Shares of Helen of Troy Limited (HELE) fell more than 5% on Wednesday after the consumer products company reported mixed first-quarter fiscal 2027 results. While sales and adjusted earnings topped expectations, management warned that tariff costs, supply-chain risks, and weak discretionary spending are squeezing margins.

The company reported first-quarter net sales of $402.1 million, up 8.2% from a year earlier and above analysts' estimate of $374.6 million. Adjusted diluted earnings came in at 17 cents per share, down from 41 cents a year ago but ahead of expectations for a 1-cent loss. GAAP diluted earnings per share were $1.51, compared with a loss of $19.65 per share in the prior-year period.

Margins Under Pressure from Tariffs

Gross margin declined to 46.0% from 47.1% a year earlier, reflecting higher tariff costs, inventory obsolescence, and an unfavorable sales mix in the Home & Outdoor segment. Adjusted operating margin slipped to 4.0% from 4.3%, while adjusted EBITDA was unchanged at $25.5 million.

Sales Growth Driven by Both Segments

Organic sales increased 7.4% during the quarter. Home & Outdoor revenue rose 9.5% to $194.9 million, supported by international demand for packs, new product launches, and broader retail distribution. Management highlighted strong international distribution and e-commerce growth for Osprey, along with distribution gains at Walmart and continued momentum on Amazon for OXO products.

Beauty & Wellness sales climbed 7.0% to $207.2 million, driven by nail care products, fans, thermometers, and new wellness offerings. Management said Braun blood pressure monitors exceeded internal expectations and gained market share at the largest U.S. mass retailer, while Olive & June continued to perform well. Core beauty brands remained under pressure, although point-of-sale trends improved.

Cash Flow Weakens as Debt Declines

Operating cash flow was negative $0.6 million, compared with positive operating cash flow of $58.3 million in the prior-year quarter. Free cash flow was negative $6.4 million, versus positive free cash flow of $45.0 million a year earlier. The company ended the quarter with $21.7 million in cash. Inventory declined to $467.4 million and included about $15 million in incremental tariff-related costs. Total debt fell to $716.1 million following net debt repayments of $65.1 million.

Sales Outlook Raised, but Risks Remain

Helen of Troy raised its fiscal 2027 net sales forecast to a range of $1.759 billion to $1.831 billion, up from its prior outlook of $1.751 billion to $1.822 billion. The updated guidance compares with the analysts' estimate of $1.79 billion. The company maintained its adjusted EPS outlook of $3.25 to $3.75, compared with analysts' estimate of $3.52. It also reaffirmed GAAP EPS guidance of $3.57 to $4.18.

Management said the first-quarter revenue received a temporary $4 million to $5 million boost from earlier Prime Day order timing, which shifted some demand from the second quarter. Management also embedded potential supply risk tied to two or three supply-chain pinch points in the outlook.

The company warned that Middle East conflict-related supply disruptions, softer consumer demand, cautious retailers, and inflation remain key risks. "Revenue risk from expected supply disruption is largely driven by the conflict in the Middle East," the company said. Its guidance also assumes June 2026 tariff rates remain in effect through the rest of fiscal 2027. Management added that it expects to collect most remaining Phase 1 tariff refunds during the second quarter and plans to reinvest much of any additional benefit.

HELE Price Action: Helen of Troy shares were down 5.33% at $26.54 at the time of publication on Wednesday.