Helen of Troy Limited, the parent of the Hydro Flask and Osprey outdoor brands, and the Oxo kitchenware brand, reported that Home & Outdoor segment net sales revenue decreased 1.6 percent to $219.8 million in the fourth quarter ended February 28, compared to $223.3 million in the prior-year quarter. The company said the decline was driven by the insulated beverageware category, partially offset by growth in packs and the home category.

The decrease was said to be primarily due to continued competitive intensity in the insulated beverageware category, softer overall consumer demand, lower replenishment orders from retail customers, decreased closeout channel sales, and lower club sales in the home category. These factors were partially offset by higher international sales across all categories, increased online channel sales in the home category, and new and expanded retailer distribution in the insulated beverageware and home categories.

Home & Outdoor segment operating income was $32.3 million, or 14.7 percent of segment net sales revenue, in the fourth quarter, compared to $35.0 million, or 15.7 percent of segment net sales revenue, in the prior-year fourth quarter. The 100 basis point decrease in segment operating margin was said to be primarily due to a less favorable product and customer mix and an increase in restructuring charges of $2.6 million. These factors were reportedly partially offset by lower commodity and product costs, favorable inventory obsolescence expenses, lower annual incentive and share-based compensation expenses.

Segment Adjusted operating income decreased 5.8 percent to $39.3 million, or 17.9 percent of segment net sales revenue, compared to $41.7 million, or 18.7 percent of segment net sales revenue, in the prior-year Q4 period.

Executive Summary
(Fourth Quarter of Fiscal 2025 compared to Fiscal 2024)

  • Consolidated net sales revenue of $485.9 million compared to $489.2 million
  • Gross profit margin of 48.6 percent compared to 49.0 percent
  • Operating margin of 0.4 percent, which includes non-cash asset impairment charges of $51.5 million, compared to 13.5 percent
  • Non-GAAP adjusted operating margin of 15.4 percent compared to 17.0 percent
  • GAAP diluted EPS of $2.22 compared to $1.79
  • Non-GAAP adjusted diluted EPS of $2.33 compared to $2.45
  • Net cash provided by operating activities of $35.0 million compared to $73.6 million
  • Non-GAAP adjusted EBITDA margin of 17.4 percent compared to 19.3 percent

Full Year Summary Comparisons
(Fiscal 2025 compared to Fiscal 2024)

  • Consolidated net sales revenue of $1.908 billion, a decrease of 4.9 percent
  • Gross profit margin improvement of 60 basis points to 47.9% compared to 47.3 percent
  • Operating margin of 7.5 percent compared to 13.0 percent
  • Non-GAAP adjusted operating margin of 13.2 percent compared to 15.0 percent
  • GAAP diluted EPS of $5.37 compared to $7.03
  • Non-GAAP adjusted diluted EPS of $7.17 compared to $8.91
  • Net cash provided by operating activities of $113.2 million compared to $306.1 million
  • Non-GAAP adjusted EBITDA margin of 15.2 percent compared to 16.8 percent

Balance Sheet and Cash Flow
(Fiscal 2025 compared to Fiscal 2024)

  • Cash and cash equivalents totaled $18.9 million, compared to $18.5 million.
  • Accounts receivable turnover was 71.5 days, compared to 66.2 days.
  • Inventory was $452.6 million, compared to $396.0 million.
  • Total short- and long-term debt was $916.9 million, compared to $665.7 million.
  • Net cash provided by operating activities for fiscal 2025 was $113.2 million, compared to $306.1 million.
  • Free cash flow for fiscal 2025 was $83.1 million, compared to $269.4 million.

Pegasus Restructuring Plan
The company previously announced a global restructuring plan to expand operating margins through initiatives designed to improve efficiency and effectiveness and reduce costs, collectively called Project Pegasus.

Project Pegasus includes multiple workstreams to further optimize the company’s brand portfolio, streamline and simplify the organization, accelerate and amplify cost of goods savings projects, enhance the efficiency of its supply chain network, optimize its indirect spending, and improve its cash flow and working capital, as well as other activities. These initiatives created operating efficiencies and provided a platform to fund growth investments.

During the fourth quarter of fiscal 2025, the company completed Project Pegasus, which resulted in total pre-tax restructuring charges of $60.9 million, of which $18.7 million were recognized in Home & Outdoor and $42.2 million in Beauty & Wellness. Total pre-tax restructuring charges were slightly above the high end of the company’s range (previously disclosed) of $55 million primarily due to incurring higher severance and employee-related costs, but well below the company’s original expectations of $85 million to $95 million when the project was initiated.

Pre-tax restructuring charges represented primarily cash expenditures and were substantially paid by the end of fiscal 2025, with a remaining liability of $7.7 million as of February 28, 2025, which is expected to be paid during fiscal 2026.

The company continues to have the following expectations regarding Project Pegasus savings:

  • Targeted annualized pre-tax operating profit improvements of approximately $75 million to $85 million began in fiscal 2024 and are expected to be substantially achieved by the end of fiscal 2027.
  • Estimated cadence of the recognition of the savings will be approximately 25 percent and 35 percent in fiscal 2024 and 2025, respectively, which were both achieved, and approximately 25 percent and 15 percent in fiscal 2026 and 2027, respectively.
  • Total profit improvements to be realized approximately 60 percent through reduced cost of goods sold and 40 percent through lower SG&A.

Fiscal 2026 Business Update
Due to evolving global tariff policies and related business and macroeconomic uncertainty, the company said it is not providing an outlook for fiscal 2026 at this time. The company is assessing the incremental tariff impact in light of continuing changes to global tariff policies, the full extent of its potential mitigation plans, and the associated timing to fully execute such plans in a rapidly changing macro environment.

To mitigate the company’s risk of ongoing exposure to tariffs, it has intensified efforts to diversify its production outside of China into regions where it expects tariffs, or overall costs, to be lower and to source the same product in more than one region, to the extent it is possible and not cost-prohibitive.

The company expects to reduce its cost of goods sold exposed to China tariffs to less than 20 percent by the end of fiscal 2026. The company continues to assess and implement other mitigation actions, which include cost reductions from suppliers and price increases to customers.

While the company has not yet made all its pricing decisions, price increases are being considered, along with other mitigation strategies.

In addition to the uncertainty from evolving global tariff policies, the company believes there is a high probability of unfavorable cascading impacts on inflation, consumer confidence, employment, and overall macroeconomic conditions that are impossible to predict at this time and outside the company’s control.

Out of an abundance of caution and in expectation of a complex and uncertain environment, the company is implementing a number of measures to reduce costs and preserve cash flow that will remain in place until there is greater certainty and less variability, which include the following:

  • Suspension of projects and capital expenditures that are not critical or in support of supplier diversification or dual-sourcing initiatives;
  • Reduction and deferral of marketing, promotional and new product development expenses;
  • Actions to reduce overall personnel costs and pause most project and travel expenses;
  • A freeze on inventory purchases from China in the short term, except purchases supporting key launches already underway and an overall reduction in inventory purchases in expectation of softer consumer demand in the short to intermediate term; and
  • Actions to optimize accounts receivable and payable days outstanding.

The company believes it can offset 70 percent to 80 percent of the tariff impact in fiscal 2026, based on current tariffs, through the combination of tariff mitigation actions and these additional cost reduction measures.

Image courtesy Osprey/Helen of Troy Limited