Yeti Holdings, Inc. reported earnings and sales declined in the second quarter in part due to its soft cooler recall. Sales on an adjusted basis increased 2 percent, and earnings and sales topped analyst targets. Yeti raised its EPS guidance for the year and predicted a return to double-digit growth in the fourth quarter. 

The company also raised the low end of its full-year adjusted net sales outlook range.

Earnings of 57 cents topped Wall Street’s consensus estimate of 46 cents. Adjusted sales, which exclude the unfavorable impact of the recall reserve adjustment, reached $427.1 million, exceeding analysts’ consensus estimate of $411.8 million.

Second Quarter 2023 Results
Sales decreased 4 percent to $402.6 million, compared to $420.0 million during the same period last year. Sales were unfavorably impacted by $24.5 million due to a recall reserve adjustment. 

Adjusted sales, which exclude the unfavorable impact of the recall reserve adjustment, increased 2 percent to $427.1 million.

Gross profit decreased 2 percent to $214.8 million, or 53.4 percent of sales, compared to $219.1 million, or 52.2 percent of sales, in the second quarter of 2022. Gross profit included a $19.4 million, or 150 basis points, unfavorable impact related to the recall reserve adjustment. Gross profit was positively impacted by lower inbound freight and lower product costs, partially offset by other costs, including higher customization costs and the unfavorable impact of foreign currency exchange rates.

Adjusted gross profit, which excludes the unfavorable impact related to the recall reserve adjustment, increased $15.2 million to $234.3 million, or 54.9 percent of adjusted sales, compared to $219.1 million, or 52.2 percent of adjusted sales, in the second quarter of 2022.

SG&A expenses increased 9 percent to $164.5 million, compared to $150.8 million in the second quarter of 2022. SG&A expenses included a $10.7 million favorable impact related to the recall reserve adjustment. As a percentage of sales, SG&A expenses increased 500 basis points to 40.9 percent from 35.9 percent in the prior year period. This increase was primarily due to higher non-variable expenses driven by higher employee costs, including incentive compensation and investments in headcount to support future growth, marketing expenses, and warehousing costs. Variable expenses increased primarily due to the increased mix of its growing Amazon Marketplace business.

Adjusted SG&A expenses, which exclude certain items, including the unfavorable impact related to the recall reserve adjustment, increased 15 percent to $167.2 million, compared to $145.3 million in the second quarter of 2022. As a percentage of adjusted sales, adjusted SG&A expenses increased 450 basis points to 39.1 percent from 34.6 percent in the prior year period.

Operating income decreased 26 percent to $50.3 million, or 12.5 percent of sales, compared to $68.3 million, or 16.3 percent of sales during the prior-year quarter, and includes an $8.7 million unfavorable impact primarily from the recall reserve adjustment.

Adjusted operating income decreased 9 percent to $67.1 million, or 15.7 percent of adjusted sales, compared to $73.8 million, or 17.6 percent of adjusted sales during the same period last year.

Net income, which includes the unfavorable impact from the recall reserve adjustment, decreased 18 percent to $38.1 million, or 9.5 percent of sales, compared to $46.3 million, or 11.0 percent of sales in the prior year quarter; Net income per diluted share decreased 17 percent to $0.44, compared to $0.53 in the prior-year quarter.

Adjusted net income decreased 9 percent to $49.8 million, or 11.7 percent of adjusted sales, compared to $54.8 million, or 13.0 percent of adjusted sales in the prior year quarter; Adjusted net income per diluted share decreased 10 percent to $0.57, compared to $0.63 per diluted share in the prior-year quarter.

Updated 2023 Outlook
Reintjes concluded, “We have narrowed our full-year sales outlook to the higher end of our prior range inclusive of the favorable impact of recall-related gift card redemptions during the second quarter. This outlook includes an expected return to double-digit growth in the fourth quarter, supported by the reintroduction and expansion of the products impacted by the recall and our continued success driving demand in newer product families and line extensions. We have also increased our gross margin outlook for the year, driven by our first-half performance, supporting an increase in our bottom-line outlook. And finally, we remain disciplined in our capital allocation approach as our cash generation continues to strengthen our balance sheet.”

 

For full details about Yeti’s Q2 results, including channel and category details, a return to double-digit growth Q4, go here:

EXEC: Yeti CEO Talks Return to Double-Digit Growth in Fourth Quarter