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HELEN OF TROY LTD (HELE)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 was weak: revenue fell 10.8% YoY to $371.7M and adjusted EPS dropped to $0.41, with a large GAAP loss from $414M of non-cash impairments; softness was concentrated in Beauty & Wellness and Home & Outdoor, with tariffs estimated to account for ~8 pts of the 10.8% decline .
  • Results missed S&P Global consensus: revenue $371.7M vs $394.9M estimate* and adjusted EPS $0.41 vs $0.84 estimate*; management cited direct‑import order cancellations, tariff pull‑forwards, China headwinds, and consumer trade-down as drivers of the shortfall .
  • Guidance: no FY outlook; Q2 FY26 net sales $408–$432M and adjusted EPS $0.45–$0.60 as tariff disruption persists and mix/promotions weigh on margins; interest expense $13–$14M, adjusted tax 28.9–30.9%, shares 22.9M .
  • Near-term stock catalysts: price-increase execution (avg 7–10% across portfolio), tariff mitigation trajectory (net tariff impact now expected to be < $15M OI hit at current tariffs), and progress on supply-chain diversification (COGS exposure to China now guided to <25% by FY26 end, higher than prior target) .

What Went Well and What Went Wrong

  • What Went Well

    • Early green shoots in sell-through: U.S. POS units up in 8 of 11 key brands; DTC +9% YoY; Osprey revenue +3.7%; Curlsmith +17%; Olive & June ahead of plan .
    • Free cash flow improvement: Q1 operating cash flow $58.3M; FCF $45.0M vs $16.2M last year, enabling $46M net debt paydown QoQ .
    • Clear mitigation roadmap: price increases queued (avg 7–10% across items, targeted by brand/SKU) and supplier diversification with dual sourcing; company now expects net tariff OI impact < $15M at current tariffs .

  • What Went Wrong

    • Tariffs and channel disruption: ~8 pts of the 10.8% sales decline tied to direct‑import cancellations, tariff-related pull-forwards and China cross‑border shifts; China localization and subsidized domestic competition weighed on thermometry .
    • Mix, promotions, and trade-down: gross margin -160 bps YoY to 47.1% on trade-down, retail trade spend, and unfavorable brand mix; adjusted operating margin compressed to 4.3% (–600 bps) .
    • Large impairment: $414.4M pre-tax impairment (goodwill $317.0M; intangibles $97.4M) drove GAAP operating margin to (109.5)% and GAAP diluted loss per share to $(19.65) .

Financial Results

MetricQ3 FY2025Q4 FY2025Q1 FY2026
Revenue ($M)$530.7 $485.9 $371.7
Gross Margin %48.9% 48.6% 47.1%
GAAP Diluted EPS ($)$2.17 $2.22 $(19.65)
Adjusted Diluted EPS ($)$2.67 $2.33 $0.41
Operating Margin (GAAP) %14.2% 0.4% (109.5)%
Adjusted Operating Margin %16.6% 15.4% 4.3%
Adjusted EBITDA Margin %18.2% 17.4% 6.9%

Q1 FY26 Actual vs S&P Global Consensus

  • Revenue: $371.7M vs $394.9M estimate* .
  • Adjusted/Primary EPS: $0.41 vs $0.84 estimate* .
    Note: *Values retrieved from S&P Global.

Segment performance (Q1 YoY)

SegmentQ1 FY2025Q1 FY2026YoY ChangeGAAP Op Margin (Q1 FY25 → Q1 FY26)Adjusted Op Margin (Q1 FY25 → Q1 FY26)
Home & Outdoor Revenue ($M)$198.5 $178.0 (10.3)% 8.0% → (120.1)% 10.6% → 5.0%
Beauty & Wellness Revenue ($M)$218.4 $193.7 (11.3)% 6.8% → (99.8)% 10.0% → 3.7%

KPIs and Balance Sheet

KPIQ1 FY2025Q1 FY2026
Cash from Operations ($M)$25.3 $58.3
Free Cash Flow ($M)$16.2 $45.0
Inventory ($M)$444.7 $484.1
Total Debt ($M)$748.4 $871.0
Net Leverage Ratio (TTM)—3.13

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Net Sales ($M)Q2 FY2026N/A$408–$432 Initiated
GAAP Diluted EPS ($)Q2 FY2026N/A$0.56–$0.68 Initiated
Adjusted Diluted EPS ($)Q2 FY2026N/A$0.45–$0.60 Initiated
Home & Outdoor SalesQ2 FY2026N/A(16.5)% to (11.5)% YoY Initiated
Beauty & Wellness SalesQ2 FY2026N/A(11.3)% to (6.1)% YoY; includes Olive & June +$26–$27M Initiated
Interest ExpenseQ2 FY2026N/A$13–$14M Initiated
Adjusted Effective Tax RateQ2 FY2026N/A28.9%–30.9% Initiated
Diluted SharesQ2 FY2026N/A~22.9M Initiated
FX AssumptionQ2 FY2026N/AJune 2025 rates constant Initiated
Net Tariff OI ImpactFY2026N/A“< $15M” at current tariffs New datapoint
COGS Exposed to China TariffsFY2026 (EoY)“<20%” (prior) “<25%” (updated) Worsened
SG&A Ratio Run-RateQ2–Q4 FY2026N/A~37–38% (normalizing) New datapoint
Inventory (Period-End)Q2 FY2026N/A$510–$520M expected New datapoint

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 FY2025)Current Period (Q1 FY2026)Trend
Tariffs & MitigationAnticipated major tariff headwinds; plan to offset 70–80% via pricing, supplier cost, and mix; paused China buys; began dual sourcing; expected most tariff impact in 2H FY26 .Tariff disruption worse than expected in Q1; direct-import cancellations, pull-forwards, China localization hurt revenue; pricing (avg 7–10%) lined up; net tariff OI impact guided to < $15M; still only Q2 outlook .Incremental pressure near term; mitigation still progressing.
Supply Chain DiversificationTarget COGS exposure to China <20% by FY26 end; accelerate Southeast Asia sourcing; build capability .Updated target to <25% by FY26 end given timing and inventory strategy; >40% dual-sourced by FY26 end, >60% by FY27 .Slower trajectory vs prior; still advancing.
Consumer/MixWeak illness season; Beauty softness; value reframing; international a bright spot .Trade-down evident (unit POS up, $ POS mixed); more promotional environment; unfavorable mix and higher trade spend hitting margins .Demand value-focused; mix pressure persists.
Pricing StrategyEvaluating targeted price actions with retailers .Average 7–10% price increases across portfolio, item-specific; conservative elasticity assumptions .Moving from evaluation to execution.
Regional/ChinaExpected China softness and nationalism; Q1 outlook pressured by China and DI pause .China market shift to localized models and subsidized domestic competitors weighing on thermometry; DI cancellations continue .Continued headwind.
Innovation & BrandsOlive & June acquisition; Drybar/Beauty innovation pipeline; OXO new storage; Osprey strength .Product-driven growth priority; Drybar all-inclusive launch; Osprey category accolades; Olive & June ahead of plan .Innovation cadence emphasized.
Cost/SG&APegasus savings fund growth; cost controls as tariffs loom .Tight cost control near term; target SG&A ~37–38% for remaining quarters; cash preservation reiterated .Reining in spend to match revenue.

Management Commentary

  • “We must get back to fundamentals and move with greater speed… improve our go-to-market effectiveness, simplify how we operate, refocus on innovation for more product-driven growth, sharpen our spend, and reinvigorate our culture with resilience and an owner’s mindset.” — Interim CEO Brian Grass .
  • “Tariff-related impacts [were] approximately 8 percentage points of the 10.8% consolidated revenue decline… We believe we can reduce our fiscal 2026 net tariff impact on operating income to less than $15 million based on tariffs currently in place.” — Brian Grass .
  • “We are implementing… average price increase across our portfolio in the range of 7% to 10%… very selective by brand… conservative elasticity assumptions.” — Management Q&A .
  • “We now expect to reduce our cost of goods sold exposed to China tariffs to less than 25% by the end of fiscal 2026… accelerating supplier diversification and dual sourcing.” — Management .

Q&A Highlights

  • Pricing elasticity/plans: Company has retailer-aligned, item-level increases averaging 7–10% and is using conservative elasticity assumptions given the macro; price moves are targeted by brand and country of origin .
  • Margin cadence: Gross margin expected to improve YoY in Q2 vs last year; SG&A ratio to step down from ~45% in Q1 toward ~40–41% near term, normalizing to ~37–38% in the back half as cost actions take hold .
  • Full-year framing: Existing FY consensus deemed “not unreasonable,” but cadence heavily 2H-weighted due to timing of price increases and tariff mitigation; caution against extrapolating Q1+Q2 to full year .
  • Distribution and sell-through: Net distribution gains cited (e.g., Walmart blood pressure monitors; Hydro Flask/Osprey in EMEA/APAC); POS unit metrics improving but retailers still cautious on orders into Q2 .
  • Cash/Inventory: Positive free cash flow expected for FY; Q2-end inventory guided to $510–$520M with ~$35M of tariff costs capitalized; net leverage just over 3.1x at Q1 end .

Estimates Context

  • Q1 FY26 misses vs S&P Global consensus: revenue $371.7M vs $394.9M estimate*; adjusted/Primary EPS $0.41 vs $0.84 estimate* .
  • Q2 FY26 setup: Company’s adjusted EPS guidance ($0.45–$0.60) brackets the S&P Global Primary EPS consensus of ~$0.53*, and revenue guidance ($408–$432M) brackets the ~$417.7M revenue consensus* .
    Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Expect near-term estimate pressure: Q1 shortfall, Q2 guidance implying continued YoY declines, and tariff/mix headwinds argue for cautious near-term revisions despite 2H mitigation plans .
  • Watch pricing execution and elasticity: 7–10% price increases are critical to restoring margins; management is conservative on elasticity, but trade-down and promotions could temper recovery .
  • Supply-chain pivot is a 2H/FY27 story: Dual sourcing and diversification should meaningfully reduce tariff exposure by late FY26/FY27, but FY26 carries transition costs and operational friction .
  • Free cash flow discipline is a support: Stronger FCF and inventory management (despite higher tariff-capitalized inventory) help de-risk leverage and fund mitigation .
  • Brand health shows resilience in value tiers: POS unit gains, Osprey strength, and Olive & June momentum indicate pockets of growth even as consumers trade down .
  • Risk skew: Macro/tariffs/China exposure and retailer caution remain key overhangs; upside hinges on price realization, POS translating to replenishment, and moderation in tariff/currency pressures .

Appendix: Additional Detail and Explanations

Why the quarter missed

  • Revenue shortfall vs consensus stemmed from direct-import order pauses amid higher tariffs, Q4 pull-forward, and China’s shift to localized fulfillment and subsidized domestic competition; consumer trade-down increased promotions and hurt mix .
  • Margin compression reflected elevated retail trade spending, unfavorable brand mix, and higher outbound freight, partly offset by Olive & June and lower commodities (Pegasus savings) .

Forward look and “why” behind guidance

  • Q2 outlook embeds ongoing tariff disruption, persistent trade-down, promotional intensity, and unfavorable operating leverage; partial offsets include supplier cost actions and Pegasus savings .
  • Management highlighted price increases taking effect in 2H, normalization of retailer inventories/direct-import patterns, and distribution gains as the bridge to a stronger back half .