Yeti managed to post revenue growth in the first quarter despite the negative impacts of the voluntary recall of three different products due to safety concerns and a slower pace of wholesale orders in North America.
“Even with the impact of the voluntary recalls, first-quarter sales growth was positive and above our expectations,” CEO Matt Reintjes said in a statement.
In March, Yeti initiated the voluntary recall of the Hopper M30 Soft Cooler, the Hopper M20 Soft Backpack Cooler, and the SideKick Dry Gear Case.
Reintjes also noted on an earnings call Thursday that gross margin expanded for the first time in seven quarters as inbound freight expenses, which rose astronomically during the pandemic, continue to drop.
Yeti Q1 Results
Total revenue increased 3% to $302.8 million led by growth in the direct-to-consumer (DTC) channel.
DTC revenue increased 7% to $167 million with growth in the channel coming from both the coolers and equipment and the drinkware product lines.
Wholesale sales fell 1% to $135.8 million, with coolers and equipment sales down and drinkware sales up.
In all channels, drinkware sales rose 3% to $190.3 million driven by strong demand for Rambler bottles as well as the debut of the new Yonder bottles and Rambler straw lid mugs.
Coolers and equipment sales rose 1% to $104.4 million. Strength in cargo, bags, and soft coolers not impacted by the recalls offset a drop in hard coolers and outdoor living products.
“We are pleased overall at our ability to post growth in the period in coolers and equipment supported by the performance of our portfolio of products, including our soft coolers (not impacted by the recall) and the success of our expanded GoBox cargo line,” Reintjes said on the call.
Gross margin improved to 53.5% compared to 52.7% in the same period last year due to lower inbound freight costs.
Net income dropped 59% to $10.6 million. Adjusted net income, which excludes the impacts of the voluntary recall, fell 46%.
Recall Design Fixes
Reintjes also praised the Yeti staff for coming up with design fixes for the Yeti products that were recalled, with the solutions going into production this month. The updated products are expected to be re-introduced into the market in the fourth quarter.
The company confirmed its guidance for the rest of the year, which assumes adjusted sales growth of 3% to 5%.
For context, Yeti revenue in fiscal 2022 increased 13% to $1.6 billion.
Adjusted net income per share in 2023 should range from $2.12 to $2.23 – a 5% to 10% decline.