Yeti: A COVID Darling Ready to Rebound.

Yeti, a COVID darling, has seen its share price collapse 70% from its all-time high of $107 in 2021. The outdoor company's decline is attributed to a shift in consumer spending towards more affordable alternatives and reduced demand for outdoor products. However, Yeti is poised to make a comeback with its focus on high-end products and strong brand recognition.

Yeti (NYSE:YETI), once a market beneficiary during the outdoor boom of the immediate post-COVID era, has seen its share price collapse more than 70% from its all-time high of $107 in 2021. The company’s EV/EBITDA multiple, historically trading in the range of 13x–18x, has compressed to 8.9x as investors seem to believe Yeti’s growth opportunities have been exhausted. Despite the meaningful tailwinds lost to changing market dynamics, Yeti has several growth catalysts that could bring back investor enthusiasm. If management can overcome the supply chain disruptions driven by ongoing geopolitical turmoil while avoiding brand dilution, a multiple expansion not seen since 2021 could occur.

Yeti’s decline is attributed to a shift in consumer spending towards more affordable alternatives and reduced demand for outdoor products. However, the company is poised to make a comeback with its focus on high-end products and strong brand recognition. The company’s sales were a beneficiary of the post-COVID outdoor boom, but as investor euphoria cooled, so did the market’s premium placed on Yeti. The company’s valuation normalization from the market has not been the only factor keeping investors away; lagging sales to its largest segment, Drinkware, have begun to face increasing pressure from brands like Hydro Flask, Stanley, and Owala as they continue to gain market share.

Yeti’s margin expansion, growing international sales, and product diversification are the key catalysts that could drive a turnaround. Since 2015, Yeti has grown its sales 2.5x while increasing the direct-to-consumer (DTC) allocation of its sales mix from 8% to 60%. The company’s gross margin has increased by an incredible 940 bps since its 2018 IPO to a Q1 2025 gross margin of 58.6%. The company has also grown its international revenue by over 68% since 2022, with a compound annual sales growth rate of 65% since its IPO. Yeti’s product innovation pipeline is robust, with over 30 new product introductions expected for 2025.

Engaged Capital, an activist investor, has recently disclosed a position in the company and believes more needs to be done to capture maximum growth in international markets. The company has agreed to expand its board with two experienced directors with strong backgrounds in product and international expansion, especially into Europe. Yeti’s focus on high-end products and strong brand recognition could drive new sales growth and help the company regain investor enthusiasm.

Yeti’s valuation has fallen significantly, trading at 8.9x TTM EV/EBITDA, compared to its expansionary period of 13x-18x. The company’s forward EV/EBITDA multiple could expand to between 14x and 17x, with an estimated fair value price per share of $56. The current price of $32.28 offers investors an attractive entry point with 73% upside. Yeti has the financial flexibility to repurchase as much as 50% of its outstanding shares over the next five years while remaining in a net cash position.

Risks to the thesis include continued headwinds from ongoing global supply chain disruptions and brand dilution from bringing too many new products to market too quickly. However, management has reacted quickly to these challenges, and the company has the potential to drive significant shareholder value through share repurchases and operational execution.

Investors have all but left Yeti to the wayside, but the company’s focus on high-end products, strong brand recognition, and growth catalysts could drive a rebound in its share price. The company offers an attractive risk/reward ratio with a generous entry point and significant upside.

References:
[1] https://seekingalpha.com/article/4800413-yeti-a-covid-darling-ready-to-make-a-comeback