Net Sales Increased 3%, Despite Stop Sale of
Recalled Products
Returns to Gross Margin Expansion
Reiterates 2023 Outlook
YETI Holdings, Inc. (“YETI”) (NYSE: YETI) today announced its
financial results for the first quarter ended April 1, 2023.
YETI reports its financial performance in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”) and as adjusted on a non-GAAP basis. YETI’s
non-GAAP measures exclude the impact of the voluntary recalls, as
well as certain other items. Please see “Non-GAAP Financial
Measures,” and “Reconciliation of GAAP to Non-GAAP Financial
Information” below for additional information and reconciliations
of the non-GAAP financial measures to the most comparable GAAP
financial measures.
Matt Reintjes, President and Chief Executive Officer, commented,
“While YETI’s first quarter results were impacted by the voluntary
recalls, we continued to demonstrate our ability to execute against
our strategic priorities while also adapting with urgency as
challenges arise. So far in 2023, we expanded the breadth of our
product portfolio through the successful introduction of our GoBox
cargo family, built new color customization capabilities for our
Yonder bottles, and continued our growth trajectory outside of the
U.S. At the same time, our rapid collaboration, iteration, and
development of a solution to the products affected by the voluntary
recalls resulted in production commencing this month on our updated
soft coolers and puts us on-track to deliver these popular products
back to the market for the fourth quarter. We are incredibly proud
of our team’s effort to drive this execution.”
Mr. Reintjes continued, “Even with the impact of the voluntary
recalls, first quarter sales growth was positive and above our
expectations, inclusive of the resiliency of our soft cooler
products that remain in the market. Gross margin inflected positive
year-over-year for the first time in seven quarters, and we remain
bullish on future gains as freight tailwinds continue. We also
remained firmly focused on investing back in the business,
resulting in planned expense deleverage for the period as we keep
our sights firmly on the future global opportunity for our brand.
Finally, with a strong cash position and lower inventory levels,
our balance sheet remains a source of strength and flexibility for
YETI.”
First Quarter 2023
Results
Sales increased 3% to $302.8 million, compared to $293.6
million during the same period last year. As previously disclosed,
our 2023 results were impacted by the stop sale of certain soft
coolers included in the voluntary recalls.
- Direct-to-consumer (“DTC”) channel sales increased 7% to $167.0
million, compared to $156.0 million in the prior year quarter, due
to growth in both Coolers & Equipment and Drinkware.
- Wholesale channel sales decreased 1% to $135.8 million,
compared to $137.7 million in the same period last year, primarily
driven by a decline in Coolers & Equipment, partially offset by
Drinkware growth.
- Drinkware sales increased 3% to $190.3 million, compared to
$184.0 million in the prior year quarter, primarily driven by
strong demand for Rambler bottles, as well as introductions of our
new Yonder bottles and Rambler straw lid mugs.
- Coolers & Equipment sales increased 1% to $104.4 million,
compared to $103.0 million in the same period last year. The strong
performance in cargo, bags, and in our soft coolers that were not
impacted by the voluntary recalls, was partially offset by a
decline in hard coolers and outdoor living products.
Gross profit increased 5% to $161.9 million, or 53.5% of
sales, compared to $154.9 million, or 52.7% of sales, in the first
quarter of 2022. Gross profit was positively impacted by lower
inbound freight, partially offset by higher product costs and the
unfavorable impact of foreign currency exchange rates. Gross profit
also included a $1.2 million, or 40 basis points, favorable impact
from adjustments to inventory reserves related to the voluntary
recalls.
Adjusted gross profit, which excludes the impact related
to the voluntary recalls, increased $5.8 million to $160.6 million,
or 53.0% of adjusted sales, compared to $154.9 million, or 52.7% of
adjusted sales, in the first quarter of 2022.
Selling, general, and administrative (“SG&A”)
expenses increased 21% to $146.8 million, compared to $121.6
million in the first quarter of 2022. As a percentage of sales,
SG&A expenses increased 710 basis points to 48.5% from 41.4% in
the prior year period. This increase was due to an increase in
variable expenses, driven by the increased mix of our faster
growing and higher gross margin DTC channel, coupled with increased
non-variable expenses driven by higher employee costs, including
investments in headcount to support future growth, warehousing
costs, and marketing expenses.
Adjusted SG&A expenses increased 19% to $139.0
million, compared to $116.8 million in the fourth quarter of 2022.
As a percentage of adjusted sales, adjusted SG&A expenses
increased 610 basis points to 45.9% from 39.8% in the prior year
period.
Operating income decreased 55% to $15.1 million, or 5.0%
of sales, compared to operating income of $33.3 million, or 11.3%
of sales during the prior year quarter.
Adjusted operating income decreased 43% to $21.7 million,
or 7.2% of adjusted sales, compared to $38.0 million, or 13.0% of
adjusted sales during the same period last year.
Net income decreased 59% to $10.6 million, or 3.5% of
sales, compared to $25.7 million, or 8.7% of sales in the prior
year quarter; Net income per diluted share was $0.12,
compared to $0.29 in the prior year quarter.
Adjusted net income decreased 46% to $15.5 million, or
5.1% of adjusted sales, compared to $28.6 million, or 9.7% of
adjusted sales in the prior year quarter; Adjusted net income
per diluted share decreased 44% to $0.18, compared to $0.32 per
diluted share in the prior year quarter.
Balance Sheet and Other
Highlights
Cash increased to $167.8 million, compared to $100.3
million at the end of the first quarter of 2022.
Inventory decreased 16% to $347.0 million, compared to
$413.0 million at the end of the prior year quarter. On a
sequential basis, inventory decreased $24.4 million, making this
the third consecutive quarter with a sequential decline in our
inventory balance.
Total debt, excluding finance leases and unamortized
deferred financing fees, was $84.4 million, compared to $106.9
million at the end of the first quarter of 2022. During the first
quarter of 2023, YETI made mandatory debt payments of $5.6
million.
Voluntary Recalls Update
As previously disclosed, in February 2023 we proposed a
voluntary recall of our Hopper® M30 Soft Cooler, Hopper® M20 Soft
Backpack Cooler, and SideKick Dry gear case (the “affected
products”). As a result, we established reserves for unsalable
inventory on-hand and estimated product recall expenses as of
December 31, 2022.
In March 2023, we initiated voluntary recalls of the affected
products. The voluntary recalls did not have a material impact to
our first quarter of 2023 results, with the exception of a $1.2
million favorable impact from a reserve adjustment. We have
developed solutions to address the potential safety concern of the
affected products and intend to resume the sale of the redesigned
products in the fourth quarter of 2023.
2023 Outlook
Mr. Reintjes concluded, “We believe we are in a strong position
to deliver upon our full year outlook. In an environment with ample
uncertainty remaining across macroeconomic and consumer behavior,
we continue to take a prudently cautious approach to our outlook,
particularly with our largest quarters ahead. Supported by our
ongoing execution across brand and product, we remain confident in
our path ahead as we look to return to double-digit sales growth in
the fourth quarter with the return of our full soft cooler line. In
addition, we also remain confident in our ability to steadily
improve our gross margin profile as we go through the year.
Finally, we believe the investments we are making this year will
fuel our future growth on a global basis as we look out over the
longer term.”
For 2023, YETI reiterates:
- Adjusted sales to increase between 3% and 5% with
adjusted sales growth weighted to the second half of the year,
inclusive of an approximate 500 basis points unfavorable impact on
our growth rate from the stop sale of the affected products by the
voluntary recalls;
- Adjusted operating income as a percentage of adjusted
sales between 15% and 15.5% and adjusted operating income to
decrease between 3% and 8%. While adjusted gross margin is expected
to expand through the remainder of the year, this benefit is
expected to be more than offset by increases in adjusted SG&A
expense due to strategic investments and the unfavorable topline
impact from the stop sale of the affected products by the voluntary
recalls;
- An effective tax rate of approximately 24.9% (compared
to 22.8% in the prior year period);
- Adjusted net income per diluted share between $2.12 and
$2.23, reflecting a 5% to 10% decrease, with earnings growth
beginning in the fourth quarter of the year;
- Diluted weighted average shares outstanding of
approximately 87.2 million; and
- Capital expenditures of approximately $60 million
primarily to support investments in technology and new product
innovation and launches.
Conference Call Details
A conference call to discuss the first quarter and full year
2023 financial results is scheduled for today, May 11, 2023, at
8:00 a.m. Eastern Time. Investors and analysts interested in
participating in the call are invited to dial 833-816-1399
(international callers, please dial 412-317-0492) approximately 10
minutes prior to the start of the call. A live audio webcast of the
conference call will be available online at
http://investors.yeti.com. A replay will be available through May
25, 2023 by dialing 844-512-2921 (international callers,
412-317-6671). The accompanying access code for this call is
10177372.
About YETI Holdings, Inc.
Headquartered in Austin, Texas, YETI is a global designer,
retailer, and distributor of innovative outdoor products. From
coolers and drinkware to bags and apparel, YETI products are built
to meet the unique and varying needs of diverse outdoor pursuits,
whether in the remote wilderness, at the beach, or anywhere life
takes you. By consistently delivering high-performing, exceptional
products, we have built a strong following of brand loyalists
throughout the world, ranging from serious outdoor enthusiasts to
individuals who simply value products of uncompromising quality and
design. We have an unwavering commitment to outdoor and recreation
communities, and we are relentless in our pursuit of building
superior products for people to confidently enjoy life outdoors and
beyond. For more information, please visit www.YETI.com.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP,
we supplement our results with non-GAAP financial measures,
including adjusted net sales, adjusted gross profit, adjusted
SG&A, adjusted operating income, adjusted net income, adjusted
net income per diluted share as well as adjusted gross profit and
adjusted SG&A, adjusted operating income and adjusted net
income as a percentage of adjusted net sales. Our management uses
these non-GAAP financial measures in conjunction with GAAP
financial measures to measure our profitability and to evaluate our
financial performance. We believe that these non-GAAP financial
measures provide meaningful supplemental information regarding the
underlying operating performance of our business and are
appropriate to enhance an overall understanding of our financial
performance. These non-GAAP financial measures have limitations as
analytical tools in that they do not reflect all of the amounts
associated with our results of operations as determined in
accordance with GAAP. Because of these limitations, these non-GAAP
financial measures should be considered along with GAAP financial
performance measures. The presentation of these non-GAAP financial
measures is not intended to be considered in isolation or as a
substitute for, or superior to, financial information prepared and
presented in accordance with GAAP. Investors are encouraged to
review the reconciliation of these non-GAAP financial measures to
their most directly comparable GAAP financial measures. A
reconciliation of the non-GAAP financial measures to such GAAP
measures can be found below.
YETI does not provide a reconciliation of forward-looking
non-GAAP to GAAP financial measures because such reconciliations
are not available without unreasonable efforts. This is due to the
inherent difficulty in forecasting with reasonable certainty
certain amounts that are necessary for such reconciliation,
including in particular the impact of the voluntary recalls and
realized and unrealized foreign currency gains and losses reported
within other expense. For the same reasons, we are unable to
forecast with reasonable certainty all deductions and additions
needed in order to provide a forward-looking GAAP financial
measures at this time. The amount of these deductions and additions
may be material and, therefore, could result in forward-looking
GAAP financial measures being materially different or less than
forward-looking non-GAAP financial measures. See “Forward-looking
statements” below.
Forward-looking statements
This press release contains ‘‘forward-looking statements’’
within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements other than statements of historical or
current fact included in this press release are forward-looking
statements. Forward-looking statements include statements
containing words such as “anticipate,” “assume,” “believe,” “can
have,” “contemplate,” “continue,” “could,” “design,” “due,”
“estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,”
“may,” “might,” “objective,” “plan,” “predict,” “project,”
“potential,” “seek,” “should,” “target,” “will,” “would,” and other
words and terms of similar meaning in connection with any
discussion of the timing or nature of future operational
performance or other events. For example, all statements made
relating to our future expectations relating to our voluntary
recalls, demand and market conditions, pricing conditions, expected
sales, gross margin, operating expense and cash flow levels, and
our expectations for opportunity or growth, including those set
forth in the quotes from YETI’s President and CEO, and the 2023
financial outlook provided herein, constitute forward-looking
statements. All forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially
from those that are expected and, therefore, you should not unduly
rely on such statements. The risks and uncertainties that could
cause actual results to differ materially from those expressed or
implied by these forward-looking statements include but are not
limited to: (i) weakening economic conditions or consumer
confidence in future economic conditions, including the ongoing
conflict in Ukraine, and inflationary conditions resulting in
rising prices; (ii) our ability to maintain and strengthen our
brand and generate and maintain ongoing demand for our products;
(iii) our ability to successfully design, develop and market new
products; (iv) our ability to effectively manage our growth; (v)
our ability to expand into additional consumer markets, and our
success in doing so; (vi) the success of our international
expansion plans; (vii) our ability to compete effectively in the
outdoor and recreation market and protect our brand; (viii) the
level of customer spending for our products, which is sensitive to
general economic conditions and other factors; (ix) problems with,
or loss of, our third-party contract manufacturers and suppliers,
or an inability to obtain raw materials; (x) fluctuations in the
cost and availability of raw materials, equipment, labor, and
transportation and subsequent manufacturing delays or increased
costs; (xi) our ability to accurately forecast demand for our
products and our results of operations; (xii) our relationships
with our national, regional, and independent retail partners, who
account for a significant portion of our sales; (xiii) the impact
of natural disasters and failures of our information technology on
our operations and the operations of our manufacturing partners;
(xiv) our ability to attract and retain skilled personnel and
senior management, and to maintain the continued efforts of our
management and key employees; and (xv) the impact of our
indebtedness on our ability to invest in the ongoing needs of our
business. For a more extensive list of factors that could
materially affect our results, you should read our filings with the
United States Securities and Exchange Commission (the “SEC”),
including our Annual Report on Form 10-K for the year ended
December 31, 2022, as such filings may be amended, supplemented or
superseded from time to time by other reports YETI files with the
SEC.
These forward-looking statements are made based upon detailed
assumptions and reflect management’s current expectations and
beliefs. While YETI believes that these assumptions underlying the
forward-looking statements are reasonable, YETI cautions that it is
very difficult to predict the impact of known factors, and it is
impossible for YETI to anticipate all factors that could affect
actual results.
The forward-looking statements included here are made only as of
the date hereof. YETI undertakes no obligation to publicly update
or revise any forward-looking statement as a result of new
information, future events, or otherwise, except as required by
law. Many of the foregoing risks and uncertainties may be
exacerbated by the global business and economic environment,
including the ongoing conflict in Ukraine.
YETI HOLDINGS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
April 1, 2023
April 2, 2022
Net sales
$
302,796
$
293,628
Cost of goods sold
140,926
138,768
Gross profit
161,870
154,860
Selling, general, and administrative
expenses
146,772
121,570
Operating income
15,098
33,290
Interest expense
(594
)
(766
)
Other income
6
902
Income before income taxes
14,510
33,426
Income tax expense
(3,946
)
(7,767
)
Net income
$
10,564
$
25,659
Net income per share
Basic
$
0.12
$
0.29
Diluted
$
0.12
$
0.29
Weighted-average common shares
outstanding
Basic
86,529
87,368
Diluted
87,086
88,223
YETI HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except per
share amounts)
April 1, 2023
December 31,
2022
April 2, 2022
ASSETS
Current assets
Cash
$
167,841
$
234,741
$
100,330
Accounts receivable, net
95,582
79,446
82,992
Inventory
347,002
371,412
413,037
Prepaid expenses and other current
assets
44,461
33,321
39,583
Total current assets
654,886
718,920
635,942
Property and equipment, net
124,843
124,587
123,882
Operating lease right-of-use assets
54,421
55,406
55,775
Goodwill
54,293
54,293
54,293
Intangible assets, net
100,813
99,429
97,090
Other assets
17,259
24,130
2,547
Total assets
$
1,006,515
$
1,076,765
$
969,529
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities
Accounts payable
$
101,703
$
140,818
$
167,409
Accrued expenses and other current
liabilities
177,058
211,399
121,802
Taxes payable
6,778
15,289
17,512
Accrued payroll and related costs
8,531
4,847
7,442
Operating lease liabilities
11,293
12,076
11,328
Current maturities of long-term debt
24,436
24,611
24,574
Total current liabilities
329,799
409,040
350,067
Long-term debt, net of current portion
65,719
71,741
89,574
Operating lease liabilities,
non-current
54,219
55,649
55,245
Other liabilities
14,217
13,858
28,276
Total liabilities
463,954
550,288
523,162
Commitments and contingencies
Stockholders’ Equity
Common stock
883
881
878
Treasury stock, at cost
(100,025
)
(100,025
)
(100,025
)
Additional paid-in capital
363,205
357,490
341,208
Retained earnings
279,115
268,551
204,517
Accumulated other comprehensive loss
(617
)
(420
)
(211
)
Total stockholders’ equity
542,561
526,477
446,367
Total liabilities and stockholders’
equity
$
1,006,515
$
1,076,765
$
969,529
YETI HOLDINGS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
April 1, 2023
April 2, 2022
Cash Flows from Operating
Activities:
Net income
$
10,564
$
25,659
Adjustments to reconcile net income to
cash used in operating activities:
Depreciation and amortization
11,402
8,650
Amortization of deferred financing
fees
138
158
Stock-based compensation
6,775
4,754
Deferred income taxes
6,832
5,069
Other
(303
)
(1,607
)
Changes in operating assets and
liabilities:
Accounts receivable
(16,114
)
27,403
Inventory
23,988
(94,342
)
Other current assets
(10,930
)
(9,593
)
Accounts payable and accrued expenses
(69,655
)
(57,064
)
Taxes payable
(8,512
)
2,979
Other
(873
)
(622
)
Net cash used in operating activities
(46,688
)
(88,556
)
Cash Flows from Investing
Activities:
Purchases of property and equipment
(10,082
)
(12,669
)
Additions of intangibles, net
(3,165
)
(3,436
)
Net cash used in investing activities
(13,247
)
(16,105
)
Cash Flows from Financing
Activities:
Repayments of long-term debt
(5,625
)
(5,625
)
Taxes paid in connection with employee
stock transactions
(1,737
)
(1,280
)
Proceeds from employee stock
transactions
679
—
Finance lease principal payment
(710
)
(698
)
Repurchase of common stock
—
(100,025
)
Net cash used in financing activities
(7,393
)
(107,628
)
Effect of exchange rate changes on
cash
428
430
Net decrease in cash
(66,900
)
(211,859
)
Cash, beginning of period
234,741
312,189
Cash, end of period
$
167,841
$
100,330
YETI HOLDINGS, INC.
Supplemental Financial
Information
Reconciliation of GAAP to
Non-GAAP Financial Information
(Unaudited) (In thousands
except per share amounts)
Three Months Ended
April 1, 2023
April 2, 2022
Net sales
$
302,796
$
293,628
Product recall(1)
16
—
Adjusted net sales
$
302,812
$
293,628
Gross profit
$
161,870
$
154,860
Product recall(1)
(1,237
)
—
Adjusted gross profit
$
160,633
$
154,860
Selling, general, and administrative
expenses
$
146,772
$
121,570
Non-cash stock-based compensation
expense(2)
(6,775
)
(4,754
)
Product recall(1)
(167
)
—
Organizational realignment costs(3)
(880
)
—
Adjusted selling, general, and
administrative expenses
$
138,950
$
116,816
Gross margin
53.5
%
52.7
%
Adjusted gross margin
53.0
%
52.7
%
SG&A expenses as a % of net sales
48.5
%
41.4
%
Adjusted SG&A expenses as a % of
adjusted net sales
45.9
%
39.8
%
________________________
(1)
Represents adjustments and charges
associated with voluntary recalls.
(2)
These costs are reported in SG&A
expenses.
(3)
Represents employee severance costs in
connection with the previously announced organizational
realignment, including our commercial and sales organization.
YETI HOLDINGS, INC.
Supplemental Financial
Information
Reconciliation of GAAP to
Non-GAAP Financial Information
(Unaudited) (In thousands
except per share amounts)
Three Months Ended
April 1, 2023
April 2, 2022
Operating income
$
15,098
$
33,290
Adjustments:
Non-cash stock-based compensation
expense(1)
6,775
4,754
Product recalls(2)
(1,070
)
—
Organizational realignment costs(3)
880
—
Adjusted operating income
$
21,683
$
38,044
Net income
$
10,564
$
25,659
Adjustments:
Non-cash stock-based compensation
expense(1)
6,775
4,754
Product recalls(1)
(1,070
)
—
Organizational realignment costs(3)
880
—
Other income(4)
(6
)
(902
)
Tax impact of adjusting items(5)
(1,612
)
(944
)
Adjusted net income
$
15,531
$
28,567
Net sales
$
302,796
$
293,628
Adjusted net sales
$
302,812
$
293,628
Operating income as a % of net sales
5.0
%
11.3
%
Adjusted operating income as a % of net
sales
7.2
%
13.0
%
Net income as a % of net sales
3.5
%
8.7
%
Adjusted net income as a % of net
sales
5.1
%
9.7
%
Net income per diluted share
$
0.12
$
0.29
Adjusted net income per diluted share
$
0.18
$
0.32
Weighted average common shares outstanding
- diluted
87,086
88,223
_________________________
(1)
These costs are reported in SG&A
expenses.
(2)
Represents adjustments and charges
associated with voluntary recalls.
(3)
Represents employee severance costs in
connection with an organizational realignment, including the
previously announced organizational realignment, including our
commercial and sales organization.
(4)
Other income substantially consists of
realized and unrealized foreign currency gains and losses on
intercompany balances that arise in the ordinary course of
business.
(5)
Represents the tax impact of adjustments
calculated at an expected statutory tax rate of 24.5% for both the
three months ended April 1, 2023 and April 2, 2022.
YETI HOLDINGS, INC.
Supplemental Financial
Information
Reconciliation of GAAP to
Non-GAAP Financial Measures
(Unaudited) (In
thousands)
Three Months Ended April 1,
2023
Three Months Ended April 2,
2022
Net Sales
Product Recalls(1)
Adjusted Net Sales
Net Sales
Product Recalls(1)
Adjusted Net Sales
Channel
Wholesale
$
135,829
$
16
$
135,845
$
137,666
$
—
$
137,666
Direct-to-consumer
166,967
—
166,967
155,962
—
155,962
Total
$
302,796
$
16
$
302,812
$
293,628
$
—
$
293,628
Category
Coolers & Equipment
$
104,354
$
16
$
104,370
$
102,958
$
—
$
102,958
Drinkware
190,287
—
190,287
183,998
—
183,998
Other
8,155
—
8,155
6,672
—
6,672
Total
$
302,796
$
16
$
302,812
$
293,628
$
—
$
293,628
_________________________
(1)
Represents adjustments and charges
associated with voluntary recalls.
YETI HOLDINGS, INC.
2023 Outlook
Reconciliation of GAAP to
Non-GAAP Financial Information
(Unaudited) (In thousands
except per share amounts)
2022
Reiterated 2023
Outlook
Low
High
Adjusted net sales
$
1,633,637
$
1,682,646
$
1,715,319
Adjusted operating income
$
274,297
$
252,397
$
265,874
Adjusted operating income as a % of net
sales
16.8
%
15.0
%
15.5
%
Adjusted net income
$
205,702
$
184,716
$
194,834
Adjusted net income as a % of net
sales
12.6
%
11.0
%
11.4
%
Adjusted net income per diluted share
$
2.36
$
2.12
$
2.23
Weighted average common shares outstanding
- diluted
87,195
87,196
87,196
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230511005203/en/
Investor Relations Contact: Tom Shaw, 512-271-6332
Investor.relations@yeti.com
Media Contact: YETI Holdings, Inc. Media Hotline
Media@yeti.com
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