Outdoor lifestyle products brand (NYSE:YETI) missed analysts' expectations in Q4 FY2023, with revenue up 16% year on year to $519.8 million. It made a non-GAAP profit of $0.90 per share, improving from its profit of $0.78 per share in the same quarter last year.
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YETI (YETI) Q4 FY2023 Highlights:
- Revenue: $519.8 million vs analyst estimates of $535.9 million (3% miss)
- EPS (non-GAAP): $0.90 vs analyst expectations of $0.96 (6.4% miss)
- Guidance for 2024 EPS (non-GAAP): $2.48 at the midpoint vs analyst expectations of $2.68 (7.6% miss)
- Free Cash Flow of $159.5 million, up 121% from the previous quarter
- Gross Margin (GAAP): 60.6%, up from 37.3% in the same quarter last year
- Market Capitalization: $4.19 billion
Founded by two brothers from Texas, YETI (NYSE:YETI) specializes in durable outdoor goods including coolers, drinkware, and gear tailored for 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 solid for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. YETI's recent history shows its momentum has slowed, as its annualized revenue growth of 8.4% over the last two years is below its five-year trend.
This quarter, YETI's revenue grew 16% year on year to $519.8 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 11.8% over the next 12 months, a deceleration from this quarter.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because 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 8.9%, subpar for a consumer discretionary business.
YETI's free cash flow came in at $159.5 million in Q4, equivalent to a 30.7% margin and in line with the same quarter last year. Over the next year, analysts predict YETI's cash profitability will fall. Their consensus estimates imply its LTM free cash flow margin of 14.2% will decrease to 10%.
Key Takeaways from YETI's Q4 Results We struggled to find many strong positives in these results. Its full-year EPS forecast missed and its revenue fell short of Wall Street's estimates by a meaningful amount. In the quarter, revenue and EPS also fell short. Management said that "results were below our guidance, primarily as a result of more cautious and inconsistent spending on high-priced ticket items in our Coolers & Equipment category." Overall, this was a poor quarter for YETI. The company is down 12.9% on the results and currently trades at $42 per share.
