Executive Summary / Key Takeaways

• Helen of Troy Limited is undergoing a significant strategic reset, focusing on revitalizing its diversified portfolio of consumer brands and enhancing operational efficiency amidst a challenging macroeconomic and trade environment.

• The company reported substantial pre-tax asset impairment charges of $740.8 million for the first six months of fiscal 2026, primarily driven by a sustained decline in its stock price and revised internal forecasts reflecting tariff impacts and consumer caution.
  

• New CEO G. Scott Uzzell is spearheading a "comeback story" by prioritizing consumer-centric innovation, streamlining organizational complexity, strengthening the portfolio for predictable growth, and improving asset efficiency, with a focus on debt reduction and accretive acquisitions.

• Fiscal 2026 guidance anticipates net sales between $1.74 billion and $1.78 billion and adjusted EPS in the range of $3.75 to $4.25, reflecting ongoing tariff impacts, cautious consumer spending, and the integration of the Olive & June acquisition.
• The company is actively mitigating tariff risks through supply chain diversification, strategic pricing, and cost reductions, aiming to offset 70% to 80% of the estimated fiscal 2026 tariff impact, while managing a net leverage ratio of 3.5x as of August 31, 2025.

A Diversified Portfolio Forging Resilience

Helen of Troy Limited, a global consumer products company, has built a robust portfolio of brands including OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith, Revlon, and the recently acquired Olive & June. The company's strategy is deeply rooted in consumer obsession, expanding market presence, leveraging its operational scale, pursuing opportunistic mergers and acquisitions, and harnessing data analytics to drive informed decisions. This foundational approach positions Helen of Troy as a mid-tier player in the consumer goods industry, competing across diverse segments such as home organization, health devices, beauty tools, and outdoor products.

In the competitive landscape, Helen of Troy differentiates itself through a focus on niche innovation and brand loyalty. Its brands, such as OXO, are recognized for intuitive designs and user-friendly features, which can foster stronger customer satisfaction and loyalty compared to more standardized offerings from larger rivals like Newell Brands (NWL). Similarly, in health and beauty, Helen of Troy's specialized products, including thermometers and beauty tools, prioritize accessibility and functionality, offering value in price-sensitive segments. Osprey, a brand within the Home Outdoor segment, holds a leading position in the U.S. technical pack market, with a market share more than three times larger than its nearest competitor. PUR, in water filtration, is the number one selling lead-reducing filter brand and can save consumers up to $75 per month compared to bottled water. Revlon hair tools also offer a compelling value proposition, delivering salon-quality styles at a fraction of the cost of other high-end brands.

Despite these strengths, Helen of Troy faces formidable competition from larger, more diversified consumer goods giants. Newell Brands, with its vast scale, often achieves greater efficiency in supply chain operations and broader market reach. Procter & Gamble (PG) and Colgate-Palmolive (CL) exhibit superior profitability and efficiency, driven by extensive global brand portfolios, robust marketing, and economies of scale. Helen of Troy's agility in product innovation allows it to respond quickly to market trends, potentially leading to faster innovation cycles than some larger competitors. However, it may lag in overall financial scale and R&D investment depth compared to these industry behemoths. The company's reliance on retail channels also presents a vulnerability, as shifts in customer dynamics can impact revenue stability and margins, potentially making it harder to compete on cost against more efficient operations.

Technological Edge and Innovation Driving Future Growth

Helen of Troy's strategic narrative is significantly bolstered by its commitment to technological differentiation and innovation, which serves as a core competitive moat. The company leverages a centralized cloud-based e-commerce platform that enables rapid deployment of new capabilities across all its brands and facilitates easier integration of new acquisitions. This platform enhances the customer experience by strengthening digital presentation, improving product browsing, and streamlining the checkout process, order delivery, and post-order customer care. This digital infrastructure is crucial for maintaining relevance in an increasingly online-driven retail landscape.

Operational efficiency is further enhanced by the automation system at its Tennessee distribution facility. After initial startup issues in Q1 fiscal 2025, these challenges were remediated by Q3 fiscal 2025, with the facility achieving targeted efficiency levels by year-end. This system is expected to provide significant efficiency gains and scale for years to come, optimizing logistics and reducing distribution costs. The successful integration of Osprey into the company's ERP system and distribution network in the U.S. and Europe during Q3 fiscal 2025 further underscores Helen of Troy's operational discipline and ability to leverage technology for seamless business processes.

Product innovation remains a cornerstone of Helen of Troy's strategy, with several brands showcasing differentiated technologies:

• Drybar All-Inclusive Multi-Styler Tool: This innovative 8-in-1 tool provides more functionality and styling options than competitors, combining heated airflow and ceramic plates to take hair from wet to dry to styled. Its unique feature allows for second-day heated-only styling without air, simplifying routines and delivering salon-quality results at a more affordable price point.
• Curlsmith Dufryzion Curl Reviving Wand: Designed for enhanced styling, this tool refreshes, enhances, and defines curls with less heat. It features interchangeable barrels to match varying consumer curl patterns, demonstrating a tailored approach to specific consumer needs.
• OXO Brew Rapid Brewer Coffee Maker: Building on the strength of OXO's coffee line, this portable brewer offers great-tasting hot coffee or cold brew concentrate in less than five minutes. Its speed and versatility cater to evolving consumer preferences for convenience and quality.
• Hydro Flask Micro Hydro: This 6.7-ounce insulated bottle is proving highly fashionable and versatile, suitable for everyday carry across wellness, outdoor, and travel occasions. Its early adoption and strong demand highlight the brand's ability to tap into both functional and aesthetic consumer trends.
• PUR Water Filtration Systems: PUR's lead-reducing filter technology is a critical differentiator, offering consumers a cost-effective solution to access cleaner drinking water. The brand actively educates consumers on water quality, reinforcing its position as a trusted solution.

These technological advancements and product innovations contribute directly to Helen of Troy's competitive moat by enhancing customer loyalty, enabling premium pricing in certain segments, and driving market share gains. The strategic intent behind R&D is to solve real consumer pain points and anticipate market shifts, ensuring the company's offerings remain relevant and superior.

A History of Adaptation and Strategic Initiatives

Helen of Troy's journey has been marked by continuous adaptation. From its origins in Texas in 1968 to its reorganization in Bermuda in 1994, the company has consistently evolved its business model. Recent history highlights several key initiatives that underscore this adaptive capacity. In fiscal 2023, the company launched "Project Pegasus," a global restructuring plan aimed at expanding operating margins through efficiency improvements and cost reductions. This initiative, completed in Q4 fiscal 2025, is expected to yield annualized pre-tax operating profit improvements of $75 million to $85 million by the end of fiscal 2027, with approximately 60% from reduced cost of goods sold and 40% from lower SGA. These savings provide crucial "fuel" for reinvestment in brands and business growth.

The company has also demonstrated resilience in navigating external challenges. Discussions with the U.S. Environmental Protection Agency (EPA) in fiscal 2022 and 2023 regarding packaging claims on certain products led to voluntary stop shipments and subsequent repackaging, which were successfully completed. Similarly, the patent infringement litigation initiated by Brita LP concerning PUR water filtration systems saw the U.S. International Trade Commission (ITC) rule in Helen of Troy's favor in September 2023, though an appeal is ongoing. These instances reflect the company's ability to address regulatory and legal hurdles while maintaining operational continuity.

A significant strategic move in December 2024 was the acquisition of Olive & June, an innovative, omni-channel nail care brand. This acquisition is a "Better Together" M&A, complementing the existing beauty portfolio by broadening beyond hair care and adding a high-growth, high-margin consumables business that is immediately accretive to revenue growth rate, gross profit margin (between 60% and 70%), adjusted EBITDA margin (north of 20% before synergies), and adjusted EPS. This move aligns with the company's long-term strategic initiative to refine and shape its portfolio for profitable growth.

Recent Financial Performance and Operational Details

The first half of fiscal 2026 presented a complex financial picture for Helen of Troy, heavily influenced by evolving U.S. tariff policies and a challenging macroeconomic environment. For the three months ended August 31, 2025, consolidated net sales revenue decreased by 8.9% to $431.8 million, compared to $474.2 million in the prior year period. The six months ended August 31, 2025, saw a 9.8% decline in consolidated net sales revenue to $803.4 million, down from $891.1 million. These declines were primarily driven by a decrease in "Organic business" sales, impacted by reduced replenishment and direct import orders from retailers, softer consumer demand, increased competition, and evolving dynamics in the China market, including a shift towards localized fulfillment models. The Olive & June acquisition partially offset these declines, contributing $33.4 million and $60.3 million to net sales revenue growth for the three and six months ended August 31, 2025, respectively.

Profitability was significantly impacted by substantial non-cash asset impairment charges. For the three months ended August 31, 2025, Helen of Troy reported a consolidated operating loss of $315.7 million, compared to an operating income of $34.9 million in the prior year. This loss included pre-tax asset impairment charges of $326.4 million. For the six months ended August 31, 2025, the consolidated operating loss was $722.8 million, including pre-tax asset impairment charges of $740.8 million. These impairments were triggered by a sustained decline in the company's stock price and downward revisions to internal forecasts, affecting brands like Hydro Flask, Osprey, Health & Wellness, Drybar, Curlsmith, and Revlon. Notably, the goodwill carrying value for the Hydro Flask reporting unit was reduced to zero.

Gross profit margin decreased by 1.4 percentage points to 44.2% for the three months ended August 31, 2025, primarily due to higher retail trade and promotional expenses and the unfavorable impact of increased tariffs on the cost of goods sold. Selling, General and Administrative (SGA) expense ratio rose by 3.1 percentage points to 41%, driven by increased share-based compensation, higher outbound freight costs, the Olive & June acquisition, and unfavorable operating leverage from decreased net sales. The company's income tax benefit for the three months ended August 31, 2025, was 6.4% of loss before income tax, a significant decrease from the 22% income tax expense in the prior year, mainly due to the tax effects of the impairment charges.

Liquidity and capital resources remain a key focus. Helen of Troy generated $47.9 million in cash from operations during the first six months of fiscal 2026. As of August 31, 2025, the outstanding principal balance under the Credit Agreement was $898.6 million, with $578.6 million available for revolving loans. The net leverage ratio stood at 3.5 times at the end of the second quarter of fiscal 2026, an increase from 3.1 times at the end of fiscal 2025, attributed to higher net debt and lower trailing twelve-month EBITDA. The company has hedged an estimated average of 81% of its outstanding debt at a fixed SOFR of 3.7% for fiscal 2026, providing certainty on interest costs.

Strategic Outlook and Guidance for Fiscal 2026

Helen of Troy's outlook for fiscal 2026 is framed by a "renewal" process under new CEO G. Scott Uzzell, who joined effective September 1, 2025. Uzzell's vision emphasizes engineering a "great comeback story" by reversing recent underperformance and restoring consistent growth through world-class innovation. His initial strategic thoughts include reenergizing the company, its brands, and its people, placing the consumer at the center of the corporate structure, strengthening the portfolio for predictable growth, and improving asset efficiency while maintaining a shareholder-friendly policy.

For the full fiscal year 2026, Helen of Troy expects net sales between $1.74 billion and $1.78 billion, implying a year-over-year decline of 8.8% to 6.7%. Consolidated adjusted EPS is projected in the range of $3.75 to $4.25, representing a decline of 47.7% to 40.7% year-over-year. The Home Outdoor segment is anticipated to see a net sales decline of 11.8% to 9.7%, while the Beauty Wellness segment is expected to decline 6.2% to 4%, including a total net sales contribution of $130 million to $137 million from Olive & June.

For the third quarter of fiscal 2026, net sales are expected to be between $491 million and $512 million, implying a decline of 7.5% to 3.5%. Consolidated adjusted diluted EPS is projected in the range of $1.55 to $1.80, a decline of 41.9% to 32.6% year-over-year. These projections reflect ongoing challenges such as lower direct import orders, changing dynamics in the China market, and cautious consumer spending.

A critical component of the fiscal 2026 outlook is the company's aggressive tariff mitigation strategy. Helen of Troy expects to offset 70% to 80% of the estimated tariff impact in fiscal 2026 through a combination of supply chain diversification, strategic price increases, and cost reduction measures. The company aims to reduce its ongoing purchasing exposure to China to between 25% and 30% of consolidated cost of goods sold by the end of fiscal 2026, with over 40% of U.S.-bound purchases sourced from China available from other regions. Management believes that while tariff headwinds will persist, their impact will be less significant in the second half of the year, supported by pricing actions largely effective by September. Free cash flow is expected to improve sequentially over the balance of fiscal 2026, and the company will proactively engage with its lenders to secure additional flexibility for debt covenants.

Risks and Challenges

Helen of Troy faces several significant risks and challenges that could impact its investment thesis. The substantial goodwill and intangible asset impairment charges recognized in fiscal 2026 highlight the sensitivity of the company's valuations to market conditions and internal forecasts. An inability to achieve expected revenue and profitability in line with internal projections could lead to further impairment charges.

The evolving U.S. tariff policies represent a major source of uncertainty and disruption. The daily changes in global trade policy, including the potential for further or higher tariffs, create significant operational and financial risks. While the company is actively diversifying its supply chain, these efforts come with higher operating and interest expenses in fiscal 2026, and the full benefits of diversification may not be realized until late fiscal 2026 or early fiscal 2027.

Macroeconomic conditions, characterized by high inflation and interest rates, continue to negatively impact consumer disposable income and discretionary spending. This has led to reduced replenishment orders from retailers and a "consumer trading down" phenomenon, resulting in average price compression in the U.S. business. The variability of the cough/cold/flu season also poses a risk, as historically low illness rates have adversely impacted sales in the Beauty Wellness segment.

Furthermore, the company's debt covenants require careful management. A continuation of negative sales trends and unfavorable macroeconomic conditions may necessitate an amendment to the Credit Agreement, and an inability to obtain such an amendment could result in an event of default. Litigation, though currently favorable in the Brita LP case, remains inherently unpredictable, with potential adverse impacts on financial position and results of operations.

Conclusion

Helen of Troy Limited is at a pivotal juncture, embarking on a strategic reset designed to re-establish consistent growth and enhance shareholder value. Under new leadership, the company is confronting significant macroeconomic and trade-related headwinds with a clear-eyed strategy focused on consumer-centric innovation, operational streamlining, and robust tariff mitigation. While recent financial performance has been impacted by substantial impairment charges and a challenging operating environment, the underlying strengths of its diversified brand portfolio, coupled with strategic investments in technology and supply chain diversification, provide a credible path forward.

The successful execution of Project Pegasus, the accretive Olive & June acquisition, and the ongoing efforts to optimize its distribution and e-commerce platforms underscore Helen of Troy's commitment to building a more resilient and agile enterprise. Investors should closely monitor the effectiveness of tariff mitigation strategies, the trajectory of consumer spending, and the company's ability to deliver on its fiscal 2026 guidance, which anticipates a stabilization and eventual rebound in performance. The emphasis on product-driven growth, asset efficiency, and a disciplined approach to capital allocation positions Helen of Troy to navigate current complexities and unlock the full potential of its brands for long-term success.