Yeti Holdings Inc. sales raised its guidance for earnings and sales for the year after reporting sales catapulted 42 percent in the first quarter ended April 3.

“Following an outstanding 2020, Yeti is off to a great start in 2021,” said Matt Reintjes, president and CEO, on a conference call with analysts. “At the heart of this performance is exceptional demand for the Yeti brand, including momentum across our global digital businesses and the strength of sell-through at wholesale.”

In the quarter, sales grew 42 percent, to $247.6 million, easily ahead of Wall Street’s consensus estimate was $219.39 million. The increase was primarily driven by its faster-growing direct-to-consumer (DTC) channel and growth in its wholesale channel.

DTC sales climbed 59 percent, to $126.8 million, driven by Drinkware and Coolers & Equipment categories. DTC sales continue to be favorably impacted by strong demand for outdoor recreation and leisure lifestyle products and a favorable shift to online shopping, resulting in increased sales volume during the quarter. As a percent of sales, DTC increased to 51 percent in the latest quarter from 46 percent a year ago.

Sales in the wholesale channel increased 27 percent, to $120.8 million, primarily driven by Coolers & Equipment and Drinkware categories.

By product category, drinkware sales increased 32 percent, to $148.9 million, reflecting the continued expansion of its product offerings, including introducing new colors and sizes and strong demand for customization.

Coolers & Equipment sales increased 57 percent, to $93.5 million, driven by strong performance in hard coolers, soft coolers, outdoor living products, bags, and cargo.

Gross margins increased 560 basis points to 58.6 percent. Of the increase, 180 basis points came from an increase in the mix of higher-margin DTC sales, 140 basis points from product cost improvements across its product portfolio, 140 basis points from lower inbound freight, and 50 basis points from other impacts.

SG&A expenses increased 38 percent year-over-year but were reduced as a percent of sales by 130 basis points to 42.5 percent.

Operating income increased 148 percent to $40.0 million, improving the operating margin to 16.2 percent from 9.3 percent. Adjusted operating income increased 143 percent to $43.8 million.

Net income increased to $30.5 million, or 35 cents a share, compared to $8.5 million, or 10 cents, a year ago. On an adjusted basis, net income jumped 236 percent to $33.3 million, or 38 cents a share, from $9.9 million, or 11 cents, a year ago. Wall Street’s consensus estimate on an adjusted basis was 21 cents.

On the call, Reintjes highlighted two themes the company believes will drive performance and focus throughout the year. The first is Yeti’s ability to connect with customers in meaningful ways.

“This connection balances real relevant brand storytelling with products that are always rooted in performance, durability and versatility,” said Reintjes. “We believe this approach not only drives demand for the brand as customers are increasingly focused on active lifestyles and outdoor pursuits. But this also positions us for continued success. If people resume activities that were disrupted by the pandemic, such as commuting weekend sports and backyard gatherings.”

Second, he pointed to the “importance of continuing to focus on a digital-lead world shaped our 2021 investment strategy with an emphasis on digital demand creation product launch, data analytics and our technology stack, ensuring we are actively driving Yeti and our wholesale partner e-commerce initiatives to complement what we do in-store.”

Reintjes said the sales growth rate in the quater was the highest since the company went public. The outsized DTC growth reflects the “ongoing and incredible demand shift toward this channel.” However, he highlighted the 26 percent wholesale gain shows “continued strength and sell-through in store retail.”

He added, “In conjunction with our financial performance, we also made very good progress across many of our key 2021 investments, including the official launch of our new collection of bags, the initial testing of machine learning to inform elements of our evolving and deepening e-commerce experience, and the continued build-out of our international infrastructure.”

“While we continue to pressures on global supply chain, logistics and materials, our team is actively managing the changing landscape to deliver supply to support strong demand and control costs,” added Reintjes. “As it relates to the ongoing COVID-19 global pandemic, we are focused on the continued health of our supply chain to support the incredible strength we are seeing in demand.”

For the current year:

  • Net sales are now expected to increase between 20 percent and 22 percent (versus the previous outlook of between 15 percent and 17 percent) with sales growth weighted to the first half of the year;
  • Operating income, as a percentage of net sales, is now expected to be approximately 19 percent versus the previous outlook of 18.5 percent;
  • Adjusted operating income, as a percentage of net sales, is now expected to be approximately 20.5 percent versus the previous outlook of 20.0 percent;
  • An effective tax rate is now expected to be approximately 24.0 percent versus the previous outlook of 24.5 percent;
  • Net income per diluted share is now expected to be between $2.12 and $2.16, versus the previous outlook of $1.95 and $1.98, reflecting a 20 percent to 22 percent increase;
  • Adjusted net income per diluted share is now expected to be between $2.28 and $2.32 versus the previous outlook of $2.11 and $2.14, reflecting a 22 percent to 24 percent increase;
  • Capital expenditures are expected to remain between $55 million and $60 million primarily to support investments in technology and new product innovation and launches.

Photo courtesy Yeti film “Mothers Who Move Mountains. Watch the video here.