from my prepared remarks, I have a little bit of a different philosophy than maybe what we had previously in terms of the best and most sustainable way to drive that growth. My belief is with the business that we have and the brands that we have, product driven growth. It's more sustainable, and we're better off with more product-driven growth than with maybe marketing-driven growth or other ways to achieve it, maybe focusing on distribution.
Olivia Tong: The the best and most sustainable way to drive that growth my belief is with the business that we have and the brands that we have product driven growth.
Olivia Tong: Is more sustainable and we're better off with more product urban growth then with you know, what maybe marketing driven growth or or other ways to achieve it maybe focusing on distribution I think you got to start with product and when you start with product. It sets the table kind of for everything else and so that's the approach we're taking now the downside of that as <unk>.
Brian Grass: I think you've got to start with product, and when you start with product, it sets the table kind of for everything else, and so that's the approach we're taking. Now the downside of that is product innovation takes longer in a lot of cases, but what we're trying to do is pull all the levers with respect to innovation. There is shorter-term innovation that's available to us. and we'll take advantage of that and that could be new features, that could be new finishes and colors. Can we allow us to deploy fast? And there are cost effective ways of doing that.
Olivia Tong: Innovation takes longer than a lot of cases, but what we're trying to do is pull all the levers with respect to innovation. There is shorter term innovation. That's that's available to us and we will take advantage of that and that could be new features that can be do finishes and colors.
Olivia Tong: You know re skinning things things of that nature and then we're also looking at bringing in outside expertise, which is going to allow us to deploy faster.
Olivia Tong: And there are cost effective ways of doing that and so we're looking at that as well how do we structure is such that the upfront investment is less than N D investment or the payment that has to go to the outside expertise comes only if the projects are successful and it's more on a royalty basis as a part of sales. So there's there's a hole.
Brian Grass: And so we're looking at that as well. How do we structure it such that the upfront investment is less, and then the investment or the payment that has to go to the outside expertise comes only if the projects are successful, and it's more on a royalty basis as a part of sales. So there's, there's a whole mixture of levers and actions that we can take. And we think there's a sweet spot to be found, where we can kind of make both our innovation investment and our marketing investment punch above its weight by just kind of looking at it differently.
Olivia Tong: Next year of of levers and actions that we can take and we think there's a sweet spot to be found where we can kind of make both our innovation investment and our marketing investment punch above its weight by just kind of looking at it differently and you know accepting that.
Brian Grass: And, you know, accepting that. top-of-funnel awareness investment maybe isn't the best choice for us right now, and we need things that produce strong ROIs kind of immediately.
Olivia Tong: Top of funnel awareness investment maybe isn't the best choice for US right now and we need things that produce strong rois kind of immediately so just just a little bit of flavor of what we're doing now and we're really trying to and hopefully you heard it simplified the organization, we've made things a little bit too complex decision.
Brian Grass: So just a little bit of flavor of what we're doing now, and we're really trying to, and hopefully you heard it, simplify the organization. We've made things a little bit too complex, decisions are too slow and require too many points of view, so we're creating more single accountability and trying to move very quickly as a way to accelerate results. Got it.
Olivia Tong: <unk> are too slow and require you know too many points of view, so we're creating more single accountability and trying to move very quickly as a way to accelerate results improvement.
Olivia Tong: Got it thanks, so much.
Olivia Tong: Thanks so much.
Susan Anderson: Our next question is from Susan Anderson with CannaCore Genuity.
Speaker Change: Our next question is from Susan Anderson with Canaccord Genuity. Please proceed.
Susan Anderson: Good morning. Thanks for all the details today.
Susan Anderson: Hi, good morning, Thanks for all the detail today I was wondering if maybe you can give just a little bit of color on just your sell throughs at retail how that performed versus kind of what you're selling Dara just trying to get a sense of.
Susan Anderson: I was wondering if maybe you can give just a little bit of color on just your sell-throughs at retail, how that performed versus kind of, you know, what your sell-ins are, just trying to get a sense of, a better sense of how the brands are performing at retail and how consumers are responding to them versus the disruption that we're seeing in the sell-ins. Thanks. Yeah, great question. We actually had pretty positive point of sale results for the quarter. You may have heard of my prepared remarks that unit point of sale was actually up in eight out of our eleven brands in the quarter.
Susan Anderson: A better sense of how the brands are performing at retail and how consumers are responding to them versus the disruption that we're seeing in the Sally and thanks, Yeah. Great question, we actually had pretty pause pretty positive point of sale results for the quarter. You may have heard in my prepared remarks that unit.
Susan Anderson: Unit point of sale was actually up.
Susan Anderson: In eight out of our 11 brands in the quarter now dollar Pos was down which we think is clear evidence of the consumer trading down. So we have called out consumer trade down as one of the factors that that were seeing in the marketplace and I think it shows in our point of sale.
Brian Grass: Now, dollar POS was down, which we think is clear evidence of the consumer trading down. So we have called out consumer trade down as one of the factors that we're seeing in the marketplace, and I think it shows in our point of sale data. We're up overall in units, but down in dollars, and, you know, we need to fix that. I'm not saying that that's something that's acceptable, but we do think, you know, the point of sale performance is a leading indicator, and we are seeing positive results on a unit basis, also on a dollar basis in spots.
Susan Anderson: The data were up overall in units, but down in dollars and in you know we need to fix that I'm, not saying that that that's something that that's acceptable, but we do think the point of sale performance is a leading indicator and we are seeing positive results on a unit basis also on a dollar base.
Brian Grass: So four out of the eleven brands also grew point of sale on a dollar basis. But we need that more broadly across the portfolio to then start, you know, showing up in our revenue. So, you know, point-of-sale is a leading indicator. I think, you know, point-of-sale unit growth is a positive that shows that we're going in the right direction or a good first step. Now we need to work on, you know, dollar improvement, and then assuming we can continue to do that with point-of-sale, it should show up in our revenue.
Susan Anderson: There's some spots so four out of 11 brands also grew point of sale on a dollar basis, but we need that more more broadly across the portfolio to then start.
Susan Anderson: Showing up in our revenue results. So you know point of sales leading indicator I think you know point of sale unit growth as a positive that shows that we're going in the right direction or a good first step now we need to work on you know dollar dollar improvement and then assuming we can continue to do that with point of sale. It should show up in our revenue.
Susan Anderson: Okay, great.
Susan Anderson: Okay, Great and then I guess, you know what that spread there or that difference or are you seeing any you know the inventory at retail is it getting too lean at all or is it still really in the back half where you're getting that kind of see that switch in retail are you now starting to order more.
Brian Grass: And then I guess, you know, with that spread there, or that difference, are you seeing any, you know, the inventory at retail? Is it getting too lean at all? Or is it still really the back half where you're going to kind of see that switch and retailers, you know, starting to order more? Yeah, I would say coming out of first quarter, we're pretty well balanced, except for a few spots. So we do, and we did forecast for additional retail adjustments. At this point, there are only a few areas where we are lean on a few brands, but other than that, we are pretty well established.
Susan Anderson: Yeah, I would say I'm coming out of first quarter, where we're pretty well balanced except for a few spots of being over inventoried them. So we do and we did.
Susan Anderson: Forecast for additional retailer adjustments into Q2.
Susan Anderson: At this point, there's only there's only a few areas where we're lean on it on a few brands that other than that wherever we're pretty well.
Susan Anderson: Situated retail.
Susan Anderson: Okay, great. Thank you. Good luck next quarter.
Speaker Change: Okay, great. Thank you good luck next quarter.
Susan Anderson: Thank you Susan.
Operator: There are no further questions at this time.
Speaker Change: There are no further questions at this time I would like to turn the conference back over to management for closing remarks.
Brian Grass: I would like to turn the conference back over to management for closing. Thank you for joining us today. I remain confident about the company, its brands, its people, and its ability to return to profitable growth. As we navigate the uncertainty of Fiscal 26, we are focused on consistently delivering on our quarterly objectives. We look forward to speaking with many of you over the days and weeks to come to discuss how we expect to achieve our short-term objectives. while rebuilding Helen of Troy to provide long-term share.
Speaker Change: Thank you for joining us today I remain confident about the company its brands its people and its ability to return to profitable growth as.
Speaker Change: As we navigate the uncertainty of fiscal 'twenty six we're focused on consistently delivering on our quarterly commitments. We look forward to speaking with many of you over the days and weeks to come to discuss how we expect to achieve our short term objectives, while rebuilding Helen of Troy to provide long term shareholder value.
Brian Grass: Thank you.
Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Operator: This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.
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