0000916789-25-000097
SEC filingRevenue declined 9.8% driven by tariff impacts and consumer softness; operating loss widened due to $740.8M asset impairment charges.
For the six months ended August 31, 2025, consolidated net sales revenue decreased 9.8% to $803.4 million from $891.1 million in the prior-year period. The decline was primarily organic (-16.5%) due to reduced replenishment orders from retail customers amid softer consumer demand, higher tariffs, and the cancellation of direct import orders from China. The acquisition of Olive & June contributed $60.3 million (6.8%) to revenue. Gross profit margin contracted 1.5 percentage points to 45.5%, driven by higher retail trade expense, tariffs, and unfavorable inventory obsolescence, partially offset by lower commodity costs from Project Pegasus and the Olive & June acquisition. SG&A expense as a percentage of sales increased 3.6 points to 42.9%, reflecting higher outbound freight, marketing, CEO succession costs of $3.5 million, and negative operating leverage, partly offset by lower distribution center costs. Operating loss was $722.8 million, including $740.8 million of pre-tax asset impairment charges, compared to operating income of $65.6 million in the prior year. Net loss totaled $759.4 million (diluted loss per share of $33.09) versus net income of $23.2 million ($1.00 per share) a year ago. On an adjusted basis, operating income fell 51.8% to $43.1 million (5.4% of sales), and adjusted diluted EPS declined 54.3% to $1.00.
Home & Outdoor: Segment revenue decreased 12.2% to $386.7 million, primarily from continued competition and net distribution losses in the insulated beverageware category, lower club and closeout channel sales, and cancellation of direct import orders due to tariffs. These were partially offset by strong demand for technical and travel packs, expanded distribution in home, and a favorable comparison from prior-year shipping disruptions. Segment operating loss was $286.4 million, including $304.6 million of asset impairment charges. Adjusted operating income fell 49.5% to $28.9 million (7.5% margin vs. 13.0% last year).
Beauty & Wellness: Segment revenue declined 7.5% to $416.7 million, with an organic decline of 20.5% largely due to declines in thermometers, fans, heaters, and hair appliances driven by China market challenges (shift to localized fulfillment, competition from domestic sellers) and tariff-related order cancellations. Olive & June contributed $60.3 million (13.4%). Operating loss was $436.4 million, including $436.1 million of impairment charges. Adjusted operating income decreased 55.9% to $14.1 million (3.4% margin vs. 7.1% last year).
Management expects continued uncertainty from evolving U.S. tariff policies, which have already resulted in higher costs ($10.5 million in COGS for H1) and reduced demand. The company is pursuing tariff mitigation through supplier diversification, cost reductions, and selective price increases, but risks remain significant. Project Pegasus savings are expected to reach approximately 25% of the targeted $75–$85 million annualized benefit in fiscal 2026. The company may seek an amendment to its Credit Agreement during the third fiscal quarter to relax financial covenants in the face of ongoing headwinds. Additional goodwill or intangible asset impairments are possible if revenue or profitability projections are not met. No formal revenue or earnings guidance was provided for the remainder of fiscal 2026.
Cash and equivalents increased to $22.4M from $18.9M at February 28, 2025. Marketable securities (U.S. Treasury Bills) totaled $11.5M. Total debt decreased slightly to $893.2M, with $578.6M available under the revolving credit facility. Shareholders' equity dropped sharply to $926.3M from $1,683.4M due to extensive impairment charges and net losses. Inventory rose to $528.9M, up from $452.6M, reflecting inventory build.
No material purchase commitments were disclosed in the Notes. The only commitments relate to the contingent consideration for the Olive & June acquisition, with a fair value of $4.1M, and legal contingencies (Brita litigation) which remain uncertain.
Buyback activity was minimal: only $0.2M in net share settlements, with no open market repurchases. The remaining authorization under the August 2024 $500M program stood at $498.4M. No dividends were declared. Debt decreased by $23.2M, primarily due to revolving loan repayments. Capital expenditures totaled $11.5M in Q2 2026.
Segment results reflect the severe impact of impairment charges. Home & Outdoor revenue declined 13.7% to $208.7M, with an operating loss of $72.6M including $85.5M impairment. Beauty & Wellness revenue decreased 4.0% to $223.1M, with an operating loss of $243.1M including $240.9M impairment. Domestic sales comprised 76.5% of total revenue, with international at 23.5%.