Helen of Troy (NASDAQ:HELE) executives said third-quarter fiscal 2026 results came in line with expectations as the company worked to stabilize performance amid what management described as a challenging consumer and trade environment. On the earnings call, CEO Scott Azell emphasized a renewed focus on brand building, consumer-centric innovation, and organizational agility, while CFO Brian Grass detailed tariff-related disruption and a lowered adjusted earnings outlook for the full year.
Management: consumers are selective; focus shifting to growth
Azell said recent trends continue to show a “bifurcated economy,” with high-income households spending more freely while lower- and middle-income consumers remain pressured by inflation in essentials such as rent, food, and insurance. Against that backdrop, he said the company’s priority is to “fix the fundamentals” and invest in brands, innovation, and talent to restore growth, even if the path is “not a straight line.”
Azell reiterated four priorities first laid out in October: re-energizing brands and people; adapting the structure to put the consumer at the center; strengthening the portfolio for more predictable growth; and improving asset efficiency while maintaining shareholder-friendly policies. He said fiscal 2027 will be “the first big step” toward the company’s longer-term strategy, with a fiscal 2027 outlook expected in April and a long-term growth strategy planned for the second half of calendar 2026.
Third-quarter sales declined; tariffs and stop-shipments disrupted revenue
Grass said consolidated net sales decreased 3.4% in the third quarter, which he called favorable to the company’s outlook range and a sequential improvement versus the first and second quarters. Organic net sales declined 10.8%, including about $17.3 million of organic revenue decline tied to tariff-related disruption—such as paused or canceled direct import orders from China, changing dynamics in the China market, and stop shipments used to support uniform adoption of price increases by retail partners.
By segment:
- Home and Outdoor: net sales declined 6.7%. Management cited strong demand for travel, technical, and lifestyle packs; strong holiday orders from brick-and-mortar home retailers; and incremental revenue from tariff-related price increases, offset by softness in insulated beverageware, lower online home-category sales, and lower closeout channel sales.
- Beauty and Wellness: net sales decreased 0.5%. Organic sales declined 13.9%, with about $12.9 million of the decline attributed to tariff-related disruption. Hair appliances and prestige liquids were pressured by soft demand, competition, canceled direct imports, and lower closeout sales. Wellness was impacted by lower international sales tied to China dynamics, pricing-related stop shipments, and a below-average illness season.
Azell highlighted growth in certain brands, noting the company grew Osprey, OXO, and Olive & June during the quarter. Olive & June contributed nearly $38 million in sales ($37.7 million per Grass) and, according to Azell, exceeded internal expectations. The company also reported organic direct-to-consumer revenue grew 21% and it generated $29 million of free cash flow in the quarter despite what Azell described as $58 million of tariff drag.
Margins pressured by tariffs; adjusted EPS $1.71
Grass said gross margin decreased 200 basis points to 46.9%, primarily due to higher tariffs and a less favorable inventory obsolescence impact year over year, partially offset by the favorable impact of Olive & June and lower commodity and product costs excluding tariffs.
SG&A as a percentage of sales increased 160 basis points, driven by the Olive & June acquisition, higher outbound freight, higher annual incentive compensation expense compared with the prior year period, and unfavorable operating leverage. Adjusted operating margin fell 370 basis points to 12.9%. Grass said adjusted operating margin declined 650 basis points in Home and Outdoor and 120 basis points in Beauty and Wellness, partially offset by margin accretion from Olive & June.
Higher interest expense—attributed to higher average borrowings following the Olive & June acquisition, tariff-driven inventory carrying costs, and higher capital spending related to supplier transitions out of China—was partially offset by lower adjusted tax expense, resulting in adjusted EPS of $1.71.
Inventory ended the quarter at $505 million versus $451 million a year earlier, including $35 million of incremental tariff-related costs and inventory from the Olive & June acquisition. Debt ended at $892 million, with $325 million in revolver availability. Net leverage was 3.77x, up from 3.54x at the end of the second quarter, which Grass attributed to lower trailing EBITDA and tariff-related impacts to cash flow and debt balances.
Tariff mitigation progress, but pricing realization lags expectations
Management said it advanced tariff mitigation via supplier diversification, SKU prioritization, cost reductions, and price increases. Grass said most price adjustments are now in place, but the company is still seeing less than full pricing realization in some parts of the market, in part due to stop shipments used to support consistent price adoption by retail partners—primarily affecting Beauty and Wellness. He said residual impacts from stop shipments are expected to carry into the fourth quarter.
Year to date, unmitigated tariffs reduced gross profit by $31.3 million, with full-year unmitigated tariff impact expected to be $50 million to $55 million. The company now expects less than a $30 million tariff impact on operating income for the full year. Grass added the company remains on track to reduce cost of goods sold subject to China tariffs to 25% to 30% by the end of fiscal 2026.
Full-year outlook: tighter revenue range, lower adjusted EPS
For fiscal 2026, Grass said the company tightened its net sales range to $1.758 billion to $1.773 billion. Within that, Home and Outdoor net sales are expected to be $812 million to $819 million (previously $800 million to $819 million), and Beauty and Wellness net sales are expected to be $946 million to $954 million (previously $939 million to $961 million).
The company lowered its adjusted EPS outlook to $3.25 to $3.75, citing less than full pricing realization, consumer trade-down and less favorable mix, higher trade and promotion expense, and continued investments in people and brands to build revenue momentum and operating leverage.
Additional outlook items included:
- GAAP SG&A ratio expected at 38% to 40%
- Adjusted effective tax rate expected at 13.4% to 14.7%
- Year-end inventory expected at $475 million to $490 million, including an estimated $39 million of incremental tariff costs
In Q&A, executives repeatedly emphasized a strategic pivot toward revenue improvement over further cost cutting, arguing operating leverage from improved sales is expected to be more sustainable than continued expense reductions. Grass said unfavorable pricing realization in the fourth quarter is a key driver of the bottom-line change versus prior expectations, noting that pricing “leakage drops straight to the bottom line” and can have an outsized profit impact.
On portfolio actions, Azell said the company has begun evaluating its brand portfolio as part of its strategic review but did not point to specific brands under consideration. Grass said the company receives inbound interest in some brands “on a regular basis,” but management’s “plan A” is focused on tightening inventory, improving balance sheet productivity, and paying down debt, while also considering longer-term asset monetization and distribution center consolidation.
About Helen of Troy (NASDAQ:HELE)
Helen of Troy Limited is a global consumer products company that designs, sources and markets a diversified portfolio of household, health and beauty brands. Headquartered in El Paso, Texas, the company operates through three principal segments—Health & Home, Housewares and Beauty—offering products under well-known names including OXO, Vicks, Braun, Honeywell Home, PUR and Hot Tools. Helen of Troy distributes its products through a combination of mass, specialty and e-commerce channels to consumers, retailers and distributors worldwide.
The Housewares segment features kitchen tools, gadgets and organizational solutions marketed primarily under the OXO brand, recognized for its ergonomic “Good Grips” design.
