Helen of Troy(HELE) - 2026 Q1 - Quarterly Results

Q1 FY2026 Financial & Operational Highlights Executive Summary Helen of Troy reported a 10.8% sales decline and a significant GAAP loss per share due to impairment charges, alongside strategic operational focus Key Financial Metrics | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Consolidated Net Sales | $371.7M | $416.8M | | GAAP Diluted (Loss) EPS | $(19.65) | $0.26 | | Adjusted Diluted EPS | $0.41 | $0.99 | | Operating Margin (GAAP) | (109.5)% | 7.4% | | Adjusted Operating Margin | 4.3% | 10.3% | | Cash Flow from Operations | $58.3M | $25.3M | - The Board's search for a new CEO is well underway, focusing on finding a leader with experience in diversified global organizations to bolster the company's brands[4] - The interim CEO has prioritized a 'back to fundamentals' approach, focusing on improving go-to-market effectiveness, simplifying operations, driving product innovation, and sharpening spending[4] - Tariff-related impacts were a major headwind, contributing approximately 8 percentage points to the 10.8% consolidated revenue decline[4] Consolidated Financial Performance Consolidated net sales decreased 10.8% to $371.7 million, primarily impacted by a $414.4 million asset impairment charge leading to a GAAP operating loss - The company recognized a significant non-cash asset impairment charge of $414.4 million, impacting goodwill ($317.0 million) and other intangible assets ($97.4 million) across both segments[7][8] - The 10.8% sales decrease was driven by a 17.0% decline in Organic business, partially offset by a 6.4% positive impact from the Olive & June acquisition[7] - Gross profit margin fell to 47.1% from 48.7%, primarily due to the comparative impact of favorable inventory obsolescence in the prior year, consumer trade-down, and higher retail trade expense[7] Consolidated Financial Summary | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net Sales Revenue | $371.7M | $416.8M | | Gross Profit | $175.0M | $203.1M | | Operating (Loss) Income (GAAP) | $(407.0)M | $30.8M | | Net (Loss) Income (GAAP) | $(450.7)M | $6.2M | | Adjusted Operating Income | $16.1M | $43.0M | Segment Performance Both segments experienced sales declines and significant operating losses due to large impairment charges, with adjusted operating income substantially decreasing Segment Performance Overview | Segment | Net Sales (Q1 FY26) | YoY Change | Adjusted Operating Margin (Q1 FY26) | Adjusted Operating Margin (Q1 FY25) | | :--- | :--- | :--- | :--- | :--- | | Home & Outdoor | $178.0M | (10.3)% | 5.0% | 10.6% | | Beauty & Wellness | $193.7M | (11.3)% | 3.7% | 10.0% | Home & Outdoor Home & Outdoor net sales decreased 10.3% to $178.0 million, primarily due to softer demand and tariffs, leading to a $213.8 million operating loss from impairment - Key drivers for the sales decline included softer demand for home/beverageware, tariff-related order cancellations, retailer pull-forward activity in the prior quarter, and lower closeout sales[15] - The segment's operating loss of $213.8 million included a $219.1 million pre-tax asset impairment charge[11] Home & Outdoor Segment Financials | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net Sales Revenue | $178.0M | $198.5M | | Operating (Loss) Income (GAAP) | $(213.8)M | $15.9M | | Adjusted Operating Income | $8.9M | $21.1M | Beauty & Wellness Beauty & Wellness net sales decreased 11.3% to $193.7 million, with organic decline offset by acquisition, leading to a $193.2 million operating loss from impairment - The organic business decline of 23.0% was partially offset by a 12.3% contribution from the Olive & June acquisition[13] - Organic sales fell due to a decline in international thermometry (China market dynamics), lower fan sales (reduced demand and tariff impact), and softer sales of hair appliances (competition and demand)[16] - The segment's operating loss of $193.2 million included a $195.3 million pre-tax impairment charge[14] Beauty & Wellness Segment Financials | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net Sales Revenue | $193.7M | $218.4M | | Operating (Loss) Income (GAAP) | $(193.2)M | $14.9M | | Adjusted Operating Income | $7.3M | $21.9M | Financial Position and Cash Flow Inventory and total debt increased, while net cash from operating activities more than doubled to $58.3 million, and free cash flow significantly improved Balance Sheet Summary | Balance Sheet Item | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $22.7M | $16.1M | | Inventory | $484.1M | $444.7M | | Total debt | $871.0M | $748.4M | Cash Flow Summary | Cash Flow Item (3 months ended) | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $58.3M | $25.3M | | Free cash flow | $45.0M | $16.2M | Second Quarter Fiscal 2026 Outlook Q2 FY2026 outlook projects consolidated net sales of $408-432 million, reflecting continued consumer softness and tariff impacts, with mitigation efforts Q2 FY2026 Financial Outlook | Q2 FY2026 Outlook | Low End | High End | | :--- | :--- | :--- | | Consolidated Net Sales | $408M | $432M | | YoY Sales Decline | (14.0)% | (8.9)% | | GAAP Diluted EPS | $0.56 | $0.68 | | Adjusted Diluted EPS | $0.45 | $0.60 | - The company is actively mitigating tariff risks by diversifying production outside of China, aiming to reduce its cost of goods sold exposed to China tariffs to less than 25% by the end of fiscal 2026[19] - The outlook reflects continued challenges, including consumer spending softness, a more promotional environment, retailer inventory rebalancing, and competitive pressure in China[22][24] - Cost reduction measures remain in place, including suspension of non-critical projects, reduced personnel costs, and optimized marketing and inventory purchases[21] Financial Statements and Reconciliations This section provides detailed unaudited financial statements for Q1 FY2026, including income, balance sheet, cash flow, and GAAP to non-GAAP reconciliations Condensed Consolidated Statements of Income The company reported a net loss of $450.7 million for the quarter, primarily due to a $414.4 million asset impairment charge Condensed Consolidated Statements of Income (in thousands) | (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :--- | :--- | :--- | | Sales revenue, net | $371,655 | $416,847 | | Gross profit | $175,011 | $203,079 | | Asset impairment charges | $414,385 | $— | | Operating (loss) income | $(407,038) | $30,763 | | Net (loss) income | $(450,718) | $6,204 | | Diluted (loss) earnings per share | $(19.65) | $0.26 | Reconciliation of GAAP to Non-GAAP Operating Income This section reconciles GAAP operating loss to adjusted operating income, showing a Q1 FY2026 adjusted operating income of $16.1 million after key adjustments Reconciliation of Operating Income (in thousands) | (in thousands) | Q1 FY2026 | | :--- | :--- | | Operating loss, as reported (GAAP) | $(407,038) | | Asset impairment charges | $414,385 | | CEO succession costs | $3,484 | | Amortization of intangible assets | $4,989 | | Non-cash share-based compensation | $296 | | Adjusted operating income (non-GAAP) | $16,116 | Reconciliation of GAAP Net Income to Adjusted EBITDA Adjusted EBITDA for the quarter was $25.5 million, reconciled from a GAAP net loss of $450.7 million by adjusting for interest, taxes, D&A, and impairment charges Reconciliation of Net Income to Adjusted EBITDA (in thousands) | (in thousands) | Q1 FY2026 | | :--- | :--- | | Net (loss) income, as reported (GAAP) | $(450,718) | | Interest expense | $13,808 | | Income tax expense | $30,180 | | Depreciation and amortization | $14,084 | | EBITDA (non-GAAP) | $(392,646) | | Asset impairment charges | $414,385 | | CEO succession costs | $3,484 | | Adjusted EBITDA (non-GAAP) | $25,519 | Reconciliation of GAAP to Non-GAAP Net Income and EPS GAAP net loss of $450.7 million, or $(19.65) per share, was reconciled to an adjusted net income of $9.5 million, or $0.41 per share Reconciliation of Net Income and EPS (in thousands, except per share) | (in thousands, except per share) | Net of Tax | Per Share | | :--- | :--- | :--- | | As reported (GAAP) | $(450,718) | $(19.65) | | Asset impairment charges | $436,154 | $18.99 | | CEO succession costs | $3,331 | $0.15 | | Intangible asset reorganization | $16,474 | $0.72 | | Amortization of intangible assets | $4,107 | $0.18 | | Adjusted (non-GAAP) | $9,487 | $0.41 |