Financial Performance Overview

YETI, a global designer and distributor of innovative outdoor products, has reported its financial results for the first quarter of fiscal year 2025. The company’s performance during this period showcases a mix of growth and challenges amidst a complex macroeconomic environment.

Revenue and Profit Trends

YETI’s net sales increased by 3% year-over-year, reaching $351.1 million in the first quarter of 2025, up from $341.4 million in the same period of 2024. This growth was driven by a 4% increase in direct-to-consumer (DTC) channel sales and a 1% increase in wholesale channel sales.

In terms of product categories, the Coolers & Equipment segment saw a 17% increase in net sales, reaching $140.2 million, while the Drinkware segment experienced a 4% decline to $205.6 million. The company attributed the Drinkware performance to a challenging comparison to the prior year’s 13% growth, as well as the strategic focus on supply chain diversification over new product innovation during the current quarter.

Gross profit increased by 4% to $201.7 million, with the gross margin rate improving by 30 basis points to 57.4%. This was primarily due to lower product costs and the absence of inventory fair value step-up amortization related to the Mystery Ranch acquisition, partially offset by a decrease in the Drinkware sales mix and the unfavorable impact of foreign currency exchange rates.

However, selling, general, and administrative (SG&A) expenses increased by 7% to $180.1 million, representing 51.3% of net sales, up from 49.5% in the prior year quarter. This increase was driven by higher general and administrative expenses, employee compensation and benefits, and depreciation and amortization, partially offset by lower distribution and fulfillment costs.

As a result, operating income decreased by 16% to $21.7 million, and net income increased by 5% to $16.6 million compared to the first quarter of 2024.

Strengths and Weaknesses

Strengths:

• Balanced omni-channel distribution strategy, with both wholesale and direct-to-consumer channels contributing to growth.
• Strong performance in the Coolers & Equipment segment, driven by growth in bags and hard coolers.
• Improved gross margin due to lower product costs and the absence of acquisition-related expenses.
• Continued international expansion, with international net sales representing 23% of total net sales in the first quarter of 2025, up from 19% in the prior year quarter.

Weaknesses:

• Decline in Drinkware segment sales, which is YETI’s largest and historically strongest product category.
• Increase in SG&A expenses, particularly in general and administrative areas, outpacing the revenue growth.
• Macroeconomic challenges, including inflationary pressures and tariff impacts, which are expected to continue to negatively affect the business in 2025.

Outlook and Future Considerations

YETI’s management acknowledges the continuation of a challenging macroeconomic environment, with uncertainties surrounding inflationary pressures, consumer confidence, and the impact of tariffs on imports from China. The company expects these factors to have a material negative impact on its gross margins and results of operations for the remainder of 2025.

To mitigate the tariff impact, YETI has accelerated its strategy to diversify its Drinkware manufacturing to additional countries beyond China, with the goal of having a large majority of such manufacturing capacity outside of China by the end of 2025. However, a significant percentage of Drinkware manufacturing capacity currently remains in China, which may lead to inventory constraints and potentially adverse impacts on sales.

YETI is also pursuing other strategic options to manage the tariff impact, including negotiations with suppliers, evaluating pricing strategies, leveraging tariff exemptions, and pursuing other supply chain optimization activities. The company believes that its strong cash position, available inventory, and access to its Revolving Credit Facility will provide sufficient liquidity to navigate the uncertain period and fund its operations for the foreseeable future.

Despite the near-term challenges, YETI remains committed to its long-term growth strategy, which includes continued product innovation, international expansion, and the enhancement of its omni-channel distribution capabilities. The company’s focus on delivering high-quality, exceptional products and building a strong brand loyalty among outdoor enthusiasts and consumers who value premium quality and design remains a key competitive advantage.

Conclusion

YETI’s financial performance in the first quarter of 2025 reflects the company’s ability to navigate a complex macroeconomic environment, with growth in the Coolers & Equipment segment and improved gross margins offsetting the decline in Drinkware sales and increased SG&A expenses. While the company faces near-term headwinds, its strategic initiatives to diversify its supply chain and manage the impact of tariffs, coupled with its strong financial position, position YETI to weather the current challenges and continue its long-term growth trajectory.