Helen of Troy Limited
07/08/2026 | Press release | Distributed by Public on 07/08/2026 05:01
Quarterly Report for Quarter Ending May 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with our condensed consolidated financial statements included under Item 1., "Financial Statements." The various sections of this MD&A contain a number of forward-looking statements, all of which are based on our current expectations. Actual results may differ materially due to a number of factors, including those discussed in the section entitled "Information Regarding Forward-Looking Statements" following this MD&A, and in Item 3., "Quantitative and Qualitative Disclosures About Market Risk" in this report, as well as in Part I, Item IA., "Risk Factors" in the Company's most recent annual report on Form 10-K for the fiscal year ended February 28, 2026 ("Form 10-K") and its other filings with the Securities and Exchange Commission (the "SEC"). When used in this MD&A, unless otherwise indicated or the context suggests otherwise, references to "the Company", "our Company", "Helen of Troy", "we", "us" or "our" refer to Helen of Troy Limited and its subsidiaries. References to "fiscal" in connection with a numeric year number denotes our fiscal year ending on the last day of February, during the year number listed.
This MD&A, including the tables under the headings "Operating Income (Loss), Operating Margin, Adjusted Operating Income (non-GAAP) and Adjusted Operating Margin (non-GAAP) by Segment" and "Net Income (Loss), Diluted Earnings (Loss) Per Share, Adjusted Income (non-GAAP) and Adjusted Diluted Earnings Per Share (non-GAAP)," reports operating income (loss), operating margin, net income (loss) and diluted earnings (loss) per share without the impact of asset impairment charges, costs incurred in connection with the departure of our former Chief Executive Officer ("CEO") primarily related to severance and recruitment costs ("CEO succession costs"), gain on the sale of our distribution facility in Southaven, Mississippi during the first quarter of fiscal 2027 ("gain on sale of distribution facility"), income tax expense from the recognition of valuation allowances in fiscal 2026 on deferred tax assets related to our intangible asset reorganization in fiscal 2025 ("intangible asset reorganization"), 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 (loss). We believe that adjusted operating income, adjusted operating margin, adjusted income and adjusted diluted earnings per share 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 reflect the operating performance of our business and facilitate a more direct comparison of our performance to our competitors. 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 earnings per share 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 33.
There were no material changes to the key financial measures discussed in our Form 10-K.
Overview
We incorporated as Helen of Troy Corporation in Texas in 1968 and were reorganized as Helen of Troy Limited in Bermuda in 1994. We are a leading global consumer products company offering creative products and solutions for our customers through a diversified portfolio of brands. Our portfolio of brands includes OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith, Revlon and Olive & June, among others. We have built leading market positions through new product innovation, product quality and competitive pricing. As of May 31, 2026, we operated two reportable segments: Home & Outdoor and Beauty & Wellness.
On April 14, 2026, we completed the sale of our distribution facility in Southaven, Mississippi for a total sales price of $82.0 million, less costs to sell of $3.8 million. Accordingly, we recognized a gain on the sale of $54.9 million within "Selling, general and administrative expense" ("SG&A") during the first quarter of fiscal 2027, which was recognized by our Beauty & Wellness segment. We used the proceeds from the sale to repay amounts outstanding under our credit facility.
We did not record any asset impairment charges during the first quarter of fiscal 2027. During the first quarter of fiscal 2026, we concluded a goodwill impairment triggering event had occurred due to a sustained decline in our stock price, and performed quantitative impairment testing on our goodwill and certain intangible assets. As a result of such testing, we recorded pre-tax asset impairment charges as follows:
| (in thousands) |
Three Months Ended May 31, 2025 |
||||
|
Home & Outdoor (1)
|
$ | 219,095 | |||
|
Beauty & Wellness (2)
|
195,290 | ||||
|
Total
|
$ | 414,385 | |||
(1)Asset impairment charges recognized for our Home & Outdoor segment included charges for our Hydro Flask and Osprey businesses of $120.8 million and $98.3 million, respectively.
(2)Asset impairment charges recognized for our Beauty & Wellness segment included charges for our Drybar, Curlsmith, Health & Wellness and Revlon businesses of $103.7 million, $36.2 million, $35.8 million and $19.6 million, respectively.
For additional information regarding the testing and analysis performed, see Note 5 to the accompanying condensed consolidated financial statements.
Significant Trends Impacting the Business
Impact of Tariffs
Since 2019, the Office of the United States Trade Representative ("USTR") has imposed, and in certain cases subsequently reduced or suspended, additional tariffs on products imported from China and other foreign countries. Additionally, the current United States ("U.S.") presidential administration has promoted and implemented plans to raise tariffs even further and pursue other trade policies intended to restrict imports. Our purchases of products from unaffiliated manufacturers located in China and other regions exposes us to higher costs of doing business from increases in tariffs.
Under the International Emergency Economic Powers Act ("IEEPA"), the U.S. presidential administration began implementing fentanyl-related IEEPA tariffs ("Fentanyl IEEPA Tariff") and additional tariffs ("Reciprocal IEEPA Tariff") during calendar year 2025. As of April 9, 2025, the U.S. had imposed (i) an aggregate additional 145% tariff on imports from China, consisting of a 20% Fentanyl IEEPA Tariff and 125% Reciprocal IEEPA Tariff and (ii) a global 10% Reciprocal IEEPA Tariff on imports from other countries including Mexico, Vietnam and other U.S. trading partners. The Reciprocal IEEPA Tariff on imports from China was subsequently lowered to 10% effective May 12, 2025, resulting in an aggregate additional 30% tariff. On July 31, 2025, the U.S. president signed an executive order imposing new
IEEPA tariffs on a number of U.S. trading partners which became effective on August 7, 2025, including a 25% Fentanyl IEEPA Tariff on imports from Mexico and a 20% and 19% Reciprocal IEEPA Tariff on imports from Vietnam and Thailand, respectively. Effective November 10, 2025, the 10% Reciprocal IEEPA Tariff on imports from China, which was set to expire, was extended to remain in effect through November 10, 2026, and the Fentanyl IEEPA Tariff was reduced from 20% to 10%, reducing the aggregate additional tariff from 30% to 20%. On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed by the U.S. president under IEEPA were unconstitutional, and the U.S. president subsequently imposed a temporary global 10% Section 122 tariff under the Trade Act of 1974 ("Section 122 Tariff") effective February 24, 2026 through July 24, 2026. As a result, the previous aggregate additional tariff on imports from China, Vietnam, Mexico and Thailand of 20%, 20%, 25% and 19%, respectively, were replaced by the 10% Section 122 Tariff. On May 7, 2026, the U.S. Court of International Trade ("CIT") found the Section 122 Tariff unlawful; however, the Section 122 Tariff will remain in place through July 24, 2026 for the Company and most importers while the case proceeds through the appeals process. Our imports manufactured in Mexico are not impacted since they qualify for duty-free preference under the United States-Mexico-Canada Agreement. Further, we benefit from certain exclusions from tariffs as a result of the COVID-19 pandemic, which were recently extended to November 9, 2026.
On March 4, 2026, the CIT issued an additional ruling that importers that paid tariffs under IEEPA are due refunds and ordered U.S. Customs and Border Protection ("CBP") to begin the refund process for all importers who were subject to IEEPA duties. During fiscal 2026, we paid IEEPA tariffs totaling $80.5 million. On April 20, 2026, the CBP launched Phase 1 of a process for submitting IEEPA refund claims. We submitted Phase 1 refund claims in May 2026 totaling $6.0 million, a small portion of which were accepted by the CBP prior to May 31, 2026. As of May 31, 2026, we concluded that $1.9 million of tariff refunds were probable of being recovered and recorded a receivable within prepaids and other current assets, along with corresponding reductions to "Cost of goods sold" of $1.8 million and inventory of $0.1 million in our condensed consolidated financial statements. The tariff refunds recognized during the first quarter of fiscal 2027 were all related to our Home & Outdoor segment. Subsequent to the first quarter of fiscal 2027, in June 2026, we submitted additional Phase 1 refund claims totaling $3.2 million related to our Beauty & Wellness segment. On June 29, 2026, CBP launched Phase 2 of the IEEPA refund claims process, which we are in process of preparing. As of July 1, 2026, we received partial payments totaling $1.6 million for our Phase 1 tariff refunds and an immaterial amount of interest. The Company will continue to monitor regulatory guidance regarding the refund process and will recognize additional recoveries when the right to receipt becomes probable.
In March 2025, the U.S. president also implemented changes under Section 232 of the Trade Expansion Act of 1962 ("Section 232 Tariffs") which resulted in additional sectoral tariffs to aluminum and steel of 25%. On June 4, 2025, the Section 232 Tariffs related to aluminum and steel were increased to 50%, and effective August 1, 2025, expanded to include copper products and components. Section 232 Tariffs were previously imposed based solely on a metal content-based calculation. Effective April 6, 2026, Section 232 Tariffs were expanded to apply to the entire customs value of covered products with tiered rates based on metal content and origin. Currently, our products are not subject to the Section 232 Tariffs on copper products and components. Our products are currently subject to (i) a Section 232 Tariff on aluminum and steel products of 25%, which primarily impacts certain products within our Home and Wellness businesses and/or (ii) the Section 122 Tariff while it remains in place through July 24, 2026 and/or (iii) tariffs under Section 301 of the Trade Act of 1974 ("Section 301 Tariffs"). The U.S. presidential administration is considering additional Section 301 Tariffs as a remedy for unfair trade practices; however, no new Section 301 Tariffs have been published since the review process is ongoing.
U.S. tariff policies continue to evolve, as well as the corresponding impacts on global trade policies. As a result, our risks and mitigation plans, as further described below, will also continue to evolve as further developments arise. Any further alteration of trade agreements and terms between China, Vietnam,
Mexico and the U.S., including limiting trade with China, Vietnam and Mexico, imposing additional tariffs on imports from China, Vietnam or Mexico and potentially imposing other restrictions on imports from China, Vietnam or Mexico, to the U.S., may result in further or higher tariffs or retaliatory trade measures by China, Vietnam or Mexico, all of which could have a material adverse effect on our business and operating results.
We are continuing to assess our incremental tariff cost exposure in light of continuing changes to global tariff policies and the full extent of our potential mitigation plans, as well as the associated timing to implement such plans and realize the anticipated benefits. To mitigate our risk of ongoing exposure to tariffs, we have initiated significant efforts to diversify our production outside of China into regions where we expect tariffs or overall costs to be lower and to source the same product in more than one region, to the extent it is possible and not cost-prohibitive. In addition to the uncertainty from evolving global tariff policies, we expect unfavorable cascading impacts on inflation, consumer confidence, employment and overall macroeconomic conditions, all of which may adversely impact our sales, results of operations and cash flows.
During fiscal 2026 and the first quarter of fiscal 2027, the impact of the tariffs adversely impacted our cost of goods sold. Our cost of goods sold during the first quarter of fiscal 2027 included $12.2 million of additional pre-tax tariff costs, net of the refunds recognized described above, compared to a de minimis impact in the prior year period when tariffs were first introduced and had not cycled through our cost of goods sold. While we successfully implemented strategic price increases during fiscal 2026 to help mitigate the impact of tariffs, we believe the benefit to net sales revenue is entirely offset by reduced unit sales volumes due to consumer price elasticity. Our net sales revenue during the first quarter of fiscal 2026 was negatively impacted by a combination of factors including the pause or cancellation of direct import orders from China by certain of our key retailers in response to increased tariff rates, a slowdown in retailer orders following pull forward activity in the fourth quarter of fiscal 2025 due to tariff uncertainty and lower consumer confidence and demand. In addition, net sales revenue during the first quarter of fiscal 2026 was negatively impacted by evolving dynamics in the China market, including a shift toward localized fulfillment models and heightened competition from domestic sellers benefiting from government subsidies. In addition to the uncertainty from evolving global tariff policies, we experienced and expect continued unfavorable cascading impacts on inflation, consumer confidence, employment and overall macroeconomic conditions, all of which may continue to adversely impact our sales, results of operations and cash flows.
Impact of Macroeconomic Trends
The Federal Open Market Committee lowered the benchmark interest rate by 50 basis points and 25 basis points during the third and fourth quarters of fiscal 2026, respectively, resulting in lower average interest rates incurred during the first three months of fiscal 2027 compared to the same period last year. As of May 31, 2026 and February 28, 2026, $425 million and $325 million of the outstanding principal balance under the Credit Agreement (as defined below), respectively, was hedged with interest rate swaps to fix the interest rate we pay. The weighted average interest rates on borrowings outstanding under the Credit Agreement inclusive of the impact of our interest rate swaps as of May 31, 2026 and February 28, 2026 were 5.6% and 5.7%, respectively. The weighted average interest rate on borrowings hedged with interest rate swaps was 3.3% as of both May 31, 2026 and February 28, 2026. As of May 31, 2026 and February 28, 2026, the Term SOFR interest rates (as defined in the Credit Agreement) were 3.6% and 3.7%, respectively. 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 not subject to the interest rate swaps. 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, as well as recent U.S. tariff policies, that are continuing to evolve and the corresponding impacts on global trade. Most recently, the outcome of the ongoing Israel-United States and Iran conflict is highly unpredictable and could lead to significant market and other disruptions,
including significant volatility in the commodity prices and supply of energy resources and supply chain interruptions. High inflation has 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 2026 and the first quarter of fiscal 2027 and may continue to have an adverse impact during the remainder of fiscal 2027. Evolving global tariff policies, military conflicts or geopolitical events (such as the Israel-United States and Iran conflict) could adversely impact inflation and interest rates which could further negatively impact consumer disposable income, credit availability and spending. 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, tariffs, consumer confidence and the Israel-United States and Iran conflict, any of which may adversely impact our results.
Consumer Spending and Changes in Shopping Preferences
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 69% of our consolidated net sales revenue was from U.S. shipments during the three months ended May 31, 2026 and 2025, respectively.
Among other things, high levels of inflation, interest rates, military conflicts or other geopolitical events, and tariffs may negatively impact consumer disposable income, credit availability and spending. Consumer purchases of discretionary items, including some of 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 2026 and the first quarter of fiscal 2027, we experienced continued competition within our Beauty & Wellness segment and in the insulated beverageware category. In addition, during fiscal 2026, we experienced lower replenishment orders in line with softer consumer demand and discretionary spending and continued competition, which adversely impacted our sales, results of operations and cash flows. During the first quarter of fiscal 2027, this trend continued in our Beauty business. 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, evolving global tariff policies, continued competition 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.
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 28% of our total consolidated net sales revenue for the three months ended May 31, 2026, and grew approximately 29% compared to the same period in the prior year. For the three months ended May 31, 2025, our online channel net sales comprised approximately 23% of our total consolidated net sales revenue, and declined approximately 18% compared to the same period in the prior year.
EPA Compliance Costs
During fiscal 2022 and 2023, we were in discussions with the U.S. Environmental Protection Agency ("the EPA") regarding the compliance of packaging and labeling claims on certain of our products in the air and water filtration and humidification categories 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 and labeling compliance discussions, we completed the repackaging and relabeling of impacted products during fiscal 2023. We continue to have ongoing settlement discussions with the EPA related to this matter. As of February 28, 2026, we accrued an estimated liability of $4.4 million, which
represents our best estimate of probable settlement costs related to this matter. See Note 8 to the accompanying condensed consolidated financial statements for additional information.
Talcum Powder Litigation Related to the Fiscal 2022 Personal Care Divestiture
In fiscal 2022, we completed the sale of our North America personal care business to HRB Brands LLC ("HRB Brands"). After the sale, we were named as a defendant in multiple lawsuits related to the use of personal care products containing talcum powder, primarily Brut deodorant and Ammens powder sold by our wholly-owned subsidiary, Idelle Labs, Ltd. We tendered indemnification of these cases to HRB Brands, which assumed control of the defense of the claims. After many years, during the fourth quarter of fiscal 2026, HRB Brands asserted that it was contesting the indemnification of these cases and tendered the indemnification back to us. Consequently, in order to protect the Company and its rights and defenses, we began to defend these cases. The Company maintains its position that HRB Brands is obligated to defend and indemnify the Company against these claims and plans to vigorously contest HRB Brands' position. With respect to the talcum powder cases, we believe we have substantial defenses to the claims. The ultimate outcome of enforcing our indemnification claims against HRB Brands and the litigation relating to the talcum cases is inherently uncertain, and we cannot predict its resolution. During the first quarter of fiscal 2027, we paid approximately $1.0 million in settlements of these cases and accrued an additional $1.3 million for potential settlements and legal fees. As of May 31, 2026, we had an estimated liability of approximately $1.8 million. We cannot estimate the amount or range of amounts by which the liability may exceed the accrual established because of (i) the inherent difficulty in projecting the number of claims that have not yet been asserted or the time period in which future claims may be asserted, (ii) the complaints nearly always assert claims against multiple defendants where the damages alleged are typically not attributed to individual defendants so that a defendant's share of liability may turn on the law of joint and several liability, which can vary by state, and (iii) the many factors, developments and inherent uncertainties involved with litigation that could affect the Company's estimate of the liability. For additional information, see Note 8 to the accompanying condensed consolidated financial statements.
Securities Class Action Lawsuit
On June 2, 2026, the Company and certain of its officers were named as defendants in a purported federal securities class action lawsuit filed in the United States District Court for the Western District of Texas. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 relating to certain prior disclosures of the Company. The plaintiff seeks to represent a class of shareholders who purchased or otherwise acquired the Company's common stock between April 24, 2024 and October 8, 2025. The Company believes the allegations asserted in the complaint are without merit and intends to defend them vigorously. At this early stage of the proceedings, the Company is unable to predict the outcome of this matter or reasonably estimate the possible loss or range of loss, if any.
Foreign Currency Exchange Rate Fluctuations
Due to the nature of our operations, we have exposure to the impact of fluctuations in exchange rates from transactions that are denominated in a currency other than our functional currency (the U.S. Dollar). Such transactions include sales and operating expenses. The most significant currencies affecting our operating results are the Euro, British Pound and Canadian Dollar.
For the three months ended May 31, 2026, changes in foreign currency exchange rates had a favorable year-over-year impact on consolidated U.S. Dollar reported net sales revenue of approximately $2.9 million, or 0.8%, compared to an unfavorable year-over-year impact of $1.0 million, or 0.2%, for the same period last year.
Variability of the Cough/Cold/Flu Season
Sales in several of our Beauty & Wellness categories are highly correlated to the severity of winter weather and cough/cold/flu incidence. In the U.S., the cough/cold/flu season historically runs from November through March, with peak activity normally in January to March. The 2025-2026 and 2024-2025 cough/cold/flu seasons were below historical averages seen prior to the impact of COVID-19.
RESULTS OF OPERATIONS
The following table provides selected operating data, in U.S. Dollars, as a percentage of net sales revenue, and as a year-over-year percentage change.
|
Three Months Ended May 31, |
% of Sales Revenue, net | ||||||||||||||||||||||||||||||||||
| (in thousands) |
2026
|
2025
|
$ Change | % Change | 2026 | 2025 | |||||||||||||||||||||||||||||
| Sales revenue by segment, net | |||||||||||||||||||||||||||||||||||
| Home & Outdoor | $ | 194,923 | $ | 177,983 | $ | 16,940 | 9.5 | % | 48.5 | % | 47.9 | % | |||||||||||||||||||||||
| Beauty & Wellness | 207,192 | 193,672 | 13,520 | 7.0 | % | 51.5 | % | 52.1 | % | ||||||||||||||||||||||||||
| Total sales revenue, net | 402,115 | 371,655 | 30,460 | 8.2 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||||
| Cost of goods sold | 217,260 | 196,644 | 20,616 | 10.5 | % | 54.0 | % | 52.9 | % | ||||||||||||||||||||||||||
| Gross profit | 184,855 | 175,011 | 9,844 | 5.6 | % | 46.0 | % | 47.1 | % | ||||||||||||||||||||||||||
|
SG&A
|
124,506 | 167,664 | (43,158) | (25.7) | % | 31.0 | % | 45.1 | % | ||||||||||||||||||||||||||
| Asset impairment charges | - | 414,385 | (414,385) | * | - | % | 111.5 | % | |||||||||||||||||||||||||||
|
Operating income (loss)
|
60,349 | (407,038) | 467,387 | * | 15.0 | % | (109.5) | % | |||||||||||||||||||||||||||
| Non-operating income, net | 218 | 308 | (90) | (29.2) | % | 0.1 | % | 0.1 | % | ||||||||||||||||||||||||||
| Interest expense | 12,243 | 13,808 | (1,565) | (11.3) | % | 3.0 | % | 3.7 | % | ||||||||||||||||||||||||||
| Income (loss) before income tax | 48,324 | (420,538) | 468,862 | * | 12.0 | % | (113.2) | % | |||||||||||||||||||||||||||
| Income tax expense | 12,562 | 30,180 | (17,618) | (58.4) | % | 3.1 | % | 8.1 | % | ||||||||||||||||||||||||||
| Net income (loss) | $ | 35,762 | $ | (450,718) | $ | 486,480 | * | 8.9 | % | (121.3) | % | ||||||||||||||||||||||||
* Calculation is not meaningful.
First Quarter Fiscal 2027 Financial Results
•Consolidated net sales revenue increased 8.2%, or $30.5 million, to $402.1 million for the three months ended May 31, 2026, compared to $371.7 million for the same period last year.
•Consolidated operating income was $60.3 million for the three months ended May 31, 2026, which includes a gain of $54.9 million from the sale of a distribution facility, compared to consolidated operating loss of $407.0 million for the same period last year. Consolidated operating loss for the three months ended May 31, 2025 included pre-tax asset impairment charges of $414.4 million. Consolidated operating margin increased to 15.0% of consolidated net sales revenue for the three months ended May 31, 2026, compared to (109.5)% for the same period last year.
•Consolidated adjusted operating income was $16.1 million for both the three months ended May 31, 2026 and 2025. Consolidated adjusted operating margin decreased 0.3 percentage points to 4.0% of consolidated net sales revenue for the three months ended May 31, 2026, compared to 4.3% for the same period last year.
•Net income was $35.8 million for the three months ended May 31, 2026, compared to net loss of $450.7 million for the same period last year. Diluted earnings per share was $1.51 for the three months ended May 31, 2026, compared to diluted loss per share of $19.65 for the same period last year.
•Adjusted income decreased 58.3%, or $5.5 million, to $4.0 million for the three months ended May 31, 2026, compared to $9.5 million for the same period last year. Adjusted diluted earnings per share decreased 58.5% to $0.17 for the three months ended May 31, 2026, compared to $0.41 for the same period last year.
Consolidated and Segment Net Sales Revenue
The following table summarizes the impact that Organic business and foreign currency had on our net sales revenue by segment:
| Three Months Ended May 31, | |||||||||||||||||
| (in thousands) | Home & Outdoor | Beauty & Wellness | Total | ||||||||||||||
|
Fiscal 2026 sales revenue, net
|
$ | 177,983 | $ | 193,672 | $ | 371,655 | |||||||||||
| Organic business | 15,623 | 11,963 | 27,586 | ||||||||||||||
| Impact of foreign currency | 1,317 | 1,557 | 2,874 | ||||||||||||||
| Change in sales revenue, net | 16,940 | 13,520 | 30,460 | ||||||||||||||
|
Fiscal 2027 sales revenue, net
|
$ | 194,923 | $ | 207,192 | $ | 402,115 | |||||||||||
| Total net sales revenue growth | 9.5 | % | 7.0 | % | 8.2 | % | |||||||||||
| Organic business | 8.8 | % | 6.2 | % | 7.4 | % | |||||||||||
| Impact of foreign currency | 0.7 | % | 0.8 | % | 0.8 | % | |||||||||||
In the above table, Organic business refers to our net sales revenue associated with product lines or brands after the first twelve months from the date the product line or brand was acquired, excluding the impact that foreign currency remeasurement had on reported net sales revenue. Net sales revenue from internally developed brands or product lines is considered Organic business activity.
Consolidated Net Sales Revenue
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Consolidated net sales revenue increased $30.5 million, or 8.2%, to $402.1 million, compared to $371.7 million. The increase was primarily driven by:
•an increase in Home & Outdoor due to strong international demand for packs, new product launches and the favorable comparative impact of retailer pull-forward activity in the fourth quarter of fiscal 2025 in response to tariff uncertainty; and
•an increase in Beauty & Wellness driven by sales of nail care, fans and thermometers, which was partially offset by a decline in hair appliances and prestige hair care products.
Consolidated net sales revenue was favorably impacted by net foreign currency fluctuations of approximately $2.9 million, or 0.8%.
Segment Net Sales Revenue
Home & Outdoor
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Net sales revenue increased $16.9 million, or 9.5%, to $194.9 million, compared to $178.0 million. The increase was primarily driven by:
•the favorable comparative impact of lower first quarter fiscal 2026 sales due to retailer pull-forward activity in the fourth quarter of fiscal 2025 in response to tariff uncertainty and potential supply disruption;
•strong international demand for technical, lifestyle and travel packs;
•incremental sales from new product launches; and
•higher sales from expanded distribution in the home and insulated beverageware categories.
These factors were partially offset by lower international sales in the home and insulated beverageware categories.
Segment net sales revenue was favorably impacted by net foreign currency fluctuations of approximately $1.3 million, or 0.7%.
Beauty & Wellness
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Net sales revenue increased $13.5 million, or 7.0%, to $207.2 million, compared to $193.7 million. The increase was primarily driven by:
•an increase in nail care due to new and expanded distribution;
•an increase in fan and thermometer sales benefitting from the favorable comparative impact of tariff related cancellations of direct import orders and disruption in the China thermometry market during the same period last year; and
•an increase in Wellness driven by incremental sales from new product launches.
These factors were partially offset by a decline in Beauty hair appliances and prestige hair care products primarily due to softer consumer demand, continued competition and reduced replenishment orders from retail customers.
Segment net sales revenue was favorably impacted by net foreign currency fluctuations of approximately $1.6 million, or 0.8%.
Consolidated Gross Profit Margin
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Consolidated gross profit margin decreased 1.1 percentage points to 46.0%, compared to 47.1%. The decrease in consolidated gross profit margin was primarily due to the net unfavorable impact of tariffs, a less favorable inventory obsolescence impact year-over-year, and an unfavorable customer mix within Home & Outdoor.
Consolidated SG&A
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Consolidated SG&A ratio decreased 14.1 percentage points to 31.0%, compared to 45.1%. The decrease in the consolidated SG&A ratio was primarily due to:
•a gain on the sale of our distribution facility in Southaven, Mississippi of $54.9 million;
•the favorable comparative impact of CEO succession costs of $3.5 million recognized in the prior year period;
•lower outbound freight costs;
•a decrease in depreciation and amortization expense; and
•the impact of favorable operating leverage due to the increase in net sales.
These factors were partially offset by an increase in share-based compensation expense.
Asset Impairment Charges
We did not record any asset impairment charges during the first quarter of fiscal 2027. During the first quarter of fiscal 2026, we recorded asset impairment charges of $414.4 million ($436.2 million after tax) to reduce our goodwill by $317.0 million and our other intangible assets by $97.4 million. For additional information regarding the testing and analysis performed, see Note 5 to the accompanying condensed consolidated financial statements.
Operating Income (Loss), Operating Margin, Adjusted Operating Income (non-GAAP) and Adjusted Operating Margin (non-GAAP) by Segment
In order to provide a better understanding of the impact of certain items on our operating income (loss), the tables that follow report the comparative pre-tax impact of asset impairment charges, CEO succession costs, gain on sale of distribution facility, amortization of intangible assets and non-cash share-based compensation, as applicable, on operating income (loss) 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."
| Three Months Ended May 31, 2026 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Home & Outdoor |
Beauty & Wellness
|
Total | ||||||||||||||||||||||||||||||||
|
Operating income, as reported (GAAP)
|
$ | 8,165 | 4.2 | % | $ | 52,184 | 25.2 | % | $ | 60,349 | 15.0 | % | |||||||||||||||||||||||
| Gain on sale of distribution facility | - | - | % | (54,854) | (26.5) | % | (54,854) | (13.6) | % | ||||||||||||||||||||||||||
| Subtotal | 8,165 | 4.2 | % | (2,670) | (1.3) | % | 5,495 | 1.4 | % | ||||||||||||||||||||||||||
| Amortization of intangible assets | 1,373 | 0.7 | % | 2,782 | 1.3 | % | 4,155 | 1.0 | % | ||||||||||||||||||||||||||
| Non-cash share-based compensation | 2,794 | 1.4 | % | 3,643 | 1.8 | % | 6,437 | 1.6 | % | ||||||||||||||||||||||||||
| Adjusted operating income (non-GAAP) | $ | 12,332 | 6.3 | % | $ | 3,755 | 1.8 | % | $ | 16,087 | 4.0 | % | |||||||||||||||||||||||
| Three Months Ended May 31, 2025 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Home & Outdoor |
Beauty & Wellness
|
Total | ||||||||||||||||||||||||||||||||
|
Operating loss, as reported (GAAP)
|
$ | (213,793) | (120.1) | % | $ | (193,245) | (99.8) | % | $ | (407,038) | (109.5) | % | |||||||||||||||||||||||
| Asset impairment charges | 219,095 | 123.1 | % | 195,290 | 100.8 | % | 414,385 | 111.5 | % | ||||||||||||||||||||||||||
| CEO succession costs | 1,742 | 1.0 | % | 1,742 | 0.9 | % | 3,484 | 0.9 | % | ||||||||||||||||||||||||||
| Subtotal | 7,044 | 4.0 | % | 3,787 | 2.0 | % | 10,831 | 2.9 | % | ||||||||||||||||||||||||||
| Amortization of intangible assets | 1,782 | 1.0 | % | 3,207 | 1.7 | % | 4,989 | 1.3 | % | ||||||||||||||||||||||||||
| Non-cash share-based compensation | 34 | - | % | 262 | 0.1 | % | 296 | 0.1 | % | ||||||||||||||||||||||||||
| Adjusted operating income (non-GAAP) | $ | 8,860 | 5.0 | % | $ | 7,256 | 3.7 | % | $ | 16,116 | 4.3 | % | |||||||||||||||||||||||
Consolidated Operating Income (Loss)
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Consolidated operating income was $60.3 million, or 15.0% of net sales revenue, compared to consolidated operating loss of $407.0 million, or (109.5)% of net sales revenue. Operating loss in the first quarter of fiscal 2026 included $414.4 million of pre-tax asset impairment charges. The remaining 13.0 percentage point increase in consolidated operating margin was primarily due to:
•a gain on the sale of our distribution facility in Southaven, Mississippi of $54.9 million;
•the favorable comparative impact of CEO succession costs of $3.5 million recognized in the prior year period;
•reduced outbound freight costs; and
•the impact of favorable operating leverage due to the increase in net sales.
These factors were partially offset by:
•the net unfavorable impact of tariffs;
•an increase in share-based compensation expense;
•a less favorable inventory obsolescence impact year-over-year; and
•unfavorable customer mix within Home & Outdoor.
Consolidated adjusted operating income was $16.1 million for both the first quarter of fiscal 2027 and 2026, representing 4.0% and 4.3% of net sales revenue, respectively.
Home & Outdoor
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Operating income was $8.2 million, or 4.2% of segment net sales revenue, compared to operating loss of $213.8 million, or (120.1)% of segment net sales revenue. Operating loss in the first quarter of fiscal 2026 included $219.1 million of pre-tax asset impairment charges. The remaining 1.2 percentage point increase in segment operating margin was primarily due to:
•the favorable comparative impact of CEO succession costs of $1.7 million recognized in the prior year period;
•reduced outbound freight costs; and
•the impact of favorable operating leverage due to the increase in net sales.
These factors were partially offset by:
•the net unfavorable impact of tariffs;
•an increase in share-based compensation expense; and
•unfavorable customer mix.
Adjusted operating income increased 39.2% to $12.3 million, or 6.3% of segment net sales revenue, compared to $8.9 million, or 5.0% of segment net sales revenue.
Beauty & Wellness
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Operating income was $52.2 million, or 25.2% of segment net sales revenue, compared to operating loss of $193.2 million, or (99.8)% of segment net sales revenue. Operating loss in the first quarter of fiscal 2026 included $195.3 million of pre-tax asset impairment charges. The remaining 24.2 percentage point increase in segment operating margin was primarily due to:
•a gain on the sale of our distribution facility in Southaven, Mississippi of $54.9 million;
•the favorable comparative impact of CEO succession costs of $1.7 million recognized in the prior year period;
•reduced outbound freight costs; and
•the impact of favorable operating leverage due to the increase in net sales.
These factors were partially offset by:
•the net unfavorable impact of tariffs;
•an increase in share-based compensation expense; and
•a less favorable inventory obsolescence impact year-over-year.
Adjusted operating income decreased 48.2% to $3.8 million, or 1.8% of segment net sales revenue, compared to $7.3 million, or 3.7% of segment net sales revenue.
Interest Expense
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Interest expense was $12.2 million, compared to $13.8 million. The decrease in interest expense was primarily due to lower average borrowings outstanding, partially offset by a higher average effective interest rate inclusive of the impact of our interest rate swaps compared to the same period last year.
Income Tax Expense
The comparison of our effective tax rate between periods is often impacted by the geographic mix of earnings among our various tax jurisdictions. Due to our organization in Bermuda and the ownership structure of our foreign subsidiaries, many of which are not owned directly or indirectly by a U.S. parent company, an immaterial amount of our foreign income is subject to U.S. taxation on a permanent basis under current law. Additionally, our intangible assets are primarily owned by foreign affiliates, resulting in proportionally higher earnings in jurisdictions with statutory tax rates lower than that of the U.S.
For interim periods, our income tax expense and resulting effective tax rate are based on an estimated annual effective tax rate, adjusted for the impact of discrete items recognized in the period. Discrete items include changes in tax laws or rates, changes in estimates for uncertain tax positions, excess tax benefits or deficiencies from stock-based compensation, foreign currency remeasurement effects that are not reasonably estimable, and other infrequent or non-recurring items. Discrete items do not include the asset impairment charges described below and in Note 5 to the accompanying condensed consolidated financial statements.
During the first quarter of fiscal 2026, we recognized goodwill and other intangible asset impairment charges of $414.4 million, which included $265.0 million of non-deductible goodwill that did not result in a tax benefit. The tax benefit on the impairment charge of $24.2 million was recognized over the course of fiscal 2026 in relation to pre-tax book income, rather than as a discrete item in the period in which the charges were incurred.
The downward revisions to our internal forecasts utilized in our impairment testing during the first quarter of fiscal 2026 impacted our assessment of the future realizability of a related deferred tax asset, which led to the recording of a discrete $16.5 million valuation allowance during the first quarter of fiscal 2026.
For the three months ended May 31, 2026, income tax expense was $12.6 million on pre-tax income of $48.3 million, compared to income tax expense of $30.2 million on a pre-tax loss of $420.5 million for the same period last year. The decrease in tax expense is primarily due to the comparative impact of non-deductible impairment charges and valuation allowances on deferred tax assets recorded during the same period last year, partially offset by the tax expense recognized for the gain on the sale of our distribution facility in Southaven, Mississippi.
Net Income (Loss), Diluted Earnings (Loss) Per Share, Adjusted Income (non-GAAP) and Adjusted Diluted Earnings Per Share (non-GAAP)
In order to provide a better understanding of the impact of certain items on our income (loss) and diluted earnings (loss) per share, the tables that follow report the comparative after-tax impact of asset impairment charges, CEO succession costs, gain on sale of distribution facility, intangible asset reorganization, amortization of intangible assets and non-cash share-based compensation, as applicable, on income (loss) and diluted earnings (loss) per share for the periods presented below. Adjusted income and adjusted diluted earnings per share 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."
| Three Months Ended May 31, 2026 | |||||||||||||||||||||||||||||||||||
| Income | Diluted Earnings Per Share | ||||||||||||||||||||||||||||||||||
| (in thousands, except per share data) | Before Tax | Tax | Net of Tax | Before Tax | Tax | Net of Tax | |||||||||||||||||||||||||||||
| As reported (GAAP) | $ | 48,324 | $ | 12,562 | $ | 35,762 | $ | 2.03 | $ | 0.53 | $ | 1.51 | |||||||||||||||||||||||
| Gain on sale of distribution facility | (54,854) | (13,549) | (41,305) | (2.31) | (0.57) | (1.74) | |||||||||||||||||||||||||||||
| Subtotal | (6,530) | (987) | (5,543) | (0.27) | (0.04) | (0.23) | |||||||||||||||||||||||||||||
| Amortization of intangible assets | 4,155 | 672 | 3,483 | 0.17 | 0.03 | 0.15 | |||||||||||||||||||||||||||||
| Non-cash share-based compensation | 6,437 | 424 | 6,013 | 0.27 | 0.02 | 0.25 | |||||||||||||||||||||||||||||
| Adjusted (non-GAAP) | $ | 4,062 | $ | 109 | $ | 3,953 | $ | 0.17 | $ | - | $ | 0.17 | |||||||||||||||||||||||
| Weighted average shares of common stock used in computing reported and non-GAAP diluted earnings per share | 23,758 | ||||||||||||||||||||||||||||||||||
| Three Months Ended May 31, 2025 | |||||||||||||||||||||||||||||||||||
| (Loss) Income | Diluted (Loss) Earnings Per Share | ||||||||||||||||||||||||||||||||||
| (in thousands, except per share data) | Before Tax | Tax | Net of Tax | Before Tax | Tax | Net of Tax | |||||||||||||||||||||||||||||
| As reported (GAAP) | $ | (420,538) | $ | 30,180 | $ | (450,718) | $ | (18.33) | $ | 1.32 | $ | (19.65) | |||||||||||||||||||||||
| Asset impairment charges | 414,385 | (21,769) | 436,154 | 18.04 | (0.95) | 18.99 | |||||||||||||||||||||||||||||
| CEO succession costs | 3,484 | 153 | 3,331 | 0.15 | 0.01 | 0.15 | |||||||||||||||||||||||||||||
| Intangible asset reorganization | - | (16,474) | 16,474 | - | (0.72) | 0.72 | |||||||||||||||||||||||||||||
| Subtotal | (2,669) | (7,910) | 5,241 | (0.12) | (0.34) | 0.23 | |||||||||||||||||||||||||||||
| Amortization of intangible assets | 4,989 | 882 | 4,107 | 0.22 | 0.04 | 0.18 | |||||||||||||||||||||||||||||
| Non-cash share-based compensation | 296 | 157 | 139 | 0.01 | 0.01 | 0.01 | |||||||||||||||||||||||||||||
| Adjusted (non-GAAP) | $ | 2,616 | $ | (6,871) | $ | 9,487 | $ | 0.11 | $ | (0.30) | $ | 0.41 | |||||||||||||||||||||||
| Weighted average shares of common stock used in computing: | |||||||||||||||||||||||||||||||||||
| Diluted loss per share, as reported | 22,943 | ||||||||||||||||||||||||||||||||||
| Adjusted diluted earnings per share (non-GAAP) | 22,971 | ||||||||||||||||||||||||||||||||||
Comparison of First Quarter Fiscal 2027 to First Quarter Fiscal 2026
Net income was $35.8 million, compared to net loss of $450.7 million. Diluted earnings per share was $1.51, compared to diluted loss per share of $19.65. The increase is primarily due to the comparative impact of after-tax asset impairment charges of $436.2 million and valuation allowances on deferred tax assets related to our intangible asset reorganization both recognized during the first quarter of fiscal 2026, the recognition of an after-tax gain on the sale of our distribution facility of $41.3 million during the first quarter of fiscal 2027, and a decrease in interest expense.
Adjusted income decreased $5.5 million, or 58.3%, to $4.0 million, compared to $9.5 million. Adjusted diluted earnings per share decreased 58.5% to $0.17, compared to $0.41.
Liquidity and Capital Resources
We principally rely on our cash flow from operations and borrowings under our Credit Agreement (as defined below) to finance our operations, capital and intangible asset expenditures, acquisitions and share repurchases. Historically, our principal uses of cash to fund our operations have included operating expenses, primarily SG&A, and working capital, predominantly for inventory purchases and the extension of credit to our retail customers. We have typically been able to generate positive cash flow from operations sufficient to fund our operating activities. In the past, we have utilized a combination of available cash and existing, or additional, sources of financing to fund strategic acquisitions, share repurchases and capital investments. We had $21.7 million in cash and cash equivalents at May 31, 2026. As of May 31, 2026, the amount of cash and cash equivalents held by our foreign subsidiaries was $16.4 million. We have no existing activities involving special purpose entities or off-balance sheet financing.
We believe our short-term liquidity requirements will primarily consist of operating and working capital requirements, capital expenditures and interest payments on our debt. Based on our current financial condition and current operations, we believe that cash flows from operations and available financing sources will continue to provide sufficient capital resources to fund our foreseeable short- and long-term liquidity requirements. In the short-term we plan to prioritize repaying our debt outstanding.
Operating Activities
Operating activities used net cash of $0.6 million for the three months ended May 31, 2026, compared to net cash provided of $58.3 million for the same period last year. The change in cash used by operating activities was primarily driven by increases in cash used primarily for accounts receivable, annual incentive compensation and income taxes, partially offset by an increase in cash earnings and decreases in payments for inventory, inclusive of tariffs, restructuring activities and interest.
Investing Activities
Investing activities provided net cash of $72.5 million during the three months ended May 31, 2026, compared to net cash used of $9.5 million for the same period last year. The increase in cash provided by investing activities was primarily due to proceeds received from the sale of our distribution facility in Southaven, Mississippi and a decrease in capital and intangible asset expenditures.
Financing Activities
Financing activities used net cash of $69.1 million during the three months ended May 31, 2026, compared to net cash used of $45.1 million for the same period last year. The increase in cash used by financing activities is primarily due to net repayments of our long-term debt of $65.1 million and a $4.1 million contingent consideration payment related to the Olive & June acquisition during the first quarter of fiscal 2027, in comparison to net repayments of long-term debt of $45.0 million during the same period last year.
Credit Agreement
We have an amended credit agreement (the "Credit Agreement") with Bank of America, N.A., as administrative agent, and other lenders that provides for aggregate commitments of $1.25 billion, which are available through (i) a $750 million revolving credit facility, which includes a $50 million sublimit for the
issuance of letters of credit, (ii) a $250 million term loan facility, and (iii) a $250 million delayed draw term loan facility. Proceeds can be used for working capital and other general corporate purposes, including funding permitted acquisitions. During the first quarter of fiscal 2026, we borrowed $250.0 million under the delayed draw term loan facility and utilized the proceeds to repay debt outstanding under the revolving credit facility. During the first quarter of fiscal 2026, we capitalized $0.4 million of lender fees and a de minimis amount of third-party fees incurred in connection with the delayed draw term loan facility borrowing, which were recorded as prepaid financing fees in long-term debt. The Credit Agreement matures on February 15, 2029. The Credit Agreement includes an accordion feature, which permits the Company to request to increase its borrowing capacity by an additional $300 million plus an unlimited amount when the Leverage Ratio (as defined in the Credit Agreement), on a pro-forma basis, is less than 3.25 to 1.00. The term loans and delayed draw term loans are currently payable at the end of each fiscal quarter in equal installments of 1.25% of the original principal balance, with the remaining balance due at the maturity date. Borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term SOFR (as defined in the Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.375% and 1.0% to 2.375% for Base Rate and Term SOFR borrowings, respectively. We also incur loan commitment and letter of credit fees under the Credit Agreement ranging from 0.1% to 0.45% per annum and 1.0% to 2.375% per annum, respectively, based on our Net Leverage Ratio.
The floating interest rates on our borrowings under the Credit Agreement are hedged with interest rate swaps to effectively fix interest rates on $425 million and $325 million of the outstanding principal balance under the Credit Agreement as of May 31, 2026 and February 28, 2026, respectively. For additional information regarding our interest rate swaps, see Notes 10, 11, and 12 to the accompanying condensed consolidated financial statements.
As of May 31, 2026, the outstanding Credit Agreement principal balance was $720.5 million (excluding prepaid financing fees) and the balance of outstanding letters of credit was $9.5 million. As of May 31, 2026, the amount available for revolving loans under the Credit Agreement was $491.2 million, and the amount available per the maximum Leverage Ratio was $168.5 million. Covenants in the Credit Agreement limit the amount of total indebtedness we can incur. As of May 31, 2026, these covenants effectively limited our ability to incur more than $168.5 million of additional debt from all sources, including the Credit Agreement.
Debt Covenants
As of May 31, 2026, we were in compliance with all covenants as defined under the terms of the Credit Agreement.
Critical Accounting Policies and Estimates
The SEC defines critical accounting estimates as those made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a company's financial condition or results of operations. For a discussion of the estimates that we consider to meet this definition and represent our more critical estimates and assumptions used in the preparation of our consolidated financial statements, see the section entitled "Critical Accounting Policies and Estimates" in our Form 10-K. Since the filing of our Form 10-K, there have been no material changes in our critical accounting policies and estimates from those disclosed therein.
Information Regarding Forward-Looking Statements
Certain statements in this report, including those in documents and our other filings with the SEC referenced herein, may constitute "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. Generally, the words "anticipates", "assumes", "believes", "expects", "plans", "may", "will", "might", "would", "should", "seeks", "estimates", "project", "predict", "potential", "currently", "continue", "intends", "outlook", "forecasts", "targets", "reflects", "could", and other similar words identify forward-looking statements. All statements that address operating results, events or developments that we expect or anticipate may occur in the future, including statements related to sales, expenses, earnings per share results, and statements expressing general expectations about future operating results, are forward-looking statements and are based upon our current expectations and various assumptions. We currently believe there is a reasonable basis for our expectations and assumptions, but there can be no assurance that we will realize our expectations or that our assumptions will prove correct. Forward-looking statements are only as of the date they are made and are subject to risks, many of which are beyond our control, that could cause them to differ materially from actual results. Accordingly, we caution readers not to place undue reliance on forward-looking statements. We believe that these risks include but are not limited to the risks described or referenced in this report and that are otherwise described from time to time in our SEC reports as filed. We undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
Such risks are not limited to, but may include:
•the geographic concentration of certain U.S. distribution facilities which increases our risk to disruptions that could affect our ability to deliver products in a timely manner;
•the occurrence of cyber incidents or failure by us or our third-party service providers to maintain cybersecurity and the integrity of confidential internal or customer data;
•a cybersecurity breach, obsolescence or interruptions in the operation of our central global Enterprise Resource Planning systems and other peripheral information systems;
•the risks associated with the use of licensed trademarks from or to third parties;
•our ability to develop and introduce a continuing stream of innovative new products to meet changing consumer preferences;
•actions taken by large customers that may adversely affect our gross profit and operating results;
•our dependence on sales to several large customers and the risks associated with any loss of, or substantial decline in, sales to top customers;
•our dependence on third-party manufacturers, most of which are located in Asia, and any inability to obtain products from such manufacturers or diversify production to other regions or source the same product in multiple regions or implement potential tariff mitigation plans;
•our ability to deliver products to our customers in a timely manner and according to their fulfillment standards;
•the risks associated with trade barriers, exchange controls, expropriations, and other risks associated with domestic and foreign operations including uncertainty and business interruptions resulting from political changes and events in the U.S. and abroad, and volatility in the global credit and financial markets and economy;
•our dependence on the strength of retail economies and vulnerabilities to any prolonged economic downturn, including a downturn from the effects of macroeconomic conditions, geopolitical conditions including global conflicts or wars such as the Israel-United States and Iran conflict, any public health crises or similar conditions;
•the risks associated with weather conditions, the duration and severity of the cold and flu season and other related factors;
•our reliance on our CEO and a limited number of other key senior officers to operate our business;
•our ability to execute and realize expected synergies from strategic business initiatives such as acquisitions, divestitures and global restructuring plans;
•the risks of significant tariffs or other restrictions continuing to be placed on imports from China, Vietnam or Mexico and any retaliatory measures taken by these countries;
•the risks of potential changes in laws and regulations, including environmental, employment and health and safety and tax laws, and the costs and complexities of compliance with such laws;
•the risks associated with increased focus and expectations on climate change and other sustainability matters;
•the risks associated with significant changes in or our compliance with regulations, interpretations or product certification requirements;
•the risks associated with global legal developments regarding privacy and data security that could result in changes to our business practices, penalties, increased cost of operations, or otherwise harm our business;
•the risks associated with product recalls, product liability, class actions and other claims against us;
•our dependence on whether we are classified as a "controlled foreign corporation" for U.S. federal income tax purposes which impacts the tax treatment of our non-U.S. income;
•the risks associated with regulatory changes in Bermuda, including economic substance and tax governance requirements;
•the risks associated with accounting for tax positions and the resolution of tax disputes;
•associated financial risks including but not limited to, the risks to our business, liquidity or cost of capital which may be materially adversely affected by constraints or changes in the capital and credit markets, interest rates and limitations under and compliance with our credit facility, including our debt covenants;
•significant additional impairment of our goodwill, indefinite-lived and definite-lived intangible assets and other long-lived assets;
•projections of product demand, sales and net income, which are highly subjective in nature, and which future sales and net income could vary by a material amount;
•increased costs of raw materials, energy and transportation; and
•the risks associated with foreign currency exchange rate fluctuations.
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