Outdoor lifestyle products brand (NYSE:YETI)
announced better-than-expected results in Q1 CY2024, with revenue up 12.7% year on year to $341.4 million. It made a non-GAAP profit of $0.34 per share, improving from its profit of $0.18 per share in the same quarter last year.
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YETI (YETI) Q1 CY2024 Highlights:
- Revenue: $341.4 million vs analyst estimates of $333.3 million (2.4% beat)
- EPS (non-GAAP): $0.34 vs analyst estimates of $0.24 (39.1% beat)
- Gross Margin (GAAP): 57.1%, up from 53.5% in the same quarter last year
- Free Cash Flow was -$114.3 million, down from $159.5 million in the previous quarter
- Market Capitalization: $2.97 billion
Founded by two brothers from Texas, YETI (NYSE:YETI) specializes in durable outdoor goods including coolers, drinkware, and other gear tailored to adventure enthusiasts.
Leisure ProductsLeisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. YETI’s annualized revenue growth rate of 16.3% over the last five years was decent for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That’s why we also follow short-term performance. YETI’s recent history shows the business has slowed as its annualized revenue growth of 7.9% over the last two years is below its five-year trend.
This quarter, YETI reported robust year-on-year revenue growth of 12.7%, and its $341.4 million of revenue exceeded Wall Street’s estimates by 2.4%. Looking ahead, Wall Street expects sales to grow 8% over the next 12 months, a deceleration from this quarter.
Cash Is KingIf you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Over the last two years, YETI has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 8.4%, subpar for a consumer discretionary business.
YETI burned through $114.3 million of cash in Q1, equivalent to a negative 33.5% margin, reducing its cash burn by 101% year on year. Over the next year, analysts predict YETI’s cash profitability will fall. Their consensus estimates imply its LTM free cash flow margin of 10.5% will decrease to 7.9%.
Key Takeaways from YETI’s Q1 Results
We were impressed by how significantly YETI blew past analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. While full year revenue guidance was maintained, EPS guidance was raised. Overall, we think this was a really good quarter that should please shareholders. The stock is up 9% after reporting and currently trades at $38 per share.
