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YETI shares fall to 2024 lows after missing expectations

AInvestThursday, Feb 15, 2024 9:09 am ET
2min read


YETI Holdings Inc. (YETI), a leading manufacturer of outdoor lifestyle products, announced its fourth-quarter earnings for the fiscal year 2023. Shares are down approximately 11% in pre-market trade as the company missed top and bottom line expectations and lowered its outlook, citing a slow down in customer spending. Shares have slipped through 20- and 50-day moving average support and are closing in on a test of multi-month lows at the $37 level. 


The company reported earnings per share (EPS) of $0.90, which fell short of the consensus estimate of $0.95. Additionally, YETI's revenues increased by 16% year over year to $519.79 million, slightly lower than Street expectations of $535.98 million.


One of the key highlights of the fourth quarter was the impressive growth in the Drinkware category, with a 12% increase in net sales. This growth propelled the Drinkware business to over $1 billion in annual sales for the first time in the company"s history. Furthermore, YETI witnessed robust international expansion during the quarter, with 39% growth in business outside the United States.


YETI reported a 16% increase in sales for the fourth quarter, reaching $519.8 million compared to $448.0 million in the same period last year. Adjusted sales, which exclude the recall reserves, increased 6% to $517.0 million.


The direct-to-consumer channel witnessed an 11% increase in sales, primarily driven by the growth in Drinkware products. The wholesale channel also performed well, with a notable 26% increase in sales. Drinkware sales rose by 12% due to expanded offerings and innovation, including new product lines and seasonal colorways. Meanwhile, Coolers & Equipment sales increased by 26%, although adjusted sales in this category decreased by 4% due to more cautious spending on higher-priced items.


YETI's gross profit reached 60.6% of sales, amounting to $315.2 million, a significant increase compared to 37.3% in the same quarter of the previous year. This increase was primarily driven by lower inbound freight costs, reduced product costs, and the higher-margin direct-to-consumer channel, which includes a growing Amazon Marketplace business. Adjusted gross profit reached $311.1 million, accounting for 60.2% of adjusted sales.


Operating income for the quarter was $98.2 million, with an operating margin of 18.9% of sales. This marked a notable improvement compared to the prior year quarter, which reported an operating loss of $43.7 million. Adjusted operating income increased by 15% to $102.6 million, with an operating margin of 19.8% of adjusted sales.


Net income for the quarter was $78.6 million, or 15.1% of sales, compared to a net loss of $27.7 million in the same period last year. The adjusted net income increased by 16% to $78.8 million, or 15.2% of adjusted sales. Consequently, YETI achieved adjusted earnings per diluted share of $0.90, representing a 15% increase compared to the prior year quarter.


However, despite the strong performance in these areas, YETI fell short of its guidance for the fourth quarter. The company attributed this lower-than-expected result to more cautious and inconsistent spending on high-priced ticket items in the Coolers & Equipment category. Despite this setback, YETI achieved record gross margins, surpassing 60%, which contributed to adjusted operating margin expansion.


YETI made substantial international investments, including brand awareness, logistics, and direct-to-consumer support, to drive future international growth. The company expanded its drinkware offerings by introducing new products in hydration, coffee, barware, and tabletop solutions, attracting both new and existing customers.

For fiscal year 2024, YETI provided guidance, expecting adjusted sales to grow between 7% and 9%. The company aims to achieve an adjusted operating income margin of approximately 16.0% and anticipates an effective tax rate of approximately 25.3%. YETI projects adjusted net income per diluted share to increase by 9% to 11%, ranging from $2.45 to $2.50. Both the revenue and EPS outlook were lower than market expectations. 


In line with its commitment to delivering value to shareholders, YETI's board of directors approved a $300 million share buyback program.


Overall, YETI's fourth-quarter earnings report reflects the company's solid performance, exemplified by growing sales, strategic product expansion, and continued international expansion. Although the fourth-quarter results fell below expectations due to cautious consumer spending, YETI's strong gross margins and focus on long-term growth remain encouraging indicators. As YETI looks ahead to fiscal year 2024, it aims to build on its success by expanding sales, optimizing profitability, and capitalizing on its global brand presence through investments in technology and new product innovation.


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