Helen of Troy Limited (HELE) Q2 2022 Earnings Call Transcript

Helen of Troy Limited (NASDAQ: HELE) Q2 2022 earnings call dated Oct. 07, 2021

Presentation:

Operator

Greetings. Welcome to Helen of Troy Ltd’s Second Quarter 2022 Earnings Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to Jack Jancin, Senior Vice President of Corporate Business Development. Thank you. You may begin.

Jack Jancin — Senior Vice President, Corporate Business Development

Thank you, operator. Good morning, everyone, and welcome to Helen of Troy’s Second Quarter Fiscal 2022 Earnings Conference Call. The agenda for the call this morning is as follows. I’ll begin with a brief discussion of forward-looking statements, Mr. Julien Mininberg, the Company’s CEO will comment on the financial performance of the quarter and specific progress on our strategic initiatives. Then Mr. Brian Grass, the Company’s CFO and Matt Osberg, the Company’s Senior Vice President of Corporate Finance who will review the financials in more detail and comment on the Company’s outlook for fiscal ’22. Following this, Mr. Mininberg, Mr. Grass, and Mr. Osberg will take questions you have for us today.

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 words similar are worth 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 companies. The Company cautions listeners not to place undue reliance on forward-looking statements or non-GAAP information.

Before I turn the call over to Mr. Mininberg, I would like to inform all interested parties that a copy of today’s earnings release has been posted to the Investor Relations section of the Company’s website at www.helenoftroy.com. The earnings release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP-based measures. The release can be obtained by selecting the Investor Relations tab on the Company’s homepage and in the Press Releases tab.

I will now turn the conference call over to Mr. Mininberg.

Julien R. Mininberg — Chief Executive Officer

Thank you, Jack. Good morning, everyone, and thank you for joining us. I’m looking forward to reviewing our second quarter results, and providing perspective on higher revenue and EPS outlook that we announced earlier today, 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 filings. 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’m pleased to report that the shipping volumes for our PUR products has continued to increase and in September, we returned to more normalized shipping level. 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 2022. Today, our main message on the largely resolved EPA matter is that, we have the material and labor currently needed to rework the affected 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 patients and appreciate how closely they had worked with us.

On PUR, we are turning the tide in the marketplace. And we’ve made significant progress on reducing out of stocks 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. It could not be more impressed or prouder of the way they flowed to the work without complaint, they worked together seamlessly, often around the clock, this is Helen of Troy’s 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 results, the 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 manner. Our leadership brand, 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 in 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 stock 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 though 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 ’20.

We are pleased to report adjusted EPS of $2.55, which was ahead of our expectations. It reflects an expansion in gross profit margin in some of our highest margin brands sweetened our mix, partially offset by more normalized levels of operating expenses versus the depressed spending levels during the peak of the pandemic in the year ago base. The adjusted EPS results also reflect our hard work to address the headwinds from the widespread inflation affecting nearly all input costs such as materials, labor and transportation, as well as the work done to blunt as much as possible. The impact on 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 delivered flat core adjusted EPS compared to be 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, with core Beauty and Housewares, both grew 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 component of our mitigation plan. 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 to help us meet consumer demand and meet customer expectations in the back half of this fiscal year. We’ve 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 points.

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 flywheel. 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 plan, including exploration of further price increases to address the inflationary pressures in the supply chain disruption, that show a 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 II 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 household penetrated during the pandemic, and the consumers they will become even more familiar with OXO’s exceptional products and promise a better are sticky. OXO continues to be the market leader in many of the US kitchen gadget categories it competes in. OXO’s good grip and steel lines made healthy contribution for quarterly growth, along with new products that are gaining traction with consumers. We saw strength in specialty retailers due in part to a surge in weddings that were postponed during COVID. OXO domestic brick and mortar growth was broad-based across all channels except the club. OXO also earned strong growth internationally, especially in EMEA as prior investments and planned 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 sales 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 proceed 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 eco-consumers and other motivations to add just one more and freshen their collection. Similar affinity that Hydro Flask brand continues to be a strong tailwind. As one high-profile example, we were very pleased to see Simone Biles using our popular new Hydro Flask USA bottle post the 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 I. Total sales were up 0.8% in the quarter, climbing 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 buoyed by the improved traffic at brick and mortar stores. Our focus on consumer-centric innovation and strategy of good, better, best in beauty appliances is paying off — paying dividends across brands, regions and channels with strong contribution from Drybar, Hot Tools, Revlon and Bed Head. Drybar is having a terrific year and making a considerable contribution to sales growth and profitability. Its 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 2022 are expected to be ahead of our pre-COVID expectations and it’s higher margins are contributing to our mix. We are delighting consumers with outstanding innovation that deliver consumer noticable benefit. Samples include the single shopping clients, the Drybar reserve ultralight dryer and our liquid glass product line. New distribution at popular destinations like new open shops inside Target and new Sephora shops inside Coles provide the opportunity to introduce the brand to more consumers shopping in the mass channel while maintaining Drybar’s prestige positioning and price point.

Hot Tools is also having a great year and it’s on track to reach record sales levels in fiscal ’22. Our good, better, best beauty strategy is also paying off with 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 line-up.

Demand for our One-Step volumizers and wavers remained strong. Our investments 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 are 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 geographies 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, handle and design, upgraded brushes 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 created.

Beyond volumizers, innovation in other parts of our beauty portfolio such as the wavers on our Bed Head brand demonstrates that we are continuing to drive demand and share with winning on-trend products across product categories. We 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 stop shipments related to the EPA matter and a particularly tough comparison to the second quarter last year, in which this segment grew 33% behind health-related products. So a bit more perspective, the first six months of fiscal 2022 on a two-year stack comparison shows that total sales for Health & Home were up 10% compared to the first half of fiscal 2020 even including the EPA matter. As the rework progresses and the shipments continue to ramp up on the affected item, 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 Braun nasal aspirators, blood pressure monitors and pulse oximeters and also on Honeywell heaters. Some retailers orders into the second quarter to reduce the impact of the port congestion and availability constraints such as containers to 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 healthcare 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 US thermometer share is now in line with pre-pandemic share levels as we saw also the availability of our market-leading products that consumers prefer. This was driven by our investment 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 US and we are shipping in line with the sanction.

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 II strategy. Now, halfway through Phase II, 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 2024. Second quarter benefited from the stepped up investments made in the second half of fiscal 2021 to support new distribution in Continental Europe, add further support to our UK businesses and increase awareness of Braun no-touch thermometers in Asia. Beauty and Housewares led the way. We saw strength in both brick and mortar and online. Demand for thermometer remain 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 the buying of fuel to continue making new investments with attractive ROI intended to further accelerate growth outside of the United States.

We step back to look at the full fiscal year 2022, 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 a significant incremental inflationary path and considering the impact of the EPA matter. The strength in the first half and our improved outlook for the balance of the year allows us to increase our core 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 is also improved. While inflation remains an issue, we are pleased with this updated outlook include continued investment in our flywheel. Looking longer-term, using our past experiences overcoming various headwinds, such as tariffs, COVID and inflation, our global team is focused on putting together the best storybook possible to address the external challenges facing virtually all.

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 attracted new brands and a previous critical mass to our flywheel. As you may have seen in a recent press release, we added $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 by 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 the elevate lives 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 public 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 emission, this key customer recognized our Health & Home division as a Walmart Giga Guru for the second consecutive year. Shareholders are likely seeing our improved ESG scores from well-known tracking agencies, such as institutional shareholder services. During the second quarter, ISS acknowledged our ESG efforts by now rating Helen of Troy social store in the top decile of firms they compare us to. Improving from our top 20% rating as recently as July and a sharp improvement from the bottom 20% ranking just one year ago. Our ISS 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 ISS score has consistently remained in the top decile for the past several years. Internally, our associates enthusiastically support and applaud this growth. As mentioned in our report, our next step is to further refine our overall ESG strategy and embedded key initiatives into the broader Phase II strategic transformation plan as far as all that we do in 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. Achieving 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 multi-year 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 four years and adjusted EPS growth of more than 60% over that same time period. As you look at the back half of Phase II 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 of the Delta variant, we have decided to postpone the return to office for our non-essential 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 two days a week and the irreplaceable power that in-person collaboration provides during the remaining three days each week. All along we’ve prioritized the health and safety of our associates, putting our people first, sticking to our principle and walking the talk on our culture. These four elements have proven to be a powerful combination during normal times, as well as during the extreme circumstances of COVID-19.

Before turning the call over to Brian, I wanted to again acknowledge the significant contributions to the success of our Company over the past 15 years. During the transformation, the leadership, strategic thinking and outstanding stewardship of our finances have made him a key asset, through business insight and friendship will be missed. 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 five years at Helen of Troy, I look forward to the many valuable contributions he will make in the CFO role as we continue through Phase II of our transformation and beyond.

With that, I will now turn the call over to Brian.

Brian L. Grass — Chief Financial Officer

Thank you, Julien. Good morning, everyone, and thank you for joining us. I’ll make some high level comments before handing it over to Matt, who will review the second quarter results and our revised outlook for the full fiscal year 2022 in more detail. We’re really pleased with our second quarter, which saw a number of positive trends including strong sales and consumer demand across the Housewares and Beauty portfolios and continued expansion of our international business. The investments we made in product innovation, operating efficiencies, shared services and elevating and unifying our people are paying off. We believe they are fueling our flywheel for the remainder of fiscal 2022 and beyond.

Our Health & Home segment sales declined primarily due to disruption from the EPA matter. But we believe we are achieving the best possible outcome under the circumstances. None of it would be possible without the strength and resilience of our operations team in Northern Mississippi and it’s incredible leaders that I’ve had the honor of working with during my time here. I’m going to miss working with you guys, but I’ll come visit soon.

Although, we continue to face unprecedented global supply chain disruption and inflationary cost pressures, I’m proud of the work we are doing to continue to mitigate these challenges and maintain the momentum toward our long-term growth trajectory. I’m also very pleased that we’re able to improve our full fiscal 2022 outlook due to the strong results in the second quarter and a more favorable-than-expected resolution of the EPA matter.

Finally, I just like to say a final farewell and express my gratitude to Julien, the Board and all the talented people, I’ve had the good fortune of working with, especially my good friends and mentors, Tom Benson and Vince Carson. I started the majority of my career at Helen of Troy and helping shape this Company’s transformation has been an incredible experience that I wouldn’t trade for anything. I’m very proud of what we have accomplished and I believe that the best is yet to come. The Company is in great hands.

And with that, I’m going to hand it over to Matt to take us through the second quarter and fiscal 2022 outlook in more detail.

Matt Osberg — Senior Vice President, Corporate Finance

Thank you, Brian. And this is our final handoff, I want to say thank you for all your hard work, financial leadership and mentoring, you will be missed and we wish you the best of luck in your new endeavors.

As we look at our results, with the sale of substantially all of the Personal Care business impacting us significantly for the quarter, on a comparative basis, it is believe you a look at our operations on a core basis if you exclude the result of the entire Personal Care business in all periods and provides the best comparability between historical and future periods. Accordingly, I will be referencing core metrics to where appropriate in my remarks today.

Now, turning to our second quarter. Core business net sales declined 7.6%, primarily due to a decrease in sales in the Health & Home segment as a result of the EPA matter. This was partially offset by strong consumer demand and point of sale growth in brick and mortar in the Beauty and Houseware segments, as well as the favorable comparative impact of COVID-19-related store closures and reduced store traffic in the prior year period.

Gross profit margin increased 0.9 percentage points to 44.3%, primarily due to a more favorable product mix within the Beauty segment and a favorable mix of more Housewares and Beauty sales within consolidated net sales revenue. This was partially offset by higher inbound freight expense due to rising freight rates and container supply shortages and the less favorable channel mix within the Housewares segment.

Our SG&A ratio increased 5.4 percentage points to 30.1% from 24.7%. In the prior year period, we benefited on both significant operating leverage as sales grew 28%, as well as lower than normal level of the personnel and advertising expenses, as spending in these areas was restricted due to temporary COVID- related cost reduction initiatives. In the current period, we were also unfavorably impacted by higher distribution and freight expenses, unfavorable operating leverage, higher share-based compensation expense, and EPA compliance costs.

GAAP operating income was $67.3 million, or 14.2% of net sales revenue. On an adjusted basis, operating margin declined 3.3 percentage points to 17.1%, primarily due to the higher SG&A ratio in the current period.

Income tax expense as a percentage of income tax — for the income before tax was 19.8%, compared to 9.6% for the same period last year. The higher than usual tax rate was primarily due to shifts in the mix of taxable income in the Company’s various tax jurisdictions driven by updates in the second quarter to our full-year income forecast. On a year-to-date basis, our effective tax rate is a more normalized 14%, roughly in line with our full-year effective tax rate outlook.

Net income was $51.3 million or $2.11 per diluted share. Non-GAAP adjusted diluted EPS decreased 29.7% to $2.65, primarily due to lower adjusted operating income in Health & Home segment, an increase in the effective tax rate and higher interest expense, partially offset by higher operating income in the Beauty segment and lower weighted average diluted shares outstanding.

Looking at the first half of our fiscal year, we are very pleased with our goals. On a core basis, we have been able to grow our net sales 8.9%. This is on top of growth of 22% recorded in the first half of fiscal 2021. We have also been able to maintain core adjusted EPS compared to fiscal 2021, which grew 50% over fiscal 2020. We believe this is a healthy outcome, given the impact of rising freight and labor costs, the lost sales and margin due to the EPA matter and the lower spending days in the first half of last year.

Now, moving on to our financial position and liquidity. Net cash used by operating activities for the first six months of the fiscal year was $58.3 million compared to net cash provided by operating activities of $186.3 million in the prior year. A portion of the cash used by operating activities was the increased inventory to help mitigate rising supply chain costs and purchase high demand products ahead of the holiday season. The global supply chain remains disrupted, we are expecting some retailers’ pull-forward orders into our fiscal third quarter in an order to ensure in-stock positions before their busiest selling season. We expect to reduce our inventory levels throughout the third and fourth quarters to end fiscal 2022 more in line with where we ended fiscal 2021.

Cash provided by investing activities for the first six months of the fiscal year was $24 million, due to the proceeds received from the sale of the Personal Care business, partially offset by capital investments in land and initial construction expenditures associated with our new 2 million square foot distribution center for the Houseware segment.

Total short- and long-term debt was $472.2 million, a sequential decrease from $511 million at the end of the first quarter. Our leverage ratio, as defined in our debt agreements, was 1.4 times in line with the ratio at the end of the first quarter and compared to 0.9 times at the same time last year. Our net leverage ratio, which nets our cash and cash equivalents with our outstanding debt was 1.4 times at the end of the second quarter compared to 1.3 times at the end of the first quarter.

Now, turning to our full-year outlook for fiscal 2022. We are pleased to be able to increase our outlook for both sales and EPS for the fiscal year. The increase to our sales outlook reflects the combination of stronger-than-expected second quarter sales and an improvement in our sales expectations in the back half of the year. The increase to our EPS outlook largely reflects the higher-than-expected earnings in the second quarter. We expect EPS for the back half of the year to be similar to our prior expectations and reflects the favorable profit impact of higher than previously expected sales in the back half of the year, offset by continued increases in freight and labor costs, as well as incremental marketing investments we are making to reenergize categories that were impacted by the EPA matter.

Our revised outlook includes an estimated unfavorable sales revenue impact of $75 million to $100 million and an unfavorable adjusted diluted EPS impact of $0.45 to $0.75 related to the expected lost sales volume and earnings due to the EPA matter. This reflects an improvement of $35 million of sales and $0.25 of adjusted diluted EPS versus our previous outlook.

The adjusted diluted EPS impact is net of the favorable impact of cost reduction actions being taken in the Health & Home segment, which include reductions in personnel, marketing and select new product development costs with the goal of preserving key long-term growth initiatives.

We now expect consolidated net sales revenue in the range from $2.02 billion to $2.07 billion, which implies a decline of 3.5% to 1.5%. We now expect core net sales revenue in the range of $1.99 billion to $2.03 billion, which implies a decline of 1.5% at the low end of our range and growth of 0.5% at the high end of our range and includes 4.9% to 3.7% of unfavorable impact related to the EPA matter. Not including the impact of the EPA matter, our core net sales outlook implies year-over-year growth of 3.4% to 4.3%.

Our updated net sales outlook for the full-year reflects improvement in all three segments with the following expectations: Housewares net sales growth of 9% to 11%; Health & Home net sales decline of 20% to 18%, including a 11.2% to 8.4% of decline related to the EPA matter; Beauty net sales growth of 7.5% to 9.5%; and Beauty Core net sales growth of 20% to 22%.

We expect consolidated GAAP diluted EPS of $7.88 to $8.31 and core diluted EPS of $7.68 to $8.11. We expect consolidated non-GAAP adjusted diluted EPS in the range of $11.26 to $11.56 and core adjusted diluted EPS in the range of $11.05 to $11.35, which excludes any EPA compliance costs, asset impairment charges, restructuring charges, tax reform, share-based compensation expense and intangible asset amortization expense. Our core adjusted diluted EPS outlook implies growth of 0.2% to 2.9%, which includes 6.8% to 4.1% of unfavorable impact to the EPA matter. Not including the EPA matter, our core adjusted diluted EPS outlook implies year-over-year growth of 7%. This EPS outlook includes the estimated unfavorable impact of the year-over-year inflationary cost pressures of approximately $60 million to $65 million, or approximately $2.45 to $2.65 of adjusted diluted EPS, representing an increase of $5 million from our previous outlook due to the continued inflation of freight and labor costs. We believe we have mitigated much of these costs through a combination of improved product mix, price increases, forward buying of inventory to delay cost impacts, utilizing previously negotiated shipping contracts at rates below current market prices and implementing other cost initiatives.

Due to the strong growth comparison in COVID-related events in fiscal 2021 and the timing of the estimated impact of the shipping restrictions related to EPA matter, we continue to expect core — consolidated core net sales growth for fiscal 2022 to be concentrated entirely in the first quarter of the fiscal year. We also expect core adjusted diluted EPS growth for fiscal 2022 to be concentrated in the first and fourth quarters of the fiscal year, with the second quarter being the most impacted by the EPA matter, as well as having the most challenging growth comparisons to the prior fiscal year.

We expect a reported core GAAP effective tax rate range of 12.7% to 13.8% and a core adjusted effective tax rate range of 10.4% to 11.4%. Consistent with prior expectation, we do not expect a meaningful impact from currently proposed tax legislation changes in fiscal 2022.

We continue to expect capital asset expenditures of $100 million to $125 million for fiscal 2022, which includes expected initial expenditures related to a new 2 million square foot distribution facility, the state-of-the-art automation for the Housewares segment. We continue to expect the total cost of the new distribution center and equipment to be in the range of $200 million to $225 million spread over fiscal years 2022 and 2023, assuming construction and equipment costs remain at current levels.

In summary, on a core basis, excluding the impact of the EPA matter, our revised full-year outlook implies net sales growth of 3.4% to 4.3%, slightly ahead of our long-term growth target. Additionally, our revised full-year outlook for the Houseware segment implies net sales growth of 9% to 11% on top of 13.5% growth in the prior year. Our Beauty segment, core sales outlook implies net sales growth of 20% to 22% on top of 30% growth in the prior year. And our Health & Home segment is forecasted to have a net sales decline of 20% to 18%, including the impacts of the EPA matter, it grew 29.9% in the prior year.

On a core basis, excluding the impact of the EPA matter, our revised full-year outlook for adjusted diluted EPS implies growth of 7% on top of growth of 26.5% in fiscal 2021. This is only slightly below our long-term growth target of 8% and includes the adverse impact of inflationary costs and approximately 23 percentage points year-over-year. Even including the adverse impact of inflationary costs and EPA matter, we still expect to be able to maintain or slightly expand consolidated adjusted operating margin for the fiscal year. We believe that this outlook is quite an accomplishment in light of the high base in fiscal 2021, the significantly higher input costs and the impact of EPA matter in fiscal 2022.

In closing, I am proud of how the entire organization has rallied in the face of significant challenges to overcome temporary obstacles, make further progress on our growth strategies and set Helen of Troy up for continued success in Phase II. We have a strong foundation and market-leading brands with a global footprint and many opportunities for growth, as well as a strong balance sheet that gives us the ability to deploy capital to drive shareholder return. I believe we are well positioned to deliver continued value for our consumers, associates, customers, communities and shareholders.

And with that, I’d like to turn it back to the operator for questions.

We are still processing the Q&A portion of the conference call. We will be updating it as soon as we analyze and process the con call. Stay tuned here for more updates.