YETI(US:YETI)2023-05-11 18:06Financial Data and Key Metrics Changes - Sales increased by 3% to $303 million compared to $294 million in the prior year period, slightly above expectations despite challenges from a voluntary product recall and cautious ordering in the wholesale channel [40][41] - Gross profit increased by 4% to $161 million, representing 53% of sales, marking the first gross margin expansion since Q2 2021, primarily due to lower inbound freight costs [50] - Operating income decreased by 43% to $22 million, or 7.2% of sales, compared to 13% in the same period last year, while net income decreased by 46% to $16 million, or $0.18 per diluted share [53] Business Line Data and Key Metrics Changes - Coolers & Equipment sales increased by 1% to $104 million, driven by demand for soft coolers not impacted by the recall and growth in the GoBox family [47] - Drinkware sales increased by 3% to $190 million, with strong demand for Rambler bottles and new products like the Yonder water bottle, although growth was impacted by the timing of customization fulfillment [48][49] - Direct-to-consumer (DTC) sales grew by 7% to $167 million, reaching 55% of total sales mix, while wholesale sales decreased by 1% to $136 million [45] Market Data and Key Metrics Changes - International sales grew by 33% to $50 million, representing approximately 16% of total sales, with strong growth in Europe, Australia, and Canada [50][31] - The mix of international sales reached a new high of 16%, up from 13% last year, attributed to the domestic impact of the recall and strong growth in key international markets [31] Company Strategy and Development Direction - The company is focused on reintroducing improved versions of recalled products in Q4 and expanding product offerings, emphasizing safety and quality [10][11] - Strategic efforts include supply chain diversification, with production of core volume SKUs beginning outside of China, and a commitment to circularity with over 70% of the product portfolio in circularity programs [12][13] - Partnerships with organizations like the World Surf League and events like the Formula One Grand Prix are aimed at enhancing brand awareness and engaging new customers [15][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's demand, despite challenges from the recall and cautious wholesale ordering, indicating a healthy overall channel inventory position [42][81] - The company expects full-year sales to increase between 3% and 5%, with low double-digit declines in Coolers & Equipment and wholesale channels in the second and third quarters, followed by a return to growth in Q4 [55][59] - Gross margin targets for 2023 are set at approximately 55%, with expectations for continued improvements in the second half of the year [61] Other Important Information - The company ended Q1 with $168 million in cash and a 16% decrease in inventory year-over-year, indicating effective inventory management [54] - SG&A expenses increased by 19% to $139 million, reflecting investments in global talent and demand creation [51][52] - The company announced the resignation of Tracey Brown from the Board of Directors, thanking her for her contributions [35] Q&A Session Summary Question: Concerns about the Drinkware business and competition - Management acknowledged market expansion in Drinkware and emphasized the strength of their portfolio strategy, addressing multiple consumer groups and use cases [68][69] Question: Quantifying sell-through growth - Management noted that sell-through growth was positive across categories but did not provide specific quantification due to variability in reporting [72][73] Question: Investment plans if gross margins improve - Management indicated that any gross margin upside would likely be reinvested in brand awareness and global expansion initiatives [74][75] Question: Timing for reintroducing recalled products - Management confirmed production is underway and expects to reintroduce products in Q4, utilizing standard marketing strategies to create consumer awareness [76][78] Question: Wholesale channel outlook - Management reported mixed feedback from wholesale partners, with some showing strong demand while others remain cautious [81][82] Question: Performance of YETI.com and customization impact - Management highlighted that while demand was strong, the unique challenges in Q1 related to customization fulfillment affected comparisons [85][86]