The Hain Celestial Group, Inc. (HAIN Quick QuoteHAIN - Free Report) reported fourth-quarter fiscal 2026 results, with an adjusted loss wider than the Zacks Consensus Estimate and net sales above the consensus mark. The quarter reflected a steep reported sales decline following the divestiture of the North American snacks business. However, organic sales trends improved sequentially, North America returned to growth and companywide margins expanded.

HAIN reported an adjusted loss of 5 cents per share, wider than the consensus estimate of a loss of 3 cents and the adjusted loss of 2 cents recorded in the prior-year quarter. The adjusted net loss was $4.4 million compared with $1.7 million a year ago.

On a GAAP basis, the company reported a loss of 68 cents per share compared with a loss of $3.06 in the prior-year period. The GAAP net loss narrowed to $61.9 million from $272.6 million, reflecting a smaller goodwill impairment charge than a year ago.

Net sales were $263.1 million, which exceeded the consensus estimate of $257 million. Sales, however, declined 27.6% from $363.3 million in the year-ago quarter, primarily due to the North American snacks divestiture.

Organic Sales Decline as Volume & Mix Remain Soft

Organic net sales decreased 2% year over year to $246.7 million. The decline reflected a 2-point reduction in volume and mix, while pricing was flat. A 26.2-point drag from divestitures, held-for-sale businesses, discontinued brands and exited categories accounted for most of the reported sales decline, while foreign currency contributed 0.4 points.

Management said sales trends improved sequentially across the business. North America grew organically, while the International segment's decline moderated from the third quarter. E-commerce sales with HAIN's largest pure-play and omnichannel customers in North America also grew at a double-digit rate during the quarter.

Gross Margin Expands on Portfolio Mix & Productivity

Adjusted gross profit fell 19.6% year over year to $59.8 million. Still, the adjusted gross margin expanded 230 basis points to 22.7%. Favorable volume and mix and productivity savings supported the margin improvement, while cost inflation remained a headwind. The quarter also included a $1.9 million benefit from tariff refunds. We anticipated the adjusted gross margin to be 23% in the quarter under review.

Selling, general and administrative (SG&A) expenses declined 7.2% to $62.5 million, mainly due to lower employee-related costs. However, SG&A represented 23.8% of net sales compared with 18.6% in the prior-year quarter, reflecting strategic-review costs and the smaller sales base.

Adjusted EBITDA decreased 5.8% to $18.7 million from $19.9 million. The adjusted EBITDA margin nonetheless increased 160 basis points to 7.1%, as lower SG&A and productivity savings partly offset inflation and lower volume and mix. This missed our estimate of 7.2%. Interest and other financing expense declined to $11.9 million from $12.8 million.

North America Returns to Organic Growth

North America net sales were $111.8 million, which came above our estimate of $92.5 million but declined 45.7% year over year because the prior-year comparison included the divested snacks business. Organic net sales rose approximately 2%, driven by strength in Meal Prep, particularly yogurt, partly offset by lower Baby and Kids sales.

The segment's adjusted gross profit declined 12% to $34.8 million, but adjusted gross margin jumped 1,190 basis points to 31.1%. The increase reflected a more favorable portfolio mix following the snacks sale and productivity savings, partly offset by inflation. Adjusted EBITDA rose 55% to $16.1 million and the margin expanded to 14.4% from 5% a year earlier.

Management highlighted strong double-digit growth at Greek Gods yogurt and Earth's Best finger foods. Celestial Seasonings also delivered growth, aided by its Wellness tea portfolio. HAIN plans to concentrate future investment on Greek Gods, Celestial Seasonings and the Earth's Best finger foods and cereal platforms.

International Profitability Remains Under Pressure

International net sales decreased 4% to $151.3 million and lagged our estimate of $164 million, while organic net sales also fell 4%. Weakness in Meal Prep and Baby and Kids more than offset growth in Beverages. The organic decline moderated from 8% in the fiscal third quarter, reflecting sequential improvement across Baby and Kids, Beverages and Meal Prep.

Adjusted gross profit fell 28% to $25 million, while adjusted gross margin contracted 555 basis points to 16.6% as cost inflation outweighed productivity savings. Adjusted EBITDA declined 41% to $12.2 million and the adjusted EBITDA margin fell to 8.1% from 13.3% in the prior-year period.

Hain Celestial’s Category Performance

In Baby and Kids, net sales were $52.3 million and organic net sales declined 11% year over year. Lower formula and puree sales in North America and weaker U.K. purees more than offset growth in North American finger foods. HAIN said its simplified Earth's Best puree portfolio produced a 30% increase in base sales velocity.

Beverages generated net sales of $55.4 million, with organic sales down 2%. Growth of 3% in both North American tea and International private-label non-dairy beverages was more than offset by lower sales elsewhere, including the effect of reduced promotional activity in North America. Wellness teas continued to post high-single-digit dollar-sales growth and gain market share.

Meal Prep net sales totaled $135 million, while organic sales rose 3% on yogurt strength in North America. Greek Gods grew dollar sales at a high-teens rate and gained share. Snacks net sales were $8.5 million and organic sales fell 7% as HAIN rationalized SKUs ahead of a brand relaunch. Following the North American snacks sale, the category consists only of jellies in the International segment.

Cash Flow & Debt Reduction Improve

HAIN ended the quarter with cash and cash equivalents of $58.1 million. Total debt was $557.8 million, down from $704.8 million at the beginning of the fiscal year, while net debt declined to $499.8 million from $650.5 million. The company reported $186 million of available liquidity under its revolving credit facility and remained in compliance with its covenants. Its net secured leverage ratio was 4.5 times, below the covenant maximum of 5.5 times.

Net cash provided by operating activities was $11.4 million in the fiscal fourth quarter compared with a $2.6 million outflow in the prior-year period. Free cash flow improved to $6.8 million from an outflow of $8.9 million. For fiscal 2026, operating cash flow rose to $78.3 million from $22.1 million, while free cash flow reached $57.7 million compared with an outflow of $3.2 million.

Inventory discipline supported the cash improvement. Days inventory outstanding declined to 80 from 88 in the prior-year quarter, though it increased from 73 in the fiscal third quarter. Capital expenditures fell to $4.6 million from $6.2 million and management expects fiscal 2027 capital spending to decline year over year because the future North American business is less capital intensive.

Hain Celestial's Portfolio Reset Shapes Fiscal 2027

HAIN agreed to sell its International business to affiliates of AURELIUS for an estimated aggregate gross price of about $323.2 million. Net proceeds of $305 million to $310 million would be used to repay the entire outstanding term loan and more than 35% of the revolver balance. On a June 30, 2026 pro forma basis, total debt would decline to approximately $250 million. The sale is expected to close in the second quarter of fiscal 2027, subject to closing conditions.

Closing requires regulatory approvals and an amendment to HAIN's credit agreement by Oct. 12, 2026. The amendment must extend the current Dec. 22, 2026 maturity by at least nine months. If the amendment is not executed by the October deadline, AURELIUS may terminate the agreement. 

HAIN plans to deliver more than $16 million of annual run-rate cost improvements, with most of the savings expected by the end of fiscal 2027. Implementation is expected to cost approximately $20 million, with 70% incurred in fiscal 2027 and the remainder in fiscal 2028. Management plans to increase marketing investment by approximately 100 basis points of net sales.

Assuming the International sale closes and the debt maturity is extended, the cost actions are expected to support a pro forma gross margin of about 30% or higher and a low-double-digit adjusted EBITDA margin for the go-forward North American business. Management did not provide traditional fiscal 2027 guidance while the strategic review, lender discussions and pending sale remain active.

HAIN Stock Past Three-Month Performance

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Shares of this Zacks Rank #3 (Hold) company have lost 1.1% over the past three months against the industry’s 3.9% growth.

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