0000916789-26-000009
SEC filingFiscal Q3 2026 revenue declined 3.4% to $512.8M, impacted by tariffs and competition, with adjusted operating margin contracting 370 bps to 12.9%.
For the three months ended November 30, 2025, consolidated net sales revenue decreased 3.4% to $512.8 million from $530.7 million in the prior year. The decline was driven by a 10.8% organic reduction, partially offset by a 7.1% contribution from the Olive & June acquisition and a 0.3% favorable foreign currency impact. Organic weakness reflected lower sales in Beauty & Wellness due to softer consumer demand, increased competition, and cancellations of direct import orders from China, as well as declines in Home & Outdoor's insulated beverageware category from continued competition and reduced retail replenishment. Gross profit margin contracted 2.0 percentage points to 46.9%, primarily from higher tariffs and a less favorable inventory obsolescence impact, partially offset by lower commodity costs and the Olive & June acquisition. Consolidated SG&A ratio increased 1.6 points to 35.6% due to higher freight, incentive compensation, and acquisition costs, partly offset by lower marketing. The company recorded $65.9 million of asset impairment charges in the quarter, leading to an operating loss of $8.4 million compared to operating income of $75.1 million. Net loss was $84.1 million, or diluted loss per share of $3.65, versus net income of $49.6 million and diluted EPS of $2.17. Adjusted operating income decreased 24.6% to $66.3 million, and adjusted diluted EPS fell 36.0% to $1.71.
Home & Outdoor segment revenue declined 6.7% to $229.6 million, reflecting continued competition and lower replenishment orders in the insulated beverageware category and decreased club and closeout channel sales. These headwinds were partially offset by strong demand for travel, technical, and lifestyle packs, the benefit of tariff-related price increases, and higher brick-and-mortar holiday sales in the home category. The segment reported an operating loss of $0.1 million (0.0% margin), inclusive of $24.0 million in asset impairment charges for Hydro Flask and Osprey. Excluding these charges, adjusted operating income fell 39.7% to $27.3 million, and adjusted margin contracted 6.5 points to 11.9%.
Beauty & Wellness segment revenue was nearly flat at $283.2 million (-0.5%), as a 13.9% organic decline was fully offset by the Olive & June acquisition. Organic weakness stemmed from softer demand, increased competition, cancellations of direct import orders from China, and stop-shipment actions to ensure consistent tariff-related price increases. The segment had an operating loss of $8.3 million (-2.9% margin), including $41.9 million of impairment charges for Health & Wellness, Drybar, and Curlsmith. Adjusted operating income decreased 8.5% to $39.0 million, and adjusted margin contracted 1.2 points to 13.8%.
Management's discussion underscores ongoing uncertainty from tariff policies, with additional IEEPA tariffs imposed during fiscal 2026 and continued volatility. The company has implemented mitigation efforts including production diversification, cost reductions, and price increases. Project Pegasus restructuring has been completed, with expected annualized pre-tax operating profit improvements of $75-85 million substantially achieved by fiscal 2027. However, near-term demand remains pressured by inflation, consumer confidence, and retailer inventory rebalancing. The company expects continued headwinds from tariffs and competition, and liquidity is managed through a $750 million revolving credit facility with amended leverage covenants. No specific numerical guidance was provided.
As of November 30, 2025, the company held $27.1M in cash and equivalents, alongside $11.5M in U.S. Treasury Bills classified as held-to-maturity. Total debt stood at $892.4M (including current maturities of $23.4M), with a net debt position of $865.3M. Shareholders' equity collapsed to $852.3M from $1.68B at February 28, 2025, driven by massive impairment charges and net losses. Inventory increased to $505.3M, up 11.6% from $452.6M at year-end, reflecting potential working capital strain.
The notes disclose no material purchase commitments or contractual obligations beyond the credit agreement and lease liabilities. Contingent consideration related to the Olive & June acquisition was $4.8M as of November 30, 2025, with potential payouts of up to $15M depending on EBITDA targets. Legal and regulatory contingencies are noted, but no specific amounts are accrued.
Share repurchases were minimal during the quarter, with only $0.2M in shares received from share-based compensation net exercises. The $500M buyback authorization from August 2024 had $498.2M remaining. No dividends are paid. Net debt decreased by $24.3M during the nine months, largely due to revolving loan repayments offset by term loan borrowings. Capital expenditures totaled $31.0M (2.36% of sales), focused on intangible assets and property.
For the quarter, Home & Outdoor segment revenue fell 6.7% YoY to $229.6M, with an operating loss of $0.07M (vs. $40.3M profit in Q3 FY2025). Beauty & Wellness revenue declined 0.5% to $283.2M, swinging to an operating loss of $8.3M (vs. $34.8M profit). The losses reflect $65.9M in asset impairment charges during the quarter. Geographic mix remained stable, with domestic sales (U.S. and Canada) at 76.7% of total revenue.
Operating cash flow (CFO) of $59.8M was positive, contrasting sharply with a net loss of $843.4M due to a massive $806.7M asset impairment charge. Without this non-cash item, adjusted net income would have been positive, indicating underlying business profitability. CFO declined 23.5% from the prior-year $78.2M, partly due to a $61.8M swing in accounts payable and a $12.8M increase in inventory. Capex rose to $31.0M (from $22.2M), representing 51.8% of CFO, a high reinvestment rate. The company generated enough cash to cover capex and limited share repurchases ($1.7M) but relied on debt proceeds ($450.5M) to fund operations, given the large net loss. Free cash flow (not explicitly stated) would be roughly $28.8M after capex. The significant impairment suggests a one-time non-cash charge; excluding it, cash flow generation appears solid.