YETI Holdings: Global Engagement and Growth Strategy
2023-07-30
The YETI Holdings Q1 2023 earnings conference call was led by the company's CEO, Matt Reintjes, and CFO, Mike McMullen. They provided an overview of the first-quarter results, which included the impact of a product recall and plans for returning improved products to the market.
One of the most important topics discussed in the meeting was the performance of the wholesale segment in the U.S. versus international markets. The company reported that while the international wholesale segment showed growth, the U.S. wholesale segment experienced a decline. They expect the decline in U.S. wholesale to continue in the coming quarters but anticipate a return to double-digit growth in the fourth quarter.
A particularly interesting aspect of the meeting was the company's global engagement and activations strategy. YETI Holdings has been actively involved in sponsoring various events and partnerships to create engagement opportunities both on and off the mountain. They have sponsored events like the natural selection tour and the Freeride World Tour, where they hosted on-site product engraving and culinary events. This demonstrates their commitment to engaging with their target audience and creating unique experiences for them.
In addition to event sponsorships, the company has also entered into partnerships with high-profile organizations such as the Oracle Red Bull racing team, serving as their official cooler and drinkware sponsor. This partnership not only provides exposure for the company but also aligns them with a successful and globally recognized brand.
Furthermore, YETI Holdings has extended its support to different communities such as fishing, skateboarding, and climbing. They have sponsored events like the Bassmaster Classic and the Phoenix Amateur, demonstrating their commitment to supporting and nurturing these communities. Additionally, they have recently launched a specialty VIP program with Metallica as they embark on their M72 World Tour. This partnership not only showcases the company's ability to integrate with popular culture but also highlights their support for artists and musicians.
The company's global engagement and activations strategy is a key aspect of their business. By actively participating in events, partnering with influential organizations, and supporting various communities, they are able to connect with their target audience on a deeper level and create a strong brand presence globally.
The market outlook for YETI Holdings is mixed. While the international wholesale segment showed growth, the U.S. wholesale segment experienced a decline. The company expects the decline in U.S. wholesale to continue in the coming quarters but anticipates a return to double-digit growth in the fourth quarter. They are optimistic about the growth potential in the drinkware segment and plan to reintroduce products currently on stop sale and introduce new products.
During the meeting, the company discussed several key drivers of their business. These include the impact of recalls on their operations and financials, freight costs affecting their gross margin, business growth opportunities in other parts of their business, and the importance of securing shelf space for their products.
YETI Holdings outlined their plans for product and service improvements, which include investing in growth opportunities outside the U.S., raising brand awareness globally, expanding global teams and technology capabilities, reintroducing recalled items and launching two new items, supporting these products with marketing efforts, leveraging marketing strategies to promote the products, introducing new sizes and additional colorways in the future, building into 2024 as a strategic category, and monitoring the wholesale channel and gathering feedback from wholesale partners.
The company's competitive landscape is evolving positively. They have a strong direct-to-consumer business across multiple European markets and are experiencing good growth in brand awareness and consumer demand. YETI Holdings is also expanding their product portfolio to engage both existing and new customers. They are implementing marketing strategies focused on brand awareness activations, on-mountain activations, and partnerships with major sports. Additionally, they are leveraging advanced analytics to effectively allocate performance marketing dollars and tailor their marketing efforts based on demographics, geographies, and consumer affinities.
During the meeting, several key performance indicators (KPIs) were discussed. These included wholesale trends, sell-through and sell-in, the impact of stop sale, and recapture rate.
Wholesale trends were down 1% overall, with international wholesale showing growth. This indicates that the company's performance in the U.S. wholesale market experienced a decline.
Sell-through and sell-in were also discussed, with positive sell-through in the U.S., indicating that products were being sold to end consumers. However, the U.S. wholesale performance was down, suggesting a difference between sell-through and sell-in, meaning products were not being sold to retailers as effectively.
The impact of a stop sale on soft coolers was highlighted, primarily affecting the U.S. market. This implies that the stop sale had a negative effect on sales and could be a significant KPI to monitor.
Lastly, the recapture rate was mentioned, although specific details were not provided. The recapture rate measures the percentage of lost customers that a company is able to win back. It is likely that the company discussed this KPI to assess their ability to regain customers after the impact of the stop sale.
Overall, these KPIs provide insights into the company's wholesale performance, sales effectiveness, and the impact of specific events on their business. Monitoring these KPIs will be crucial for the company to evaluate their performance and make informed decisions moving forward.
Looking ahead, YETI Holdings provided their outlook for the quarter and year. They expect full-year sales to increase between 3% and 5% compared to fiscal 2022 adjusted net sales. Sales for the first three quarters of the year are expected to be roughly flat in aggregate, with a low single-digit decline in sales for the second quarter and approximately flat growth for the third quarter. The stop sale of recall products will have a significant impact on growth in the second and third quarters, estimated to be approximately 900 basis points in both quarters. Fourth-quarter buying patterns for the holiday season are expected to be more normalized compared to the third quarter last year. Growth by channel and category is expected to vary, with low double-digit declines in the coolers and equipment category for the second and third quarters, followed by strong growth in the fourth quarter. Drinkware growth is expected to improve in the back half of the year. The wholesale channel is expected to decline low double digits.
In terms of strategic initiatives, YETI Holdings is focused on setting itself up for growth outside the U.S. They plan to invest in raising brand awareness and expanding their global teams and technology capabilities. In Q4, they will reintroduce recall items and two new items into the market. The company intends to reintroduce the products using their usual marketing strategies and leveraging their brand awareness. They also have plans for growth in 2024, with the introduction of new sizes and additional colorways in the strategic category.
In conclusion, YETI Holdings reported a good start to 2023, with top and bottom-line results on track to meet their full-year financial commitments. Despite challenges such as a voluntary product recall and slow orders in the North American wholesale channels, the company achieved sales growth in coolers and equipment as well as drinkware. The direct-to-consumer channel saw a significant increase in sales, while wholesale declined slightly. YETI Holdings expressed satisfaction with their team's focus on brand and innovation, and they have plans to continue driving growth in the coming quarters.