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HELE Q2 Earnings Top Estimates on Margin Gains, Guidance Raised
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Key Takeaways
HELE's Q2 adjusted EPS jumped 33.9% to 79 cents, beating estimates, as net sales rose 2.1%.
Home & Outdoor sales grew 9.2%, while tariff benefits helped expand gross margin by 800 bps.
HELE raised its fiscal 2027 adjusted EPS outlook to $3.60-$4.15 and free cash flow forecast to $120M-$140M.
Helen of Troy Limited (HELE - Free Report) reported improved profitability in the second quarter of fiscal 2027, supported by strength in its Home & Outdoor business, favorable tariff-related benefits and lower interest expenses. Management also raised its annual earnings outlook.
The company posted adjusted earnings of 79 cents per share, beating the Zacks Consensus Estimate of 51 cents. The bottom line increased 33.9% from 59 cents reported in the year-ago quarter. Net sales increased 2.1% year over year to $440.9 million. The Zacks Consensus Estimate was pegged at $441.5 million.
Helen of Troy Limited Price, Consensus and EPS Surprise
The top line benefited from strong demand for packs, higher international sales, assortment and distribution gains, increased closeout channel sales and new product launches. These gains were partly offset by weakness in hair appliances, prestige hair care and water filtration.
The consolidated gross margin expanded 800 basis points (bps) to 52.2%, primarily reflecting favorable tariff refunds, net of higher tariff costs and lower retail trade and promotional expenses. Tariff-related effects contributed approximately 560 bps to the improvement. Inflationary product costs and unfavorable inventory obsolescence trends partly offset these gains.
The consolidated selling, general and administrative (SG&A) expense ratio increased 540 bps to 46.4%, reflecting higher personnel expenses, packaging-related costs, marketing investments and divestiture litigation expenses.
Adjusted operating income increased 40.9% to $37.9 million, while the adjusted operating margin expanded 240 bps to 8.6%. Adjusted EBITDA rose to $49.4 million from $36.2 million, with the corresponding margin improving 280 bps to 11.2%.
Helen of Troy's Segmental Performance
Home & Outdoor net sales increased 9.2% to $227.9 million, driven by growth across OXO, Hydro Flask and Osprey. Strong demand for technical, travel and lifestyle packs, higher international sales, distribution gains and new product launches supported performance. The segment's adjusted operating income increased 39.2% to $28 million, while its adjusted operating margin expanded 270 bps to 12.3%. Favorable tariff-related effects and operating leverage supported profitability, partly offset by higher personnel, packaging and marketing costs.
Beauty & Wellness net sales declined 4.5% to $213 million. Weak demand for hair appliances and prestige hair care products, competitive pressures, reduced retailer replenishment orders and lower water filtration sales weighed on the performance. These declines were partly offset by higher heater and thermometer sales, strong nail care demand and new product introductions. The segment's adjusted operating income increased 45.7% to $10 million, while its adjusted operating margin improved 160 bps to 4.7%.
HELE's Financial Position
Helen of Troy ended the quarter with cash and cash equivalents of $22.6 million compared with $22.4 million a year ago. Total short- and long-term debt declined to $672.6 million from $893.2 million in the prior-year period.
Inventory decreased to $480.3 million from $528.9 million a year earlier. Accounts receivable turnover increased to 67.6 days from 72.2 days. The company's net leverage ratio improved to 3.0 times from 3.5 times at the end of the preceding quarter.
For the first six months of fiscal 2027, operating cash flow increased to $56.5 million from $47.9 million. Free cash flow rose to $38.3 million from $23 million in the year-ago period.
Helen of Troy's Outlook for Fiscal 2027
Management narrowed its fiscal 2027 net sales guidance to $1,768-$1,822 million from $1,759-$1,831 million. Home & Outdoor sales are projected at $851-$876 million, while Beauty & Wellness sales are anticipated at $917-$946 million.
Adjusted earnings guidance was raised to $3.60-$4.15 per share from $3.25-$3.75. Adjusted EBITDA is now expected between $203 million and $210 million, up from the previous projection of $190-$197 million.
The company also raised its free cash flow forecast to $120-$140 million from $85-$100 million. Management expects a net leverage ratio of 2.7 times or lower by fiscal year-end.
For the third quarter, management anticipates net sales of $478.3-$504.5 million and adjusted earnings of $2.05-$2.40 per share, including an estimated tariff refund benefit of 66-77 cents per share.
HELE's Tariff Strategy and Business Priorities
The second-quarter results included gross pretax tariff refunds of $26.9 million, of which approximately $23 million was reinvested. This resulted in a net pretax benefit of approximately $4 million and an estimated adjusted earnings benefit of 12 cents per share.
For fiscal 2027, management expects approximately $80.5 million in gross tariff refunds, with 83-88% earmarked for reinvestment in brand development, organizational capabilities and inventory improvements. The estimated net pretax benefit is $10-$14 million.
The outlook incorporates continued inflationary pressures, cautious retailer inventory management, weak discretionary demand and heightened promotional activity. Higher commodity, freight and supply-chain costs remain challenges as management prioritizes brand investment, commercial execution and balance-sheet productivity.
The Zacks Rank #3 (Hold) stock has rallied 28.2% over the past year against the industry’s decline of 1.4%.
The Zacks Consensus Estimate for e.l.f. Beauty’s current fiscal-year sales and earnings per share (EPS) implies growth of 20.3% and 16.6%, respectively, from the year-ago figures.
Mondelez International, Inc. (MDLZ - Free Report) , a global snacking company, currently carries a Zacks Rank #2 (Buy). MDLZ delivered a trailing four-quarter earnings surprise of 5.8%, on average.
The Zacks Consensus Estimate for Mondelez’s current fiscal-year sales and EPS implies growth of 3.7% and 4.5%, respectively, from the year-ago figures.
Mama's Creations, Inc. (MAMA - Free Report) , a prepared-foods company focused on fresh, ready-to-eat and deli products, currently carries a Zacks Rank of 2. MAMA delivered a trailing four-quarter surprise of 121.7%, on average.
The Zacks Consensus Estimate for Mama's Creations’ current fiscal-year sales and EPS indicates respective increases of 30.3% and 66.7% from the year-ago period.
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HELE Q2 Earnings Top Estimates on Margin Gains, Guidance Raised
Key Takeaways
Helen of Troy Limited (HELE - Free Report) reported improved profitability in the second quarter of fiscal 2027, supported by strength in its Home & Outdoor business, favorable tariff-related benefits and lower interest expenses. Management also raised its annual earnings outlook.
The company posted adjusted earnings of 79 cents per share, beating the Zacks Consensus Estimate of 51 cents. The bottom line increased 33.9% from 59 cents reported in the year-ago quarter. Net sales increased 2.1% year over year to $440.9 million. The Zacks Consensus Estimate was pegged at $441.5 million.
Helen of Troy Limited Price, Consensus and EPS Surprise
Helen of Troy Limited price-consensus-eps-surprise-chart | Helen of Troy Limited Quote
HELE's Q2 Performance: Key Metrics & Insights
The top line benefited from strong demand for packs, higher international sales, assortment and distribution gains, increased closeout channel sales and new product launches. These gains were partly offset by weakness in hair appliances, prestige hair care and water filtration.
The consolidated gross margin expanded 800 basis points (bps) to 52.2%, primarily reflecting favorable tariff refunds, net of higher tariff costs and lower retail trade and promotional expenses. Tariff-related effects contributed approximately 560 bps to the improvement. Inflationary product costs and unfavorable inventory obsolescence trends partly offset these gains.
The consolidated selling, general and administrative (SG&A) expense ratio increased 540 bps to 46.4%, reflecting higher personnel expenses, packaging-related costs, marketing investments and divestiture litigation expenses.
Adjusted operating income increased 40.9% to $37.9 million, while the adjusted operating margin expanded 240 bps to 8.6%. Adjusted EBITDA rose to $49.4 million from $36.2 million, with the corresponding margin improving 280 bps to 11.2%.
Helen of Troy's Segmental Performance
Home & Outdoor net sales increased 9.2% to $227.9 million, driven by growth across OXO, Hydro Flask and Osprey. Strong demand for technical, travel and lifestyle packs, higher international sales, distribution gains and new product launches supported performance. The segment's adjusted operating income increased 39.2% to $28 million, while its adjusted operating margin expanded 270 bps to 12.3%. Favorable tariff-related effects and operating leverage supported profitability, partly offset by higher personnel, packaging and marketing costs.
Beauty & Wellness net sales declined 4.5% to $213 million. Weak demand for hair appliances and prestige hair care products, competitive pressures, reduced retailer replenishment orders and lower water filtration sales weighed on the performance. These declines were partly offset by higher heater and thermometer sales, strong nail care demand and new product introductions. The segment's adjusted operating income increased 45.7% to $10 million, while its adjusted operating margin improved 160 bps to 4.7%.
HELE's Financial Position
Helen of Troy ended the quarter with cash and cash equivalents of $22.6 million compared with $22.4 million a year ago. Total short- and long-term debt declined to $672.6 million from $893.2 million in the prior-year period.
Inventory decreased to $480.3 million from $528.9 million a year earlier. Accounts receivable turnover increased to 67.6 days from 72.2 days. The company's net leverage ratio improved to 3.0 times from 3.5 times at the end of the preceding quarter.
For the first six months of fiscal 2027, operating cash flow increased to $56.5 million from $47.9 million. Free cash flow rose to $38.3 million from $23 million in the year-ago period.
Helen of Troy's Outlook for Fiscal 2027
Management narrowed its fiscal 2027 net sales guidance to $1,768-$1,822 million from $1,759-$1,831 million. Home & Outdoor sales are projected at $851-$876 million, while Beauty & Wellness sales are anticipated at $917-$946 million.
Adjusted earnings guidance was raised to $3.60-$4.15 per share from $3.25-$3.75. Adjusted EBITDA is now expected between $203 million and $210 million, up from the previous projection of $190-$197 million.
The company also raised its free cash flow forecast to $120-$140 million from $85-$100 million. Management expects a net leverage ratio of 2.7 times or lower by fiscal year-end.
For the third quarter, management anticipates net sales of $478.3-$504.5 million and adjusted earnings of $2.05-$2.40 per share, including an estimated tariff refund benefit of 66-77 cents per share.
HELE's Tariff Strategy and Business Priorities
The second-quarter results included gross pretax tariff refunds of $26.9 million, of which approximately $23 million was reinvested. This resulted in a net pretax benefit of approximately $4 million and an estimated adjusted earnings benefit of 12 cents per share.
For fiscal 2027, management expects approximately $80.5 million in gross tariff refunds, with 83-88% earmarked for reinvestment in brand development, organizational capabilities and inventory improvements. The estimated net pretax benefit is $10-$14 million.
The outlook incorporates continued inflationary pressures, cautious retailer inventory management, weak discretionary demand and heightened promotional activity. Higher commodity, freight and supply-chain costs remain challenges as management prioritizes brand investment, commercial execution and balance-sheet productivity.
The Zacks Rank #3 (Hold) stock has rallied 28.2% over the past year against the industry’s decline of 1.4%.
Stocks to Consider
e.l.f. Beauty, Inc. (ELF - Free Report) , a cosmetics and skincare products company currently carries a Zacks Rank #1 (Strong Buy). ELF delivered a trailing four-quarter surprise of 61.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for e.l.f. Beauty’s current fiscal-year sales and earnings per share (EPS) implies growth of 20.3% and 16.6%, respectively, from the year-ago figures.
Mondelez International, Inc. (MDLZ - Free Report) , a global snacking company, currently carries a Zacks Rank #2 (Buy). MDLZ delivered a trailing four-quarter earnings surprise of 5.8%, on average.
The Zacks Consensus Estimate for Mondelez’s current fiscal-year sales and EPS implies growth of 3.7% and 4.5%, respectively, from the year-ago figures.
Mama's Creations, Inc. (MAMA - Free Report) , a prepared-foods company focused on fresh, ready-to-eat and deli products, currently carries a Zacks Rank of 2. MAMA delivered a trailing four-quarter surprise of 121.7%, on average.
The Zacks Consensus Estimate for Mama's Creations’ current fiscal-year sales and EPS indicates respective increases of 30.3% and 66.7% from the year-ago period.