Helen of Troy Limited
07/10/2025 | Press release | Distributed by Public on 07/10/2025 05:01
Quarterly Report for Quarter Ending May 31, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with our condensed consolidated financial statements included under Item 1., "Financial Statements." The various sections of this MD&A contain a number of forward-looking statements, all of which are based on our current expectations. Actual results may differ materially due to a number of factors, including those discussed in the section entitled "Information Regarding Forward-Looking Statements" following this MD&A, and in Item 3., "Quantitative and Qualitative Disclosures About Market Risk" in this report, as well as in Part I, Item IA., "Risk Factors" in the Company's most recent annual report on Form 10-K for the fiscal year ended February 28, 2025 ("Form 10-K") and its other filings with the Securities and Exchange Commission (the "SEC"). When used in this MD&A, unless otherwise indicated or the context suggests otherwise, references to "the Company", "our Company", "Helen of Troy", "we", "us", or "our" refer to Helen of Troy Limited and its subsidiaries. References to "fiscal" in connection with a numeric year number denotes our fiscal year ending on the last day of February, during the year number listed.
This MD&A, including the tables under the headings "Operating (Loss) Income, Operating Margin, Adjusted Operating Income (non-GAAP), and Adjusted Operating Margin (non-GAAP) by Segment" and "Net (Loss) Income, Diluted (Loss) Earnings Per Share, Adjusted Income (non-GAAP), and Adjusted Diluted Earnings Per Share (non-GAAP)," reports operating (loss) income, operating margin, net (loss) income and diluted (loss) earnings per share without the impact of asset impairment charges, a discrete tax charge to revalue existing deferred tax liabilities due to Barbados enacting domestic corporate income tax legislation ("Barbados tax reform"), costs incurred in connection with the departure of our former Chief Executive Officer ("CEO") primarily related to severance and recruitment costs ("CEO succession costs"), income tax expense from the recognition of a valuation allowance on a deferred tax asset related to our intangible asset reorganization in fiscal 2025 ("intangible asset reorganization"), restructuring charges, amortization of intangible assets, and non-cash share-based compensation for the periods presented, as applicable. These measures may be considered non-GAAP financial measures as defined by SEC Regulation G, Rule 100. The tables reconcile these measures to their corresponding GAAP-based financial measures presented in our condensed consolidated statements of (loss) income. We believe that adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted earnings per share provide useful information to management and investors regarding financial and business trends relating to our financial condition and results of operations. We believe that these non-GAAP financial measures, in combination with our financial results calculated in accordance with GAAP, provide investors with additional perspective regarding the impact of such charges and benefits on applicable income, margin and earnings per share measures. We also believe that these non-GAAP measures reflect the operating performance of our business and facilitate a more direct comparison of our performance to our competitors. The material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not reflect the full economic impact of our activities. Our adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted earnings per share are not prepared in accordance with GAAP, are not an alternative to GAAP financial measures and may be calculated differently than non-GAAP financial measures disclosed by other companies. Accordingly, undue reliance should not be placed on non-GAAP financial measures. These non-GAAP financial measures are discussed further and reconciled to their applicable GAAP-based financial measures contained in this MD&A beginning on page 39.
There were no material changes to the key financial measures discussed in our Form 10-K.
Overview
We incorporated as Helen of Troy Corporation in Texas in 1968 and were reorganized as Helen of Troy Limited in Bermuda in 1994. We are a leading global consumer products company offering creative products and solutions for our customers through a diversified portfolio of brands. Our portfolio of brands includes OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith, Revlon and Olive & June, among others. We have built leading market positions through new product innovation, product quality and competitive pricing. As of May 31, 2025, we operated two reportable segments: Home & Outdoor and Beauty & Wellness.
As previously disclosed in our SEC filings, on May 2, 2025, Noel Geoffroy departed the Company as CEO. The Board of Directors appointed Brian Grass as the Company's interim CEO and has engaged a leading executive search firm to assist with the process to identify a permanent CEO. Mr. Grass is expected to serve as the interim CEO until a permanent CEO is appointed.
During the first quarter of fiscal 2026, we concluded a goodwill impairment triggering event had occurred due to a sustained decline in our stock price, and performed quantitative impairment testing on our goodwill and certain intangible assets. As a result of such testing, we recorded asset impairment charges of $414.4 million ($436.2 million after tax). Intangible asset impairment charges recognized for our Home & Outdoor segment totaled $219.1 million and included charges for our Hydro Flask and Osprey businesses of $120.8 million and $98.3 million, respectively. Intangible asset impairment charges recognized for our Beauty & Wellness segment totaled $195.3 million and included charges for our Drybar, Curlsmith, Health & Wellness and Revlon businesses of $103.7 million, $36.2 million, $35.8 million and $19.6 million, respectively. For additional information regarding the testing and analysis performed, refer to "Critical Accounting Policies and Estimates" in this Item 2., "Management's Discussion and Analysis of Financial Condition and Results of Operations."
On December 16, 2024, we completed the acquisition of Olive & June, LLC ("Olive & June"), an innovative, omni-channel nail care brand. Olive & June products deliver a salon-quality experience at home and include nail polish, press-on nails, manicure and pedicure systems, grooming tools and nail care essentials. The Olive & June brand and products were added to the Beauty & Wellness segment. The total purchase consideration consists of initial cash consideration of $224.7 million, which is net of cash acquired and a favorable post-closing adjustment of $3.9 million, and contingent cash consideration of up to $15.0 million subject to Olive & June's performance during calendar years 2025, 2026 and 2027, payable annually. The acquisition of Olive & June complements and broadens our existing Beauty portfolio beyond the hair care category and advances our strategy to deploy accretive capital that leverages our capabilities and scale to accelerate growth, further expand margins, and drive greater earnings growth and free cash flow conversion.
Significant Trends Impacting the Business
Impact of Tariffs
Since 2019, the Office of the United States Trade Representative ("USTR") has imposed additional tariffs on products imported from China. Additionally, the current United States ("U.S.") presidential administration has promoted and implemented plans to raise tariffs even further and pursue other trade policies intended to restrict imports. Our purchases of products from unaffiliated manufacturers located in China and other regions exposes us to higher costs of doing business from increases in tariffs.
As of April 9, 2025, the U.S. had imposed an aggregate additional 145% tariff on imports from China. This aggregate additional tariff was lowered to 30% effective May 14, 2025. Other recent policy updates include a 25% tariff on imports from Mexico, which was subsequently postponed. In addition, a 46% tariff on imports from Vietnam and specific tariffs on various U.S. trading partners were imposed by the U.S.
but subsequently paused for 90 days and replaced with a universal 10% tariff effective April 9, 2025, which is scheduled to revert to the previously specified tariff rates on July 9, 2025. The U.S. tariff policies are continuing to evolve as well as the corresponding impacts on global trade policies. As a result, our risks and mitigation plans, as further described below, will also continue to evolve as further developments arise. Any alteration of trade agreements and terms between China and the U.S., including limiting trade with China, imposing additional tariffs on imports from China, and potentially imposing other restrictions on imports from China to the U.S. may result in further or higher tariffs or retaliatory trade measures by China. For example, China announced a reciprocal 125% tariff on imports from the U.S. effective April 11, 2025, which was subsequently lowered to 10% effective May 14, 2025.
We are continuing to assess our incremental tariff cost exposure in light of continuing changes to global tariff policies and the full extent of our potential mitigation plans, as well as the associated timing to implement such plans. To mitigate our risk of ongoing exposure to tariffs, we have initiated significant efforts to diversify our production outside of China into regions where we expect tariffs or overall costs to be lower and to source the same product in more than one region, to the extent it is possible and not cost-prohibitive. We are also continuing to implement other mitigation actions, which include cost reductions from suppliers and price increases to customers on products subject to tariffs. In addition to the uncertainty from evolving global tariff policies, we expect unfavorable cascading impacts on inflation, consumer confidence, employment, and overall macroeconomic conditions, all of which may adversely impact our sales, results of operations and cash flows.
The changes in tariffs described above did not have a material impact on our cost of goods sold during the first quarter of fiscal 2026. However, net sales revenue was negatively impacted by a combination of factors including the pause or cancellation of China direct import orders by key retailers in response to increased tariff rates, a slowdown in retailer orders following pull forward activity in the fourth quarter of fiscal 2025 due to tariff uncertainty, and lower consumer confidence and demand. Sales were also negatively impacted by evolving dynamics in the China market, including a shift toward localized fulfillment models and heightened competition from domestic sellers benefiting from government subsidies.
In the first quarter of fiscal 2026, we adjusted our measures to reduce costs and preserve cash flow as the environment continued to evolve. While we have resumed targeted growth investments, we remain disciplined in our approach given continued tariff volatility. The current measures in place include the following:
•Suspension of projects and capital expenditures that are not critical or in support of supplier diversification or dual sourcing initiatives;
•Actions to reduce overall personnel costs and pause most project and travel expenses remain in place;
•A resumption of optimized marketing, promotional and new product development investments focused on opportunities with the highest returns;
•A resumption of targeted inventory purchases from China in the short term, with a measured approach in expectation of softer consumer demand in the short to intermediate term; and
•Actions to optimize working capital and balance sheet productivity.
Impact of Macroeconomic Trends
The Federal Open Market Committee lowered the benchmark interest rate by 75 basis points and 25 basis points during the third and fourth quarters of fiscal 2025, respectively, resulting in lower average interest rates incurred during the first quarter of fiscal 2026 compared to the same period last year. As of May 31, 2025 and February 28, 2025, $750 million and $550 million of the outstanding principal balance under the Credit Agreement (as defined below), respectively, was hedged with interest rate swaps to fix the interest rate we pay. While the actual timing and extent of additional future changes in interest rates
remains unknown, lower average interest rates would reduce interest expense on our outstanding variable rate debt not subject to the interest rate swaps. The financial markets, the global economy and global supply chain may also be adversely affected by the current or anticipated impact of military conflicts or other geopolitical events as well as recent U.S. tariff policies that are continuing to evolve and the corresponding impacts on global trade. High inflation and interest rates have also negatively impacted consumer disposable income, credit availability and spending, among others, which have adversely impacted our business, financial condition, cash flows and results of operations during fiscal 2025 and the first quarter of fiscal 2026 and may continue to have an adverse impact during the remainder of fiscal 2026. The evolving global tariff policies could adversely impact inflation and interest rates which could further negatively impact consumer disposable income, credit availability and spending. See further discussion below under "Consumer Spending and Changes in Shopping Preferences." We expect continued uncertainty in our business and the global economy due to pressure from inflation, tariffs and consumer confidence, any of which may adversely impact our results.
Consumer Spending and Changes in Shopping Preferences
Our business depends upon discretionary consumer demand for most of our products and primarily operates within mature and highly developed consumer markets. The principal driver of our operating performance is the strength of the U.S. retail economy. Approximately 69%and 67% of our consolidated net sales revenue was from U.S. shipments during the three month periods ended May 31, 2025 and 2024, respectively.
Among other things, high levels of inflation, interest rates and tariffs may negatively impact consumer disposable income, credit availability and spending. Consumer purchases of discretionary items, including the products that we offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. Dynamic changes in consumer spending and shopping patterns are also having an impact on retailer inventory levels. Our ability to sell to retailers is predicated on their ability to sell to the end consumer. During fiscal 2025, we experienced reduced replenishment orders from retail customers in line with softer consumer demand and discretionary spending, which adversely impacted our sales, results of operations and cash flows. Additionally, during fiscal 2025 and the first quarter of fiscal 2026, we experienced increased competition within our Beauty & Wellness segment and in the insulated beverageware category, which led to some declines in retail distribution. During the first quarter of fiscal 2026, we experienced reduced replenishment orders from retail customers who paused or cancelled orders originating in China in response to the increased tariff rates, as well as broader pressures in the China market related to a shift toward localized fulfillment models and increased competition from government-subsidized domestic sellers. In addition, we continue to experience lower replenishment orders in line with softer consumer demand and discretionary spending and continued competition, which adversely impacted our sales, results of operations and cash flows. If orders from our retail customers continue to be adversely impacted, our sales, results of operations and cash flows may continue to be adversely impacted. We expect continued uncertainty in our business and the global economy due to inflation, evolving global tariff policies, continued competition and changes in consumer spending patterns. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.
Our concentration of sales reflects the continued evolution of consumer shopping preferences. Our net sales to pure-play online retailers and retail customers fulfilling end-consumer online orders, as well as our own online sales directly to consumers (collectively "online channel net sales") comprised approximately 23%of our total consolidated net sales revenue for the three month period ended May 31, 2025, and declinedapproximately 18%compared to the same period in the prior year. For the three month period ended May 31, 2024, our online channel net sales comprised approximately 25% of our total consolidated net sales revenue, and declined approximately 14%compared to the same period in the prior year.
With the continued importance of online sales in the retail landscape, many brick and mortar retailers are aggressively looking for ways to improve their customer delivery capabilities to be able to meet customer expectations. As a result, it has become increasingly important for us to leverage our distribution capabilities in order to meet the changing demands of our customers, including increasing our online capabilities to support our direct-to-consumer sales channels and online channel sales by our retail customers. To meet these needs, we completed the construction of an additional distribution facility in Gallaway, Tennessee that became operational during the first quarter of fiscal 2024. During the first quarter of fiscal 2025, we experienced automation system startup issues at the facility which impacted some of our Home & Outdoor segment's small retail customer and direct-to-consumer orders. As a result, our sales during the first quarter of fiscal 2025 were adversely impacted due to shipping disruptions, and we incurred additional costs and lost efficiency as we worked to remediate the issues. As a result of the remediation efforts performed, the automation system began to operate as designed during the third quarter of fiscal 2025, and we achieved targeted efficiency levels by the end of fiscal 2025.
Additionally, we have invested in a centralized cloud-based e-commerce platform, which most of our brands are currently utilizing. The centralized cloud-based e-commerce platform enables us to leverage a common system and rapidly deploy new capabilities across all of our brands, as well as more easily integrate new brands. We believe this platform enhances the customer experience by strengthening the digital presentation and product browsing capabilities and improving the checkout process, order delivery and post-order customer care.
Project Pegasus
During fiscal 2023, we initiated a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and effectiveness and reduce costs (referred to as "Project Pegasus"). During the fourth quarter of fiscal 2025, we completed Project Pegasus, but still expect to realize the targeted savings through fiscal 2027. Project Pegasus included initiatives to further optimize our brand portfolio, streamline and simplify the organization, accelerate and amplify cost of goods savings projects, enhance the efficiency of our supply chain network, optimize our indirect spending and improve our cash flow and working capital, as well as other activities. These initiatives created operating efficiencies, as well as provided a platform to fund growth investments. During fiscal 2023, 2024 and 2025 we incurred restructuring charges in connection with Project Pegasus primarily for professional fees and severance and employee related costs, which were recorded as "Restructuring charges" in the condensed consolidated statements of (loss) income. Restructuring charges primarily represented cash expenditures and were substantially paid by the end of fiscal 2025, with a remaining liability of $7.7 millionas of February 28, 2025.
We continue to have the following expectations regarding Project Pegasus savings:
•Targeted annualized pre-tax operating profit improvements of approximately $75 million to $85 million, which began in fiscal 2024 and we expect to be substantially achieved by the end of fiscal 2027.
•Estimated cadence of the recognition of the savings will be approximately 25% and 35% in fiscal 2024 and 2025, respectively, which were both achieved, and approximately 25% and 15% in fiscal 2026 and 2027, respectively.
•Total profit improvements to be realized approximately 60% through reduced cost of goods sold and 40% through lower SG&A.
During both the first quarters of fiscal 2025 and 2026, our gross margin and operating margins were favorably impacted by lower commodity and product costs driven by our cost of goods saving projects. Expectations regarding our Project Pegasus initiatives and our ability to realize targeted savings are based on management's estimates available at the time and are subject to a number of assumptions that could materially impact our estimates.
We did not incur any restructuring charges during the first quarter of fiscal 2025. During the three month period ended May 31, 2024, we incurred $1.8 millionof pre-tax restructuring costs in connection with Project Pegasus. We made total cash restructuring payments of $2.9 millionand $3.0 million during the three month periods ended May 31, 2025 and 2024, respectively, and had a remaining liability of $4.8 millionas of May 31, 2025. See Note 8 to the accompanying condensed consolidated financial statements for additional information.
Water Filtration Patent Litigation
On December 23, 2021, Brita LP filed a complaint against Kaz USA, Inc. and Helen of Troy Limited in the U.S. District Court for the Western District of Texas (the "Patent Litigation"), alleging patent infringement by the Company relating to its PUR gravity-fed water filtration systems. Brita LP simultaneously filed a complaint with the U.S. International Trade Commission ("ITC") against Kaz USA, Inc., Helen of Troy Limited and five other unrelated companies that sell water filtration systems (the "ITC Action"). The complaint in the ITC Action also alleged patent infringement by the Company with respect to a limited set of PUR gravity-fed water filtration systems. This action sought injunctive relief to prevent entry of certain accused PUR products (and certain other products) into the U.S. and cessation of marketing and sales of existing inventory already in the U.S. On February 28, 2023, the ITC issued an Initial Determination in the ITC Action, tentatively ruling against the Company and the other unrelated respondents. The ITC has a guaranteed review process, and thus all respondents, including the Company, filed a petition with the ITC for a full review of the Initial Determination. On September 19, 2023, the ITC issued its Final Determination in the Company's favor. The ITC determined there was no violation by the Company and terminated the investigation. Brita LP is appealing the ITC's decision to the Federal Circuit ("CAFC Appeal") and filed its Notice of Appeal on October 24, 2023. The Company intervened in the CAFC Appeal and oral argument has been scheduled for August 5, 2025. The Patent Litigation remains stayed for the time being. We cannot predict the outcome of these legal proceedings, the amount or range of any potential loss, when the proceedings will be resolved, or customer acceptance of any replacement water filter. Litigation is inherently unpredictable, and the resolution or disposition of these proceedings could, if adversely determined, have a material and adverse impact on our financial position and results of operations. For additional information regarding the Patent Litigation and the ITC Action, see Note 9 to the accompanying condensed consolidated financial statements.
EPA Compliance Costs
During fiscal 2022 and 2023, we were in discussions with the U.S. Environmental Protection Agency (the "EPA") regarding the compliance of packaging claims on certain of our products in the air and water filtration categories and a limited subset of humidifier products within the Beauty & Wellness segment that are sold in the U.S. The EPA did not raise any product quality, safety or performance issues. As a result of these packaging compliance discussions, we voluntarily implemented a temporary stop shipment action on the impacted products as we worked with the EPA towards an expedient resolution. We resumed normalized levels of shipping of the affected inventory during fiscal 2022, and we completed the repackaging and relabeling of our existing inventory of impacted products during fiscal 2023. Additionally, as a result of continuing dialogue with the EPA, we executed further repackaging and relabeling plans on certain additional humidifier products and certain additional air filtration products, which were also completed during fiscal 2023. Ongoing settlement discussions with the EPA related to this matter may result in the imposition of fines or penalties in the future. Such potential fines or penalties cannot be reasonably estimated. See Note 9 to the accompanying condensed consolidated financial statements for additional information.
Foreign Currency Exchange Rate Fluctuations
Due to the nature of our operations, we have exposure to the impact of fluctuations in exchange rates from transactions that are denominated in a currency other than our functional currency (the U.S. Dollar).Such transactions include sales and operating expenses. The most significant currencies affecting our operating results are the Euro, Canadian Dollar and British Pound.
For the three months ended May 31, 2025, changes in foreign currency exchange rates had an unfavorableyear-over-year impact on consolidated U.S. Dollar reported net sales revenue of approximately $1.0 million, or 0.2%, compared to a favorableyear-over-year impact of $0.4 million, or 0.1%, for the same period last year.
Variability of the Cough/Cold/Flu Season
Sales in several of our Beauty & Wellness segment categories are highly correlated to the severity of winter weather and cough/cold/flu incidence. In the U.S., the cough/cold/flu season historically runs from November through March, with peak activity normally in January to March. The 2024-2025 and 2023-2024 cough/cold/flu seasons were below historical averages seen prior to the impact of COVID-19.
RESULTS OF OPERATIONS
The following table provides selected operating data, in U.S. Dollars, as a percentage of net sales revenue, and as a year-over-year percentage change.
| Three Months Ended May 31, | % of Sales Revenue, net | ||||||||||||||||||||||||||||||||||
| (in thousands) |
2025 (1)
|
2024 | $ Change | % Change | 2025 | 2024 | |||||||||||||||||||||||||||||
| Sales revenue by segment, net | |||||||||||||||||||||||||||||||||||
| Home & Outdoor | $ | 177,983 | $ | 198,459 | $ | (20,476) | (10.3) | % | 47.9 | % | 47.6 | % | |||||||||||||||||||||||
| Beauty & Wellness | 193,672 | 218,388 | (24,716) | (11.3) | % | 52.1 | % | 52.4 | % | ||||||||||||||||||||||||||
| Total sales revenue, net | 371,655 | 416,847 | (45,192) | (10.8) | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||||
| Cost of goods sold | 196,644 | 213,768 | (17,124) | (8.0) | % | 52.9 | % | 51.3 | % | ||||||||||||||||||||||||||
| Gross profit | 175,011 | 203,079 | (28,068) | (13.8) | % | 47.1 | % | 48.7 | % | ||||||||||||||||||||||||||
|
SG&A
|
167,664 | 170,481 | (2,817) | (1.7) | % | 45.1 | % | 40.9 | % | ||||||||||||||||||||||||||
| Asset impairment charges | 414,385 | - | 414,385 | * | 111.5 | % | - | % | |||||||||||||||||||||||||||
| Restructuring charges | - | 1,835 | (1,835) | (100.0) | % | - | % | 0.4 | % | ||||||||||||||||||||||||||
|
Operating (loss) income
|
(407,038) | 30,763 | (437,801) | * | (109.5) | % | 7.4 | % | |||||||||||||||||||||||||||
| Non-operating income, net | 308 | 100 | 208 | * | 0.1 | % | - | % | |||||||||||||||||||||||||||
| Interest expense | 13,808 | 12,543 | 1,265 | 10.1 | % | 3.7 | % | 3.0 | % | ||||||||||||||||||||||||||
|
(Loss) income before income tax
|
(420,538) | 18,320 | (438,858) | * | (113.2) | % | 4.4 | % | |||||||||||||||||||||||||||
| Income tax expense | 30,180 | 12,116 | 18,064 | * | 8.1 | % | 2.9 | % | |||||||||||||||||||||||||||
|
Net (loss) income
|
$ | (450,718) | $ | 6,204 | $ | (456,922) | * | (121.3) | % | 1.5 | % | ||||||||||||||||||||||||
(1)Includes a full quarter of operating results from Olive & June, acquired on December 16, 2024. For additional information see Note 4 to the accompanying condensed consolidated financial statements.
* Calculation is not meaningful.
First Quarter Fiscal 2026 Financial Results
•Consolidated net sales revenue decreased 10.8%, or $45.2 million, to $371.7 million for the three months ended May 31, 2025, compared to $416.8 million for the same period last year.
•Consolidated operating loss was $407.0 million for the three months ended May 31, 2025, compared to consolidated operating income of $30.8 million for the same period last year. Consolidated operating loss for the three months ended May 31, 2025 includes pre-tax asset impairment charges of $414.4 million. Consolidated operating margin decreased to (109.5)% of consolidated net sales revenue for the three months ended May 31, 2025, compared to 7.4% for the same period last year.
•Consolidated adjusted operating income decreased 62.5%, or $26.8 million, to $16.1 million for the three months ended May 31, 2025, compared to $43.0 million for the same period last year. Consolidated adjusted operating margin decreased 6.0 percentage points to 4.3% of consolidated net sales revenue for the three months ended May 31, 2025, compared to 10.3% for the same period last year.
•Net loss was $450.7 million for the three months ended May 31, 2025, compared to net income of $6.2 million for the same period last year. Diluted loss per share was $19.65 for the three months ended May 31, 2025, compared to diluted earnings per share of $0.26 for the same period last year.
•Adjusted income decreased 59.4%, or $13.9 million, to $9.5 million for the three months ended May 31, 2025, compared to $23.3 million for the same period last year. Adjusted diluted earnings per share decreased 58.6% to $0.41 for the three months ended May 31, 2025, compared to $0.99 for the same period last year.
Consolidated and Segment Net Sales Revenue
The following table summarizes the impact that Organic business, foreign currency and acquisitions had on our net sales revenue by segment:
| Three Months Ended May 31, | |||||||||||||||||
| (in thousands) | Home & Outdoor | Beauty & Wellness | Total | ||||||||||||||
|
Fiscal 2025 sales revenue, net
|
$ | 198,459 | $ | 218,388 | $ | 416,847 | |||||||||||
| Organic business | (20,657) | (50,335) | (70,992) | ||||||||||||||
| Impact of foreign currency | 181 | (1,221) | (1,040) | ||||||||||||||
| Acquisition (1) | - | 26,840 | 26,840 | ||||||||||||||
| Change in sales revenue, net | (20,476) | (24,716) | (45,192) | ||||||||||||||
|
Fiscal 2026 sales revenue, net
|
$ | 177,983 | $ | 193,672 | $ | 371,655 | |||||||||||
| Total net sales revenue growth (decline) | (10.3) | % | (11.3) | % | (10.8) | % | |||||||||||
| Organic business | (10.4) | % | (23.0) | % | (17.0) | % | |||||||||||
| Impact of foreign currency | 0.1 | % | (0.6) | % | (0.2) | % | |||||||||||
| Acquisition | - | % | 12.3 | % | 6.4 | % | |||||||||||
(1)Includes a full quarter of operating results from Olive & June, acquired on December 16, 2024. For additional information see Note 4 to the accompanying condensed consolidated financial statements.
In the above table, Organic business refers to our net sales revenue associated with product lines or brands after the first twelve months from the date the product line or brand was acquired, excluding the
impact that foreign currency remeasurement had on reported net sales revenue. Net sales revenue from internally developed brands or product lines is considered Organic business activity.
Consolidated Net Sales Revenue
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Consolidated net sales revenue decreased $45.2 million, or 10.8%, to $371.7 million, compared to $416.8 million. The decline was driven by a decrease from Organic business of $71.0 million, or 17.0%, primarily due to:
•a decline in Beauty & Wellness due to a decrease in sales of thermometers and fans primarily due to reduced replenishment orders from retail customers in Wellness and lower sales of hair appliances driven by softer consumer demand, increased competition and a net distribution loss in Beauty year-over-year; and
•a decline in Home & Outdoor due to lower replenishment orders from retail customers and softer consumer demand primarily in the home and insulated beverageware categories, and continued competition and a net distribution loss in the insulated beverageware category year-over-year.
These factors were partially offset by:
•strong domestic demand for technical packs in Home & Outdoor; and
•the favorable comparative impact of shipping disruption at our Tennessee distribution facility due to automation startup issues affecting some of our Home & Outdoor segment's small retail customer and direct-to-consumer orders during the first quarter of fiscal 2025.
The Olive & June acquisition contributed $26.8 million, or 6.4%, to consolidated net sales revenue growth. Net sales revenue was unfavorably impacted by net foreign currency fluctuations of approximately $1.0 million, or 0.2%.
Segment Net Sales Revenue
Home & Outdoor
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Net sales revenue decreased $20.5 million, or 10.3%, to $178.0 million, compared to $198.5 million. The decrease was primarily driven by:
•lower replenishment orders from retail customers and softer consumer demand primarily in the home and insulated beverageware categories;
•continued competition, a net distribution loss year-over-year and a decrease in closeout channel sales in the insulated beverageware category;
•the unfavorable impact of retailer pull-forward activity in the fourth quarter of fiscal 2025 in response to tariff uncertainty and potential supply disruption; and
•a decrease in club channel sales due to cancellation of direct import orders in response to higher tariffs.
These factors were partially offset by:
•strong domestic demand for technical packs; and
•the favorable comparative impact of shipping disruption at our Tennessee distribution facility due to automation startup issues affecting some of the segment's small retail customer and direct-to-consumer orders during the first quarter of fiscal 2025.
Net sales revenue was favorably impacted by net foreign currency fluctuations of approximately $0.2 million, or 0.1%.
Beauty & Wellness
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Net sales revenue decreased $24.7 million, or 11.3%, to $193.7 million, compared to $218.4 million. The decrease was primarily driven by a decrease from Organic business of $50.3 million, or 23.0%, primarily due to:
•a decline in international thermometry sales due to evolving dynamics in the China market, including a shift away from cross-border ecommerce toward localized fulfillment models, heightened competition from domestic sellers benefiting from government subsidies and a weaker illness season in Asia;
•a decrease in fan sales primarily driven by reduced replenishment orders from retail customers due to a decline in consumer demand and the cancellation of direct import orders from China in response to higher tariffs; and
•a decline in sales of hair appliances and prestige hair care products primarily due to softer consumer demand, increased competition, a net distribution loss year-over-year and the cancellation of direct import orders from China in response to higher tariffs.
These factors were partially offset by the favorable comparative impact of the shipping disruption from Curlsmith system integration challenges during the first quarter of fiscal 2025 and higher sales of heaters.
The Olive & June acquisition contributed $26.8 million, or 12.3%, to segment net sales revenue growth. Net sales revenue was unfavorably impacted by net foreign currency fluctuations of approximately $1.2 million, or 0.6%.
Consolidated Gross Profit Margin
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Consolidated gross profit margin decreased 1.6 percentage points to 47.1%, compared to 48.7%. The decrease in consolidated gross profit margin was primarily due to the comparative impact of favorable inventory obsolescence expense in the prior year, consumer trade-down behavior as shoppers seek greater value and prioritize essential categories, higher retail trade expense and a less favorable brand mix within Home & Outdoor.
These factors were partially offset by the favorable impact of the acquisition of Olive & June within the Beauty & Wellness segment and lower commodity and product costs, partly driven by Project Pegasus initiatives.
Consolidated SG&A
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Consolidated SG&A ratio increased 4.2 percentage points to 45.1%, compared to 40.9%. The increase in the consolidated SG&A ratio was primarily due to:
•higher marketing expense;
•higher outbound freight costs;
•CEO succession costs of $3.5 million;
•the impact of the Olive & June acquisition; and
•the impact of unfavorable operating leverage due to the decrease in net sales.
Asset Impairment Charges
During the first quarter of fiscal 2026, we recorded asset impairment charges of $414.4 million ($436.2 million after tax) to reduce our goodwill by $317.0 million and our other intangible assets by $97.4 million.
For additional information regarding the testing and analysis performed, refer to "Critical Accounting Policies and Estimates" in this Item 2., "Management's Discussion and Analysis of Financial Condition and Results of Operations."
We did not record any asset impairment charges during the first quarter of fiscal 2025.
Restructuring Charges
We did not incur any restructuring charges during the first quarter of fiscal 2025. During the three month period ended May 31, 2024, we incurred $1.8 millionof pre-tax restructuring costs in connection with Project Pegasus, which were primarily comprised of severance and employee related costs. During the three month periods ended May 31, 2025 and 2024, we made total cash restructuring payments of $2.9 millionand $3.0 million, respectively. We had a remaining liability of $4.8 million as of May 31, 2025.
Operating (Loss) Income, Operating Margin, Adjusted Operating Income (non-GAAP), and Adjusted Operating Margin (non-GAAP) by Segment
In order to provide a better understanding of the impact of certain items on our operating (loss) income, the tables that follow report the comparative pre-tax asset impairment charges, CEO succession costs, restructuring charges, amortization of intangible assets, and non-cash share-based compensation, as applicable, on operating (loss) income and operating margin for each segment and in total for the periods presented below. Adjusted operating income and adjusted operating margin may be considered non-GAAP financial measures as contemplated by SEC Regulation G, Rule 100. For additional information regarding management's decision to present this non-GAAP financial information, see the introduction to this Item 2., "Management's Discussion and Analysis of Financial Condition and Results of Operations."
| Three Months Ended May 31, 2025 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Home & Outdoor |
Beauty & Wellness
|
Total | ||||||||||||||||||||||||||||||||
|
Operating loss, as reported (GAAP)
|
$ | (213,793) | (120.1) | % | $ | (193,245) | (99.8) | % | $ | (407,038) | (109.5) | % | |||||||||||||||||||||||
| Asset impairment charges | 219,095 | 123.1 | % | 195,290 | 100.8 | % | 414,385 | 111.5 | % | ||||||||||||||||||||||||||
|
CEO succession costs
|
1,742 | 1.0 | % | 1,742 | 0.9 | % | 3,484 | 0.9 | % | ||||||||||||||||||||||||||
| Subtotal | 7,044 | 4.0 | % | 3,787 | 2.0 | % | 10,831 | 2.9 | % | ||||||||||||||||||||||||||
| Amortization of intangible assets | 1,782 | 1.0 | % | 3,207 | 1.7 | % | 4,989 | 1.3 | % | ||||||||||||||||||||||||||
| Non-cash share-based compensation | 34 | - | % | 262 | 0.1 | % | 296 | 0.1 | % | ||||||||||||||||||||||||||
| Adjusted operating income (non-GAAP) | $ | 8,860 | 5.0 | % | $ | 7,256 | 3.7 | % | $ | 16,116 | 4.3 | % | |||||||||||||||||||||||
| Three Months Ended May 31, 2024 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Home & Outdoor |
Beauty & Wellness
|
Total | ||||||||||||||||||||||||||||||||
| Operating income, as reported (GAAP) | $ | 15,850 | 8.0 | % | $ | 14,913 | 6.8 | % | $ | 30,763 | 7.4 | % | |||||||||||||||||||||||
| Restructuring charges | 440 | 0.2 | % | 1,395 | 0.6 | % | 1,835 | 0.4 | % | ||||||||||||||||||||||||||
| Subtotal | 16,290 | 8.2 | % | 16,308 | 7.5 | % | 32,598 | 7.8 | % | ||||||||||||||||||||||||||
| Amortization of intangible assets | 1,765 | 0.9 | % | 2,755 | 1.3 | % | 4,520 | 1.1 | % | ||||||||||||||||||||||||||
| Non-cash share-based compensation | 3,013 | 1.5 | % | 2,820 | 1.3 | % | 5,833 | 1.4 | % | ||||||||||||||||||||||||||
| Adjusted operating income (non-GAAP) | $ | 21,068 | 10.6 | % | $ | 21,883 | 10.0 | % | $ | 42,951 | 10.3 | % | |||||||||||||||||||||||
Consolidated Operating (Loss) Income
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Consolidated operating loss was $407.0 million, or (109.5)% of net sales revenue, compared to consolidated operating income of $30.8 million, or 7.4% of net sales revenue. Operating loss in the first quarter of fiscal 2026 included $414.4 million of pre-tax asset impairment charges. The remaining 5.4 percentage point decrease in consolidated operating margin was primarily due to:
•the comparative impact of favorable inventory obsolescence expense in the prior year;
•higher marketing expense;
•consumer trade-down behavior;
•higher outbound freight costs;
•higher retail trade expense;
•CEO succession costs of $3.5 million;
•a less favorable brand mix within Home & Outdoor; and
•the impact of unfavorable operating leverage due to the decrease in net sales.
These factors were partially offset by the favorable impact of the acquisition of Olive & June within the Beauty & Wellness segment and lower commodity and product costs, partly driven by Project Pegasus initiatives.
Consolidated adjusted operating income decreased 62.5% to $16.1 million, or 4.3% of net sales revenue, compared to $43.0 million, or 10.3% of net sales revenue.
Home & Outdoor
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Operating loss was $213.8 million, or (120.1)% of segment net sales revenue, compared to operating income of $15.9 million, or 8.0% of segment net sales revenue. Operating loss in the first quarter of fiscal 2026 included $219.1 million of pre-tax asset impairment charges. The remaining 5.0 percentage point decrease in segment operating margin was primarily due to:
•the comparative impact of favorable inventory obsolescence expense in the prior year;
•a less favorable brand mix;
•consumer trade-down behavior;
•higher outbound freight costs;
•CEO succession costs of $1.7 million;
•higher marketing expense;
•higher retail trade expense; and
•the impact of unfavorable operating leverage due to the decrease in net sales.
These factors were partially offset by lower commodity and product costs, partly driven by Project Pegasus initiatives.
Adjusted operating income decreased 57.9% to $8.9 million, or 5.0% of segment net sales revenue, compared to $21.1 million, or 10.6% of segment net sales revenue.
Beauty & Wellness
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Operating loss was $193.2 million, or (99.8)% of segment net sales revenue, compared to operating income of $14.9 million, or 6.8% of segment net sales revenue. Operating loss in the first quarter of fiscal 2026 included $195.3 million of pre-tax asset impairment charges. The remaining 5.8 percentage point decrease in segment operating margin was primarily due to:
•higher marketing expense;
•the comparative impact of favorable inventory obsolescence expense in the prior year;
•consumer trade-down behavior;
•higher outbound freight costs;
•an increase in legal and professional fees;
•CEO succession costs of $1.7 million;
•higher retail trade expense; and
•the impact of unfavorable operating leverage due to the decrease in net sales.
These factors were partially offset by:
•the favorable impact of the acquisition of Olive & June;
•favorable product liability expense; and
•lower commodity and product costs, partly driven by Project Pegasus initiatives.
Adjusted operating income decreased 66.8% to $7.3 million, or 3.7% of segment net sales revenue, compared to $21.9 million, or 10.0% of segment net sales revenue.
Interest Expense
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Interest expense was $13.8 million, compared to $12.5 million. The increase in interest expense was primarily due to higher average borrowings outstanding, partially offset by a lower average effective interest rate inclusive of the impact of our interest rate swaps compared to the same period last year.
Income Tax Expense
The comparison of our effective tax rate between periods is often impacted by the geographic mix of earnings among our various tax jurisdictions. Due to our organization in Bermuda and the ownership structure of our foreign subsidiaries, many of which are not owned directly or indirectly by a U.S. parent company, an immaterial amount of our foreign income is subject to U.S. taxation on a permanent basis under current law. Additionally, our intangible assets are primarily owned by foreign affiliates, resulting in proportionally higher earnings in jurisdictions with statutory tax rates lower than that of U.S.
The Organisation for Economic Co-operation and Development ("OECD") has introduced a framework to implement a global minimum corporate income tax of 15%, referred to as "Pillar Two." Certain countries in which we operate have enacted or are in process of enacting domestic legislation aligned with OECD's Pillar Two "Model Rules." Pillar Two legislation in effect for our fiscal 2025 and 2026 has been incorporated into our financial statements.
In the fourth quarter of fiscal 2025, we implemented a reorganization involving the transfer of intangible assets previously held by Helen of Troy Limited (Barbados) to our subsidiary in Switzerland. The reorganization resulted in the consolidation of the ownership of intangible assets, supporting streamlined internal licensing and centralized management of the intangible assets. Further, the reorganization resulted in a transitional income tax benefit of $64.6 million from the recognition of a deferred tax asset, partially offset by taxes associated with the transfer.
In response to Pillar Two, on May 24, 2024, Barbados enacted a domestic corporate income tax rate of 9%, effective for our fiscal 2025. We incorporated this corporate income tax into our estimated annual effective tax rate increasing our income tax provision beginning in the first quarter of fiscal 2025. In addition, we revalued our existing deferred tax liabilities subject to the Barbados legislation, which resulted in a discrete tax charge of $6.0 million during the first quarter of fiscal 2025. Additionally, Barbados enacted a domestic minimum top-up tax ("DMTT") of 15% which was effective beginning with our fiscal 2026. As a result of the reorganization of our intangible assets described above, the Barbados DMTT will not have a material impact on our condensed consolidated financial statements.
Like Barbados, the government of Bermuda enacted a 15% corporate income tax that was effective for us beginning in fiscal 2026. This Bermuda tax will not have a material impact on our condensed consolidated financial statements.
We expect our ongoing effective tax rate, excluding discrete or non-recurring items, to increase relative to historical periods due to the impact of global tax reform initiatives, including the implementation of Pillar Two and economic substance regulations. As additional jurisdictions implement or revise legislation in response to these reforms, we may experience further adverse impacts on our global effective tax rate.
For interim periods, our income tax expense and resulting effective tax rate are based on an estimated annual effective tax rate, adjusted for the impact of discrete items recognized in the period. Discrete items include changes in tax laws or rates, changes in estimates for uncertain tax positions, excess tax benefits or deficiencies from stock-based compensation, foreign currency remeasurement effects that are not reasonably estimable, and other infrequent or non-recurring items. Discrete items do not include the
intangible asset impairment charges described below and in Note 5 to the accompanying condensed consolidated financial statements.
During the first quarter of fiscal 2026, we recognized a goodwill and other intangible asset impairment charge of $414.4 million, which included $265.0 millionof non-deductible goodwill that will not result in a tax benefit. The expected tax benefit of the impairment charge of $24.2 millionwill be recognized over the course of the fiscal year in relation to pre-tax book income, rather than as a discrete item in the period in which the charge was incurred. Our estimated annual effective tax rate for fiscal 2026 is negative, which when applied to the quarter-to-date loss in the first quarter, results in a quarter-to-date tax expense in the first quarter of fiscal 2026.
The downward revisions to our internal forecasts utilized in our impairment testing during the first quarter of fiscal 2026 impacted our assessment of the future realizability of a related deferred tax asset, which led to the recording of a $16.5 million valuation allowance during the first quarter of fiscal 2026.
For the three months ended May 31, 2025, income tax expense was $30.2 million compared to $12.1 million for the same period last year. The year-over-year increase in the tax expense is primarily due to the timing of the accounting for the tax impact of the impairment charge in the quarter and a related valuation allowance on intangible asset deferred tax assets, partially offset by a decrease in tax expense for discrete items.
Net (Loss) Income, Diluted (Loss) Earnings Per Share, Adjusted Income (non-GAAP), and Adjusted Diluted Earnings Per Share (non-GAAP)
In order to provide a better understanding of the impact of certain items on our (loss) income and diluted (loss) earnings per share, the tables that follow report the comparative after-tax impact of asset impairment charges, Barbados tax reform, CEO succession costs, intangible asset reorganization, restructuring charges, amortization of intangible assets, and non-cash share-based compensation, as applicable, on (loss) income and diluted (loss) earnings per share for the periods presented below. Adjusted income and adjusted diluted earnings per share may be considered non-GAAP financial measures as contemplated by SEC Regulation G, Rule 100. For additional information regarding management's decision to present this non-GAAP financial information, see the introduction to this Item 2., "Management's Discussion and Analysis of Financial Condition and Results of Operations."
| Three Months Ended May 31, 2025 | |||||||||||||||||||||||||||||||||||
|
(Loss) Income
|
Diluted (Loss) Earnings Per Share
|
||||||||||||||||||||||||||||||||||
| (in thousands, except per share data) | Before Tax | Tax | Net of Tax | Before Tax | Tax | Net of Tax | |||||||||||||||||||||||||||||
| As reported (GAAP) | $ | (420,538) | $ | 30,180 | $ | (450,718) | $ | (18.33) | $ | 1.32 | $ | (19.65) | |||||||||||||||||||||||
|
Asset impairment charges
|
414,385 | (21,769) | 436,154 | 18.04 | (0.95) | 18.99 | |||||||||||||||||||||||||||||
|
CEO succession costs
|
3,484 | 153 | 3,331 | 0.15 | 0.01 | 0.15 | |||||||||||||||||||||||||||||
|
Intangible asset reorganization
|
- | (16,474) | 16,474 | - | (0.72) | 0.72 | |||||||||||||||||||||||||||||
| Subtotal | (2,669) | (7,910) | 5,241 | (0.12) | (0.34) | 0.23 | |||||||||||||||||||||||||||||
| Amortization of intangible assets | 4,989 | 882 | 4,107 | 0.22 | 0.04 | 0.18 | |||||||||||||||||||||||||||||
| Non-cash share-based compensation | 296 | 157 | 139 | 0.01 | 0.01 | 0.01 | |||||||||||||||||||||||||||||
| Adjusted (non-GAAP) | $ | 2,616 | $ | (6,871) | $ | 9,487 | $ | 0.11 | $ | (0.30) | $ | 0.41 | |||||||||||||||||||||||
|
Weighted average shares of common stock used in computing:
|
|||||||||||||||||||||||||||||||||||
|
Diluted loss per share, as reported
|
22,943 | ||||||||||||||||||||||||||||||||||
|
Adjusted diluted earnings per share (non-GAAP)
|
22,971 | ||||||||||||||||||||||||||||||||||
| Three Months Ended May 31, 2024 | |||||||||||||||||||||||||||||||||||
| Income |
Diluted Earnings Per Share
|
||||||||||||||||||||||||||||||||||
| (in thousands, except per share data) | Before Tax | Tax | Net of Tax | Before Tax | Tax | Net of Tax | |||||||||||||||||||||||||||||
| As reported (GAAP) | $ | 18,320 | $ | 12,116 | $ | 6,204 | $ | 0.78 | $ | 0.51 | $ | 0.26 | |||||||||||||||||||||||
|
Barbados tax reform
|
- | (6,045) | 6,045 | - | (0.26) | 0.26 | |||||||||||||||||||||||||||||
| Restructuring charges | 1,835 | 165 | 1,670 | 0.08 | 0.01 | 0.07 | |||||||||||||||||||||||||||||
| Subtotal | 20,155 | 6,236 | 13,919 | 0.85 | 0.26 | 0.59 | |||||||||||||||||||||||||||||
| Amortization of intangible assets | 4,520 | 661 | 3,859 | 0.19 | 0.03 | 0.16 | |||||||||||||||||||||||||||||
| Non-cash share-based compensation | 5,833 | 264 | 5,569 | 0.25 | 0.01 | 0.24 | |||||||||||||||||||||||||||||
| Adjusted (non-GAAP) | $ | 30,508 | $ | 7,161 | $ | 23,347 | $ | 1.29 | $ | 0.30 | $ | 0.99 | |||||||||||||||||||||||
|
Weighted average shares of common stock used in computing reported and non-GAAP diluted earnings per share
|
23,633 | ||||||||||||||||||||||||||||||||||
Comparison of First Quarter Fiscal 2026 to First Quarter Fiscal 2025
Net loss was $450.7 million, compared to net income of $6.2 million. Diluted loss per share was $19.65, compared to diluted earnings per share of $0.26. The decrease is primarily due to the recognition of an after-tax asset impairment charge of $436.2 million during the first quarter of fiscal 2026 and lower operating income exclusive of the asset impairment charges.
Adjusted income decreased $13.9 million, or 59.4%, to $9.5 million, compared to $23.3 million. Adjusted diluted earnings per share decreased 58.6% to $0.41, compared to $0.99.
Liquidity and Capital Resources
We principally rely on our cash flow from operations and borrowings under our Credit Agreement (as defined below) to finance our operations, capital and intangible asset expenditures, acquisitions and share repurchases. Historically, our principal uses of cash to fund our operations have included operating expenses, primarily SG&A, and working capital, predominantly for inventory purchases and the extension of credit to our retail customers. We have typically been able to generate positive cash flow from operations sufficient to fund our operating activities. In the past, we have utilized a combination of available cash and existing, or additional, sources of financing to fund strategic acquisitions, share repurchases and capital investments. We generated $58.3 million in cash from operations during the first quarter of fiscal 2026 and had $22.7 million in cash and cash equivalents at May 31, 2025. As of May 31, 2025, the amount of cash and cash equivalents held by our foreign subsidiaries was $19.5 million. We have no existing activities involving special purpose entities or off-balance sheet financing.
We believe our short-term liquidity requirements will primarily consist of operating and working capital requirements, capital expenditures and interest payments on our debt.
Based on our current financial condition and current operations, we believe that cash flows from operations and available financing sources will continue to provide sufficient capital resources to fund our foreseeable short- and long-term liquidity requirements.
We continue to evaluate acquisition opportunities on a regular basis. We may finance acquisition activity with available cash, the issuance of shares of common stock, additional debt, or other sources of financing, depending upon the size and nature of any such transaction and the status of the capital markets at the time of such acquisition.
We may also elect to repurchase additional shares of common stock under our Board of Directors' authorization, subject to limitations contained in our debt agreement and based upon our assessment of a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities. We may finance share repurchases with available cash, additional debt or other sources of financing. For additional information, see Part II, Item 5., "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" in our Form 10-K and Part II, Item 2., "Unregistered Sales of Equity Securities and Use of Proceeds" in this report.
Operating Activities
Operating activities provided net cash of $58.3 million for the three months ended May 31, 2025, compared to net cash provided of $25.3 million for the same period last year. The increase in cash provided by operating activities was primarily driven by decreases in cash used primarily for accounts receivable, annual incentive compensation and income taxes, partially offset by a decrease in cash earnings and increases in payments for inventory and interest.
Investing Activities
Investing activities used net cash of $9.5 million during the three months ended May 31, 2025, compared to net cash used of $9.2 million for the same period last year. The increase in cash used by investing activities was primarily due to an increase in capital and intangible asset expenditures, partially offset by a favorable net working capital settlement during the first quarter of fiscal 2026 related to the acquisition of Olive and June. The increase in capital and intangible asset expenditures was primarily due to an increase in expenditures for computer, furniture and other equipment. Capital and intangible asset
expenditures during both periods also included expenditures for tooling, molds, and other production equipment.
Financing Activities
Financing activities used net cash of $45.1 million during the three months ended May 31, 2025, compared to net cash used of $18.5 million for the same period last year. The increase in cash used by financing activities is primarily due to net repayments of our long-term debt of $45.0 million during the three months ended May 31, 2025, in comparison to net borrowings of $82.4 million during the same period last year to help fund payments for repurchases of common stock of $103.0 million.
Credit Agreement
We have a credit agreement (the "Credit Agreement") with Bank of America, N.A., as administrative agent, and other lenders that provides for aggregate commitments of $1.5 billion, which are available through (i) a $1.0 billion revolving credit facility, which includes a $50 million sublimit for the issuance of letters of credit, (ii) a $250 million term loan facility, and (iii) a committed $250 million delayed draw term loan facility, which may be borrowed in multiple drawdowns until August 15, 2025. Proceeds can be used for working capital and other general corporate purposes, including funding permitted acquisitions. At the closing date, February 15, 2024, we borrowed $457.5 million under the revolving credit facility and $250.0 million under the term loan facility and utilized the proceeds to repay all debt outstanding under our prior credit agreement. During the first quarter of fiscal 2026, we borrowed $250.0 million under the delayed draw term loan facility and utilized the proceeds to repay debt outstanding under the revolving credit facility. During the first quarter of fiscal 2026, we capitalized $0.4 million of lender fees and a de minimis amount of third-party fees incurred in connection with the delayed draw term loan facility borrowing, which were recorded as prepaid financing fees in long-term debt. The Credit Agreement matures on February 15, 2029. The Credit Agreement includes an accordion feature, which permits the Company to request to increase its borrowing capacity by an additional $300 million plus an unlimited amount when the Leverage Ratio (as defined in the Credit Agreement) on a pro-forma basis is less than 3.25 to 1.00. The term loans are payable at the end of each fiscal quarter in equal installments of 0.625% through February 28, 2025, 0.9375% through February 28, 2026, and 1.25% thereafter of the original principal balance of the term loans, which began in the first quarter of fiscal 2025 for the term loan facility and will begin in the second quarter of fiscal 2026 for the delayed draw term loan facility, with the remaining balance due at the maturity date. Borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term SOFR (as defined in the Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.125% and 1.0% to 2.125% for Base Rate and Term SOFR borrowings, respectively.
The floating interest rates on our borrowings under the Credit Agreement are hedged with interest rate swaps to effectively fix interest rates on $750 million and $550 million of the outstanding principal balance under the Credit Agreement as of May 31, 2025 and February 28, 2025, respectively. For additional information regarding our interest rate swaps, see Notes 11, 12, and 13 to the accompanying condensed consolidated financial statements.
In connection with the acquisition of Olive & June, we provided notice of a qualified acquisition and borrowed $235.0 million under our Credit Agreement to fund the acquisition initial cash consideration. The exercise of the qualified acquisition notice triggered temporary adjustments to the maximum leverage ratio, which was 3.50 to 1.00 before the impact of the qualified acquisition notice. As a result of the qualified acquisition notice, commencing at the beginning of our fourth quarter of fiscal 2025, the maximum leverage ratio is 4.50 to 1.00 through November 30, 2025 and 3.50 to 1.00 thereafter. For additional information on the acquisition, see Note 4 to the accompanying condensed consolidated financial statements.
As of May 31, 2025, the outstanding Credit Agreement principal balance was $876.8 million(excluding prepaid financing fees) and the balance of outstanding letters of credit was $9.5 million. As of May 31, 2025, the amount available for revolving loans under the Credit Agreement was $605.1 million, andthe amount available per the maximum leverage ratio was $346.7 million. Covenants in the Credit Agreement limit the amount of total indebtedness we can incur. As of May 31, 2025, these covenants effectively limited our ability to incur more than $346.7 million of additional debt from all sources, including the Credit Agreement.
As of May 31, 2025, we were in compliance with all covenants as defined under the terms of the Credit Agreement.
Critical Accounting Policies and Estimates
The SEC defines critical accounting estimates as those made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a company's financial condition or results of operations. For a discussion of the estimates that we consider to meet this definition and represent our more critical estimates and assumptions used in the preparation of our consolidated financial statements, see the section entitled "Critical Accounting Policies and Estimates" in our Form 10-K. Since the filing of our Form 10-K, there have been no material changes in our critical accounting policies and estimates from those disclosed therein, except as described below:
During the first quarter of fiscal 2026, we concluded that a goodwill impairment triggering event had occurred due to a further sustained decline in our stock price, resulting in our carrying value (excluding long-term debt) exceeding the Company's total enterprise value (market capitalization plus long-term debt). Additional factors that contributed to this conclusion included downward revisions to our internal forecasts and strategic long-term plans, which reflect the tariff policies in effect and the related macroeconomic environment at the end of our first quarter of fiscal 2026, including the corresponding impact on consumer spending and retailer orders. These factors were applicable to all of our reporting units, indefinite-lived trademark licenses and trade names and definite-lived trademark licenses, trade names and certain other intangible assets. Thus, we performed quantitative impairment testing on our goodwill and intangible assets described above.
Based on the outcome of these assessments, we recognized asset impairment charges totaling $414.4 million during the first quarter of fiscal 2026. Asset impairment charges recognized for our Home & Outdoor segment totaled $219.1 million and included charges for our Hydro Flask and Osprey businesses of $120.8 million and $98.3 million, respectively. Asset impairment charges recognized for our Beauty & Wellness segment totaled $195.3 million and included charges for our Drybar, Curlsmith, Health & Wellness and Revlon businesses of $103.7 million, $36.2 million, $35.8 million and $19.6 million, respectively.
Impairment of Goodwill
We review goodwill for impairment on an annual basis or more frequently whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If such circumstances or conditions exist, we perform a qualitative assessment to determine whether it is more likely than not that the assets are impaired. We evaluate goodwill at the reporting unit level (operating segment or one level below an operating segment). We operate two reportable segments, Home & Outdoor and Beauty & Wellness, which are comprised of eight reporting units, one of which does not have any goodwill recorded. If the results of the qualitative assessment indicate that it is more likely than not that the assets are impaired, further steps are required in order to determine whether the carrying value of each reporting unit exceeds its fair market value. An impairment charge is recognized to the extent the goodwill
recorded exceeds the reporting unit's fair value. We perform our annual impairment testing for goodwill as of the beginning of the fourth quarter of our fiscal year.
As described above, during the first quarter of fiscal 2026, we concluded that a goodwill impairment triggering event had occurred, and our qualitative assessment resulted in us performing quantitative goodwill impairment testing on all of our reporting units. The quantitative assessments performed during the first quarter of fiscal 2026 resulted in a total goodwill impairment charge of $317.0 million, which includes impairment charges of $93.3 million and $74.2 million related to our Osprey and Hydro Flask reporting units, respectively, recorded in the Home & Outdoor segment and $87.3 million, $32.4 million and $29.7 million related to our Drybar, Curlsmith and Heath & Wellness reporting units, respectively, recorded in the Beauty & Wellness segment. The remaining carrying values of the Osprey, Hydro Flask, Drybar, Curlsmith and Health & Wellness reporting units' goodwill as of May 31, 2025 were $116.4 million, $41.7 million, $47.0 million, $84.7 million and $255.1 million, respectively. In connection with our annual budgeting and forecasting process, management reduced its forecasts for net sales revenue growth, gross margin and earnings before interest and taxes to reflect the tariff policies in effect and the related macroeconomic environment at the end of our first quarter of fiscal 2026, including the corresponding impact on consumer spending and retailer orders, as applicable. The revised forecasts also resulted in management selecting lower residual growth rates, which were also reflective of revised long-term industry growth expectations. An inability to achieve expected revenue growth and profitability in line with our internal projections could result in further declines in the fair value that may result in additional goodwill impairment charges.
All of our other reporting units had a fair value that exceeded their carrying value by at least 10% except for our Olive & June reporting unit. Our Olive & June reporting unit's fair value exceeded its carrying value by 3%, as expected, due to the minimal amount of time that has passed since its acquisition in the fourth quarter of fiscal 2025.
Considerable management judgment is necessary to estimate expected future cash flows for our reporting units, including evaluating the impact of operational and external economic factors on our future cash flows, all of which are subject to uncertainty. The assumptions and estimates used in determining the fair value of our reporting units involve significant elements of subjective judgment and analysis by management. Certain future events and circumstances, including higher tariffs, deterioration of retail economic conditions, higher cost of capital, and a decline in actual and expected consumer demand, among others, could result in changes to these assumptions and judgements. A revision of these estimates and assumptions could cause the fair values of the reporting units to fall below their respective carrying values, resulting in impairment charges, which could have a material adverse effect on our results of operations.
Some of the inherent estimates and assumptions used in determining the fair value of our reporting units are outside of the control of management, including interest rates, cost of capital, tax rates, tariff rates, strength of retail economies and industry growth. While we believe that the estimates and assumptions we use are reasonable at the time made, it is possible changes could occur. The recoverability of our goodwill is dependent upon discretionary consumer demand and execution of our strategic plan, which includes investing in our brands, growing internationally, new product introductions and expanded distribution to drive revenue growth and profitability and achieve our projections, and our tariff mitigation plans. The net sales revenue and profitability growth rates used in our projections are management's estimate of the most likely results over time, given a wide range of potential outcomes. Actual results may differ from those assumed in forecasts, which could result in material impairment charges. We will continue to monitor our reporting units for any triggering events or other signs of impairment including consideration of changes in tariff rates and the macroeconomic environment, significant declines in operating results, further significant sustained decline in market capitalization from current levels, and other factors, which could result in impairment charges in the future.
Impairment of Intangible Assets
We review our indefinite-lived intangible assets for impairment on an annual basis or more frequently whenever events or changes in circumstances indicate that their carrying value may not be recoverable. If such circumstances or conditions exist, we perform a qualitative assessment to determine whether it is more likely than not that the assets are impaired. If the results of the qualitative assessment indicate that it is more likely than not that the assets are impaired, further steps are required in order to determine whether the carrying values of the indefinite-lived intangible assets exceeds their fair values. We perform our annual impairment testing for our indefinite-lived intangible assets as of the beginning of the fourth quarter. We review our definite-lived intangible assets if a triggering event occurs during the reporting period. If such circumstances or conditions exist, further steps are required in order to determine whether the carrying value of each of the individual assets exceeds its fair market value.
As described above, during the first quarter of fiscal 2026, we concluded that an impairment triggering event had occurred and concluded to perform quantitative impairment analyses on our indefinite-lived intangible assets, which include trademark licenses and trade names and our definite-lived trademark licenses, trade names and certain other intangible assets. Our intangible asset impairment test compares the fair value of our intangible assets with their carrying amount and an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value.
Our indefinite-lived intangible asset testing resulted in a total impairment charge of $48.0 million, which includes impairment charges of $37.0 million, $5.0 million and $6.0 million related to our Hydro Flask, Osprey and PUR trade names, respectively. The remaining carrying values of the Hydro Flask, Osprey and PUR trade names as of May 31, 2025 were $22.0 million, $165.0 million and $48.0 million, respectively.
Our definite-lived trademark license and trade name testing resulted in a total impairment charge of $26.3 million, which includes impairment charges of $19.6 million, $3.9 million and $2.8 million related to our Revlon trademark license, Curlsmith trade name and Drybar trade name. The remaining carrying values of the Revlon trademark license and Curlsmith and Drybar trade names as of May 31, 2025 were
$44.8 million, $13.9 million and $4.0 million, respectively.
Our definite-lived customer relationships and lists assessment resulted in a total impairment charge of $19.5 million, which includes $10.7 million and $8.8 million related to our Drybar and Hydro Flask customer relationships, respectively, which reduced the carrying values of these assets to zero.
Our other intangible assets assessment resulted in a total impairment charge of $3.6 million, which includes $2.8 million and $0.8 million related to Drybar and Hydro Flask other intangibles, respectively, which reduced the carrying values of these assets to zero.
Our Hydro Flask and Osprey intangible assets are included within our Home & Outdoor segment. Our Revlon, Curlsmith, Drybar and PUR intangible assets are included within our Beauty & Wellness segment. In connection with our annual budgeting and forecasting process, management reduced its forecasts for net sales revenue growth, gross margin and earnings before interest and taxes to reflect the tariff policies in effect and the related macroeconomic environment at the end of our first quarter of fiscal 2026, including the corresponding impact on consumer spending and retailer orders, as applicable. The revised forecasts also resulted in management selecting lower residual growth rates, which were also reflective of revised long-term industry growth expectations, and royalty rates, as applicable. An inability to achieve expected revenue growth and profitability in line with our internal projections could result in further declines in the fair value that may result in additional impairment charges to these intangible assets.
All of our other indefinite-lived and definite-lived trademark licenses and trade names had a fair value that exceeded their carrying value by at least 10%.
The assumptions and estimates used in determining the fair value of our intangible assets involve significant elements of subjective judgment and analysis by management. Certain future events and circumstances, including higher tariffs, deterioration of retail economic conditions, higher cost of capital, a decline in actual and expected consumer demand, could result in changes to these assumptions and judgements. A revision of these estimates and assumptions could cause the fair values of the intangible assets to fall below their respective carrying values, resulting in impairment charges, which could have a material adverse effect on our results of operations.
The estimates and assumptions inherent in determining the fair value of our intangible assets are subject to the same risks described above for determining the fair value of our goodwill. Further declines in anticipated consumer spending or an inability to achieve expected revenue growth and profitability in line with our strategic long-term plans, including our tariff mitigation plans, could result in declines in the fair value that may result in impairment charges to our intangible assets. We will continue to monitor our intangible assets for any triggering events or other signs of impairment including consideration of changes in tariff rates and the macroeconomic environment, significant declines in sales or operating results, and other factors, which could result in impairment charges in the future. For additional information, refer to Note 5 and Note 11 to the accompanying condensed consolidated financial statements.
Information Regarding Forward-Looking Statements
Certain statements in this report, including those in documents and our other filings with the SEC referenced herein, may constitute "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. Generally, the words "anticipates", "assumes", "believes", "expects", "plans", "may", "will", "might", "would", "should", "seeks", "estimates", "project", "predict", "potential", "currently", "continue", "intends", "outlook", "forecasts", "targets", "reflects", "could", and other similar words identify forward-looking statements. All statements that address operating results, events or developments that we expect or anticipate may occur in the future, including statements related to sales, expenses, including cost reduction measures, earnings per share results, and statements expressing general expectations about future operating results, are forward-looking statements and are based upon our current expectations and various assumptions. We currently believe there is a reasonable basis for our expectations and assumptions, but there can be no assurance that we will realize our expectations or that our assumptions will prove correct. Forward-looking statements are only as of the date they are made and are subject to risks, many of which are beyond our control, that could cause them to differ materially from actual results. Accordingly, we caution readers not to place undue reliance on forward-looking statements. We believe that these risks include but are not limited to the risks described or referenced in this report and that are otherwise described from time to time in our SEC reports as filed. We undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
Such risks are not limited to, but may include:
•the geographic concentration of certain U.S. distribution facilities which increases our risk to disruptions that could affect our ability to deliver products in a timely manner;
•the occurrence of cyber incidents or failure by us or our third-party service providers to maintain cybersecurity and the integrity of confidential internal or customer data;
•a cybersecurity breach, obsolescence or interruptions in the operation of our central global Enterprise Resource Planning systems and other peripheral information systems;
•our ability to develop and introduce a continuing stream of innovative new products to meet changing consumer preferences;
•actions taken by large customers that may adversely affect our gross profit and operating results;
•our dependence on sales to several large customers and the risks associated with any loss of, or substantial decline in, sales to top customers;
•our dependence on third-party manufacturers, most of which are located in Asia, and any inability to obtain products from such manufacturers or diversify production to other regions or source the same product in multiple regions or implement potential tariff mitigation plans;
•our ability to deliver products to our customers in a timely manner and according to their fulfillment standards;
•the risks associated with trade barriers, exchange controls, expropriations, and other risks associated with domestic and foreign operations including uncertainty and business interruptions resulting from political changes and events in the U.S. and abroad, and volatility in the global credit and financial markets and economy;
•our dependence on the strength of retail economies and vulnerabilities to any prolonged economic downturn, including a downturn from the effects of macroeconomic conditions, any public health crises or similar conditions;
•the risks associated with weather conditions, the duration and severity of the cold and flu season and other related factors;
•our reliance on our CEO and a limited number of other key senior officers to operate our business;
•the risks associated with the use of licensed trademarks from or to third parties;
•our ability to execute and realize expected synergies from strategic business initiatives such as acquisitions, including Olive & June, divestitures and global restructuring plans, including Project Pegasus;
•the risks of significant tariffs or other restrictions continuing to be placed on imports from China, Mexico or Vietnam, including by the new U.S. presidential administration which has promoted and implemented plans to raise tariffs and pursue other trade policies intended to restrict imports, or any retaliatory trade measures taken by China, Mexico or Vietnam;
•the risks of potential changes in laws and regulations, including environmental, employment and health and safety and tax laws, and the costs and complexities of compliance with such laws;
•the risks associated with increased focus and expectations on climate change and other sustainability matters;
•the risks associated with significant changes in or our compliance with regulations, interpretations or product certification requirements;
•the risks associated with global legal developments regarding privacy and data security that could result in changes to our business practices, penalties, increased cost of operations, or otherwise harm our business;
•our dependence on whether we are classified as a "controlled foreign corporation" for U.S. federal income tax purposes which impacts the tax treatment of its non-U.S. income;
•the risks associated with legislation enacted in Bermuda and Barbados in response to the European Union's review of harmful tax competition and additional focus on compliance with economic substance requirements by Bermuda and Barbados;
•the risks associated with accounting for tax positions and the resolution of tax disputes;
•the risks associated with product recalls, product liability and other claims against us;
•associated financial risks including but not limited to, increased costs of raw materials, energy and transportation;
•significant additional impairment of our goodwill, indefinite-lived and definite-lived intangible assets or other long-lived assets;
•the risks associated with foreign currency exchange rate fluctuations;
•the risks to our liquidity or cost of capital which may be materially adversely affected by constraints or changes in the capital and credit markets, interest rates and limitations under our financing arrangements; and
•projections of product demand, sales and net income, which are highly subjective in nature, and from which future sales and net income could vary by a material amount.
Helen of Troy Limited published this content on July 10, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on July 10, 2025 at 11:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]