YETI Q1 Earnings Call: Tariffs and Supply Chain Disruptions Weigh on 2025 Outlook

Outdoor lifestyle products brand (NYSE:YETI) exceeded the market’s revenue expectations in Q1 CY2025 as sales rose 2.9% year on year to $351.1 million. Its non-GAAP EPS of $0.31 per share was 15.2% above analysts’ consensus estimates.

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StockStory’s Take

YETI’s first quarter results were shaped by a mix of category momentum, supply chain transformation, and evolving consumer trends. Management highlighted strong performance in Coolers & Equipment and continued international growth, supported by ongoing product innovation. CEO Matt Reintjes noted that hard coolers and bags outperformed, while parts of the drinkware segment experienced softness due to both market dynamics and supply chain diversification efforts. The company’s omni-channel strategy, including direct-to-consumer and wholesale, benefited from a broad portfolio and expanding digital engagement, though U.S. drinkware faced a challenging comparison to the prior year. Management expressed caution about macroeconomic conditions and consumer uncertainty, emphasizing disciplined cost management and operational flexibility amid ongoing external pressures.

Looking ahead, YETI’s revised guidance for 2025 reflects anticipated headwinds from accelerated supply chain shifts and heightened tariffs, particularly on products imported from China. CFO Mike McMullen explained that the supply chain transformation will create inventory constraints and delay some product launches, with the impact expected to build throughout the year. Management is closely monitoring consumer demand, especially in the U.S., and expects international markets to be a relative bright spot. Reintjes stated, “We are in a transition year as we pivot our supply chain and inventory management to minimize tariff exposure, and these actions will better position us for 2026.” The company remains focused on mitigating tariff costs, maintaining operational discipline, and investing in innovation and global expansion despite the near-term disruptions.

Key Insights from Management’s Remarks

YETI’s management attributed the quarter’s performance to product innovation in Coolers & Equipment and international expansion, while emphasizing that tariff-driven supply chain changes and cautious consumer demand have altered their outlook for the remainder of the year.

• Coolers & Equipment momentum: Category innovation drove continued growth in hard coolers and soft backpack formats, with the new Roadie 15 and Ranchero backpacks showing strong results. Management credited these launches for sustaining double-digit category growth and reinforcing YETI’s strategy of product diversification beyond drinkware.

• International strength: Exceptional performance in Europe, Australia, and Canada helped offset sluggishness in U.S. drinkware. The company’s efforts to localize marketing and expand retail partnerships abroad contributed to 22% international sales growth, and early-stage investments in Japan lay groundwork for further expansion in Asia.

• Drinkware headwinds: U.S. drinkware was pressured by lower demand for large-format, trend-driven items and supply chain constraints. Management noted that product launch delays and inventory shortages—linked to the supply chain transition—limited the impact of new innovation in this segment.

• Supply chain transformation: YETI accelerated its shift of drinkware sourcing out of China to reduce tariff exposure, expecting less than 5% of U.S. product costs to be China-sourced by the end of 2025. This transformation has temporarily constrained inventory and delayed select product launches, but is expected to strengthen the business over the long term.

• Operational discipline and cost management: The company responded to a dynamic environment by reducing inventory, pausing some capital expenditures, and engaging suppliers for cost offsets. Operating expense growth was lower than internal plans, reflecting a focus on preserving margins while continuing to invest in strategic initiatives like new product development and international team expansion.

Drivers of Future Performance

YETI’s 2025 outlook is guided by ongoing supply chain realignment, tariff headwinds, and expectations of uneven consumer demand, particularly in its U.S. business.

• Tariffs and supply chain transition: Management identified tariffs as the primary factor compressing gross margins by around 450 basis points, with $100 million in tariff costs—mostly China-related—expected to weigh on profitability. The accelerated supply chain shift will constrain supply of some products, delay launches, and require operational adjustments well into 2025.

• Innovation pipeline adjustments: Over 30 new products are planned for 2025, but some launches will be limited to non-U.S. markets or deferred to 2026 due to supply constraints. Management believes this “second bite” at innovation in 2026 will support growth once supply chain transitions are completed.

• Consumer and channel caution: YETI is closely tracking wholesale order patterns and direct-to-consumer trends for signs of softening demand. While international markets are expected to remain strong, U.S. consumer uncertainty and cautious wholesale inventory management could limit revenue growth, particularly in drinkware. The company is also experimenting with lower safety stocks and tighter inventory management to adapt to the volatile environment.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will monitor (1) progress on the supply chain transition away from China, (2) the pace and global reach of new product introductions, and (3) stabilization in gross margins as tariff mitigation efforts take effect. Additional key markers include the performance of YETI’s international business and execution on inventory management strategies, both of which will be critical to navigating a volatile macro environment and setting up for 2026.

YETI currently trades at a forward P/E ratio of 11.8×. In the wake of earnings, is it a buy or sell? The answer lies in our full research report (it’s free).

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