8-K: Hain Celestial Q1 FY26: Sales Decline, Profitability Mixed

Hain Celestial reported fiscal first quarter 2026 financial results, with net sales down 7% but sequential organic sales improvement and adjusted EBITDA growth in North America.

Summary

• Net sales for the fiscal first quarter ended September 30, 2025, were $368 million, a 7% decrease year-over-year.
• Organic net sales decreased by 6% compared to the prior year, driven by a 7-point decrease in volume/mix, partially offset by a 1-point increase in pricing.
• The company reported a net loss of $21 million, compared to a net loss of $20 million in the prior year period.
• Adjusted net loss was $7 million, an increase from an adjusted net loss of $4 million in the prior year period.
• Adjusted EBITDA was $20 million, an 11.8% decrease from $22 million in the prior year period.
• Loss per diluted share was $0.23, compared to $0.22 in the prior year, with adjusted loss per diluted share at $0.08, up from $0.04.
• North America segment organic net sales decreased by 7% year-over-year, showing sequential improvement from a 14% decrease in the fiscal fourth quarter of 2025.
• International segment organic net sales decreased by 4% year-over-year, also showing sequential improvement from a 6% decrease in the fiscal fourth quarter of 2025.
• Total debt increased to $716 million at the end of the fiscal first quarter from $705 million at the beginning of the fiscal year, with net debt rising to $668 million from $650 million.
• The company ended the quarter with a net secured leverage ratio of 4.8x under its credit agreement.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative. While management stated results met expectations and noted sequential improvements in organic sales and North America EBITDA, overall net sales, gross profit margins, and net income declined. Debt also increased, and the International segment's performance significantly deteriorated. The positive commentary is tempered by the underlying negative financial trends.

Positives

• First quarter results met management's expectations on both the topand bottom-line.
• Organic net sales trends demonstrated sequential improvement in both North America (from -14% to -7%) and International (from -6% to -4%) segments.
• Cost discipline and actions to streamline the cost structure drove a reduction in Selling, General & Administrative (SG&A) expenses.
• Early results from the '5 actions to win' strategy are visible, including benefits from pricing initiatives beginning to build.
• North America Adjusted EBITDA increased by 37% to $17 million, driven by productivity savings, SG&A reduction, and pricing/trade efficiencies.
• Gross margin in North America increased by 30 basis points to 20.8%, and adjusted gross margin increased by 200 basis points to 22.7%.
• Net cash used in operating activities improved to $8 million from $11 million in the prior year period.
• Free cash flow improved to negative $14 million from negative $17 million in the prior year period.

Negatives

• Net sales decreased by 7% year-over-year to $368 million.
• Organic net sales declined by 6% year-over-year, primarily due to a 7-point decrease in volume/mix.
• Gross profit margin decreased by 220 basis points to 18.5%, and adjusted gross profit margin decreased by 120 basis points to 19.5%.
• Net loss increased to $21 million from $20 million in the prior year period.
• Adjusted net loss increased to $7 million from $4 million in the prior year period.
• Adjusted EBITDA decreased by 11.8% to $20 million from $22 million in the prior year period.
• Loss per diluted share increased to $0.23 from $0.22, and adjusted loss per diluted share increased to $0.08 from $0.04.
• International segment's gross profit and adjusted gross profit decreased by 25%, with margins declining by 530 basis points to 15.7%.
• International segment's Adjusted EBITDA decreased by 38% to $13 million, with its margin falling to 7.7% from 12.5%.
• Snacks category organic net sales declined by 17% due to velocity challenges and distribution losses in North America.
• Baby & Kids category organic net sales declined by 10% due to industry-wide volume softness in purees in the UK.
• Total debt increased to $716 million and net debt increased to $668 million at quarter-end.
• The net secured leverage ratio of 4.8x indicates a high level of leverage.

Risks

• Challenges and uncertainty resulting from the impact of competition.
• Changes to consumer preferences.
• Ability to execute business strategy.
• Ability to manage the supply chain effectively.
• Input cost inflation, including as a result of tariffs.
• Reliance on independent contract manufacturers.
• Disruption of operations at manufacturing facilities.
• Customer concentration.
• Reliance on independent distributors.
• Risks associated with operating internationally.
• Risks associated with outsourcing arrangements.
• Risks associated with geopolitical conflicts or events.
• Reliance on independent certification for a number of products.
• Ability to attract and retain highly skilled people.
• Risks related to tax matters.
• Compliance with the credit agreement and ability to refinance indebtedness.
• Foreign currency exchange risk.
• General economic conditions.
• Impairments in the carrying value of goodwill or other intangible assets.
• The reputation of the company and its brands.
• Ability to use and protect trademarks.
• Cybersecurity incidents.
• Disruptions to information technology systems.
• Pending and future litigation, including litigation relating to Earth's Best baby food products, securities class action, and an SEC investigation.
• Potential liability if products cause illness or physical harm.
• The highly regulated environment in which the company operates.
• Ability to manage financial reporting and internal control systems and processes.
• Compliance with data privacy laws.
• The adequacy of insurance coverage.
• Climate impacts.
• Liabilities, claims or regulatory change with respect to environmental matters.

Future Outlook

The company anticipates improved trends in the back half of the fiscal year, driven by operational and financial foundations being laid. Management's near-term priorities include stabilizing sales, improving profitability, optimizing cash, and deleveraging the balance sheet. A strategic review with Goldman Sachs is also progressing.

Management Comments

• "First quarter results met our expectations on the topand bottom-line."
• "Organic net sales trends demonstrated sequential improvement in both our North America and International segments."
• "Cost discipline and the decisive actions taken to streamline our cost structure drove a reduction in SG&A, and we are seeing early results from the execution against our 5 actions to win, including benefits from pricing initiatives beginning to build."
• "Our near-term priorities remain clear: stabilizing sales, improving profitability, optimizing cash, and deleveraging our balance sheet."
• "We have made tangible progress in laying the operational and financial foundations necessary to position Hain for sustainable growth, and we have building blocks in place to drive improved trends in the back half of the year."
• "In parallel, we continue to make good progress against the strategic review work with Goldman Sachs."

Industry Context

The company noted industry-wide volume softness in purees in the UK as a primary driver for the decline in its Baby & Kids category. This suggests broader market challenges affecting the baby food sector in that region, impacting Hain Celestial's international performance in this category.

Legal Proceedings

• The company is involved in certain litigation expenses related to a securities class action, baby food litigation, and an SEC investigation, which are adjusted for in non-GAAP financial measures.

Stakeholder Impact

• Shareholders: Experienced increased net and adjusted net losses per share, and the company's debt levels increased, potentially impacting future returns and financial flexibility.
• Employees: Cost discipline and streamlining of cost structure, including SG&A reduction, could imply workforce adjustments or increased efficiency demands.
• Customers: Pricing initiatives are being implemented, which could affect product affordability, while volume softness in key categories like snacks and baby & kids indicates changing consumer preferences or competitive pressures.
• Creditors: The increase in total and net debt, along with a net secured leverage ratio of 4.8x, indicates higher leverage, which could be a concern for lenders.

Next Steps

• Continue execution against the '5 actions to win' strategy.
• Focus on stabilizing sales, improving profitability, optimizing cash, and deleveraging the balance sheet.
• Drive improved trends in the back half of the fiscal year.
• Continue progress on the strategic review work with Goldman Sachs.

Key Dates

Recommendation

The company's Q1 FY26 results present a mixed picture. While management indicates results met expectations and highlights sequential improvements in organic sales trends and strong adjusted EBITDA growth in North America, overall net sales and profitability (net loss, adjusted net loss, total adjusted EBITDA) declined year-over-year. The International segment's performance was particularly weak, and debt levels increased. The ongoing strategic review with Goldman Sachs and the stated priorities of stabilizing sales, improving profitability, and deleveraging the balance sheet suggest a company in transition. Given the combination of some positive operational momentum and sequential improvements against a backdrop of overall financial declines and increased leverage, a 'hold' recommendation is appropriate. Investors should await further clarity on the strategic review and evidence of sustained improvement in overall financial performance and debt reduction before considering a stronger position.

Keywords

Hain Celestial, HAIN, financial results, Q1 2026, earnings, health and wellness, organic food, natural products, snacks, baby food, beverages, meal prep, adjusted EBITDA, net sales, debt, strategic review