Thank you, Jack. Good morning, everyone and thank you for joining us. I am looking forward to reviewing our second quarter results to providing perspective on the higher revenue and EPS outlook that we announced earlier today, to updating you on our ESG progress, and to discussing several important organizational topics with you.
Before doing so, I want to provide a brief update on the EPA matter discussed in our first quarter call in July and in August via our investor presentation and 8-K filing.
As a reminder, in July, the EPA approved modest changes to the labeling claims on our existing water filtration packaging, which we implemented and subsequently began shipping limited quantities. I am pleased to report that the shipping volume for our PUR products has continued to increase. And in September, we returned to more normalized shipping levels. In August, we communicated that the EPA had approved changes to our air filtration packaging and we began shipping limited quantities of the impacted products at the end of that month.
We expect to return to a more normalized level of shipping activity for our Honeywell air filtration products by the end of our third quarter of fiscal ‘22. Today, our main message on the largely resolved EPA matter is that we have the material and labor currently needed to rework the effective inventory and are accelerating that work rapidly.
We are making good progress on the millions of affected packages, putting us in a better position to serve our retail customers. We thank them for their patience and appreciate how closely they have worked with us. On PUR, we are turning the tide in the marketplace.
We have made significant progress on reducing out-of-stock and earning back market share.
Third-party syndicated data shows fewer out-of-stocks have improved by more than 30 points and market share is up by more than 10 points since mid-August. More extensive and complex rework on the air-affected purifiers is well underway and a primary focus. I would also like to thank the hundreds of Helen of Troy associates who have worked tirelessly to resolve these matters and minimize the impact to consumers, to retailers and to our business. I could not be more impressed or prouder of the way they flow through the work without complaint. They work together seamlessly often around the clock. This is Helen of Troy at its finest and it’s our culture in action.
Now turning to our second quarter results, overall, the quarter exceeded our expectations.
Our diversified portfolio once again delivered a balanced result with Housewares and Beauty both growing over major double-digit sales increases in the second quarter of last fiscal year and Health & Home declining less than we expected during the favorable resolution to the EPA matter.
Our leadership brands outside of Health & Home had excellent growth, led by Drybar, Hydro Flask and Hot Tools, all of which faced headwinds in the year ago base from the pandemic. International had a solid growth sales in the second quarter.
Turning to online sales, our 18% decline in the quarter reflects two things: first, approximately two-thirds of this decline was due to the impact of our stop-ship action as we address the EPA matter.
Second, even though COVID remains top of mind, many consumers are returning to in-person shopping compared to the previous year when COVID-related store closures accelerated the larger trend of brick-and-mortar sales that were shifting online. Even more of our sales in brick-and-mortar this quarter, online represented 22% of total sales, similar to our pre-COVID online penetration in fiscal study.
We are pleased to report adjusted EPS of $2.65, which was ahead of our expectations. It reflects an expansion in gross profit margin as some of our highest-margin brands sweetened our mix partially offset by more normalized levels of operating expenses versus the depressed spending level during the peak of the pandemic in the year-ago base. The adjusted EPS results also reflects our hard work to address the headwinds from the widespread inflation affecting nearly all input costs such as material, labor and transportation as well as the work done to blunt as much as possible the impact from significant levels of supply chain disruption seen across nearly every sector of the global economy. Stepping back to look at the first half of our fiscal year, we are pleased to be growing our core sales and deliver flat core adjusted EPS compared to the especially difficult comparisons in the prior year period. We achieved this despite the EPA matter and despite the significant supply chain-related headwinds.
Our diversified portfolio played a major role in this where core Beauty and Housewares both grow significantly over their higher basis in the first half of last year. Taking a look at those supply chain and cost challenges, our investments in inventory earlier this year have been an important – of our mitigation plans. Higher inventory also positioned us well to meet demand and better manage supply chain disruptions. We believe having more inventory on hand ahead of our busy season in Q3 and Q4 will help us meet consumer demand and meet customer expectations in the back half of this fiscal year.
We have also made good use of our pre-negotiated sea freight contracts at rates considerably lower than the current elevated spot market.
As part of our mitigation plans, we began to implement price increases on certain brands, most of which became effective at the end of the second quarter. Pricing on other brands will take place in the third quarter with the benefit being realized in the second half of the year and into fiscal ‘23.
We have taken a measured approach on pricing, which is designed to protect our market shares by managing key consumer price pumps. I’m very proud of our global operations team and of our business units, all of whom have worked diligently to contain and reduce costs, freeing up the oxygen needed to continue to invest in our fire. They, along with our associates around the world, are highly engaged, enthusiastic and dedicated to furthering our growth objectives. They are currently putting in place additional mitigation plans, including exploration of further price increases to address the inflationary pressures and the supply chain disruption that show little sign of abating in the short term. We believe that the powerful combination of containment and investment is the exact right formula to drive our growth initiatives for the balance of our Phase 2 transformation and to create incremental shareholder value. I would now like to touch on the results in our business segments for the second quarter. Housewares led the way, posting net sales growth of 6.6% on top of 20.3% growth in the second quarter of last year. Both OXO and Hydro Flask experienced solid organic growth, reflecting both domestic and international strength. OXO continues to deliver growth at key brick-and-mortar retailers.
As discussed in prior calls, we believe the new and younger households penetrated during the pandemic and the consumers that have become even more familiar with OXO’s exceptional products and promise of better are sticky. OXO continues to be the market leader in many of the U.S. kitchen category it competes. OXO’s Good Grips and Steel lines made healthy contribution to quarterly growth, along with new products that are gaining traction with consumers. We saw strength at specialty retailers due in part to a surge in – that were postponed during COVID. OXO domestic brick-and-mortar growth is broad based across all channels, except the cloud. OXO also earned strong growth internationally, especially in EMEA as prior investments and plans long in the works paid off with improved growth and profitability in that region. Hydro Flask also saw broad-based strength in domestic brick-and-mortar driven by retailers increasing orders to replenish from a stronger back-to-school season and support expected future demand. On top of the current acceleration in pre-holiday ordering, we are seeing healthy inventory retailer replenishment in line with the strong sell-through for those customers where we have visibility. Internationally, Hydro Flask grew even faster, primarily concentrated in Canada and Asia-Pacific.
New product introductions beyond the bottle contributed to growth in the quarter as consumers pursued more outdoor activities close to home in the current COVID environment. Within our bottle line, the new colors and sizes in the fall collection gave consumers another motivation to add just one more and freshen their collection. Activity for the Hydro Flask brand continues to be a strong tailwind.
As one high-profile example, we were very pleased to see some own dials using our popular new Hydro Flask USA bottle at the Tokyo Olympics.
Turning to Beauty, the segment delivered its 11th consecutive quarter of sales growth, continuing its remarkable transformation story that began in the middle of Phase 1. Total sales were up 0.8% in the quarter, finding over 34.6% growth in the second quarter of last year. On a core basis, which excludes the impact of the Personal Care business that we divested in June of this year, Beauty sales grew 13.9% in the second quarter.
Our leadership brands Drybar and Hot Tools led the growth in Beauty, with strong consumer demand, belied by the improved traffic at brick-and-mortar stores.
Our focus on consumer-centric innovation and strategy of good, better, best in beauty appliances, These are paying off and these are paying dividends across brands, regions and channels with strong contributions from Drybar, Hot Tools, Revlon and Bed Head. Drybar is having a terrific year and making a considerable contribution to sales growth and profitability. With strong product innovation, the improvement in the brick-and-mortar channel, expanded distribution and the reopening of salon, the brand is on a strong growth trajectory. Sales in fiscal ‘22 are expected to be ahead of our pre-COVID expectations and its higher margins are contributing to our mix.
We are delighting consumers with outstanding innovation that deliver consumer noticeable benefits. Samples include the single-shot appliance, the Drybar reserve ultra-light dryer and our liquid glass product line.
New distribution at popular destinations like new ULTA shops, inside Target and new Sephora shops inside Kohl’s provide the opportunity to introduce the brand to more consumers shopping in the mass channel, while maintaining Drybar’s prestige positioning and price on. Hot Tools is also having a great year and is on track to reach record sales levels in fiscal ‘22.
Our good, better, best beauty strategy is also paying off of the expansion of Hot Tools from the professional channel to also include retail. We launched Hot Tools signature series in 2019 to bring professional quality features and functions to a broader demographic. Signature series has grown each year since its introduction and is achieving market share gains as it grows its awareness, its presence and its product lineup. Demand for our one-step volumizers and wavers remain strong.
Our investment in social media and digital content continue to elevate the profile of our volumizers with existing users and to attract new ones to the franchise. One-step online reviews are now over 350,000 at an average of 4.6 stars on Amazon alone with 80% of those with 5 stars. The volumizer household penetration well below conventional appliances, we believe the franchise has significant room to grow through new product innovation and expansion into new geography and new adjacencies. One recent example is our Revlon plus, which is arriving on shelves now ahead of the upcoming holiday season. Revlon plus features an additional heat setting, sleeker handle and design, upgraded bristles and improved internal technology that exemplify our consumer-centric approach.
Our goal is to keep delivering innovation that maintains our significant market share lead in the volumizer segment that we create.
Beyond volumizers, innovation in other parts of our Beauty portfolio, such as the wavers on our Bed Head brand demonstrate that we are continuing to drive demand and share with winning on-trend products across product categories. Beauty also did well internationally, continuing its strong growth in Latin America and EMEA. With international shares and margins expanding, we are investing in the bright prospects we see for further international growth.
Turning to Health & Home, sales declined by 33.1% in the second quarter primarily as a result of the voluntary stock shipments related to the EPA matter and the particularly tough comparison to the second quarter last year in which this segment grew 33% behind health-related products due to COVID.
For a bit more perspective, the first 6 months of fiscal ‘22 on a 2-year stack comparison shows the total sales for Health & Home were up 10% compared to the first half of fiscal ‘20, even including the EPA matter.
As the rework – and the shipments continue to ramp up on the affected items, we are raising our sales outlook for this segment for the remainder of this fiscal year and remain confident in its long-term prospects.
During the quarter, we saw strength in several areas of the Health & Home portfolio, such as nasal aspirators, blood pressure monitors and pulse oximeters and also Honeywell.
Some retailers will head to orders into the second quarter to reduce the impact of port congestion and availability constraints such as containers and trucking.
We are pleased to see our prior investments in developing new Health & Home products for categories such as blood pressure, sinus and pulse oximeters now producing growth in those categories and further diversifying Health & Home into adjacent health care areas with long-term potential. In thermometers, while the overall market was lower in the second quarter compared to the high COVID base of last year, our market share rebounded sharply.
Our U.S. thermometer share is now in line with pre-pandemic share level as we saw the availability of our market-leading products that consumers prefer. This was driven by our investments to improve our supply chain and by higher inventory levels, which address out-of-stocks with retailers. Inventory in the channel is healthy in the U.S., and we are shipping in line with consumption.
Moving on to international, we saw solid growth in the quarter to round out an outstanding first half. Doubling down on international is an important strategic choice in our Phase 2 strategy.
Now halfway through Phase 2, we remain ahead of the glide path we outlined in our 2019 Investor Day to create at least $100 million of incremental organic sales outside of the United States by the end of fiscal ‘24.
Second quarter benefited from the step-up investments made in the second half of fiscal ‘21 to support new distribution in Continental Europe and fully support to our U.K. businesses and increased awareness of brand thermometers in Asia. Beauty and Housewares led the way. We saw strength in both brick-and-mortar and online. Demand for thermometers remained strong in EMEA. Revenue and profitability for Beauty in EMEA and Latin America all continue to grow sharply, and EMEA market shares are growing fast. Progress we have achieved in international markets is defined with fuel to continue making new investments with attractive ROI intended to further accelerate growth outside of the United States. If we step back to look at the full fiscal year ‘22, we are in a position to raise our outlook today. On a core adjusted basis, at the high end of our range, our outlook indicates growth on both the top and bottom line.
We are very pleased to be able to do this, considering the elevated base laid down last fiscal year, considering the significant incremental inflationary costs when considering the impact of the EPA matter. The strength of the first half and our improved outlook for the balance of the year allows us to increase our store sales expectation in all three business segments. Beauty and Housewares are both expecting to deliver healthy growth in revenue and profitability on top of the elevated base they laid down last year. Based on the favorable resolution of the EPA matter, our Health & Home outlook has also improved.
While inflation remains an issue, we are pleased that this updated outlook includes continued investment in our flywheel.
Looking longer term, using our past experience overcoming various headwinds such as tariffs, COVID and inflation, our global team is focused on putting together the best playbook possible to address the external challenges facing virtually all companies.
As mentioned in our last call, we are actively involved in several M&A processes and remain committed to putting our strong balance sheet to work to create additional shareholder value by adding attractive new brands and a previous critical mass to our flywheel.
As you may have seen in a recent press release, we added a $500 million share repurchase authorization at the end of the quarter, putting us in a position to continue to opportunistically repurchase our stock from time to time.
Before I wrap up my remarks, I would like to touch on our continued progress on ESG and on a few important organizational matters. We see ESG as a strategic priority for our company’s sustained success and highly consistent with our corporate purpose, which is to elevate live and store together. This is important work, and I am pleased with the progress we are making. In June, we captured many aspects of that progress in our first published ESG report.
We are pleased to see more external recognition of our ESG efforts from key stakeholders, such as customers and shareholders. In August, as part of Walmart’s Project Gigaton, which is intended to help eliminate a gigaton of CO2 emissions, this key customer recognized our Health & Home division as a Walmart Giga – for the second consecutive year. Shareholders have likely seen our improved ESG scores from well-known tracking agencies such as institutional shareholder services.
During the second quarter, IFS acknowledged our ESG efforts by now rating Helen of Troy’s social score in the top decile of firms they compare us to, an improvement from our top 20% rating as recently as July and a sharp improvement from the bottom 20% ranking just 1 year ago.
Our IFS environmental score has also improved markedly over the past year, now in the top 30% of companies they compare us to up from the bottom decile a year ago. On governance, our IFS has consistently remained in the top decile for the past several years. Internally, our associates enthusiastically support and applaud this.
As mentioned in our report, our next step is to further refine our overall ESG strategy and embedded key initiatives into the broader Phase 2 strategic transformation plan that drives all that we do with Helen of Troy.
As discussed in our public remarks at our Annual Meeting of Shareholders on August 25, several months ago, we began actively recruiting to add a new Director to our Board. This recruitment effort has three specific goals.
First is to add additional outstanding executive experience in the global consumer products industry on top of the 100-plus years already represented on the Board.
Second is to add racial and ethnic diversity. And third is to add even more gender diversity. Even these goals will deliver on our broader corporate diversity, equity and inclusion initiatives as well as the Board’s independent goals.
Turning now to our organization, I would like to make a few comments. Those of you who have been following our multiyear transformation know that we have been building out our organizational capability and leadership team for many years. This talented team that we have in place now and the powerful culture we have built have helped drive revenue growth of more than 40% in the last 4 years and adjusted EPS growth of more than 50% over that same time period.
As we look at the back half of Phase 2 and our long-term trajectory, we are ready to add a Chief Operating Officer to our global leadership team to help drive the significant plans we have for the coming years.
We have begun recruiting for this new position, which will report to me. We would like to have the new COO in place for the beginning of our next fiscal year.
Another organizational update I’d like to share is our return-to-office plan. Taking stock of recent developments to the Delta variant, we have decided to postpone the return to office for our nonessential workers until January. We intend to implement the same hybrid model we discussed several quarters ago, which we believe provides the best balance of the proven benefits of work from home 2 days a week and the irreplaceable power that in-person collaboration provides during the remaining 3 days each week. All along, we have prioritized the health and safety of our associates, putting our people first, sticking to our principles and walking the talk on our culture. These four elements have proven to be a powerful combination during normal time as well as during the extreme circumstances of COVID-19.
Before turning the call over to Brian, I wanted to again acknowledge his significant contribution to the success of our company over the past 15 years.
During the transformation, his leadership, strategic thinking and outstanding stewardship of our finances have made him a key asset with business insights and friendship.
As previously announced, Matt Osberg officially stepped into the CFO chair on November 1. Building on all of the strength, Matt has already demonstrated in the business and in the organization over his past 5 years of Helen of Troy, I look forward to the many valuable contributions he will make in the CFO role as we continue through Phase 2 of our transformation and beyond. With that, I will now turn the call over to Brian.