Helen of Troy Limited

our priorities and amplify our focus on consumers. Building on organizational changes put in place last summer, we've made strides to prepare for success. In October, I outlined four priorities. Re-energize our brands and our people. Adapting our structure to put the consumer at the center. Strengthen the portfolio for predictable growth. Improve asset efficiency while maintaining shareholder friendly policies. This is informing our direction as we complete our FY27 annual planning process, and will inform our go-forward strategy. FY27 will be the first big step towards our future. More to come in the coming months. As a brand company, we win and lose with the consumer, and growth is our scoreboard. We will make bold choices, embrace new thinking, and learn from past decisions while minimizing disruption. Our growth priorities are clear. Staying true to our North Star as a consumer, invest in brand building and editing and amplifying our focus, and execute with excellence by fully leveraging the talent and skill sets that already exist. By keeping the consumer at the center, we sharpen priorities and move from slow and complex to fast and agile. Teams are untangling complexity to enable faster decision closer to the consumer as we speak. A growth priority is product innovation. I'm inspired by the passion, commitment, and expertise of our teams. I believe we can drive new product development by better understanding our consumers, allocating resources and accelerating time to markets. Brands of our size can't do everything, but we must be focused and sharp as we drive separation from our competition. Each business will have a distinct strategy centered on two or three priorities. Making these tough choices will bring greater clarity to our brands for employees, consumers, and investors. As we reposition the business, we plan to direct resources in a disciplined and targeted manner towards the most impactful opportunities and innovative ideas. allowing them to incubate and take hold. This will both strengthen our portfolio and drive momentum of those products and brands that have the best opportunities for growth, not just for this quarter or next fiscal year, but for the long term as well. To fund these investments and decisions and position us for long-term sustainable growth, we plan to stay focused on maximizing operational and balance sheet efficiency. A key ingredient of our success will also be the power of our organization to fully leverage talent and skill sets that already exist in the building we recently welcomed back a key member of my leadership team to reignite the power of one this is the plumbing that enables the work to be done more effectively at helena troy it's a common language of systems and processes and people we must balance short-term performance with long-term aspiration this work starts with my global leadership team and will be cascaded throughout the organization We will continue to emphasize working capital efficiency and balance sheet health and productivity. A good example is the recently announced amendment to our credit agreement, which extends the leverage ratio holiday and updates the interest coverage ratio definition. These changes give us greater flexibility to navigate the evolving trade and external landscape. We look forward to sharing our fiscal 27 outlook in April and plan to outline our long-term growth strategy in the second half of calendar 26. And now I'd like to briefly touch on quarterly business segment performance. Overall net sales outperformed our expectations. Home and outdoor and beauty and wellness sales declined 6.7% and 0.5% respectively, while international sales fell 8.1%. Olive and June continued to outperform our profitability expectations, delivering nearly $38 million in sales. While I am not satisfied with these overall results, I'm encouraged by some of the highlights across our portfolio. These give me confidence we can learn and replicate across our portfolio and execute. Our ability to grow and capture market share is a product of leadership choices and operational excellence. We plan to be more intentional on our agenda and sharpen our execution. Highlights include we grew Osprey, OXO, and Olive and June. We exceeded Olive and June internal expectations. We increased organic B2C revenue by 21%, and we delivered $29 million of free cash flow despite $58 million in tariff drag. Across our portfolio, we're delivering exciting innovation. In the home and outdoor segment, we launched Osprey and Hydroflask cooler collaboration, combining Osprey's legendary carry technology with Hydroflask leak-proof insulation for ultimate performance. Osprey also introduced a mountain-bound series of winter luggage, crafted with nano-tough fabric for rugged, highly water-resistant protection for ski and snowboard gear. Hydroflask delighted families with the Eric Carl collaboration, featuring iconic Very Hungry Caterpillar in our insulated kids bottle. OXO expanded its TOT baby-led weaning suite and added a new TOT and coffee SKUs at our TOT partners. This month marks the debut of OXO's Trident series cookware, which provides superior heat distribution and high-performance cooking without the hassle of a cleanup. In beauty and wellness, Olive & June continued to introduce trend-right collections tied to holidays and events, including Be Bold collection, Halloween designs, festive holiday stickers. After quarter-end, Olive & June launched a playful collaboration with Peachy Babies, combining nails and slime for the most satisfying collab yet. along with pressies for kids and tweens, which is seeing strong early success at top retailers. For cold and flu season, Honeywell introduced two fresh, new-styled Allergen Plus HEPA-certified air purifiers, a three-in-one for large rooms and a tabletop for smaller spaces. These innovations, along with many more coming to market, give me increasing confidence we're focused on the right things to improve our business. I believe we can win for our consumer through innovation and marketplace execution. This allows us to return to revenue leadership, strong margins, and robust cash flow. But we know it won't be a straight line. We're making tough choices to invest in our future. We build our platform for growth and improve our financial profile through better operating leverage, while we create greater competitive advantage across the portfolio. With that, I'm going to turn it over to Brian to walk through the financial results and outlook.

Thank you, Scott. Good morning, everyone, and happy new year. Today we reported third quarter net sales and adjusted EPS results in line with our expectations. I would like to thank our associates for their hard work in achieving our financial objectives for the quarter in what continues to be a challenging environment. Operationally, we made headway on improving our go-to-market effectiveness, leaning in on innovation for more product-driven growth, focusing on the fundamentals, and putting our brands back at the center, fully leveraging their unique strengths. Scott mentioned several new innovations in market, and I'm excited by new launches planned for the coming year. There's renewed energy across our organization, reinforced by the culture work Scott mentioned. Our third quarter results reflect progress towards simplifying operations, sharpening priorities, and increasing agility. But we know much more improvement is needed, and we continue to take decisive steps to position Helena Troy for sustainable growth. On tariffs, We advanced mitigation strategies, including supplier diversification, skew prioritization, cost reductions, and price increases. The majority of our price adjustments are now in place, but we are still navigating some parts of the market where we achieve less than full pricing realization due to stop shipments we believe are necessary to support consistent adoption of price increases by our retail partners, primarily impacting the beauty and wellness segment. We expect some residual impact from stop shipments to carry into the fourth quarter, which I will touch on later in my remarks. Year to date, gross unmitigated tariffs had a $31.3 million impact on gross profit, with the full year impact expected to be in the range of $50 to $55 million. We now expect less than a $30 million tariff impact on operating income for the full year, net mitigation actions, up from our prior expectation of approximately 20 million, primarily driven by delayed timing of pricing realization. We remain on track to reduce our cost of goods sold subject to China tariffs to between 25 to 30 percent by the end of fiscal 26. Our diversification and dual sourcing strategies are reducing long-term supply chain risk and helping to insulate us from further policy changes or other geopolitical impacts. Turning to our results, consolidated net sales decreased 3.4%, favorable to our outlook range, and a sequential improvement compared to the first and second quarters of the year. Organic net sales declined 10.8%. Approximately 3.3 percentage points, or $17.3 million, of the organic revenue decline was driven by tariff-related revenue disruption, which includes the pause or cancellation of direct import orders from China changing dynamics within the China market, and the impact of stop shipments referred to earlier. Home and outdoor net sales declined 6.7%. We saw strong demand for travel, technical, and lifestyle packs, strong holiday orders from brick-and-mortar retailers in the home category, and incremental revenue from tariff-related price increases, offset by softness and insulated beverage ware, lower online sales in the home category, and lower overall closeout channel sales. Beauty and wellness net sales decreased 0.5%. Organic beauty and wellness sales declined 13.9% with approximately 4.5 percentage points or $12.9 million driven by tariff-related disruption. In beauty, hair appliances and prestige liquids were impacted by soft consumer demand, competitive pressures, the cancellation of direct import orders, and lower closeout channel sales. Wellness was unfavorably impacted by lower international sales due to evolving dynamics in the China market, pricing-related stock shipments referred to earlier, and a below average illness season. These headwinds were partially offset by a strong contribution from Olive in June of $37.7 million. Consolidated gross profit margin decreased 200 basis points to 46.9%, primarily due to the net unfavorable impact of higher tariffs and a less favorable inventory obsolescence impact year over year. These factors were partially offset by the favorable impact of Olive in June and lower commodity and product costs exclusive of tariffs. SG&A ratio increased 160 basis points, primarily due to the acquisition of Olive in June, higher outbound freight, higher annual incentive compensation expense compared to the same period last year, and unfavorable operating leverage. Lower gross profit margin and a higher SG&A ratio resulted in a consolidated adjusted operating margin decrease of 370 basis points to 12.9%, which consisted of a decrease of 650 basis points for home and outdoor and 120 basis points for beauty and wellness. The declines were driven primarily by the net unfavorable impact of tariffs, higher incentive compensation expense, and unfavorable operating leverage, partially offset by margin accretion from Olive and June in the beauty and wellness segment. We incurred higher interest expense due to higher average borrowings driven by the Olive and June acquisition, higher inventory carrying costs due to tariffs, and higher CapEx spend as we make supplier transitions out of China. Higher interest expense was partially offset by lower adjusted income tax expense, resulting in adjusted EPS of $1.71. Inventory ended at $505 million, which includes $35 million in incremental tariff-related costs year-over-year and incremental inventory from the Olive and June acquisition, compared to $451 million at the same time last year. Debt closed at $892 million, with $325 million in revolver availability. Our net leverage ratio was 3.77 times compared to 3.54 times at the end of the second quarter. The increase in our leverage was due to lower trailing 12-month EBITDA driven primarily by higher tariff costs and the unfavorable cash flow and balance sheet impacts of tariffs on our outstanding debt balance. Year-to-date free cash flow was $29 million which includes 58 million of incremental cash outflows for tariff payments and the cost of supplier transitions out of China. Now I'd like to turn to our annual outlook. We've tightened our range on the top line to 1.758 billion to 1.773 billion with home and outdoor net sales of 812 to 819 million compared to our previous expectation of 800 to 819 million. and beauty and wellness net sales of $946 to $954 million compared to our previous expectation of $939 to $961 million. We lowered our adjusted EPS expectations to a range of $3.25 to $3.75, driven by less than full pricing realization, consumer trade down behavior and less favorable mix, higher trade and promotion expense, and the preservation of investments in our people and brands to build revenue momentum and more favorable operating leverage going forward. We expect a full year GAAP SG&A ratio in the range of 38 to 40%. We expect a full year adjusted effective tax rate in the range of 13.4 to 14.7%. Inventory is expected to be 475 to 490 million at year end. which includes an estimated $39 million of incremental costs from tariffs. Our outlook includes the ongoing impact from changing dynamics in the China market, lapping of tariff-related order pull forward in the fourth quarter of fiscal 25, and residual stop shipments to support consistent tariff pricing adoption. We expect modest improvements in direct import orders and select programs shifting to warehouse replenishment. Overall, we expect retailers to continue to closely manage inventories. Despite a recent uptick in flu incidents, overall incidents for the full season and upper respiratory illness in particular are tracking well below both last year and the trailing three season average. Retailer inventories look to be sufficiently stocked to supply demand should illness continue to increase during the remainder of the fourth quarter. Given the challenging operating environment, we expect margin pressure to persist through the fourth quarter, reflecting consumer trade down, a more promotional environment, a delay in achieving full pricing realization, and cautious retail behavior. While we remain focused on cost control, we are preserving key strategic investments in support of our people, new product innovation, stronger brand loyalty, and better commercial execution. As we transition back to growth mode, we expect to have a bias towards revenue improvement over cost reduction in order to recapture our operating leverage. Before I conclude my remarks, I want to direct your attention to the investor presentation posted to our website, which contains additional information and perspective on our third quarter results and our outlook for the remainder of the year. And with that, I'll turn it back to the operator for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit to one question and one follow-up question and re-queue for additional questions. Our first question is from Rupesh Park with Oppenheimer and Company. Please proceed.