Helen of Troy Ltd. Q3 FY2025 earnings call

Business Performance

• Third quarter results within outlook despite cautious consumer spending; Tennessee distribution facility running well; on track to achieve labor efficiencies by year-end.
• Progress on resetting and revitalizing brands, especially in Home & Outdoor; Project Pegasus on track with lower product and commodity costs boosting gross margin.
• Progress on strategic initiatives: formation of NA RMO, distribution gains in U.S. and internationally, use of data and analytics across business.
• Completed acquisition of Olive & June, which complements beauty portfolio and adds high-growth, high-margin consumables business.

Segment Details

• Home & Outdoor: OXO saw growth from distribution gains at Walmart, new product launches (e.g., Brew Rapid brewer), and international sales; Hydro Flask had positive momentum from distribution gains and innovation; Osprey continued momentum in everyday packs with successful launches.
• Beauty & Wellness: Revlon gained momentum at mass and online; Curlsmith benefited from incremental investments in innovation and marketing; Wellness brands (Braun, Vicks) maintained market share despite weak illness season; PUR grew share in water filtration through value reframing and initiatives.

Consolidated net sales declined 3.4%. Home & Outdoor segment sales increased 4.3% driven by growth in all 3 brands and international strength. Beauty & Wellness segment was unfavorably impacted by a weaker illness season. Consolidated gross profit margin increased 90 basis points to 48.9%. Home & Outdoor adjusted operating margin increased 150 basis points to 18.4% due to favorable inventory obsolescence, lower annual incentive, and lower commodity costs (partially offset by incremental growth investments). Beauty & Wellness adjusted operating margin declined 100 basis points to 15% due to incremental growth investment and unfavorable operating leverage (partially offset by lower annual incentive, lower outbound freight, lower commodity costs, and favorable inventory obsolescence).

• Revised net sales outlook: $1.888B to $1.913B (decline of 5.8% to 4.6%) due to weak illness season and Olive & June acquisition.
• Adjusted EPS outlook: $7.15 to $7.40, including accretion of $0.05 to $0.07 from Olive & June acquisition.
• Adjusted EBITDA outlook: $292M to $295M, with margin compression due to automation issues at Tennessee facility and weak illness season.
• Net leverage ratio expected between 2.85x and 2.75x by fiscal '25 end.

• Weak global cough, cold, flu season impacting Wellness sales.
• Bankruptcy of large retailers like Container Store affecting OXO.
• Bifurcation in consumer spending between higher and lower income households.
• Uncertainty around tariffs and their impact on supply chain and production costs.

Q: Bob Labick asks about Iron Giant distribution center benefits and O&J acquisition impact.

A: Noel Geoffroy states the Tennessee distribution center provides capabilities for full case and DTC business, pleased with team's efforts to get automation working; Brian Grass adds distribution cost reduction vision remains, and Olive & June acquisition may bring upside in DTC efficiency over time.

Q: Peter Grom asks about fourth quarter top line drivers and '26 outlook.

A: Noel Geoffroy says Home & Outdoor shows continued strength, Beauty & Wellness impacted by weak illness season; Brian Grass notes consumer and retailer variability; Noel Geoffroy mentions long-term targets stand, more color on '26 in late April.

Q: Rupesh Parikh asks about OXO and Hydro Flask distribution gains velocities.

A: Noel Geoffroy says OXO kitchen utensils saw double-digit household penetration expansion at Walmart; Hydro Flask initial distribution at Target and Costco showing positive momentum but early to tell velocity fully; Costco program had strong initial velocity.

Q: Olivia Tong Cheang asks about consumer bifurcation and shelf space gains.

A: Noel Geoffroy says consumer bifurcation continues as a headwind; Home & Outdoor distribution gains in key retailers are positive tailwinds, Wellness susceptible to illness season variability, Beauty business has areas of improvement but work in progress.

Q: Susan Anderson asks about Beauty segment liquids performance and inventory.

A: Noel Geoffroy says Curlsmith performs well with strong consumer retention; Drybar has pockets of strong performance in subsegments; Brian Grass says inventory higher due to strategic build in thermometry and tariff-related factors; Noel Geoffroy adds retailer inventory high in Wellness due to weak illness season.