YETI Holdings, Inc. Q1 FY2025 earnings call

Key priorities include accelerating product innovation, transforming the supply chain to reduce exposure to China, and maintaining operational discipline. The product innovation pipeline is robust with over 30 new product introductions planned for 2025, despite supply chain disruptions. Supply chain transformation efforts are ahead of plan, with 90% of US drinkware capacity expected to be outside China by the end of 2025, aiming to reduce cost of goods sold related to China for the US market. Operationally, the company is managing costs, maintaining balance sheet strength, and lowering capital expenditures. Brand activities include successful global events, partnerships, and ambassador engagements, with deepening in sports and entertainment. Investments have been made in Asia-based testing and innovation locations, design offices in Denver and other areas, and teams in Japan, the UK, and Europe to drive innovation and growth.

In the first quarter of 2025, Coolers & Equipment sales increased 17% to $140.2 million, marking the fifth consecutive quarter of double-digit growth. Drinkware sales decreased 4% to $205.6 million. International business sales saw a 22% increase to $79.9 million in the first quarter, despite a foreign exchange headwind. For Coolers & Equipment, hard coolers like the Roadie 15 and soft coolers such as backpack and flip coolers performed well, and bags including Crossroads packs, Camino Totes, and the new Ranchero backpack also had strong demand. Drinkware faced challenges in the US market due to supply chain diversification efforts but experienced double-digit growth outside the US. Internationally, Europe, Australia, Canada, and Japan all showed growth, with Japan in the early stages of market expansion.

Full-year sales are expected to increase between 1% and 4% compared to fiscal 2024. The primary driver of the revised top-line outlook is inventory supply disruptions from supply chain diversification efforts. Q2 is expected to be flat to slightly down year-over-year due to US drinkware supply disruptions and softer market dynamics. Gross margins are projected to be approximately 54%, a decline of about 450 basis points. Operating expenses are expected to have ~30 basis points of deleverage. Operating income is anticipated to be ~12% of sales, a decline of slightly less than 500 basis points. Adjusted earnings per diluted share are between $1.96 and $2.02. Capital expenditures are estimated at ~$60 million, and free cash flow is expected to be between $100 million and $125 million.

Potential impact of tariff and trade disruptions on revenue and profitability, a more cautious consumer backdrop, uncertainty regarding tariffs, and geopolitical uncertainties affecting international markets.

Q: Randy Konik from Jefferies asked about the number of new product introductions expected for 2025 and the cadence.

A: Matt Reintjes stated that 2025 is expected to have over 30 new product introductions compared to 24 in 2024, and the up cadence is expected to continue.

Q: Brooke Roach from Goldman Sachs inquired about the outlook for the drinkware business.

A: Matt Reintjes mentioned that the drinkware market had rapid expansion, the strategy is to diversify the portfolio, and wholesale partnerships are strong.

Q: Peter Benedict from Baird asked about mitigation efforts and international growth.

A: Matt Reintjes talked about supply chain transformation and international growth in established markets as well as Japan.

Q: Alexia Morgan from Piper Sandler asked about the impact on Canada and Q2 sales.

A: Matt Reintjes said teams are local and monitoring, and Mike McMullen noted they closely watch intra quarter trends.

Q: Joe Altobello from Raymond James asked about the guidance reduction and positioning versus others.

A: Mike McMullen discussed the impact of supply disruption and Matt Reintjes said supply chain diversification is a long-term project.

Q: Jim Duffy from Stifel asked about drinkware supply chain diversification.

A: Matt Reintjes and Mike McMullen talked about regions gaining share, operational execution, and inventory challenges.

Q: Anna Glaessgen from B. Riley Securities asked about inventory allocation.

A: Matt Reintjes and Mike McMullen talked about inventory prioritization and working capital management