YETI Holdings Faces Headwinds: Is Now the Time to Buy the Dip?

YETI Holdings (YETI) has long been a symbol of premium outdoor gear, but its recent financial results reveal a company navigating turbulent waters. Slowing growth, margin pressures, and strategic bets on supply chain diversification have created a critical inflection point. While the near-term outlook is clouded by tariffs and competitive pressures, the question remains: Is this a moment to buy the dip, or a warning to steer clear?

The Deteriorating Fundamentals

YETI's first-quarter 2025 results underscore a slowdown in its once-sizzling growth engine. Revenue rose a modest 3% to $351.1 million, with adjusted earnings per share (EPS) dropping 9% to $0.31. The most concerning metric is operating income, which plunged 16% to $21.7 million, reflecting escalating costs tied to global supply chain restructuring.

The data reveals a stock that has shed over 25% since late 2024, as investors digest revised guidance. YETI now projects 2025 adjusted sales growth of just 1-4%, down from a prior 5-7%, with adjusted EPS expectations cut by nearly 30%. These downgrades signal a reality check: the company's shift away from China-based manufacturing—aimed at reducing tariff exposure—is exacting a near-term toll.

The Tariff Tax and Strategic Trade-Offs

The decision to move production out of China, while critical for long-term resilience, has introduced both cost and timing pressures. YETI's gross margin dipped 20 basis points to 57.4%, with adjusted gross margin falling further due to a weaker Drinkware mix and currency headwinds. Drinkware sales, a core product line, declined 4%, as YETI prioritized supply chain investments over new innovation. This trade-off is risky: competitors like Yeti (yes, the lowercase “y” brand) and outdoor retailers are likely capitalizing on YETI's pause in Drinkware development to gain market share.

Geographically, while international sales surged 22%, this growth was partially offset by a 500-basis-point FX drag. YETI's U.S. sales, meanwhile, contracted 2%, suggesting domestic demand may be peaking.

A Glimmer of Resilience

Amid the challenges, YETI's balance sheet remains a fortress. Cash reserves swelled to $259 million, up from $174 million a year ago, while debt dropped to $77 million. This liquidity provides a cushion to weather the current storm. Additionally, cooler and equipment sales—YETI's flagship products—soared 17%, proving the brand's core appeal remains intact.

The company's long-term strategy also holds promise. By reducing China's role in its supply chain to less than 5% of costs by year-end, YETI aims to insulate itself from tariff volatility and geopolitical risks. While this transition is costly now, it could position the company to capture outsized gains if global trade tensions ease.

The Case for Buying the Dip

YETI's stock price decline has priced in much of the near-term pain. With a P/E ratio of 22—below its five-year average—and a robust balance sheet, the stock now offers a potential entry point for investors willing to look beyond the next 12 months. The cooler and equipment segments, which now account for nearly 40% of sales, could drive a rebound if YETI reignites innovation in Drinkware and leverages its expanding international footprint.

Risks to Consider

The risks are significant. Competitors could erode YETI's margins further, while delays in supply chain diversification might prolong margin pressure. The company's reliance on discretionary spending also leaves it vulnerable to broader economic slowdowns.

Final Take

YETI is at a crossroads. The current quarter's results and revised guidance paint a picture of a company in transition—one that's investing heavily in long-term resilience at the cost of short-term profits. For investors with a multi-year horizon, the stock's valuation and strategic moves may warrant a position. However, those focused on immediate gains should tread carefully. YETI's journey offers a classic “value” opportunity: a brand with enduring strength, temporarily beaten down by execution challenges. The question is whether investors can stomach the volatility long enough to see the payoff.

In a world where tariffs and trade wars are the new normal, YETI's pivot to self-reliance could prove prescient. The next 12 months will test its resolve—but for patient investors, the dip may yet become a buying opportunity.