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Bear of the Day: YETI (YETI)
YETI Inc. (YETI - Free Report) has seen changes in demand after 2-years of strong growth. This Zacks Rank #5 (Strong Sell) cut its full year earnings and sales outlook.
YETI is a retailer, designer and distributor of innovative outdoor products. It makes coolers, drinkware, bags and apparel designed to meet the needs of diverse outdoor pursuits. The company has built a strong following of brand loyalists globally.
A Miss in the Second Quarter
On Aug 4, YETI reported second quarter results and missed on the Zacks Consensus. It reported $0.63 versus the Zacks Consensus of $0.68.
This was the company's first earnings miss since going public in 2018.
Sales rose 17% to $420 million compared to $357.7 million a year ago. This was on top of last year's 45% growth. It had a 3-year compounded annual growth rate of 22%.
But these sales were slightly below expectations, due to softer digital traffic and new customer acquisition trends after several years of strong growth.
All of its segments saw growth in the quarter. Drinkware sales rose 12% as it expanded its Drinkware product offerings.
Cooler & Equipment sales gained 23% driven by strong performance in bags, soft coolers and hard coolers.
Gross Margins Fall
The company saw a decrease in gross margins of 630 basis points primarily driven by higher inbound freight, higher product costs and the unfavorable impact of foreign currency exchange rates. This was only partially offset by price increases.
Additionally, a shift towards wholesale and towards coolers and equipment also negatively impacted gross margin.
YETI expects this shift to continue throughout the balance of the year.
In better news on transportation costs, it's seeing signs of meaningful container cost decreases which should positively impact gross margins as they enter into Fiscal 2023.
YETI Cut Full Year Sales and Earnings Guidance
Given the dynamic environment, YETI felt it was prudent to cut its full year guidance.
Sales are now expected to increase between 15% and 17%, which is down from its prior outlook of between 18% and 20%.
Earnings are now forecast to be between $2.34 and $2.46, down from their previous guidance of $2.86 to $2.91.
Not surprising, the analysts have cut their estimates. 8 estimates were lowered for both 2022 and 2023 in the last 30 days.
The 2022 Zacks Consensus Estimate is now expected to be $2.46, down from $2.90. That's actually an earnings decline of 4.3% in 2022 as the company made $2.57 last year.
Shares Plunge, But is YETI on Sale?
YETI was one of the big pandemic winners. From 2018, when it went public, through late 2021, shares were up over 500%.
But they have sunk 51% year-to-date.
Image Source: Zacks Investment Research
But is it a deal? YETI has a forward P/E of 16.6. That's cheaper than the shares have been in the past, but it's not dirt cheap.
YETI doesn't pay a dividend, but it did complete a $100 million share repurchase plan in the first quarter of 2022.
Investors who love the brand might want to wait for signs that earnings may start to rise again before diving in.