A Look at YETI Holdings’ Risk Factors

Texas-based YETI Holdings, Inc. (YETI) provides innovative outdoor products, including coolers, drinkware, backpacks and bags. Let’s look at YETI’s recent Q2 2021 performance and understand what has changed in its key risk factors that investors should know.

Revenue increased 44.8% year-over-year to $357.7 million, outperforming analysts’ estimates by $29.1 million. YETI witnessed double-digit growth across direct-to-consumer and wholesale channels on the back of strong performance in both Drinkware and Coolers & Equipment segments.

The President and CEO of YETI, Matt Reintjes, remarked, “The ongoing momentum in the business continues to be supported by the incredible execution of our team and many brand partners.

“We remain diligent and thoughtful as we contain and mitigate global supply chain volatility and cost pressures, with a focus on what we directly control – driving brand passion, consideration, and demand.”

Significantly, the company saw a 52% increase in gross profit to $209.1 million and a gross margin expansion of 280 basis points, which were driven by a favorable mix shift to DTC channel, cost improvements and lower inventory reserves.

Despite a 50% jump in SG&A expenses, net income surged 68% to $56.2 million. Earnings per share surged to $0.68 from $0.41 a year ago and outperformed consensus estimates by $0.12. (See Insiders’ Hot Stocks on TipRanks)

Furthermore, YETI updated its Fiscal 2021outlook. It now expects net sales growth to be in the range of 26% and 28%, as compared to the previous outlook of 20% to 22% growth. The company expects its earnings per share to land between $2.42 and $2.46 versus the previous estimate of $2.28 to $2.32.

On October 5, UBS analyst Peter Grom reiterated a Hold rating on the stock and decreased the price target to $92 from $112.

Berenberg Bank’s Rudy Yang also reiterated a Hold rating on YETI and increased the price target to $103 from $83.

Yang said, “The company continues to benefit from growing preferences for outdoor activities, as the company delivered 45% year-over-year sales growth. Although robust demand has led the company to increase its FY2021 guidance for sales and adjusted EPS growth, we remain cautious of near-term margin pressures and ongoing inventory constraints.”

Based on 10 Buys and 5 Holds, consensus on the Street is a Moderate Buy. The average YETI Holdings price target of $110.33 implies 26.6% upside potential for the stock.

Now, let’s look at what has changed in the company’s key risk factors.

According to the new Tipranks’ Risk Factors tool, YETI’s main risk category is Finance & Corporate, which accounts for 30% of the total 53 risks identified. The company has changed two key risk factors in its recent Q2 report.

Under the Finance & Corporate risk category, YETI notes that its business could be harmed if it is unable to accurately forecast its results of operations and growth rate.

As YETI expands into new markets and geographies and introduces new products, forecasting performance will be challenging. The COVID-19 pandemic-induced uncertainty also exacerbates this difficulty.

A failure to forecast results of operations accurately may result in poor operating decisions, excess inventory levels, or a shortage of products for consumers.

Under the Macro & Political risk category, YETI highlights that the COVID-19 pandemic could continue to negatively impact the global supply chain, YETI’s business and financial condition and its ability to obtain financing.

The Finance & Corporate risk factor’s sector average is at 39%, compared to YETI’s 30%. Shares are up 27.3% so far this year.

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