By Eric Smith

One month ago at the ICR Conference in Orlando, FL, the top executives at Yeti Holdings Inc. laid out some ambitious financial goals for 2019 and beyond. And Yeti’s fourth-quarter performance, unveiled in Thursday’s earnings report, proved the company is on the right path.

Broad-based strength in Q4 saw the Austin, TX-based company’s net sales skyrocket 19 percent to $241.2 million in Q4, gross margin improve 690 basis points to 53 percent, net income jump 533 percent to $25.2 million (or 30 cents per diluted share), adjusted net income grow 379 percent to $32 million (or 38 cents per diluted share) and adjusted EBITDA increase 58 percent to $52.2 million. Yeti beat EPS estimates by 3 cents and revenue estimates by $1.5 million.

For the year, Yeti’s net sales increased 22 percent to $778.8 million, net income soared 275 percent to $57.8 million (or 69 cents per diluted share), adjusted net income spiked 227 percent to $75.7 million (or 91 cents per diluted share) and adjusted EBITDA grew 53 percent to $149 million.

“We finished 2018 with significant momentum in our business as we delivered full-year results well above our original outlook and solidly at the high end of the revised outlook,” said CEO Matt Reintjes. “We are extremely pleased with the strength in our business as our brand and products continue to resonate with consumers across all markets. We look forward to building on that momentum throughout 2019 as we continue to expand our customer base, drive product innovation, grow our direct-to-consumer business, and expand internationally.”

Read more: Yeti Holdings Q4 Profits Jump

Yeti credited a sound omnichannel strategy for the strong quarter. The company’s wholesale segment grew 4 percent in the fourth quarter and 10 percent in 2018 for the full year, while direct-to-consumer business continued jumped 45 percent in the fourth quarter and 48 percent for the full year.

“We ended a great year on an exceptional note as the Yeti brand and product portfolio continue to resonate with consumers through the fourth quarter and the holiday season,” Reintjes said on Thursday morning’s earnings conference call with analysts.

He then dug into Yeti’s four strategic growth drivers, which he and CFO Paul Carbone outlined in last month’s ICR Conference presentation. The drivers are:

  • Expand the consumer base and engagement. “We’re continuing to find places to push where the Yeti brand belongs and where the consumer can change the nature of the consumer’s engagement with the product,” Reintjes said, adding that the company wants to continue becoming much more than a South and Southeast brand, as it was in the beginning, while also continuing to draw in younger customers and more women.
  • Introduce new products to existing and new customers. “Product is the heart of what we do,” he said. “We’ve invested heavily in the resources and infrastructure to continue to innovate and continue to expand the product portfolio.” Case in point: the company’s new 20,000-square foot innovation center, a structure that “allows us to not only innovate but to bring those innovations to market.”
  • Accelerate DTC and corporate sales. While the company has historically been focused on wholesale, it is becoming much more of a DTC brand and is building the infrastructure to support that, Reintjes said.
  • Expand internationally. “Up until 2017, international wasn’t a focus for Yeti because we were historically supply constrained and we had focused on addressing the domestic demand,” Reintjes said. Now the company is looking to leverage its growth in Canada and Australia to emerging markets like Japan, China and Europe.

Reintjes then gave analysts on Thursday’s call an update on those growth drivers. Here is a summary of each:

  • Expand the consumer base and engagement. Reintjes said the company is pleased with the growing reach of the Yeti brand, which has been driven by “multilayered marketing programs, word-of-mouth referrals, experiential brand events and Yeti ambassadors.” The company in the fourth quarter launched a national TV and digital brand campaign and in early January appointed Melisa Goldie to the management team as Yeti’s first chief marketing officer.
  • Introduce new products to existing and new customers. Yeti brought a number of new products to market, including coolers, packs and drinkware. “We’re extremely proud of our product development track record as this is the cornerstone of our brand,” Reintjes said. “In the fourth quarter and throughout 2018, we continued to see traction of our legacy products while also generating strong enthusiasm for new introductions.”
  • Accelerate DTC and corporate sales. Growing that omnichannel presence is mission-critical for the brand. “A key tenet of our omnichannel strategy is that we want to be where the consumers shop, leveraging our wholesale accounts and then extending the brand through our own direct efforts across yeti.com, yeticustomshop.com, corporate sales, the Amazon Marketplace, and our own retail stores,” Reintjes said.
  • Expand internationally. The company entered Japan in late 2018 as a wholesale partner and is exploring European and Asian expansions. “While our international business currently represents less than 2 percent of sales, demand signals remain strong and we believe that we have an incredible opportunity over time to expand our brand globally,” Reintjes said.

Wall Street reacted positively to Yeti’s fourth quarter (and second since its October IPO), with shares of the company up $3.24, or 17.4 percent, to $21.90 at market close Thursday.

Analysts also lauded the company’s performance, citing its ability to execute on those strategic goals laid out last month.

Jim Duffy of Stifel wrote in a note to investors: “With continued innovation, new product introduction and marketing reach into new recreational categories, we expect Yeti to expand its addressable consumer audience and range of use cases for the brand. We believe Yeti can achieve a 15 percent three-year revenue CAGR to approach $1 billion in revenue in 2020, with 20 percent EBITDA margins, positive cash flow and ROIC (return on invested capital) in the high-20 percent range. While tariff risk and insider ownership are an overhang on shares near term, we believe long-term investors will be rewarded by both earnings growth and multiple expansion.”

The company updated its outlook for 2019. Yeti expects net sales to increase between 11.5 percent and 13 percent compared to Fiscal 2018 with growth across both channels led by the DTC channel. And it projects adjusted earnings per diluted share between 99 cents and $1.04, reflecting 10 percent to 15 percent growth.

Adjusted EBITDA is expected to be between $169 million and $174.3 million, reflecting 13 percent to 17 percent growth, while capital expenditures should be between $35 million and $40 million.

Photo courtesy Yeti

 

[author] [author_image timthumb=’on’]https://s.gravatar.com/avatar/dec6c8d990a5a173d9ae43e334e44145?s=80[/author_image] [author_info]Eric Smith is Senior Business Editor at SGB Media. Reach him at eric@sgbonline.com or 303-578-7008. Follow on Twitter or connect on LinkedIn.[/author_info] [/author]