Yeti Holdings Inc. reported earnings increased three-fold in the first quarter ended April 3 as sales grew 42 percent. Both earnings and sales came in well above Wall Street targets.

Matt Reintjes, president and CEO, commented, “Yeti had an exceptional start to the year with first-quarter net sales growth of 42 percent fueled by continued strong demand for the brand throughout the period. Significant gross margin expansion powered nearly a 700-basis point improvement in operating margin for the period, contributing to a more than three-fold increase in earnings per share.”

Reintjes added, “Building upon the outstanding financial performance in the first quarter, we are focused on investments that will accelerate our future growth through global product and channel expansion, innovative marketing, and growing digital capabilities including enhanced data analytics. We believe that these efforts will not only foster a deep connection between our brand and consumers both digitally and, as the world reopens more fully, in a direct, personal way but will also support our plans for long-term, sustainable growth.”

Reintjes concluded, “After the strong start to 2021, we are raising both our full-year net sales and earnings per share outlooks to 20 percent and 22 percent growth, respectively, versus the prior year. The Yeti momentum carried over from 2020 and on display to start 2021 showcases the passion for the brand and the relevance of our product portfolio as consumers continue to participate in the significant growth in active, outdoor lifestyles. We believe we are well-positioned to generate and build upon this customer enthusiasm for the brand now and into the future.”

For The Three Months Ended April 3, 2021

  • Net sales increased 42 percent to $247.6 million, compared to $174.4 million during the same period last year. Wall Street’s consensus estimate was $219.39 million;
  • Direct-to-consumer (“DTC”) channel net sales increased 59 percent to $126.8 million, compared to $79.6 million in the prior-year quarter, driven by strong performance in both Coolers & Equipment and Drinkware. The DTC channel grew to 51 percent of net sales, compared to 46 percent in the prior-year period;
  • Wholesale channel net sales increased 27 percent to $120.8 million, compared to $94.8 million in the same period last year, driven by both Coolers & Equipment and Drinkware;
  • Drinkware net sales increased 32 percent to $148.9 million, compared to $112.6 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 net sales increased 57 percent to $93.5 million, compared to $59.5 million in the same period last year, driven by strong performance in hard coolers, soft coolers, outdoor living products, bags, and cargo;
  • Gross profit increased 57 percent to $145.2 million, or 58.6 percent of net sales, compared to $92.5 million, or 53.0 percent of net sales, in the first quarter of 2020. The 560 basis point increase in gross margin was primarily driven by a favorable mix shift to our DTC channel, product cost improvements, lower inbound freight and decreased tariffs;
  • Selling, general, and administrative (“SG&A”) expenses increased 38 percent to $105.1 million, compared to $76.3 million in the first quarter of 2020. As a percentage of net sales, SG&A expenses decreased 130 basis points to 42.5 percent from 43.7 percent in the prior-year period. This decrease included 280 basis points of benefit from non-variable expense leverage on higher net sales. Variable expenses added 150 basis points, driven by the increased mix of our faster growing and higher gross margin DTC channel, which grew to 51 percent of net sales during the period;
  • Operating income increased 148 percent to $40.0 million, or 16.2 percent of net sales, compared to $16.2 million, or 9.3 percent of net sales, during the prior-year quarter;
  • Adjusted operating income increased 143 percent to $43.8 million, or 17.7 percent of net sales, compared to $18.0 million, or 10.3 percent of net sales, during the same period last year;
  • Net income increased to $30.5 million, or 12.3 percent of net sales, compared to $8.5 million, or 4.9 percent of net sales, in the prior-year quarter.
  • Net income per diluted share increased to $0.35, compared to $0.10 per diluted share in the prior-year quarter;
  • Adjusted net income increased to $33.3 million, or 13.5 percent of net sales, compared to $9.9 million, or 5.7 percent of net sales, in the prior-year quarter; and
  • Adjusted net income per diluted share increased to $0.38, compared to $0.11 per diluted share in the prior-year quarter. Wall Street’s consensus estimate was 21 cents.

Balance Sheet and Cash Flow Highlights

  • Cash increased to $190.3 million, compared to $118.2 million at the end of the first quarter of 2020;
  • Inventory decreased 9 percent to $183.9 million, compared to $202.4 million at the end of the prior-year quarter. As Yeti continues to rebuild inventory levels, Yeti expects positive year-over-year inventory growth beginning in the second quarter and for the remainder of 2021; and
  • Total debt, excluding finance leases and unamortized deferred financing fees, was $129.4 million, compared to $346.3 million at the end of the first quarter of 2020. During the first quarter of 2021, Yeti made mandatory debt payments of $5.6 million. At the end of the first quarter of 2021, our cash balance exceeded total debt by $60.9 million.

Updated 2021 Outlook
For Fiscal 2021, a 52-week period, compared to a 53-week period in Fiscal 2020, Yeti expects:

  • 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;
  • Diluted weighted average shares outstanding is now expected to be approximately 88.5 million (versus the previous outlook of 88.6 million); and
  • 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