Helen of Troy (HELE) Q2 2027 Earnings Call Transcript

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DATE

Thursday, Oct. 8, 2026

CALL PARTICIPANTS

• Senior Director, IR and Corporate Communications - Anne Rakunas
• CEO - Scott Uzzell
• CFO - Brian Grass

TAKEAWAYS

• Consolidated Net Sales -- $440.9 million, growing 2.1% year over year driven by growth in technical and lifestyle packs.
• Adjusted Diluted EPS -- $0.79, an increase from $0.59 in the prior year period reflecting higher operating income and reduced interest expense.
• Home & Outdoor Net Sales -- $227.9 million, representing 9.2% growth with increased demand across all three segment brands.
• Beauty & Wellness Net Sales -- $213.0 million, a decline of 4.5% due to softer demand in hair appliances and prestige hair care products.
• Gross Profit Margin -- 52.2%, an increase of 800 basis points primarily reflecting $26.9 million in gross pretax tariff refunds.
• International Sales -- $105.1 million, growing 3.7% led by Hydro Flask, OXO, and Osprey brand performance.
• Total Debt -- $672.6 million, a reduction of $221 million compared to the second quarter of the prior year.
• Net Leverage Ratio -- 3.0x, decreasing from 3.5x at the end of the first quarter of fiscal 2027.
• Inventory -- $480.3 million, representing a $48.6 million decrease from the same period last year reflecting targeted liquidation of slower-moving stock.
• Free Cash Flow -- $38.3 million for the first half of the fiscal year, an increase from $23.0 million in the prior year period.
• Full-Year Net Sales Guidance -- $1.768 billion to $1.822 billion, narrowed from the previous range of $1.759 billion to $1.831 billion.
• Full-Year Adjusted Diluted EPS Guidance -- $3.60 to $4.15, including an after-tax net tariff benefit of $0.30 to $0.45.
• Full-Year Gross Tariff Refunds -- $80.5 million, with plans to reinvest $66.5 million to $70.5 million back into the business.
• Capital Expenditures Guidance -- $39 million to $43 million, raised from the previous range of $30 million to $34 million to focus on product innovation and supply chain diversification.
• Active Inventory Composition -- 12 percentage point improvement target for the end of the fiscal year, compared to 7 percentage points achieved in the first half.
• Fiscal 2027 Net Leverage Target -- 2.7x or lower by the end of the year, ahead of previous debt paydown expectations.
• Q3 Fiscal 2027 Net Sales Guidance -- $478.3 million to $504.5 million, reflecting seasonal expectations.
• Q3 Fiscal 2027 Adjusted Diluted EPS Guidance -- $2.05 to $2.40, which includes a net after-tax tariff refund benefit of $0.66 to $0.77.
• Accounts Receivable Turnover -- 67.6 days, an improvement from 72.2 days in the same period last year.
• Full-Year Weighted Average Diluted Shares -- 24.2 million, an increase from the previous estimate of 23.8 million due to a higher stock price.
• SG&A Ratio -- 46.4%, an increase of 540 basis points reflecting higher personnel expenses and planned reinvestment of tariff refunds.
• Interest Expense -- $10.9 million, a decrease of $3.3 million compared to the prior year period due to lower average borrowings.

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RISKS

• Grass stated, "We are also experiencing product cost inflation due to escalating gas and diesel prices, commodities, currency and supply scarcity," noting multiple external pressures on the company cost structure.
• Grass stated, "The Company's outlook reflects management's view of continued inflationary pressures, softness in discretionary categories, conservative retailer inventory management and an increasingly competitive and promotional landscape," identifying challenges for the second half of the fiscal year.
• Grass warned that the revised full-year outlook reflects potential supply disruption and product cost inflation largely driven by the conflict in the Middle East.

SUMMARY

Helen of Troy Limited (NASDAQ:HELE) reported second quarter results characterized by significant margin expansion and debt reduction as management executes a multiyear transformation road map. Management reported that the company achieved its net sales targets while exceeding internal expectations for adjusted diluted EPS and adjusted EBITDA. The company utilized $26.9 million in gross pretax tariff refunds during the quarter to fund strategic reinvestments in brand building, packaging redesign, and organizational structure. Financial health improved through a $221 million year-over-year reduction in total debt and a decrease in inventory levels. Management raised the full-year guidance for adjusted diluted EPS and free cash flow while narrowing the revenue outlook to reflect current consumer demand trends and a promotional retail environment.

• CEO Uzzell noted the implementation of a new general manager structure, stating, "We're moving the strategy and decision-making closer to the consumer, the brand and the marketplace."
• Management reported that OXO expanded into the pet category during the quarter with a full line launch that officially commenced in Aug. 2026.
• PUR achieved an industry milestone as the only water filter certified to reduce lead, microplastics, and total PFAS in both pitcher and dispenser formats.
• The company improved the health of its inventory by increasing the percentage of active inventory by 7 percentage points during the first half of the fiscal year.
• Osprey expanded its presence in the travel market with the launch of the Ozone Hardside ultra-lightweight luggage collection.
• Management appointed a new leader for the Beauty & Wellness segment to strengthen accountability and address brands currently under performance pressure.
• The company expects to recognize the remaining $51.8 million in gross tariff refunds during the third quarter of fiscal 2027.

INDUSTRY GLOSSARY

• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for non-cash or non-recurring items such as asset impairments and restructuring charges.
• GAAP: Generally Accepted Accounting Principles, the standard framework for financial accounting used in the United States.
• IEEPA: The International Emergency Economic Powers Act, a federal law authorizing the regulation of international commerce during a declared national emergency.
• PFAS: Per- and polyfluoroalkyl substances, synthetic chemicals used in various consumer products that are subject to increasing environmental regulation.
• POS: Point of sale, referring to data that tracks retail transactions at the time and place of purchase.

Full Conference Call Transcript

Operator: Greetings, and welcome to Helen of Troy Limited Second Quarter 2027 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anne Rakunas, Senior Director, IR and Corporate Communications. You may begin.

Anne Rakunas: Thank you, operator. Good morning, everyone. Welcome to Helen of Troy's Second Quarter Fiscal '27 Earnings Conference Call. The agenda for the call this morning is as follows: I will begin with a brief description of forward-looking statements. Scott Uzzell, our CEO, will then share his thoughts on progress in the quarter; and Brian Grass, our CFO, will provide an overview of our financial performance in the second quarter and our revised expectations for the full year fiscal '27. Following our prepared remarks, we'll open up the call for Q&A. This conference call may contain certain forward-looking statements that are based on management's current expectations with respect to future events or financial performance.

Generally, the words anticipates, believes, expects and other similar words are words identifying forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from the actual results. This conference call may also include information that may be considered non-GAAP financial information. These non-GAAP measures are not an alternative to GAAP financial information and may be calculated differently than the non-GAAP financial information disclosed by other parties. The company cautions listeners not to place undue reliance on forward-looking statements or non-GAAP information.

Before I turn the call over to Scott, I would like to inform everyone that a copy of today's earnings release can be found on the Investor Relations section of our website by scrolling to the bottom of the home page. The earnings release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP-based measures. We've also posted an investor presentation to our website. And I will now turn the call over to Scott.

George Uzzell: Thank you, Anne. Good morning, everyone. Thank you for joining us. When we spoke in July, I shared that we were focused on strengthening the critical fundamentals of our company. We continue to make progress to become a better Helen of Troy on the road becoming a bigger Helen of Troy. Our Q2 results reflect continued execution against the priorities outlined in our multiyear road map. Our Q2 sales were in line with our outlook and our adjusted diluted EPS came in ahead. But as I stated over the last several quarters, our recovery will not be linear.

In fiscal '27, we are squarely focused on demonstrating markers of progress to set us up for sustained and repeat strong performance over many years to come. It's about brand growth, driving sales growth through disciplined investment in brands and categories where we believe we have a clear path to win. It's about marketplace execution, realizing the value of our brands through premium positioning and strong market execution to continue strengthening our gross margin. And it's about balance sheet productivity, paying down debt further. We're pursuing these priorities through 3 foundational pillars paired with continued balance sheet discipline. We continue to execute against all these areas.

We are 2 quarters into our plan to making a better Helen of Troy, and we are making progress. The operating environment continues to be dynamic, but I truly believe what we need to do to reach our aspirations in our control, and we are encouraged by what we see across several areas of the business. I want to highlight a few Q2 examples. We grew sales year-over-year across all 3 Home & Outdoor brands. Osprey led growth again this quarter, reflecting strong consumer and category performance, new product introductions, continued improvement in our international distribution network. OXO benefited from targeted actions to improve inventory composition, net distribution gains and new product introductions.

Hydro Flask was aided by targeted actions to improve inventory composition, new product innovation and partial recapture of tariff-related disruption within the corporate channel. Wellness grew, driven primarily by growth in Vicks and Braun, reflecting net distribution gains and lapping tariff-related items and new product introductions. Olive & June produced another solid quarter, reflecting strong consumer demand, higher replenishment orders and new and expanded distribution. In the rest of Beauty, new product innovations are contributing to sales, although some brands continue to experience softer demand. We know we have more work to do on our commercial execution and demand creation to fully capitalize on our opportunities.

International was another bright spot with sales growing 3.7% in the quarter, led by Hydro Flask, OXO and Osprey, reflecting new products, expanded distribution, improving execution in select markets. Our new distributor in Australia is one of our examples of more agile go-to-market approach we discussed last quarter. Importantly, in terms of North American point of sale, Beauty & Wellness showed noticeable improvement in Q2 relative to our longer trends, reflecting continued strength from Olive & June and Braun, along with improving trends across several of our more pressured businesses, including Revlon, Hot Tools, Honeywell and Curlsmith. For the first half of the fiscal year, we generated free cash flow of $38 million.

And as of August, we improved our net leverage ratio to 3.0x, down from 3.5x at the end of Q1, continuing our multi-quarter trend of debt reduction. We also made progress normalizing our channel inventory with aggregate retail inventory coverage for our brands improving compared to a year ago. We continue to address pockets of elevated inventory for certain brands within select channels. That improvement reflects targeted closeout and liquidation efforts to clear slower-moving stock. This is the kind of disciplined execution we mean when we talk about editing and amplifying our highest impact priorities, focusing our resources where we see the greatest opportunity to strengthen our brands and improve our performance.

As I mentioned last quarter, our work continues to be guided by 3 pillars: consumer-first innovation, commercial and operational excellence and people and culture. Under consumer-first innovation, we're becoming more deliberate about our products and platforms we prioritize. Across the portfolio, we're focusing resources on the most differentiated consumer opportunities and supporting those opportunities with the right distribution, inventory and media plans. In Home & Outdoor, OXO expanded its entry into pet category this quarter. After a limited release launch during Prime Day, the full line officially launched across all channels in August. This was supported with fully integrated campaign across media, digital, e-commerce, influencers sampling and experiential events designed to build awareness and connect with pet parents.

Osprey is also expanding further into travel with the launch of the Ozone [ Hardside ]. It's an ultra lightweight 4-wheel luggage collection that brings Osprey's expertise in lightweight, durable design in the largest segment of the travel market. These are great examples of further extending brands in attractive adjacencies with additional products and expanded distribution opportunities. Hydro Flask, Micro Hydro continues to perform well, driven by a wider retail placement and more sizes. The brand recently launched new innovations, including lunch totes, bags and soft coolers and limited editions Daydream bottle and lunch box collection in time for back-to-school.

In Beauty & Wellness, I'm excited about PUR's latest industry milestone this quarter, becoming the only water filter certified to reduce lead, microplastics and total PFAS in both pitcher and dispenser format, addressing 3 contaminants as consumers say concern them most in their drinking water. Olive & June continued to strengthen its cultural relevance with its first exclusive influencer collaboration at Ulta Beauty, partnering with the digital creator Avery Woods to bring fresh, trend-driven offerings to consumers. The brand also celebrated its 10th Allure Best of Beauty Award with its Gel Mani System earning the prestigious honor for the second consecutive year, reinforcing Olive & June's leadership in at-home manis.

Olive & June continues to be a great addition to the Helen of Troy portfolio. Innovation is just the first step. We must sharpen the full commercial process around it. That brings me to the second pillar, commercial and operational excellence. I've shared our intent to be closer to our consumer and move with the speed of the marketplace. We are making this a reality. Last quarter, I introduced our new general manager structure. As we fill these roles, we're moving the strategy and decision-making closer to the consumer, the brand and the marketplace.

We've made progress establishing that structure during the quarter, including putting currently planned leaders in place and clarifying accountability and creating closer alignment around our growth priorities. While this work is still in the early stages, we're seeing benefits from faster decision-maker and greater cross-functional collaboration. Over time, we believe this structure will strengthen our ability to respond to changing market conditions and improve execution across our portfolio. We are already seeing early evidence of this in our Home & Outdoor business, where sales and brand teams are working more closely together, evaluating distribution, customer relationships and capacity earlier in the product development process.

This closer alignment is also accelerating how we share consumer and retailer insights to further improve the development process and respond quicker to promotional programs. We continue to sharpen our pricing, promotion, channel management, digital shelf, retail media and demand planning capabilities, meeting consumers on a modern shopping journey through stronger omnichannel capabilities. We're using current point-of-sale and inventory signals to update our assumptions more quickly. Our incremental investment is more selective with clear expectations of measurable results. This discipline is particularly important in the current environment. I am pleased how our teams are managing through geopolitical cost and supply chain challenges with the impacts we anticipated largely tracking in line with our expectations.

Our third pillar is people and culture. Building a stronger company starts with building a stronger organization. Throughout the year, we continue to simplify how we operate, strengthen ownership and ensure our teams are focused on opportunities with the greatest potential to create value. As a part of that work, we recently appointed a new leader for our Beauty & Wellness business. This is an important step in strengthening our leadership and accountability within this segment as we work to build on improving trends we are seeing and accelerate the actions needed across the brands where we still are working to stabilize performance.

We are also continuing to cascade our culture work throughout the organization, helping create a common set of behaviors, expectations and ways of working that support our strategy and position us for long-term success. I am encouraged by the focus, urgency and collaboration I see across the organization. To bring it all together, Q2 was another step in our journey to become a better Helen of Troy before becoming a bigger Helen of Troy. Continued balance sheet productivity, alongside the progress we've made across the portfolio gives us more flexibility to keep investing in our brands and position our company for sustained long-term growth.

Our priorities for the rest of the year are clear: accelerating the brands showing the strongest consumer momentum, building on improving trends across Beauty & Wellness and taking targeted actions where performance remains under pressure. We know there is more work ahead, but I believe we have the right talent and strategies in place, and we will continue to invest with discipline and execute with focus. With that, I want to turn it over to Brian.

Brian Grass: Thank you, Scott, and good morning, everyone. Our second quarter was another step in the right direction with results at the better end of expectations, reflecting improving business fundamentals and continued progress against our strategic priorities even as we navigate a challenging environment with a lot of moving parts. Sales were in line with our outlook, while adjusted diluted EPS, adjusted EBITDA and free cash flow were ahead of our expectations for the base business, which does not include the net benefit from tariff refunds. On the subject of tariff refunds, our results for the second quarter include gross pretax tariff refunds of approximately $26.9 million.

As stated last quarter, we intend to reinvest a large portion of the gross tariff refund benefit back into the business. After reinvestment, we realized a net pretax benefit of approximately $4 million and an after-tax diluted EPS benefit of approximately $0.12 using our estimated annual adjusted effective tax rate. Our outlook for the full year now includes a gross tariff refund benefit for the full amount of [ IEEPA ] tariffs paid of $80.5 million as well as our intended reinvestment in the range of $66.5 million to $70.5 million, leaving an estimated net pretax benefit in the range of $10 million to $14 million and a net benefit to diluted EPS in the range of $0.30 to $0.45.

In our earnings release and the investor presentation posted to our website this morning, we are providing a net tariff benefit separately from our base business for the second quarter and intend to do so for the remainder of the year. It's important to note that while tariff refunds are providing a fiscal '27 benefit that we are largely reinvesting, we have not been made whole from the cumulative tariff impacts to our business. We've paid tariffs that have not been refunded. We've incurred operating and capital expenditures to diversify our supply base and absorb longer lead times. We've seen certain revenue bases disrupted and not fully recovered, and we've incurred higher interest expense on the cash tariff outlay.

We are also experiencing product cost inflation due to escalating gas and diesel prices, commodities, currency and supply scarcity. Despite the overall disruption in the environment and the unfavorable impact to our revenue and cost structure, we continue to view the refunds as an opportunity to improve the health of our business, and I'm proud of the organization's agility to mobilize thoughtful and disciplined investment in a very short period of time. In the investor presentation, we've included a slide that illustrates the nature of the investments we intend to make for the full fiscal year. Turning to financial highlights for the second quarter. Consolidated sales increased 2.1%, in line with our outlook.

For Home & Outdoor, sales increased 9.2% with growth across all 3 brands. For Beauty & Wellness, sales declined 4.5%, reflecting growth in Wellness and Nail Care, which was more than offset by a decline in the remainder of Beauty. Consolidated gross profit margin increased 800 basis points to 52.2%, reflecting the favorable impact of tariff refunds, net of higher tariff costs, totaling approximately 560 basis points and lower overall retail trade and promotional expense year-over-year. These factors were partially offset by inflationary product cost pressures due to commodities, fuel prices, freight, currency and supply scarcity and less favorable inventory obsolescence year-over-year.

SG&A ratio increased 540 basis points to 46.4%, primarily reflecting our stated intention to reinvest tariff refunds as well as base business investments in the organization, go-to-market structure and brands. The increase also reflects higher packaging costs related to legislation enacted by several U.S. states and foreign geographies to reduce single-use plastics and establish regulatory requirements, which include programs designed to transfer the cost of packaging disposal from municipalities to producers of consumer packaged goods.

While we expect this to be a continuing trend, we intend to use tariff refunds as an opportunity to offset some of our initial disposal costs, but more proactively to take a fresh look at our packaging and design it to be more environmentally friendly and more appealing to our consumers and retailers. Finally, SG&A includes divestiture litigation costs related to the divestiture of our North American personal care business that occurred over 5 years ago. For a further description of these costs, please refer to today's earnings release.

Adjusted EBITDA increased $13.2 million and adjusted EBITDA margin improved by 280 basis points, primarily driven by the favorable impact of tariff refunds, net of higher tariff costs, lower overall retail trade and promotional expense and the impact of favorable operating leverage. partially offset by an increase in personnel expense, higher packaging-related costs, inflationary product cost pressure, increased marketing expense and less favorable inventory obsolescence expense year-over-year. Due to strong cash flow and a cash benefit from net tariff refunds, we are ahead of our debt paydown expectations at this point in the year, contributing to an interest expense decrease of $3.3 million.

Our GAAP effective tax rate was 66.4% and our adjusted effective tax rate was 34.1%, primarily due to an increase in tax jurisdictions with losses, which are excluded from the estimated annual effective tax rate calculation for U.S. GAAP. We expect our tax rate to normalize in the remainder of the year, resulting in an estimated adjusted effective tax rate of 24% to 27% for the full year. Moving on to balance sheet highlights and free cash flow performance. Inventory ended at $480 million, a $49 million decrease from the same period last year. We also improved the health of our inventory, increasing the overall percentage of active inventory by 7 percentage points during the first half of the year.

We reduced our total debt to $673 million at the end of the second quarter, a reduction of $221 million compared to the same period last year and $108 million since the beginning of the fiscal year. Our net leverage ratio decreased to 3.0x compared to 3.5x at the end of the first quarter, well ahead of our original target for this point of the year. Cash flow from operations was $56.5 million and free cash flow was $38 million for the first half of the year. Turning to our full year fiscal '27 outlook.

We are narrowing the range of our net sales expectations slightly to $1.768 billion to $1.822 billion, with Home & Outdoor net sales of $851 million to $876 million and Beauty & Wellness net sales of $917 million to $946 million. We are maintaining our adjusted EBITDA expectations for the base business of $193 million to $196 million and raising our consolidated EBITDA expectations to $203 million to $210 million to reflect estimated net pretax tariff refund benefit in the range of $10 million to $14 million.

We are slightly narrowing our adjusted EPS expectations for the base business to a range of $3.30 to $3.70 and raising our consolidated adjusted EPS expectations to a range of $3.60 to $4.15 to reflect the estimated after-tax net tariff refund benefit in the range of $0.30 to $0.45. And we are raising our free cash flow expectations to a range of $120 million to $140 million, while increasing our planned capital expenditure range by $9 million.

Our revised consolidated full year outlook reflects the estimated unfavorable impact from product cost inflation and potential supply disruption largely driven by the conflict in the Middle East. management's view of continued inflationary pressures, including escalating fuel and diesel prices, higher interest and mortgage rates, softness in discretionary categories, conservative retailer inventory management and an increasingly competitive and promotional landscape, our plans for a higher concentration of foundational and longer-term tariff refund investments for which we do not expect an immediate return and an assumed return on shorter-term investments, offset by pressure on the consumer and overall price elasticity as well as the assumed impact of increased investment from the competitive set and an increase in estimated diluted shares outstanding to 24.2 million for the full year and 24.5 million for the second half of the year, primarily due to the increase in share price.

In terms of quarterly cadence, we expect net sales in the range of $478.3 million to $504.5 million for the third quarter of fiscal '27. In terms of adjusted EPS, we expect a higher net tariff refund benefit in the third quarter as we expect the remaining [ IEEPA ] gross tariff refunds of $51.8 million to be fully recognized in the third quarter, while a portion of our planned strategic reinvestment is expected to fall in the fourth quarter, which will effectively lift third quarter adjusted EPS and compress fourth quarter adjusted EPS.

As a result, for the third quarter of fiscal '27, we expect consolidated adjusted EPS in the range of $2.05 to $2.40, which includes a net after-tax tariff refund benefit in the range of $0.66 to $0.77 and implies adjusted EPS for the base business in the range of $1.39 to $1.63. In closing, we believe our second quarter results demonstrate continued progress, but they also reinforce the need to remain disciplined and appropriately cautious in a very dynamic environment. We are encouraged by the performance of our strongest brands as well as improving fundamentals across the balance of the portfolio, continued international growth and the effectiveness of our sourcing and supply chain mitigation actions.

We're also encouraged by the progress we've made to improve the health of our inventory through the first half of the year and are targeting a 12 percentage point improvement in our active inventory composition by the end of the year, which we believe sets us up for success in fiscal '28. We are ahead of schedule in terms of debt paydown due to strengthening cash flow, and we now expect a net leverage ratio of 2.7x or lower by the end of fiscal '27.

At the same time, we see opportunities for more consistent performance across our portfolio, and we have meaningful work ahead to stabilize our more pressured brands, rebuild the organization and further strengthen the underlying earnings profile of the business. We will continue to allocate our resources towards the highest priority opportunities to feed the flywheel while maintaining flexibility to adjust as demand conditions evolve. Our focus remains on delivering consistent results, further improving working capital efficiency and building the capabilities required to support sustainable growth over time. And with that, I'll turn it back to the operator for Q&A.

Operator: [Operator Instructions] Today's first question is coming from Peter Grom of UBS.

Peter Grom: So maybe just a bigger picture question to start. I wanted to ask on kind of the consumer and just the macro backdrop, and you kind of talked about how choppy it's been. So curious if you can provide a view on what you're seeing from your core consumer? Have you seen any shifts in behavior of late? And then I guess related, you talked about input cost pressures. So can you maybe just unpack your broader cost basket and how you see inflation trending from here?

George Uzzell: Peter, this is Scott and team. Good to hear from you. I'll just step back and I'll answer your question around the consumer. As I've always said and we continue to believe that 80% of our opportunity is related to things that we control within our building and 20% are the things that are happening around the world and around the consumer. I'll start with us a little bit. We shared that we're focused on kind of 3 fundamental phases of building our business.

And Phase 1 in FY '27 is getting our foundation right, which is around investing in our brands, standing up an operating model that makes us closer to the consumer in the marketplace and driving balance sheet productivity. And that's what we're focused on right now, and that's kind of agnostic to the consumer. As we look at the work that we've done in Q2 and Q1 and year-to-date, we continue to invest in our brands. We're focused on building our commercial muscle, commercial discipline muscle to execute in the marketplace. upping our ability to execute as a company and driving balance sheet productivity, all of which we've made some progress in quarter 2.

In the 20%, the part that's out there outside of the realm of Helen of Troy, I do believe the consumer is under pressure, whether it be fuel prices, interest rates, just the cost of living for the middle market consumer specifically in North America, it's definitely more challenging this year than it was last year. But for companies that deliver amazing innovation that tell great stories that execute well, the consumer is still showing up. I also will say from a retailer standpoint broadly, it's definitely a much more promotional environment than it's been in the past, but it's one that we believe that we can continue to compete in. Brian, anything you want to add?

Brian Grass: Yes. I would say, Peter, we did our -- we made our very best attempt to estimate inflationary costs last quarter. So when we gave you the outlook last quarter, we had made a fulsome effort to make an estimate of what we thought those -- all those inflationary cost movements would mean. I would say, while the conflict in the Middle East is still not resolved, the costs have largely stabilized as compared to our original estimates. So we're not changing our view the way we estimated the cost to play out versus what we provided in Q1.

And I'll point out that the outlook we gave in Q1 did not have the full tariff refund benefit, but it was our intention for it to include the full inflationary cost impact in the outlook, and that remains the same. So those costs are included in our base business, not in the tariff refund benefit.

Peter Grom: That's very helpful. And then just one follow-up on just the illness incidence. So I think previously, the expectation would be that it would be in line with the prior 3 years. I think it's now expected to be slightly below. Is that -- what's driving that? Is that just simply being more conservative? Or is that something you're seeing more real time that's kind of driving that view?

Brian Grass: Yes. I would just say initial indications are that it's trending to be lower. And so we're just going to take that as a cue and be a little bit more conservative and not have an outlook that's depending on strength of a cold flu season.

Operator: Our next question is coming from Bob Labick of CJS Securities.

Bob Labick: I wanted to discuss, can you talk about, I guess, specific to talent to your brands, your volume and pricing in the quarter and then kind of category demand where you're gaining share and losing share? And then, I guess, finally, what does it take to get consistent growth in Beauty & Wellness going forward?

George Uzzell: Yes, I'll kick off on there. So I'd say this, you asked the first part was where are we gaining share and where we see strength. I can tell you where we see strength. We definitely see strength in many pockets of our Home & Outdoor business, specifically OXO and Osprey. We see strength in our Olive & June, our nail business. We see strength in our Braun business and many categories that we in. From a beauty and wellness standpoint, it's a complicated category. There's a prestige as well as mass business at the same token. But what I'd say here are the steps that we're taking.

As I step back to FY '27, I know you and I spent time together that we're focused on getting the fundamentals right across our business by showing you markers of progress. And those markers of progress really fall into 4 buckets. How do we begin to drive brand momentum because I fundamentally believe a better Helen of Troy is one it's built where brands are growing. Second, how do we drive better commercial discipline. That's how we show up in the marketplace and follow the consumer shopping journey. How do we execute our capabilities across our enterprise better and more seamless? And then how do we drive balance sheet productivity.

As we are 2 quarters into FY '27 and 2 quarters into kind of our comeback, we're making progress, but it's not even across our whole portfolio. as you can see in our performance, whether it be our Home & Outdoor had a very strong quarter. We had several brands within our wellness portfolio that advanced. We had our international business making advance. When we get to Beauty & Wellness, which I believe I have aspirations for in the future, we're focused on a couple of things. Getting the right people leading the business, we've made some critical changes there, and I'm excited about the team that we have in place. Second, the strategy.

We've got some good work going on in strategy on how do we participate in the market and engage both prestige and mass in the right way. Next, how do we pull new product development forward so we can bring it in front of the consumer at a more rapid pace. And then lastly, how do we bring omnichannel capabilities to market so that the consumer can follow us in the journey. All of those are under construction. I knew this year was going to be still a continued challenge year for our beauty business, but I can tell you we're doing the work to set ourselves up for the future.

Brian Grass: I would just add a little bit, Bob, that dollars are better than units for us, but I would say that's true of the market, largely in our categories. So not unusual with what the market trend is. We are looking at our price in a few areas to see if we need to recalibrate, and I think we will probably make some adjustments there. But we're showing -- we're not where we want to be, but we're showing improving trends, I'd say, across the portfolio. I'd say beverageware, hair care and water filtration are areas where we weren't -- we didn't do so well in the quarter.

But again, we see some indications of improvement kind of across the portfolio.

Bob Labick: Okay. Great. And then just kind of on my follow-up, you talked about it a little bit, and I think you have a nice slide, it looks like Slide 9, in terms of where you're reinvesting the kind of tariff refund. And I know you paid out more than you're getting back, but it's still new money right now. And I was hoping you could kind of just dig a little deeper and summarize and elaborate for us on the reinvestment and really where and when kind of you expect to see benefits from that reinvestment kind of going forward?

George Uzzell: Great question. Yes. And I know Brian and I will tag team this. I go back to our strategy that I've been talking about for the last several quarters that our path to where we are as a company, it did not happen overnight, and we need to get back to basics on making a better Helen of Troy.

So as we looked at the opportunity of regaining the tariffs, even although not all of them that we paid in, we really just said, how do we make critical investments to do the fundamentals and the foundational elements of our business around brand investment, packaging, product development, things that are going to not only pay dividends this year, but play for many, many years to come. And that's where we made our investment while also giving some of it to pretax earnings.

What Brian will do is give you a little bit more specificity, but the tariff refunds are really around accelerating the work to build the foundation elements for Helen of Troy to make us better for the future.

Brian Grass: Yes, Bob, I kind of view it as investment and expression I often use, putting problems behind us. If there were things that in the past with your organic business that were harder to digest, I view tariff refund benefit as an opportunity to digest those costs, put it behind us, things like cleaning up inventory, the packaging, if we can pull things forward, things that we had on the road map that we already know that we need to do, if we can pull them forward into this tariff refund period, that's what we're trying to do.

And then there's all the things [ Scott ] was talking about, brand investment and even creating content, you can phase that out over time or you can kind of pull that forward and do it in a period and get that out of the way and then you've got your content developed and you can go forward with it. So I kind of think of it as it is an investment and it's traditional and you get an ROI and all that kind of stuff, but I also view it as trying to be clean going into fiscal '28. We want our inventory to be clean.

We want to pull forward as much cost as possible so that we don't have to bear the cost in fiscal '28. So there's a blend and we try to break it into kind of 4 buckets of what we call foundational investment. That's just investment that you need to do before you can do kind of the high-return media spending. You got to have your foundation correct. And that relates to consumer insights and things like that growth strategy, we invested in our growth strategy as a part of this.

And so the weight of the 2 buckets that won't have an immediate return are kind of the foundational bucket and the longer-term bucket on the slide. that I think we do get a huge benefit for and set us up for success in fiscal '28, but aren't going to provide an immediate return. And then there's kind of a near-term bucket that will have a fiscal '27 ROI, and that's about 25% of the spend and then the remainder goes to pretax earnings. But that's kind of how we try to bucket the spend, and it's a lot of investment, but it's also a lot of putting problems behind us.

Operator: The next question is coming from Olivia Tong of Raymond James.

Olivia Tong Cheang: I want to unpack the revenue outlook a bit. The guide implies growth deceleration in the second half for Home & Outdoor, but some improvement in the rate of decline on Beauty & Wellness. So can you talk about what drives the reversion -- sort of reversion to the mean on both? And then specifically on Home & Outdoor, you saw growth accelerate in Q2, but you lowered the full year outlook. So can you talk about the drivers there? And then just lastly, a key competitor for Hydro Flask outlined long-term targets recently, which I'm sure you saw mid- to high single-digit sales, higher margins.

So as you think about the long-term opportunity for Hydro Flask and your Drinkware business, what do you think about the -- what's your view on the growth of the category and then your ability to capture that?

George Uzzell: This is Scott. Thank you. I'll take a quick part and then Brian will tag team it. I'd say this, first from an outlook standpoint, -- let me just -- it's a lot here. So basically this, I go back to that this year was about building markers of progress for our company and doing -- trying to get the foundational elements right. And we're leveraging Tier 3 funds and really the hard work and the discipline of this team to be sharper on fewer things to drive more impact in the marketplace, all with the intent that we know a healthy Helen of Troy is one that's built where brands are growing and winning in their categories.

We know that, that is not evenly spread across all brands, but we're making progress there. That's kind of one. Two, from an outlook standpoint, when I think about the balance of the year, and we're 2 quarters into kind of our transformation, it's a multiyear plan. And then I look at the state of the consumer. And when I say state of the consumer, I think the consumer will continue to pursue great innovation, great products, great marketplace. But I believe that there are more wins in the consumer space than there were a year ago. versus wins that they're back, whether it be fuel, interest rates, just running their lives.

And as I think about, a, where we are in the stage of our transformation and our comeback as well as the state of the consumer, it's one of let's continue to do the basics to build our business and continue to drive markers of progress against the commitments we've made to the marketplace. That's kind of been our focus. The next double-click around the insulated beverage category, specifically Hydro Flask. I still have really, really high confidence in Hydro Flask and confidence in that team.

What I can tell you as we focus on in FY '27 and FY '28 for that brand, it's really around how do we talk to the consumer that loves the brand that calls it the OG of the category that believes that the brand identifies with them from an inclusivity standpoint from about moment outdoors that we know there's a following there. So how do we storytell and connect with that consumer and that team is doing the work to make sure we're driving the right marketing message.

Second, we're innovating within the category to bring news like Micro Hydro and many other products that are relevant to that category to make sure that we continue to hold our premium position, but making sure we're bringing new news to the category. And then third, which I think is the most significant unlock is moving to adjacencies where we can take the brand that's already connected with [ cult ] following to other parts of other needs that build on the ethos of Hydro Flask, not only for today but for the future. And that work is underway.

Brian Grass: Yes, Olivia, I'd add on to that with respect to the slowdown in home and outdoor sales in the second half or not slowdown, but the change in our outlook, the beverageware category as a whole is a little bit saturated, and we see that environment becoming promotional. We want to maintain our positioning, and you kind of referred to another competitor that is putting out long-term outlook for high growth. I think that's because they've been able to maintain the positioning, and we want to be able to try and do the same thing. So we won't participate so much in that promotional environment.

And because of the saturation that we see, it will put pressure on our second half. We also see some inventory correction needed in the channel in the beverageware category. And so that will -- we're hoping that will play out in the second half of the year and that we're in a cleaner position going into fiscal '28. And then with respect to better Beauty & Wellness, as we've been saying, we've been seeing improving trends, in particular, in the wellness part of the business, and that's playing itself out and us raising our outlook a little bit. We've got some strength that is building in the wellness part of the portfolio.

Operator: Our next question is coming from Susan Anderson of Canaccord Genuity.

Susan Anderson: I guess maybe just a follow-up on Olivia's question really quick just on the lower sales expectation in the back half for Home & Outdoor. I guess just -- is it just Hydro Flask really that you're expecting to be a little bit more pressured, but the other brands you expect to continue to grow nicely. And then also just looking at the growth in the quarter for Home & Outdoor, I was just curious how much of it was driven by new space gains and international growth versus the growth in the U.S.

Brian Grass: So on the first question, yes, Hydro is the driver of the Home & Outdoor revision to our outlook for revenue. The second question, I don't know if we have it broken apart. I would say there was kind of equal -- using all levers for growth in terms of new product introductions, distribution, category expansion, international, which international is doing using a combination of those levers to grow. We're excited that in international, we've got some new partnerships there that we're really leaning into and are excited about and seeing good traction from. So it's kind of pulling all the levers, Susan, I would say. I wouldn't say there's one that outweighs the other.

We're trying to have a balanced growth platform.

Susan Anderson: Okay. Great. And then I guess just in Beauty & Wellness, maybe if you could talk about kind of the puts and takes for top line growth in the back half versus what you saw in the first half? And then just on the Prestige beauty side and hair tools, how are you thinking about kind of like that sequential trajectory? Are you starting to see sales improve at least sequentially? And when do you think you could kind of get an inflection in the category?

George Uzzell: This is Scott. I always like to step back. When I step back 6 months ago and I looked at FY '27, and at that point, I was 6 months into my job, I knew that we have a lot of opportunity across our portfolio. And as we approach FY '27, as I talked about in the past that I knew there were categories and brands that I felt like we're ready for kind of fully funded growth plans for FY '27 because the consumer is ready, the team is ready, the pipeline is ready. Let's go to market, and we made those investments.

And then we had a group of brands in the middle that we probably wanted to fund higher, but we said they're ready to move forward, but still we still -- we can't do everything, and we funded those. And then in the Beauty business specifically, we knew this year was going to be a challenging year. We know that we've got new people on the business. We've got a new product pipeline we're trying to pull forward. We were still working on our storytelling, and we're preparing ourselves for the future. So we definitely will be -- we want to do better with our Beauty business, but we expect this year to continue to be a challenging business.

Brian, you like to add?

Brian Grass: Yes. I'd just add that in kind of the prestige part of beauty, it's up against some closeout noise in the prior year where we had some specific activity that was pretty lumpy in the prior year. So that's driving a little bit of the decline. We are seeing improving trends, even though the results are not where we want them to be, we're seeing some improving trends in the POS data. And then if you kind of look at mass beauty, we're assessing whether we need to recalibrate on some pricing, in particular, in Revlon. And so we think that's going to help the performance there when we get that right. And then we're really happy with wellness.

We're happy with where wellness is going and the trends there. And I would say we're really, really happy with Olive & June.

Operator: At this time, I'd like to turn the floor back over to Mr. Uzzell for closing comments.

George Uzzell: Yes. I want to say thank you, everyone. Closing comments. Thank you very much for spending time with us this morning. We're pleased with the quarter and continued progress on our multiyear road map to growth. This year is about putting markers on the board and getting back to restoring brand momentum, standing up a new operating model and continued focus on balance sheet productivity. Thank you for spending time with us this morning, and have a wonderful day. Thank you.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.

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