Helen of Troy Ltd. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Navigating Volatile Environment: Acknowledged volatile global trade policy creating uncertainty, stepping back from fiscal '26 guidance and prior long-term algorithm. Focusing on controlling controllables, including pausing China purchases, diversifying supply chain, SKU prioritization, and evaluating pricing/promotional plans.
• Brand Performance: Many brands hold leadership positions, resonate well during economic downturns. Actions to reset and revitalize business strengthened brand fundamentals, increased growth investment, and expanded distribution.
• Tariff Mitigation Actions: Accelerating supply chain diversification outside China, refreshing SKU prioritization, evaluating marketing spend, making organizational changes, and leaning into international and value reframing opportunities.

Segment Performance

• Beauty & Wellness: In the fourth quarter, total sales increased 0.1% driven by Olive & June, Honeywell, Vicks, and Braun. Olive & June had sales of $23 million. For the fiscal year, Beauty faced challenges but Revlon showed sequential improvement, Drybar had goodwill impairment charges, and Olive & June outperformed expectations with growth at Target, Walmart, and industry accolades.
• Home & Outdoor: Organic business declined 1.2% in the fourth quarter, driven by Hydro Flask, but Osprey and OXO grew. OXO had strong performance at Walmart and Amazon, with expanded distribution and innovation. Osprey grew in international and DTC, while Hydro Flask saw category slowdown but expanded presence in Target and had a successful US DTC launch of Micro Hydro.

Guidance

• Noel Geoffroy stated they can't provide fiscal '26 guidance yet and stepped back from the long-term algorithm due to volatile trade environment. Brian Grass mentioned they're not providing fiscal '26 outlook, but expect to offset 70%-80% of tariff impact in fiscal '26 through mitigation actions like supplier diversification, cost reductions, and pricing/promotional evaluations. They also expect to reduce ongoing purchasing exposure to China to less than 20% by end of fiscal '26.

Risks

• Volatile Trade Policy: Uncertainty from global trade policy changes disrupting business and consumer behavior.
• Tariff Impact: Potential unmitigated tariff impacts, with over $200 million expected in fiscal '26 net of cost savings.
• Supply Chain Diversification: Challenges in qualifying new suppliers and completing supply chain diversification in a timely manner.
• Economic Downturn: Risks of further consumer spending pullback and retailer inventory adjustments.

Question and Answer

• Q: Bob Labick asks about diversifying manufacturing base, percent of new manufacturing with existing vs new partners A: Noel Geoffroy says it's a blend of working with current suppliers outside China and some new suppliers. Brian Grass adds larger percentage is with existing suppliers.
• Q: Rupesh Parikh asks about quantifying unmitigated tariff impact for fiscal '26 A: Brian Grass says at current rates, over $200 million impact expected in fiscal '26.
• Q: Rupesh Parikh asks about positive free cash flow for full year A: Brian Grass says absolutely.
• Q: Susan Anderson asks about consumer weakness and Q1 dynamics A: Noel Geoffroy mentions consumer softness anticipated due to tariffs, retailer orders pausing direct import from China impacting Q1. Brian Grass adds demand softness helps with tariff impact timeline.
• Q: Peter Grom asks about Pegasus savings and Q1 margin line of sight A: Brian Grass says cost savings from Pegasus were for growth investment and they're being cautious with spending in Q1 due to revenue trends and broader impact concerns.