Yeti Holdings, Inc. President and CEO Matt Reintjes reported the company he leads wrapped a great first half of 2024, showcasing the strength of its brand, its products and its global go-to-market, and raising its guidance for earnings and sales for the year as second-quarter results topped analyst targets.

“Innovation across our portfolio, in particular coolers, proved to be impactful, creating what we believe will be momentum going into the second half of the year and beyond,” Reintjes suggested during a conference call with analysts. “Complementing our focus on Coolers, we continue to drive expansion in our Drinkware portfolio. These efforts are seen in our wholesale sell-through, our social engagement and sentiment, and our global performance.”

Reintjes said Yeti drove 9 percent sales growth in the second quarter, above expectations, led by Coolers & Equipment and International, “emphasizing this top-line performance and showing the continued resilience and strength of the brand.” He said they also delivered excellent gross margin expansion on top of significant improvement last year.

“We anticipate that the end result of these efforts, and the momentum we are seeing, puts us on pace to deliver record-high gross margins for the full year,” said Reintjes. “Our top-line and gross margin execution continues to support our long-term growth and strategic investments, while also delivering upside to the bottom line.”

Last year’s second quarter included several adjustments to the company’s recall reserve, according to comments by company CFO Michael McMullen on the Q2 conference call, resulting in the reporting of Adjusted and GAAP (generally accepted accounting practices) results associated with the company’s fall 2022 cooler recall’s impact on the 2023 second quarter due to the issuance and use of gift cards in the recall, return and replace process.

“As expected, we saw the full impact of the gift card comparison in our e-commerce business,” McMullen noted.

The CFO noted that the second quarter year-over-year growth trend includes a nearly 300 basis-point net headwind from gift card redemptions with 12.5 million redeemed in Q2 2023 compared to just 2.3 million redeemed in the 2023 Q2 period.

“This reserve was initially established in Q4 of 2022 and then updated in Q2 of 2023 to better reflect actual consumer recall activity,” McMullen stated. “This update and other period costs reduced prior-year GAAP sales by $24.5 million, reduced prior-year GAAP cost of goods sold by $5.1 million, and reduced prior-year GAAP SG&A expense by $10.7 million. By comparison, no adjustments were made to the recall reserve in this year’s second quarter.”

He also said GAAP results this quarter include transition costs associated with the Mystery Ranch and  Butter Pat Industries acquisitions the company made earlier to start the year, primarily the impact of purchase accounting on gross margins. “As per our historical reporting practices, the impact of these and other non-recurring items are excluded from our non-GAAP results,” he offered.

GAAP net sales increased 15 percent y/y, including the recall reserve adjustment in the second quarter of 2023, which reduced year-ago Q2 sales by $24.5 million. Adjusted net sales, which excludes the recall reserve adjustment, increased 9 percent year-over-year (y/y) to $463.5 million for the quarter, beating analysts’ consensus estimate of $456.7 million.

Coolers & Equipment (C&E) GAAP net sales increased 31 percent y/y, while Coolers & Equipment adjusted net sales increased 14 percent y/y to $206 million in the quarter.

McMullen said the company had a strong quarter in coolers supported by combined initiatives and growing momentum. “Soft coolers outperformed our expectations with the complete line of M-series Backpacks and Totes fully in stock across the market following last year’s recall,” he shared.

The CFO said the hard coolers business faced a tough comparison given the benefit it experienced last year from not having soft coolers in the market (due to the recall) heading into the peak summer season. “But we were very pleased with the initial performance of the new Roadie 32 and Roadie 15, further supporting our optimism for coolers in the back half of the year,” he added.

In the Equipment categories, the Yeti bags business reportedly continues to perform well with SideKick and Panga product lines exceeding internal expectations.

“In addition, our Camino Carryall bags continue to grow nicely as the awareness of this fantastic product line builds. Finally, and as indicated, Mystery Ranch products continue to perform in line with our expectations,” McMullen offered.

Reintjes added, “On the equipment side, we continue to integrate the designs and talent of Mystery Ranch with the Yeti team. We’ve established a robust long-term roadmap for the category and are on track to launch a range of new products starting in the first quarter of 2025, roughly one year post-acquisition.”

Drinkware GAAP net sales and Adjusted net sales both increased 6 percent to $247 million in Q2, which was said to be “generally in line with expectations.” Category growth reportedly continues to be supported by the overall breadth of the product assortment, the strong success of new innovation launched over the past year, and the contribution from the International business.

“In Drinkware, our new products continue to deliver, including our expanded stackable tumblers and straw mugs,” Reintjes shared. “We’re also seeing strong receptivity to new additions that are highlighting the opportunity in the broader food and beverage space. This was particularly evident with the French press, which received a number of industry accolades, strong social sentiment, and excellent consumer demand.”

McMullen noted a growing lineup of tabletop and barware options were also a highlight in Q2.  He said the French press got off to a fantastic start since launch, and they are seeing good attachment for several other products in the portfolio, such as the new Rambler 16 stackable cup and the new Rambler 14 stackable mug.

“As a reminder, all of these products launched within the last 12 months,” McMullen noted. “In addition, our limited flask and shot glass releases were a success, selling out in less than a week. We plan to have both products back in stock later in the third quarter.”

New Categories
Yeti said category expansion will continue in the second half of the year, starting with the introduction of its first line of cookware products.

“As planned, we will introduce three sizes of Yeti cast iron skillets later this month, which will initially be available in our Yeti direct channels, with prices ranging from $150 to $250. We believe this will be the best cast iron in the world, opening the door for broader opportunities in the cookware and culinary space going forward,” Reintjes shared.

“Importantly, any expansion will fit within the Yeti ecosystem and ethos of leading products built with durability, performance, and design,” he concluded.

Channel Summary

Wholesale GAAP net sales increased 21 percent, while Wholesale adjusted net sales increased 11 percent to $213 million in the quarter, excluding the impact of the recall reserves, driven by growth in both Coolers & Equipment and Drinkware. “We saw growth on a sell-through basis across both categories as well, McMullen offered.

The CFO said inventory in the channel remains healthy and is well-positioned to support demand for the back half of the year.

“In our wholesale channel, we saw balanced, positive demand across our categories, highlighting the brand’s strong market share,” added Reintjes. “In recent quarters, we continue to build our brand experience with our existing accounts, thoughtfully partner with new accounts globally, and explore new wholesale opportunities that match our broadening range of product categories.”

Direct-to-Consumer (DTC) GAAP net sales increased 11 percent y/y to $250.4 million, compared to $226.4 million in the prior-year quarter, due to growth in Coolers & Equipment and Drinkware. Excluding the impact related to the recall reserves, DTC Adjusted net sales increased 7 percent y/y, also with solid growth in both C&E and Drinkware.

“All of our DTC channels posted growth in the quarter, led by our Amazon business,” McMullen noted. “We were also pleased with the growth of e-commerce, especially considering it absorbed the entire gift card impact. Excluding the headwind from gift cards, total DTC growth was approximately 12 percent.”

Reintjes added that the company is focused on delivering an unparalleled customer experience within its retail stores.

“We added our 21st Yeti retail store outside of Kansas City during the second quarter,” he noted. “We remain on track to reach 24 locations by the end of the year, and we are incredibly excited to announce today’s grand opening of our first Canadian store in Calgary.”

Region Summary
“In the quarter, we were pleased by the positive trend we saw in average order value and units per transaction, as we expect consumers to continue to be discerning with their purchases,”  Reintjes said. “Our Amazon marketplace continues to provide reach, driving strong growth across Drinkware and C&E. Growth in corporate sales included the emergence of our international business and positive order volume in our U.S. business, even though we continue to see signs of caution in corporate spending.

International GAAP net sales increased 35 percent, while International Adjusted net sales increased 34 percent to $77 million, reportedly driven by strong growth in Europe and Australia.

“We continue to be very pleased with the results and the momentum that we are seeing internationally, and expect to continue investing to drive brand awareness, build out our local teams, and establish the infrastructure needed to support what we believe is a significant opportunity for growth,” McMullen said.

“Our international growth continues to showcase the relevance and opportunity for Yeti. It also reinforces that our growth and brand playbook travel,” added Reintjes. “We’re incredibly bullish on this opportunity, particularly as Europe growth inflects as we begin our approach to Asia in 2025. Providing a little more color on our existing region, Europe posted strong gains across channels.”

Reintjes said the Australian business continues to outperform expectations with strength across channels.

“To extend our momentum, we remain focused on meeting the needs of the urban customer, an area where we still see meaningful opportunity. The key step here is the recent debut of a store test with Rebel Sports, the leading premium sports retailer in the market. Customization is another opportunity for both e-commerce and corporate sales,” he said.

“In Canada, we continue to drive the reach of our omni-channel and expanded product offerings to match the U.S. Additionally, we are finding opportunities to share impactful brand spend across North America, ” Reintjes shared.

“While the wholesale environment in Canada remains challenging, we were encouraged by the sell-through performance at our largest accounts. Similar to Australia, we are also making progress scaling our customization business, including our e-commerce capabilities and the growing traction of our corporate sales.” he said.

U.S. domestic GAAP net sales increased 12 percent and U.S. Adjusted net sales increased 5 percent y/y.

NFL Partnership
Matt Reintjes also announced a new deal that signals Yeti’s continued movement to sports through a newly signed licensing agreement with the NFL.

“Under this agreement, fans will soon be able to purchase officially licensed Yeti Drinkware and coolers for all 32 NFL teams,” he said. “The NFL license has also been key to us establishing our first NFL team partnership with the Dallas Cowboys as the official cooler and drinkware of the team. Launching this season, we look forward to building out this program as we move into 2025 and beyond. These new deals build on a sports foundation that now includes three of the largest pro leagues in the U.S. in addition to a wide range of global partnerships.

Income Statement Summary
GAAP gross margin expanded 360 basis points to 57.0 percent of sales in Q2. The recall reserves unfavorably impacted gross profit by $19.4 million in the second quarter of 2023 and had a favorable 150 basis point impact on the increase in gross margin compared to the prior-year quarter. The remaining increase in gross margin was primarily due to lower inbound freight costs and lower product costs.

Adjusted gross profit increased 14 percent to $268 million, or 57.7 percent of sales, compared to 54.9 percent in the Q2 period last year. The company said positive drivers of the 280-basis-point increase include 320 basis points from lower inbound freight, and 90 basis points from lower product costs. These gains were said to be partially offset by 50 basis points from strategic price decreases on certain hard coolers that were implemented during the first quarter, and 80 basis points from a combination of other smaller impacts.

SG&A expenses increased 20 percent to $196.9 million in Q2 on a GAAP basis, compared to $164.5 million in the second quarter of 2023. The recall reserves unfavorably impacted SG&A expenses by $10.7 million in the second quarter of 2023. As a percentage of sales, SG&A expenses increased 160 basis points to 42.5 percent in Q2 from 40.9 percent in the prior-year Q2 period. 

Excluding the impact of the recall reserves, Adjusted SG&A expenses increased by $21.7 million primarily due to higher employee costs, higher variable expenses on higher sales, and marketing expenses.

Adjusted SG&A expenses for the quarter increased 12 percent to $188 million, or 40.5 percent of sales, compared to 39.1 percent in the Q2 period last year. Non-variable expenses reportedly increased 80 basis points as a percent of sales, primarily driven by higher employee costs. Variable expenses increased 60 basis points as a percent of sales, primarily driven by the Amazon channel.

“Looking forward, we do expect to get some modest leverage on our variable costs in the second half of this year,” McMullen said.

Adjusted SG&A expenses increased 12 percent to $187.5 million, compared to $167.2 million in the second quarter of 2023. As a percentage of adjusted sales, adjusted SG&A expenses increased 140 basis points to 40.5 percent from 39.1 percent in the prior year period. This increase was primarily due to higher employee costs.

GAAP operating income increased 34.0 percent to $67.4 million, or 14.5 percent of sales, in the quarter, compared to $50.3 million, or 12.5 percent of sales, in the prior-year quarter.

Adjusted operating income increased 19 percent to $80.0 million, or 17.3 percent of adjusted sales, compared to $67.1 million, or 15.7 percent of adjusted sales during the same period last year.

GAAP operating margin expanded 200 basis points to 14.5 percent of sales.

Adjusted operating income increased 19 percent to $80 million, or 17.3 percent of sales, an increase of 160 basis points over the 15.7 percent reported in the prior-year Q2 period.

Yeti Holdings GAAP net income increased 32 percent to $50.4 million, or 10.9 percent of sales, compared to $38.1 million, or 9.5 percent of sales in the prior-year quarter. Net income per diluted share was 59 cents, compared to 44 cents in the prior-year quarter.

Adjusted net income increased 20 percent to $59.6 million, or 12.9 percent of adjusted sales, compared to $49.8 million, or 11.7 percent of adjusted sales in the prior year quarter; Adjusted net income per diluted share increased 23 percent to 70 cents, compared to 57 cents per diluted share in the prior-year quarter.

First Half YTD Summary

  • Sales increased 14 percent to $804.9 million, compared to $705.4 million in the prior year. The recall reserves unfavorably impacted sales by $24.5 million in the prior-year period.
    • Adjusted sales, which exclude the unfavorable impact of the recall reserve adjustment in the first half of 2023, increased 10 percent to $804.9 million.
    • Sales and adjusted net sales for the first six months of 2024 and 2023 include $4.3 million and $12.5 million of sales related to gift card redemptions in connection with recall remedies.
  • DTC channel sales increased 11 percent to $438.2 million, compared to $393.4 million in the prior year period, due to growth in both Coolers & Equipment and Drinkware.
    • Excluding the impact related to the recall reserves, DTC channel-adjusted sales increased 9 percent to $438.2 million.
  • Wholesale channel sales increased 18 percent to $366.7 million, compared to $312.0 million in the same period last year, due to growth in Coolers & Equipment and Drinkware.
    • Excluding the impact related to the recall reserves, wholesale channel-adjusted sales increased 12 percent to $366.7 million.
  • Drinkware sales increased 9 percent to $461.1 million, compared to $423.7 million in the prior year period, driven by the continued expansion and innovation of our Drinkware product offerings and new seasonal colorways.
  • Coolers & Equipment sales increased 25 percent to $325.8 million, compared to $261.0 million in the same period last year, driven by strong performance in soft coolers and bags.
    • Excluding the impact related to the recall reserves, Coolers & Equipment adjusted sales increased 14 percent to $325.8 million.
  • Gross profit increased 22 percent to $459.1 million, or 57.0 percent of sales, compared to $376.7 million, or 53.4 percent of sales, in the prior year period. 
    • Adjusted gross profit increased 17 percent to $463.9 million, or 57.6 percent of adjusted sales, compared to $394.9 million, or 54.1 percent of adjusted sales, in the prior year period. 
  • SG&A expenses increased 18 percent to $365.9 million, compared to $311.3 million in the prior year period. The recall reserves unfavorably impacted SG&A expenses by $10.5 million in the first half of 2023. 
    • Adjusted SG&A expenses increased 12 percent to $344.3 million, compared to $306.1 million in the prior year period.
  • GAAP operating income increased 43 percent to $93.2 million, or 11.6 percent of sales, compared to $65.4 million, or 9.3 percent of sales during the prior year period.
    • Adjusted operating income increased 35 percent to $119.6 million, or 14.9 percent of adjusted sales, compared to $88.8 million, or 12.2 percent of adjusted sales during the same period last year.
  • GAAP net income increased 36 percent to $66.3 million, or 8.2 percent of sales, compared to $48.6 million, or 6.9 percent of sales in the prior year period. Net income per diluted share was 77 cents, compared to 56 cents in the prior-year H1 period.
    • Adjusted net income increased 36 percent to $88.9 million, or 11.0 percent of adjusted sales, in the first half, compared to $65.3 million, or 8.9 percent of adjusted sales in the prior year H1 period. Adjusted net income per diluted share increased 37 percent to $1.03 a share, compared to 75 cents per diluted share in the prior-year first half period.

Balance Sheet and Cash Management
Cash decreased by $10.2 million to $212.9 million at quarter-end, compared to $223.1 million at the end of the second quarter of 2023.

Inventory increased 17 percent to $378.3 million at quarter-end, compared to $322.0 million at the end of the prior-year Q2 period. The increase was driven primarily by restocking its full line of soft coolers and bags inventory in connection with the Mystery Ranch acquisition.

Total debt, excluding finance leases and unamortized deferred financing fees, was $80.2 million at the end of June, compared to $84.4 million at the end of the second quarter of 2023. During the second quarter of 2024, the company made mandatory debt payments of $1.1 million.

Global Sourcing Shifts
Reintjes said the company continues to drive the strategic diversification of our global supply.

:Today, approximately 40 percent of our total cost of goods is tied to products sourced from China, primarily related to our Drinkware portfolio,” he shared. “As we have previously discussed, we began our major supply chain transformation journey in 2018, beginning with our soft goods. At that time, we also indicated we started to optimize our Drinkware supply base, including process improvements and automation efforts with our partners.

“As mentioned in early 2023, we successfully proved out our model and began our first production location for Drinkware outside of China,” he continued. “We are pleased with the quality and performance of this initiative, and by year-end 2024 expect to bring online a second non-China location for Drinkware. As a result, we expect that by the end of this year, approximately 20 percent of our global Drinkware production capacity will be located outside of China. As we look forward to other opportunities and initiatives, we believe we can extend this program further, providing greater global scale, diversification, and reach of our supply base.”

He said they also expect to have the flexibility to allocate capacity to specific end markets for cost optimization.

“By the end of 2025, we plan that roughly half of our Drinkware production capacity will reside outside of China and available to support our global growth. Going forward, we anticipate opportunity to scale this diversification even further to meet the needs of the business. This has been, and will continue to be, a significant priority for Yeti. Our work here is designed to give us maximum flexibility to address a range of future global tariff scenarios and cost dynamics. To be clear, as we expressed when we started these initiatives in 2018, we will focus on making the right long-term decisions to support our growing global business while being mindful of the geopolitical landscape,” the CEO summarized.

Updated 2024 Outlook
Reintjes concluded, “Supported by our execution in the front half of the year, we are increasing both our top line and bottom line outlooks. This reflects our strong second-quarter results and continued confidence in our ability to deliver the second half of the year despite an uncertain macro environment. Finally, given our strong cash position, we will continue to actively pursue and evaluate strategic opportunities for capital deployment.

“As we move to the second half of the year, we have ample reason to be encouraged across product categories, channels, and geographies. While being mindful of the macroeconomic and geopolitical complexities that we expect to remain present through the year, our focus remains on controlling what we can, and being nimble and prepared to respond effectively in a face of uncertainty.”

For Fiscal 2024, Yeti expects:

  • Adjusted sales to increase between 8 percent and 10 percent (versus the previous outlook of between 7 percent and 9 percent);
  • Adjusted operating income, as a percentage of adjusted sales, of approximately 16.5 percent (versus the previous outlook of between 16.0 percent and 16.5 percent);
  • An effective tax rate of approximately 25.2 percent (compared to 24.8 percent in the prior year period);
  • Adjusted net income per diluted share between $2.61 and $2.65 (versus the previous outlook of between $2.49 and $2.62), reflecting a 16 percent to 18 percent increase;
  • Diluted weighted average shares outstanding of approximately 86.0 million (versus the previous outlook of 86.1 million); and
  • Capital expenditures between $50 million and $60 million (versus the previous outlook of approximately $60 million) primarily to support investments in technology and new product innovation.

Image courtesy Yeti