Greetings, and welcome to Helen of Troy Limited's second quarter 2027 earnings conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anne Rakunas, Senior Director, IR and Corporate Communications. Thank you. You may begin.
Thank you, Operator. Good morning, everyone. Welcome to Helen of Troy's second quarter fiscal 2027 earnings conference call. The agenda for the call this morning is as follows. I will begin with a brief description of forward-looking statements. Scott Uzzell, our CEO, will then share his thoughts on progress in the quarter. Brian Grass, our CFO, will provide an overview of our financial performance in the second quarter and our revised expectations for the full year fiscal 2027. Following our prepared remarks, we will open up the call for Q&A.
This conference call may contain certain forward-looking statements that are based on management's current expectation with respect to future events or financial performance. Generally, the words "anticipates," "believes," "expects," and other similar words are 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, I would like to inform everyone 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. I will now turn the call over to Scott.
Thank you, Anne. Good morning, everyone. Thank you for joining us. When we spoke in July, I shared that we were focused on strengthening the critical fundamentals of our company. We continue to make progress to become a better Helen of Troy on the road to becoming a bigger Helen of Troy. Our Q2 results reflect continued execution against the priorities outlined in our multi-year roadmap. Our Q2 sales were in line with our outlook, and our adjusted diluted EPS came in ahead. As I stated over the last several quarters, our recovery will not be linear. In fiscal 2027, we are squarely focused on demonstrating markers of progress to set us up for sustained and repeat strong performance over many years to come. It is about brand growth, driving sales growth through disciplined investment in brands and categories where we believe we have a clear path to win.
It's about marketplace execution, realizing the value of our brands through premium positioning and strong market execution to continue strengthening our gross margin. We're pursuing these priorities through three foundational pillars paired with continued balance sheet discipline. We continue to execute against all these areas. We are two quarters into our plan to making a better Helen of Troy, and we are making progress. The operating environment continues to be dynamic, but I truly believe what we need to do to reach our aspirations is in our control. We are encouraged by what we see across several areas of the business. I want to highlight a few Q2 examples. We grew sales year-over-year across all three Home & Outdoor brands.
Osprey led growth again this quarter, reflecting strong consumer and category performance, new product introductions, continued improvement in our international distribution network. OXO benefited from targeted actions to improve inventory composition, net distribution gains, and new product introductions. Hydro Flask was aided by targeted actions to improve inventory composition, new product innovation, and partial recapture of tariff-related disruption within the corporate channel. Wellness grew, driven primarily by growth in Vicks and Braun, reflecting net distribution gains and lapping tariff-related items and new product introductions. Olive & June produced another solid quarter, reflecting strong consumer demand, higher replenishment orders, and new and expanded distribution. In the rest of Beauty, new product innovations are contributing to sales, although some brands continue to experience softer demand. We know we have more work to do on our commercial execution and demand creation to fully capitalize on our opportunities.
International was another bright spot, with sales growing 3.7% in the quarter, led by Hydro Flask, OXO, and Osprey, reflecting new products, expanded distribution, improving execution in select markets. Our new distributor in Australia is one of our examples of more agile go-to-market approach we discussed last quarter. Importantly, in terms of North American point of sale, Beauty & Wellness showed noticeable improvement in Q2 relative to our longer trends, reflecting continued strength from Olive & June and Braun, along with improving trends across several of our more pressured businesses, including Revlon, Hot Tools, Honeywell, and Curlsmith. For the first half of the fiscal year, we generated free cash flow of $38 million. As of August, we improved our net leverage ratio to 3.0x, down from 3.5x at the end of Q1, continuing our multi-quarter trend of debt reduction.
We also made progress normalizing our channel inventory, with aggregate retail inventory coverage for our brands improving compared to a year ago. We continue to address pockets of elevated inventory for certain brands within select channels. That improvement reflects targeted closeout and liquidation efforts to clear slower moving stock. This is the kind of discipline execution we mean when we talk about editing and amplifying our highest impact priorities, focusing our resources where we see the greatest opportunity to strengthen our brands and improve our performance. As I mentioned last quarter, our work continues to be guided by three pillars, consumer-first innovation, commercial and operational excellence, and people and culture. Under consumer-first innovation, we're becoming more deliberate about our products and platforms we prioritize. Across the portfolio, we're focusing resources on the most differentiated consumer opportunities and supporting those opportunities with the right distribution, inventory, and media plans.
In Home & Outdoor, OXO expanded its entry into pet category this quarter. After a limited release launch during Prime Day, the full line officially launched across all channels in August. This was supported with fully integrated campaign across media, digital, e-commerce, influencers, sampling, and experiential events designed to build awareness and connect with pet parents. Osprey is also expanding further into travel with the launch of the Ozone Hardside. It is an ultra-lightweight, four-wheel luggage collection that brings Osprey's expertise in lightweight, durable design to the largest segment of the travel market. These are great examples of further extending brands in attractive adjacencies with additional products and expanded distribution opportunities. Hydro Flask Micro Hydro continues to perform well, driven by wider retail placement and more sizes.
The brand recently launched new innovations including lunch totes, bags, and soft coolers, and limited edition kids' Daydream bottle and lunch box collection in time for back to school. In Beauty & Wellness, I am excited about PUR's latest industry milestone this quarter, becoming the only water filter certified to reduce lead, microplastics, and total PFAS in both pitcher and dispenser formats, addressing three contaminants that consumers say concern them most in their drinking water. Olive & June continued to strengthen its cultural relevance with its first exclusive influencer collaboration at Ulta Beauty, partnering with a digital creator, Avery Woods, to bring fresh, trend-driven offerings to consumers. The brand also celebrated its 10th Allure Best of Beauty award, with its gel mani system earning the prestigious honor for the second consecutive year, reinforcing Olive & June's leadership in at-home nails.
Olive & June continues to be a great addition to the Helen of Troy portfolio. Innovation is just the first step. We must sharpen the full commercial process around it. That brings me to the second pillar, commercial and operational excellence. I have shared our intent to be closer to our consumer and move with the speed of the marketplace. We are making this a reality. Last quarter, I introduced our new general manager structure. As we fill these roles, we are moving the strategy and decision-making closer to the consumer, the brand, and the marketplace. We have made progress establishing that structure during the quarter, including putting currently planned leaders in place and clarifying accountability and creating closer alignment around our growth priorities. While this work is still in the early stages, we are seeing benefits from faster decision-maker and greater cross-functional collaboration.
Over time, we believe this structure will strengthen our ability to respond to changing market conditions and improve execution across our portfolio. We are already seeing early evidence of this in our Home & Outdoor business, where sales and brand teams are working more closely together, evaluating distribution, customer relationships, and capacity earlier in the product development process. This closer alignment is also accelerating how we share consumer and retailer insights to further improve the development process and respond quicker to promotional programs. We continue to sharpen our pricing, promotion, channel management, digital shelf, retail media, and demand planning capabilities, meeting consumers on a modern shopping journey through stronger omni-channel capabilities. We are using current point of sale and inventory signals to update our assumptions more quickly. Our incremental investment is more selective, with clear expectations of measurable results. This discipline is particularly important in the current environment.
I am pleased how our teams are managing through geopolitical costs and supply chain challenges with the impacts we anticipated largely tracking in line with our expectations. Our third pillar is people and culture. Building a stronger company starts with building a stronger organization. Throughout the year, we continue to simplify how we operate, strengthen ownership, and ensure our teams are focused on opportunities with the greatest potential to create value. As a part of that work, we recently appointed a new leader for our Beauty & Wellness business. This is an important step in strengthening our leadership and accountability within this segment as we work to build on improving trends we're seeing and accelerate the actions needed across the brands where we still are working to stabilize performance.
We're also continuing to cascade our culture work throughout the organization, helping create a common set of behaviors, expectations, and ways of working that support our strategy and position us for long-term success. I am encouraged by the focus, urgency, and collaboration I see across the organization. To bring it all together, Q2 was another step in our journey to become a better Helen of Troy before becoming a bigger Helen of Troy. Continued balance sheet productivity alongside the progress we've made across the portfolio gives us more flexibility to keep investing in our brands and position our company for sustained long-term growth.
Our priorities for the rest of the year are clear: accelerating the brands showing the strongest consumer momentum, building on improving trends across Beauty & Wellness, and taking targeted actions where performance remains under pressure. We know there is more work ahead, but I believe we have the right talent and strategies in place, and we will continue to invest with discipline and execute with focus. With that, I want to turn it over to Brian.
Thank you, Scott, and good morning, everyone. Our second quarter was another step in the right direction, with results at the better end of expectations, reflecting improving business fundamentals and continued progress against our strategic priorities, even as we navigate a challenging environment with a lot of moving parts. Sales were in line with our outlook, while adjusted diluted EPS, adjusted EBITDA, and free cash flow were ahead of our expectations for the base business, which does not include the net benefit from tariff refunds. On the subject of tariff refunds, our results for the second quarter include gross pre-tax tariff refunds of approximately $26.9 million. As stated last quarter, we intend to reinvest a large portion of the gross tariff refund benefit back into the business.
After reinvestment, we realized a net pre-tax benefit of approximately $4 million and an after-tax diluted EPS benefit of approximately $0.12 using our estimated annual adjusted effective tax rate. Our outlook for the full year now includes a gross tariff refund benefit for the full amount of IEEPA tariffs paid of $80.5 million, as well as our intended reinvestment in the range of $66.5 million-$70.5 million, leaving an estimated net pre-tax benefit in the range of $10 million-$14 million and a net benefit to diluted EPS in the range of $0.30-$0.45. In our earnings release and the investor presentation posted to our website this morning, we are providing the net tariff benefit separately from our base business for the second quarter and intend to do so for the remainder of the year.
It's important to note that while tariff refunds are providing a fiscal 2027 benefit that we are largely reinvesting, we have not been made whole from the cumulative tariff impacts to our business. We've paid tariffs that have not been refunded. We've incurred operating and capital expenditures to diversify our supply base and absorb longer lead times. We've seen certain revenue bases disrupted and not fully recovered, and we've incurred higher interest expense on the cash tariff outlay. We are also experiencing product cost inflation due to escalating gas and diesel prices, commodities, currency, and supply scarcity. Despite the overall disruption in the environment and the unfavorable impact to our revenue and cost structure, we continue to view the refunds as an opportunity to improve the health of our business, and I'm proud of the organization's agility to mobilize thoughtful and disciplined investment in a very short period of time.
In the investor presentation, we've included a slide that illustrates the nature of the investments we intend to make for the full fiscal year. Turning to financial highlights for the second quarter, consolidated sales increased 2.1% in line with our outlook. For Home & Outdoor, sales increased 9.2% with growth across all three brands. For Beauty & Wellness, sales declined 4.5%, reflecting growth in wellness and nail care, which was more than offset by a decline in the remainder of Beauty. Consolidated gross profit margin increased 800 basis points to 52.2%, reflecting the favorable impact of tariff refunds, net of higher tariff costs, totaling approximately 560 basis points and lower overall retail trade and promotional expense year-over-year. These factors were partially offset by inflationary product cost pressures due to commodities, fuel prices, freight, currency, and supply scarcity, and less favorable inventory obsolescence year-over-year.
SG&A ratio increased 540 basis points to 46.4%, primarily reflecting our stated intention to reinvest tariff refunds, as well as base business investments in the organization, go-to-market structure, and brands. The increase also reflects higher packaging costs related to legislation enacted by several U.S. states and foreign geographies to reduce single-use plastics and establish regulatory requirements, which include programs designed to transfer the cost of packaging disposal from municipalities to producers of consumer packaged goods. While we expect this to be a continuing trend, we intend to use tariff refunds as an opportunity to offset some of our initial disposal costs, but more proactively, to take a fresh look at our packaging and design it to be more environmentally friendly and more appealing to our consumers and retailers.
Finally, SG&A includes divestiture litigation costs related to the divestiture of our North American personal care business that occurred over five years ago. For a further description of these costs, please refer to today's earnings release. Adjusted EBITDA increased $13.2 million, and adjusted EBITDA margin improved by 280 basis points, primarily driven by the favorable impact of tariff refunds, net of higher tariff costs, lower overall retail trade and promotional expense, and the impact of favorable operating leverage, partially offset by an increase in personnel expense, higher packaging-related costs, inflationary product cost pressure, increased marketing expense, and less favorable inventory obsolescence expense year-over-year. Due to strong cash flow and a cash benefit from net tariff refunds, we are ahead of our debt paydown expectations at this point in the year, contributing to an interest expense decrease of $3.3 million.
Our GAAP effective tax rate was 66.4%, and our adjusted effective tax rate was 34.1%, primarily due to an increase in tax jurisdictions with losses, which are excluded from the estimated annual effective tax rate calculation per U.S. GAAP. We expect our tax rate to normalize in the remainder of the year, resulting in an estimated adjusted effective tax rate of 24%-27% for the full year. Moving on to balance sheet highlights and free cash flow performance. Inventory ended at $480 million, a $49 million decrease from the same period last year. We also improved the health of our inventory, increasing the overall percentage of active inventory by seven percentage points during the first half of the year.
We reduced our total debt to $673 million at the end of the second quarter, a reduction of $221 million compared to the same period last year, and $108 million since the beginning of the fiscal year. Our net leverage ratio decreased to 3x, compared to 3.5x at the end of the first quarter, well ahead of our original target for this point of the year. Cash flow from operations was $56.5 million, and free cash flow was $38 million for the first half of the year. Turning to our full-year fiscal 2027 outlook, we are narrowing the range of our net sales expectations slightly to $1.768 billion-$1.822 billion, with Home & Outdoor net sales of $851 million-$876 million, and Beauty & Wellness net sales of $917 million-$946 million.
We are maintaining our adjusted EBITDA expectations for the base business of $193 million-$196 million and raising our consolidated EBITDA expectations to $203 million-$210 million to reflect the estimated net pre-tax tariff refund benefit in the range of $10 million-$14 million. We are slightly narrowing our adjusted EPS expectations for the base business to a range of $3.30-$3.70 and raising our consolidated adjusted EPS expectations to a range of $3.60-$4.15 to reflect the estimated after-tax net tariff refund benefit in the range of $0.30-$0.45. We are raising our free cash flow expectations to a range of $120 million-$140 million, while increasing our planned capital expenditure range by $9 million.
A revised consolidated full-year outlook reflects the estimated unfavorable impact from product cost inflation and potential supply disruption, largely driven by the conflict in the Middle East. Management's view of continued inflationary pressures, including escalating fuel and diesel prices, higher interest and mortgage rates, softness in discretionary categories, conservative retailer inventory management in an increasingly competitive and promotional landscape. Our plans for a higher concentration of foundational and longer-term tariff refund investments for which we do not expect an immediate return, and an assumed return on shorter-term investments offset by pressure on the consumer and overall price elasticity, as well as the assumed impact of increased investment from the competitive set, and an increase in estimated diluted shares outstanding to 24.2 million for the full year and 24.5 million for the second half of the year, primarily due to the increase in share price.
In terms of quarterly cadence, we expect net sales in the range of $478.3 million - $504.5 million for the third quarter of fiscal 2027. In terms of adjusted EPS, we expect a higher net tariff refund benefit in the third quarter as we expect the remaining IEEPA gross tariff refunds of $51.8 million to be fully recognized in the third quarter. While a portion of our planned strategic reinvestment is expected to fall in the fourth quarter, which will effectively lift third quarter adjusted EPS and compress fourth quarter adjusted EPS. As a result, for the third quarter of fiscal 2027, we expect consolidated adjusted EPS in the range of $2.05 - $2.40, which includes a net after-tax tariff refund benefit in the range of $0.66 - $0.77 and applies adjusted EPS for the base business in the range of $1.39 - $1.63.
In closing, we believe our second quarter results demonstrate continued progress, but they also reinforce the need to remain disciplined and appropriately cautious in a very dynamic environment. We are encouraged by the performance of our strongest brands, as well as improving fundamentals across the balance of the portfolio, continued international growth, and the effectiveness of our sourcing and supply chain mitigation actions. We're also encouraged by the progress we've made to improve the health of our inventory through the first half of the year and are targeting a 12 percentage point improvement in our active inventory composition by the end of the year, which we believe sets us up for success in fiscal 2028.
We are ahead of schedule in terms of debt paydown due to strengthening cash flow, and we now expect a net leverage ratio of 2.7x or lower by the end of fiscal 2027. At the same time, we see opportunities for more consistent performance across our portfolio, and we have meaningful work ahead to stabilize our more pressured brands, rebuild the organization, and further strengthen the underlying earnings profile of the business.
We will continue to allocate our resources toward the highest priority opportunities to feed the flywheel while maintaining flexibility to adjust as demand conditions evolve. Our focus remains on delivering consistent results, further improving working capital efficiency, and building the capabilities required to support sustainable growth over time. I will turn it back to the operator for Q&A.
Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you please limit yourself to one question and one follow-up. You may re-queue for any additional questions after that. Again, that is star one to register a question at this time. Today's first question is coming from Peter Grom of UBS. Please go ahead.
Great. Thank you. Good morning, everyone. Hope you are doing well. Maybe just a bigger picture question to start. I wanted to ask on the consumer and just the macro backdrop. You talked about how choppy it has been. So curious if you can provide a view on what you are seeing from your core consumer. Have you seen any shifts in behavior of late? I guess related, you talked about input cost pressures. Can you maybe just unpack your broader cost basket and how you see inflation trending from here?
Hey, Peter. Good morning. This is Scott and team. Good to hear from you. I will just step back and I will answer your question around the consumer. As I have always said, and we continue to believe that, 80% of our opportunity is related to things that we control within our building, and 20% are the things that are happening around the world and around the consumer. I will start with us a little bit. We shared that we are focused on three fundamental phases of building our business.
Phase one in FY 2027 is getting our foundation right, which is around investing in our brands, standing up an operating model that makes us closer to the consumer in the marketplace, and driving balance sheet productivity. That is what we are focused on right now, and that is kind of agnostic to the consumer. We believe that is about making a better Helen of Troy.
As we look at the work that we've done in Q2 and Q1 and year to date, we continue to invest in our brands. We're focused on building our commercial muscle, our commercial discipline muscle, to execute in the marketplace, upping our ability to execute as a company, and driving balance sheet productivity, all of which we've made some progress in quarter two. The 20%, the part that's out there outside of the realm of Helen of Troy, I do believe the consumer is under pressure, whether it be fuel prices, interest rates, just the cost of living for the middle-market consumer, specifically in North America.
It's definitely more challenging this year than it was last year. But for companies that deliver amazing innovation, that tell great stories, that execute well, the consumer's still showing up. I also will say from a retailer standpoint, broadly, it's definitely a much more promotional environment than it's been in the past, but it's one that we believe that we can continue to compete in. Brian, anything you want to add?
Yeah, I would say, Peter, we made our very best attempt to estimate inflationary costs last quarter. So when we gave you the outlook last quarter, we had made a fulsome effort to make an estimate of what we thought all those inflationary cost movements would mean. I would say while the conflict in the Middle East is still not resolved, costs have largely stabilized as compared to our original estimates. So we're not changing our view of the way we estimated the cost to play out versus what we provided in Q1. I'll point out that the outlook we gave in Q1 did not have the full tariff refund benefit, but it was our intention for it to include the full inflationary cost impact in the outlook, and that remains the same. So those costs are included in our base business, not in the tariff refund benefit.
That's very helpful. Then just one follow-up on just the illness incidents. I think previously the expectation would be that it would be in line with the prior three years. I think it's now expected to be slightly below. What's driving that? Is that just simply being more conservative, or is that something you're seeing more real-time that's kind of driving that view?
Yeah, I would just say initial indications are that it is trending to be lower. So we are just going to take that as a cue and be a little bit more conservative and not have an outlook that is depending on strength of a cold flu season.
Great. Well, thank you so much. I will pass it on.
Thank you, Peter.
Thank you. Our next question is coming from Bob Labick of CJS Securities. Please go ahead.
Hi. Good morning. Thanks for taking our questions.
Hey, Bob.
Good morning, Bob.
Hi. I wanted to discuss, can you talk about, I guess specific to Helen of Troy and to your brands, your volume and pricing in the quarter, and then kind of category demand where you're gaining share and losing share. Then, I guess finally, what does it take to get consistent growth in Beauty & Wellness going forward?
Yeah, I'll kick off on there. I'd say this. You asked the first part was where are we gaining share and where we see strength. I can tell you where we see strength. We definitely see strength in many pockets of our Home & Outdoor business, specifically OXO and Osprey. We see strength in our Olive & June, our nail business. We see strength in our Braun business and many categories that we in. From a Beauty & Wellness standpoint, it's a complicated category that's a prestige as well as a mass business at the same token. But what I'd say, here are the steps we're taking. If I step back to FY 2027, I know you and I spent time together, that we're focused on getting the fundamentals right across our business by showing you markers of progress. And these markers of progress really fall into four buckets.
How do we begin to drive brand momentum? Because I fundamentally believe a better Helen of Troy is one that's built where brands are growing. Second, how do we drive better commercial discipline? That's how we show up in the marketplace and follow the consumer shopping journey. How do we execute our capabilities across our enterprise better and more seamless? And then how do we drive balance sheet productivity? As we are two quarters into FY 2027 and two quarters in to kind of our comeback, we're making progress, but it's not even across our whole portfolio. As you can see in our performance, whether it be our Home & Outdoor had a very strong quarter. We had several brands within our Wellness portfolio that advanced. We had our international business make an advance.
But when we get to Beauty & Wellness, which I believe I have aspirations for in the future, we're focused on a couple things. Getting the right people leading the business. We've made some critical changes there, and I'm excited about the team that we have in place. Second, the strategy. We've got some good work going on in strategy on how do we participate in the market and engage both prestige and mass in the right way.
Next, how do we pull new product development forward so we can bring it in front of the consumer at a more rapid pace? And then lastly, how do we bring omnichannel capabilities to market so that the consumer can follow us in the journey? All of those are under construction. I knew this year was going to be still a continued challenge year for our Beauty business. But I can tell you we're doing the work to set ourselves up for the future.
I would just add a little bit, Bob, that dollars are better than units for us, but I would say that that's true of the market largely in our category. Not unusual with what the market trend is. We are looking at our price in a few areas to see if we need to recalibrate, and I think we will probably make some adjustments there. We're not where we want to be, but we're showing improving trends, I'd say, across the portfolio. I'd say beverage wear, hair care, and water filtration are areas where we didn't do so well in the quarter. But again, we see some indications of improvement kind of across the portfolio.
Okay, great. Just, kind of on my follow-up, you've talked about it a little bit, and I think you have a nice slide, looks like slide nine, in terms of where you're reinvesting the kind of tariff refund. I know you paid out more than you're getting back, but it's still new money right now. I was hoping you could kind of just dig a little deeper and summarize and elaborate for us on the reinvestment and really where and when kind of you expect to see benefits from that reinvestment kind of going forward.
Oh, great question. Yeah. I know Brian and I will tag team this. I go back to our strategy that I've been talking about for the last several quarters, that our path to where we are as a company, it did not happen overnight and we needed to get back to basics on making a better Helen of Troy. As we looked at the opportunity of regaining the tariffs, although not all of them that we paid in, we really just said, "How do we make critical investments to do the fundamentals and the foundational elements of our business around brand investment, packaging, product development, things that are going to not only pay dividends this year, but play for many, many years to come?"
That's where we made our investment, while also giving some of it to pre-tax earnings. What Brian will do is give you a little bit more specificity, but the tariff refunds are really around accelerating the work to build the foundational elements for Helen of Troy to make us better for the future.
Yeah, Bob, I kind of view it as investment and an expression I often use, putting problems behind us. If there were things that in the past with organic business that were harder to digest, I view tariff refund benefit as an opportunity to digest those costs, put it behind us. Things like cleaning up inventory, the packaging. If we can pull things forward, things that we had on the roadmap that we already know that we need to do, if we can pull them forward into this tariff refund period, that's what we're trying to do. Then there's all of the things Scott was talking about, brand investment and even creating content.
You can phase that out over time or you can kind of pull that forward and do it in a period and get that out of the way and then you've got your content developed and you can go forward with it. So, I kind of think of it as, it is an investment and it's traditional and you get an ROI and all that kind of stuff, but I also view it as trying to be clean going into fiscal 2028. We want our inventory to be clean. We want to pull forward as much cost as possible so that we don't have to bear the cost in fiscal 2028. So there's a blend, and we try to break it into kind of four buckets of what we call foundational investment.
That's just investment that you need to do before you can do kind of the high return media spending. You got to have your foundation correct, and that relates to consumer insights and things like that. Growth strategy, we invested in our growth strategy as a part of this. So the weight of the two buckets that won't have an immediate return are kind of the foundational bucket and the longer-term bucket on the slide that I think we do get a huge benefit for and set us up for success in fiscal 2028, but aren't going to provide an immediate return.
Then there's kind of a near term bucket that will have a fiscal 2027 ROI, and that's about 25% of the spend, and then the remainder goes to pre-tax earnings. But that's kind of how we tried to bucket the spend, and it's a lot of investment, but it's also a lot of putting problems behind us.
Great. Appreciate that. Thanks very much.
Thank you. The next question is coming from Olivia Tong of Raymond James. Please go ahead.
Great. Thanks. Good morning. I want to unpack the revenue outlook a bit. The guide implies growth deceleration in the second half for Home & Outdoor, but some improvement in the rate of decline on Beauty & Wellness. Can you talk about what drives the reversion to the mean on both? Then specifically on Home & Outdoor, you saw growth accelerate in Q2, but you lowered the full year outlook. Can you talk about the drivers there? Then just lastly, a key competitor for Hydro Flask outlined long-term targets recently, which I am sure you saw, made the high single digits in sales, higher in margins. As you think about the long-term opportunities for Hydro Flask and your drinkware business, what is your view on the growth of the category and then your ability to capture that? Thanks.
Olivia, this is Scott. Thank you. I will take a quick part and then Brian will tag team it. I would say this, first from an outlook standpoint. It is a lot here. Basically this, I go back to that this year was about building markers of progress for our company and trying to get the foundational elements right. We are leveraging tariff refunds and really the hard work and the discipline of this team to be sharper on fewer things, to drive more impact in the marketplace, all with the intent that we know a healthy Helen of Troy is one that is built where brands are growing and winning in their categories. We know that that is not evenly spread across all brands, but we are making progress there. That is kind of one.
Two, from an outlook standpoint, when I think about the balance of the year, and we are two quarters into kind of our transformation, it is a multi-year plan. Then I look at the state of the consumer, and when I say the state of the consumer, I think the consumer will continue to pursue great innovation, great products, great marketplace. But I believe that there are more winds in the consumer space than there were a year ago versus winds at their back, whether it be fuel, interest rates, just running their lives. That as I think about, A, where we are in the stage of our transformation and our comeback, as well as the state of the consumer, it is one of let us continue to do the basics to build our business and continue to drive markers of progress against commitments we have made to the marketplace.
That's kind of been our focus. The next double click around the insulated beverage category, specifically Hydro Flask. I still have really, really high confidence in Hydro Flask and high confidence in that team. What I can tell you as we focus on in FY 2027 and FY 2028 for that brand, it's really around, how do we talk to the consumer that loves the brand, that calls it the OG of the category, that believes that the brand identifies with them from an inclusivity standpoint, from about moments outdoors, that we know there's a following there. So how do we story tell and connect with that consumer and that team's doing work to make sure we're driving the right marketing message.
Second, we're innovating within the category to bring new news like Micro Hydro and many other products that are relevant to that category to make sure that we continue to hold our premium position, but making sure we're bringing new news to the category. Third, which I think is the most significant unlock, is moving to adjacencies where we can take the brand that's already connected with a following to other needs that build on the ethos of Hydro Flask, not only for today, for the future. That work is underway.
Yeah, Olivia, I'd add on to that with respect to the slowdown in Home & Outdoor sales in the second half, or not slowdown, but the change in our outlook. The beverageware category as a whole is a little bit saturated, and we see that environment becoming promotional. We want to maintain our positioning, and you kind of referred to another competitor that is putting out long-term outlook for high growth. I think that's because they've been able to maintain the positioning, and we want to be able to try and do the same thing. We won't participate so much in that promotional environment, and because of the saturation that we see, it'll put pressure on our second half.
We also see some inventory correction needed in the channel in the beverageware category, and so we're hoping that will play out in the second half of the year and that we're in a cleaner position going into fiscal 2028. With respect to better Beauty & Wellness, as we've been saying, we've been seeing improving trends, in particular in the Wellness part of the business, and that's playing itself out and us raising our outlook a little bit. We've got some strengths that is building in the Wellness part of the portfolio.
Great. Thanks, guys. Appreciate it.
Thank you. Our next question is coming from Susan Anderson of Canaccord Genuity. Please go ahead.
Hi. Good morning. Thanks for taking my question. Good to see the progress in the quarter. I guess maybe just a follow-up on Olivia's question, really quick, just on the lower sales expectation in the back half for Home & Outdoor. I guess, is it just Hydro Flask really that you're expecting to be a little bit more pressure, but the other brands you expect to continue to grow nicely? And then also just looking at the growth in the quarter for Home & Outdoor, I was just curious, how much of it was driven by new space gains and international growth versus the growth in the U.S.? Thanks.
So on the first question, yes, Hydro is the driver of the Home & Outdoor revision to our outlook for revenue. The second question, I don't know if we have it broken apart. I would say there was kind of equal using all levers for growth in terms of new product introductions, distribution. Category expansion, international, which international is doing a combination of those, using a combination of those levers to grow. We are excited that in international, we have got some new partnerships there that we are really leaning into and are excited about and seeing good traction from. It is kind of pulling all the levers, Susan, I would say. I would not say there is one that outweighs the other. We are trying to have a balanced growth platform.
Okay, great. I guess just in Beauty & Wellness, maybe if you could talk about kind of like the puts and takes for top line growth in the back half versus what you saw in the first half. Then just on the prestige beauty side and hair tools, how are you thinking about kind of like that sequential trajectory? Are you starting to see sales improve at least sequentially? When do you think you could kind of get an inflection in the category? Thanks.
Susan, this is Scott. I always like to step back. When I stepped back six months ago and I looked at FY 2027, and at that point I was six months into my job, I knew that we have a lot of opportunity across our portfolio. As we approached FY 2027, as I talked about in the past, that I knew there were categories and brands that I felt like were ready for kind of fully funded growth plans for FY 2027 because the consumer is ready, the team is ready, the pipeline is ready, let us go to market. We made those investments. Then we had a group of brands in the middle that we probably wanted to fund higher, but we said they are ready to move forward, but still we cannot do everything, and we funded those.
In the Beauty business specifically, we knew this year was going to be a challenging year. We know that we have got new people on the business. We have got a new product pipeline we are trying to pull forward. We were still working on our storytelling, and we are preparing ourself for the future. So, we definitely want to do better with our Beauty business, but we expected this year to continue to be a challenging business. Brian, would you like to add?
Yeah, I would just add that in kind of the prestige part of Beauty, it is up against some closeout noise in the prior year where we had some specific activity that was pretty lumpy in the prior year. So that is driving a little bit of the decline. We are seeing improving trends, even though the results are not where we want them to be. We are seeing some improving trends in the POS data. Then, if you kind of look at mass beauty, we are assessing whether we need to recalibrate on some pricing, in particular in Revlon. So we think that is going to help the performance there when we get that right. Then we are really happy with Wellness. We are happy with where Wellness is going and the trends there. I would say we are really, really happy with Olive & June.
Okay, great. Thanks so much. Good luck this holiday season.
Thank you.
Thank you.
Thank you. At this time, I would like to turn the floor back over to Mr. Uzzell for closing comments.
Yeah, I want to say thank you everyone. Closing comments, yeah. Thank you very much for spending time with us this morning. We are pleased with the quarter and continued progress on our multi-year roadmap to growth. This year is about putting markers on the board and getting back to restoring brand momentum, standing up a new operating model and continued focus on balance sheet productivity. Thank you for spending time with us this morning, and have a wonderful day. Thank you.
Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.