Helen of Troy Limited Q1 FY2027 earnings call

- Strategic Roadmap & Operating Model Evolution * Fiscal 27 is the first year of a multi-year growth roadmap focused on becoming a more efficient, consumer-focused company before accelerating broader brand growth, built on three core pillars: consumer-first innovation, commercial/operational excellence, and people/culture. * Implemented a new operating structure with 5 dedicated segment general managers (a mix of internal promotions and external hires, with no material increase in operating costs) each with full end-to-end ownership of their brand portfolio, plus 3 dedicated geographic general managers to accelerate growth outside North America. This structure pushes decision-making closer to consumers and markets, reduces competing priorities, speeds up decision-making, and frees senior leadership to focus on long-term strategic and cross-portfolio opportunities. * Simplified internal processes to reduce unnecessary complexity and foster faster collaboration and testing of new tactics before scaling.

- Commercial & Operational Execution Improvements * Maintained pricing discipline: prior price increases across major brands are mostly holding in market, with ongoing monitoring in select areas where consumer price elasticity is higher than expected. * Prioritized higher-quality revenue by shifting product and channel mix away from lower-margin channels toward higher-value products and customers, and standardizing pricing and promotion practices to protect long-term brand value. * Strengthened e-commerce capabilities: aligned pricing across channels, addressed unauthorized third-party seller issues to create a consistent consumer experience, and improved digital shelf and retail media effectiveness. * Improved demand planning: building a more connected forecasting approach that better links demand signals, promotional plans, and inventory decisions. * Reduced total inventory year-over-year by $17 million, despite $15 million in incremental tariff costs in inventory, and cut total debt by $716 million using proceeds from the sale of a distribution facility, lowering the net leverage ratio to 3.48x from 3.87x at the end of Q4 fiscal 26.

- Innovation & Brand Highlights * Delivered differentiated consumer-centric innovation that drove share gains even in a cautious spending environment: Osprey's new convertible travel packs, OXO's expansion into the high-growth pet product category, Braun's share-gaining blood pressure monitors in U.S. mass retail, and Olive and June's culturally resonant Star Wars collaboration that drove strong consumer engagement. * Planning accelerated international growth via a new hybrid go-to-market model that pairs local market expertise with direct consumer brand engagement, with more details to share in fall 2026.

- Capital Allocation * Maintained a disciplined approach to capital allocation and balance sheet management, focused on strengthening business fundamentals to support long-term growth.

Consolidated net sales for Q1 fiscal 27 increased 8.2% year-over-year, beating management expectations. The 8.2% overall growth includes a 4-5 million benefit from order phasing due to an earlier Prime Day timing. There are two core business segments: 1. Home and Outdoor: Sales increased 9.5% year-over-year, with broad-based growth across all three brands: Osprey (strongest performer, driven by improved international distribution and e-commerce momentum), OXO (growth from lapping prior tariff disruption, strong point-of-sale, and expanded brick-and-mortar distribution), and Hydro Flask (growth from expanded retail distribution, inventory optimization, and e-commerce momentum). This segment contributes approximately 48-49% of total full-year expected net sales based on the guidance range. 2. Beauty and Wellness: Sales increased 7% year-over-year, with growth across both beauty and wellness sub-segments. Wellness outperformed expectations, with growth across Braun, Vicks, Honeywell, and Pure, driven by lapping prior year tariff disruption, solid point-of-sale, and expanded distribution. In beauty, Olive and June led growth, supported by expanded distribution, innovation, and consumer engagement; these gains were partially offset by continued softness in other core beauty brands from ongoing point-of-sale pressure and pricing elasticity impacts. This segment contributes approximately 51-52% of total full-year expected net sales based on the guidance range. International sales overall increased 1.1% year-over-year, driven by Osprey's improved distribution and broad wellness portfolio strength, partially offset by softer demand in kitchenware and hair appliances amid competitive conditions.

- Full year fiscal 27 net sales guidance was raised slightly to a range of 1.759 billion to 1.831 billion, from the prior range. The update reflects Q1 outperformance, partially offset by 4-5 million in sales pulled forward into Q1 from Q2 due to the earlier Prime Date timing, and embedded revenue risk from expected supply chain disruption. - The segment-level full year net sales guidance is 859 million to 884 million for Home and Outdoor, and 900 million to 947 million for Beauty and Wellness. - Adjusted EBITDA guidance is maintained at 190 million to 197 million, implying 2.1% to 6.3% year-over-year growth. The pre-tax benefit of 9.2 million from phase one tariff refunds is included in this outlook, but this benefit is fully offset by higher expected cost inflation for the remainder of the year. - Adjusted EPS guidance is maintained at $3.25 to $3.75, and full year free cash flow guidance is maintained at 85 million to 100 million. - Planned capital expenditure guidance was increased by 2 million from the prior outlook. - Management expects low-to-mid single digit year-over-year sales growth in the first half of fiscal 27, and a low single digit year-over-year sales decline at the guidance midpoint in the second half, due to easier year-over-year comparisons in H1 (from lapping 2026 H1 tariff disruption) and the timing of brand and people investments. - Approximately 20% of total annual adjusted EPS is expected to be generated in the first half, with 15% in Q2, consistent with prior guidance. - Management does not include any benefit from future phases of tariff refunds in the current guidance, as the timing and collectability of these refunds cannot yet be reliably predicted. Any future tariff refund benefits will largely be reinvested into the business and used for increased product development and commercial capital expenditure, with a portion reserved as a buffer against unexpected cost inflation.

- Consumer spending remains under pressure, with consumers more cautious on discretionary purchases, and retailers exhibiting more conservative ordering behavior, leading to higher-than-expected price elasticity in some categories and ongoing pressure on core beauty brand sales. - Heightened geopolitical tension, particularly the conflict in the Middle East, has exacerbated existing supply chain disruption and volatility, creating supply scarcity at a small number of key pinch points for the company's product portfolio. - Higher-than-expected cost inflation from increased commodity input prices, unfavorable Chinese yuan fluctuations, higher inbound and outbound freight costs, and increased costs to secure inventory to avoid supply disruption more than offset the 9.2 million phase one tariff refund benefit included in the current guidance. - Tariff refund timing and collectability remains uncertain, even for approved phases, which creates variability in the timing of expected benefit to earnings and cash flow. - Cost volatility from ongoing tariff cycles creates continued pressure on gross margins, with Q1 fiscal 27 expected to see the highest year-over-year gross margin compression from tariffs, as higher tariff rates cycle through cost of goods sold with minimal tariff impact in the year-ago quarter.

Q: When will tariff benefits hit the P&L, and what drives the expected low single-digit second half revenue decline at guidance midpoint? Also, what are the top reinvestment opportunities for near-term growth? A: The $7 million remaining uncollected from phase one tariff refunds is expected to mostly be collected in Q2 fiscal 27. Future tariff refund benefits from phase two and beyond will likely be spread across multiple quarters, potentially extending into fiscal 28, which management views as favorable for orderly reinvestment of the proceeds. The expected second half revenue decline reflects easier year-over-year comparisons from lower disruption in the 2026 second half. Top reinvestment opportunities are talent and agile operating model improvements, consumer-focused strategic innovation across core brands, omnichannel capability building, supply chain optimization, and targeted international growth expansion. A portion of any unexpected benefit will also be held as a buffer for above-expected cost inflation.

Q: Can you elaborate on the revenue risk from expected supply disruption embedded in guidance? Is this just conservatism, or do you have clear line of sight to potential issues? A: After accounting for the 5 million in Q2 sales pulled forward to Q1 from the Prime Day shift, the remaining ~15 million of embedded supply risk reflects clear line of sight to 2-3 specific supply pinch points that could create product scarcity. While supply chain pressures were moderating before recent escalations in geopolitical tension, the new uncertainty increases volatility, so management intentionally embedded a conservative estimate of potential disruption into the outlook.

Q: How confident is management that prior price increases will hold for the rest of the year, and how does this impact margin phasing? A: Around 80% of planned price increases have successfully held across the portfolio, and management will continue to monitor and adjust as needed in high-elasticity categories. Point-of-sale dollar growth across the portfolio is performing better than the original elasticity assumptions embedded in guidance, though unit growth is lower in some high-elasticity segments in line with expectations. Management currently feels well-positioned on pricing and will continue to adjust price mix as needed to balance demand and margin protection.

Q: How does SG&A investment cadence look going forward as the company ramps up reinvestment from tariff refunds? A: The base plan, which includes only the 9.2 million phase one tariff benefit, maintains a 40 basis point increase in investment consistent with prior guidance. A large majority of any future tariff refund benefits from additional phases will be reinvested into the business, increasing SG&A spend as benefits are received. With $70 million in paid tariffs eligible for future refunds expected to be processed over coming quarters, management will ramp investment as visibility on refund timing improves.