Helen Of Troy Ltd Q4 FY2026 Earnings Call

Greetings, and welcome to the Helen of Troy 4th Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.

I will now turn the conference call over to Anne Racunas, Director of External Communications. thank you you may begin thank you operator good morning everyone welcome to helen of troy's fourth quarter fiscal 26 earnings conference call the agenda for the call this morning is as follows i will begin with a brief discussion of forward-looking statements dada zell our ceo will then share his thoughts and areas of focus and brian grass our cfo will provide an overview of our financial performance in the fourth quarter in fiscal year and outline our expectations for the full year fiscal 27 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 expectations 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 differ materially from the actual result. 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 from forward-looking statements or non-GAAP information. Before I turn the call over to Scott, I would like to inform all interested parties that a copy of today's earnings release can be found on the investor relations sections of our website by scrolling to the bottom of the home page. The earnings release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP-based measures. We've also posted an investor presentation to our website, which contains additional information and perspective on our results and outlook. With that, I will now turn the conference call over to Scott.

Thank you, Ann. Good morning, everyone. It's great to be with you as we close FY26, and I can begin to outline a look to our future. We finished quarter four with a sharp focus on execution, the road to being a bigger company. We're going to do this through ruthless focus and discipline execution. Focus, discipline, and execution best to EPS was in line. Our strategic investment as we make deliberate choices to invest in our brands and our people, position an organization for the future, dynamic year. One in which we took action to address both internal and external challenges by implementing organizational changes necessary to move close to the consumer and win in the marketplace. We're committed to operating Helena Troy more effectively by removing complexity, editing our priorities, and amplifying our actions for impact. operating rigor and supply chain and demand planning resulted in year-over-year inventory levels that were essentially flat even as we absorbed significant higher tariffs in our inventory tariff mitigation was paramount utilizing supplier diversification sku streamlining and pricing actions to protect our margins debt reduction continues to be a proven mississippi distribution facility and enabling our teams to move with the speed of the consumer which was not created overnight and our recovery will not be instantaneous however we're taking measured approach plans I want to be direct about the market we are navigating while our home and outdoor business held steady our beauty wellness business felt the poor and fever rate stayed well below average to restock our wellness products retail inventory is finally stabilizing most retailers are back to healthy stock levels and are working through any residual pockets of excess we can't control the macro challenges but we will be intentional in our actions but brands that deliver innovative products that make consumers lives better through style utility and personalization will continue to win in the marketplace our innovation is landing we see sales trends improving as we launch new products that offer real solutions taking market share even in this environment brands love in june are standing out as leaders the challenges we navigate in the fiscal 26 were a catalyst for change providing the necessary clarity of where we must invest to achieve this we're executing a multi-year roadmap a three-phase evolution from stable until 27 begins with phase one this is about restoring brand momentum and rebuilding top line momentum for our declining scale brands making the consumers through the following critical actions this is about editing and amplifying our brand building efforts by using a framework to identify the highest return brand investment opportunities to skate to where the puck will be by investing in capabilities to leverage our consumer insights to inform a trend-forward innovation roadmap strategic investment remains a priority remains a priority if we put capital behind innovation and brands and people operationalizing consumer-centered decision-making by placing talent and decisions closer to the consumer and marketplace for speed and execution. Modernizing operations is a parallel priority, strengthening our digital foundation, building a baseline in AI, elevating our e-commerce presence, and upgrading our advanced planning systems to drive greater supply chain visibility and responsiveness. And then sixth, platform-level improvements to our operating engine will continue as we stabilize the enterprise for long-term growth. Consumer-first innovation. This is centered on accelerating product development and modernizing our global reach through high-impact social and digital storytelling that resonates across our global footprint. In-home and outdoor, we're expanding brand reach by entering product lines where our brands are resonating with consumers and have a clear, strong consumer demand for a wider variety of use cases. We also recently launched a new carry-out soft cooler performance and longevity. Hydroflat's legacy continues to be recognized by the industry, with the wide-mouth-awarded Gear Junkies overall pick for Best Insulated Water Bottle of 2026. Expanding in adjacent categories in food storage and feeding in second half of the year. And ease of use in high-growth areas where we see a significant opportunity. Continues to achieve accolades, winning Best New Product released in 2025 during its 17th Annual Coffee, among other recognition we've received. And Osprey continues to augment its technical pack offerings, providing outdoor enthusiasts with new pack solutions that excel in hiking, backpacking, and travel environments. The station remains a primary driver for brand building and consumer relevance. Our new Revlon versus Sylvia and Walmart is the first exceeding expectation of its meaningful, time-saving innovation by taking hair from wet to damp to dry and refreshed without the need for multiple attachments. expanded its portfolio with the new CurlFit Reviving Mist, a unique alternative to a traditional dry shampoo. While Olive & June introduced new press-ons with hand-painted charms and fresh beauty brands, continue to receive top industry recognition, including multiple Glamour 2026 Best of Beauty Awards for Olive & June, Revlon, and Dry Bar. Fix & Pure in the coming months, as we continue to leverage strategic global expansion as a critical key investment in our operating model, Delay the groundwork for durable and long-term growth. Sharpening our execution. Social commerce is increasingly an important connection point for our consumer. We will advance our work across platforms like TikTok Shop and MetaShop to meet our consumers where they are. Our online presence matches our premium nature of our brands. Operational excellence. Prioritizing critical capabilities to grow for strategic retail partners. We're strengthening digital marketplace capabilities, including catalog and product page management and third-party seller mitigation. building long-term, modernizing our technology and systems by prioritizing core platform upgrades, data and analytics, planning capabilities, and optimized inventory performance. And we're continuing to make targeted investments in sourcing capabilities. Our people and culture, it's really the right capabilities to win. Lead model, reengaging our current teams as we transition toward a new era of ownership, mindset, and impact flexibility. We're thoughtfully investing in high-potential talent internally and attracting new talent externally to provide fresh ideas and modern brand building skills to drive our future, augmenting our team's ingenuity. We're investing in hands-on training to automate routine tasks and innovation that went and pivot back towards reflects our focus on restoring top-line performance while operating with excellent look reflects growth in outdoor as we work to stabilize beauty and wellness. Adjusted EPS and profitability targets are grounded in disciplined investment framework, allocating capital to high-strength and long-term brand health. Flow generation remains to drive working capital efficiencies and continued debt reduction. Concentrating and catalyzing during year two to ensure capital and resources behind the categories and regions where we have the biggest right to win. Active portfolio management is designed to ensure capital is deployed where it generates the highest return. But to that end, we have the greatest right to be successful. As our brand teams to spend 100% of our scaling during year four and five, we plan to shift our four that demonstrated clear positioning and shared capabilities, expanding on sourcing, governance, international reach to create a durable growth and sustainable value creation We plan to pursue acquisitions of both brands and specialized capabilities that leverage our enterprise scale. We plan to prioritize expansion into high growth adjacencies as we utilize our platform to become a global leader in consumers. We plan to support billion-dollar plan category leadership goals by deeper organizational alignment, internal engagement sessions, retail long-term initiatives, and fiscal 27 marks a turning point for Helena Troy. We want to be a better company on the road to being a bigger company. We want to be a productively deploying digital and data-driven capabilities that bring us closer to the community. our Do-Fewer-Things-Better mantra, long-term growth, and I'll look in more detail.

Good morning, everyone. Adjusted EPS and cash flow at the better end of our expectations for our associates. Oddly at the year, our performance reflects continued progress on a number of commercial and operational initiatives. While these actions did not fully apply in the School 26, they have built the foundation for product-driven growth that we are a priority. One, we leaned into innovation-led growth with multiple new launches, as Scott mentioned, and more to come in fiscal 27. Management in dual sourcing is our supply chain, which is helping to mitigate the impact of continued geopolitical uncertainty. For the full fiscal year, gross unmitigated tariffs had a firm combination of skew prioritization, cost increases, and supplier diversification. We successfully reduced the net operating income impact to less than $30 million for the fiscal year. And our diversified cost of goods sold subject to China tariffs to approximately 30% dual source, approximately 45% by the end of fiscal 27, further mitigating our supply chain risk. Operational fundamentals beyond supply footprint diversification, we focused on strengthening the fundamentals of our execution. Our supply chain and sales teams are a lot of the last quarter in beauty and wellness shipments in almost all of these instances, and I'm grateful for the collaborative partnerships we have with our retail customers. Here are the financial highlights for the four years. Consolidated sales decreased 3.2% of the contribution of all of in June, partially offset the year-over-year decline from tariff-related revenue disruption, and lower core business volume. 1.5% contributed solid year-over-year growth at value customers and also saw strength in the closeout channel as we improved our inventory composition. Osprey's growth was primarily driven by the e-commerce channel expansion into adjacencies and the clearance of end-of-season goods through the outdoor channel. Beauty and wellness sales decreased approximately 2.8 percentage points driven by tariff-related disruption. Revlon, Olive & June and Braun at Walmart and Target, and a solid contribution from Internet. Olive and June saw organic growth in its business of 18% and contributed 4.9% of marketing, new product introductions, loyalty, and consumer engagement. Olive and June has been a great at performing valuation metrics. It saw solid performance in EMEA and APAC, driven by early flu incidents in those regions, order timing shifts, strong replenishment, expanded distribution, and new product innovation. The profit margin decreased 400 basis points than in the prior within Home and Outdoor. The impact of the acquisition of Olive in June, the lower commodity and product costs, exclusive of tariffs. Expansed year over year, EPA compliance costs, and the acquisition of Olive in June. The operating margin decreased 710 basis points to 8.3%, primarily due to the net impact of tariffs, the increase in incentive-compensable operating leverage, and the preservation of trade and brand spending to support future revenue growth. The balance sheet highlights, we continue to emphasize productivity as an engine to fund our strategic investments, prove our operating flexibility, this million, were largely flat to the prior year, despite $34 million of incremental at the end of fiscal productive inventory, while also clearing out slower-moving inventory, which resulted in a net reduction of almost $50 million in the fourth quarter alone, $781 million. Our net leverage ratio was 3.877 times at the end of the third quarter. The increase was primarily driven by lower trailing 12-month EBITDA, reflecting lower revenue and high-level free cash flow, driven by the inventory reduction and the conversion of prior quarter peak season receivables. enabling $112 million of debt pay down in the quarter. The fiscal year was $100 million associated with diversifying our supplier base regions outside of China. To the end of the fourth productivity of our balance sheet with the sale of our distribution facility in South Haven, Mississippi. The sale generated proceeds of approximately $78 million, which we used to pay down our debt. We expect to connect productivity opportunities to further strengthen our financial flexibility, focus our resources on the core business as we pivot to growth. $751 billion to $1.822 billion of $854 million to $882 million. And beauty and wellness net sales of $897 million to $940 million. Adjusted EBITDA of $190 million to $197 million, which implies year-over-year growth of 2.1%. adjusted EPS of $3.25 to $3.75 in the range of $85 million to be uneven growth to be slightly positive, with the second half of the year slightly negative. Due to the cadence of people and brand investments, and in the cost of goods, we expect roughly 15% of our total annual adjusted EPS outlook in the first half of the year, with roughly break-even adjusted EPS. In the help of modeling our fiscal 27 outlook includes tariffs in place as of april 20 to remain in effect for the balance of the year not including the benefit from any potential fluctuation in commodity costs rate or disruption expected net leverage ratio or by the end of the year to 27 continued working capital efficiency during fiscal 20 expected to be between 28 to 32 million with an emphasis on product innovation and supply chain diversification currency exchange rates remain constant for the remainder of fiscal expectations regarding the operating environment. We continue to expect inventory management in an increasingly competitive and promotional landscape. It cannot be reasonably estimated. We expect continued diversification of a global manufacturing footprint, reducing the cost of goods sold exposed to China tariffs to less than 20 percent by the end of fiscal 27, and limiting the net operating income impact to less than $10 million for the financing people, and includes an increase in growth investments of approximately 40 basis points in innovation initiatives and build long-term sustainable momentum. Finally, while we are not yet where we want to be in terms of financial performance, the midpoint of our outlook implies a forward free cash flow yield of 20% using Tuesday's market capitalization. We believe this is a I'll turn it back to the operator for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Peter Grom with UBS. Please proceed with your question.

Yeah, great. Thank you. Good morning, everyone. So, Scott, the commentary on the different phases and the path forward was incredibly helpful, but can you maybe frame or help us understand what success looks like on the other side of this. I'm not trying to get guidance on, you know, 28 or 29 today, but for a business that several years ago had significantly greater earnings power versus what's outlined in guidance today, I'm just curious how you would frame the opportunity and whether you think the business can get back to levels we saw several years ago, particularly as it sounds like you may be stepping up investment levels across a greater number of brands moving forward.

Peter, yeah, good morning. Thank you for your question. Let me just give you a little bit of backdrop, myself and the leadership team, to just kind of put a pin in quarter four and then get more into your question. When we think about quarter four, there were four things we were really focused on. One is to get really sharp on our ambition so that the work that we set up for FY27, we can begin to show markers of progress. How do we begin to start that journey now in quarter top line and begin to put things in place in our organization to set us up for the future? Three, how do we invest in our people and our culture for not only for quarter four but to start the journey as we get back to where we want to get to and then for balance sheet productivity and paying down debt you know we quietly feel like we made progress in all all four of those areas but as we look to the future we think about that a healthy Helena Troy is really about first being a better company before on our road to being a bigger company and it's built on many pillars then underpinned by brands that are healthy with the score market share, and then investing in critical capabilities. First, making sure we get our organization and team and talent closer to the marketplace and closer to where decisions are made and commercially execute. Second, invest in commercial and brand building capabilities that are going to enable our brands to have the right to win on the shelf or on the digital marketplace. How do we invest in a mold with our supply chain so we can be agile and responsive of a dynamic marketplace? And then lastly, how do we continue to be thoughtful on our global execution? Because we know that our global business needs to play, it should be underpinned by investing in our culture and people, because they're going to have to help us drive it, and then continue to be focused on a healthy balance sheet. 27 is really showing markers of progress by doing the things I just talked about, becoming a better Helena Troy on the road to a faster growing.

That's super helpful. And then, Brian, just a question on the guidance. And I guess just it's more around the level of visibility or flexibility that you have today. And I just ask that more in the context, pretty volatile external backdrop. And the guidance, I think you mentioned, is more than 80% weighted to the back half of the year. So, can you just walk through the level of confidence that you've embedded in that inflection? Have you embedded more conservative underlying assumptions to account for maybe some things that might not go your way? And I guess very specifically, there was a commentary in the release around commodity cost, freight, and supply availability. I think it was mentioning no significant fluctuation. Is that just related to where things stand today, or does guidance assume no major cost impacts related to these factors?

Yeah, just to cover the last part first, we've called out the fact that, you know, changed as a result of the IRA. It's only, you know, a few weeks old. Commodity prices reacted pretty significantly, and that does impact our raw material costs. So we're calling it out, but I think, you know, almost anyone would say it's a little too new, a little too fresh to think that you can get your arms around it and embed it in your outlook. And so we have not attempted to do that. We are proactively working to minimize any impacts, make sure that we have raw material that we're going to need in the short term. There could be scarcity issues that come up and to lock in pricing. We also attempt to lock in our inbound freight pricing and are in the process of securing favorable rates as compared to as also spiked. So I would say, look, we haven't adjusted our conflict. We have taken actions to minimize the impact, and then we're just going to have to see how that plays out. Hopefully, from a modeling perspective, you appreciate that, us not trying to model something that's really difficult in an early stage to model. So that's how we've appeared in the lumpiness of the prior year and the cadence of our people and brand investment in the current year, and mixing that all together really results in the lower EPS in the first half of the year and the higher EPS in the second half of the year. And really the biggest part of it is the higher average tariff into our cost of goods sold in the first half of this year, whereas you really didn't have almost any tariff impacts. We did have a tariff cause impact in the first half of this year and then overlay that with the investments that we're making in our people and our brands and that compresses the first half of the year. And then it also releases in the second half of the year and you get the benefit in the second half of the year. So I wouldn't say it's about conservatism or trying to, you know, make the number, the dynamics of prior year versus current.

Thank you so much. I'll pass it on.

Our next question comes from the line of Bob Labick with CJS Securities. Please proceed with your question.

Good morning. Thanks for taking our questions. So I just wanted to start with, you know, in terms of the revenue guidance, how much price is baked into the guidance for next year? And have retailers fully accepted that? Because, you know, we had the stop order and this is – so kind of where do you stand in that? How much price is in the revenue guidance? Where are you getting it? And I guess I'll stop there for a second, and then I'll ask a follow-up.

Brian, you want to go ahead and take it? So if you bake it all in together, if you're looking for traces, Bob, it's about 50 million dollars that were or is is impacting our revenue through uh price increase now no that sounds like a big number that doesn't even probably come close as all kind of you know regulatory costs that are emerging related to packaging and things of that nature so um it it makes a little bit of a dent in terms and and in that impact that i'm giving you is kind of the year-over-year impact in in terms of fiscal 27 and i would say in 26 we only got partial uh realization of that and and in some cases it was delayed and and so on and so forth we have almost or effectively 100 of our planned pricing increases in place it did take us a period of fiscal 26 to get everything in place but we now have the ones that we intend to pursue effectively all in place with with a couple uh minor exceptions that it was just one of the levers that we pulled to try and offset tariffs along with, you know, a combination of price decreases. You know, this was one of them and that's the impact.

Okay, great. And then, you know, in the theme of invest to grow, I think, Brian, at the end of the prepared remarks, you mentioned a 40 basis point increase in growth investment. What are the steps, what's necessary, I guess, internally to be done before you increase it more? I imagine when you get to where you want to be, it'll be more than 40 basis points more of investment spending to get to the right growth and to reignite growth. So kind of what are the next steps that you guys are taking so that you can lean harder into the growth engine?

I think you're right. I'm glad you asked the question. We built the plan this year intentionally to lean into any overperformance with additional growth investment. We have framed up and have kind of planned and sitting on the shelf a whole host of investments that we couldn't afford to make in the plan that we're providing today. And the idea is that with any overperformance, we're going to continue to pursue those high ROI investments and lean in. And the hope is that by the end of the year, it's not 40 basis points. It's more because, you know, we've got better operating leverage and produce more profit as a result of the growth and then continue to feed the flywheel. So we've intentionally built a plan that allows us to do that and, you know, are giving you the base plan. And then when we have upside, which, you know, we're expecting and think we can drive, that overperformance will go into greater investment. Does that make sense?

Yes. Yeah, no, absolutely. That's great. I'll jump back in queue. Thank you so much. Thank you.

Our next question comes from the line of Susan Anderson with Canaccord Genuity. Please proceed with your question.

Thanks for taking my question. I guess, Brian, maybe just to drill down on the segments in the quarter a little bit, I guess within beauty and wellness, maybe if you can talk about kind of the brand performance, I guess, was beauty or wellness the bigger driver of the decline and how did Drybar and then Curl Smith perform, and then you mentioned the cold cough season being weak, so was that the biggest driver or was it pretty equal between the two? And then I guess same thing in home and outdoor, I think you talked about Osprey doing well online, just curious how it did in the stores, and are you still seeing that category decline, and is Osprey still gaining share? Thanks.

Yeah, so I might break it down a little bit differently within beauty and wellness than you did. I would say Olive and June and Revlon had relative strength. And then the remainder of beauty, I would say relatively compared to them, was on the weaker side of things. And then in wellness, yes, I would say overall that was a little weaker than we'd like it to be, both in terms of cough, cold, flu season, and in some of the more competitive categories, you know, where Honeywell plays and some of the other brands, a little bit of relative softness. So hopefully that gives you kind of the walk on beauty and wellness. With respect to home and outdoor, we're seeing very positive trends almost, you know, across the board in that business. And so we're excited about what we're beginning to see there. With respect to Osprey in particular, the category is generally trending down but Osprey is generally trending up and taking share and performing well in that category and then we continue to expand into adjacent categories so so we like that part of the business and then you know I would say overall as a company if you just kind of look at the trends we're not where we want to be across all brands and all categories with respect to POS but we are trending largely in the right direction if you look across and and looked at the trend line we are trending up across the majority of the brands in their respective categories so we think that that's a a sign of progress okay great thanks for the color

and then scott maybe if you could talk about the new innovation i think you mentioned that resonated uh maybe with consumers well in the quarter across the portfolio and any color you can give on kind of newness coming out throughout this year and then i think you also mentioned increased focus on income investment maybe talk about what that will look like is that going to be in brand websites to drive DTC is it more you know increase in tech investment and social selling thanks yeah so so we of course we've had a number of innovations across the portfolio but I'll highlight a couple so Osprey continues to have new innovation to expand its its strength

in technical packs to adjacent categories that we saw continued strength on olive and june not only in their core business they continue to bring new innovation and new reasons to bring consumers to the category the versa styler early off to a very top so we've had you know multiple levels of innovation what i can tell you what i've been focused on over the last several months that as i traveled around the company it's really trying to pull innovation forward innovation that had the right consumer insights and business cases how do we put more investment against it and if it makes sense how do we pull it in the fourth quarter slash first quarter on a faster track and so those are that connected to two I don't know if that answers your question but that that that's that's what I meant when I made that statement as well as hydroflask I could go on and on and on sorry around digital capabilities yeah so um so depending on the brand clearly trying to drive some web traffic but that the bulk of my comments are really around digital capabilities on sensing and understanding where the consumer is going to be digital capabilities on making sure that we're showing up on partner sites with the best advantage versus our competition and driving more agility for our brands to to interact

with social commerce whether it be meta shop tick tock shop and other future ways of connecting with our consumers okay great thanks so much good luck this year thank you as a reminder if you would like to ask a question press star one on your telephone keypad our next question comes from the line of olivia tong with raymond james please proceed with your question great thanks good morning um i want to get a better sense of your expectation for category growth that you're embedding for next year and what it was this year.

You know, as we think, also as we think about your cadence of stabilization, realize there's a big difference in your overcomps. But, you know, why do you not expect growth in the second half on sales? I think, you know, sort of alluding to Peter's earlier question, there's been a multi-year challenge. So as you think about your optimism around innovation and several other things, why shouldn't we expect a little bit more in the second half? And just following up on that, if you could talk about, you know, retailer discussions that support some of the enthusiasm that you have around innovation and then managing the tail of brands, you know, or the tail of exits that still need to be managed out.

Yeah, so we're going to take this on a couple parts. A great question. This is Scott. When we talk about stabilization for FY27, first I think about what do we control within kind of the four walls of Ellen Detroit, and it's really around editing our agenda and amplifying the things that we think have the biggest growth potential and moving with the speed of the marketplace. That's kind of one. And we've been doing that work, and that's embedded in our plan. And underneath that, we're very sharp and very, with conviction, the critical capabilities necessary for each one of our brands to have the best chance to compete. And there are everything from what's the right operating model to drive decision-making and move at the speed of the consumer, taking it from an abstract concept to making sure organizationally we're set up for success, we're doing that work. Consumer-led innovation by leveraging consumer insights to not only develop an innovation roadmap that's going to answer the question today, but to get ahead of the marketplace for the future. We're doing that work as we speak. Investing in omni-channel capabilities. I talked about this in the last question, everything from sensing the consumer, engaging with the right capabilities against social commerce, making sure we're partnering with our biggest strategic retail partners in the right way and being really sharp on that against these critical opportunities that we've identified, and then standing up on work in our supply chain that helps us make, move, and hold product in the way to make sure the right product's in the right place at the right time and doing it more effectively. And the combination of those four things, just the way we operate, will drive us towards stabilization. The second piece is the part of your question of what's embedded in terms of the category assumptions and how does it play out? I'm going to flip it over to Brian.

I mean, in terms of category, you know, one measure, I would say that, you know, by the same pressure on the consumer, price elasticity and all of those things, a little bit of a headwind as we understand why you're not seeing maybe more revenue. I think I can help you through. We have seen improvement, but we haven't assumed continued improvement to see has an impact. And then what we're doing is offsetting that. We're offsetting that several ways. We are lapping prior-year tariff-related China market. That's all still a work in process, and we may recover more of that. But what we've assumed at this point is we've recovered about half. Really the exciting parts, which is product innovation and commercial building blocks, international growth. We also have price increases in there. And so when you just put all together, it happens to result in, you know, flattish net sales year over year. But, you know, we are assuming current POS trends are trending in the right direction. And I think, you know, any upside is our continued improvement in those POS trends, which we have not assumed.

Understood. And then if I could just follow up, I appreciate the color that you gave in terms of your outlook and on commodity costs and supply chain and what have you. And realize that, you know, it is, of course, a moving target. But as we look at oil still, you know, off its peak, but still quite a bit above pre-Iran conflict and the discussions that you've had with some of your providers, you mentioned that you're paying below market. But can you talk about the change relative to the prior year, you know, that you're looking at, you know, and discussing with those providers?

Yeah, thanks, Olivia. The comment we made on being below spot price was relative specifically to freight increasing, but we feel like we've contracted at rates below that and feel comfortable with that, assuming we can stay on contracted rates and there's no significant disruption that would push us outside of that. So that's the freight, and that's related to that one specific comment I made. From the conflict overall and its potential impact on our suppliers, it's obvious are going up almost instantaneously as a result of the conflict, and a lot of it's driven based on fuel. So we know that that's out there, and we have had discussions with our suppliers on potential impacts. At this point in time, I can't give you any estimate of where that will go or end up. And, you know, typically when we have these discussions, they evolve over a period of time, and there's not like this instantaneous kind of adjustment. Same thing played out with tariffs. We absorb, and then how we manage that with our suppliers evolved over time, and there were adjustments over time, but a lot of adjustments didn't occur over time. It is happening live. We are aware of the potential impact, but it's such early days. I don't think it's possible to estimate anything, and we're going to work with our suppliers like we always have and, you know, get to a good outcome.

Understood. Best of luck.

We have no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Thank you for joining us today, and we look forward to speaking to many of you in the coming weeks. Have a wonderful day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.