HELEN OF TROY LTD

Previous wording

This MD&A, including the tables under the headings “Operating Income, Operating Margin, Adjusted Operating Income (non-GAAP), and Adjusted Operating Margin (non-GAAP) by Segment” and “Net Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP),” reports operating income, operating margin, net income and diluted earnings per share (“EPS”) without the impact of a discrete tax charge to revalue existing deferred tax liabilities due to Barbados enacting domestic corporate income tax legislation (“Barbados tax reform”), a charge for uncollectible receivables due to the bankruptcy of Bed, Bath & Beyond (“Bed, Bath & Beyond bankruptcy”), restructuring charges, amortization of intangible assets, and non-cash share-based compensation for the periods presented, as applicable. These measures may be considered non-GAAP financial measures as defined by SEC Regulation G, Rule 100. The tables reconcile these measures to their corresponding GAAP-based financial measures presented in our condensed consolidated statements of income. We believe that adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted EPS provide useful information to management and investors regarding financial and business trends relating to our financial condition and results of operations. We believe that these non-GAAP financial measures, in combination with our financial results calculated in accordance with GAAP, provide investors with additional perspective regarding the impact of such charges and benefits on applicable income, margin and earnings per share measures. We also believe that these non-GAAP measures facilitate a more direct comparison of our performance to our competitors. We further believe that including the excluded charges and benefits would not accurately reflect the underlying performance of our operations for the period in which the charges and benefits were incurred and reflected in our GAAP financial results. The material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not reflect the full economic impact of our activities. Our adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted EPS are not prepared in accordance with GAAP, are not an alternative to GAAP financial measures and may be calculated differently than non-GAAP financial measures disclosed by other companies. Accordingly, undue reliance should not be placed on non-GAAP financial measures. These non-GAAP financial measures are discussed further and reconciled to their applicable GAAP-based financial measures contained in this MD&A beginning on page 35.

Current wording

This MD&A, including the tables under the headings “Operating Income, Operating Margin, Adjusted Operating Income (non-GAAP), and Adjusted Operating Margin (non-GAAP) by Segment” and “Net Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP),” reports operating income, operating margin, net income and diluted earnings per share (“EPS”) without the impact of a discrete tax charge to revalue existing deferred tax liabilities due to Barbados enacting domestic corporate income tax legislation (“Barbados tax reform”), a charge for uncollectible receivables due to the bankruptcy of Bed, Bath & Beyond (“Bed, Bath & Beyond bankruptcy”), gain on sale of distribution and office facilities, restructuring charges, amortization of intangible assets, and non-cash share-based compensation for the periods presented, as applicable. These measures may be considered non-GAAP financial measures as defined by SEC Regulation G, Rule 100. The tables reconcile these measures to their corresponding GAAP-based financial measures presented in our condensed consolidated statements of income. We believe that adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted EPS provide useful information to management and investors regarding financial and business trends relating to our financial condition and results of operations. We believe that these non-GAAP financial measures, in combination with our financial results calculated in accordance with GAAP, provide investors with additional perspective regarding the impact of such charges and benefits on applicable income, margin and earnings per share measures. We also believe that these non-GAAP measures facilitate a more direct comparison of our performance to our competitors. We further believe that including the excluded charges and benefits would not accurately reflect the underlying performance of our operations for the period in which the charges and benefits were incurred and reflected in our GAAP financial results. The material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not reflect the full economic impact of our activities. Our adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted EPS are not prepared in accordance with GAAP, are not an alternative to GAAP financial measures and may be calculated differently than non-GAAP financial measures disclosed by other companies. Accordingly, undue reliance should not be placed on non-GAAP financial measures. These non-GAAP financial measures are discussed further and reconciled to their applicable GAAP-based financial measures contained in this MD&A beginning on page 37.

Previous wording

During fiscal 2023, we initiated a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and effectiveness and reduce costs (referred to as “Project Pegasus”). Project Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the organization, accelerate and amplify cost of goods savings projects, enhance the efficiency of our supply chain network, optimize our indirect spending and improve our cash flow and working capital, as well as other activities. We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments. During the three and six month periods ended August 31, 2024, we incurred $1.5 million and $3.4 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the condensed consolidated statements of income. We recognized $3.6 million and $11.0 million of pre-tax restructuring costs during the three and six month periods ended August 31, 2023, respectively, in connection with Project Pegasus. See further discussion below within “Significant Trends Impacting the Business” under “Project Pegasus” and Note 6 to the accompanying condensed consolidated financial statements.

Current wording

During fiscal 2023, we initiated a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and effectiveness and reduce costs (referred to as “Project Pegasus”). Project Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the organization, accelerate and amplify cost of goods savings projects, enhance the efficiency of our supply chain network, optimize our indirect spending and improve our cash flow and working capital, as well as other activities. We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments. During the three and nine month periods ended November 30, 2024, we incurred $3.5 million and $6.9 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the condensed consolidated statements of income. We recognized $3.9 million and $14.9 million of pre-tax restructuring costs during the three and nine month periods ended November 30, 2023, respectively, in connection with Project Pegasus. See further discussion below within “Significant Trends Impacting the Business” under “Project Pegasus” and Note 6 to the accompanying condensed consolidated financial statements.

Previous wording

Fiscal 2025 begins our Elevate for Growth Strategy, which provides our strategic roadmap through fiscal 2030. The long-term objectives of Elevate for Growth include continued organic sales growth, further margin expansion, and accretive capital deployment through strategic acquisitions, share repurchases and capital structure management. The Elevate for Growth Strategy includes an enhanced portfolio management strategy to invest in our brands and grow internationally based upon defined criteria with an emphasis on brand building, new product introductions and expanded distribution. We are continuing to execute our initiatives under Project Pegasus, which we expect to generate incremental fuel to invest in our brand portfolio and new capabilities. We intend to further leverage our operational scale and assets, including our new state-of-the-art distribution center, improved go-to-market structure with our North America RMO, and our expanded shared services capabilities. We also plan to complete the geographic consolidation of our Beauty & Wellness businesses, create a centralized marketing organization that embraces next-level data analytics and consumer insight capabilities, and further integrate our supply chain and finance functions within our shared services. Additionally, we are committed to fostering a winning culture and continuing our sustainability and inclusion efforts to support our Elevate for Growth Strategy.

Current wording

Fiscal 2025 begins our Elevate for Growth Strategy, which provides our strategic roadmap through fiscal 2030. The long-term objectives of Elevate for Growth include continued organic sales growth, further margin expansion, and accretive capital deployment through strategic acquisitions, share repurchases and capital structure management. The Elevate for Growth Strategy includes an enhanced portfolio management strategy to invest in our brands and grow internationally based upon defined criteria with an emphasis on brand building, new product introductions and expanded distribution. We are continuing to execute our initiatives under Project Pegasus, which we expect to generate incremental fuel to invest in our brand portfolio and new capabilities. We intend to further leverage our operational scale and assets, including our new state-of-the-art distribution center, improved go-to-market structure with our North America RMO, and our expanded shared services capabilities. We completed the geographic consolidation of our Beauty & Wellness businesses during the third quarter of fiscal 2025. We also plan to create a centralized marketing organization that embraces next-level data analytics and consumer insight capabilities and further integrate our supply chain and finance functions within our shared services. Additionally, we are committed to fostering a winning culture and continuing our sustainability and inclusion efforts to support our Elevate for Growth Strategy.

Previous wording

During the second quarter of fiscal 2025, we performed quantitative impairment testing on our goodwill and certain intangible assets and determined none were impaired. Accordingly, no impairment charges were recorded. For additional information and sensitivity analysis, refer to “Critical Accounting Policies and Estimates” in this Item 2., “Management's Discussion and Analysis of Financial Condition and Results of Operations”.

Current wording

During the second quarter of fiscal 2025, we performed quantitative impairment testing on our goodwill and certain intangible assets and determined none were impaired. Accordingly, no impairment charges were recorded. For additional information, refer to “Critical Accounting Policies and Estimates” in this Item 2., “Management's Discussion and Analysis of Financial Condition and Results of Operations”.

Previous wording

During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business, currently located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in the Boston, Massachusetts area. This geographic consolidation and relocation is the next step in our initiative to streamline and simplify the organization and is expected to be completed during fiscal 2025. We expect these changes will enable a greater opportunity to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment.

Current wording

During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business, located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in the Boston, Massachusetts area. This geographic consolidation and relocation aligns with our initiative to streamline and simplify the organization and was completed during the third quarter of fiscal 2025. We expect these changes to enable a greater opportunity to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment.

Previous wording

In addition, we implemented plans to reduce inventory levels, increase inventory turns, and improve cash flow and working capital during fiscal 2023. Improvements related to these initiatives began in the second half of fiscal 2023, and continued during fiscal 2024, enabling us to repay amounts outstanding under our long-term debt agreement and reduce our interest expense during fiscal 2024. During the first and second quarters of fiscal 2024, our gross margin and operating margins were favorably impacted by our SKU rationalization efforts in Beauty & Wellness. In addition, during the first and second quarters of fiscal 2025, our gross margin and operating margins were favorably impacted by lower commodity and product costs driven by our cost of goods savings projects. Expectations regarding our Project Pegasus initiatives and our ability to realize targeted savings, including expectations concerning costs and savings, are based on management’s estimates available at the time and are subject to a number of assumptions that could materially impact our estimates.

Current wording

In addition, we implemented plans to reduce inventory levels, increase inventory turns, and improve cash flow and working capital during fiscal 2023. Improvements related to these initiatives began in the second half of fiscal 2023, and continued during fiscal 2024, enabling us to repay amounts outstanding under our long-term debt agreement and reduce our interest expense during fiscal 2024. During the three and nine month periods ended November 30, 2023, our gross margin and operating margins were favorably impacted by our SKU rationalization efforts in Beauty & Wellness. In addition, during the third quarter of fiscal 2024, we had lower salary and wage costs primarily as a result of our Project Pegasus role reductions despite higher annual merit increases. During the three and nine month periods ended November 30, 2024, our gross margin and operating margins were favorably impacted by lower commodity and product costs driven by our cost of goods savings projects. Expectations regarding our Project Pegasus initiatives and our ability to realize targeted savings, including expectations concerning costs and savings, are based on management’s estimates available at the time and are subject to a number of assumptions that could materially impact our estimates.

Previous wording

During the three and six month periods ended August 31, 2024, we incurred $1.5 million and $3.4 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the condensed consolidated statements of income. We recognized $3.6 million and $11.0 million of pre-tax restructuring costs during the three and six month periods ended August 31, 2023, respectively, in connection with Project Pegasus. We made total cash restructuring payments of $5.6 million and $15.2 million during the six month periods ended August 31, 2024 and 2023, respectively, and had a remaining liability of $2.5 million as of August 31, 2024. See Note 6 to the accompanying condensed consolidated financial statements for additional information.

Current wording

During the three and nine month periods ended November 30, 2024, we incurred $3.5 million and $6.9 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the condensed consolidated statements of income. We recognized $3.9 million and $14.9 million of pre-tax restructuring costs during the three and nine month periods ended November 30, 2023, respectively, in connection with Project Pegasus. We made total cash restructuring payments of $9.8 million and $17.5 million during the nine month periods ended November 30, 2024 and 2023, respectively, and had a remaining liability of $1.8 million as of November 30, 2024. See Note 6 to the accompanying condensed consolidated financial statements for additional information.

Previous wording

The Federal Open Market Committee increased the benchmark interest rate by 50 basis points and 25 basis points during the first and second quarters of fiscal 2024, respectively. As a result, we incurred higher average interest rates during the first and second quarters of fiscal 2025 compared to the same periods last year. The Federal Open Market Committee lowered the benchmark interest rate by 50 basis points subsequent to the second quarter of fiscal 2025. While the actual timing and extent of additional future changes in interest rates remains unknown, lower average interest rates would reduce interest expense on our outstanding variable rate debt. The financial markets, the global economy and global supply chain may also be adversely affected by the current or anticipated impact of military conflicts or other geopolitical events. High inflation and interest rates have also negatively impacted consumer disposable income, credit availability and spending, among others, which have adversely impacted our business, financial condition, cash flows and results of operations during fiscal 2024 and the first and second quarters of fiscal 2025 and may continue to have an adverse impact during the remainder of fiscal 2025. See further discussion below under “Consumer Spending and Changes in Shopping Preferences.” We expect continued uncertainty in our business and the global economy due to pressure from inflation and consumer confidence, any of which may adversely impact our results.

Current wording

The Federal Open Market Committee increased the benchmark interest rate by 50 basis points and 25 basis points during the first and second quarters of fiscal 2024, respectively. As a result, we incurred higher average interest rates during the first and second quarters of fiscal 2025 compared to the same periods last year. The Federal Open Market Committee lowered the benchmark interest rate by 75 basis points during the third quarter of fiscal 2025, resulting in lower average interest rates incurred during the third quarter of fiscal 2025 compared to the same period last year. While the actual timing and extent of additional future changes in interest rates remains unknown, lower average interest rates would reduce interest expense on our outstanding variable rate debt. The financial markets, the global economy and global supply chain may also be adversely affected by the current or anticipated impact of military conflicts or other geopolitical events. High inflation and interest rates have also negatively impacted consumer disposable income, credit availability and spending, among others, which have adversely impacted our business, financial condition, cash flows and results of operations during fiscal 2024 and the first three quarters of fiscal 2025 and may continue to have an adverse impact during the remainder of fiscal 2025. See further discussion below under “Consumer Spending and Changes in Shopping Preferences.” We expect continued uncertainty in our business and the global economy due to pressure from inflation and consumer confidence, any of which may adversely impact our results.

Previous wording

Our business depends upon discretionary consumer demand for most of our products and primarily operates within mature and highly developed consumer markets. The principal driver of our operating performance is the strength of the U.S. retail economy. Approximately 73% and 74% of our consolidated net sales revenue was from U.S. shipments during the three month periods ended August 31, 2024 and 2023, respectively. For the six month periods ended August 31, 2024 and 2023, U.S. shipments were approximately 70% and 73% of our consolidated net sales revenue, respectively.

Current wording

Our business depends upon discretionary consumer demand for most of our products and primarily operates within mature and highly developed consumer markets. The principal driver of our operating performance is the strength of the U.S. retail economy. Approximately 72% and 74% of our consolidated net sales revenue was from U.S. shipments during the three month periods ended November 30, 2024 and 2023, respectively. For the nine month periods ended November 30, 2024 and 2023, U.S. shipments were approximately 71% and 73% of our consolidated net sales revenue, respectively.

Previous wording

Among other things, high levels of inflation and interest rates may negatively impact consumer disposable income, credit availability and spending. Consumer purchases of discretionary items, including the products that we offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. Dynamic changes in consumer spending and shopping patterns are also having an impact on retailer inventory levels. Our ability to sell to retailers is predicated on their ability to sell to the end consumer. During fiscal 2024, we experienced some improvement in replenishment orders from certain retail customers in certain product categories relative to fiscal 2023. However, during the first and second quarters of fiscal 2025, we experienced reduced replenishment orders from retail customers in line with softer consumer demand and discretionary spending, which adversely impacted our sales, results of operations and cash flows. If orders from our retail customers continue to be adversely impacted, our sales, results of operations and cash flows may continue to be adversely impacted. We expect continued uncertainty in our business and the global economy due to inflation and changes in consumer spending patterns. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.

Current wording

Among other things, high levels of inflation and interest rates may negatively impact consumer disposable income, credit availability and spending. Consumer purchases of discretionary items, including the products that we offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. Dynamic changes in consumer spending and shopping patterns are also having an impact on retailer inventory levels. Our ability to sell to retailers is predicated on their ability to sell to the end consumer. During fiscal 2024, we experienced some improvement in replenishment orders from certain retail customers in certain product categories relative to fiscal 2023. However, during the first three quarters of fiscal 2025, we experienced reduced replenishment orders from retail customers in line with softer consumer demand and discretionary spending, which adversely impacted our sales, results of operations and cash flows. If orders from our retail customers continue to be adversely impacted, our sales, results of operations and cash flows may continue to be adversely impacted. We expect continued uncertainty in our business and the global economy due to inflation and changes in consumer spending patterns. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.

Previous wording

Our concentration of sales reflects the continued evolution of consumer shopping preferences. Our net sales to pure-play online retailers and retail customers fulfilling end-consumer online orders, as well as our own online sales directly to consumers (collectively “online channel net sales”) comprised approximately 29% and 27% of our total consolidated net sales revenue for the three and six month periods ended August 31, 2024, respectively. Our online channel net sales grew approximately 1% for the three month period ended August 31, 2024 and declined approximately 6% for the six month period ended August 31, 2024 compared to the same periods in the prior year. For the three and six month periods ended August 31, 2023, our online channel net sales comprised approximately 27% and 26% of our total consolidated net sales revenue, respectively, and grew approximately 17% and 12%, respectively, compared to the same periods in the prior year.

Current wording

Our concentration of sales reflects the continued evolution of consumer shopping preferences. Our net sales to pure-play online retailers and retail customers fulfilling end-consumer online orders, as well as our own online sales directly to consumers (collectively “online channel net sales”) comprised approximately 29% and 28% of our total consolidated net sales revenue for the three and nine month periods ended November 30, 2024, respectively, and declined approximately 9% and 7% compared to the same periods in the prior year, respectively. For the three and nine month periods ended November 30, 2023, our online channel net sales comprised approximately 31% and 28% of our total consolidated net sales revenue, respectively, and grew approximately 15% and 14%, respectively, compared to the same periods in the prior year.

Previous wording

With the continued importance of online sales in the retail landscape, many brick and mortar retailers are aggressively looking for ways to improve their customer delivery capabilities to be able to meet customer expectations. As a result, it has become increasingly important for us to leverage our distribution capabilities in order to meet the changing demands of our customers, including increasing our online capabilities to support our direct-to-consumer sales channels and online channel sales by our retail customers. To meet these needs, we completed the construction of an additional distribution facility in Gallaway, Tennessee that became partially operational during the first quarter of fiscal 2024. During the first quarter of fiscal 2025, we experienced automation system startup issues at the facility which impacted some of our Home & Outdoor segment's small retail customer and direct-to-consumer orders. As a result, our sales during the first quarter of fiscal 2025 were adversely impacted due to shipping disruptions, and we incurred additional costs and lost efficiency during both the first and second quarters of fiscal 2025 as we worked to remediate the issues. During the second quarter of fiscal 2025, the remediation efforts for the automation system were substantially completed, and we believe the impact on sales was minimal during the quarter.

Current wording

With the continued importance of online sales in the retail landscape, many brick and mortar retailers are aggressively looking for ways to improve their customer delivery capabilities to be able to meet customer expectations. As a result, it has become increasingly important for us to leverage our distribution capabilities in order to meet the changing demands of our customers, including increasing our online capabilities to support our direct-to-consumer sales channels and online channel sales by our retail customers. To meet these needs, we completed the construction of an additional distribution facility in Gallaway, Tennessee that became partially operational during the first quarter of fiscal 2024. During the first quarter of fiscal 2025, we experienced automation system startup issues at the facility which impacted some of our Home & Outdoor segment's small retail customer and direct-to-consumer orders. As a result, our sales during the first quarter of fiscal 2025 were adversely impacted due to shipping disruptions, and we incurred additional costs and lost efficiency during both the first and second quarters of fiscal 2025 as we worked to remediate the issues. During the second quarter of fiscal 2025, the remediation efforts for the automation system were substantially completed, and we believe the impact on sales was minimal during the quarter. As a result of the remediation efforts performed, the automation system began to operate as designed during the third quarter of fiscal 2025 and we expect to achieve targeted efficiency levels by the end of fiscal 2025.

Previous wording

During fiscal 2022 and 2023, we were in discussions with the U.S. Environmental Protection Agency (the “EPA”) regarding the compliance of packaging claims on certain of our products in the air and water filtration categories and a limited subset of humidifier products within the Beauty & Wellness segment that are sold in the U.S. The EPA did not raise any product quality, safety or performance issues. As a result of these packaging compliance discussions, we voluntarily implemented a temporary stop shipment action on the impacted products as we worked with the EPA towards an expedient resolution. We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging and relabeling of our existing inventory of impacted products during fiscal 2023. Additionally, as a result of continuing dialogue with the EPA, we executed further repackaging and relabeling plans on certain additional humidifier products and certain additional air filtration products, which were also completed during fiscal 2023. Ongoing settlement discussions with the EPA related to this matter may result in the imposition of fines or penalties in the future. Such potential fines or penalties cannot be estimated. See Note 7 to the accompanying condensed consolidated financial statements for additional information.

Current wording

During fiscal 2022 and 2023, we were in discussions with the U.S. Environmental Protection Agency (the “EPA”) regarding the compliance of packaging claims on certain of our products in the air and water filtration categories and a limited subset of humidifier products within the Beauty & Wellness segment that are sold in the U.S. The EPA did not raise any product quality, safety or performance issues. As a result of these packaging compliance discussions, we voluntarily implemented a temporary stop shipment action on the impacted products as we worked with the EPA towards an expedient resolution. We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging and relabeling of our existing inventory of impacted products during fiscal 2023. Additionally, as a result of continuing dialogue with the EPA, we executed further repackaging and relabeling plans on certain additional humidifier products and certain additional air filtration products, which were also completed during fiscal 2023. Ongoing settlement discussions with the EPA related to this matter may result in the imposition of fines or penalties in the future. Such potential fines or penalties cannot be reasonably estimated. See Note 7 to the accompanying condensed consolidated financial statements for additional information.

Previous wording

For the three months ended August 31, 2024, changes in foreign currency exchange rates had an unfavorable year-over-year impact on consolidated U.S. Dollar reported net sales revenue of approximately $0.5 million, or 0.1%, compared to a favorable year-over-year impact of $1.4 million, or 0.3%, for the same period last year. For the six months ended August 31, 2024, changes in foreign currency exchange rates hadan unfavorable year-over-year impact on consolidated U.S. Dollar reported net sales revenue of approximately$0.2 million, or less than 0.1%, compared to a favorable year-over-year impact of $0.9 million, or 0.1% for the same period last year.

Current wording

For the three months ended November 30, 2024, changes in foreign currency exchange rates had a favorable year-over-year impact on consolidated U.S. Dollar reported net sales revenue of approximately $0.1 million, or less than 0.1%, compared to a favorable year-over-year impact of $4.6 million, or 0.8%, for the same period last year. For the nine months ended November 30, 2024, changes in foreign currency exchange rates had an unfavorable year-over-year impact on consolidated U.S. Dollar reported net sales revenue of approximately $0.1 million, or less than 0.1%, compared to a favorable year-over-year impact of $5.4 million, or 0.3% for the same period last year.

Previous wording

Second Quarter Fiscal 2025 Financial Results

Current wording

Third Quarter Fiscal 2025 Financial Results

Previous wording

•Adjusted income decreased 34.1%, or $14.2 million, to $27.5 million for the three months ended August 31, 2024, compared to $41.8 million for the same period last year. Adjusted diluted EPS decreased 30.5% to $1.21 for the three months ended August 31, 2024, compared to $1.74 for the same period last year.

Current wording

•Adjusted income decreased 27.7%, or $42.9 million, to $112.0 million for the nine months ended November 30, 2024, compared to $154.9 million for the same period last year. Adjusted diluted

Previous wording

These factors were partially offset by lower commodity and product costs, partly driven by Project Pegasus initiatives.

Current wording

These factors were partially offset by an increase in Home & Outdoor driven by growth in all three brands and strength in international.

Previous wording

•a decline in Home & Outdoor primarily due to lower replenishment orders from retail customers, softer consumer demand, increased competition in the insulated beverageware category, continued softness in technical packs and related accessories, and the impact of the shipping disruption at our Tennessee distribution facility due to automation startup issues affecting some of the segment's small retail customer and direct-to-consumer orders during the first quarter of fiscal 2025.

Current wording

•a decline in Home & Outdoor primarily due to lower replenishment orders from retail customers, softer consumer demand, increased competition in the insulated beverageware category, softness in the technical pack and accessory category and the impact of shipping disruption at our Tennessee distribution facility due to automation startup issues affecting some of the segment's small retail customer and direct-to-consumer orders during the first quarter of fiscal 2025.

Previous wording

These factors were partially offset by international growth and higher sales of fans and thermometers in Beauty & Wellness.

Current wording

These factors were partially offset by international growth and higher sales of insulated beverageware, fans and thermometers.

Previous wording

Net sales revenue increased $2.0 million, or 0.8%, to $241.9 million, compared to $240.0 million. The increase was primarily driven by:

Current wording

Net sales revenue increased $10.2 million, or 4.3%, to $246.1 million, compared to $235.9 million. The increase was primarily driven by:

Previous wording

•higher international sales primarily driven by new and expanded retailer distribution; and

Current wording

•higher international sales primarily driven by new and expanded retailer distribution in the insulated beverageware category and strong demand for technical packs; and

Previous wording

•expanded retailer distribution in the home category.

Current wording

•a decrease in club channel sales in the home category;

Previous wording

Net sales revenue decreased $16.7 million, or 3.7%, to $440.4 million, compared to $457.1 million. The decrease was primarily driven by:

Current wording

Net sales revenue decreased $6.6 million, or 0.9%, to $686.5 million, compared to $693.1 million. The decrease was primarily driven by:

Previous wording

Consolidated net sales revenue decreased $17.3 million, or 3.5%, to $474.2 million, compared to $491.6 million, primarily driven by a decline in Beauty & Wellness due to lower sales of hair appliances, air purifiers and humidifiers primarily driven by softer consumer demand, shifts in consumer spending, reduced orders from retail customers and increased competition in hair appliances and air purification.

Current wording

•increased competition in the insulated beverageware category;

Previous wording

•the impact of the shipping disruption at our Tennessee distribution facility due to automation startup issues affecting some of the segment's small retail customer and direct-to-consumer orders during the first quarter of fiscal 2025.

Current wording

•the impact of shipping disruption at our Tennessee distribution facility due to automation startup issues affecting some of the segment's small retail customer and direct-to-consumer orders during the first quarter of fiscal 2025.

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•an increase in Home & Outdoor driven by sales growth in the home and insulated beverageware categories;

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•net gains in retailer distribution in the home and insulated beverageware categories;

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•higher international sales primarily driven by new and expanded retailer distribution; and

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•higher international sales primarily driven by new and expanded retailer distribution across all categories and strong demand for lifestyle packs; and

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Net sales revenue decreased $19.3 million, or 7.7%, to $232.3 million, compared to $251.6 million. The decrease was primarily driven by:

Current wording

Net sales revenue decreased $29.1 million, or 9.3%, to $284.6 million, compared to $313.7 million. The decrease was primarily driven by:

Previous wording

•a decline in sales of hair appliances primarily due to softer consumer demand, shifts in consumer spending and increased competition;

Current wording

•a decline in sales of hair appliances primarily due to softer consumer demand, increased competition and a net distribution decline;

Previous wording

•a decrease in water filtration product revenue primarily driven by the expiration of an out-license relationship.

Current wording

•a decrease in water filtration product revenue primarily driven by the expiration of an out-license relationship and category softness.

Previous wording

Net sales revenue decreased $58.4 million, or 11.5%, to $450.7 million, compared to $509.1 million. The decline was primarily driven by:

Current wording

Net sales revenue decreased $87.5 million, or 10.6%, to $735.3 million, compared to $822.8 million. The decline was primarily driven by:

Previous wording

•a decline in sales of hair appliances and prestige hair care products primarily due to softer consumer demand, shipping disruption from Curlsmith system integration challenges, and increased competition;

Current wording

•a decline in sales of hair appliances and prestige hair care products primarily due to softer consumer demand, increased competition, net distribution declines and shipping disruption from Curlsmith system integration challenges;

Previous wording

•lower sales of humidifiers and air purifiers, primarily driven by reduced replenishment orders from retail customers due a decline in consumer demand, a softer 2023/2024 illness season and increased competition in air purification; and

Current wording

•lower sales of humidifiers and air purifiers, primarily driven by reduced replenishment orders from retail customers due to a decline in consumer demand, softness in consecutive illness seasons and increased competition in air purification;

Previous wording

•a decrease in water filtration product revenue primarily driven by the expiration of an out-license relationship.

Current wording

•a decrease in water filtration product revenue primarily driven by the expiration of an out-license relationship and category softness.

Previous wording

Consolidated gross profit margin increased 0.9 percentage points to 47.0%, compared to 46.1%. The increase in consolidated gross profit margin was primarily due to lower commodity and product costs, partly driven by Project Pegasus initiatives and favorable inventory obsolescence expense year-over-year.

Current wording

Consolidated gross profit margin increased 0.9 percentage points to 48.9%, compared to 48.0%. The increase in consolidated gross profit margin was primarily due to favorable inventory obsolescence expense year-over-year and lower commodity and product costs, partly driven by Project Pegasus initiatives.

Previous wording

Consolidated SG&A ratio increased 1.4 percentage points to 37.9%, compared to 36.5%. The increase in the consolidated SG&A ratio was primarily due to:

Current wording

Consolidated SG&A ratio increased 6.2 percentage points to 34.0%, compared to 27.8%. The increase in the consolidated SG&A ratio was primarily due to:

Previous wording

Consolidated SG&A ratio increased 3.4 percentage points to 39.3%, compared to 35.9%. The increase in the consolidated SG&A ratio was primarily due to:

Current wording

Consolidated SG&A ratio increased 4.3 percentage points to 37.3%, compared to 33.0%. The increase in the consolidated SG&A ratio was primarily due to:

Previous wording

Operating income was $31.2 million, or 12.9% of segment net sales revenue, compared to $36.1 million, or 15.0% of segment net sales revenue. The 2.1 percentage point decrease in segment operating margin was primarily due to unfavorable distribution center expense, a less favorable product and customer mix and higher marketing expense as we reinvested back into our brands.

Current wording

•higher marketing expense as we reinvested back into our brands;

Previous wording

During the three and six month periods ended August 31, 2024, we incurred $1.5 million and $3.4 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were primarily comprised of severance and employee related costs and professional fees. We recognized $3.6 million and $11.0 million of pre-tax restructuring costs during the three and six month periods ended August 31, 2023, respectively, in connection with Project Pegasus, which primarily included professional fees. During the six month periods ended August 31, 2024 and August 31, 2023, we made total cash restructuring payments of $5.6 million and $15.2 million, respectively. We had a remaining liability of $2.5 million as of August 31, 2024.

Current wording

During the three and nine month periods ended November 30, 2024, we incurred $3.5 million and $6.9 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were primarily comprised of severance and employee related costs, contract termination costs and professional fees. We recognized $3.9 million and $14.9 million of pre-tax restructuring costs during the three and nine month periods ended November 30, 2023, respectively, in connection with Project Pegasus, which primarily included professional fees and severance and employee related costs. During the nine month periods ended November 30, 2024 and November 30, 2023, we made total cash restructuring payments of $9.8 million and $17.5 million, respectively. We had a remaining liability of $1.8 million as of November 30, 2024.

Previous wording

In order to provide a better understanding of the impact of certain items on our operating income, the tables that follow report the comparative pre-tax impact of Bed, Bath & Beyond bankruptcy, restructuring charges, amortization of intangible assets, and non-cash share-based compensation, as applicable, on operating income and operating margin for each segment and in total for the periods presented below. Adjusted operating income and adjusted operating margin may be considered non-GAAP financial measures as contemplated by SEC Regulation G, Rule 100. For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Current wording

In order to provide a better understanding of the impact of certain items on our operating income, the tables that follow report the comparative pre-tax impact of Bed, Bath & Beyond bankruptcy, gain on sale of distribution and office facilities, restructuring charges, amortization of intangible assets, and non-cash share-based compensation, as applicable, on operating income and operating margin for each segment and in total for the periods presented below. Adjusted operating income and adjusted operating margin may be considered non-GAAP financial measures as contemplated by SEC Regulation G, Rule 100. For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”