Greetings and welcome to the Helen of Troy Second Quarter Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It is now my pleasure to introduce your host Mr. Jack Jancin, Senior Vice President of Corporate Business Development. Thank you, sir. Please go ahead.

Thank you, operator. Good morning everyone and welcome to Helen of Troy’s second quarter fiscal year 2021 earnings conference call. The agenda for the call this morning is as follows. I will begin with a brief discussion of forward-looking statements. Mr. Julien Mininberg, the company’s CEO will comment on some high-level results for the quarter and discuss current business trends. Then Mr. Brian Grass, the company’s CFO will review the financials in more detail and reflect on considerations from the ongoing COVID-19 pandemic uncertainty as fiscal year 2021 progresses. Both Julien and Brian will speak to you about our announced leadership plans. Following this, we will open the call to take your questions. 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 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 maybe 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 then the news tab. I will now turn the conference call over to Mr. Mininberg.

Thank you, Jack. Good morning, everyone, and thank you for joining us today. I hope you and your families are staying safe and healthy. We recognize that people around the world continue to suffer as the virus and natural disasters take their toll. We extend our deepest sympathy to those who have lost loved ones to COVID-19, have been ill with the virus, and faced financial hardship or are dealing with the devastating impact of hurricanes or wildfires. Turning to our earnings, Helen of Troy posted outstanding results this morning as our diversified portfolio continues to perform very well. We have been able to successfully adapt to and navigate through countless COVID related challenges. From the start of this pandemic, we took decisive action to lead our business and organization through unchartered waters. We had two goals in mind. Our first was to safeguard employee health while continuing to provide our consumers and customers with the high level of service they've become accustomed to. Our second goal has been to adapt to the new normals with the speed and agility needed to stay focused on delivering business results for here and now, while also advancing our multi-year Phase 2 strategic plan for sustained long-term results. We remain laser focused on those goals and on our Phase 2 transformation targets. We began leaning back into our key Phase 2 priorities in the second quarter. The continued strength of the business now puts us in a position to do so even further in the back half of our fiscal year. We believe these investments will continue to benefit all stakeholders as we drive our value creation flywheel. The results we are reporting today would not be possible without the tremendous commitment of our exceptional people. The dedication of the essential frontline workers…

Thank you, Julien. Good morning everyone and thank you for joining us. I hope that you're safe and healthy. Our thoughts continue to be with the people who've been directly affected by the COVID-19 pandemic. We want to extend our appreciation for the efforts of first responders, healthcare providers, and essential workers, and for the efforts of our own associates that aren't able to work from home. I'm pleased to say that the rate of infection among our associates has been minimal. Our priority has been and continues to be their well-being during this unprecedented time. The impact of COVID-19 pandemic has significantly accelerated demand for leadership brands, and I'm grateful that Helen of Troy is in the position to continue to provide products that help individuals and families during this difficult time. As Julien highlighted, we delivered an exceptional quarter, reporting more than 20% growth across all three segments and strong operating margin expansion. Our profitability was buoyed by temporary expense reduction and deferral initiatives put in place earlier in the year due to the uncertainty of the pandemic's impact on economic activity. Based on strong performance and a little more visibility with respect to COVID’s impact on our business, we have now reversed many of the expense reduction initiatives, particularly personnel related actions in reactivated several key Phase 2 investments. We remain below normalized levels of marketing spend for several reasons, which I will cover later in my remarks. On the whole, the business is showing sales strength that I have not seen in my 14 years with the company, which combined with an expanding gross profit margin and expense discipline resulted in adjusted diluted EPS growth of 68.3% in the second quarter. Our liquidity was another highlight ending the quarter was 1.1 billion in liquidity including 148.4…

Thank you. [Operator Instructions] Our first question today is coming from Bob Labick of CJS Securities. Please go ahead.

Good morning and congratulations on the personal news, as well as the strong operating performance.

Thanks Bob.

Thanks Bob. Great to hear from you. Appreciate it.

Yes, you guys as well, great. No, it’s super exciting to hear, Julien that you're extending your contract and staying on, and Brian obviously, I'll admit a little bit of a surprise announcement, but it sounds like you've thought about it a lot, and it sounds terrific, so congratulations.

Well, thanks. I’m going to miss working with you for sure, and you know, it's not goodbye now, so we have a little bit of time, but I’ve valued our working together over the past, so I will miss that.

Oh! Absolutely, no. I appreciate it very much as well, and I won't say goodbye yet either because we have another year. Maybe before just jumping to the operational results, one more question for you, Brian, if you don't mind, can you talk about your current, you know, ownership position in Helen of Troy, and how that might, you know, change or be impacted, if that's thought of as part of the funding of your future pursuits, or how you're thinking about that?

Sure. So, I have a meaningful position in Helen of Troy in terms of stock ownership, and, I would expect that the takeaway is – I would expect that to continue through my date of retirement. I do expect to have some level of sales for diversification purposes and retirement planning purposes. But again, I expect my ownership to remain meaningful throughout my tenure. It's also important to note that per my severance agreement and our retirement plan, I'm eligible for continued vesting of my stock awards. And so, I have a vested interest in Helen of Troy’s success, the succession planning work that we're doing for years after my retirement because I have a vested interest in those stock awards that will vest one, two, three years after the date of my retirement. So, I think that the key takeaway is, I have a, you know, very, very meaningful ownership interest in Helen of Troy stock, and I would expect that to change in a meaningful way although there could be some sales over time, just again for diversification and retirement planning.

Okay, got it. It makes a lot of sense. And, as I said, we have another year, so I won't say goodbye. But jumping over to operations or just the business in general, obviously, you guys are a consumer-centric company focusing on innovation, and new products and that's what's been driving your growth for so long. How have the needs, the wants, or the desires of your customers changed from COVID? And how are you changing right now to address these needs, and being able to still get consumer insights in a different environment?

Yes, thanks, Bob. It's a great question. Consumer centric, that's exactly the right word for us. It is our single-minded focus, and frankly our obsession. In the case of COVID-related demand, consumers are doing some interesting things. As indoor season comes along in the Northern Hemisphere, so think schools, universities, less time outside in general because of the temperature, we're seeing a considerable surge in things like air purifiers. There's tons of articles in the press, some in the scientific press, lots of recommendations now, even from the CDC on the subject of indoor transmission, ventilated spaces, droplets, particles, et cetera. So, this is a big deal, and it is changing consumer behavior. We're seeing a tremendous surge in air purifier sales. That's only accelerated since Q2, so here we are in almost the middle of Q3 and I can definitely say that that is growing considerably. We're bringing tons more capacity online, as we said in the public remarks. In fact, about 50%, more, you know, purifiers on top of what we’ve already sold and have coming by the end of next month into our production system. And in the case of thermometers, there's a change as well. Here we're seeing people going from this idea of detecting temperature to now screening, and that's happening both on the consumer household side and also in institutions of all kinds. So, thermometers, and you may have seen it yourself. I recently went to an Apple store and the people with six feet apart online, the first thing they do is check your temperature. Importantly, with no contact thermometers, which has become a big SKU for us. We’re making a lot more of those as well in our production increases. Lastly, on consumer behavior, the nesting thing has been a really big…

Okay, great. Appreciate all that color there. And you've talked about, you know, a number of times on the call today, obviously, you're selling products as fast and sometimes, you know, can't even sell as many you're making – as you're selling as fast you can make them and you’ve pulled back on marketing to not exacerbate the supply constraints. What -- is there other areas to spend? Are you shifting your spending patterns? What other projects can you spend on? And can you give us some examples of, you know, what you're doing with that marketing? Obviously, some of the marketing is, you know, flowing through with a lack of marketing just flowing through the bottom line, but are there other things you can be spending on internally?

Yes, a ton. So – and there’ll even be some confusion on this. So, I want to make sure this gets out and I'm really glad you bring it up. Two things I'd like to say, one is, we are spending heavily on the phase two key initiatives and it's not just marketing. And the second is that we are spending on marketing, especially in certain areas. We just don't want to stimulate short-term demand on products where we already have so much natural demand that we can't meet the supply, so that's an ROI thing. If you already had an overwhelming amount of orders and you can't meet every single one of them to spend short-term money to generate more of those orders is not a good return on the investment. In the case of the other areas that we're spending, think of the things that were listed in the call, infrastructure, that's IT, distribution throughput capability, it's also the ability to diversify our supply chain beyond just China, which is something that many people on this call were pounding the table for only a few months ago and we have been doing for some time. We're also spending a fair amount of money on hiring; especially in key areas of the company I think upstream, especially engineering quality, product development. We’re spending on product development in a big way, and in marketing itself, there's things that don't hit the market in the very short-term. So think of content for videos, packaging, new claims, development, testing, new product, testing with consumers, market research, and other areas, as well as mentioned on the call. We're spending money also on the topic of culture, especially now, with new people coming on board. Training them in the work-from-home environment takes a little bit of extra cost because they don't have the natural on-boarding experience. So, plenty of money going out the door and on the subjects of all of it against Phase 2 flywheel generators, and lastly, on the marketing, to be careful not to spend to generate short-term demand if we don't see enough supply.

Hey, Bob, I'd like to add something too. We're taking advantage of this opportunity to spend a lot operationally as well. So, we're expanding our distribution footprint where, you know, improving the quality of our systems and doing a lot of activities around that. I – and I really think the outcome is good either way. I think maybe there's focus on a little bit of compression in the back half, but I think, you know, if we have a little compression, even with that, we still get a very good outcome for the year and we've been able to invest behind our brands. If we aren't able to do the spending, then we're going to get a great tremendous outcome in terms of earnings and I think still be in a very good spot with respect to demand trends and the health of the business and we've made the investment operationally that will support the growth for the future. So, I kind of view the situation we're in as been, you know, no loose. It's just a little bit fluid, and so, when people want very precise financial projections, it's hard to give, but it's not a bad outcome either way. It's either going to be a very strong profit results or it'll be a good profit result with investment behind our brands and investment behind the infrastructure of our business. So, you know, I view it as, you know, can't lose in the situation, it's just a wide range of outcomes that we could have for the full year and we want to be very transparent about that and that's what we're trying to do.

Okay, great. No, that sounds terrific. And then last one, I promise I'll jump back in queue, but, you know, typically, your back-to-school has been pretty big for Hydro Flask. So, I was kind of curious this year is obviously, massively different than any other time. And one, kind of an update on that, how that may have – may or may not be impacting Hydro Flask? And then, I can't help myself so I also want to ask about, you know, potential customization, you know, enhancements to the Hydro Flask opportunity and kind of where that stands?

Yes, let's start with Hydro Flask, just tons of opportunity on Hydro Flask where we spent years building that franchise. We're doing a ton more of it right now. We use the word leaning in a couple of times in our comments and we mean it. There's some key brands that we said we are investing heavily in. We also said that short term, there are marketing opportunities. Hydro Flask is very much one of them, in fact, almost on the top of the list. We're spending also, by the way, on volumizer franchise, which is growing rapidly and expanding around the world. We're spending on international. We're spending on those no contact thermomometers, especially in Asia as examples. Now on Hydro Flask, the build-out is a big deal. It's doing extremely well in most of its markets, especially outside the United States right now happens to be on Fire. And on DTC is a huge new driver for Hydro Flask beyond what we've done already. One where we feel we can catch up considerably with what's going on in the market and we're pulling a ton of the investment.

Okay, super. Well, I will jump back in and pass the questions on. Thank you.

Thanks. Our pleasure.

Thank you. Our next question is coming from Rupesh Parikh of Oppenheimer. Please go ahead.

Good morning. Thanks for taking my question and also congrats on a nice quarter. So, I guess I wanted to start out with just a question on guidance. So, we look at your commentary, it suggests either we could see [indiscernible] 20 basis points to 40 basis points [indiscernible] spending plans are 80 to 60 basis – 80 basis points to 160 basis points if you can. So least based on my assessment that implies operating margins could be down more than 200 basis points in the back half of the year, is that accurate? And then, is there any way to, I guess, think about, you know what – you know, whether these investments accelerate investments maybe that you would have made in future years and you just pulled them forward to this year?

So, I think it's called the directionally accurate. I mean, I didn't calculate the back half, but I think if you do the math of what we've given you, you can – you get the outcome. So, it's really just math what happens in the back half and that's, you know, really not our focus. Our focus is the outcome for the year and the health of the business going forward and that's what we're striving towards. The quarterly variability, I think, is not worth us spending much time on because, you know, it doesn't matter at the end of the day, how we get there, it just matters, you know, where we get and we want to be careful with the health of the business and we're focused on that. But like I said previously to Bob, either outcome is very positive in our minds. Either we've used the opportunity that we've been given to invest behind the brands and we're in a very strong position going into next year and we have a little bit of compression in the back half of the year, or we don't have the compression. We have the incredible result for the full fiscal year and we're still positioned, we believe, to do well going forward. But we are very conscious and aware of the health of our brands. And so, we want to use every opportunity that we've been given with the demand surge to invest behind our brands. It's just the demand surge has been so great that we have to be a little more selective in terms of our marketing spend because we can't drive demand where we can't fulfill, meet the needs of the demand. And so, it's a very unique situation to be in and a good situation to be in and we're figuring it out and I think we're stewarding the brands and the business, as well as we possibly can given all the volatility. So, I hope that answers your question. I know it's more specific about the precise compression. I think that's something to consider and know as you're doing the math of our projections, but I don't think it should be the takeaway. The takeaway should be we're stewarding the health of our business the best we can in this environment and I think we're in a very good place.

Okay, great. That's helpful thought there. And then, maybe just one follow-up question. So, as we look at the health and home business, you know, obviously, very strong growth in Q2. I was just curious if you could speak to the sell-in versus sell-out, if you saw any re-stock benefit during the quarter as maybe some of your retailers ordered ahead of the key season?

Yes, it's mostly sell-in and sell-out. The demand is extremely strong, especially in four leadership brands that make up the vast majority of health and home. So just to be clear, that's Vicks, Braun, Honeywell, and PUR, and people may have the wrong impression. They may think that somehow we don't have supply. It's not true. We have large amounts of supply. We've made them bigger and they're going to get bigger still. What is true is that we have even larger amounts of demand, especially in the air purifiers and the thermometers. And so, what's happening is the sell-ins is – sorry, the inbound is quickly the outbound, and for retailers, what's ordered is quickly sold through. That is leading to some out of stocks and that's why we called it out and you can probably see those in the marketplace. In the case of the replenishment orders, they're constant and we're fulfilling as much of those as we humanly can. There is some allocation just because of the limited supply and as we catch up, there's less and less of that. And then, in terms of the replenishment for the cold and flu season, retailers are properly positioned, I believe for a normal cold and flu season. There is uncertainty and we called it out in our remarks about what that season will be like for the simple reason that COVID is unusual and concurrent. So, we'll see how that goes, but everything is in the right place and the more that we bring in, it all sells through and that's happening for retailers too and they’re replenishing as fast as they can.

Okay, great. Thank you very much for all the color and best of luck for the balance of the year. Oh, sorry. Go on.

Sorry. Let me follow up a little bit on the compression in the second half. I mean, you're pointing out I think that it seems like a big number. I want to point out that in – the profitability in the back half last year was very strong too and we had a very strong demand surge or volume surge, especially in Q4, which was a little bit ahead of our expectations. And so, the profit was also ahead of our expectations, and, you know, we didn't have a spending lined up to go along with that outcome. So, it – hopefully a little bit of color there and you understand that the comparison is important as well and that will factor into the compression, but like I said, I think either way, the outcome is good for the full year, and quite honestly, even in the second half because I think we'll be positioning ourselves well for next year.

Yes. It may be time to just get real clear on this compression thing because I think it's coming up a fair amount and it's possible that people are having a concern that is greater than the situation that we're really in. Think of the year as a lumpy one. We were in a situation like everyone else in the world where COVID hit hard in months like March, April, May, and we like others turned off some lights, which is – and cut our spending. We had increases in margin because of that. As the demand surged and we saw that in Q1 and now again in Q2, we had margin expansion that's above normal and not a sustainable regular number. As we look at our Phase 2 investments that we originally envisioned at the beginning of the year, they are bold and they are right and those significant investments are what powered flywheel and is creating the long-term transformation that has generated so much value in this stock. The result now is that the same management team is doing the right thing. We are using the tremendous cash flow of the company that you saw, that $171 million free cash flow in the first half, to drive that engine in the back half. So, if you start the spending in the front half because of the lumpy COVID thing and have opportunities both on infrastructure, as well as in the marketplace, hiring of the other things I mentioned in the list I gave him the public remarks, only if we would not do that and spend into strength. What you'll see, as Brian pointed out, is a year that should have a tremendous outcome on top of the tremendous outcome we had last year and the lumpiness in between is the truth of COVID. If we went and spent the rest of the year hiding under our beds and preserving that very, very high, unusual margin of the first half, I think we'd be doing a tremendous disservice to the long-term trajectory of the business into our shareholders.

Okay, great. Thank you. I think that was helpful color. You’ve cleared some confusion.

Yes, sorry to be tough there. But I think people have this idea that, you know, short term-ism is somehow a good idea. We're not only managing for the long haul, but I think of it this way, we plan in; I think in five year chunks, that's our strategy. We plan in three year chunks, that's our strategic execution. And we deliver in one-year chunks and for the last six years, we've not only done that, but delivered strongly. We don't think this year will be an exception, but that lumpiness is unusual. It's COVID driven and we are doing the right thing.

Okay, great. Thank you.

Thank you. Our next question is coming from Olivia Tong of Bank of America. Please go ahead.

Hey, thanks. Good morning. I just want to talk a little bit about sales. You talked about, you know, September kind of continuing the trend that you saw in the quarter – in the August quarter. Can you talk a little bit about what has the Q2 benefited from catching up the prior demand? Did the quarter benefit in any way from a pull forward or future sales? Or have these trends kind of just net-net, you know, sort of any impact from the timing shifts? And then just also, you know, obviously, realize that a number of your categories you’re benefiting from COVID prevention, wildfire-related demand, all these things. So, can you talk to your expectations when we do get a vaccine and what implications that might happen in sales? Thanks.

Yes, a couple of things in there. So there's backwards ones, current ones and future ones. So let me try to unpack it that way. Start with the backward ones, we did not see pull forward. What we see is a surge in demand in Q1. We saw it again in Q2 and we saw an acceleration in Q2, not only in demand, but in people's opportunity to buy in brick and mortar. As stores opened in Q2, we all saw that during months, like June, July into August, and people were shopping, but frankly, at a lower rate. Our online continued to surge, that's the whole bricks to clicks thing, and the fact that people at home a lot more, so they're just in stores less, that's the traffic things. So not pull forward, but sell through. In terms of the surges in demand, it's correct that COVID is driving surges in things like the health-related products like the thermometers, air purifiers, water purifiers, et cetera. And in the case of the future, what we've seen so far in September is the same. It has been very, very strong. We're in the early days of October and while we didn't say it in our prepared remarks, I can say we’re in a safe harbor here in a public call that October is also continuing to be excellent although we're in the early days of October. Of course, we've forecasted internally and that forecast looks good. That said there is a fog that comes with COVID. And to your point about the future, there are unknowns and we tried to call that out in our prepared remarks and be responsible about the truth of that uncertainty. So starting with the vaccine, there's much talk about the vaccine, but there are three questions about it that nobody knows. When, how many, and how many will take it? So when will the vaccine come? How many doses will be available? And how many people will take it after all? Not to mention how effective, I'm just assuming it will be effective. Those things are just not known. But let alone the impact it may have on the cold and flu season, which people speculate about, but frankly, no facts on the matter. So as we looked at the future, what we think is that sales will remain strong. As we said in our prepared remarks, the torrid growth of the first half will moderate a bit; people should hear the word growth. And remember, in the back half base, there was significant growth in the back half space and we see significant growth over that. So, hopefully that gives you some color on the sales side, past, present and future.

Olivia, it’s Brian. I just want to add that Julien mentioned store closures and lower foot traffic. I want to point out that we got the results for Q2 without even having a full quarter of either stores being open or operating at full kind of traffic with full traffic patterns and that's still not going to continue for a while. I mean, we have some of our retailers that have same store sales down 50% year-over-year, yet we were still able to produce the results that we did for the second quarter. So you're kind of asking, did we accelerate anything into the second quarter? And the answer is no. In fact, I think the second quarter was dampened by the fact that we didn't have brick and mortar fully up and operating, probably likely won’t for some time. But I think our results have shown that we can be very successful in that environment.

Great, thanks. That's helpful. And second question for me is just, and I apologize if it appears like I'm beating a dead horse, but it does seem like the market is clearly questioning the second half margin implications. So, why shouldn't the year benefit more significantly from the sales leverage in the first half? I mean, did you add any more projects than you originally planned? If so, what are they? Because adding personnel back, you know, was – well, that was part of the plan pre-COVID right? Sticking to investments, that was the plan pre-COVID. So, why isn't there more of an incremental margin expansion plan for the year just from the fact that sales are coming in significantly better than you thought?

Yes, go ahead, Brian.

Let me start Olivia and I think then Julien will add. Yes, we had plans pre-COVID, but we put those plans largely on the shelf for the first half of the year. So, if you're now going to take something that was going to be spread over four quarters of the year, and now you're concentrating them into two quarters of the year, you will obviously have compression. I also think it's just not a right way to run a business to take a tailwind like we've seen from COVID and not use the opportunity to invest some of that tailwind that we've received back into the business. We've always talked about our kind of algorithm [letting 50%] of our unexpected profit improvements were expected and allowing that to drop to the bottom line and then reinvesting the other half of that. We're taking the same approach now and we've got this situation where we were able to make all the expenditures or chose not to make the expenditures in the first half of the year and we want to get back on track on a lot of that. So, to me, it's very clear why the situation would occur with the numbers in the compression across the quarters. Our spending was very much dampened by the actions we were taking in the first half of the year. I mean, you can see it in our SG&A margin and look back at the company historically, it's – we've never had a SG&A ratio below 25%. So, it's artificially low. We need to get [our base] spending back, and yes, we are choosing to make more investments than we had even originally planned in terms of operations and infrastructure because we need to keep up with the amazing growth that we've had, honestly, over the last two years and with half of the year this year. So, hopefully that helps and maybe Julien wants to add.

Yes, just a simple thought, which is maybe [Sesame Street simple], so apologies if it's that simple, which is if you look at the beginning of the year and the end, I think you'll like what you see. In the beginning of the year, we were coming off tremendous strain from last fiscal, big growth, 9.2% and $9.30 of adjusted EPS. We had significant incremental investments that's what we call bold and right in Phase 2, and they were shut down for a period of time, largely the first quarter because of COVID. As we started turning them back on at the beginning of Q2, we had tremendous sales surge and that margin expansion that everybody and the market seems to be focused on, that's great news. We would be absolute fools now with a better forecast in our hand, a better result in our hand, not to deliver a year that’s same or even better than the one that we originally envisioned on the going in basis. We have the cash flow for it; we have the earnings for it; and we have the initiatives for it. And we are only spending money on things that we strongly believe in. So, if you look at the end of the year, you should get a result that’s better than the one that all of the analysts envision; better than the one that we ourselves envision. And you end up with a significant acceleration of a business that already was accelerated. From that standpoint, it's hard to see the problem here.

Yes, and one last thing I'll point out is, you have things like incentive compensation that with the results that we have for the first half of the year and what we're projecting for the full-year to escalate significantly because the results are so good. So, the compensation has to get adjusted and that falls in the back half as well. So there are, you know, things like that also contribute to the compression, but in our minds, it's all positive. And like Julien said, I think you're going to like the outcome at the end of the year.

Great, thanks guys. I’ll pass it on.

Thank you. Our next question is coming from Anthony Lebiedzinski of Sidoti & Company. Please go ahead.

Yes, good morning. And thank you for taking the questions and nice to hear that Julien you'll be staying on for another year, and congratulations Brian for your pending retirement. So, just wanted to follow-up, Julien you said earlier that you'd be looking for the torrid pace of sales to moderate. Would that be mostly in the health and home segment or are you concerned about moderation in other segments of your business as well?

Yes. Let's make sure we're clear on the sort of moderation. We just grew 28%, so that probably qualifies for being torrid. I don’t know if that's the right word, but it's fast, I can say that, and it's ahead of our expectations as well as the consensus that was in the market. In the case of moderation, if you look at the sales that were expected in the market, we don't think they're very far off, to be very honest. And that said, we are continuing to see sales coming in faster. I’ve mentioned a couple of times that September was extremely strong for us and October, while its early days, so far, quite good. In terms of the stuff that’s yet to come, that's where the fog of COVID comes in, and I just can't tell you how that's going to turn out. I can say that what we do see on sales looks strong, just doesn't look 28% strong. So that's all that we meant by the word moderation. If the market heard anything else, with full respect they are incorrect. And on the topic of extension of my tenure, I want to say thank you. I'm very proud of what we're doing at Helen of Troy. We are building the company to last it has delivered and the idea of seeing all through the transformation, both Phase 1 in the first five years and now Phase 2 in these second five years, that would mark a 10-year run and I would be very proud and honored to have the opportunity to take the company through the entire transformation from start to finish, so thank you. And with regard to Brian, we're – he's in a strong go for the full year and we have tremendous internal capability as well in the company in addition to the external search that we mentioned in our prepared remarks, so we're in good hands on the CFO side now, as well as on the other side of Brian's retirement [a year round].

Julien, let me just add a little bit. On the compression, I think, as far as the moderation of the sales in the second half, I think it's less a function of reduced demand and more a function of the comparison to the prior year. We grew 10% in the third quarter of last year and we grew 15% in the fourth quarter of last year. Beauty grew 23%, Housewares grew 15% and health and home grew 10% or rather 10.5%. So, just to be clear, the moderation in growth is less. We see demand weakening, and more of, it's going to be against the comparison where there was very high growth in the last year and some of that was even COVID-related in the fourth quarter in the health and home business state. There was certainly demand for thermometry even in our fourth quarter of last year and some of the other products, so hopefully that makes sense. It's not a weakening so much in the demand, it's more the comparison.

Got it. Okay and thank you very much for that. And just wondering if you guys could perhaps maybe quantify the cost of additional distribution and storage facilities that you talked about in the press release? And also, you know, as far as the impact of reversing the previous compensation reductions, is there a number you can quantify for those as well?

Well, on the distribution expense, I would say it's, you know, probably not a needle mover at the total company level. It's meaningful spend that we're having to incur to keep up with growth and it's the right thing to do and it bridges us into the next phase of our distribution footprint that we're in the middle of working on right now. I think you have to understand that the levels of growth that we've gone through over the last three years to appreciate, you know, why we're in the position where we need to make these investments and we've had extensive growth and it's a good problem to have and we're making those investments and doing it in the right way. But I wouldn't say you're going to – that is a factor for the second half of the year, but I don't think it's, you know, the highest on the list. It may be on – in the middle of the list or towards the bottom of the list in terms of influencing that. And then, in terms of the compensation reduction anniversary, I think the way it played out is that won't be so significant of a hurdle to overcome because we acted quickly to restore a lot of that compensation and even we were in situations where we felt like we needed to make hires, certain hires, even though we were in the middle of a hiring freeze because strategically and support the business, we thought it was the right thing to do. So, I think we've minimized the impact of the lower personnel spending in the first part of the year. It will be a factor that we have to consider for next year, but like I said, I think it – the way it played out, it ended up being smaller than we all thought it would be as we – COVID-19 began.

Got it. And then, I guess a last question for me as far as, you know the tax rate. Can you, Brian, recap what you expect for the back half of the year for tax rate and then for fiscal 2022?

Sure. The back half of the year consistent with where we normally are, you know, I think 10% – 9%, 10% or 11% and it will bounce around quarter-to-quarter in that range. And then, as I mentioned, there is a change with respect to our Macau entity and the tax regulations there, where we will now, going into next fiscal year, be subject to the corporate tax rate there whereas in the past we had a zero tax rate there, and that's a massive change. But we were able to structure and do our transfer pricing analysis in a way where the total consolidated effective tax rate impact will only be 1.5 percentage points to 2 percentage points going into next year. So you could take where we are, call it 10-ish, maybe a little lower, and then add 1.5 percentage points to 2 percentage points to that and that should be kind of our ongoing effective tax rate.

Got it. Okay, well, thank you, and best of luck.

Thank you.

Thank you, Anthony.

Thank you. [Operator Instructions] Our next question is coming from Linda Bolton Weiser of D.A. Davidson. Please go ahead.

Hi, how are you? And congratulations on the quarter and your personal news. Can I just ask you about when you talked about the second half of last year and the hard comparisons, if you actually look back it looked like you had margin decline in the fourth fiscal quarter last year and it was because – it looked like the SG&A spending was actually really high. It was up – SG&A was up 33% year-over-year. So, can you remind us what happened in the fourth quarter of last year? Was that marketing spending? Or was that compensation expense? Or what was that exactly in the fourth quarter of last year?

Fourth quarter of – and you’re right Linda, I'll also point out that the third quarter of last year, the margins were extremely high. So, high margin in Q3, lower margin in Q4, you're right. I think if you blend the two together, you know, you get more of a normalized margin for us. And so, yes, there were shifts in span, less spending in Q3 and more spending in Q4 and we leaned – what we did in Q4 as we saw the results in Q3 and made very conscious decisions in Q4 to spend into the strength that we were seeing. And we likely would have continued that trend going into Q1 and Q2 of this year, but because of COVID, we had to readjust. So, hopefully that makes sense to you. We saw the result for Q3 and we had a good outlook for the remainder of the year. We made decisions to spend into the business in Q4 and that's why the Q4 margin is lower than normal, but I think if you look at both of those two quarters together it's more normalized margin.

Okay, thanks. I'll leave it there. Thank you.

Welcome.

Thank you. Our next question is coming from Steve Marotta of C.L. King. Please go ahead.

Good morning, Julien, and Brian. In the interest of time, I'll ask one very quick question as it pertains. I believe, Julien, you mentioned the share repurchase as one potential outcome for capital use. Can you talk a little bit about how that effect has been officially suspended during COVID, if it has been unsuspended, if it was never suspended, and what the balance of that share repurchase plan might be?

Yes. Yes, good. Thanks and hi, Steven. Thanks for asking that. In the early days of COVID, we didn't feel comfortable on the topic of share repurchase even though the stock was greatly depressed along with the rest of the entire securities market. There were just too much uncertainty and we didn't know what was to come. We also couldn't give guidance at that time and not even the pretty significant set of breadcrumbs that we've put out today. In the second – the first quarterly report, the one we gave in July, we gave much more news about what we were seeing in terms of trends and signals about where we were on the business. But nonetheless, as you can tell from today's announcement, did not buy back stock. In terms of where we are now, without telegraphing in any way, I can simply say that we have put out a pretty strong result in the first half and we've given you as much visibility as we can for the second half. So even in the absence of guidance, were we to make the decision to buy back stock, we would feel very comfortable doing so and the market has given a keen understanding of where we stand past, present, and our visibility for the future. And with regard to the capital allocation, you see our balance sheet and also our cash flow. I'd like to remind everyone here that we're entering the strongest cash flow part of the year, which traditionally is the back half. So that's likely to be an accelerant for us from the balance sheet standpoint. You see our debt ratios as well. Our net debt ratio that we just reported, is half a turn, I believe and Brian to please confirm, and we're about to generate a lot more cash, assuming the second half of the year goes well. And so even with the investments that we're making, which I again remind these were the original investments that we planned at the beginning of the year, it just got lumpy, meaning less in the first half more in the second half, and I just can't emphasize it enough. If we believe that the full visibility is there, and what we buy back stock we would do so without concern.

Helpful. Thank you.

Thank you. At this time, I'd like to turn the floor back over to Mr. Mininberg for closing comments.

Yeah, well, thank you, everybody for joining us. We really appreciate it. Thank you for listening. It was simply an outstanding quarter, and not just an outstanding quarter, but an outstanding first half. We like very much where we stand. We believe we're making all the right choices on what to do going forward. That said there is uncertainty out there and I hope we communicated it responsibly today. We look forward to speaking to many of you in the coming days and weeks, and updating you on our progress. Our next report will be of our results for the third quarter and that will come on traditional timing in January. So, with that, thank you very much.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and have a wonderful day.