(This story was updated on 4/13/2023.)
Yeti Holdings, retailer and manufacturer of outdoor products, reported sales were nearly flat for the fourth quarter of 2022 compared to the same period the previous year, after an issue with several product lines led to voluntary recalls.
The recalls also led Yeti to a report a net loss for the quarter.
Q4 2022 Results
For Q4 2022, sales increased 1% to $448 million compared to the same period the previous year for the Austin-based company. Those figures include the $38.4 million hit the company incurred from the recalls. Adjusted sales, excluding the recalls, increased 10% to $486.4 million.
Including the impact of the recalls, Yeti’s net loss was $27.7 million compared to net income of $72.9 million in the prior year quarter.
Adjusted net income decreased 13% to $67.7 million compared to $78 million in the prior year quarter.
Q4 direct-to-consumer sales, including the impact from the recalls, increased 17% to $309.5 million on strong sales of drinkware, coolers and equipment.
However, wholesale channel sales decreased 23% to $138.5 million including the impact from the recalls. Adjusted wholesale sales fell 5%.
Drinkware sales in the quarter increased 8% to $308.2 million, driven by the company’s expanded product offerings and strong demand for customization.
Coolers and equipment sales decreased 14% to $130.5 million, but that was largely because of the $38.4 million impact from the recalls. Excluding the recalls, sales in the coolers and equipment category increased 11% to $168.9 million.
Fiscal 2022 Results
For the full year, Yeti revenue totaled $1.59 billion, a 13% increase – that’s on top of a 29% increase in 2021. Excluding the impact from the recalls, annual revenue grew 16%.
Net income, including the recalls’ impact, dropped 58% to $89.7 million compared to net income of $212.6 million in the prior year.
Adjusted net income decreased 11%.
More About the Yeti Recall
“Our results reflect the impact of the proposed voluntary recalls that we recognized during the fourth quarter,” said Matt Reintjes, president and chief executive officer of Yeti, who spoke on the company’s earnings call today.
“We believe these recalls are the right decision for our customers and our brand, and consistent with our commitment to durability, performance, quality and design.”
The company identified a problem last year with the magnet-lined closures on certain soft coolers and dry gear cases.
A strip of material housing these magnets can fail and the magnets can fall off or out of the coolers, posing a risk of serious injury or death if the magnets are ingested.
The affected products were the Hopper M30 soft cooler, Hopper M20 soft backpack cooler and SideKick dry gear case.
Yeti had sold about 1.5 million units with these materials since 2018, and was aware of about 1,400 units, or 0.1% of the total sold, that have had issues with the magnet-lined closure. No injuries have been reported.
The company acted in January to remove the products from the market and stop selling them, then imposed voluntary recalls.
That led to an inventory write-off of $34.1 million in the period for the unsellable inventory.
Yeti set aside $94.8 million for estimated future product refunds, the cost to fix or replace affected products, and other recall-related costs.
The total unfavorable impact of the voluntary recalls on Yeti’s Q4 operating income was $128.9 million.
Stock Falls on Disappointing Guidance
Shares of Yeti’s stock were down 2% Thursday afternoon after the company posted its fourth-quarter results and its guidance for 2023 fell short of analyst expectations.
For fiscal 2023, YETI expects adjusted sales to increase between 3% and 5% with most of the growth happening in the second half of the year.
Yeti expects 2023 annual adjusted earnings of between $2.12 and $2.23 a share, with no earnings growth expected until the fourth quarter.
Yeti operates in North America, Asia, Australia, New Zealand, Europe and the U.K.
Last week, Yeti announced the appointment of Mike McMullen as its senior vice president, chief financial officer and treasurer. McMullen served as Yeti’s interim CFO since October 2022.
Bart Schaneman can be reached at email@example.com.