Helen of Troy(US:HELE)2026-01-08 12:01Financial Performance - Management reduced forecasts for net sales revenue, gross margin, and earnings before interest and taxes due to tariff policies and macroeconomic conditions, impacting consumer spending and retailer orders [36]. - For the three months ended November 30, 2025, total sales revenue was $512.8 million, a decrease of 3.4% from $530.7 million in the same period of 2024 [92]. - For the nine months ended November 30, 2025, total sales revenue was $1.316 billion, down 7.4% from $1.422 billion in the same period of 2024 [92]. - The company incurred an operating loss of $731.1 million for the nine months ended November 30, 2025, compared to an operating income of $140.7 million in the same period of 2024 [92]. - Consolidated operating loss was $8.4 million for the three months ended November 30, 2025, compared to operating income of $75.1 million for the same period last year, with an operating margin decrease to (1.6)% from 14.2% [150]. - Net loss was $84.1 million for the three months ended November 30, 2025, compared to net income of $49.6 million for the same period last year, resulting in a diluted loss per share of $3.65 [150]. - For the first nine months of fiscal 2026, net loss was $843.4 million, compared to net income of $72.8 million, leading to a diluted loss per share of $36.70 versus diluted earnings per share of $3.15 [215]. Asset Impairment - Goodwill impairment charges for the Home & Outdoor segment totaled $648.6 million for the nine months ended November 30, 2025, with significant charges from Hydro Flask and Osprey reporting units [37]. - The Beauty & Wellness segment recorded goodwill impairment charges of $207.3 million for Health & Wellness, Drybar, Curlsmith, and Revlon businesses for the nine months ended November 30, 2025 [38]. - Impairment charges during the nine months ended November 30, 2025, totaled $648.6 million for goodwill, $97.0 million for indefinite-lived intangible assets, and $61.1 million for definite-lived intangible assets [77]. - The company recognized pre-tax asset impairment charges of $65.9 million for the three months ended November 30, 2025, and $806.7 million for the nine months ended November 30, 2025 [233]. Stock and Shareholder Actions - The company authorized a repurchase of up to $500 million of common stock, with $498.2 million remaining available for purchase as of November 30, 2025 [47]. - The company repurchased 1,011,243 shares of common stock for an aggregate value of $100.019 million at an average price of $98.91 per share during the nine months ended November 30, 2024 [49]. - The company recorded share-based compensation expense of $14.7 million for the nine months ended November 30, 2025, net of income tax benefits [45]. Debt and Financing - As of November 30, 2025, total long-term debt was $892.393 million, with a weighted average interest rate of 5.8% [57]. - The company entered into a credit agreement providing for aggregate commitments of $1.5 billion, including a $1.0 billion revolving credit facility and a $250 million term loan facility [58]. - The outstanding principal balance under the Credit Agreement was $897.5 million as of November 30, 2025, with $625 million hedged using interest rate swaps [83]. - The company was in compliance with all covenants under the terms of the amended credit agreement as of November 30, 2025 [66]. Segment Performance - The company operates through two reportable segments: Home & Outdoor and Beauty & Wellness, with performance assessed using segment operating income [90]. - The Home & Outdoor segment reported sales revenue of $229.6 million, down 6.7% from $246.1 million year-over-year [92]. - The Beauty & Wellness segment generated sales revenue of $283.2 million, a slight decrease from $284.6 million in the prior year [92]. - Organic business revenue declined by $57.1 million, or 10.8%, for the three months ended November 30, 2025, primarily due to lower sales in Beauty & Wellness and Home & Outdoor segments [154]. Tax and Regulatory Matters - The company expects an increase in its effective tax rate for fiscal 2026 due to global tax reform initiatives, including the implementation of Pillar Two [103]. - Income tax expense for the three months ended November 30, 2025, was $60.0 million on a pre-tax loss of $24.0 million, compared to $13.5 million on pre-tax income of $63.2 million for the same period last year [108]. - For the nine months ended November 30, 2025, income tax expense was $69.2 million on a pre-tax loss of $774.2 million, compared to $30.4 million on pre-tax income of $103.3 million for the same period last year [109]. Operational Challenges - The company experienced reduced replenishment orders from retail customers due to softer consumer demand, adversely impacting sales and cash flows during fiscal 2025 [129]. - The company expects continued uncertainty in its business due to inflation, tariffs, and consumer confidence, which may adversely impact results [127]. - The cough/cold/flu season for 2024-2025 was below historical averages, which may affect sales in the Beauty & Wellness segment [144]. Acquisitions and Growth Strategies - The company completed the acquisition of Olive & June for an initial cash consideration of $224.7 million, which is expected to enhance its Beauty portfolio and drive greater earnings growth [117]. - The Olive & June acquisition contributed $37.7 million, or 7.1%, to consolidated net sales revenue growth for the three months ended November 30, 2025 [155]. - The Olive & June acquisition contributed $97.9 million, or 13.3%, to segment net sales revenue growth for the first nine months of Fiscal 2026 [164]. Restructuring Initiatives - Project Pegasus, a global restructuring plan, was completed in Q4 of fiscal 2025, with expected savings to be realized through fiscal 2027, incurring restructuring charges of $3.5 million and $6.9 million for the three and nine months ended November 30, 2024, respectively [50][51]. - The company incurred cash restructuring payments of $5.7 million and $9.8 million for the nine months ended November 30, 2025, and 2024, respectively [51]. - The company has a remaining liability of $7.7 million related to restructuring charges as of February 28, 2025, from Project Pegasus [134].