Greetings, and welcome to the Helen of Troy Third Quarter Fiscal 2021 Earnings 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. I would now like to turn the conference over to your host, Mr. Jack Jancin, Senior Vice President, Corporate Business Development for Helen of Troy. Thank you. You may begin.

Thank you, Operator. Good morning everyone, and welcome to Helen of Troy's third quarter fiscal 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 provide some high-level comments on results for the quarter and current business trends. Then they outline some longer term drivers of growth. Then Mr. Brian Grass, the company's CFO will review the financials in more detail and comment on the company's outlook for fiscal 2021. 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 may be calculated differently than the non-GAAP financial information disclosed by other companies. The company cautions listeners not to place undue reliance on forward-looking statements or non-GAAP information. Before I turn the call over to Mr. Mininberg, I would like to inform all interested parties that a copy of today's earnings release has been posted to the Investor Relations section of the company's Web site 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 call over to Mr. Mininberg.

Thank you, Jack, and good morning everyone. Happy New Year. I hope you all had a safe and happy holiday season. Thank you for joining us today. There's a lot of ground to cover this morning. I want to start by highlighting our outstanding third quarter results. Sales in the quarter grew over 34%, with strong demand for our products driving significant growth in each of our three business segments globally. Adjusted EPS grew over 20%, and cash flow from operations was very healthy, tremendous progress that further accelerates outstanding year-to-date performance. With just a few weeks to go before the end of fiscal '21, we are on track to becoming a $2 billion company this year and delivering at least $11.50 a share in adjusted EPS. We are especially pleased to announce this expected earnings result even as we make significantly increased growth investments to fund key programs that will help drive fiscal '22, and lay the groundwork for the major initiatives intended to power our value creation flywheel for the back half of Phase II. In line with our capital allocation strategy, we've put some of our strong cash flow to work in the third quarter, returning capital to shareholders by buying back just under a million shares of our stock, at an average price below $200 a share. During the third quarter, we also continue to build our inventory back to healthy levels, and in December, we extended our exclusive global license for the Revlon trademark with a one-time upfront payment at an attractive multiple. In recent years, our Revlon business has more than doubled, making it a key propellant of our global hair appliance business. We are pleased to secure the Revlon brand as an important element of our good, better, best approach for continued growth…

Thank you, Julien. Good morning, everyone and thank you for joining us. I hope that you're all safe and healthy. As Julien highlighted, we delivered an exceptional quarter that exceeded our expectations with broad based and consistently strong sales growth across all our business segments and key measures. Building on solid results in the first-half of the year and despite significantly higher inbound freight costs, we also drove meaningful gross profit margin expansion in the quarter by strengthening and consolidating our supplier base, introducing new products with healthier margins and improving our sales mix organically and through the acquisition of Drybar products at the end of fiscal '20. Our SG&A ratio and operating margins reflect the shifting marketing and new higher spending to the second-half of fiscal '21 due to cost reduction measures in the first-half as well as incremental marketing and long-term investment spending to drive growth during Phase II of our transformation. As we stated last quarter, we're using the strength of fiscal '21 as an opportunity to accelerate and fund investments that we believe will benefit fiscal '22 and beyond. I'll speak more to these investments later in my comments regarding the outlook for the full fiscal year '21. Overall, our business continues to show strength and resiliency generating adjusted diluted EPS growth of 20.5% for the quarter and over 35% growth for the fiscal year-to-date. The liquidity was another highlight ending the quarter with approximately $962 million, including $157 million in cash and cash equivalents and $805 million available on a $1.25 billion credit facility. This is just slightly below our $1.1 billion in liquidity at the end of the second quarter, reflecting investments in working capital and capital expenditures as well as open market share repurchases about $192 million made during the quarter. We generated…

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Bob Labick with CJS Securities. Please proceed with your question.

Good morning. Happy New Year and congratulations on continued outstanding results.

Thanks, Bob.

Great. I'd love to start with obviously super strong growth in online; you're at 24% still, which is great. That still means that 76% of your sales are in bricks-and-mortar. So I guess I have a two-part question here. One, could you give us an update on the health and strength of your retail network given what's going on in the world? And then the second part of the question is, intuitively you would have guessed that online would have grown faster than bricks-and-mortar in this quarter, in this time period, yet you're still at that kind of 24%, 25% online. And again, the growth is outstanding, but maybe give us a sense of why online is not outpacing bricks-and-mortar too.

Yes, Julien, do you want to take that or do you want me to? Your line is muted, possibly. Let me go ahead and do that, Bob. So the first part of the question, you asked about the retail network. Let me understand what you mean by the strength of it, are you talking about our distribution or the customer relationships?

Sure, just -- no, just more the health of your retail partners, and how they stand and how they've been impacted, and how that may impact you going forward. So the -- you mentioned some – DICK’s, Bed, Bath, and Beyond, REI Target, Walmart, et cetera. How are their businesses doing given the pandemic? And is that -- how will that impact you going forward? And then the other part is how is that -- I'm using the word network, growing as fast as your online also, just kind of curious on both?

Yes, I mean I think the -- or sorry, there's Julien.

Yes. No, you go ahead, Brian. And I'll build. I have some thoughts here, but please go ahead.

Yes, I would say overall I think the retail -- our retail customers are strong. I mean there's winners and losers, and the ones that have won, obviously, and there’s a more mass kind of dates, like Walmart and Target and Amazon, of course. We feel very good about our positioning with those customers and then the ones that are not doing as well, I think they're just more focused on the future and preparing themselves for what life is going to look like when we come out of this, and you brought up two very good ones, DICK’s and REI. We see no weakness in kind of their view of the future and their positioning. In fact, I think they're leaning in on a lot of our products more than we would expect. And so, I see confidence in the retail community almost across the board. There's pockets where they're in a very tough situation, Drybar salons for instance, they're in a very tough spot because COVID has had such a significant impact on them, but that's the exception in my mind in terms of the strength with our retail customer sites. I see positivity and they're really lining things up for the future. Does that answer your question?

Yes, that part of the question perfectly.

Yes, well, one build Bob, on this one, and I hope my voice is coming through now. In terms of this one, a lot of companies are posting big gains online, but importantly as a substitution for weakness in brick-and-mortar. And in our case, there are big gains online, 30-plus percent online growth is not shabby, especially given the big growth of the base that it's on because most companies are not coming from a 20-plus percent online sales growth, so if we're that developed, and then growing at 30 or so percent from there, I would stand behind that online result. But the point I'm trying to make is that for plenty of people, the brick-and-mortar strength is just not there, that's not the case for Helen of Troy and nor was it the case in Q3. As an example, in Beauty, a huge growth in distribution and sell-through in brick-and-mortar volumizers in particular or the One-Step products and not just Revlon. So think of Walmart, Costco, Walgreens as three examples in Q3 in Beauty. And so well, that must mean that Amazon or something was down, and it's not the case. Amazon themselves said that that same product was their number one beauty item during their own pre-holiday announcements that they made, just to give an example in Beauty. In Housewares, big dot.com sales, but even bigger brick-and-mortar sales, and then in Health & Home, the brick-and-mortar purchases for healthcare products tends to generally exceed the online for the simple reason that when you're sick you don't wait two days for Amazon to deliver a package, you just go buy, and those buys happen in brick-and-mortar. So, I would look at it a bit the opposite, to be honest, Bob, of wow, here's a company that is already big online got a lot bigger. And then unlike plenty of other companies, big brick-and-mortar on top with drivers like the ones you just heard, not so shabby.

Yes, Bob, I was going to answer the second part of the question separately. I think it's a math thing, online didn't really slow down for us, it just was on pace with the rest -- with the strong growth elsewhere. So same growth in online that we've experienced in the past, no deceleration, it just doesn't make any progress on the percentage of the total when the rest of the company is growing as fast. So we don't -- it's a little bit of a math anomaly, but we don't think there was any slowdown in online. It's just that everything else accelerated.

Terrific. Okay, and then for my follow-up, just sticking with kind of channels or whatever, I'm trying to tie this into calling it a follow-up. But in the past we've talked about commercial opportunities for you, particularly in the Health & Home related products, schools, hotels, office spaces. Can you just give us an update on the progress, and how long does this take just to set expectations, so I don't ask you every quarter if it's a two, three-year thing and something like that?

Yes, I'll take this one. Institutional was identified early on in the pandemic as an opportunity, and it's been something on our mind for a while. And the pandemic provided a catalyst for it, just like it has for other things in this world, like work from home, and things like this. And so institutional became a thing. What it did for us is it allowed us to bring on some folks in the sales force who have unique institutional sales work with in-line product as first, which has been successful for us, think air purifiers over the last quarter as an example of that. Thermometers before that, and also ongoing is two examples of institutional now inline. It further gave us the opportunity to re-look at the way we do connected devices, bring some new capability in engineering and outline a roadmap for institutional that'll go on for multiple years. So, progress in sales, progress in sales force, progress in new product development planning, and progress -- excuse me, I'm creating a multiyear trajectory for institutional for Helen of Troy. So we like our prospects. It's primarily in Health & Home. And we think it'll go on for several years. The demand will ebb and flow, I think -- it's big deal right now just because there is so much demand for it. That may abate a little bit on the other side of the vaccine, one the one hand. On the other side there is a new normal going on in the marketplace, and that new normal will favor institutional sales over a multiyear period.

Got it. Okay, thank you. Congratulations again on obviously outstanding results. And I will jump back in the queue.

Bob, he's so emotional about it he gets choked up. You have to forgive him.

Yes, thanks. It's just one of those moments when talk and choke at the same time, but I survived the question, Bob.

Thank you. Our next question comes from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.

Good morning. Thanks for taking our question. Also, congrats on a really strong quarter. So maybe I'll start with a question for Brian first, so Julien this is also a chance to get your breath. The commentary I guess through your transcripts is, I guess, as I look towards the next fiscal year, and maybe you can't really provide much commentary, if assuming that you guys are trying to put out there that there's many drivers to -- that you guys have in your control to drive EPS growth going forward. So is there any commentary you can provide in terms of the next fiscal, if you expect to see growth versus the guidance that you provided this year?

Well, yes, I mean we said it in our comments, and I think we added a lot. I think I would -- if I was an investor, that the things I would focus on is the fact that we're able to exceed our expectations for this year significantly, and then still make a lot of investments for next year, and so we've accelerated. Things that we would have normally had to spend on in fiscal year '22, and are now accomplishing those things in fiscal '21, which really sets us up, as I said in my remarks, to be flexible next year. We're always managing this kind of formula or this algorithm between how much we want to invest and how much do we need to contribute to earnings growth. And so next year, we feel we're going to be much more flexible in that because we've been able to make investments this year that we didn't anticipate being able to make. So we like that. We talked about things we did with our balance sheet in the quarter or for after the quarter, that our EPS growth drivers for next year, and that's $0.70 of contribution just from two balance sheet actions which is over or in line with what our annual growth rate would be long-term in terms of a percentage. So we get a contribution from that. I'm not guaranteeing that in terms of growth for next year. I'm saying that's a driver that we have that will help as we manage the formula of investment, and all the other things that we need to get through next year. So I mean in conclusion for me, that it's -- the future is bright because we've been able to take advantage of fiscal '21 to set up '22 for success, and that's how we look at it.

Okay, great.

Yes, I strongly affirm this, Rupesh. We can't project fiscal '22 this early on. The fog of COVID is burning fairly bright, even right now the new variant that's more contagious, and who knows what the world will bring in the next couple of months. That said, we are in our normal budget cycle. The $0.70 building block that Brian just referred to and mentioned in his formal remarks is substantial, and it is largely secured for next year, it's just mapped, and it is already in our hands, and it is favorable, so that's a good start. You add the forward spending that we're accelerating into fiscal '21 that he mentioned, and there's less spending required in fiscal '22 because we're doing it now. And you look at that and say, "Oh, that compresses the back half of this year." Our response is, of course it does. It does because we were largely dark in the first-half of this fiscal year, just like the entire rest of the planet was, and yet are leaning forward to do what's bold and right now. All of that stuff not only helps the business for the long-term but it helps fiscal '22 specifically, so it bears an elephant in the room, which is can these guys grow earning in fiscal '22. We're trying to send a message, which is we've got good building blocks now, $0.70 plus what you just heard. We'll spend now and will help fiscal '22. And on top of this we'll work through our budget and get the rest of the details right, and then intend to give guidance in April. So we also tried to say in our comments, and with no arrogance, I assure you, that it's not the first time that something big comes along. Pandemics are global and we are humble on the one hand. On the other hand, tariffs were supposed to bowl Helen of Troy over and the others lists that we gave and we were able to find ways. But strongly our intention today as well even just reaffirmed our forward guidance for the rest of phase II with that 8% a year average annual EPS growth. There is a message in there.

Okay, great. That's really helpful color. It's great. That's one of the concerns out there, and then in the Beauty side, obviously very explosive growth this quarter. Is there any way to quantify how much came from distribution versus consumption?

Yes, mostly consumption, but plenty of new distribution. I don't know how to emphasize this one enough. We've got the formula right on the subject of being in touch with consumers with good products. So think One-Step franchise. It's not just one Revlon although Revlon is our lead and it's doing extremely well. And the distribution gains are coming because of the strength of the product, not coming -- and therefore we are shipping a lot of products and it's somehow sitting on the shelf. You wouldn't have Walmart and Amazon coming out with statements that the biggest sell-through items for the holidays in those areas are the volumizers if it was sell-in for us. And it's a same story in drug where traditionally we're not a big presence in the appliance business in drug. But now, we are making significant progress there because the product is selling through. Then you take the same story in the U.K. You take the same story in Target and other big customers, and it tells you a message which is that that product is a big seller. Look from Amazon 150,000 reviews by definition every single one of them is from someone who bought the product, not someone who got in -- some company got in the distribution and loaded up the tray. And we have now caught up on the supply side, so we're able to supply that demand in the market. So, this is sell-through. And the distribution is coming because of the sell-through, so Costco and others saying I want it too. And we're finding ways to give them SKUs that work for them. And it's now across the lineup. So think of Bed Head, Gold N Hot, Hot Tools, and Dry Bar. So, we like where we are going with this. And we are bringing new products all over the place including international.

Great, thank you. I'll pass it along.

Thank you. Our next question comes from the line of Anthony Lebiedzinski with Sidoti & Company. Please proceed with your question.

Yes. Good morning everyone and also Happy New Year to all as well. And so, you guys talked about the high growth in consumables in terms air filters and water filters and so on. And can you give us a sense as to what percentage of your revenue is coming from consumables now? Just wanted to get a better sense as to the opportunity for growth from that segment going forward?

Sure. I'll start here and I think Brian has got some builds -- at least we don't breakout specifically the ratio that you are looking at, but it is very favorable. And not just in terms of sales but importantly also in terms of margin. So, think of a consumable punching multiple times the weight of the device itself because of relative profitability. So, we've never sold as many air purifiers and thermometers as we did right now. And things like air purifiers, water purifiers also are record for us. And same story with humidifiers but to a lesser extent. These products all had filters that go with them. Those filters are not only selling through because of the installed base. But that installed base is so much bigger that next year, those filters at a higher margin are a new building block for us. Maybe to just give you a number that could help, think of like 50% growth in the installed base and then take two or three times the profitability. And no matter what the number is, it's one to three time higher than what it was before being two to three up or higher than it was before. And that gets you a lot of growth room in the revenue as well as the margins.

Yes, let me…

[Multiple speakers] -- numbers you want to put to those statements.

Yes, let me build on that. I mean you framed it up as growth in the quarter from consumables and there was. But it's more of a future opportunity which is why we are calling it out. So I can give you an example in Health & Home in the categories that you have consumables, devices grew like 100%. But consumables only grew 50%. So, that's an indication of the future opportunity by getting installed base increase as much it has been year-to-date in Health & Home devices that take consumables and then the fact that consumable revenues lag in that by half, it's a future opportunity which is why we are calling it out. That installed base increase that we saw this fiscal year is going to provide consumables revenue for years to come. And we know it because we see consumables revenue lagging device revenue, and it's a future indicator. We've still got good consumables revenue on our installed base from the past. But our installed base now and going forward is much much greater and that's why we called it out.

Yes. In Health & Home as the big guys for consumables right now we sell more filters than we do devices. And it's not like there's something wrong with the devices. It's just that we've been added for many, many years and there's a large installed base of devices. Now, it's larger. So, this is repeats what Brian just said. In air purifiers, of course, there's a large installed base. There's now just a larger one including in institutional. And then every year when we sell more devices, you don't just get the new device; we purchase cycle of filters but also that entire installed base that was there before over the life of the existing devices. So, same with humidifiers, you've heard us talk years ago about the importance of vapopads on Vicks, it was the same math. Market maybe didn't care much, but it doesn't mean they were right. The fact is we sell tens of millions of pads a year at very high margin in a hugely installed base of humidifiers almost all of which take Vicks VapoPads. And that's incredibly profitable for us.

But again just for perspective, devices grew like air purification definitely does some stocking up. It grew over a 100% in the nine months year-to-date. Consumables for air purification only grew 50%. So, by installing -- by increasing the installed base by 100%, there will be huge driving consumables going forward.

All right. Thank you. That's very helpful. And I guess my second question, going back to the last quarterly conference call back in October, you guys talked about like you [technical difficulty] issues as well as inventory, it looks you [technical difficulty] build up inventory sequentially. Can you give us a sense as to how satisfied are you with current inventory levels? And are there any other stock issues that you want to speak about? Or, do you think you're in good shape with that?

I think I can start. I would say given the circumstances, we're really happy with where we are. It's not perfect and we do have isolated instances about our stocks or did in the third quarter, but we are light years ahead of where we were in considering the circumstances what we've come through to get here, we are happy. We would likely still continue to build inventory through the fourth quarter. And that's really out of an abundance in caution to get us through Chinese New Year and even a couple of months past that period, and be able to assess the environment and the supply chain and the virus and all the things that along with it. And then, really position ourselves next year by the end of the year to get the optimal inventory level. So, I would say we feel overall good. We have got pockets of things where we like to be in a little bit better position. But considering circumstances, I think we are - it's a win.

Yes. Looking where we were just two quarters ago. We were unable to meet the demand behind on inventory and not happy with our position catching up as quick as we could with supply. You heard in our prepared remarks how much progress we have made on that. And then if you think it was unique to the numbers, how could we be building inventory if we don't have enough supply. Just doesn't work. And so, what Brian just said is the testimony. And if you look at the levels, they are healthy. Our turns were I think 3.6 times last quarter versus 2.9 in the year ago period. That's a reflection of the excess demand and the under supply. Now that we catch up that number normalizes and there's more inventory going in, it's looks perfect.

Got it. Thank you very much and best luck.

Yes, pleasure.

Thank you. Our next question comes from the line of Linda Bolton Weiser with D.A. Davidson. Please proceed with your question.

Yes, hi. So my question is I mean you just talked about your greater confidence a little bit in your inventory level. But the IRI data indicates that you're still kind of maybe chasing demand in some areas like thermometers. So given that may be the case, how confident are you that you'll follow through with the investment spending in the fourth quarter that you're guiding to?

Yes, Hi, Linda, and Happy New Year. And I'm so glad this question comes up, we're still chasing demand in some aspects of thermometer in particularly no touch. So IRT or Infrared Thermometers that measure through the year we're doing much more, we've made very significant capacity in investments, and they have increased our volume markedly same thing notice, but not even quite as much to keep up with the demand. The point is we're still chasing a little bit there. Soon enough, we'll have more and be able to satisfy all the demand and we think go forward as well. There are even a few selective stocks here and there still on OXO, much, much less than there was just a quarter ago, let alone two quarters ago. And then in terms of the confidence on the investments, I'm really glad you asked this because there's a massive difference between this idea of short-term investments that stimulate demand, we're not especially focused on those at all, because we have the demand, we're interested in investments that are driving fiscal '22 and beyond and that gives us an opportunity to forward buy so to speak some of the things like media content, so think of lots of assets that are being developed there. I'll give you a concrete example, maybe it'll help, we'll be launching, re-launching the Drybar website with a major overhaul in just a month or so maybe two months now. And that it has all new content, entirely new systems underneath it that costs a fair amount of money. None of it will stimulate demand in Q4, and that's not our focus, our focus is on fiscal '22. It's one example, and other is in Europe, there's two or three very large projects in Europe around distribution improvements in certain products in certain categories. There's new products being launched in Europe, where we're spending money now. And then in Asia, on the no touch side, for thermometers, we're putting some pretty significant investments anticipating that increase in supply, very little of that will impact Q4 demand. But all of it is a forward buy on fiscal '22 and money that we won't have to spend in fiscal '22 to do the same, which is very good for the flow of earnings, which I know is an important thing on this call.

Linda, I would build on that just a little bit and say I'm more confident about it than I was at the end of last quarter, you saw that we had $4 million or $5 million that we weren't able to spend in Q3 and we now have a forecast for Q4. I think the worst case scenario is you could see something like that again in Q4 where we have $4 million or $5 million or something like that, where we just can't get it all through the pipe, but that's small in the grand scheme of things, I'm going to consider that level of difference of $4 million or $5 million isn't big enough for us to even worry about. So I think we're getting narrowed in on what we're able to do and not able to do based on the demand trends. And you could see some of that spending bleed over but not much at all.

Thank you. And then can I just ask a quick one on the Health & Home segment. You've had easy comparisons in the prior-year up till now, which has helped the growth rate. But you do have a harder comparison coming up in the fourth quarter and then you've got the weaker flu season. But then you've still got the COVID driven demand. Do you think that Health & Home can actually still post revenue growth in the fiscal fourth quarter?

Well, yes, I don't know if you caught it in the prepared remarks. But implied in our outlook is growth of 15% to 25% for Health & Home in the fourth quarter. So we wouldn't put that out there if we didn't believe it. We believe that like we do see that the growth is decelerating from the first nine months of the fiscal year and it's for the exact reason that you point out which is that the comparison gets much more difficult in the fourth quarter, grew 10.5% in the fourth quarter of last year, and year-to-date, they were in a decline of 5.2%. So hopefully that makes sense to you. We're going to -- we're forecasting a decelerated rate of growth in the fourth quarter, but we still believe the segment can grow, and as I said, 15% to 25%, which is pretty good on 10.5% growth base.

It's not just that one, I know everyone's asking that because of COVID, but the other segments beauty and housewares also have significant large year-over-year increases in Q4 updates and yet that percentage that Brian cited in his prepared remarks applies to all of the, sorry, not the percent of, but the message applies to all of the business units, which is all of them are going to grow in the Q4 despite the big Q4 search in a year ago base, and Health & Home more so than any, which I think is a testimony to the question that you're asking.

Okay. Thank you very much.

Thank you. Our next question comes -- I'm sorry…

Please go ahead, Operator.

Thank you. Our next question comes from the line of Olivia Tong with Bank of America. Please proceed with your question.

Great. Thanks. Good morning. I really wanted to talk a little bit about the margin by segment, because I imagine there are many different dynamics at play, particularly as we eventually start to move towards reopening. So first in terms of the Housewares division, if you could just talk through, I imagine that's just a mix between OXO and Hydroflask. Would you expect them in fiscal '22 that starts to turn the opposite way? And then if you could just talk through margins and the other two divisions as well, Health & Home and Beauty, the sustainability particularly of the acceleration and beauty margins. Thanks so much.

Yes, Olivia, it's Brian. I'll start and Julien wants to build, he can add. On housewares, you mentioned the mix and yes, it is a driver, but I mean almost as big of a driver is really the marketing spend that they have in the third quarter, and we're expecting to build on that in fourth quarter. So it's a combination of both things. There is some other smaller things going on there, but really I would focused on those two big things it's mixed. And then don't forget about marketing. I mean, we were talking a lot about this investment spend. A lot of that is going into behind the OXO and Hydroflask brands. So we feel good about their margins, the margins haven't really deteriorated and going forward to your question about Hydroflask yes, we see that mixed rebalancing into next year. And so hopefully margin tailwind in the Housewares segment compared to this year for two reasons, one the mix were rebalanced we believe. And then, two, we may not have the same level of marketing spend, but who knows, we may. That's the reason why we're not giving you more information on fiscal '22 as we haven't made all those choices yet. What we're telling you is we accelerated investments out of '22 into '21, which frees us up to be a lot more flexible, but we could choose to double down on some investment spending in fiscal year '22, therefore, because we haven't made the decisions. We can't give them more color other than that. So hopefully that helps. Yes, we see margin maybe tailwind for the Housewares segment, as compared to this year going forward. And then on the other go ahead.

Because you're talking about the go-forward part on beauty, remember there is a building block for next year at a higher margin, which is Drybar. Drybar was largely shut down this year, I think of the salons and for next year, There'll be more of that assuming on the other side of the vaccine, Drybar punches at a higher weight than the average for beauty. So there is good building blocks for next year, and some of the investment was pulled into this year. So it helps in that regard, you also heard us talk about a large multi-year cost of goods reduction projects. Not all of that will hit in fiscal '22 and some of it will be reinvested in the business. And that said, it's all good for margin.

Yes. I was actually -- maybe going to talk about the other two segments. Yes, that's okay. Health & Home also a major driver of their compression was in spending. And again, we expect that to continue in the fourth quarter and that's kind of the headline there, it's really spending driven. And then, beauty is in a situation where the growth was so significant that spending was not quite in line with that growth. So you see that margin expanding quite a bit, but the idea is we want to be somewhat proportional with our growth in terms of our spending and kind of do the 50-50 formula of all of our over performance, we've been 50% back in business and dropped 50% of the bottom line. And Beauty got a little bit out of whack with that, with the significant growth in the third quarter, but we want to rebalance that going forward.

Got it. Thanks. That's helpful. Yes, for sure. One that sort of squaring on beauty a little bit, just the sustainability of that beauty book, because obviously the other two divisions were very strong as well, but beauty was the one that saw a pretty big acceleration relative to prior quarters. So, as you sort of lean into that and also think about potential reopening recovery, Drybar getting better, et cetera, us going out again, how do you think about the sustainability of the demand for the Volumizer products? And then also your ability to maintain market share because you are starting to see a lot more in terms of copycat products creep up. Are you expanding capacity and do you have capacity for expansion in order to continue to support that growth and drive that growth as we sort of look at next year, and potential for reopening as well? Thanks.

Yes, it's a great question on Beauty, because when you've got a boom like that, 50% growth, and you say, "Well, who grows 50% and then again keeps it all." My comment might surprise you. Beauty grew in spite of COVID, not because of COVID. So Health & Home got a big tailwind from COVID, OXO, the home nesting trend, which we've talked about a lot. But if you think about COVID, I'll give you a couple of fundamentals that were not helpful to Beauty and yet there's the growth. So now imagine, to your question, what happens when those fundamentals get favorable or at least not negative, and you balance it against the increased competition. So store and salon closures in the beginning or the first-half of this year during the shutdown period were pretty high, there's less of that now. But as we go into at least the first-half of fiscal '22, it's just an advantage on the other side of the vaccine, whenever that gets prevalent enough. So that's a headwind in the base that's not in some form of fiscal '22. Another that people may not remember just because it was a long time ago, but as coronavirus first spread in China, around the period of Chinese New Year last year, it largely shut down the Chinese manufacturing base because the workers were locked down hard by the Chinese government due to the spread out of the Wuhan area at the beginning, before it was a pandemic. That hurt our supply, and we've since increased our supply considerable, so that missed or out of stock is in the base, but for next year we get to grow over it, especially in the early part of the year. And then the whole stay home thing, it's less…

Thank you. Our next question comes from the line of Steve Marotta with C.L. King. Please proceed with your question.

Good morning, Julien, Brian, and Jack. Given the time constraints I'll only limit my question to one, and we'll deal with everything offline, could you talk a little bit about profitability differential in your direct-to-consumer digital channel versus the wholesale channel, both brick-and-mortar and digital?

Sure. So there's not much of a difference in that profitability, when you're -- when you say the digital, I am assuming you're referring to all ecommerce, not just our own DTC. Our own DTC, the smaller the business obviously the less profitable it is until you are able to scale up. But we've got enough critical mass where our DTC is very profitable, and even in most cases in line with the entire company, even though the cost of [indiscernible] is higher, and that includes the cost of acquiring the customers and all of that. So, we're -- we've used the word agnostic about which channel we go through. I don't like that word. I like better the thought that we want to serve the customer wherever they want to be. And profitability is something that we have to work through, but it's really on the earlier stages of a development of a DTC business. And we're at a point in most of our -- not most, but in a lot of ours where we're past that point, and we don't really have to focus on the profitability because it's there, and we're meeting the customer where the customer wants to be. Now, where we're trying to create something new in terms of DTC, that's more of a factor that we have to consider, but again, the businesses that we've got that are really driving there, not a factor at all. The profitability is at least neutral; in some cases it's even better.

Yes, that answers the question, Brian. Thank you.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Mininberg for any final comments.

Yes, thanks, Operator. And thanks everybody for joining us today. We're very excited about the results we just put up. We're extremely excited to become a $2 billion company per our guidance, and continue to add earnings per share above expectations, even as we make all the investments and the forward investments that we talked about. We're also quite excited about our long-term prospects for the back half of Phase II, and we tried to outline those building blocks for you today in the form that they are at this stage in our budget cycle. We see room for encouragement there, to put it mildly. So we look forward to speaking to many of you in the coming weeks, and many of those [technical difficulty] virtual conferences. Beyond that, we do expect to host our fourth quarter and fiscal year-end call, in late April, at which time we also intend to provide our outlook for fiscal '22. So, have a great day everybody, and thank you so much for joining today.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.