Q2 2026: Contradictions Emerge on Pricing, Tariff Strategies, and Consumer Response in Earnings Calls

The above is the analysis of the conflicting points in this earnings call

Date of Call: October 9, 2025

Financials Results

• Revenue: Consolidated net sales down 8.9% YOY; organic ex-Olive & June down 16%
• EPS: $0.59 adjusted diluted EPS, down from $1.21 prior year (~51% decline)
• Gross Margin: 44.2%, down 140 bps YOY (tariffs impacted ~-200 bps)
• Operating Margin: Adjusted operating margin 6.2%, down 360 bps YOY

Guidance:

• FY26 net sales: $1.74B–$1.78B (-8.8% to -6.7% YOY)
• FY26 adjusted EPS: $3.75–$4.25 (-47.7% to -40.7% YOY)
• FY26 Home & Outdoor: -11.8% to -9.7%; Beauty & Wellness: -6.2% to -4.0%
• Olive & June FY26: total revenue $130M–$137M (incremental $109M–$112M)
• Q3 net sales: $491M–$512M (-7.5% to -3.5%); adjusted EPS: $1.55–$1.80 (-41.9% to -32.6%)
• Q3 Beauty & Wellness: -2.9% to +1.0% (incl. Olive & June $36M–$39M); Home & Outdoor: -12.8% to -8.7%
• 2H SG&A ratio expected: 34%–36%
• Adjusted effective tax rate: FY26 15%–16% (Q3 22%–25%; Q4 28%–31%)
• Year-end inventory: $480M–$500M
• Pricing largely implemented by late Sept; some shipments held pending adoption

Business Commentary:

* Challenges and Recovery Plan: - Helen of Troy's net sales decreased by 8.9% and reported a $315.7 million operating loss in Q2 fiscal 2026. - The decline was attributed to tariffs causing disruptions to direct import orders and impacting profitability, along with weakening consumer demand and retail inventory adjustments.

• Divisional Performance and Impact of Tariffs:
• The Beauty & Wellness segment reported a 4% decline in sales, with 5 percentage points attributed to tariff-related disruptions.

• The Home & Outdoor segment experienced a 13.7% decline, with 4 percentage points attributed to tariffs, impacting orders and retail inventory.

• Go-To-Market and Operational Enhancements:

• Helen of Troy made improvements in operating effectiveness by restructuring commercial triangles, implementing single points of accountability, and rebuilding its organizational structure.

• These changes aimed to improve efficiency, communication, and decision-making, which were proactive measures to enhance performance and grow shareholder value.

• Tariff Mitigation and Cost Management:

• The company initiated measures such as supplier diversification, inventory management, and cost reductions to mitigate the impact of tariffs.
• These strategies were aimed at securing favorable costs, navigating product availability, and stabilizing supply chains amidst ongoing disruptions.

Sentiment Analysis:

• Net sales decreased 8.9% YOY; adjusted EPS fell to $0.59 from $1.21; adjusted operating margin declined 360 bps to 6.2%; GAAP operating loss of $315.7M driven by $326.4M impairment. Guidance implies FY revenue down 8.8%–6.7% and adjusted EPS down 47.7%–40.7%. Management cited ongoing tariff headwinds, delayed price adoption, cautious consumers, and retailer inventory adjustments.

Q&A:

• Question from Rupesh Parikh (Oppenheimer): How do you view the portfolio today and are divestitures on the table?
  Response: Early review suggests all brands have promise; portfolio is under evaluation for the long-term plan, but no specific divestiture decisions now.

• Question from Rupesh Parikh (Oppenheimer): Is FY26 a fair base to grow from into FY27?
  Response: No FY27 guidance, but many FY26 headwinds are transitory and expected to ease into FY27, creating a better base.

• Question from Bob Labick (CJS Securities): What are the key steps to revitalize leading brands that have slowed?
  Response: Center on consumer insights, reignite product innovation, and streamline decision-making to execute fewer, high-impact initiatives faster.

• Question from Bob Labick (CJS Securities): Thoughts on leverage, covenants, and capital structure?
  Response: Target leverage near ~2x; in constructive talks for covenant relief; expect amendment fees but no major changes to interest costs.

• Question from Susan Anderson (Canaccord Genuity): Where are the biggest category opportunities ahead?
  Response: Opportunities across both segments; focus on fewer initiatives, strengthen core (Osprey, OXO, Curlsmith, Olive & June), pay down debt, and pursue M&A later.

• Question from Susan Anderson (Canaccord Genuity): Segment puts/takes this quarter and brand performance?
  Response: Sell-in lagged sell-through; Wellness weaker (tariffs, cough/cold), Beauty mixed with improving pipeline, Home soft on imports/inventory; Osprey strong; tumblers soft, pivoting Hydro Flask toward bottles.

• Question from Olivia Tong (Raymond James): Where will innovation lead and how manage drinkware discounting?
  Response: Embed consumer-first innovation across portfolio; in hydration, address tumbler saturation/discounting by leaning into bottles, expanding adjacencies and distribution.

• Question from Olivia Tong (Raymond James): Confidence in tariff mitigation and pricing actions?
  Response: Most price increases are implemented; holding some shipments for consistent adoption; conservative elasticity assumptions; continue supplier cost reductions while protecting growth investments.

• Question from Sharad for Peter Grom (UBS): How much recovery depends on volume stabilization and timing?
  Response: Outlook assumes continued soft demand and conservative elasticity; tailwinds expected from retailer inventory rebalancing and direct-import recovery in 2H.

• Question from Sharad for Peter Grom (UBS): What are you seeing in the consumer backdrop and Beauty specifically?
  Response: Trade-down exists in certain Beauty categories, especially younger consumers; mixed AUR trends; growth hinges on new product development and support.