YETI Holdings, Inc. — Form 10-Q Summary
Reporting period: The filing covers the third quarter and first nine months of fiscal 2021, ended October 2, 2021; comparatives are the periods ended September 26, 2020. The request metadata says “2020 Q3,” but the filing itself is for 2021 Q3.
Financial performance
| Metric | Q3 2021 | Q3 2020 | First 9 months 2021 | First 9 months 2020 |
|---|---|---|---|---|
| Net sales | $362.6m (+23%) | $294.6m | $967.9m (+35%) | $716.0m |
| Gross profit | $207.0m (+19%) | $174.0m | $561.3m (+39%) | $404.0m |
| Gross margin | 57.1% | 59.1% | 58.0% | 56.4% |
| Operating income | $68.7m | $70.1m | $181.2m | $132.8m |
| Net income | $53.0m | $51.4m | $139.7m | $93.4m |
| Diluted EPS | $0.60 | $0.58 | $1.58 | $1.07 |
| Operating cash flow | — | $73.2m | $239.1m |
Q3 SG&A rose 33% to $138.3m and increased to 38.1% of sales from 35.3%. Operating income fell despite sales growth; net income increased as interest expense and income tax expense were lower. For the first nine months, SG&A increased 40% to $380.1m and rose to 39.3% of sales from 37.9%.
DTC sales grew 31% in Q3 to $197.1m; wholesale sales rose 15% to $165.5m. DTC represented 54% of sales versus 51% a year earlier. Drinkware sales were $205.0m (+24%) and Coolers & Equipment sales were $149.0m (+20%). International sales were $34.1m in Q3, up from $20.2m.
Financial position and liquidity
- At October 2, 2021, cash was $259.3m, inventory $266.0m, and total assets $945.5m. Inventory had risen from $140.1m at January 2, 2021.
- Total liabilities were $505.9m and stockholders’ equity was $439.6m. The balance sheet reports current and long-term debt of $126.3m combined; management separately reports $118.1m principal outstanding under Term Loan A, with no revolver borrowings.
- The $150.0m revolving credit facility was fully available. The company reported $43.0m of working capital excluding cash and compliance with all credit-facility covenants.
- Nine-month operating cash flow was $73.2m, down from $239.1m, primarily because working capital consumed more cash, notably the $126.4m inventory increase. Investing used $47.9m, including $41.2m for property and equipment; financing used $18.2m, mainly debt repayments.
Changes, outlook, and risks
- Q3 gross margin declined 200 basis points year over year, chiefly from higher inbound freight, GSP program non-renewal and other costs. For the first nine months, gross margin improved 160 basis points, supported by product cost improvements, lower inventory reserves, and higher DTC mix, partly offset by freight and GSP-related duties.
- Management said demand remained robust, but supply constraints were limiting product availability, especially in wholesale. Port congestion, transport delays, labor and container shortages, and COVID-related disruption in sourcing markets—including a Vietnam shutdown—were affecting supply. Freight and certain product input costs were expected to remain elevated through the rest of fiscal 2021.
- Management stated that cash, operating cash generation, and available revolver capacity should meet liquidity and capital needs for at least the next 12 months. Fiscal 2021 capital expenditures for property and equipment, excluding finance lease assets, were expected to be $55m–$60m. The filing provides no clear full-year sales or earnings guidance.
- The company began using a roughly 970,000-square-foot Memphis distribution facility during Q3 and expected to exit its Dallas facility by year-end 2021. Transition execution and distribution costs are risks.
- Other notable exposures include reliance on a limited number of manufacturers, tariffs and GSP uncertainty, variable-rate debt and LIBOR transition, consumer discretionary demand, and cyber and technology risks. The largest customer represented about 11% of Q3 gross sales. Management said existing legal proceedings were not expected to materially affect financial position, results, or cash flows.
Important facts for investors to verify
- Whether supply-chain delays and elevated freight and input costs ease, and how they affect product availability and gross margin.
- Whether inventory growth converts into sales and cash; operating cash flow fell sharply year over year.
- Whether DTC growth and channel mix continue to support profitability despite higher SG&A and fulfillment costs.
- Progress on the Memphis distribution transition and the disclosed $55m–$60m capital-expenditure plan.
- Exposure to concentrated manufacturers, the largest customer, import duties, and any change in GSP or tariff treatment.