Sign in
HO

HELEN OF TROY LTD (HELE)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY26 was mixed: revenue and adjusted EPS landed at the better end of guidance and beat consensus, but tariffs and non‑cash impairments drove GAAP losses and margin compression. Revenue was $431.8M vs $417.7M consensus (+3.4%), adj. EPS $0.59 vs $0.53 consensus; GAAP diluted EPS was a loss of $13.44 due to $326M impairments . Q2 consensus: Revenue $417.7M*, EPS $0.53*.
  • Management initiated FY26 guidance (first time this year): net sales $1.739–$1.780B, GAAP diluted loss/share ($29.90)–($29.40), adj. EPS $3.75–$4.25; Q3 net sales $491–$512M and adj. EPS $1.55–$1.80 .
  • Tariffs remain the dominant headwind (~200 bps gross margin drag), with price increases largely implemented by late September; FY26 net tariff impact on operating income now expected to be < $20M (prior < $15M) and COGS exposure to China revised to 25–30% by year‑end (prior < 25%) .
  • Strategic positives: Olive & June outperformed ($33.4M Q2 contribution), Osprey strength, DTC +15% YTD; negatives: insulated beverageware softness, China channel shifts, and potential covenant flexibility needs (leverage 3.5x) .
  • Stock catalysts: consensus beat on revenue/adj. EPS; initiation of FY guidance; tariff mitigation/pricing progress vs sustained tariff/macro risk and prospective credit agreement amendment .

Consensus estimates marked with * were retrieved from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • Delivered at/above the high end of outlook ranges; adj. EPS $0.59, revenue $431.8M; DTC revenue +15% YTD; Olive & June “continues to exceed expectations” with $33.4M sales .
    • Outdoor/brand momentum: Osprey led technical and travel packs; OXO distribution gains; Hydro Flask product pipeline (Micro Hydro, travel formats) and a new Hydro Flask × Arbor Snowboards collaboration launched post‑quarter .
    • New CEO’s consumer‑centric playbook: “Moving forward, the consumer will be at the center of everything we do… engineer a great comeback story” (CEO Scott Uzzell) . “Execution is a job of management… execute fewer, more impactful initiatives with excellence” .

  • What Went Wrong

    • Tariffs compressed profitability: ~200 bps gross margin drag; higher retail trade/promo and outbound freight; consolidated gross margin fell to 44.2% (–140 bps YoY); consolidated adj. op margin 6.2% (–360 bps YoY) .
    • Category/geo headwinds: insulated beverageware weakness, retailer inventory caution; China shift to localized fulfillment and subsidized domestic competitors pressured thermometry and beauty .
    • Balance sheet pressure: inventory up to $528.9M; total debt $893.2M; net leverage 3.54x; management may seek a limited covenant relief “holiday” (supportive lender discussions) .

Financial Results

Headline metrics vs prior quarter, prior year, and estimates

MetricQ4 FY25 (oldest)Q1 FY26Q2 FY26 ActualQ2 FY26 Consensus*
Revenue ($M)$485.9 $371.7 $431.8 $417.7*
Gross Margin %48.6% 47.1% 44.2% —
Operating Margin % (GAAP)0.4% (109.5)% (73.1)% —
Adjusted Operating Margin %15.4% 4.3% 6.2% —
GAAP Diluted EPS ($)$2.22 ($19.65) ($13.44) —
Adjusted Diluted EPS ($)$2.33 $0.41 $0.59 $0.53*
Adjusted EBITDA Margin %17.4% 6.9% 8.4% —
  • Beat/miss vs consensus: Revenue +$14.1M; EPS +$0.06 (both beats) . Q2 consensus values from S&P Global*.

Segment breakdown (sales and adjusted operating margin)

SegmentQ4 FY25 Sales ($M)Q4 FY25 Adj. Op Margin %Q1 FY26 Sales ($M)Q1 FY26 Adj. Op Margin %Q2 FY26 Sales ($M)Q2 FY26 Adj. Op Margin %
Home & Outdoor$219.8 17.9% $178.0 5.0% $208.7 9.6%
Beauty & Wellness$266.1 13.4% $193.7 3.7% $223.1 3.1%

KPIs and balance sheet

KPIQ4 FY25Q1 FY26Q2 FY26
Domestic Revenue ($M)$372.3 $278.0 $330.5
International Revenue ($M)$113.6 $93.7 $101.3
Inventory ($M)$452.6 $484.1 $528.9
Total Debt ($M)$916.9 $871.0 $893.2
Net Leverage Ratio (x)2.96 3.13 3.54
Cash from Operations ($M)$35.0 (Q4) $58.3 (Q1) ($10.5) (Q2)
Free Cash Flow ($M)$83.1 (FY25) $45.0 (Q1) $23.0 (H1 FY26)

Key drivers and adjustments

  • Non‑cash impairments of $326.4M in Q2 (after‑tax $294.0M; –$12.77/share) drove GAAP loss; adjusted results exclude impairments, amortization, share‑based comp, and restructuring .
  • Gross margin down 140 bps YoY to 44.2%, primarily from higher tariffs (~200 bps drag), plus higher promo; partially offset by Olive & June mix, lower commodity/product costs (Project Pegasus), and lower obsolescence .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Net SalesFY26Not provided $1.739B–$1.780B Initiated
GAAP Diluted EPSFY26Not provided ($29.90)–($29.40) Initiated
Adjusted Diluted EPSFY26Not provided $3.75–$4.25 Initiated
Net SalesQ3 FY26Not provided $491M–$512M Initiated
GAAP Diluted EPSQ3 FY26Not provided $1.85–$2.05 Initiated
Adjusted Diluted EPSQ3 FY26Not provided $1.55–$1.80 Initiated
Adjusted SG&A RatioH2 FY26—34%–36% New color
Interest ExpenseFY26—$56M–$57M New color
Adjusted Effective Tax RateQ3 FY26—22%–25% New color
Adjusted Effective Tax RateFY26—15%–16% New color
Diluted SharesFY26—23.0M New color
Net Tariff Impact on Op IncFY26< $15M < $20M Raised
COGS Exposure to ChinaEnd FY26< 25% 25%–30% Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY25, Q1 FY26)Current Period (Q2 FY26)Trend
Tariffs/macroFY26 outlook withheld in Q4 amid tariff uncertainty; mitigation targeted to offset 70–80% . Q1: ~8 pts of the 10.8% revenue decline tied to tariffs; net tariff impact to op income “< $15M”; COGS exposure <25% by YE FY26 .Gross margin –200 bps from tariffs; pricing largely implemented by end‑Sept; net tariff impact now “< $20M”; COGS exposure 25–30% by YE FY26 .Persistent headwind; mitigation progressing but impact higher
Supply chain diversificationAccelerating production diversification; inventory freezes/pulls (Q4) .Dual‑sourcing in progress; capex tied to supplier transitions; benefits late FY26/early FY27 .Improving slowly
Product performanceQ4: Olive & June accretive; Osprey/Wellness strength; beverageware softness . Q1: Osprey strong; beverageware/home soft .Osprey strong; OXO gains; Olive & June beat; beverageware softness persists; new Revlon One‑Step Multi‑Styler launch .Mixed; pockets of strength
China/thermometryChina market shift to localized fulfillment, subsidized domestic players; weak illness season (Q1) .Continuing headwinds: thermometry and beauty direct imports impacted; APAC replenishment slower .Ongoing headwind
DTC/digital—DTC +15% YTD on platform and CX improvements .Improving
Leverage/covenantsFY25 net leverage 2.96x . Q1: 3.13x .3.54x; likely to seek covenant relief “holiday”; lender discussions supportive .Deteriorated, actions planned
AI/technology—Not a focus topic.—

Management Commentary

  • Strategy and tone: “We will position our corporate structure to place the consumer at the center of everything we do… We will take thoughtful and swift actions to simplify our business and drive transparency and accountability” — CEO Scott Uzzell . “Execution is a job of management… we will be laser focused on executing fewer, more impactful initiatives with excellence” .
  • Operational progress: “Net sales and adjusted EPS at or above the high end of our outlook ranges… DTC revenue growth of 15% year over year” — CFO Brian Grass . “Distribution operations are now hitting service level targets and nearing peak efficiency levels” .
  • Tariff/pricing update: “Majority of our planned price increases [to retailers] implemented as of the end of September… holding shipments in some instances as we work toward consistent adoption” . “We now anticipate that we can lower our COGS subject to China tariff to between 25% and 30% by the end of fiscal 2026” — Assistant CFO Tracy Schuerman .

Q&A Highlights

  • Portfolio/divestitures: New CEO is evaluating but too early for decisions; all brands “have promise” .
  • Estimates base and FY27: Management sees transitory FY26 headwinds (tariffs, revenue/expense) that should dissipate into FY27, forming a base for growth; no FY27 guidance yet .
  • Leverage/covenant amendment: Target leverage “closer to 2x”; lenders supportive of a limited covenant relief “holiday”; expect fees but no major interest cost changes .
  • Category dynamics: Hydration discounting concentrated in tumblers; pivoting back to bottles where Hydro Flask has strength; adjacency expansion in pipeline .
  • Pricing/elasticity: Price increases broadly accepted; shipments held to ensure consistent adoption; conservative elasticity embedded in outlook; profitability improves despite potential unit loss .
  • Clarification: Olive & June full‑year incremental revenue contribution corrected to $109–$112M (not $130–$137M) during Q&A; release and deck are correct .

Estimates Context

  • Q2 FY26 vs consensus: Revenue $431.8M vs $417.7M*; Adjusted EPS $0.59 vs $0.53* — both beats .
  • Q3 FY26 setup: Guidance revenue $491–$512M vs consensus $502.4M*; adj. EPS $1.55–$1.80 vs consensus $1.69* — midpoints roughly in line, with elasticity and pricing adoption timing key to H2 margins . Consensus estimates marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Quality of beat: Modest top‑line and adj. EPS beat on tighter execution and Olive & June/Osprey strength, despite tariff drag — constructive for near‑term sentiment .
  • FY guidance reinstatement reduces uncertainty; Q3 guide brackets consensus; watch H2 pricing realization vs elasticity and promotional intensity .
  • Tariffs remain main risk: net impact raised to < $20M and COGS exposure revised higher (25–30%); mitigation levers (pricing, supplier cost downs, diversification) progressing but timing matters .
  • Balance sheet watch: leverage 3.54x and likely covenant amendment — lender tone supportive; balance‑sheet prudence and inventory reduction trajectory are pivotal into FY27 .
  • Category mix: Beverageware softness and China headwinds offset by Osprey/Olive & June; pipeline (Revlon Multi‑Styler, Hydro Flask collaborations) supports product‑led recovery narrative .
  • Execution pivot: New CEO’s consumer/innovation focus and simplification mandate should tighten go‑to‑market; near‑term operating discipline (SG&A 34–36% H2) underpins margin stabilization .
  • Trading implications: Favor tactical long bias on execution/guidance catalyst, but size positions with tariff/covenant risks and category elasticity in mind; monitor Q3 adoption of price increases and DTC momentum .