YETI, a global designer, retailer, and distributor of innovative outdoor products including coolers, drinkware, bags and apparel, today announced its financial results for the first quarter (Q1) ended April 2, 2022, with a remarkable revenue increase of 19% year over year. Sales for the brand have nearly doubled since 2019 according to Matt Reintjes, president and CEO who stated, “Demand for the YETI brand remained strong in the first quarter. 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.”
YETI market growth is through product innovations
Reintjes discussed on the earnings call how the company has experienced significant growth since 2019 with a 3-year CAGR (compound annual growth rate) of 24%, stating; “We have been able to quickly adapt to changing market conditions and we are on track to deliver another year of strong growth and profitability.” YETI is focused on product innovations, building deep engagement with its core customers and providing unique omnichannel experiences through data-driven decisions and exploiting opportunities for international growth.”
The international business for YETI was up 45% compared to last year and remains a focus for the company. International sales represent 13% of the business and Paul C. Carbone, senior vice president and CFO of YETI, discussed how the long-term goal is for international sales to comprise about 20% of total revenues.
Drinkware drives strong revenue growth
The direct-to-consumer business increased 23% and represented 53% of total revenue for Q1. Last full year, DTC was 56% of the total net sales for YETI. Drinkware remains a strong category with sales growing by 24% to $184 million, followed by coolers and equipment with a sales increase of 10% and breaking $100 million for Q1. New product offerings drive drinkware sales in terms of size and colors along with a strong demand for customization.
Reintjes said, “We have a high-quality customer and we are always looking for ways to create more opportunities to be a part of a consumer’s life throughout the day.” For example, regarding the evolution of YETI’s drinkware products which range from durable, double-wall vacuum insulated coffee mugs to insulated lowballs, pints and tumblers to reusable bottles, Reintjes stated, “We have followed the life of a customer by offering products from coffee to cocktails and hydration in between.”
Profits and operating income
Compared to last year, gross margins were down from 58.6% to 52.7%, mostly attributed to higher inbound freight costs, higher product costs and the unfavorable impact of import duties. Operating income was 11.3% of sales, lower than last year’s 16.2%. While sales were up significantly for the quarter and operating expenses were down, the net profit for the company decreased 16% primarily due to the decrease in gross margin including carry-over freight charges from Q4 that were paid in Q1.
Supply chain impact
In addition to increasing freight costs, YETI inventory increased 125% compared to the end of the prior-year quarter. Nearly two-thirds of this increase was related to the necessity of higher product inventories to account for longer delivery times and ongoing supply chain disruptions. Carbone discussed the company’s strong vendor relations with its suppliers in China and how YETI was not significantly impacted by product shortages in Q1 despite the widespread challenges in getting products out of China due to COVID-related issues.
Customer loyalty remains strong
Mr. Reintjes was quoted in the press release as stating, “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.”
2022 will be another strong year for YETI
Carbone said that the company expects net sales to increase between 18% and 20% for the full year of 2022 with gross margins coming in at 55%, which is higher than pre-pandemic margins of 52%. As a growth strategy, Reintjes discussed using an advanced analytics team to continuously scrutinize customer acquisition, retention and value, which allows the brand to deploy marketing and demand creation strategies that are relevant to the market.