Matt Reintjes, president and chief executive officer, commented, “Demand for the YETI brand remained strong in the first quarter, as we delivered above-plan sales growth of 19 percent year over year. Remarkably, our sales have nearly doubled since the same period in 2019. We are very encouraged with this performance when measured against the backdrop of ongoing and emerging challenges that continue to pressure consumer spending and sentiment. While cost pressures remain a heightened focus, we are reiterating our operating income and operating margin outlooks for the year. Additionally, we are increasing our EPS outlook reflecting the return of $100 million to shareholders through our share repurchase activity during the quarter.”
Reintjes continued, “We remain incredibly focused on delivering against our global strategic priorities in 2022. Highlights include the successful launch of product innovation in soft coolers and bags, the expansion of digital and in-person brand building initiatives, and the launch of our re-designed, mobile-focused e-commerce experience. As we have over the past two years, YETI will continue to be agile in our execution as we continue to drive long-term demand for the YETI brand.”
For the Three Months Ended April 2, 2022
Sales increased 19 percent to $293.6 million, compared to $247.6 million during the same period last year.
- Direct-to-consumer (“DTC”) channel sales increased 23 percent to $156.0 million, compared to $126.8 million in the prior year quarter, led by strong performance in Drinkware. The DTC channel grew to 53 percent of sales, compared to 51 percent in the prior year period.
- Wholesale channel sales increased 14 percent to $137.7 million, compared to $120.8 million in the same period last year, driven by both Coolers & Equipment and Drinkware.
- Drinkware sales increased 24 percent to $184.0 million, compared to $148.9 million in the prior year quarter, primarily driven by the continued expansion of our Drinkware product offerings, including the introduction of new colorways and sizes, and strong demand for customization.
- Coolers & Equipment sales increased 10 percent to $103.0 million, compared to $93.5 million in the same period last year, driven by strong performance in bags, outdoor living products, hard coolers and cargo.
Gross profit increased 7 percent to $154.9 million, or 52.7 percent of sales, compared to $145.2 million, or 58.6 percent of sales, in the first quarter of 2021. The 590 basis point decrease in gross margin was primarily driven by higher inbound freight, including a 220 basis point impact of a non-recurring true-up of prior year freight costs, and an unfavorable impact of the non-renewal of the Global System of Preferences (“GSP”) program on import duties, partially offset by price increases and a favorable mix shift to our DTC channel.
Selling, general, and administrative (“SG&A”) expenses increased 16 percent to $121.6 million, compared to $105.1 million in the first quarter of 2021. As a percentage of sales, SG&A expenses decreased 110 basis points to 41.4 percent from 42.5 percent in the prior year period, primarily driven by non-variable expense leverage on higher sales, partially offset by higher variable expenses by our increase in DTC sales mix during the quarter.
Operating income decreased 17 percent to $33.3 million, or 11.3 percent of sales, compared to $40.0 million, or 16.2 percent of sales during the prior year quarter.
Adjusted operating income decreased 13 percent to $38.0 million, or 13.0 percent of sales, compared to $43.8 million, or 17.7 percent of sales during the same period last year.
Net income decreased 16 percent to $25.7 million, or 8.7 percent of sales, compared to $30.5 million, or 12.3 percent of sales in the prior year quarter; Net income per diluted share decreased 17 percent to $0.29, compared to $0.35 per diluted share in the prior year quarter.
Adjusted net income decreased 12 percent to $29.2 million, or 10.0 percent of sales, compared to $33.3 million, or 13.5 percent of sales in the prior year quarter; Adjusted net income per diluted share decreased 13 percent to $0.33, compared to $0.38 per diluted share in the prior year quarter.
Sales of $293.6 million came in Wall Street’s consensus estimate of $290.5 million. Adjusted earnings per share of 33 cents topped Wall Street’s consensus of 32 cents.
Balance Sheet and Cash Flow Highlights
Cash decreased to $100.3 million, compared to $190.3 million at the end of the first quarter of 2021. During the first quarter of 2022, YETI initiated and completed its previously announced $100.0 million share repurchase program by repurchasing 1.7 million shares.
Inventory increased 125 percent to $413.0 million, compared to $183.9 million at the end of the prior year quarter. Nearly two thirds of this increase is related to higher in transit inventory due to extended lead times from ongoing supply chain disruptions and the impact of higher inbound freight costs.
Total debt, excluding finance leases and unamortized deferred financing fees, was $106.9 million, compared to $129.4 million at the end of the first quarter of 2021. During the first quarter of 2022, YETI made mandatory debt payments of $5.6 million.
Updated Fiscal 2022 Outlook
Reintjes concluded, “Our fiscal 2022 outlook continues to be supported by strong sales growth of between 18 percent and 20 percent with each quarter expected to be in line with this range. Our operating income growth will strengthen as the gross margin comparisons begin to ease throughout the year as we roll over the cost headwinds that accelerated in the second half of fiscal 2021. In addition, we will remain disciplined in investing in our business to support both near-term and long-term opportunities for the brand.”
For Fiscal 2022, its outlook for the following financial metrics remains unchanged vs. our prior outlook:
- Sales are expected to increase between 18 percent and 20 percent;
- Operating income as a percentage of sales is expected to be approximately 18.5 percent and operating income to increase between 13 percent to 15 percent;
- Adjusted operating income as a percentage of sales is expected to be approximately 20 percent and adjusted operating income to increase between 13 percent to 15 percent;
- The effective tax rate is expected to be approximately 24 percent (versus 21.8 percent in the prior year period); and
- Capital expenditures are expected to be approximately $60 million primarily to support investments in technology and new product innovation and launches.
Our outlook for the following financial metrics has increased vs. our prior outlook:
- Net income per diluted share is now expected to be between $2.67 and $2.72 (versus the previous outlook of between $2.62 and $2.67), reflecting an 11 percent to 13 percent increase, with earnings growth weighted to the second half of the year;
- Adjusted net income per diluted share is now expected to be between $2.86 and $2.91 (versus the previous outlook of between $2.82 and $2.86), reflecting an 11 percent to 13 percent increase, with earnings growth weighted to the second half of the year; and
- Diluted weighted average shares outstanding is now expected to be 87.4 million (versus the previous outlook of 88.9 million).
Photo courtesy Yeti
