Helen of Troy Limited (NASDAQ:HELE) Q1 2024 Earnings Call Transcript

Helen of Troy Limited (NASDAQ:HELE) Q1 2024 Earnings Call Transcript July 10, 2023

Helen of Troy Limited beats earnings expectations. Reported EPS is $1.94, expectations were $1.59.

Operator: Greetings. Welcome to the Helen of Troy Limited First Quarter Fiscal 2024 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded. At this time, I’ll hand the conference over to Jack Jancin, Senior Vice President of Corporate Business Development. Mr. Jancin, you may now begin.

Jack Jancin: Thank you, operator. Good morning, everyone, and welcome to Helen of Troy’s first quarter fiscal 2024 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 and Ms. Noel Geoffroy, the company’s COO, will comment on financial performance of the quarter and current trends. Then, Mr. Brian Grass, the company’s interim CFO, will review the financials in more detail and review our financial outlook for fiscal 2024. Following this, we 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 words identifying forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from actual results. This conference call may also include information that may be considered non-GAAP financial information. These non-GAAP measures are not an alternative to GAAP financial information and may be calculated differently than the non-GAAP financial information disclosed by other parties. The company cautions listeners not to place undue reliance on forward-looking statements or non-GAAP information. Before I turn the call over to 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 then the Press Releases tab. I will now turn the conference call over to Mr. Mininberg.

Julien Mininberg: Thank you, Jack. Good morning, everyone and thank you for joining us. Today, we would like to talk about our first quarter results, provide color across our business and update you on our continued strong progress on Project Pegasus as well as some other company initiatives. We will also discuss our outlook for the full fiscal year. Starting with the quarter, I am pleased to report that our results, including our sales and adjusted earnings per share were better than we expected despite continued pressure on our categories from lower consumer demand and shifting buying patterns. We’re also pleased to improve our margins, make further progress on inventory reduction and deliver significantly improved cash flow.

Looking at revenue, we saw outperformance from key leadership brands, including OXO, Osprey and PUR as well as from Curlsmith. Several of our leadership brands are improving share in certain categories in the United States, including technical backpacks from Osprey, kitchen utensils and storage containers from OXO, pharmacy humidifiers for Vicks, nasal aspirators for Braun and seasonal heaters for Honeywell. Our prestige hair care liquids, which features some of the highest margins in the company, grew during the quarter compared to the first quarter of last year. International also outperformed during the quarter driven by Braun. Our strategic choice to Double Down on International continues to pay off. For perspective, our consolidated first quarter revenue grew at a 6% compound annual growth rate compared to the pre-COVID base of fiscal ’20.

During the quarter, we also made good progress on margin, significantly improving gross profit margin and expanding our adjusted operating margin. We also delivered outstanding operating cash flow in the quarter, well ahead of expectations, driven by better-than-expected sales and significant progress on reducing working capital. I am very pleased with how well our organization is executing on the very — various initiatives we have announced designed to significantly improve cash flow in fiscal ’24. In line with our stated objective, we used our cash flow to further reduce our debt, putting us in a better position to deploy additional capital sooner. Turning to our outlook. We are maintaining our expectations for net sales and adjusted earnings per share for the full fiscal year as well as our key cash flow and balance sheet targets.

We expect to deliver, including a return to adjusted earnings per share growth in the back half despite expected pressure on our categories and consumers for the remainder of the fiscal year. That consumer pressure includes inflation, interest rates that are expected to stay higher and increasing household debt, all of which are headwinds to discretionary purchases. On a positive note, we are seeing that retailer inventory rebalancing has largely normalized following the significant adjustments affecting nearly all consumer discretionary categories over the past year. Our retail partners are now increasingly matching their orders to consumer demand, where we have syndicated point of sale data, and in retailers, where we have specific point of sale data, we are seeing demand normalize in some of our categories and settle at or above pre-COVID levels.

Before turning the call over to Noel and Brian, I would like to comment on Pegasus. As you may recall, Pegasus is designed to improve operating margins, cash flow and operating and organizational efficiency. I am very pleased with how well our associates around the world have embraced the Pegasus structural changes and its financial goals. On the structural side, the specific changes we announced in January are working. The new North American regional market organization is expected to take our sales and shopper capabilities to new levels. In our business segments, our brand and category teams are now even more obsessed with delighting consumers. Similarly, in shared services, our global operations teams are implementing new standardized tools and fully owning our supply chain end-to-end.

On the savings side, the set of work streams we are executing under Pegasus are nicely on track. In all cases, our people are flowing to the work, they are demonstrating their adaptability, demonstrating the power of our culture and executing with excellence. We continue to believe these initiatives will improve profitability and provide significant fuel to make additional growth investments in our flywheel that are intended to drive sustainable long-term growth and value creation. I will now turn the call over to Noel, who will speak more about further progress on several business initiatives, including some that fall under the Pegasus work streams. She will also speak to our business segment performance.

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Noel Geoffroy: Thank you, Julien, and good morning, everyone. Echoing Julien’s comments, I am proud of our team’s focus, dedication and achievements to date from a wide range of initiatives. I’d like to highlight several of those here including Pegasus. Specific to Pegasus as expected, we are seeing significant momentum and savings in line with the previously announced target. This continues to help us offset some of the anticipated cost headwinds this fiscal year. Further, the new capabilities and our go-to-market structure, analytics, operations and finance are expected to help improve our performance and simplify how we work in fiscal ’24 and beyond. As a reminder, about 25% of our Pegasus savings is scheduled for this fiscal year, with the largest portion of targeted savings scheduled for realization in fiscal ’25 and the remainder in fiscal ’26.

We intend to use the savings to fuel our value creation flywheel, investing in brilliant marketing and even more consumer-centric innovation to delight consumers and shoppers and further enhancing the capabilities of our regional market organizations and global shared services. We also continue to look for ways to accelerate the savings, so that we can reinvest in growth more quickly. One of the key structural changes from Pegasus was the creation of our North American Regional Market Organization or NARMO. On our fourth quarter call, we highlighted the benefits of this organization including securing new distribution, implementing joint business plans with our biggest retail partners and even shopper data to better identify and act on relevant insights.

We recently held our first ever NARMO sales meeting focused on educating, collaborating, sharing best practices and rallying behind our brand plans and multi-year innovation pipeline. The meeting was full of energy, pride and collaboration and I’m pleased to report that the team has identified and is securing meaningful additional growth opportunities that we expect to contribute to sales longer term. Another Pegasus initiative relates to our design to value or DTV initiative. Our DTV approach combines consumer insights to understand what they value most, competitive insights into how other companies’ products meet consumer needs, and supplier insights into new technologies and the cost to manufacture. We use this process to elevate and build better.

Our team is energized and has several new design to value exploratory initiative inside. These include additional platforming across several different products to standardize select componentry and raw materials as well as new design engineered to deliver better performance at a lower cost. We are making significant progress on our previously announced nearshore sourcing initiative to grow with existing and new supplier capabilities outside of China. This will help us diversify geopolitical risk, enhance our responsiveness and reduce inventory. These moves also create value as they can provide quicker (ph) transit times, greater speed to market, scale advantages and process standardization. During the first quarter, we implemented a major piece of our multi-year nearshoring strategy successfully relocating some production of Hydro Flask bottles to the Western Hemisphere.

OXO Pop containers are also expected to begin nearshoring by early fall of this year. I’m also very proud to share that our new Gallaway, Tennessee distribution center completed in March was recently awarded the prestigious LEED Silver certification. In addition to its environmentally friendly design, this new facility has significant levels of new capability and automation that will enhance multiple areas of our business for years to come. We now have greater ability and capacity for inline customization and personalization for direct-to-consumer Hydro Flask orders. This enables consumers to make their bottle or tumbler fit as unique personality and needs through engraving customer color combinations and custom accessories like strap, lid and boot style.

Most recently, in June, we increased our personalization options by adding 86 new designs that consumers can choose from. We are also scaling up our automatic carton packaging system. These machines create custom shipping boxes from continuous feed corrugated cardboard. Each shipping carton is perfectly sized to fit each order. This real-time format change is managed automatically and directly from a database. The equipment offers high levels of flexibility, automation and speed of processing and can create one box every few seconds. Our made to fit shipper incorporates bumpers into the packaging, protect items from damage during transit, while reducing the amount of packing material used. The packaging also offers EVM sealing and resealing for frictionless returns.

We launched this better and more efficient initiative on Hydro Flask bottles and are meaningfully reducing carbon emissions and cardboard required for using less filling materials and reducing the customer transport volume queue by almost half for our bottles. This capability offers a better consumer experience, improved operational efficiency and less waste. I would like now turn to our first quarter business results. Consolidated net sales declined 6.6% and core adjusted diluted earnings per share declined 19.5% in the first quarter. As Julien highlighted, these results were better than we anticipated. Let’s start with Home & Outdoor. Osprey performed very well in the quarter, driven by a number of factors including our improved inventory position compared to fiscal ’23 when COVID-related factory closures curtailed supply.

We also benefited from new product introductions and accelerated demand in the travel category both in the U.S. and abroad as well as strong online point of sale and replenishment. Osprey also expanded its number one share position in U.S. backpack (ph) in the most recent three-month period. The gain was driven by improved supply and product innovation, such as improved spike in hydration packs and extended its technical packs to empower people of all shapes and sizes to embrace the outdoors. We expect Osprey to continue to benefit from our better inventory position, to strengthen the travel market, our strong innovation and expanded distribution in both existing and new customers in fiscal ’24. The OXO brand also outperformed the market in core categories, even as the overall home category trends continue to normalize from COVID highs and consumer spending shift toward necessities, travel and services.

Sales were also impacted in the quarter by the timing of some club programs, which fell into the first quarter last year, but will fall later this fiscal year. For additional perspective, the kitchen gadgets and dry food storage categories and OXO sales remains solidly ahead of pre-pandemic levels. OXO saw strong point of sale and replenishment from key brick-and-mortar retailers and also benefited from new distribution, including sell-in for test of OXO Soft Works at Walmart. OXO’s market share growth in both kitchen gadgets and dry food storage in the most recent three month period was also driven by new product innovation. One particularly successful innovation that launched in May is the OXO Grilling Prep and Carry System designed based on the consumer insight of reducing trips from the inside kitchens to the grill.

The 4.9 star rated set features nesting containers to prep, marinate, transport and serve grilled meat and vegetables. It has garnered strong attention on TikTok and earned a ringing endorsement by the kitchen of highly respected third-party which called it a game changing OXO fine that is a must have for grilling season. Turning to Hydro Flask. In brick-and-mortar, the brand faced continued pressure in the quarter from overall softness in the insulated bottles category. Consumer preference continue to shift away from bottles in the U.S. where Hydro Flask is by far the leader to tumblers where the brand has a smaller presence. Subsequent to the end of the quarter, Hydro Flask executed a soft launch of the new travel tumbler on June 21 exclusively on hydroflask.com with great colors, the unique ability to customize with engraving and a flexible straw.

We are excited by the strong consumer response and are optimistic about growing this new addition to the Hydro Flask family. In March, Hydro Flask introduced a first of its kind stainless steel bottle trade in and recycling program specifically designed to ensure Hydro Flask products are recycled in an easy and responsible way. The process is simple and straightforward. Consumers register the Hydro Flask bottle receive and print out a shipping label and drop it off at the nearest shipping location. No packaging required. Hydro Flask recycles the products and the consumer receives a $5 promotional code to use on a future purchase. This illustrates how the brand is participating in the circular economy and is providing a way for consumers to feel better about parting ways with their well-loved Hydro Flask.

Turning now to Beauty & Wellness. In our Beauty portfolio, our hair appliance has maintained a strong position, even as the broader category continued to moderate compared to the prior year period. The Revlon Volumizer maintains above 4.5 star ratings with over 330,000 reviews on Amazon alone and multiple industry awards, including four additional awards in 2023 such as the Allure Readers’ Choice Award. Appliance category softness was offset by good performance in our Prestige Liquid, which included a full quarter’s contribution from Curlsmith compared to six weeks contribution in the prior year due to the acquisition timing. Both Drybar and Curlsmith performed well in the quarter and our new Hot Tools liquids available exclusively at Ulta are resonating with consumers and on track to meet our expectations.

We have meaningful new beauty product introductions planned for this fiscal year, including new product line launches and line extensions, supported by commercial innovation as well as engaging promotions around major holidays. Drybar new launches include the smooth shot, paddle brush blow dryer, a new addition to our top selling Drybar detox dry shampoo range and a line of liquid products designed to offer more thickness and volume. Curlsmith also has a great lineup of new products including effortless waves, flawless finished hair spray, and a new anti-frizz-recipe line. Turning now to Wellness. Our previously announced few rationalization program disproportionately touched our Wellness portfolio. That impact was felt in the quarter on sales, but meaningfully improved the margin profile of the portfolio complemented by strong performance from high margin Vicks inhalant consumables.

Looking at specific Wellness categories, we saw strong thermometry sales outside the U.S. as supply improves. This was offset by softer sales seasonal fans, air filtration, and humidification products as consumer spending shifted to other categories such as services and travel. Despite overall category declines, Helen of Troy’s U.S. market shares remained strong in thermometers, inhalants and humidifiers with the number one position among branded products in all three of those categories. In water filtration, we saw some pickup in overall category growth in the first quarter and PUR made a positive growth contribution for Beauty & Wellness sales. Subsequent to the end of the first quarter, we saw incremental air purification device and filter sales due to the wildfire smoke that blanketed much of the U.S. northeast quadrant and parts of the Midwest in late May and throughout June.

We are proud to be able to help consumers and service retailers when they need us most. As these wildfire continue, we will continue to serve the demand. Last, on the international front, we achieved sales growth driven primarily by the contribution of Braun, Osprey, Hot Tools and Curlsmith. Replenishment orders in select brick-and-mortar partners continue to normalize in line with point of sale. Braun outperformed our expectations as we were able to partially overcome continued supply constraints to help meet increased thermometer demand for the brand in EMEA and Asia. With that, I would like to hand the call over to Brian.

Brian Grass: Thank you, Noel. Good morning, everyone. Looking forward to seeing some of you at the CJS Conference tomorrow. As Julien and Noel mentioned, first quarter results exceeded our sales and earnings expectations with year-over-year margin expansion despite unfavorable operating leverage. This outperformance, coupled with meaningful working capital improvement, drove strong cash flow and leverage reduction also ahead of our expectations at this point in the year. Consolidated net sales decreased 6.6% favorable to the 9% to 7% decline we provided in our outlook in April. This reflects the shift of approximately $5 million of sales we previously expected in the second quarter of fiscal ’24 into the first quarter. As a reminder, our outlook includes expected declines from our SKU rationalization efforts and the impact of the Bed Bath & Beyond bankruptcy.

We saw favorable performance from key brands in both business segments, international and the online channel. In Home & Outdoor, OXO exceeded our expectations despite the decline in club channel programs year-over-year and Osprey growth was driven by strong consumer demand for travel related products. In Beauty & Wellness, demand for Braun thermometry drove year-over-year growth, especially in international markets and high water filtration demand drove growth in PUR. Our prestige beauty brands, Drybar and Curlsmith continued to drive underlying growth and improve our mix with distribution expansion and innovative products that resonate with consumers. Gross profit margin improved 380 basis points to 45.4% compared to 41.6% in the same period last year in line with our expectations for the quarter.

Year-over-year improvement was due to a more favorable product mix in Beauty & Wellness driven by Pegasus SKU rationalization and more favorable customer mix in Home & Outdoor, lower inbound freight costs and the favorable comparative impact of EPA compliance costs of 180 basis points incurred in the same period last year. GAAP operating margin for the quarter was 8.6% compared to 6.7% in the same period last year. We were pleased to expand adjusted operating margin by 30 basis points to 13.9% despite unfavorable operating leverage. The primary drivers of this improvement were a more favorable product mix within Beauty & Wellness, reflecting the benefits of SKU rationalization, a more favorable customer mix within Home & Outdoor and lower inbound freight costs.

These factors were partially offset by higher inventory reserve expense, increased annual incentive compensation expense and an increase in outbound freight costs. On a segment basis, Home & Outdoor adjusted operating margin decreased 30 basis points to 15.8% driven by higher distribution expense, increased marketing expense, higher inventory reserve expense and increase in outbound freight costs and unfavorable operating leverage, partially offset by a favorable customer mix and lower inbound freight costs. Adjusted operating margin for Beauty & Wellness segment increased 80 basis points, reflecting a more favorable product mix driven by our SKU rationalization efforts, lower inbound freight costs, lower distribution expense, reduced marketing expense and a decrease in legal fees.

Net income was $22.6 million or $0.94 per diluted share. Non-GAAP adjusted diluted EPS decreased 19.5% to $1.94 per diluted share, primarily due to higher interest expense and lower adjusted operating income in Home & Outdoor. Cash flow in the quarter was strong. We generated $121.1 million of operating cash flow with a sequential decline in inventory of $21.6 million among other working capital improvements. Inventory at the end of the first quarter was $433.9 million on track with our objective to reduce inventory to $400 million or below by the end of fiscal ’24. We generated $109.2 million of free cash flow ahead of our expectations for the quarter. We ended the quarter with total debt of $837.2 million, a sequential decline of approximately $97.3 million.

Our net leverage ratio improved to 2.56 times compared to 2.81 times at the end of the fourth quarter. At the beginning of the first quarter, we swapped an additional $200 million of our outstanding variable rate debt to fixed rates, bringing the fixed rate total to $625 million or 75% of our total debt outstanding. At the end of the first quarter, our debt covenants allowed for additional borrowings of up to $343 million and the amount available for borrowings under our credit agreement was $638 million. We believe we remain on track to reduce our net leverage ratio to between 2 times and 1.85 times by the end of fiscal ’24, not including any benefits from facility footprint optimization efforts that are underway. Turning to our outlook for fiscal ’24.

We are maintaining our full year expectations. While we are pleased to have outperformed our expectations in the first quarter, at this point in the year, we are maintaining our flexibility to use the over performance to fund incremental growth investments in our most attractive brand opportunities or as an offset to potential further consumer spending softness. We will continue to assess our algorithm for balancing investment spending and earnings growth as the year progresses. Our view on a significant or prolonged recession has not changed and that it cannot be reasonably estimated and therefore it is not included in our outlook. We are encouraged by the continued overall improvement in trade inventory on a sequential basis and believe that when consumer demand does strengthen, we are well positioned with a diversified product portfolio and sufficient inventory to serve that demand.

We continue to expect consolidated sales between $1.965 billion and $2.015 billion in fiscal ’24, implying a decline of 5.2% to 2.8%, which continues to reflect the estimated unfavorable year-over-year revenue impacts of our SKU rationalization efforts and the bankruptcy of Bed Bath & Beyond of approximately 3.4% combined. In terms of our net sales outlook by segment, we expect the Home & Outdoor decline of 1.7% to growth of 1% and the Beauty & Wellness decline of 8% to 5.8%. We believe we remain on track to deliver our gross margin expansion target of approximately 460 basis points at the high end of our guidance range as we drive improvement in product and customer margin mixes, disproportionately feed our highest margin businesses from an investment perspective and realize the benefit of lower commodity and inbound freight costs.

We expect GAAP diluted EPS of $3.81 to $4.67, which includes the estimated balance sheet impact of the Bed Bath & Beyond bankruptcy of $0.17, an estimated restructuring charges of $2.75 to $2.43. We continue to expect non-GAAP adjusted diluted EPS in the range of $8.50 to $9, which implies a decline of 10.1% to 4.8%. Our adjusted diluted EPS outlook continues to include an increase in interest and depreciation expense totaling approximately $0.91 net of tax or a 9.6% growth headwind. Our outlook continues to reflect operational earnings growth despite unfavorable operating leverage. At the high end of our outlook range, adjusted EBITDA is expected to grow approximately 6.3% and margin is expected to expand by approximately 150 basis points despite incremental annual incentive compensation expense of approximately $27 million year-over-year, which represents an 8.2% growth headwind and 135 basis point margin headwind.

Our outlook for operational earnings growth is driven by a better overall margin mix, lower commodity and inbound freight costs and cost savings from Pegasus, which remains on track. We expect Pegasus to be a force multiplier with benefits in fiscal ’24 to include initial cost savings, organizational and go-to-market effectiveness, more efficient and effective marketing spend, and optionality to consider opportunistic incremental growth investments during the year. We continue to expect Pegasus to generate savings of approximately $20 million in fiscal ’24 with additional savings expected from lower inbound freight and commodity costs. As previously discussed, the Pegasus savings will partially offset several structural headwinds in fiscal ’24 including incremental depreciation expense of approximately $12 million before tax, related to our new state-of-the-art distribution facility, higher annual incentive compensation expense of approximately $27 million before tax, as we reinstate expected expense at target performance and higher interest expense of approximately $15 million before tax as we annualize the increase in interest rates in fiscal ’23.

This concludes our expectation of cumulative incremental rate increases of 100 basis points in fiscal ’24. Moving on to our tax outlook. We now expect a GAAP effective tax rate range of 21% to 19% for the full fiscal year ’24 and a non-GAAP adjusted effective tax rate range of 13.5% to 12.5%. In terms of quarterly cadence, we continue to expect the majority of our net sales growth to be concentrated in the third quarter of fiscal ’24 and expect a decline of approximately 8% to 6% in the second quarter. This reflects the shift of approximately $5 million in sales from the second quarter into the first quarter that I mentioned earlier. We expect adjusted diluted EPS growth to be in — to be concentrated in the third and fourth quarters of fiscal ’24 as we benefit from lower inbound freight and commodity costs.

We also expect to realize the benefits of debt deleveraging more fully in the second half of the year. Accordingly, we expect a decline in adjusted diluted EPS of 20% to 30% in the first half of fiscal ’24 with near offsetting growth in the second half of the year. We continue to expect capital asset expenditures of between $45 million and $50 million for fiscal ’24, which includes approximately $25 million for the completion of our new distribution facility and the full installation of the state-of-the-art automation equipment. We continue to expect that the final cost of the facility and its equipment will be within our original expectations. With lower CapEx needs in fiscal ’24, we continue to expect free cash flow to be in the range of $250 million to $270 million and net leverage ratio improvement to between 2 times to 1.85 times by the end of fiscal ’24.

We continue to assess opportunities to further optimize our facility footprint, which we believe could unlock an additional $100 million to $125 million of cash flow that is not currently included in our outlook. In summary, we are pleased to reiterate an outlook that we believe is accretive to our current valuation with strong free cash flow, operational earnings growth and margin expansion despite a challenging consumer environment. We remain very excited about the opportunities that Pegasus provides to drive further performance improvement in fiscal ’24 and beyond. Finally, we believe our strong cash flow and asset optimization efforts will allow us to continue to meaningfully reduce our debt leverage and consider capital deployment optionality going forward.

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

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Q&A Session

Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question today is from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.

Rupesh Parikh: Good morning. Thanks for taking our question, also congrats on a nice quarter. So I just wanted to go back to the Hydro Flask brand. So there seems like there’s positives and negatives right now for the brand. So your tumbler launch seems like it’s off to good start. At the same time, we are seeing discounting in the channel for the product. So I just wanted to get a sense of just overall health of brand (ph) and your updated expectations for Hydro Flask this year.

Julien Mininberg: Great. Good morning, Rupesh and hi, to everyone. Noel Please go ahead.

Noel Geoffroy: Yeah. Hi, Rupesh. Good to hear your voice. Yeah. So on Hydro Flask, I would say, as I outlined in the script, we continue to see consumers shifting from bottles where Hydro Flask is by far the leader to the tumblers in the quarter. But as you outlined, we were really pleased to do an initial soft launch of our travel tumbler in June, so just past the end of the quarter, and we are really encouraged by the early sales results from that. Consumers are reporting — they’re really pleased with the functionality of what we’ve put out there, and we see it as a really nice momentum piece for us in the balance of this fiscal year. We also — I mentioned a couple of other initiatives on Hydro Flask. We greatly enhanced our personalization and customization offerings, we got out there with the bottle return program.

So a lot of positive news happening on Hydro Flask right now and we see that as strong building blocks to strengthen kind of the performance in the back half of the year across the brand in total and especially entering into the tumbler piece of the market that’s been growing.

Brian Grass: Just to handle the promotional question, Rupesh, I would say the promotional activity is kind of normal for us. We did a map pricing holiday during the quarter, and that’s pretty much standard. And then, we do promotions really to get out of colors that we’re discontinuing and get into new colors and new items. And so, I would call both of those activities, the MAP program and the kind of rotating into new products, both normal promotional activity.

Rupesh Parikh: Right. And just, Brian, related to Hydro Flask, I believe your expectation was for growth for the full year. Is that still the expectation?

Brian Grass: Slight growth to flattish, I would say, and that’s still our expectation. We’re — it’s early days on the traveler. We’re excited about the traveler, but we have not factored in a meaningful upside into our forecast from it. At this point, we are encouraged by it, but we’re going to let it evolve. And I just want to point out, we did a soft launch online. The retailers are very excited about, but we want to let it play out a little bit before we start leaning in more.

Rupesh Parikh: Great. Thank you. I’ll pass it on.

Operator: Our next question is from the line of Bob Labick with CJS Securities. Please proceed with your questions.

Peter Lukas: Yes. Hi. Good morning. It’s Pete Lukas for Bob. You gave us a lot of detail on Project Pegasus, obviously, seeing significant benefits to the margin profile. What has surprised you the most in terms of the rollout, either positively or negatively and what is the biggest things you’ve learned so far?