YETI Holdings, Inc. Q1 FY2026 earnings call

Core Business Strength & Structural Improvements

• Demand is resilient, diversified, and increasingly repeatable across categories, channels, and geographies, reducing reliance on any single product cycle or channel dynamic. Broad-based strength in core drinkware and coolers/equipment platforms, augmented by consistent innovation and enabled by an omnichannel model, creates a durable strategic advantage.
• The business is delivering sustained growth after moving past 2025 market dynamics and supply chain disruptions, while successfully broadening its customer base alongside retaining core buyers. 12-month consumer retention at Yeti.com is stable, and lifetime value continues to grow; U.S. brand awareness, consideration, and preference increased across all categories, with bags hitting all-time highs since 2022 tracking began. Product satisfaction hits ~98%, and nearly two-thirds of surveyed customers own products across multiple Yeti categories.

International Expansion Progress

• International sales are on track to represent more than 23% of full-year 2026 total sales, and Yeti remains early in unlocking this long-term growth opportunity. The company follows a repeatable, deliberate expansion framework: right assortment, right distribution, localized activation, and disciplined investment. Europe is expanding distribution and improving productivity at top accounts; Japan is in the ramp-up phase, Southeast Asia is continuing rollout, and China/Korea launches are targeted for H2 2026. Canada and Australia, Yeti's largest international markets, are expected to deliver solid full-year performance despite macro pressures.

Product Platform Performance

• Drinkware has returned to sustained growth as a scalable, durable platform, with 5% global YoY growth driven by broad-based platform expansion rather than a single hit product. Growth is supported by refreshed core products, targeted extensions (including stackable cups, chug bottles, ceramic mugs, and Yonder shaker bottles), and disciplined pricing. Additional growth runway exists in sports and fitness hydration, which attracts younger consumers and expands the category's addressable market.
• Coolers and equipment delivered double-digit growth led by soft coolers and bags, where standout Daytrip and Camino models extend Yeti into everyday use cases while maintaining its core value proposition of toughness and reliability. Demand has outstripped constrained supply for key soft cooler and bag programs since 2025, but additional capacity coming online in H2 2026 will allow Yeti to capture unmet demand. Hard coolers saw growth supported by seasonal color innovation, and the GoBox One protective case established a foundation for future storage/case category expansion.

Channel Strategy

• Wholesale delivered 19% YoY growth, the strongest quarter in over three years, validating brand strength and product relevance. Yeti maintains a disciplined channel approach focused on protecting premium positioning, prioritizing long-term shelf productivity over short-term volume, which has resulted in balanced, well-aligned inventory and strong partner confidence in Yeti's innovation pipeline.
• D2C underlying consumer demand was strong across e-commerce, Amazon, and Yeti stores, offset only by soft corporate sales. Yeti continues to invest in digital capabilities (including the AI-powered shopping assistant Ranger, which improves conversion and scales efficiently with assortment growth) and new channel tests such as the recently launched TikTok Shop, which will be scaled deliberately based on performance, repeat purchase, and brand standards.

Durable Competitive Advantages

Yeti's competitive moat is built on three reinforcing pillars:

• Brand trust and authenticity: Consumer trust built over 20 years delivers sustained pull, reduces marketing friction, and makes innovation adoption faster and more efficient, creating an advantage that is difficult to replicate.
• Scalable product platforms: Yeti builds reusable platforms rather than one-off products, allowing it to reuse design and supply chain expertise while expanding into new use cases and deepening consumer relationships. New product launches over the past 24 months represent 25-30% of category sales, while legacy products continue to deliver stable long-tail revenue, creating a compounding product development effect.
• Disciplined global omnichannel model: Each channel (wholesale for discovery, owned D2C for loyalty, marketplaces for convenience, corporate for engagement) reinforces the others and reduces reliance on any single demand source, increasing resilience across economic cycles.

Financial Position & Capital Allocation

• Yeti maintains a fortress balance sheet with over $425 million in total liquidity, ~$70 million in total debt, and strong free cash flow generation. The company has returned ~$500 million to shareholders via share repurchases over the past two years, and the board recently upsized total share repurchase authorization to $500 million, while retaining flexibility to invest through business cycles.

Overall Q1 2026 net sales reached $380.4 million, an 8.3% year-over-year increase. By product category: 1. Drinkware: Sales grew 5% year-over-year to $217 million, representing ~57% of total Q1 revenue, marking the second consecutive quarter of growth and a return to U.S. drinkware growth. 2. Coolers and Equipment: Sales grew 11% year-over-year to $156 million, representing ~41% of total Q1 revenue, with double-digit growth led by strong performance in soft coolers and bags, where demand outpaced supply in the quarter. By channel: 1. Wholesale: Global wholesale sales grew 19% year-over-year to $184 million (~48% of total Q1 revenue), the strongest quarterly wholesale performance in over three years, with healthy channel inventory and double-digit U.S. sell-through growth. 2. Direct-to-Consumer (D2C): D2C sales were flat year-over-year at $197 million (~52% of total Q1 revenue); underlying consumer demand across owned e-commerce, Amazon Marketplace, and Yeti retail stores grew in line with overall sales, but a year-over-year decline in corporate sales (driven by buyer caution, order timing, and tough prior-year comparisons) offset these gains. Corporate sales represent ~25% of total D2C sales. By region: 1. U.S.: Sales grew 8% year-over-year to $293 million (~77% of total Q1 revenue), with growth across both core product categories offset by soft corporate sales. 2. International: Sales grew 9% year-over-year to $87 million (~23% of total Q1 revenue), including an 800 basis point FX tailwind; underlying consumer demand remained strong across markets, with Q1 growth impacted by a decline in large repeat corporate orders from 2025.

• Full-year 2026 total sales growth guidance is raised to 7% to 8% from the prior 6% to 8%, driven by stronger than expected Q1 performance; sales growth is expected to be relatively consistent across remaining quarters of the year.
• By category: Management maintained prior guidance, expecting high single-digit to low double-digit growth for coolers and equipment, and mid-single-digit growth for drinkware for the full year. By channel: Wholesale is expected to grow slightly faster than D2C in 2026. By region: U.S. sales are expected to deliver low- to mid-single-digit growth, and international sales are projected to grow 18% to 20% (high teens to 20%) for the full year, unchanged from prior guidance.
• Full-year 2026 gross margin guidance is raised to 56.5% to 57% from the prior 56% to 57%. At the midpoint, this represents a 60 basis point year-over-year decline, an improvement from the prior guidance of a 90 basis point decline, driven by lower than expected realized tariff rates partially offset by higher commodity and transportation costs. Gross margins are expected to decline ~200 basis points year-over-year in H1 2026, then expand ~50 basis points year-over-year in H2 2026 as the 2025 tariff headwind lapses.
• Full-year operating expense growth guidance is maintained at 4% to 7% year-over-year, reflecting operating leverage and ongoing cost discipline; higher OPEX growth in H1 will moderate in H2 due to the timing of brand marketing spend and a return to normalized incentive compensation accrual.
• Adjusted operating income margin guidance is raised to ~14.6% for 2026, 20 basis points above 2025 and prior guidance. Adjusted operating income growth is now projected at 8% to 10% from the prior 6% to 8%.
• Adjusted diluted EPS guidance is raised to $2.83 to $2.89, representing 14% to 17% year-over-year growth, up from the prior guidance of $2.77 to $2.83 (12% to 14% growth), driven by higher projected operating margins.
• Capital expenditure guidance is unchanged at $60 to $70 million for 2026, focused on technology, product innovation, and supply chain investments. Full-year 2026 free cash flow is projected at $200 to $225 million, unchanged from prior guidance.
• Long-term, Yeti expects to deliver sustained top-line growth in the high single-digit to low double-digit range, with EPS and free cash flow growing faster than revenue driven by margin expansion and share repurchases.

• Persistent macroeconomic uncertainty could impact consumer discretionary spending, particularly in international markets like Australia that are already facing macro pressures.
• Tariff policy remains fluid and uncertain: the recent reduction in tariff rates to half the originally expected 20% is set to expire in July 2026, with rates expected to return to the 20% range barring further policy changes. There is also significant uncertainty around the amount and timing of any potential IEPA tariff refunds, which are not included in guidance.
• Input cost pressures from higher resin prices, fuel costs, and inbound transportation costs have partially offset the benefit of lower realized tariff rates, creating ongoing gross margin volatility.
• Supply constraints for high-demand soft coolers and bags have limited Yeti's ability to capture existing demand in Q1, though additional capacity is expected to come online in H2 2026.
• Corporate sales, particularly large orders, are episodic and sensitive to macroeconomic conditions and budget cycles, creating quarterly volatility in D2C results. International results are more sensitive to large corporate order volatility than the U.S. business due to the smaller overall scale of international operations.
• Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from projections, as detailed in Yeti's most recent Form 10-K filing.

Q: Given stronger than expected Q1 top-line, temporary Q1 headwinds from soft corporate sales and constrained bag supply, and international volatility, how confident is management in the 2026 revenue guidance, and what does this imply for the long-term high single-digit to low double-digit growth target? What structural changes have been made to improve margin resilience through transient headwinds like tariffs?

A: Management stated the solid Q1 performance and early Q2 momentum confirm the business model is intact, and the raised 2026 revenue guidance is solid. Temporary Q1 headwinds are expected to abate: corporate sales trends have improved in early Q2, bag supply will increase in H2, and international expansion continues to make steady forward progress. Long-term, the diversified channel, product portfolio, and nimble global supply chain create significant margin resilience, allowing Yeti to offset transient cost shocks while generating strong free cash flow for shareholder returns.

Q: What is Yeti's strategic action plan for corporate sales, what share of D2C does it represent today, and how does geographic split differ between the U.S. and international? What is the FX impact on full-year international growth guidance of 18% to 20%?

A: Corporate sales represent ~25% of total D2C sales overall, and is split into three buckets: base run-rate business, large lumpy orders, and strategic partnerships that also drive brand building. Yeti maintains active teams across all three buckets, and has already stepped up activity in Q2 after a slow Q1 start. International corporate sales have a similar overall mix but are more sensitive to large order volatility due to smaller scale. Q1 2026 had an 800 basis point FX tailwind, but this benefit is not expected to persist through the full year, and the 18% to 20% growth guidance only includes minimal incremental FX benefit, with strong underlying consumer demand supporting the target.

Q: With changing gross margin pressures from tariff shifts, transportation, and commodity costs, what is Yeti's exposure, how confident is management in the new guidance, and will gross margin decline moderate in Q2 compared to Q1?

A: Original 2026 guidance assumed 20% IEPA tariffs, but tariffs were cut to roughly 10% in late February, creating a $15 million net benefit relative to original plans, roughly two-thirds of which was offset by higher fuel, transportation, and commodity input costs. The net $5 million benefit was incorporated into the raised guidance. Management expects tariffs to return to 20% in July when the current reduced rate expires, but any further extension of lower rates would create additional upside. Gross margin decline is expected to moderate through the year, with expansion in H2 as 2025 tariff impacts lap.

Q: What drove the inflection in U.S. drinkware growth in Q1, is the growth sustainable for the rest of the year, and how much of the improvement comes from easing promotional pressure versus execution?

A: The inventory correction for large format straw products has largely completed, and the core driver of growth is successful execution of Yeti's diversification strategy for the drinkware platform, not an easing of overall promotional pressure. New innovation including stackable cups, chug bottles, and sports hydration products has expanded use cases and attracted new consumers, and strong sell-through has finally led to recovering sell-in as wholesale partners refill shelves. Growth is expected to continue through the rest of the year, in line with full-year mid-single-digit guidance.