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Income Taxes | 6 Months Ended
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Aug. 31, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Note 15 - Income Taxes We reorganized the Company in Bermuda in 1994, and many of our foreign subsidiaries are not directly or indirectly owned by a U.S. parent. As such, a significant portion of our foreign income is not subject to U.S. taxation on a permanent basis under current law. Additionally, our intangible assets are primarily owned by foreign affiliates, resulting in proportionally higher earnings in jurisdictions with statutory tax rates lower than the U.S. Taxable income in each jurisdiction, whether U.S. or foreign, is determined by the subsidiary’s operating results as well as applicable transfer pricing and tax regulations. In July 2025, a reconciliation bill, commonly referred to as the One Big Beautiful Bill Act, was signed into law. The legislation includes a broad range of U.S. tax reform provisions. We are evaluating the impact of these provisions; however, there were no discrete effects in the second quarter and we do not expect a material impact on our fiscal 2026 consolidated financial statements. The Organisation for Economic Co-operation and Development (“OECD”) has introduced a framework to implement a global minimum corporate income tax of 15%, referred to as “Pillar Two.” Certain countries in which we operate have enacted, or are in process of enacting, domestic legislation aligned with OECD’s Pillar Two “Model Rules.” Pillar Two legislation in effect for our fiscal 2025 and 2026 has been incorporated into our financial statements. In June 2025, the Group of Seven, comprised of Canada, France, Germany, Italy, Japan, the United Kingdom and the U.S., announced an agreement under which U.S. multinational companies would be excluded from certain elements of the Pillar Two global minimum tax rules in exchange for the U.S. withdrawing planned retaliatory tax measures. This agreement has not yet been formally incorporated into the OECD Pillar Two Model Rules. We will continue to monitor the potential implications of this development, as it may influence the broader application of the Pillar Two Model Rules globally. In the fourth quarter of fiscal 2025, we implemented a reorganization involving the transfer of intangible assets previously held by Helen of Troy Limited (Barbados) to our subsidiary in Switzerland. The reorganization resulted in the consolidation of the ownership of intangible assets, supporting streamlined internal licensing and centralized management of the intangible assets. Further, the reorganization resulted in a transitional income tax benefit of $64.6 million from the recognition of a deferred tax asset, partially offset by taxes associated with the transfer. In response to Pillar Two, on May 24, 2024, Barbados enacted a domestic corporate income tax rate of 9%, effective for our fiscal 2025 and a domestic minimum top-up tax (“DMTT”) of 15% which was effective beginning with our fiscal 2026. During the first quarter of fiscal 2025, we incorporated the corporate income tax into our estimated annual effective tax rate and revalued our existing deferred tax liabilities subject to the Barbados legislation, which resulted in a discrete tax charge of $6.0 million. However, as a result of the reorganization of our intangible assets described above, the Barbados corporate income tax and DMTT will not have a material impact on our condensed consolidated financial statements beginning in fiscal 2026. Like Barbados, the government of Bermuda enacted a 15% corporate income tax that was effective for us beginning in fiscal 2026. This Bermuda tax will not have a material impact on our condensed consolidated financial statements. We expect our fiscal 2026 effective tax rate, excluding discrete items and asset impairment charges described below and in Note 5, to increase relative to historical periods due to the impact of global tax reform initiatives, including the implementation of Pillar Two and economic substance regulations. As additional jurisdictions implement or revise legislation in response to these reforms, we may experience further adverse impacts on our global effective tax rate. For interim periods, our income tax expense and resulting effective tax rate are based on an estimated annual effective tax rate, adjusted for the impact of discrete items recognized in the period. Discrete items include changes in tax laws or rates, changes in estimates for uncertain tax positions, excess tax benefits or deficiencies from stock-based compensation, foreign currency remeasurement effects that are not reasonably estimable, and other infrequent or non-recurring items. Discrete items do not include the asset impairment charges described below and in Note 5. During the three and six months ended August 31, 2025, we recognized goodwill and other intangible asset impairment charges of $326.4 million and $740.8 million, respectively, which included $246.0 million and $511.0 million, respectively, of non-deductible goodwill that will not result in a tax benefit. The expected tax benefit of $38.0 million on the year-to-date impairment charges will be recognized over the course of the fiscal year in relation to pre-tax book income, rather than as a discrete item in the periods in which the charges were incurred. The downward revisions to our internal forecasts utilized in our impairment testing during fiscal 2026 impacted our asse ssment of the future realizability of a related deferred tax asset, which led to the recording of a $13.5 million and $30.0 million valuation allowance during the three and six months ended August 31, 2025, respectively. For the three months ended August 31, 2025, the income tax benefit as a percentage of loss before income tax was 6.4%, compared to an income tax expense as a percentage of income before income tax of 22.0% for the same period last year. The decrease in the effective tax rate is primarily due to the impairment charges in fiscal 2026 and the related tax effects described above, and increases in tax benefits for discrete items, partially offset by valuation allowances on intangible asset deferred tax assets. For the six months ended August 31, 2025, the income tax expense as a percentage of loss before income tax was (1.2)%, compared to an income tax expense as a percentage of income before income tax of 42.1% for the same period last year. The decrease in the effective tax rate is primarily due to the impairment charges in fiscal 2026 and the related tax effects described above, increases in tax benefits for discrete items in fiscal 2026 and the comparative impact of tax expense recognized during the first quarter of fiscal 2025 as a result of the Barbados tax legislation, partially offset by valuation allowances on intangible asset deferred tax assets.

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