HELEN OF TROY LTD (HELE) stock intrinsic value fair value estimate & owner earnings analysis

Helen of Troy is a diversified consumer products company organized around two segments: Home & Outdoor (OXO kitchen tools, Hydro Flask insulated bottles, Osprey backpacks) and Beauty & Wellness (the licensed Braun- and Vicks-branded personal care and health devices, PUR water filtration, Hot Tools styling tools, Drybar, Curlsmith, and the nail-care brand Olive & June, added in December 2024). Fiscal 2026 (ended February 28, 2026) was the hardest year in the company's recent history, with $885.9 million of non-cash goodwill and trademark write-downs spread across the portfolio: Hydro Flask ($115.9 million), Osprey ($113.1 million), the Health & Wellness business ($235.2 million), Drybar ($134.3 million) and Curlsmith ($107.9 million). It's worth noting that the write-downs weren't confined to recently purchased brands — Hydro Flask and Osprey have been owned since 2016 and 2013, respectively — so this looks less like a story of simply overpaying for acquisitions and more like a broader post-pandemic demand reset across the whole portfolio, acquired and organically built brands alike. Net sales have now fallen in four consecutive fiscal years, from a pandemic-era peak of about $2.22 billion in fiscal 2022 to roughly $1.79 billion in fiscal 2026, with both segments losing ground while new tariffs on goods sourced from China, Vietnam, Mexico and Thailand added costs the company could not fully pass through. The tariff picture has actually eased over the course of the year: the additional tariff on Chinese imports peaked near 145% in April 2025, was cut to roughly 30% in May 2025, cut again to about 20% by November 2025, and as of late February 2026 was replaced for most countries by a temporary global 10% tariff after the U.S. Supreme Court ruled the prior legal basis for the tariffs unconstitutional. That temporary tariff is due to expire in late July 2026, and what replaces it is genuinely unknown. We've treated this as a real two-sided uncertainty rather than assuming the relief is either permanent or temporary. Because the write-downs are non-cash, they don't directly reduce the cash the business generates, and we haven't treated them as a direct hit to value. To gauge normal cash generation, we looked at owner earnings over a full ten-year stretch from fiscal 2017 through fiscal 2026, spanning the pandemic-era surge in demand for hydration bottles, kitchenware and home devices and its aftermath. The middle of that range is roughly $7 per share; the two most recent years came in well below that, at $2.39 and $2.21 per share. A few concrete, dated developments inform how quickly we think that trough gives way to recovery. First, the company's multi-year cost program (Project Pegasus) targeted $75-85 million of annual pre-tax profit improvement, with roughly 85% already delivered through fiscal 2026 and the final ~15% slated for fiscal 2027. Second, the company sold a distribution facility in Southaven, Mississippi in April 2026 for $82 million and used the proceeds to pay down debt — long-term debt already fell from about $756 million at fiscal year-end to about $691 million three months later. Third, net sales in that same quarter (March-May 2026) grew about 8% year-over-year, the first quarter of growth after four straight years of annual declines. This is real, dated evidence, not optimism, and it's why our base case assumes fiscal 2027 owner earnings grow modestly (roughly mid-teens percentage) rather than continuing the prior year's decline. Our bear case assumes the tariff relief proves temporary and is not fully replaced by anything better, that the softness which hit Hydro Flask, Osprey and the Beauty & Wellness brands continues rather than stabilizing, and that heavy reliance on two retail channels (Amazon at about 20% of sales and Walmart at about 13%) continues to limit the company's ability to pass through costs. Combined with roughly $780 million of debt, this leaves owner earnings depressed in the $1.50-$1.70 per share range for most of the next decade. Our base case assumes the business stabilizes rather than fully recovers: the recent quarter's tariff relief and revenue growth hold up reasonably well, the cost program's final savings come through in fiscal 2027, and management continues paying down debt. Owner earnings recovers gradually from this year's trough toward roughly $5 per share by the middle of our forecast and holds near that level — well below the pre-write-down historical norm, reflecting a smaller, more disciplined brand portfolio going forward. Our bull case assumes Olive & June becomes a genuine growth contributor, the Home & Outdoor brands regain pricing power as oversupply clears, the tariff relief holds or improves, and debt paydown is fast enough to eventually support share buybacks. Given the wide gap between our bear and base cases — a real reflection of the leverage on the balance sheet and the demonstrated pattern of write-downs across both acquired and long-held brands — the margin-of-safety price is set at a substantial discount to our base-case estimate.