Yeti Holdings’ Earnings Call: Growth Amid Challenges

Yeti Holdings ((YETI)) has held its Q3 earnings call. Read on for the main highlights of the call.

Yeti Holdings’ recent earnings call painted a picture of mixed sentiment, with notable achievements and challenges. The company reported strong international growth and product innovation, particularly in the Coolers & Equipment segment. However, it also faced hurdles in the U.S. market, especially in the Drinkware category and e-commerce, compounded by margin pressures due to tariffs.

International Growth Acceleration

International sales for Yeti Holdings surged by 14% to $100.4 million, accounting for about 21% of total sales in the third quarter. Europe, with the U.K. leading the charge, demonstrated exceptional growth. The company also made significant strides in Japan and other Asian markets, underscoring its successful international expansion strategy.

Coolers & Equipment Segment Growth

The Coolers & Equipment category saw a 12% increase in sales, reaching $215.4 million. This growth was primarily driven by robust demand for bags and soft coolers, indicating a strong consumer preference for these products.

Strong Sell-Through in U.S. Wholesale

Despite a decline in sell-in, the U.S. wholesale channel experienced double-digit sell-through growth in both Coolers & Equipment and Drinkware. This reflects strong consumer demand and effective inventory management strategies.

Positive Brand and Innovation Developments

Yeti is celebrating its 20th anniversary with a major brand campaign, expanding its sports partnerships, and advancing product innovation. The company plans to launch over 30 new products in 2025, showcasing its commitment to staying at the forefront of the market.

Successful Supply Chain Diversification

Yeti has effectively diversified its supply chain, reducing exposure to U.S. tariffs on goods sourced from China to less than 5% of the total cost of goods sold by year-end. This strategic move mitigates risk and enhances operational resilience.

Drinkware Sales Decline

The Drinkware category experienced a 4% decline in sales, totaling $263.8 million. This downturn was attributed to increased promotional activity and cautious wholesale ordering in the U.S.

Gross Margin Decrease

Yeti’s adjusted gross profit margin fell by 230 basis points to 55.9%, primarily due to higher tariff costs and a lower mix of Drinkware sales, impacting overall profitability.

Challenges in U.S. E-Commerce

While there was growth in traffic and average order value, conversion rates on yeti.com decreased, indicating a more discerning consumer base. This trend affected overall performance in the U.S. e-commerce segment.

Forward-Looking Guidance

Yeti Holdings provided an optimistic outlook for future growth, anticipating long-term top line growth in the high single to low double digits. Key drivers include a robust product innovation pipeline, significant international expansion, and strong growth in the Coolers & Equipment category. Despite challenges in U.S. e-commerce and cautious wholesale sell-in, Yeti’s diversified strategy and brand expansion efforts are expected to maintain momentum. Strategic investments in transformative technologies, such as artificial intelligence, aim to enhance consumer engagement and operational efficiency. For fiscal year 2025, Yeti projects sales growth between 1% and 2%, with international business expected to grow 15% to 20%, while U.S. sales may see a slight decline due to Drinkware dynamics.

In conclusion, Yeti Holdings’ earnings call reflected a balanced mix of achievements and challenges. The company’s strong international growth and product innovation were tempered by difficulties in the U.S. market. However, with strategic initiatives and a positive outlook, Yeti is poised to navigate these challenges and sustain its growth trajectory.