Yeti Holdings, Inc. reported earnings on an adjusted basis were down slightly in the third quarter ended October 1 but topped analyst targets. Sales growth of 20 percent, led by wholesale, also topped estimates and the company maintained and narrowed its outlook for the year.

Adjusted EPS of 63 cents in the quarter exceeded Wall Street’s consensus target of 59 cents. Sales of $433.6 million was ahead Wall Street’s consensus estimate of $414 million.

Matt Reintjes, president and chief executive officer, commented, “We are very pleased with our stronger than expected 20 percent growth in the third quarter, which highlights the strength and diversity of our omni-channel distribution strategy. This performance included balanced sell-in and sell-through at wholesale, solid customer retention and new customer acquisition growth in our direct channel, and a strong contribution from our international expansion. Similar to prior quarters, our margin performance remained challenged given lingering supply chain disruptions, though as previously indicated, many of these pressures are showing signs of relief. We continue to expect that these improvements will primarily benefit our results in 2023.”

Reintjes continued, “As we enter the holiday season, we believe we are well positioned to win with consumers by leveraging our strong brand and innovative product portfolio. Our approach to winning the fourth quarter gifting occasions remains focused on what we do best—driving the desire for both the brand and product. To do this, we will build upon recent launches across coolers and drinkware products, expand engagement opportunities through our marketing channels, and drive relevant messaging that highlights the value and versatility of Yeti products.”

For the Three Months Ended October 1, 2022

Sales increased 20 percent to $433.6 million, compared to $362.6 million during the same period last year.

  • Direct-to-consumer (“DTC”) channel sales increased 15 percent to $227.4 million, compared to $197.1 million in the prior year quarter, led by strong performance in Drinkware. The DTC channel represented 52 percent of sales, compared to 54 percent in the prior year period.
  • Wholesale channel sales increased 25 percent to $206.2 million, compared to $165.5 million in the same period last year, driven by Coolers & Equipment.
  • Drinkware sales increased 17 percent to $239.0 million, compared to $205.0 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 25 percent to $185.7 million, compared to $149.0 million in the same period last year, driven by strong performance in soft coolers, bags and hard coolers.

Gross profit increased 7 percent to $222.4 million, or 51.3 percent of sales, compared to $207.0 million, or 57.1 percent of sales, in the third quarter of 2021. The 580 basis point decrease in gross margin was primarily driven by higher inbound freight, higher product costs and the unfavorable impact of foreign currency exchange rates, partially offset by price increases.

Selling, general, and administrative (“SG&A”) expenses increased 11 percent to $153.9 million, compared to $138.3 million in the third quarter of 2021. As a percentage of sales, SG&A expenses decreased 260 basis points to 35.5 percent from 38.1 percent in the prior year period, primarily driven by non-variable expense leverage on higher sales, partially offset by higher variable expenses driven by higher distribution and logistics costs.

Operating income decreased slightly to $68.5 million, or 15.8 percent of sales, compared to $68.7 million, or 19.0 percent of sales during the prior year quarter.

Adjusted operating income decreased 1 percent to $73.3 million, or 16.9 percent of sales, compared to $74.2 million, or 20.5 percent of sales during the same period last year.

Other expense increased to $7.3 million compared to $1.2 million in the third quarter of 2021, primarily due to foreign currency losses related to intercompany balances.

Net income decreased 14 percent to $45.5 million, or 10.5 percent of sales, compared to $53.0 million, or 14.6 percent of sales in the prior year quarter; Net income per diluted share decreased 13 percent to $0.52, compared to $0.60 per diluted share in the prior year quarter.

Adjusted net income decreased 6 percent to $54.7 million, or 12.6 percent of sales, compared to $58.0 million, or 16.0 percent of sales in the prior year quarter; Adjusted net income per diluted share decreased 3 percent to $0.63, compared to $0.65 per diluted share in the prior year quarter.

For the Nine Months Ended October 1, 2022

Sales increased 19 percent to $1,147.2 million, compared to $967.9 million in the prior year.

  • DTC channel sales increased 17 percent to $608.2 million, compared to $520.8 million in the prior year period, driven by Drinkware. The DTC channel represented 53 percent of sales, compared to 54 percent in the prior year period.
  • Wholesale channel sales increased 21 percent to $539.0 million, compared to $447.1 million in the same period last year, primarily driven by Coolers & Equipment and Drinkware.
  • Drinkware sales increased 17 percent to $639.1 million, compared to $546.8 million in the prior year period, due to 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 20 percent to $482.0 million, compared to $400.3 million in the same period last year. The strong performance was driven by growth in bags, soft coolers, hard coolers and outdoor living products.

Gross profit increased 6 percent to $596.4 million, or 52.0 percent of sales, compared to $561.3 million, or 58.0 percent of sales in the prior year. The 600 basis point decrease in gross margin was primarily driven by higher inbound freight, higher product costs and the unfavorable impact of foreign currency exchange rates, partially offset by price increases.

Selling, general, and administrative expenses increased 12 percent to $426.3 million, compared to $380.1 million in the prior year. As a percentage of sales, SG&A expenses decreased 210 basis points to 37.2 percent from 39.3 percent in the prior year period, primarily driven by non-variable expense leverage on higher sales, partially offset by higher variable expenses driven by higher distribution and logistics costs.

Operating income decreased 6 percent to $170.1 million, or 14.8 percent of sales, compared to $181.2 million, or 18.7 percent of sales during the prior year.

Adjusted operating income decreased 5 percent to $185.2 million, or 16.1 percent of sales, compared to $195.4 million, or 20.2 percent of sales during the same period last year.

Other expense increased to $12.2 million compared to $2.5 million in the third quarter of 2021, primarily due to foreign currency losses related to intercompany balances.

Net income decreased 16 percent to $117.4 million, or 10.2 percent of sales, compared to $139.7 million, or 14.4 percent of sales in the prior year; Net income per diluted share decreased 15 percent to $1.35, compared to $1.58 per diluted share in the prior year.

Adjusted net income decreased 9 percent to $138.0 million, or 12.0 percent of sales, compared to $152.3 million, or 15.7 percent of sales in the prior year period; Adjusted net income per diluted share decreased 8 percent to $1.58, compared to $1.72 per diluted share in the same period last year.

Balance Sheet and Other Highlights

Cash decreased to $77.8 million, compared to $259.3 million at the end of the third 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 65 percent to $439.4 million, compared to $266.0 million at the end of the prior year quarter. The year-over-year increase was primarily driven by higher freight costs, the mix of our inventory shifting to coolers & equipment units from drinkware, and total inventory unit growth of 17 percent across both coolers & equipment and drinkware. On a sequential basis, total inventory declined approximately $50 million or 10 percent.

Total debt, excluding finance leases and unamortized deferred financing fees, was $95.6 million, compared to $118.1 million at the end of the third quarter of 2021. During the first nine months of 2022, Yeti made mandatory debt payments of $16.9 million.

Fiscal 2022 Outlook

Reintjes concluded, “We are maintaining and narrowing our Fiscal 2022 outlook, with all components remaining within our previous outlook. We expect full year 2022 sales growth of 16 percent, as our expectations for the second half of the year have not changed. This growth incorporates the strength of our third quarter performance, which did see an increase in wholesale orders that were backed by continued strong sell-through and the channel’s effort to reach more optimal inventory levels earlier than we would normally see ahead of the holiday season. Our sales growth outlook for the year takes this into consideration, as well as a prudently cautious position for the fourth quarter. We also expect our adjusted operating margin to come in at approximately 17 percent, which is reflective of the supply chain cost challenges and our continued focus on balancing growth across our channels and categories. We remain confident in our ability to drive brand and product momentum, build out a great team, and strengthen an already sound balance sheet, as we look forward into the fourth quarter of 2022, Fiscal 2023, and beyond.”

For Fiscal 2022, Yeti expects:

  • Sales are expected to increase approximately 16 percent (Previous guidance, 15 percent and 17 percent);
  • Operating income as a percentage of sales is expected to be approximately 16 percent (prior, 16 percent) and operating income is expected to decrease approximately 6 percent (prior, 3 percent to 7 percent);
  • Adjusted operating income as a percentage of sales is expected to be approximately 17 percent (prior, 17 percent and 17.5 percent) and adjusted operating income is expected to decrease approximately 6 percent (prior, 2 percent to 7 percent);
  • The effective tax rate is expected to be approximately 24.6 percent (compared to 20.8 percent in the prior year period);
  • Adjusted net income per diluted share is expected to be approximately $2.36 (prior,  $2.34 and $2.46), reflecting a 9 percent decrease;
  • Diluted weighted average shares outstanding is expected to be 87.3 million; and
  • Capital expenditures are now expected to be approximately $50 million (versus the previous outlook of approximately $60 million) primarily to support investments in technology and new product innovation and launches.

Photo courtesy Yeti