YETI Holdings, Inc. Q3 FY2024 earnings call

• Strong net sales growth: Net sales up 10% in the quarter, driven by growth across all channels, categories, and geographies.
• Innovation: Continued innovation in drinkware (e.g., bar and tableware launches) and coolers (new products and accessories).
• International growth: Fourth consecutive quarter of over 30% growth outside the US, with strong performance in Europe and Australia.
• Supply chain initiatives: Commenced production at a second drinkware facility outside China, on track for a third; aiming for 20% of drinkware capacity outside China by end of 2024 and 50% by end of 2025.
• Brand engagement: Participated in over 100 global events, leveraged sports partnerships, and launched the YETI ID program for D2C.
• Omnichannel performance: Strong wholesale performance (e.g., Wetlands collection demand) and D2C growth (higher quality customers), with new store openings.

Coolers and equipment sales increased 12% to $193 million, representing approximately 40.38% of total net sales ($478 million). Drinkware sales increased 9% to $275 million, accounting for approximately 57.53% of total net sales. Growth was seen across all categories, channels, and geographies.

• Full year sales: Expected to increase ~9% compared to fiscal 2023, midpoint of prior range 8%-10%.
• Gross margin: Target of approximately 58.5%, 160 basis points expansion year-over-year.
• Adjusted operating margins: Expected to be 16.5%, 90 basis points higher than fiscal 2023.
• Adjusted EPS: Expected to be approximately $2.65, high end of prior range, ~18% year-over-year growth.
• Free cash flow: Between $150 million and $200 million.

• Tariffs: Uncertainty around tariff impacts on product costs and pricing.
• Macroeconomic conditions: Potential impact on consumer spending, especially in the shortened holiday season.
• Supply chain uncertainties: Risks associated with supply chain expansion and potential disruptions.

Q: Around sourcing diversification outside China and tariff impacts?

A: Any product made in China can go directly to regions; working with suppliers and assessing new partners, considering price adjustments if needed.

Q: SG&A growth and gross margin tailwinds?

A: Intentionally investing some gross margin expansion into SG&A to drive future growth, planning to manage gross and operating margins together.

Q: International business infrastructure and growth in Europe, Asia?

A: Canada and Australia have built infrastructure; Europe early in growth with strong reception; Asia in early startup phase.

Q: 4Q EPS expectations and dynamics?

A: Q4 has unique dynamics, including shoulder buying season, margin considerations, and continued investment, with outlook consistent with year-to-date performance.

Q: 30% international revenue growth composition and Q4 outlook?

A: International growth similar to US with wholesale, D2C, and custom business; Q4 drinkware outlook similar to year-long dynamics with new products and strong partnerships.