Helen of Troy Limited (HELE) Q1 2027 Earnings Report, Transcript and Summary

Greetings. Welcome to the Helen of Troy's Limited First Quarter Fiscal 27 Earnings Call. At this time, all participants will be in listen only mode. A question and answer session will follow today's formal presentation. Please note this conference is being recorded. At this time, I will turn the conference over to Anne Rakunas, director, external communications.

Thank you, operator. You may now begin.

Thank you, operator.

Good morning, everyone. Welcome to Helen of Troy's First Quarter Fiscal 27 Earnings Conference Call. The agenda for the call this morning is as follows: I will begin with a brief discussion of forward looking statements Scott Uzzell, our CEO, will then share his thoughts and areas of focus. And Brian Grass, our CFO, will provide an overview of our financial performance in the first quarter and outline our expectations for the full year fiscal 27. Following our prepared remarks, we will open up the call for Q and A. This conference call may contain forward looking statements that are based on management's current expectations. With respect to future events or financial performance. Generally, the words anticipates, believes, expects, and other similar words identifying forward looking statements. Forward looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from the actual results. This conference call may also include information that may be considered non GAAP financial information. These non GAAP measures are not an alternative to GAAP financial information, and may be calculated differently than the non GAAP financial information disclosed by other parties. The company cautions listeners not to place undue reliance on forward looking statements or non GAAP information. Before I turn the call over to Scott Uzzell, I would like to inform all interested parties that a copy of today's earnings release can be found on the Investor Relations section of our website by scrolling to the bottom of the homepage. The earnings release contains tables that reconcile non GAAP financial measures to their corresponding GAAP based measures. We have also posted an investor presentation to our website. And with that, I will now turn the conference call over to Scott Uzzell.

Good morning, everyone. Thank you for joining us. When we last spoke, we laid our ambition to be a better company on the road to being a bigger company. Today, I want to share our progress on being a better Helen of Troy. We are focused on getting closer to the consumer, sharpening how we--how we run our business, We are starting to see early evidence we are making progress. Our Q1 sales results came in ahead of our expectations. Across both our business segments, Our margin and EPS performance reflect deliberate investment in brands, innovation, and people as we focus on building more consistent, durable enterprise, not just a quarter or 2 of improvement. While we are encouraged by a solid start to the fiscal year, we remain clear eyed. This is the first year of a multiyear road map. 1 we laid out for you in April at our April earnings call. We are focused on the work to be done to make Helen of Troy reach our potential. The long term lens is particularly important as we continue to navigate a dynamic operating environment. The consumer remains under pressure. And we are managing through a more volatile cost environment. We are taking disciplined actions to balance near term margin pressures while positioning the business for the long term. As we have said before, we cannot control the macros. But we can control how we execute within it. And while we are executing well and where we are executing well, we are winning. Our North America POS, these are tracked channels. We saw consolidated growth year over year. Concentrated in Braun, Osprey, OXO, and Olive & June. On a sequential basis compared to fourth quarter, trends improved in key areas with the biggest improvement in beauty and wellness. Some brand callouts include Osprey's Daylight and Transporter expandable travel packs that deliver a consumer-relevant solution seamlessly converting from a personal item to an airline approved carry on. This is differentiated innovation over delivering against financial targets and driving meaningful share gains. OXO successfully extends the brand's award-winning, performance-intuitive design into the high growth pet category. With a range of new products spanning feeding bowls, stands, mats, storage solutions, positioning the brand to capture incremental demand and expanding adjacent categories. Braun blood pressure monitors, launched in mass channels last fall. They combine medical grade accuracy with simplicity. They are outperforming plan and stand out as the only products in the category gaining share at the world's largest mass retailer based in The US. And Olive & June launched an out of this world collaboration with Star Wars, The Mandalorian Grogu, bringing consumer collectibles, exclusive and culturally resonant products that elevate the brand and drive engagement at scale. These results reflect a simple point. Brands that deliver meaningful innovation and meet real consumer needs can continue to win even in a more cautious spending environment. But as we said last quarter, fiscal 27 is about restoring momentum, by focusing on editing and amplifying the priorities and actions of the enterprise by directing our time, capital, and attention towards the highest impact opportunities. Our actions are guided by 3 pillars. First, consumer first innovation. Second, commercial and operational excellence. Third, our people and culture. As we reenergize our organization, we want to ensure that we have the capabilities to win. Our approach is intentional. We are focused first on strengthening operational discipline and improving how the business runs before we lean more fully in the broader brand acceleration. In Q1, we made meaningful progress against these prior priorities that form key elements of our 3 pillars. Making our consumer-centered offense a reality, going from the abstract to how do we make this real? And it is about how we organize and what we do every day. First, we are sharpening how we run the business. Fewer priorities, clearer choices, more consistent execution against the things that matter most. A key step in executing our strategy is how we are evolving our operating model. We are reshaping the organization to move closer to our consumers. Putting the energy, the inertia, the focus, the decision making closer to our consumer marketplace. This is about building brands and products that deliver utility and style. This is how amazing brands are built and create magical connections with their consumers. This can only happen when leaders live in the cultural space and life of the consumer. So they can take consumers to new places. Our new Helen of Troy office will enable this to be a cornerstone of our company of the future. Under this model, we have designated 5 dedicated segment general managers. Each with full ownership of the brand portfolio, including strategy, innovation, commercial execution, and business results. These roles are a mix of internal leaders stepping into expanded roles as well as recruiting external talent to broaden the capabilities of the organization. A deliberate combination that gives us both continuity and fresh perspective without materially increasing our operating costs. We have also formalized 3 geographic or geo-general manager roles to stitch and accelerate brand development beyond the North American borders. it is strategic. it is intentional. it is focused on brand building in the right global markets. To better leverage our strong international structure that is already in place. The result is dedicated leaders who live and breathe a focused consumer segment or marketplace rather than balancing competing priorities across multiple brands. We expect this will free up our segment presidents to do what they do best, clear the forest for strategic growth by scaling enterprise solutions, advancing cross portfolio opportunities, and shaping our long term strategic agenda. We believe this will result in a company closer to the consumer with sharper ownership faster decision making, and the leadership firepower to unlock full potential of our brands. This is a natural next step in the operating model evolution we described last quarter. Second, we are strengthening the fundamentals of our commercial and operational execution. We have identified clear priorities to operate with greater discipline, and we are moving quickly to address them. This starts with pricing discipline. Our previous pricing actions now in place across our major brands are largely holding in the market. Though we continue to monitor retailer consumer response in select areas, elasticity has been higher than expected. A related focus is improving the quality of our revenue. Being more deliberate about our product and channel mix, reducing exposure to lower margin channels, and shifting towards higher value products and customers. We are also bringing greater consistency to how we price and promote, ensuring we drive demand in ways that protect brand value. At the same time, we are improving alignment across sales, marketing, and product, with a sharper focus on higher impact product and our most important customers. At its core, this work is about bringing greater control and consistency to how we operate across channels and with our customers. In parallel, strengthening the core capabilities that enable consistent execution. In ecommerce, we are bringing greater discipline to how we show up across channels. Starting with pricing alignment and improving marketplace dynamics, including addressing third party sellers to create a more consistent presence. We are also continuing to improve our digital shelf and retail media effectiveness, areas where we see meaningful opportunity. In demand planning, we are in the early stages of building a more connected approach to forecasting. Improving how we link demand signals promotional plans, and inventory decisions. And while we are doing all these things every day, we are maintaining a disciplined approach to capital allocation and balance sheet management as we strengthen the foundation of the business. Lastly, we are making progress in how decisions get made. We are simplifying processes reducing unnecessary complexity, and pushing decision making closer to the consumer and marketplace. As a result, we are already seeing faster decision making across the organization. Our brand teams are collaborating more closely on incremental distribution opportunities, Our marketing and product teams are actively deploying test and learn models to try new tactics and measure results before scaling. These changes are fostering a more efficient operating model, with clear ownership. That enables us to act with clarity and control. At the same time, continuing to invest our time and resources in growth. Our approach is disciplined. We are targeting areas where we have a clear right to win and where the returns are compelling. A really good or a great example of this is in our international business. We plan to accelerate growth by evolving how we go to market. Leaning into a more agile, hybrid model that pairs strong local partners that know the market with direct consumer engagement with our brands. it is a more flexible approach at helping us move a lot faster. Execute better, and build stronger connection with consumers as we scale into specific global markets. We will share more about this later this fall. We are being deliberate in these investments, ensuring that we are aligned with the near term priorities and our ability to execute. So as we look ahead, our focus remains on execution, on giving you visible markers of progress. We will have more to share in the coming quarters. To bring it all together, encouraged by how the year is starting and the progress we are seeing. Our focus now is staying disciplined, building consistency, and continuing to get better at how we--how we operate. Execution will drive the rest of the year. Delivering great problem solving products moving on key commercial priorities, and managing through cost volatility. We have still got work to do, we are headed in the right direction, and we are building on a strong foundation to unlock the full potential of our portfolio, and drive more consistent long term growth. With that, I will turn it over to Brian Grass.

Thank you, Scott, and good morning, everyone. We believe our start to fiscal 27 is another step in the right direction. With net sales and adjusted EPS above our expectations driven by disciplined execution across the organization and improving business fundamentals. I am encouraged by how we are navigating a dynamic operating environment and addressing margin pressure from heightened geopolitical and supply chain disruption, which I will cover in more detail shortly. Overall, the quarter reinforces the initial progress we are making as we transition to a growth first model while maintaining a prudent disciplined approach to investing back into our business and mitigating supply chain volatility. Turning to the financial highlights for the first quarter. Consolidated sales increased 8.2% favorable to our expectations. Note that our Q1 sales results benefited from approximately $4 million to $5 million of favorable order phasing driven by the earlier timing of Prime Day. For Home and Outdoor, sales increased 9.5% with broad based growth across all 3 brands. Osprey was the strongest performer with growth driven by improvements in our international distribution network, and ecommerce momentum. OXO benefited from lapping prior tariff-related disruption, strong point of sale trends, and expanded brick and mortar distribution. Hydro Flask growth reflects expanded retail distribution inventory optimization, and ecommerce momentum. For beauty and wellness, sales increased 7% reflecting growth in both beauty and wellness. Our wellness portfolio outperformed expectations driven by growth across Braun, Vicks, Honeywell, and PUR. Driven by lapping prior-year tariff-related disruption, solid point of sale, and expanded distribution. In beauty, Olive & June led the way with strong growth supported by expanded distribution, continued innovation, and strong consumer engagement. These gains were partially offset by continued softness in some of our core beauty brands reflecting ongoing point of sale pressure and pricing elasticity impacts. International sales increased 1.1% for the quarter. Growth was driven primarily by Osprey's improved distribution network, and broad based strength across the wellness portfolio. Partially offset by softer consumer demand in kitchenware and hair appliances amid a competitive retail environment. Our margins and profitability were largely in line with our expectations. With adjusted EPS and EBITDA results reflecting the execution of our growth first model that reinvest the majority of overperformance back into the business. We recognized a pretax benefit of $1.8 million for Phase 1 tariff refunds that we estimated to be collectible as of the end of the quarter. Which contributed to adjusted EPS ahead of expectations. I will share more regarding tariff refunds when I cover our outlook for the remainder of the year. Consolidated gross profit margin decreased 110 basis points to 46% reflecting the net unfavorable impact of tariffs a less favorable inventory obsolescence impact year over year, and a less favorable customer mix within home and outdoor. We expect the first quarter of fiscal 27 to have the most year over year gross margin compression from tariffs due to higher rates still cycling through cost of goods sold and minimal tariff impact in the same period last year. SG&A ratio decreased to 31% compared to 45.1% in the same period last year. Primarily driven by a pretax gain of $55 million from the sale of a distribution facility that we disclosed in April partially offset by higher investment in our people year over year. Adjusted operating margin decreased 30 basis points to 4% reflecting the unfavorable impact of tariffs and higher investment in our organization and go to market structure. Partially offset by lower outbound freight and favorable operating leverage. Moving on to balance sheet highlights. Inventory ended at $467 million, a $17 million decrease from the prior year. Despite approximately $15 million of incremental tariff costs in the inventory. We reduced our total debt by $716 million as we used the proceeds from the sale of the distribution facility to lower outstanding borrowing. Our net leverage ratio decreased to 3.48x compared to 3.87x at the end of the fourth quarter. Free cash flow was slightly negative in the quarter primarily due to cash used for tariff payments annual incentive compensation payments, and higher cash taxes. Partially offset by an increase in cash earnings. Turning now to our full year fiscal 27 outlook. We are raising our net sales expectations slightly to $1.759 billion to $1.831 billion with home and outdoor net sales of $859 million to $884 million and beauty and wellness net sales of $900 million to $947 million. We are maintaining adjusted EBITDA of $190 million to $197 million which implies year over year growth of 2.1% to 6.3%. We are maintaining adjusted EPS of $3.25 to $3.75 and we are maintaining free cash flow of $85 million to $100 million. While increasing our planned capital expenditure range by $2 million Our full year revenue outlook reflects our first quarter performance partially offset by retailer order pull forward of approximately $4 million to $5 million out of the second quarter due to the shift in prime day timing as well as revenue risk from expected supply disruption largely driven by the conflict in the Middle East. Our adjusted EBITDA and EPS outlook now reflects the pretax benefit of Phase 1 tariff refunds. Now estimated to be approximately $9.2 million but that benefit is more than offset by the expectation of cost inflation for the remainder of the year. The higher costs are being driven by increases in commodity inputs, and pressure from unfavorable Chinese yuan fluctuations increased inbound and outbound freight expense, and higher cost to secure goods to avoid supply disruption. Some of this pressure was building before the conflict in the Middle East. But the heightened geopolitical and supply chain disruption has exacerbated the impact we are now expecting. We are not assuming any benefit from future tariff refund phases of this time since we cannot reliably predict when those refunds might be received or whether they will be ultimately be collected. We are preparing to file claims for the second phase of tariff refunds which was just announced on June 29. When we are able to get enough clarity on the timing and collectability, I expect that we will include future phases in our outlook. We have paid $71 million in EPA tariffs that were not included in the phase 1 refund process. While we expect that future phase refunds could provide some upside to our current earnings outlook, we are developing plans to reinvest a large portion of the P&L benefit back into our business. As well as increase our capital expenditures on key product development and commercial initiatives with the expected cash flow benefit. In terms of quarterly cadence, we expect first half year over year sales growth in the low to mid single digits with the low single digit decline in the second half of the year. Due to the cadence of people and brand investment, and higher average tariff costs cycling out of inventory and into cost of goods sold in the first half of fiscal 27 we now expect roughly 20% of our total annual EPS outlook in the first half of the year with roughly 15% in the second quarter consistent with our previous outlook. In closing, while the operating environment remains challenging, with increasing inflationary pressures, softer and more selective discretionary demand, cautious retailer behavior, and elevated promotional intensity, are taking deliberate actions to position the business for improved performance and deliver reliable results. We continue to prioritize targeted investments in our brands and capabilities to position us for growth restore operating leverage, and build long term momentum. While we make plans to use it additional potential tariff refund benefits, to feed the flywheel even further and mitigate expected inflationary pressure on our supply chain. Our continued focus on working capital efficiency and balance sheet productivity supports both strategic investment and operational flexibility. We continue to evaluate opportunities to enhance financial flexibility and concentrate our resources on our core business as we advance in our next phase. And with that, I will turn it back to the operator for Q&A.

Thank you. We will now be conducting a question and answer session If you would like to ask a question at this time, please press 1 for your total keypad. And a confirmation tone to indicate your line is in the question queue. For participants using speaker equipment, Thank you. And our first question comes from the line of Bob Labick with CJS Securities. Please proceed with your questions.

Good morning. Congratulations on a good start to the year.

Thank you. Yes.

So just kind of starting off with what Brian with you just finished up with a little bit of, you know, kind of cadence and guidance there.

Can you just maybe expand a little bit upon when tariff refunds may hit the P and L if you think about that? And just and the drivers of the you know, kind of I guess, low single digit declines in the second half revenue, that you have talked about, which is consistent with what you said last time as well. Yeah. And just to clarify the second point, Bob, when I referred to low single digit decline for the second half, that refers to the midpoint of our range. I failed to say that when speaking but, that is the intent Then to kinda go back and get to your question about tariff refunds and cadence, we do not totally know because the process while it is defined in terms of what to do to submit refund claims, and there is a general rule that within you know, 90 days, you should get claims approved. It does not totally follow that there is does not appear to us that there is a pattern that we can reliably depend on. But what I would say is this, is the first phase which is about $7 million remaining, yet to be collected. I would expect that the bulk of that would be collected within our second quarter. Then that leaves future phases, and, really, we have not even submitted our phase 2 claims yet. And then we know we are gonna have some claims that fall out of phase 2 and will fall into potentially a phase 3 or a phase 4. So I do see that the tariff refund benefit getting spread out over a period of quarters I do think that potentially we could have some even fall into fiscal, 2028. Probably will not be hugely meaningful, but I do think that is possible at this point in time. And I actually like the fact that the cadence is being spread out a little bit. it is not concentrated in 1 quarter. Because that gives us the ability to better execute the reinvestment back into the business If it is all in 1 quarter, it is very hard to match up the spending with the rev with the benefit it is spread out over a period of time, I think we can we can really do well to invest the benefit, and improve the health of our businesses. So that is that is kind of our view of the potential cadence. I know it probably does not give you much more in terms of specifics, but it is it is kind of the best information we have. And if, you know, there is questions about you know, reinvesting that, happy to take those questions. Yeah.

Actually, that is that was exactly where I wanted to go with that. Obviously, you saw some nice you know, recovery and good sales growth in the quarter. And part of what you have been talking about, particularly last quarter and I think even a little before, is you know, reinvest in the business to get growth versus cut to get higher earnings. And so maybe talk a little bit about where are you seeing now that you have had a little more time to look into it or explore it or whatever you wanna call it? Where are seeing the best opportunities for reinvestment to get kind of near term growth? What brands and what areas, you know, offer the best opportunities for reinvestment.

Bob, this is Scott. I will take that first part, then Brian can finish it off. Thanks, Bob. I would say this just to be consistent with what we talked about last quarter. Is that we know a healthy Helen of Troy to make it some better Helen Of Troy is built on healthy brands. And so we are focused really in 5 areas maniacally. An agile operating model, which is really investing in talent and how we stand up getting our folks closer to the consumer, I will talk more about that. Investing in strategic innovation against many of our brands that are ready to connect with the consumer, investing in omnichannel acceleration, making sure we have got the right capabilities, to work brick and mortar online as well as in between. And We have been standing up work in our supply chain, how we make and move product around the world. And then I just recently was over in Asia, spending time for international team on what is the right markets going forward to be short fewer markets that are more sharper with the right business model to execute investment in those in other parts of the world. So it is really around brands, innovation, and people. that is we are focused on as we go to more growth forward approach in fiscal 2027. Braun, any ads?

Yeah. The only thing I would add is the intent is also to mitigate any cost inflation that is above and beyond what we have assumed in our currently. We have made an attempt to capture our current view of what that is and that is already baked into the Outlook that you have to the extent that it is worse than what we currently estimated, we would use part of the tariff refund benefit to mitigate those extra costs. that is not our preference in our in our base plan. Our base plan to use it for reinvestment, but it is there as a buffer as well. Thank you.

The next questions are from the line of Peter Grom with UBS. Please proceed with your questions.

Great. Thank you. Good morning, everybody. So I guess I just wanted to get some perspective on the revenue outlook.

I think Braun, you kinda gave some commentary around the pull forward around Prime Day, which makes sense.

But I think you also made a comment around revenue risk from expected supply disruption. So can you maybe just unpack that a bit? Is that just conservatism given the current environment? Or is that something you have reasonable line of sight into? it is Yeah. I will take the first part. Frank. Let me take the first part, and I will let and you could pay it off. I think, you know, as you know, as we look at our enterprise, we are focused on the things 80% that we believe can control, which is investing in brands, people in new product innovation, and getting back to growth. But as we think about the external factors, that are out there, whether it be, you know, continued inflationary pressure, softness in discretionary categories, you know, retailers in the marketplace in general being just much more conservative as they wait by are things that are not just for us. This is everybody in the category. Just, you know, it just we live in an uncertain world. But Braun, I do not know if you wanna talk more about the way we cadence the revenue throughout the year, but confident in the work that we are doing inside the building to make sure we are a better LA. We have a lot of concerns. Concerns are the wrong term. We just have our cautious around what is happening around the world and that we deal in. Braun, any ads?

No. I agree with all of that. And just to do the math on kind of if you say we beat expectations by $25 million in the first quarter, The there is $5 million approximately. That was pulled forward out of Q2. So I think you know, factor that into the equation. We flowed through 10, so that leaves about 15 in terms of potential supply risk that to your point, we do have line of sight to. And up until yesterday, I would say, things are moderating and starting to look better, and maybe that is a conservative estimate. But now you have the things that happened last night where you know, they are probably gonna be more disruption. So I think it was intended to be a conservative estimate of the potential supply chain. And it is look. it is 2 or 3 pinch points where we may have scarcity of supply, and will we be able to get access to that supply? it is not like it is a massive amount in the system. So it is really 2 or 3 pinch points We are being we are trying to be conservative and hopefully appreciate that it is volatile. I mean, 1 day, 2 days ago, I would have said things are moderating, but up until last night, things seem to be going in the other direction. And so I am glad that we you know, embedded a conservative point of view into our outlook. that is helpful.

And I guess I wanted to go there next I mean, I guess, you know, going back to April Right? I think and I know some of this was not included in the guidance, but there was some, you know, thought around the benefit from tariffs would kinda largely offset know, input costs. And I know phase 1 of refunds is coming through. But and I hear you. Yeah. The last couple days are starting to move the other way, but it would appear from our perspective that relative to where we were in April that costs are lower. Can you maybe just provide some context around what is embedded from the outlook from a cost standpoint and just given how volatile it is, how we should be monitoring that as we think about the balance of the year?

Yeah. Yeah, not to give you specific amounts, Peter, but what we said was so there was a tariff refund benefit that we are now capturing in our outlook, and that is about $9 million. We said that the cost that we are estimating is more than that, more than offsets that. And so not to give you a specific amount, what we have assumed is, you know, something greater than the $9 or $10 million of tariff refund benefit. We have kind of found a way to offset the amount that is more than the tariff refund. So that is our current view. And, look, you gotta understand. It takes time for some of that to bleed through. The total cost of this inflationary pressure will be higher than that greater than the $10 million number but it takes time for that to cycle through cost of goods sold. And so that is why you know, it may be smaller Thank you.

Okay. Please go ahead. I am sorry. No. I was just gonna say, Braun, just to clarify, like, would if I were to include the other phases of the tariffs, would that be more than enough to offset the inflation?

I think that is how I originally interpreted the comment back to April. Rather not just the phase 1. Yes. In terms of impact of this fiscal in terms of impact of fiscal 27, I would expect if we are able to collect all of the tariff refunds that we are due that the rep the tariff refund benefit would be greater than the inflationary cost. Pressure. Yes. that is a reasonable assumption. Okay. You so much. Apologies for the additional questions. I will pass it on. Thank you.

You may then requeue for any additional questions. The next question is from the line of Olivia Tong with Raymond James. Please proceed with your questions.

Great. Thanks. Good morning. I wanted to talk a little bit about the price mix impact on the quarter. And then your assumption for the year. Clearly, a tough consumer backdrop and given the level of in your categories, what is your level of confidence that you can hold the current level of pricing that you have pushed through, what you are embedding in terms of the promotional backdrop, for the rest of the year and how you think about the phasing of margins over the course of the year as a result of that? Thank you.

Olivia, I will take the first part. You know, the thing about it is from a pricing standpoint, as we shared in prior quarters, it varies by brand and category. But for the most part, feel like 80% of what we wanted to get pricing, we were able to pass it through, and we are competing in those markets. Will always continue to monitor that to make sure that if whether it is competition, what is going on in the marketplace, or what is going on by retailers, we have the right to adjust. But at this point, you know, we had to flow that through to offset the work of the negative impact of tariffs a year ago. Braun, do you have anything you want to add?

Yeah. I would just add that we do have our overall point of sale dollar grow we do have overall point of sale dollar growth across the portfolio. And in certain areas where we took price there is a divergence between dollar share growth and POS growth, which I would say is in line with our expectations. We built elasticity assumptions into our outlook and assumed that there would be a high level of elasticity. And I would say that the dollars are doing better than what we originally assumed in terms of performance in light of the price increases. But as Scott said, it is something that we are gonna continue to monitor, and we may adjust over time. Currently, we feel good about our pricing situation, but, like, you know, in areas where units are down, we wanna continue to stay on top of that and say, do we have the right price mix? And so it will be something that we continue to, evolve or stay on top of. But currently, we think we are in a good position. Got it.

Thanks. And then just following up, the updated sales lines, I appreciate, the color that you gave, the quantification you gave to Peter's question. But it does assume pretty flattish sales for the next 3 quarters after a nice bump in Q1, realizing, of course, a piece of that is the pull forward But that being said, you know, can you talk about your confidence in the recovery path from here? Clearly, I assume you wanna do better than flattish, but could you maybe talk also about what underlying category growth expectations you have embedded in your outlook and the path forward, in terms of any new product introductions, that could potentially improve the sales cadence from this point forward?

Sure. I can take that. So it is important to think about the comparison when you think about the sales trajectory for the remainder of the year. And know, why we Q1 would be the highest, sales performance, in our expectations. Because the compare is so low, and there was so much tariff revenue disruption. In the first quarter and the first half of the year. So that kinda moderated in the second half of last year, and so there is less disruption to recapture. And so that is why the growth rate decelerates in the remaining 3 quarters. And you know, you asked about level of confidence. We you know, we have not stretched in terms of any assumptions like you mentioned, category expansion, or any things like that. We have kinda kept current state. With respect to that and are really using current POS trends project the remainder of the year, which I think is the right thing to do. So that is how we are thinking about that, and then we would layer in, as you mentioned, new innovation, new distribution, things like that are known. And that we have line of sight to. So we feel like it is a very, sustain it is supportable forecast that we think we can deliver on. Does that answer all the parts of your question? I think you had a couple different things in there. I wanna make sure I got everything. Nope. that is great. Thank you.

Our next question from the line of Susan Anderson with Canaccord Genuity. Please proceed with your questions.

I guess maybe just a follow-up on the sales cadence and then I think you guys had mentioned you guys had some expanded distribution in home and insulated beverages. I guess I was curious where that was at and what channels, and then also just in general, the core sales without the pull forward and the increased distribution? I guess, did you see you know, kind of, like, growth in existing channels? Thanks.

Well, I will I will kick off. it is a great question. I would say this What you will see across Home and Outdoor that team has been really focused on a couple of things. what is the right level of investment against brands so that we make sure we are connecting for our core consumer in this dynamic operating environment. Bringing relevant innovation that not only is in the core categories they are in, but enabling them to also go in adjacent spaces. And then we continuing to focus on great storytelling to connect with the consumer. And what we are seeing across home and outdoors is not only landing us with distribution in the current channels that we are in with either more SKUs or more different types of products. it is allowed us to expand in different places without me going into specific partners. But, but it is allowing us to continue to grow our distribution and other partners within home and outdoor. I do not know if you have anything to add as well as around the sales cadence for the year.

Yeah. And just on the distribution question, in home, it is Walmart distribution that expansion that is driving it. Then we are also seeing good growth on Amazon. Part of that due to the Prime Day shift And then on Hydro Flask, the distribution expansion is with DICK'S, Sporting Goods, and then we also had a Target planogram reset then we are also seeing good momentum on, ecommerce as well. So supported by Amazon. So those are kind of the distribution drivers there. Did I did I get everything on the question? Was there something else Yeah. No. That was great. that is helpful.

And then I guess maybe just in beauty, I think you talked I can I can tell you Go ahead?

And our about Olive & June driving that growth and then some of the wellness products as well.

But I guess just in terms of the other core beauty brands, I believe they are still down. But I guess, are you seeing that trend line improve at all, you know, sequentially? Are you seeing, I guess, the decline moderate as you kind of move forward? Yeah.

This is Scott Uzzell, and Brian Grass can build.

We are still not where we want to be if you look at the rest of that If you take, beauty carve out Olive & June for beauty, we are still not where we wanna be, but we do see some bright spots in terms of trend line improving with respect to POS. So not where we wanna be, but we do see indicators that say we are we are doing some of the right things, and the POS is starting to move in the right direction. Okay.

Great. And then maybe if I could add just 1 last 1 on the model. Just SG&A going forward, I guess, as you guys continue to look to maybe invest more in the brands, like how are you thinking about that investment? And then also, is that a SG&A cadence? Thanks.

The how I would think about it is we kinda have a base plan that just assumes phase 1 tariff refunds of the $9 million that we have embedded in our outlook. In that base plan, investment is increasing 40-bps. that is stayed consistent with our original outlook, and we are carrying that forward. So we would we would look to maintain that at a minimum. And then any over performance not any--but a large portion of any over performance would then be reinvested in terms of increasing the SG&A. Based on the overperformance And then you have the plan that reflects tariff refunds. Whereas I mentioned we want to reinvest the bulk of the tariff refund benefit So I it is hard to really tell you what that looks like from a margin perspective and dollar perspective because we kinda do not know yet what the tariff refund cadence will be But we wanna we wanna reinvest a high proportion of whatever that tariff refund benefit is, and we know that we have $70 million of EPA tariffs that we paid that we believe should be subject to tariff refunds at some point in time over the next several quarters. And so we will be looking to deploy, again, the bulk of that in our plan b as I will call it, when we are able to get visibility on when we will be able to collect those. So I hope that helps. We are sticking with our 40-basis-point increase in the base plan. And then when we get the tariff refunds, we will be looking to amp that up significantly cannot tell you exactly what the margins will look like, but, hopefully, you got enough direction. Okay. Great. Thanks so much for all the details.

Thank you. At this time, I will turn the floor back to management for closing comments.

Yes. I want to say thank you very much spending time with us this morning. As we talked about, we are off to our races around a 3 phase road map to growth. This year is about putting markers on the board and getting back to restoring brand momentum. So standing up a new operating model, which we will share more about in detailed comments, and continue to focus on balance sheet productivity. Thank you for spending time with us this morning. Have a great day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference.