0000916789-26-000096
SEC filingRevenue grew 8.2% to $402.1M, but adjusted operating margin contracted to 4.0% due to tariff headwinds.
Consolidated net sales revenue increased 8.2% to $402.1 million for the first quarter of fiscal 2027, compared to $371.7 million in the same period last year. The growth was driven by both segments, with Home & Outdoor up 9.5% and Beauty & Wellness up 7.0%. Gross profit rose 5.6% to $184.9 million, but gross margin contracted 1.1 percentage points to 46.0% due to net unfavorable tariff impacts, less favorable inventory obsolescence, and unfavorable customer mix in Home & Outdoor.
Operating income was $60.3 million (15.0% margin), compared to an operating loss of $407.0 million in the prior year, which included $414.4 million of asset impairment charges. Excluding non-recurring items, adjusted operating income was flat at $16.1 million, and adjusted operating margin declined 0.3 percentage points to 4.0%. Net income was $35.8 million ($1.51 per diluted share) versus a net loss of $450.7 million ($(19.65) per share) in the prior year. Adjusted net income fell 58.3% to $4.0 million, and adjusted diluted EPS decreased 58.5% to $0.17.
Interest expense fell 11.3% to $12.2 million on lower average borrowings, partially offset by a higher effective interest rate. Income tax expense was $12.6 million on pre-tax income of $48.3 million, compared to $30.2 million on a pre-tax loss of $420.5 million, reflecting the absence of non-deductible impairment charges and valuation allowances.
Home & Outdoor: Net sales increased 9.5% to $194.9 million, driven by strong international demand for technical, lifestyle, and travel packs, new product launches, and a favorable comparison to the prior year when retailers pulled forward orders due to tariff uncertainty. Operating income was $8.2 million (4.2% margin), versus a loss of $213.8 million in the prior year. Adjusted operating income rose 39.2% to $12.3 million (6.3% margin), benefiting from lower freight costs and operating leverage, partially offset by tariffs and unfavorable mix.
Beauty & Wellness: Net sales increased 7.0% to $207.2 million, led by nail care (new and expanded distribution), fans and thermometers (favorable compare to prior year tariff-related order cancellations), and new wellness product launches. These gains were partially offset by declines in hair appliances and prestige hair care due to softer demand and competition. Operating income was $52.2 million (25.2% margin), versus a loss of $193.2 million. Adjusted operating income decreased 48.2% to $3.8 million (1.8% margin), reflecting tariff costs, higher share-based compensation, and unfavorable inventory obsolescence.
Management’s discussion emphasizes ongoing uncertainty from evolving U.S. tariff policies, which resulted in $12.2 million of additional pre-tax tariff costs net of refunds in the quarter. The company is actively pursuing production diversification outside China and has implemented price increases, though these are believed to be fully offset by volume declines due to consumer price elasticity. Macroeconomic headwinds, including high inflation, potential interest rate changes, and geopolitical tensions (Israel-United States/Iran conflict), are expected to continue pressuring consumer spending and retailer orders. No quantitative guidance is provided; however, the MD&A notes that the company expects continued adverse impacts on sales, results, and cash flows from tariffs, competition, and changing consumer behavior. The company prioritizes debt repayment and remains compliant with all debt covenants.
As of May 31, 2026, total assets stood at $2.08B, down from $2.12B at fiscal year-end. Cash and cash equivalents increased to $21.7M from $18.9M. The company holds $11.1M in U.S. Treasury Bills classified as held-to-maturity. Total debt decreased $64.7M to $716.1M, primarily driven by net repayments under the revolving credit facility. The weighted average interest rate on borrowings was 5.6%. Shareholders' equity rose to $843.5M due to net income and other comprehensive income, partially offset by share repurchases. Inventory increased to $467.4M, reflecting seasonal builds.
No purchase commitments were disclosed in the Notes. The company has a contingent consideration liability of $0.4M related to the Olive & June acquisition, down from $5.4M due to a $5.0M payment. The remaining liability reflects probability-adjusted earn-out targets. Legal contingencies include talcum powder lawsuits with an estimated liability of $1.8M and a securities class action lawsuit with no estimable loss.
Share repurchases were limited to $1.2M for net exercises related to share-based compensation; no open market repurchases occurred. The board-authorized $500M repurchase program has $496.8M remaining as of May 31, 2026. No dividends were declared or paid. Total debt decreased by $64.7M, including $6.3M in mandatory term loan repayments and net revolver paydowns. Capital expenditures totaled $5.8M (1.4% of sales), down from $13.4M in the prior year quarter.
Net sales revenue for the quarter was $402.1M, with Home & Outdoor contributing $194.9M (+9.5% YoY) and Beauty & Wellness $207.2M (+7.0% YoY). Operating income for Home & Outdoor was $8.2M (4.2% margin) versus Beauty & Wellness at $52.2M (25.2% margin), the latter benefiting from a $54.9M gain on sale of a distribution facility. Excluding this gain, Beauty & Wellness operating income would have been negative. Geographic mix: domestic (U.S. and Canada) 76.4%, international 23.6%.