Restructuring Plan

3 Months Ended

May 31, 2024

Restructuring and Related Activities [Abstract]

Note 6 - Restructuring Plan

During fiscal 2023, we initiated Project Pegasus, a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and effectiveness and reduce costs. Project Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the organization, accelerate and amplify cost of goods savings projects, enhance the efficiency of our supply chain network, optimize our indirect spending and improve our cash flow and working capital, as well as other activities. We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments.

During the fourth quarter of fiscal 2023, we made changes to the structure of our organization. These changes resulted in our previous Health & Wellness and Beauty operating segments being combined into a single reportable segment, the creation of a North America Regional Market Organization (“RMO”) responsible for sales and go-to-market strategies for all categories and channels in the U.S. and Canada, and further centralization of certain functions under shared services, particularly in operations and finance to better support our business segments and RMOs. This new structure reduced the size of our global workforce by approximately 10%. We believe that these changes better focus business segment resources on brand development, consumer-centric innovation and marketing, the RMOs on sales and go to market strategies, and shared services on their respective areas of expertise while also creating a more efficient and effective organizational structure.

During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business, currently located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in the Boston, Massachusetts area. This geographic consolidation and relocation is the next step in our initiative to streamline and simplify the organization and is expected to be completed during fiscal 2025. We expect these changes will enable a greater opportunity to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment.

As previously disclosed, we continue to have the following expectations regarding Project Pegasus charges:

•Total one-time pre-tax restructuring charges of approximately $50 million to $55 million over the duration of the plan, expected to be completed during fiscal 2025.

•Pre-tax restructuring charges to be comprised of approximately $15 million to $19 million of severance and employee related costs, $28 million of professional fees, $3 million to $4 million of contract termination costs, and $4 million of other exit and disposal costs.

•All of our operating segments and shared services will be impacted by the plan and pre-tax restructuring charges include approximately $16 million to $17 million in Home & Outdoor and $34 million to $38 million in Beauty & Wellness.

•Pre-tax restructuring charges represent primarily cash expenditures, which are expected to be substantially paid by the end of fiscal 2025.

We also continue to have the following expectations regarding Project Pegasus savings:

•Targeted annualized pre-tax operating profit improvements of approximately $75 million to $85 million, which began in fiscal 2024 and we expect to be substantially achieved by the end of fiscal 2027.

•Estimated cadence of the recognition of the savings will be approximately 25% in fiscal 2024, which was achieved, approximately 35% in fiscal 2025, approximately 25% in fiscal 2026 and approximately 15% in fiscal 2027.

•Total profit improvements to be realized approximately 60% through reduced cost of goods sold and 40% through lower SG&A.

During the three month periods ended May 31, 2024 and 2023, we incurred $1.8 million and $7.4 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the condensed consolidated statements of income.

The following tables summarize restructuring charges recorded as a result of Project Pegasus for the periods presented:


	Three Months Ended May 31, 2024						Total Incurred Since Inception
(in thousands)	Home & Outdoor		Beauty & Wellness		Total
Severance and employee related costs	$	440	$	1,125	$	1,565	$	16,841
Professional fees	—		270		270		27,147
Contract termination	—		—		—		1,331
Other	—		—		—		2,590
Total restructuring charges	$	440	$	1,395	$	1,835	$	47,909


	Three Months Ended May 31, 2023
(in thousands)	Home & Outdoor		Beauty & Wellness		Total
Severance and employee related costs	$	484	$	408	$	892
Professional fees	2,269		3,357		5,626
Contract termination	—		688		688
Other	37		112		149
Total restructuring charges	$	2,790	$	4,565	$	7,355

The tables below present a rollforward of our accruals related to Project Pegasus, which are included in accounts payable and accrued expenses and other current liabilities:


(in thousands)	Balance at February 29, 2024		Charges		Payments		Balance at May 31, 2024
Severance and employee related costs	$	4,493	$	1,565	$	(2,975)	$	3,083
Professional fees	272		270		(24)		518
Contract termination	—		—		—		—
Other	—		—		—		—
Total	$	4,765	$	1,835	$	(2,999)	$	3,601


(in thousands)	Balance at February 28, 2023		Charges		Payments		Balance at May 31, 2023
Severance and employee related costs	$	3,173	$	892	$	(2,316)	$	1,749
Professional fees	3,201		5,626		(6,026)		2,801
Contract termination	160		688		(848)		—
Other	34		149		(183)		—
Total	$	6,568	$	7,355	$	(9,373)	$	4,550