Engaged Capital and Yeti reach a key agreement. Here are three ways to create shareholder value

Core Viewpoint - Engaged Capital has entered into a cooperation agreement with Yeti, aiming to enhance board governance and drive growth opportunities for the company, which has seen a slowdown in growth despite its strong brand and product offerings [2][9]. Company Overview - Yeti is a global designer, retailer, and distributor of premium outdoor products, known for high-quality insulated coolers and tumblers, with net sales in 2024 comprising 60% from Drinkware, 38% from Coolers & Equipment, and 2% from Other categories [3]. - The company employs a diverse omnichannel strategy, selling directly to consumers and through major outdoor retailers, focusing on innovative design and premium quality to maintain competitive advantage and consumer loyalty [3]. Financial Performance - Yeti had an initial public offering in October 2018 at $18 per share, achieving annual growth rates between 17$108 in November 2021 [4]. - Growth has slowed to 3.98% in 2023, with the stock closing at $30.15, trading at eight-times EBITDA compared to over 20-times historically, indicating a perception of stability without growth prospects [4][6]. Growth Opportunities - There are three key opportunities for Yeti to create value: geographic expansion into Europe and Asia, product category diversification into luggage, bags, and camping equipment, and enhancing communication and execution strategies to boost investor confidence [4][5][6]. - The company has a strong cash position of$280 million and nearly $300 million in EBITDA, suggesting potential for significant stock buybacks, which could enhance shareholder value [6]. Board and Management Changes - The cooperation agreement includes increasing the board size to 10 directors and appointing Arne Arens and J. Magnus Welander, both with strong backgrounds in product and international expansion [2][7]. - The new directors are expected to help mitigate risks associated with market expansion and encourage more aggressive growth initiatives, addressing potential complacency in management [9]. Market Comparisons - Comparisons are drawn with SharkNinja, which successfully expanded its product lines and maintained strong investor relations, highlighting the need for Yeti to adopt similar strategies to enhance growth and market presence [5][8].