YETI: Promising New Partnership and Growing International Presence (NYSE:YETI)

Since my article earlier this summer, YETI Holdings, Inc.’s (NYSE:YETI) stock has remained mostly flat while the S&P 500 is up over 5%.

Yeti continues to look attractive to me as the company has released some interesting, new products over the last few months, and they announced a new partnership with Tractor Supply Company (TSCO).

Let’s dig into the latest quarter and review the financial results as well as the developments within the company over the last several months.

New Products and New Partnership

Since my last update, Yeti has launched several new products including the M12 backpack, M15 tote, and various new items in drinkware such as stackable cups, cocktail shakers, and wine chillers as the images below depict:

It’s great to see the company continue to innovate and create successful products. To give one example, it appears the Yonder bottles launched this year were a hit for Yeti as the company’s CEO, Matt Reintjes, noted on the Q3 2023 earnings call, “We continue to see our innovation in Drinkware resonate with consumers and put us in a position to capitalize on trends in the market. For instance, we expanded our Yonder product lines with new sizes and lid offerings and launched new color match lids in our Rambler stainless bottle line. In addition, we had incredibly successful fall color launches in Camp Green, Cosmic Lilac, and Power Pink.”

There was a great question on the Q3 earnings call questioning Yeti’s product innovation strategy to which Reintjes essentially stated the organization is going to continue to emphasize product innovation, in a smart, responsible way focusing on current products within coolers, drinkware, and other “Yeti worthy innovation areas.”

I was also happy to hear Yeti entered into a new partnership with Tractor Supply. This is an excellent partnership in my opinion, and it makes perfect sense for the business as Yeti is trying to reach different communities such as ranch and rodeo. Many of the “communities” Yeti has called out in the below community reach graphic align with Tractor Supply consumers:

Reintjes had a similar comment in the company’s earning call stating, “Tractor Supply Company’s unique national reach and strong heritage in farm and ranch provide what we see as highly complementary distribution to our existing channel.”

International Growth

International growth will be vital to the company’s success, and it’s clear the company is making strides to continue its positive momentum overseas. Australia is now the first international market to offer e-commerce customization and Canada will soon have similar capabilities. A distribution center also opened up in Australia in August.

In Europe, Reintjes noted a new distribution center opened in the Netherlands and there were encouraging signs of brand awareness in the United Kingdom, Germany, and the broader DACH region.

Furthermore, Reintjes noted Yeti added new global ambassadors from countries such as Canada and Japan which will certainly help boost the company’s international awareness. As I’ll discuss in more depth below, the financials are illustrating that the brand is gaining more traction globally as international sales continue to trend in the right direction.

Financials

Yeti reported a respectable quarter as revenue for Q3 2023 came in at roughly $433 million which was flat compared to the same quarter in the prior year. However, gross profit did improve by roughly 13% compared to Q3 2022. This was due to lower freight and lower product costs.

For the quarter direct-to-consumer sales were roughly $260 million which is an increase of 14% compared to the prior year’s quarter. Wholesale sales were $174 million for the quarter which is a decline of 16% compared to Q2 2023.

Drinkware sales were roughly $253 million for the quarter which is a 6% increase compared to the prior year’s quarter and cooler and equipment sales were roughly $171 million which is a decrease of 8% compared to last year’s third quarter.

Internationally sales were roughly $68 million, nearly 16% of total sales. Internationally sales were 20% higher compared to Q2 2023. This is good to see as I think international growth is a key driver for the business. As you can see below, the company has continued to increase their international sales over the years:

The company still has a healthy balance sheet with roughly $281 million in cash and enough current assets to cover all of their current liabilities as you can see below:

Additionally, I like that the company’s debt has continued to decline over the years, as you can see from this graphic below from the company’s Q3 2023 investors’ presentation:

Valuation

Yeti has a valuation grade of “D-” according to the Seeking Alpha Quant system:

Although still higher than the sector median in the above metrics, most of these metrics are essentially unchanged since my prior article. I still maintain that long-term investors could initiate a position at this price and lower their cost average when there are opportunities.

Conclusion

There were many encouraging developments for Yeti this quarter. I really like the new partnership with Tractor Supply. It makes complete sense in my opinion and as Matt Reintjes said about this partnership on the Q3 earnings call, “YETI has a strong heritage in the farm and ranch space, and we see this as a great fit given Tractor Supply’s unique scale…”

I think Yeti will be able to reach new customers and enhance the awareness of their brand and their newer products with this relationship.

The international growth is promising as well. International sales continue to increase, and I view the additional international distribution centers and new global brand ambassadors as positives.

New products continue to come out, and it sounds like continued innovation and new products are on the horizon as the company will wisely allocate capital to products that make sense to Yeti’s brand.

I believe 2024 will be a better year for the company, and I’m excited to see Yeti’s latest products and for their brand awareness to continue to grow globally.