YETI(YETI) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - YETI reported a 20% increase in sales for Q3 2022, reaching $433.6 million compared to $362.6 million in the prior-year period, exceeding expectations [38] - Gross profit increased by 7% to $222.4 million, representing 51.3% of sales, down from 57.1% in the same period last year due to higher inbound freight and product costs [44] - Adjusted net income decreased by 6% to $54.7 million, or $0.63 per diluted share, compared to $58 million, or $0.65 per diluted share in the prior-year period [46] Business Line Data and Key Metrics Changes - Coolers & Equipment sales increased by 25% to $185.7 million, driven by improved inventory positioning and ongoing demand [41] - Drinkware sales grew by 17% to $239 million, with strong trends in bottles and travel mugs [43] - The Bags category also contributed to growth, supported by new product introductions [40] Market Data and Key Metrics Changes - International sales grew by 60% to $56.5 million, representing 13% of total sales, with strong performance across Canada, Australia, and Europe [30] - The U.S. market showed strong wholesale performance, coupled with robust DTC growth [31] Company Strategy and Development Direction - YETI's strategic growth priorities include expanding brand awareness and customer engagement, focusing on product innovation and customization capabilities [13] - The company aims to capture holiday demand with a strong product lineup and marketing campaigns [12] - YETI plans to accelerate store openings in 2023 to enhance brand exposure and customer experience [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about gross margin tailwinds building in 2023, despite current market uncertainties [10] - The company remains focused on maintaining a healthy balance sheet and strong cash flow generation moving into 2023 [36] - Management highlighted the importance of product innovation as a catalyst for customer growth and retention [74] Other Important Information - The company is actively managing inventory to better match demand, with a focus on reducing transit times [56] - YETI's recent product innovations include new drinkware and cooler models, which are expected to drive future growth [12][21] Q&A Session Summary Question: Changes in customer behavior heading into the holiday season - Management noted strong customer engagement and brand recognition, with a focus on distributing products effectively across channels [62] Question: Performance of drinkware in wholesale - Management confirmed that drinkware performed positively in wholesale, benefiting from improved inventory levels [64] Question: Supply chain pressures and revenue growth scenarios - Management expects easing supply chain pressures to provide a tailwind in FY '23, with more clarity to come in future earnings calls [68] Question: Trends on YETI's direct-to-consumer channels - Management reported strong retention rates on yeti.com and emphasized the importance of a balanced omni-channel strategy [70] Question: Innovation as a growth catalyst - Management highlighted the critical role of innovation in driving customer acquisition and retention, with a focus on expanding product offerings [74] Question: Gross margin headwinds and pricing strategy - Management discussed the impact of inbound freight costs and product costs on margins, while maintaining a consistent pricing strategy [81]