Helen of Troy(HELE) - 2025 Q4 - Annual Report

PART I Business Overview Helen of Troy Limited is a global consumer products company with Home & Outdoor and Beauty & Wellness segments, executing "Elevate for Growth" and "Project Pegasus" strategies - Helen of Troy Limited was reorganized in Bermuda in 1994 as a leading global consumer products company with a diversified brand portfolio including OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith, Revlon, and Olive & June[13] - The company currently operates two reporting segments: Home & Outdoor and Beauty & Wellness[14][17] - The company has completed its second phase transformation strategy (commencing in fiscal year 2020 and concluding in fiscal year 2024), achieving net sales growth and gross margin expansion, and completing the acquisitions of Drybar, Osprey, and Curlsmith, as well as the divestiture of its Personal Care business[16] - In fiscal year 2025, the "Elevate for Growth" strategy was launched as a strategic roadmap through fiscal year 2030, targeting sustained organic sales growth, further profit expansion, and value-accretive capital deployment through strategic acquisitions, share repurchases, and capital structure management[19] - On December 16, 2024, the company completed the acquisition of Olive & June, an innovative omnichannel nail care brand, integrating it into the Beauty & Wellness segment for an initial cash consideration of $229.4 million[20] - The "Project Pegasus" global restructuring plan aims to expand operating margins through initiatives such as optimizing the brand portfolio, streamlining the organization, accelerating cost savings, improving supply chain efficiency, and optimizing indirect expenditures[18] Key Customer Sales Contribution in Fiscal Year 2025 | Customer | FY2025 Sales Contribution | FY2024 Sales Contribution | FY2023 Sales Contribution | | :--- | :--- | :--- | :--- | | Amazon.com Inc. | 22% | 21% | 17% | | Walmart, Inc. | 11% | 9% | 10% | | Target Corporation | 11% | 10% | 10% | | Top Five Customers Total | 49% | 47% | 43% | Net Sales Seasonality (as a Percentage of Annual Net Sales) | Fiscal Quarter Ending Month | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | May | 21.8 % | 23.7 % | 24.5 % | | August | 24.9 % | 24.5 % | 25.2 % | | November | 27.8 % | 27.4 % | 26.9 % | | February | 25.5 % | 24.4 % | 23.4 % | Our Company Helen of Troy Corporation, founded in Texas in 1968 and reorganized in Bermuda in 1994, has established a leading market position through innovation and competitive pricing - Helen of Troy Corporation was incorporated in Texas in 1968 and reorganized as Helen of Troy Limited in Bermuda in 1994[13] - The company has established a leading market position through new product innovation, product quality, and competitive pricing, with a brand portfolio including OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith, Revlon, and Olive & June[13] Segment Information The company operates two reporting segments, Home & Outdoor and Beauty & Wellness, offering diverse product categories for household, outdoor, beauty, and health needs - The company currently operates two reporting segments: Home & Outdoor and Beauty & Wellness[14] - The Home & Outdoor segment offers products for home activities (food preparation, storage, cooking, cleaning, organization, beverage service) and outdoor performance products (hydration products, coolers, backpacks, travel gear)[17] - The Beauty & Wellness segment provides beauty products (hair styling appliances, beauty tools, liquid and aerosol personal care products, nail care solutions) and health products (humidifiers, thermometers, water and air purifiers, heaters, fans)[17] Our Strategic Initiatives The company has completed two phases of transformation, expanding its brand portfolio and operational efficiency, and launched the "Elevate for Growth" strategy for long-term organic growth and profit expansion - The first phase of the transformation strategy was completed in fiscal year 2019, focusing on leading brands, strategic acquisitions, efficient operations, organizational culture upgrades, improved inventory turnover and return on invested capital, and capital return to shareholders[15] - The second phase of the transformation strategy concluded in fiscal year 2024, achieving net sales growth and gross margin expansion, expanding the brand portfolio and international footprint through the acquisitions of Drybar, Osprey, and Curlsmith, and divesting the Personal Care business[16] - The second phase also initiated the "Project Pegasus" global restructuring plan, aiming to expand operating margins by improving efficiency, effectiveness, and reducing costs[16] - In fiscal year 2025, the "Elevate for Growth" strategy was launched as a strategic roadmap through fiscal year 2030, targeting sustained organic sales growth, further profit expansion, and value-accretive capital deployment[19] - In fiscal year 2025, the company completed the geographic integration of its U.S. Beauty business, co-locating it with the Wellness business in the Boston area to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment[18][19] - On December 16, 2024, the company acquired Olive & June, integrating it into the Beauty & Wellness segment to complement and broaden the existing beauty product portfolio and advance the "Elevate for Growth" strategy[20] Our Products The company's product portfolio spans Home & Outdoor and Beauty & Wellness segments, offering a wide range of solutions from kitchenware and outdoor gear to hair tools and wellness devices Product Categories and Key Products by Business Segment | Segment | Product Category | Key Products | | :--- | :--- | :--- | | Home & Outdoor | Home Solutions | Food storage containers, kitchen tools, baking essentials, kitchen organization, bath, cleaning, baby and toddler products, coffee preparation tools, and electronics | | Home & Outdoor | Insulated Beverageware, Coolers and Food Storage Solutions | Insulated drinkware, coolers, food and lunch containers, insulated bags, outdoor kitchen tools, and accessories | | Home & Outdoor | Technical, Outdoor, Travel, and Lifestyle Packs and Accessories | Technical and outdoor sports backpacks, bike bags, hydration and travel bags, duffels and luggage, lifestyle and everyday packs, child carriers, and accessories | | Beauty & Wellness | Hair Tools and Accessories | Mass, professional, and premium hair styling appliances, brushes, beauty tools, and accessories | | Beauty & Wellness | Hair Liquids | Premium shampoos, liquid hair styling products, treatments, and conditioners | | Beauty & Wellness | Nail Consumables and Grooming Tools | Nail polish, press-on nails, manicure and pedicure systems, grooming tools, and nail care essentials | | Beauty & Wellness | Wellness Devices and Consumables | Thermometers, blood pressure monitors, pulse oximeters, nasal aspirators, humidifiers, faucet-mount and pitcher water filtration systems, air purifiers, heaters, fans, and consumables for humidification, thermometry, water filtration, and air purification | Our Trademarks The company sells products under both owned and licensed trademarks, with a significant portion of Beauty & Wellness net sales relying on continued use of licensed brands - The company sells products under both owned and licensed trademarks, believing its key trademarks have high brand recognition among retailers and consumers[22] - A significant portion of the Beauty & Wellness segment's net sales depends on the continued use of licensed trademarks, requiring licensor approval for new products and packaging, with some license agreements mandating minimum royalty payments[23] Key Trademarks by Segment | Segment | Owned Trademarks | Licensed Trademarks | | :--- | :--- | :--- | | Home & Outdoor | OXO, Good Grips, Soft Works, OXO tot, OXO Brew, OXO Strive, OXO Outdoor, Hydro Flask, Osprey | - | | Beauty & Wellness | Drybar, Hot Tools, Curlsmith, Olive & June, PUR | Revlon, Bed Head, Honeywell, Braun, Vicks | Patents and Other Intellectual Property The company holds utility and design patents in the U.S. and internationally, protecting its competitive advantage through intellectual property and trade secrets - The company holds utility and design patents in the United States and various other countries, protecting certain details of its processes, products, and strategies through trade secrets to maintain a competitive advantage[25] Sales and Marketing The company distributes products globally through diverse channels, with 71% of fiscal year 2025 sales in the U.S., supported by an integrated marketing center - The company's products are sold in over 100 countries worldwide, with U.S. sales accounting for 71% of total net sales in fiscal year 2025[26] - Sales channels include mass retailers, sporting goods retailers, department stores, drug store chains, home goods stores, grocery stores, specialty stores, prestige beauty chains, beauty supply retailers, e-commerce retailers, wholesalers, warehouse clubs, and direct-to-consumer channels[26] - In fiscal year 2024, the company hired a Global Chief Marketing Officer and established an Integrated Marketing Center of Excellence in fiscal year 2025 to support international and North American Regional Market Organizations (RMOs) and brand marketing teams[26] Research and Development The company's R&D focuses on developing differentiated and innovative products to drive organic growth, investing in product design and consumer insights - The company's research and development activities focus on developing differentiated and innovative products to drive sustained organic growth, with continuous investment in product design and R&D capabilities, including in-depth consumer insight research[27] Manufacturing and Distribution Most finished goods are produced by third-party manufacturers, primarily in Asia, with key distribution centers located in Mississippi and Tennessee - Most of the company's finished goods are produced by unaffiliated manufacturers, primarily located in China, Mexico, and Vietnam. In fiscal years 2025 and 2024, finished goods produced by Asian suppliers accounted for 79% of total purchases, with Chinese suppliers accounting for 63% and 62%, respectively[28] - The company owns and leases office and distribution space in the United States, including its U.S. headquarters in El Paso, Texas, and distribution centers in Southaven and Olive Branch, Mississippi, and Gallaway, Tennessee[29] Customers The company relies on a concentrated customer base, with Amazon, Walmart, and Target being major contributors to net sales in fiscal year 2025 Key Customer Sales Contribution in Fiscal Year 2025 | Customer | FY2025 Sales Contribution | FY2024 Sales Contribution | FY2023 Sales Contribution | | :--- | :--- | :--- | :--- | | Amazon.com Inc. | 22% | 21% | 17% | | Walmart, Inc. | 11% | 9% | 10% | | Target Corporation | 11% | 10% | 10% | | Top Five Customers Total | 49% | 47% | 43% | Order Backlog The company typically does not have a significant order backlog across its distribution channels due to customer requirements for short-notice shipments - The company typically does not have a significant order backlog in any distribution channel, as customers generally require shipments on short notice[32] Seasonality The company's sales are seasonal, influenced by calendar events, holidays, and weather patterns, with the third fiscal quarter historically generating the highest net sales - The company's sales are seasonal, influenced by calendar events, holidays, and seasonal weather and disease patterns, with the third fiscal quarter (ending November 30) historically generating the highest net sales[33] Net Sales Seasonality (as a Percentage of Annual Net Sales) | Fiscal Quarter Ending Month | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | May | 21.8 % | 23.7 % | 24.5 % | | August | 24.9 % | 24.5 % | 25.2 % | | November | 27.8 % | 27.4 % | 26.9 % | | February | 25.5 % | 24.4 % | 23.4 % | Competitive Conditions The company operates in highly competitive and mature markets, leveraging strong brands, innovation, and supply chain expertise as key competitive advantages - The markets for the company's products are highly competitive and mature, competing with numerous companies of varying sizes, including well-known global competitors and retailer private labels[34] - The company's competitive advantages include well-known brands, engineering expertise and innovation, sourcing and supply chain proficiency, and strong relationships with manufacturers[34] Key Competitors by Business Segment | Segment | Competitors | | :--- | :--- | | Home & Outdoor | Lifetime Brands, Inc. (KitchenAid), Breville Group, Corning Incorporated (Pyrex), Progressive International (SnapLock), Meyer Corporation (Farberware), Newell Brands Inc., Simple Human LLC, Yeti Holdings, Inc., Bradshaw International (GoodCook), PMI Worldwide (Stanley), Patagonia, Gregory Mountain Products, CamelBak, The North Face, Deuter, Cotopaxi, Thule Group, Trove Brands, LLC | | Beauty & Wellness | Conair, Spectrum Brands Holdings Inc. (Remington), Coty Inc., Dyson Ltd, L'Oréal S.A., DevaCurl, SharkNinja, Inc., Exergen Corporation, Omron Healthcare, Inc., Crane Engineering, Newell Brands, Inc., Lasko Products, LLC, Vesync Co., Ltd (Levoit), The Clorox Company (Brita), Zero Technologies, LLC, Vornado Air Circulation Systems, Unilever (Blueair), Wella Operations US LLC, KISS USA, Guardian Technologies LLC. | Environmental and Health and Safety Matters The company's operations are subject to various environmental, health, and safety regulations, including past discussions with the EPA regarding product packaging compliance - The company's operations are subject to national, state, local, and provincial environmental, health, and safety laws and regulations, as well as industry-specific product certifications[36] - In fiscal years 2022 and 2023, the company engaged in discussions with the U.S. Environmental Protection Agency (EPA) regarding packaging claim compliance for certain air and water filtration products and humidifiers in the Beauty & Wellness segment, voluntarily pausing shipments of affected products, and subsequently completing repackaging and relabeling[37][38] - In fiscal year 2023, the company incurred $23.6 million in expenses related to EPA compliance costs, with $16.9 million recognized in cost of goods sold and $6.7 million in selling, general, and administrative expenses (SG&A)[38] - Ongoing settlement discussions with the EPA may result in future fines or penalties, which cannot be reasonably estimated at this time[37] Sustainability Initiatives Sustainability is a core component of the "Elevate for Growth" strategy, overseen by the Board and focusing on environmental stewardship, ethical sourcing, and human capital development - The company is committed to maintaining rigorous corporate governance standards, supporting transparency, ethical business practices, and creating long-term value for stakeholders, with sustainability initiatives being a core component of the "Elevate for Growth" strategy[41] - The Board of Directors, through its Corporate Governance Committee, oversees sustainability-related matters, with initiatives led by the Vice President of Regulatory, Sustainability, and Governance, aligning with global frameworks such as SASB, TCFD, and GRI[42] - The company prioritizes environmental stewardship principles in product design and development, such as circularity, recyclability, and reduced packaging waste, and conducts comprehensive supply chain audits to ensure compliance with ethical labor practices and responsible sourcing[43] - In June 2024, the company published its fourth Sustainability Report, summarizing strategies and progress in environmental stewardship and human capital development[45] Human Capital The company fosters an inclusive culture, offering development opportunities and benefits to its 1,883 global full-time employees, with some international staff covered by collective agreements - The company is committed to fostering a positive, inclusive, caring, belonging, and supportive corporate culture, providing global employees with learning and development opportunities, volunteer time off, financial and retirement planning advice, employee stock purchase plans, and health benefits[46] - As of February 28, 2025, the company had 1,883 full-time employees globally, utilizing temporary, part-time, and seasonal employees as needed[50] - None of the company's U.S. employees are subject to collective bargaining agreements, while some employees in Europe and Vietnam are covered by local collective arrangements or works councils[50] - The company promotes inclusive workforce development through initiatives such as leadership training, recruitment efforts, employee learning programs, and employee resource groups[52] Available Information The company provides SEC filings, including 10-K, 10-Q, 8-K reports, proxy statements, and insider trading reports, on its investor relations website - The company provides SEC filings, including 10-K, 10-Q, 8-K reports, proxy statements, and reports of stock transactions by directors and executive officers, on the investor relations page of its primary website (http://www.helenoftroy.com)[54](index=54&type=chunk) Risk Factors The company faces diverse risks including operational, strategic, legal, regulatory, tax, and financial challenges that could significantly impact its business and financial performance - The company faces risks including geographic concentration of distribution facilities, cybersecurity incidents, ERP system disruptions, demand for product innovation, reliance on a few large customers, dependence on Asian third-party manufacturers, supply chain interruptions, international trade barriers and political events, retail economic dependence, weather and disease seasonality, loss of key executives, reliance on trademark licenses, and inability to successfully execute strategic initiatives[58] - Legal, regulatory, and tax risks include import tariffs from China, Mexico, or Vietnam, changes in laws and regulations (including environmental, employment, health and safety, and tax laws), climate change and sustainability requirements, privacy and data security laws, controlled foreign corporation classification, Bermuda and Barbados economic substance legislation, and resolution of tax disputes[62] - Financial risks include increased raw material, energy, and transportation costs, impairment of goodwill and intangible assets, foreign currency exchange rate fluctuations, capital and credit market restrictions, interest rate changes, and the highly subjective nature of product demand, sales, and net income forecasts[62] Business, Operational and Strategic Risks The company faces operational and strategic risks from concentrated distribution, cybersecurity threats, innovation demands, customer and manufacturer reliance, and global economic and political factors - The geographic concentration of the company's U.S. distribution facilities increases the risk of operational disruptions, potentially affecting timely product delivery[63] - Cybersecurity incidents or the failure of third-party service providers to maintain data integrity could have a material adverse effect on operations and profitability[64] - The company's success in competition depends on continuously developing and launching innovative products to meet evolving consumer preferences[72] - The company's operating results depend on sales to a few large customers, and the loss of any major customer or a significant decline in sales could materially adversely affect revenue and profitability[75] - The company relies on third-party manufacturers, most of whom are located in Asia, and the inability to obtain products from these manufacturers could materially adversely affect the business[76] - The company's ability to deliver products to customers on time and meet customer fulfillment standards is affected by various factors, some of which are beyond its control[80] - International operations face risks such as trade barriers, exchange controls, expropriation, and political events in the U.S. and abroad, as well as volatility in global financial markets[82] - The company's business depends on the strength of the retail economy and may be vulnerable during prolonged economic downturns, including those impacted by macroeconomic conditions and public health crises[85] - The company's business is affected by factors such as weather conditions and the duration and severity of cold and flu seasons, which can lead to fluctuations in quarterly and annual operating results[86] - The company relies on its Chief Executive Officer and a few other key senior management personnel to operate its business, and the loss of any of these individuals could materially adversely affect the business[87] - The company relies on third-party licensed trademarks and licenses certain trademarks to third parties for royalty income, and any loss could materially adversely affect revenue and profitability[88] - The company may not successfully execute strategic business initiatives, such as acquisitions, divestitures, and global restructuring plans, including Project Pegasus, or realize anticipated synergies[89] Legal, Regulatory and Tax Risks The company is exposed to legal, regulatory, and tax risks from tariffs, evolving laws, sustainability demands, data privacy, and complex international tax classifications - The company's business and operating results could be materially adversely affected if high tariffs or other restrictions continue to be imposed on imported products from China, Mexico, or Vietnam, or if these countries adopt retaliatory trade measures[91] - Changes in laws and regulations, including environmental, employment, health and safety, and tax laws, and the cost and complexity of complying with them, could materially adversely affect the company's business[92] - Increasing focus and expectations regarding climate change and other sustainability matters could materially adversely affect the company's business, financial condition, and results of operations, and harm its reputation[98] - Significant changes in regulations, interpretations, or product certification requirements, or the company's failure to comply, could adversely affect operations[99] - Legal developments in global privacy and data security could lead to changes in the company's business practices, fines, increased operating costs, or other harm to the business[103] - Under U.S. federal income tax law, the tax treatment of the company's non-U.S. income depends on its classification as a "controlled foreign corporation," and changes in ownership structure could affect this classification[105] - Legislation enacted by Bermuda and Barbados in response to the European Union's review of harmful tax competition, and additional scrutiny of economic substance requirements, could adversely affect the company's operations[106] - The company's judgments regarding the accounting treatment of tax positions and the resolution of tax disputes could affect net earnings and cash flows[109] - The company's business involves potential risks of product recalls, product liability, and other claims, which could materially adversely affect its business, results of operations, and financial condition[110] Financial Risks The company faces financial risks from rising costs, asset impairment, foreign exchange volatility, capital market constraints, interest rate changes, and forecasting inaccuracies - Significant increases in raw material, energy, and transportation costs could adversely affect the company's operating results and cash flows[113] - If the company's goodwill, indefinite-lived and definite-lived intangible assets, or other long-lived assets become impaired, the company would be required to record additional impairment charges, which could be substantial[115] - The company's operating results could be adversely affected by fluctuations in foreign currency exchange rates, as it conducts a portion of its international business in non-U.S. dollar currencies[122] - Restrictions or changes in capital and credit markets, interest rates, and limitations under financing arrangements could materially adversely affect the company's liquidity or cost of capital[124] - The company's forecasts for product demand, sales, and net income are highly subjective, and future sales and net income could differ materially from projections[130] Unresolved Staff Comments This report contains no unresolved staff comments - There are no unresolved staff comments in this report[134] Cybersecurity The company maintains an enterprise-wide information security program aligned with the NIST Cybersecurity Framework to manage threats, with Board oversight through the Audit Committee - The company relies on electronic information systems, networks, and technology to support operations, utilizing commercial systems, software, tools, third-party service providers, and monitoring to ensure the security of confidential information and data[135] - The company follows the NIST Cybersecurity Framework (CSF) to identify, assess, and manage cybersecurity threats, maintaining vulnerability management processes and an Incident Response Team (IRT)[136] - The company engages third-party service providers for 24/7 proactive monitoring and has a vendor risk management process to assess the cybersecurity posture of technology third-party service providers[137] - The company's Board of Directors oversees cybersecurity risk management through the Audit Committee, with a Director of Cybersecurity and IT Compliance responsible for implementing related programs[141][142] Risk Management and Strategy The company's enterprise-wide information security program, aligned with the NIST framework, identifies, protects, detects, and responds to cybersecurity threats, supported by third-party monitoring and an incident response plan - The company has established an enterprise-wide information security management program designed to identify, protect, detect, and respond to reasonably foreseeable material cybersecurity threats, adhering to the NIST Cybersecurity Framework[135][136] - The company utilizes various security tools to prevent, identify, escalate, investigate, remediate, respond to, and recover from identified vulnerabilities and cybersecurity incidents[135] - The company engages third-party service providers for 24/7 proactive monitoring and maintains a vendor risk management process to assess the cybersecurity posture of technology third-party service providers[137] - The company maintains a cyber incident response plan (IRP) designed to provide a structured and systematic process for timely and effective identification, resolution, and communication of cybersecurity incidents[138] Cybersecurity Governance Cybersecurity is a key component of the company's enterprise risk management, with oversight from the Board's Audit Committee and dedicated leadership for program implementation - Cybersecurity is an integral component of the company's enterprise risk management process, with significant focus from the Board of Directors and management[141] - The company has a Director of Cybersecurity and IT Compliance who reports to the Senior Vice President of Information Technology and is responsible for implementing controls, procedures, and practices to minimize company risk[141] - The Audit Committee assists the Board of Directors in overseeing cybersecurity-related risks and directly supervises cybersecurity risk management, conducting cybersecurity reviews at least annually[142] Properties The company utilizes owned, leased, and third-party managed facilities globally for operations, including its U.S. headquarters and three primary distribution centers in Mississippi and Tennessee - As of February 28, 2025, the company owned, leased, or utilized various sales, sourcing, research and development, administrative, and distribution facilities globally through third-party management service agreements[144] - The company leases its U.S. headquarters in El Paso, Texas, and owns three primary distribution facilities, two in Southaven and Olive Branch, Mississippi, and a third in Gallaway, Tennessee, which became operational in the first quarter of fiscal year 2024[144] - The Gallaway and Southaven distribution facilities serve the Home & Outdoor and Beauty & Wellness segments, respectively, while the Olive Branch facility serves both segments[144] Legal Proceedings The company is involved in patent infringement litigation with Brita LP and ongoing EPA regulatory discussions regarding product packaging, with potential for future fines - The company is involved in several legal proceedings and regulatory matters, including patent infringement litigation ("Patent Litigation") and a U.S. International Trade Commission ("ITC") action initiated by Brita LP, concerning the company's PUR gravity-fed water filtration systems[146] - The ITC issued a final determination in the company's favor on September 19, 2023, finding no infringement and terminating the investigation, but Brita LP is appealing to the Federal Circuit[146] - The company engaged in discussions with the U.S. Environmental Protection Agency (EPA) regarding packaging claim compliance for certain air and water filtration products and humidifiers in the Beauty & Wellness segment, and has completed repackaging and relabeling efforts[147][148] - Ongoing settlement discussions with the EPA may result in future fines or penalties, which cannot be reasonably estimated at this time[148] Water Filtration Patent Litigation Brita LP filed patent and ITC lawsuits against the company regarding PUR water filtration systems, with the ITC ruling in the company's favor, though Brita LP is appealing - Brita LP filed patent litigation and an ITC action against Kaz USA, Inc. and Helen of Troy Limited on December 23, 2021, alleging patent infringement by the company's PUR gravity-fed water filtration systems[146] - The ITC issued a final determination in the company's favor on September 19, 2023, finding no infringement and terminating the investigation. Brita LP is appealing to the Federal Circuit[146] - The patent litigation is currently stayed, and the company cannot predict the ultimate outcome, potential amount of loss, or timing of resolution for these legal proceedings[146] EPA Regulatory Matter The company engaged with the EPA regarding packaging compliance for certain Beauty & Wellness products, completing repackaging, with ongoing settlement discussions potentially leading to future fines - In fiscal years 2022 and 2023, the company engaged in discussions with the EPA regarding packaging claim compliance for certain air and water filtration products and humidifiers in the Beauty & Wellness segment, voluntarily pausing shipments of affected products, and subsequently completing repackaging and relabeling[147][148] - Ongoing settlement discussions with the EPA may result in future fines or penalties, which cannot be reasonably estimated at this time[148] Mine Safety Disclosures Mine safety disclosures are not applicable to this report - Mine safety disclosures are not applicable in this report[150] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under HELE, with 22.9 million shares outstanding as of April 17, 2025, and a $500 million share repurchase authorization - The company's common stock is listed on the Nasdaq Global Select Market under the symbol HELE[152] - As of April 17, 2025, the company had 22,942,650 shares of common stock outstanding[5] - The company has not paid any cash dividends since its inception, and future dividend policy will depend on earnings, financial condition, and market conditions[154] - In August 2024, the Board of Directors authorized the repurchase of up to $500 million of outstanding common stock over a three-year period, replacing a previous authorization of approximately $245.3 million[155] Fiscal Year 2025 Fourth Quarter Stock Repurchase Activity | Period | Total Shares Purchased (in thousands) | Average Price Paid per Share | Total Shares Purchased Under Publicly Announced Plans or Programs (in thousands) | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands USD) | | :--- | :--- | :--- | :--- | :--- | | December 1 to December 31, 2024 | 14 | $69.19 | 14 | $499,941 | | January 1 to January 31, 2025 | 23 | $64.77 | 23 | $499,940 | | February 1 to February 28, 2025 | 193 | $58.39 | 193 | $499,928 | | Total | 230 | $59.69 | 230 | - | Market Information for Common Stock The company's common stock is listed and traded on the Nasdaq Global Select Market under the ticker symbol HELE - The company's common stock is listed on the Nasdaq Global Select Market under the symbol HELE[152] Approximate Number of Equity Security Holders of Record As of April 17, 2025, the company had 99 holders of record for its common stock - As of April 17, 2025, the company had 99 holders of record for its common stock[153] Cash Dividends The company has not paid cash dividends since its inception, prioritizing retained earnings for operations, expansion, share repurchases, and potential acquisitions - The company's current policy is to retain earnings to fund business operations and expansion, common stock repurchases, and potential acquisitions. The company has not paid any cash dividends since its inception[154] Issuer Purchases of Equity Securities In August 2024, the Board authorized a $500 million common stock repurchase program, with $499.9 million remaining as of February 28, 2025 - In August 2024, the Board of Directors authorized the repurchase of up to $500 million of outstanding common stock over a three-year period, replacing a previous authorization of approximately $245.3 million[155] - Repurchases may be made through open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, or a combination thereof[155] Fiscal Year 2025 Fourth Quarter Stock Repurchase Activity | Period | Total Shares Purchased (in thousands) | Average Price Paid per Share | Total Shares Purchased Under Publicly Announced Plans or Programs (in thousands) | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands USD) | | :--- | :--- | :--- | :--- | :--- | | December 1 to December 31, 2024 | 14 | $69.19 | 14 | $499,941 | | January 1 to January 31, 2025 | 23 | $64.77 | 23 | $499,940 | | February 1 to February 28, 2025 | 193 | $58.39 | 193 | $499,928 | | Total | 230 | $59.69 | 230 | - | Reserved This section is reserved and contains no specific information - This section is reserved and contains no specific information[134] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's fiscal year 2025 financial performance, highlighting net sales and operating income declines, ongoing strategic initiatives, and key accounting policies - The company uses key financial metrics such as net sales, organic business sales, adjusted operating margin, and adjusted diluted earnings per share to evaluate historical performance, project future performance, and compare with competitors[164] Consolidated Financial Performance Overview for Fiscal Years 2025 and 2024 | Metric | FY2025 (in millions USD) | FY2024 (in millions USD) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Net sales | $1,907.7 | $2,005.1 | (4.9)% | | Operating income | $142.7 | $260.6 | (45.2)% | | Operating margin | 7.5% | 13.0% | (5.5) percentage points | | Adjusted operating income (non-GAAP) | $252.3 | $301.5 | (16.3)% | | Adjusted operating margin (non-GAAP) | 13.2% | 15.0% | (1.8) percentage points | | Net income | $123.8 | $168.6 | (26.6)% | | Diluted earnings per share | $5.37 | $7.03 | (23.6)% | | Adjusted income (non-GAAP) | $165.4 | $213.5 | (22.5)% | | Adjusted diluted earnings per share (non-GAAP) | $7.17 | $8.91 | (19.5)% | - Fiscal year 2025 operating income includes $51.5 million in pre-tax asset impairment charges, $14.8 million in pre-tax restructuring charges, and $3.0 million in pre-tax acquisition-related expenses[209] - In fiscal year 2025, the company acquired Olive & June, contributing $23.0 million in net sales, representing 1.1% of total sales[212] - In fiscal year 2025, the company recorded $51.5 million in asset impairment charges due to the impairment of goodwill and definite-lived trade names related to the Drybar business[171][223] - In fiscal year 2025, the company incurred $14.8 million in pre-tax restructuring charges related to the "Project Pegasus" restructuring plan, primarily for severance and employee-related costs[168][180][225] - In fiscal year 2025, the company's income tax benefit rate was 35.0%, primarily due to a $64.6 million transitional income tax benefit from intangible asset restructuring[241] Overview Helen of Troy Limited, a global consumer products company, completed its second transformation phase, launched "Elevate for Growth," acquired Olive & June, and recorded asset impairment charges in fiscal year 2025 - Helen of Troy Limited is a leading global consumer products company offering innovative products and solutions through a diversified brand portfolio including OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith, Revlon, and Olive & June[166] - Fiscal year 2024 concluded the second phase of the transformation strategy, achieving net sales growth and gross margin expansion, and initiating the "Project Pegasus" global restructuring plan[167] - In fiscal year 2025, the "Elevate for Growth" strategy was launched as a strategic roadmap through fiscal year 2030, targeting sustained organic sales growth, further profit expansion, and value-accretive capital deployment[169] - In the fourth quarter of fiscal year 2025, the company recorded $51.5 million in asset impairment charges due to the impairment of goodwill and definite-lived trade names related to the Drybar business[171] - On December 16, 2024, the company completed the acquisition of Olive & June for an initial cash consideration of $229.4 million, integrating it into the Beauty & Wellness segment[172] - On September 28, 2023, the company sold its distribution and office facility in El Paso, Texas, for $50.6 million, recognizing a gain on sale of $34.2 million[173] Significant Trends Impacting the Business Key trends impacting the business include the "Project Pegasus" restructuring, ongoing patent litigation, macroeconomic pressures, supply chain disruptions, and foreign exchange fluctuations - The "Project Pegasus" global restructuring plan aims to expand operating margins through initiatives such as optimizing the brand portfolio, streamlining the organization, accelerating cost savings, improving supply chain efficiency, and optimizing indirect expenditures[174] - In fiscal year 2025, the company incurred $14.8 million in pre-tax restructuring charges related to "Project Pegasus," which is expected to generate $75 million to $85 million in annual pre-tax operating income improvement[180][181] - The water filtration patent litigation is ongoing, with Brita LP appealing the ITC's favorable ruling to the company, and the outcome could materially impact the company's financial condition and results of operations[182] - Macroeconomic trends, such as high inflation and interest rates, continue to negatively impact consumer discretionary income, credit availability, and spending, thereby affecting the company's business[183] - In fiscal year 2025, the company's sales were adversely affected by reduced retail customer replenishment orders, softer consumer demand, increased competition in the insulated drinkware market, and shipping disruptions due to automation startup issues at its Tennessee distribution facility[186][187] - In fiscal year 2025, the company did not incur significant expenses related to EPA compliance costs, but ongoing settlement discussions with the EPA may result in future fines or penalties[195] - U.S. tariffs on imports from China and other changes in trade policy could materially adversely affect the company's business and operating results, with the company working to diversify production outside of China[196][197] - In fiscal year 2025, foreign currency exchange rate fluctuations had an unfavorable impact of approximately $2.5 million (0.1%) on consolidated net sales[200] - In fiscal year 2025, the Beauty & Wellness segment's net sales were adversely affected by a disease season that was below historical averages[201] Results of Operations The company's fiscal year 2025 results show a decline in net sales and operating income, impacted by asset impairment, restructuring charges, and increased SG&A expenses Consolidated Financial Performance Overview for Fiscal Years 2025 and 2024 | Metric | FY2025 (in millions USD) | FY2024 (in millions USD) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Net sales | $1,907.7 | $2,005.1 | (4.9)% | | Operating income | $142.7 | $260.6 | (45.2)% | | Operating margin | 7.5% | 13.0% | (5.5) percentage points | | Adjusted operating income (non-GAAP) | $252.3 | $301.5 | (16.3)% | | Adjusted operating margin (non-GAAP) | 13.2% | 15.0% | (1.8) percentage points | | Net income | $123.8 | $168.6 | (26.6)% | | Diluted earnings per share | $5.37 | $7.03 | (23.6)% | | Adjusted income (non-GAAP) | $165.4 | $213.5 | (22.5)% | | Adjusted diluted earnings per share (non-GAAP) | $7.17 | $8.91 | (19.5)% | Net Sales Change by Segment for Fiscal Years 2025 and 2024 | Segment | FY2024 Sales (in thousands USD) | Organic Business Change (in thousands USD) | Foreign Exchange Impact (in thousands USD) | Acquisition Impact (in thousands USD) | FY2025 Sales (in thousands USD) | Total Net Sales Growth (Decline) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Home & Outdoor | $916,381 | $(9,205) | $(845) | — | $906,331 | (1.1)% | | Beauty & Wellness | $1,088,669 | $(108,670) | $(1,675) | $23,010 | $1,001,334 | (8.0)% | | Total | $2,005,050 | $(117,875) | $(2,520) | $23,010 | $1,907,665 | (4.9)% | - Consolidated gross margin increased by 0.6 percentage points to 47.9% in fiscal year 2025, primarily due to favorable inventory obsolescence charges and lower cost of goods and products, partly attributable to the Project Pegasus initiative[218] - Consolidated SG&A expense as a percentage of net sales increased by 3.6 percentage points to 37.0% in fiscal year 2025, primarily due to increased marketing expenses, an unfavorable comparative impact from the gain on sale of the El Paso facility, higher distribution center expenses, and unfavorable operating leverage from lower net sales[220] - In fiscal year 2025, the company recorded $51.5 million in asset impairment charges due to the impairment of goodwill and definite-lived trade names related to the Drybar business[223] - In fiscal year 2025, the company incurred $14.8 million in pre-tax restructuring charges related to the "Project Pegasus" restructuring plan[225] - Interest expense for fiscal year 2025 was $51.9 million, a decrease from the prior year, primarily due to a lower average borrowing balance, partially offset by an increase in the average effective interest rate[234] - The income tax benefit rate for fiscal year 2025 was 35.0%, primarily due to a $64.6 million transitional income tax benefit from intangible asset restructuring and the resolution of uncertain tax positions, partially offset by Barbados tax legislation and rate changes[241] - Net income for fiscal year 2025 was $123.8 million, with diluted earnings per share of $5.37, primarily impacted by lower operating income and asset impairment charges, partially offset by a lower effective income tax rate and a reduced number of diluted shares outstanding[244] Liquidity and Capital Resources The company relies on operating cash flow and credit facilities for liquidity, with $113.2 million net cash from operations and $312.4 million available under its revolving credit facility in fiscal year 2025 - The company primarily relies on cash flows from operating activities and borrowings under its credit agreement to meet funding requirements for operations, capital expenditures, acquisitions, and share repurchases[246] - In fiscal year 2025, operating activities provided $113.2 million in net cash, with cash and cash equivalents totaling $18.9 million as of February 28, 2025[246] - In fiscal year 2025, investing activities used $263.1 million in cash, primarily for the acquisition of Olive & June ($229.4 million) and capital and intangible asset expenditures ($30.1 million)[252][253] - In fiscal year 2025, financing activities provided $150.2 million in cash, primarily including borrowings and repayments under the revolving credit facility, and the repurchase of 1.039 million shares of common stock for a total of $103.2 million[255][256] - On February 15, 2024, the company entered into a new credit agreement with total commitments of $1.5 billion, comprising a $1.0 billion revolving credit facility, a $250 million term loan, and a $250 million delayed draw term loan[257][258] - As of February 28, 2025, the outstanding principal balance under the credit agreement was $921.9 million, with $312.4 million available under the revolving credit facility[265] - The company was in compliance with all covenants under its credit agreement, including key financial covenants such as minimum interest coverage ratio and maximum leverage ratio[267][268] Critical Accounting Policies and Estimates Key accounting policies involve significant estimates and judgments for income tax provisions, inventory valuation, goodwill and intangible asset impairment, and share-based compensation - The determination of income tax provisions involves significant estimates and judgments regarding future taxable income, the recoverability of deferred tax assets, and uncertain tax positions[271][272][276] - Inventory is measured at the lower of cost or net realizable value, with inventory impairment reserves estimated based on factors such as historical sales trends, future demand, and market conditions[277] - Accounting for goodwill and intangible assets involves determining the fair value of acquired assets and assumed liabilities in business combinations, and conducting annual or more frequent impairment tests[278][280] - In the fourth quarter of fiscal year 2025, the company recorded $51.5 million in asset impairment charges due to the impairment of goodwill and definite-lived trade names related to the Drybar business[118][287][299] - Impairment tests for long-lived assets, including definite-lived intangible assets, are conducted when a triggering event occurs, with fair value estimates relying on subjective judgments such as future cash flow projections, discount rates, and royalty rates[294][295][297] - The determination of the economic useful lives of intangible assets, such as trademark licenses, trade names, customer relationships, and patents, involves significant judgments regarding asset plans, markets, economic factors, laws and regulations, and industry trends[305] - Share-based compensation is measured based on the fair value at the grant date, and for performance-conditioned awards, compensation expense is recognized when the performance condition is deemed probable of achievement[306][307] Information Regarding Forward-Looking Statements This report contains forward-looking statements based on current expectations and assumptions, subject to risks that may cause actual results to differ materially - Certain written and oral statements in this annual report may constitute "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995, based on the company's current expectations and various assumptions[310] - Forward-looking statements are made only as of the date they are made and are subject to risks that could cause actual results to differ materially from expectations, with the company undertaking no obligation to publicly update or revise any forward-looking statements[310] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to financial market risks from foreign currency and interest rate fluctuations, managed through hedging instruments like forward contracts and interest rate swaps - The company primarily faces financial market risks arising from foreign currency exchange rate and interest rate changes[311] - The company hedges foreign currency risk through forward contracts and uses interest rate swaps to manage interest rate risk on its floating-rate debt[315][318] - As of February 28, 2025, a hypothetical unfavorable 10% change in foreign currency exchange rates would decrease the fair value of derivatives by $7.9 million, and a hypothetical unfavorable 10% change in interest rates would decrease the fair value of interest rate swaps by $2.2 million[316][319] - As of February 28, 2025, a hypothetical 1% increase in interest rates would increase the company's annual interest expense by approximately $3.7 million (net of interest rate swap impact)[321] Foreign Currency Risk The company faces foreign currency risk from international operations, with 14% of fiscal year 2025 net sales in non-USD currencies, and uses forward contracts to hedge this exposure - The U.S. dollar is the functional and reporting currency for the company and all its subsidiaries. The company faces foreign currency risk through its international operations, with approximately 14% of fiscal year 2025 net sales denominated in non-U.S. dollar currencies[312] - The company hedges foreign currency risk through forward contracts to mitigate volatility in net earnings, cash flows, and net asset values resulting from changes in foreign currency exchange rates[315] - As of February 28, 2025, a hypothetical unfavorable 10% change in foreign currency exchange rates would decrease the fair value of derivatives by $7.9 million[316] - The company sources most of its products from third-party manufacturers in China, where labor and raw material costs are denominated in Renminbi, and fluctuations in the Renminbi-to-U.S. dollar exchange rate could affect product costs[317] Interest Rate Risk The company is exposed to interest rate risk on its floating-rate debt, which is partially hedged using interest rate swaps, though SOFR's limited history presents forecasting challenges - The interest on the company's outstanding debt is based on floating rates, exposing it to the risk of changes in short-term market interest rates[318] - The company hedges a portion of its floating-rate debt through interest rate swaps, with $550 million of outstanding principal balance under the credit agreement hedged as of February 28, 2025[318][510] - As of February 28, 2025, a hypothetical 1% increase in interest rates would increase the company's annual interest expense by approximately $3.7 million (net of interest rate swap impact)[321] - SOFR (Secured Overnight Financing Rate) has a limited history as a benchmark rate, making its future performance difficult to predict accurately, which could affect the interest rates on the company's financial instruments[318] Financial Statements and Supplementary Data This section presents the company's consolidated financial statements, including balance sheets, income statements, cash flow statements, and related notes, with unqualified audit opinions - This section includes management's report on internal control, the independent registered public accounting firm's reports, and the consolidated financial statements as of February 28, 2025, and February 29, 2024[324] - Independent registered public accounting firm Grant Thornton LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of February 28, 2025[331] - Independent registered public accounting firm Grant Thornton LLP issued an unqualified opinion on the company's consolidated financial statements as of February 28, 2025, and February 29, 2024[339] - Key audit matters include the estimation of the fair value of trademarks acquired in the Olive & June, LLC acquisition, and the impairment assessment of definite-lived and indefinite-lived intangible assets and goodwill[344][347] Management's Report on Internal Control Over Financial Reporting Management concluded that the company's internal control over financial reporting was effective as of February 28, 2025, excluding the acquired Olive & June business - The company's management is responsible for establishing and maintaining adequate internal control over financial reporting and assessing its effectiveness based on the COSO "Internal Control—Integrated Framework"[325][327] - As of February 28, 2025, management assessed and concluded that the company's internal control over financial reporting was effective, excluding the assessment of Olive & June[328] - Olive & June's assets and net sales represented 1.3% of the company's consolidated total assets (excluding goodwill and intangible assets) and 1.2% of consolidated net sales, respectively, and were excluded from the assessment[328] Reports of Independent Registered Public Accounting Firm Grant Thornton LLP issued unqualified opinions on the company's internal control over financial reporting and consolidated financial statements, highlighting key audit matters like intangible asset valuation - Grant Thornton LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of February 28, 2025[331] - Grant Thornton LLP issued an unqualified opinion on the company's consolidated financial statements as of February 28, 2025, and February 29, 2024[339] - Key audit matters include the estimation of the fair value of trademarks acquired in the Olive & June acquisition, and the impairment assessment of definite-lived and indefinite-lived intangible assets and goodwill[344][347] Consolidated Financial Statements This section presents the company's consolidated balance sheets, income statements, and cash flow statements for fiscal years 2023-2025, providing a comprehensive financial overview Consolidated Balance Sheets (as of February 28, 2025, and February 29, 2024) | Item | February 28, 2025 (in thousands USD) | February 29, 2024 (in thousands USD) | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $18,867 | $18,501 | | Accounts receivable, net | $428,330 | $394,536 | | Inventories | $452,615 | $395,995 | | Prepaid expenses and other current assets | $26,102 | $27,012 | | Income taxes receivable | $5,798 | $7,874 | | Total current assets | $931,712 | $843,918 | | Property, plant and equipment, net | $330,029 | $336,646 | | Goodwill | $1,182,899 | $1,066,730 | | Other intangible assets, net | $566,756 | $536,696 | | Operating lease assets | $35,063 | $35,962 | | Deferred tax assets, net | $67,660 | $3,662 | | Other assets | $17,964 | $15,008 | | Total assets | $3,132,083 | $2,838,622 | | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | Accounts payable | $269,405 | $245,349 | | Accrued expenses and other current liabilities | $160,740 | $181,391 | | Income taxes payable | $26,739 | $17,821 | | Long-term debt, current portion | $9,375 | $6,250 | | Total current liabilities | $466,259 | $450,811 | | Long-term debt, non-current portion | $907,519 | $659,421 | | Lease liabilities, non-current | $39,949 | $37,262 | | Deferred tax liabilities, net | $29,283 | $41,253 | | Other non-current liabilitie