8-K: Hain Celestial Q2 FY26: Sales Down, Impairment Hits Net Loss

Hain Celestial Group reports a 7% net sales decline and a significant net loss of $116 million for its fiscal second quarter, impacted by goodwill and intangible asset impairment charges.

Summary

• Net sales were $384 million for the fiscal second quarter ended December 31, 2025, representing a 7% decrease year-over-year.
• Organic net sales also decreased by 7% compared to the prior year period, driven by a 9-point decrease in volume/mix, partially offset by a 2-point increase in pricing.
• Gross profit margin was 19.4%, a 330-basis point decrease from the prior year period, with adjusted gross profit margin at 19.5%, a 340-basis point decrease.
• Net loss was $116 million, compared to a net loss of $104 million in the prior year period, including pre-tax non-cash impairment charges of $132 million ($131 million after-tax) related to goodwill and certain intangible assets.
• Adjusted net loss was $3 million, compared to adjusted net income of $8 million in the prior year period.
• Adjusted EBITDA was $24 million, a decrease from $38 million in the prior year period.
• Loss per diluted share was $1.28, compared to $1.15 in the prior year period, while adjusted loss per diluted share was $0.03, compared to adjusted earnings per diluted share of $0.08.
• Net cash provided by operating activities increased 20% year-over-year to $37 million in the fiscal second quarter.
• Free cash flow was $30 million in the fiscal second quarter, up from $25 million in the prior year period.
• Total debt remained stable at $705 million, and net debt decreased to $637 million at the end of the fiscal second quarter from $650 million at the beginning of the fiscal year.
• The company ended the fiscal second quarter with a net secured leverage ratio of 4.9x as calculated under its credit agreement.
• North America organic net sales decreased by 10%, primarily driven by snacks and baby formula, partially offset by growth in beverages.
• International organic net sales decreased by 3%, primarily due to lower sales in baby & kids, showing sequential improvement from the fiscal first quarter of 2026.
• Snacks category organic net sales declined 20% due to distribution losses and velocity challenges in North America.
• Baby & Kids category organic net sales declined 14% due to industry-wide volume softness in purees in the UK and formula in North America.
• Beverages category organic net sales increased 3% due to growth in tea in North America, accelerating from the fiscal first quarter of 2026.
• Meal Prep category organic net sales declined 1%, primarily driven by spreads and drizzles in the UK, partially offset by strength in yogurt in North America.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a challenging quarter marked by significant impairment charges and broad sales declines, despite some positive cash flow generation and strategic portfolio adjustments. The path to sequential improvement is noted, but current performance is weak.

Positives

• Net cash provided by operating activities increased 20% year-over-year to $37 million in the fiscal second quarter.
• Free cash flow increased to $30 million in the fiscal second quarter, up from $25 million in the prior year period.
• Net debt decreased to $637 million at the end of the fiscal second quarter from $650 million at the beginning of the fiscal year.
• The divestiture of the North American snack business is expected to provide greater financial flexibility and an improved margin and cash flow profile.
• Core categories are stable, and operational execution is improving.
• The International segment demonstrated sequential improvement in organic net sales decline (3% decrease compared to 4% decrease in Q1 FY26).
• Beverages category organic net sales increased 3% year-over-year, showing acceleration from the 2% growth in Q1 FY26.
• The company recognized proceeds from an insurance claim of $25.9 million, which was collected on January 2, 2026.

Negatives

• Net sales decreased 7% year-over-year to $384 million.
• Organic net sales decreased 7%, primarily due to a 9-point decrease in volume/mix.
• Gross profit margin decreased by 330 basis points to 19.4%, and adjusted gross profit margin decreased by 340 basis points to 19.5%.
• Net loss increased to $116 million from $104 million in the prior year period.
• The net loss included pre-tax non-cash impairment charges of $132 million ($131 million after-tax) related to goodwill and certain intangible assets.
• Adjusted net loss was $3 million, a decline from adjusted net income of $8 million in the prior year period.
• Adjusted EBITDA decreased to $24 million from $38 million in the prior year period, a 35.9% decline.
• Loss per diluted share was $1.28, compared to $1.15 in the prior year period.
• Adjusted loss per diluted share was $0.03, compared to adjusted earnings per diluted share of $0.08 in the prior year period.
• North America organic net sales decreased by 10%, and its adjusted EBITDA decreased 57% to $11 million.
• International organic net sales decreased by 3%, and its adjusted EBITDA decreased 16% to $19 million.
• Snacks category organic net sales declined 20% year-over-year due to distribution losses and velocity challenges in North America.
• Baby & Kids category organic net sales declined 14% year-over-year due to industry-wide volume softness in purees in the UK and formula in North America.
• Meal Prep category organic net sales declined 1% year-over-year.
• The net secured leverage ratio was 4.9x, as calculated under the credit agreement.

Risks

• Challenges and uncertainty resulting from the impact of competition.
• Changes to consumer preferences.
• Ability to execute business strategy.
• The ability to satisfy the conditions to the closing of the contemplated disposition of the North American snacks business, which may include conditions outside of the company's control.
• The ability to successfully separate the North American snacks business and realize the benefits of the contemplated disposition.
• Compliance with the credit agreement and the ability to refinance, retire, and/or extend the maturity of the company's existing debt.
• The 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.
• The ability to attract and retain highly skilled people.
• Risks related to tax matters.
• 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.
• The 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.
• Potential liability if products cause illness or physical harm.
• The highly regulated environment in which the company operates.
• The 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 sequential improvement in the back half of the year due to ongoing actions across simplification, pricing, innovation, and productivity. Management remains confident in its path forward.

Management Comments

• "We demonstrated meaningful strategic and operational progress in the second quarter and are advancing our turnaround strategy with urgency."
• "We took bold steps to sharpen our portfolio and strengthen our balance sheet through the divestiture of our North American snack business, giving us greater financial flexibility alongside an improved margin and cash flow profile."
• "Our core categories are stable, our operational execution is improving, and we demonstrated strong cash delivery in the quarter."
• "The actions underway across simplification, pricing, innovation, and productivity provide a clear path to sequential improvement in the back half of the year."
• "We remain confident in our path forward."

Industry Context

StockSavvy.ai notes that the health and wellness sector, while generally resilient, faces challenges from evolving consumer preferences, supply chain complexities, and inflationary pressures. Hain Celestial's divestiture of its North American snack business aligns with a broader industry trend of companies streamlining portfolios to focus on core, higher-margin categories and improve financial flexibility amidst a competitive landscape. The decline in organic sales, particularly in snacks and baby formula, reflects specific category headwinds and competitive dynamics within the CPG space.

Comparison to Industry Standards

• NA

Legal Proceedings

• Pending and future litigation, including litigation relating to Earth's Best baby food products.
• Expenses and items relating to securities class action and SEC investigation.

Stakeholder Impact

• Shareholders: Negative impact due to increased net loss, decreased adjusted net income/EBITDA, and significant impairment charges. Potential positive long-term impact from strategic divestiture and turnaround efforts if successful.
• Employees: Potential impact from the divestiture of the North American snack business and ongoing productivity/transformation initiatives.
• Customers: Impact from changes in product portfolio (divestiture of snacks) and potential benefits from focus on core "better-for-you" brands.
• Creditors: The net secured leverage ratio of 4.9x and the need to comply with credit agreement terms are relevant.

Next Steps

• Continue advancing the turnaround strategy with urgency.
• Execute actions across simplification, pricing, innovation, and productivity to achieve sequential improvement in the back half of the year.
• Successfully separate the North American snacks business and realize the benefits of the contemplated disposition.

Key Dates

Recommendation

The significant net loss, driven by substantial impairment charges, coupled with a broad decline in net sales and adjusted EBITDA, indicates fundamental operational challenges. While management highlights strategic actions and future improvements, the current financial performance is weak, and the high leverage ratio (4.9x) adds risk. The divestiture is a positive strategic move, but its benefits are yet to materialize, and the immediate outlook remains challenging. Investors should consider selling given the poor performance and uncertainties.

Keywords

health and wellness, organic food, natural products, consumer packaged goods, CPG, snacks, baby food, beverages, meal prep, financial results, SEC filing, HAIN, The Hain Celestial Group, Inc., Q2 2026, earnings, impairment, divestiture