Yeti executives had a lot to say about the recent acquisition of backpack brand Mystery Ranch, including moves Yeti is making to support the brand and capitalize on its existing strengths.

The company also indicated that it sees a big opportunity in softgoods overall and has hired an outdoor industry veteran and former Osprey Packs CEO to lead the division.

During a conference call with investors Wednesday morning, Yeti leadership said they plan to operate Mystery Ranch as is for now while the companies work on the integration.

“There are areas where the Mystery Ranch brand has incredible relevance and credibility, and we’ll continue to stoke and foster that because I think that’s important for both storytelling and innovation, and how we build out the overall portfolio,” said Matt Reintjes, Yeti CEO.

“But as we think about a forward roadmap, the expectation is that the technology, the design, the talent team that we’ll put behind that really will be to build out a larger Yeti portfolio and take advantage of this front-end commercialization engine.”

Yeti paid $48.5 million for Mystery Ranch and cast-iron cookware brand Butter Pat in the first quarter of 2024 but did not say how much it paid for each brand separately.

Go-Forward Plan for Packs

When asked about acquiring Mystery Ranch, Reintjes said Yeti is looking for talent, technology, and design that brings a “differentiating point of view that’s leverageable and scalable” when considering an acquisition.

Reintjes said the strength of the Mystery Ranch brand is the product’s carrying systems and how it is used in “heavy-hauling, heavy-carry environments.”

Regarding that strength and the question of intellectual property, he said, “There are some things around the Mystery Ranch designs that that are protectable and have been protected that we really liked.”

“We saw (Mystery Ranch) as incredibly complementary and we think those technologies in those designs are leverageable and have more broad, more scalable applications,” Reintjes said.

He also mentioned the interplay between Yeti’s legacy packs and the Mystery Ranch products.

“As we bring those assortments together, there’s going to be some moving parts in there,” Reintjes said. “There’s going to be some SKU rationalization. There’s going to be some price-point rationalization. There’s going to be building up that assortment.”

Mike McMullen, chief financial officer for Yeti, added that Mystery Ranch products will have a higher mix of wholesale sales in year one.

Mystery Ranch currently goes to market through four primary channels: direct, traditional outdoor retail, specialty, and international distribution.

Yeti Hires Layne Rigney to Lead Softgoods

Yeti recently hired Layne Rigney, the former CEO of Osprey Packs and the former president of Camelbak, to run its softgoods department, including the Mystery Ranch acquisition.

Reintjes pointed out that the global market for premium bags is more than $9 billion.

“The team in Bozeman shares that Yeti commitment to superior design, driving innovation and supporting our communities with the best gear you can make,” Reintjes said. “This range of mission-based outdoor and everyday designs will perfectly complement Yeti’s premium line of waterproof and everyday bags.”

Q4 2023 Results

Yeti reported a 16% sales increase to $519.8 million for the quarter ended Dec. 30.

Gross profit increased 89% to $315.2 million, or 60.6% of sales in the quarter.

Net income was $78.6 million, or 15.1% of sales, compared to a net loss of $27.7 million, or 6.2% of sales, in the prior-year quarter.

Q4 Wholesale and DTC Up – More Yeti Stores Planned

Adjusted wholesale sales totaled $172.9 million, up 1.3% for the quarter.

“Inventory in the channel is in good shape and running below where we entered 2023,” Reintjes said.

Adjusted direct-to-consumer sales were $344 million, up 9% for the quarter.

The company sees Yeti branded stores as “powerful tools” to drive awareness, consideration, purchases, and broader customer acquisition.

Yeti plans to add four to five new locations in 2024, including its first store in New York City and its first international store in Calgary.

Coolers and Equipment Sales Disappoint in Q4

Reintjes said Yeti had had high expectations for the holiday season given the strong year-to-date Q3 sell-through trends of hard coolers coupled with the return of key soft cooler products.

However, overall demand for hard and soft coolers fell short of expectations, he added, partially due to promotional activity.

“Given that, we feel really good,” Reintjes said. “We felt really good about our inventory position coming out of this holiday season and we’d expect to stay more in balance as we go through this year.”

Yet’s Rare Miss in Q4

Anna Glaessgen, a financial analyst who covers Yeti for B. Riley Financial, pointed out in her analysis following the call that Yeti’s Q4 sales and EPS miss for Q4, was “rare,” as the coolers and equipment segment was impacted by consumer caution and inconsistency around high-ticket spend. At the same time, SG&A came in higher than expected.

Adjusted sales of $517 million for the quarter fell shy of Wall Street’s $536 million estimate, with adjusted EPS of 90 cents versus the 96 cents consensus estimate, Glaessgen noted.

While sales growth was essentially in line with expectations, “More surprising to us, however, was the adjusted EPS shortfall, as operating margin is impacted by implied SG&A deleverage,” Glaessgen wrote.

2023 Full-Year Results

For the full year, Yeti’s net sales increased 4% to $1.65 billion compared to fiscal year 2022. That’s on top of a 13% increase in 2022.

Gross profit increased 24% to $943.2 million, or 56.9% of sales, for the year.

Net income increased 89% to $169.9 million, or 10.2% of sales, compared to $89.7 million, or 5.6% of sales in the prior year.

Drinkware Growth

Reintjes noted that Yeti drinkware hit $1 billion in annual sales in 2023.

Revenue and Profit Growth Forecast for 2024

For fiscal year 2024, Yeti expects adjusted sales to increase between 7% and 9%.

“We’re taking a prudently conservative approach to planning our top line in a year when we expect ongoing spending pressures and macro uncertainty,” McMullen said.

The company also expects adjusted net income per diluted share between $2.45 and $2.50 – a 9% to 11% increase.

Yeti also announced that its board of directors has authorized the repurchase of up to $300 million of Yeti’s common stock.

“We plan to be opportunistic with repurchases to offset dilution, as we see buybacks that fit within our capital allocation priority,” Reintjes said.

Bart Schaneman can be reached at [email protected].