The Hain Celestial Group (NASDAQ:HAIN) outlined a major portfolio shift and reiterated its turnaround priorities during its fiscal second-quarter 2026 earnings call, highlighted by a definitive agreement to sell its North American snacks business for $115 million in cash. Management said proceeds will be used to reduce debt and strengthen the balance sheet as the company continues a broader strategic review aimed at simplifying operations, improving margins and liquidity, and lowering leverage.
Strategic review: North American snacks divestiture and portfolio focus
President and CEO Alison Lewis said the company’s strategic review—conducted with Goldman Sachs—has moved from assessment into an “execution phase,” beginning with the sale of the North American snacks business to Snackrupters. Lewis described the divestiture as a “pivotal moment” intended to sharpen Hain’s focus on categories and markets where it believes it has stronger “rights to win,” while also improving financial flexibility.
In Q&A, Lewis said the snacks category required capabilities that were harder for Hain to build—such as heavy innovation cadence, consistent marketing investment, and DSD-like merchandising—given snacks’ “impulse” and “demand creation” nature. CFO Lee Boyce added that the operating model, talent profile, and capital allocation needs differ meaningfully versus the rest of the portfolio.
Operational progress: cost discipline, service levels, and working capital
Lewis said the turnaround plan remains centered on five actions: streamlining the portfolio; accelerating brand renovation and innovation; implementing revenue growth management (RGM) and pricing; driving productivity and working capital efficiency; and strengthening digital capabilities. She pointed to early improvements in operating discipline, including better forecast accuracy, higher service levels, and inventory reductions.
- Forecast accuracy in the U.S. improved by four points quarter-over-quarter, reaching the highest level in several years in December, according to management.
- Days inventory outstanding improved by four days in North America and nine days internationally, which management said supported cash flow.
- North America service levels were above 96%, described as the best in recent history.
- SG&A improved 13% year-over-year, or 120 basis points as a percentage of sales, management said.
Fiscal Q2 financial results: sales decline and margin pressure, offset by SG&A cuts
Boyce reported organic net sales declined 7% year-over-year in the quarter, reflecting a 9-point decline in volume/mix partially offset by a 2-point increase in price. He added that organic net sales were flat year-over-year when excluding “hotspots” including North American snacks, Ella’s Kitchen wet baby food, and Earth’s Best baby formula (which was affected by lapping a return-to-market pipeline last year).
Adjusted gross margin was 19.5%, down about 340 basis points year-over-year. Management attributed the decline to cost inflation, lower volume/mix, and unfavorable fixed-cost absorption, partially offset by pricing and productivity. Boyce said actions underway—SKU simplification, RGM, targeted pricing, productivity initiatives, and manufacturing efforts to improve absorption and reduce discards—are intended to support margin improvement in the back half of the fiscal year.
SG&A fell 13% to $61 million, driven by reduced employee-related expenses and non-people cost discipline. SG&A represented 15.9% of net sales compared with 17% a year earlier. Boyce said the company is nearly finished with its restructuring program, with $103 million in charges taken to date (excluding inventory write-downs). Total charges are now expected to be $115 million to $125 million, reflecting a $15 million increase tied to actions anticipated in connection with the snacks sale. Hain reiterated its goal to deliver $130 million to $150 million in benefits through fiscal 2027.
Interest expense rose 22% to $16 million, primarily due to higher spread and increased amortization of deferred financing fees following an amendment to the credit agreement. Boyce said Hain has hedged more than 50% of its loan facility at fixed rates of 7.1%.
Adjusted net loss was $3 million, or $0.03 per diluted share, versus adjusted net income of $8 million, or $0.08 per diluted share, a year earlier. Adjusted EBITDA was $24 million compared with $38 million in the prior year, and adjusted EBITDA margin was 6.3%.
Segment and category commentary: tea and yogurt strength; snacks and baby headwinds
North America organic net sales declined 10%, driven mainly by lower snacks volume and baby formula, partially offset by beverage growth. Excluding snacks, North America organic net sales would have declined 3%, Boyce said. North America adjusted gross margin was 20.8%, down 440 basis points; excluding snacks and Yves (a business the company previously said it was exiting), gross margin would have been 28.6%. North America adjusted EBITDA was $11 million, or 5.5% of net sales; excluding snacks and Yves, EBITDA margin would have been 12.8%.
International organic net sales declined 3%, mainly due to lower baby and kids sales, an improvement from the 4% decline in the first quarter. International adjusted EBITDA was $19 million, or 10.2% of net sales, down 16% year-over-year.
By category, management cited:
- Snacks: Organic net sales down 20% year-over-year due to club distribution losses and velocity challenges in North America, though management said it has seen velocity improvements tied to avocado innovation and multi-pack optimization.
- Baby and kids: Organic net sales down 14%, driven by UK wet baby food softness and North America formula affected by the prior-year pipeline. Management highlighted low double-digit dollar sales growth in Earth’s Best finger foods and cereal, and high-teens growth in Ella’s Kitchen finger foods. Lewis said the BBC Panorama documentary aired in early May last year and the company expects to begin cycling that drag in fiscal Q4; she also said the formula business faced a significant cycle in the quarter and should move toward a more normalized place.
- Beverages: Organic net sales up 3% year-over-year, led by North America tea, with Celestial Seasonings bagged tea supported partly by the Wellness Tea launch.
- Meal prep: Organic net sales down 1%, as UK spreads and drizzles softness was partly offset by North America yogurt strength. Boyce said Greek Gods delivered high-teens dollar and unit growth and gained share.
Cash flow, debt reduction, and capital structure priorities
Hain reported free cash flow of $30 million, up 22% from $25 million a year earlier, driven by inventory reductions, higher cash earnings, and improved payables, partially offset by lower accounts receivable recovery. Cash on hand was $68 million and net debt was $637 million, down $32 million in the quarter. Boyce said Hain had $144 million of liquidity under its revolver and remained in compliance with covenants.
The company’s credit facility matures in December 2026; Boyce noted borrowings were classified as a current liability in the 10-Q. Management said it remains focused on debt reduction and has reduced net debt by $140 million over the last 10 quarters. Boyce also cited expected collection of $26 million in insurance proceeds in January as a contributor to cash flow during fiscal 2026.
Pro forma for the snacks transaction, management said leverage would decline from 4.9x at quarter end to approximately 4x, with net proceeds dedicated to debt repayment. The company also discussed evaluating refinancing, maturity extensions, potential capital raising, and additional asset sales as part of a “multi-stage plan” to improve liquidity and leverage and address the upcoming maturity.
Hain said it is not providing numeric fiscal 2026 operating guidance due to uncertainty around the strategic review’s timing and outcome, but reiterated expectations for positive free cash flow for the full year and stronger top- and bottom-line performance in the second half versus the first half. Management said it expects to provide pro forma financials upon closing of the snacks divestiture, which it expects in February, and characterized the divestiture as gross margin and EBITDA accretive over time.
About The Hain Celestial Group (NASDAQ:HAIN)
The Hain Celestial Group, Inc (NASDAQ: HAIN) is a leading global producer and marketer of natural and organic branded products. The company operates through two principal segments—Grocery and Personal Care—offering a diversified portfolio that spans shelf-stable foods, snacks, beverages, condiments and natural personal care items. Its product lineup addresses growing consumer demand for clean-label, plant-based and ethically sourced offerings in everyday categories.
Within its Grocery segment, Hain Celestial markets well-known brands such as Celestial Seasonings teas, Earth’s Best organic baby foods, Rudi’s organic bakery items, Terra vegetable chips and Sensible Portions snacks.
