Here's Why Investors Should Retain YETI Holdings Stock Now
YETI Holdings, Inc. YETI is likely to benefit from product innovation, expansion efforts and strategic partnerships. A focus on supply-chain diversification bodes well. However, the macroeconomic environment poses concerns.
Factors Driving the YETI Stock
Innovation Driving Growth: YETI’s continuous focus on innovation has been a catalyst for its success. In the second quarter, the company introduced new cooler products, including the Roadie 15, which has seen strong early demand. YETI's innovative approach extends to its Drinkware portfolio, with the launch of new products like stackable tumblers, straw mugs and even cookware. The company’s expansion into culinary products, such as cast-iron skillets, is expected to open new avenues for growth in the second half of the year and beyond.
Strong International Expansion: YETI's international growth continues to be a key driver of its overall performance. In the second quarter, international revenues surged by 34%, accounting for 17% of the company’s total business, up from 13% last year. The company's expansion into Europe and Asia is poised to boost its global footprint, with plans to enter new markets in 2025. As YETI continues to build its ambassador network and partnerships, this global diversification provides a strong foundation for sustained growth, including its recent licensing deal with the NFL.
Supply-Chain Diversification: YETI’s ability to manage supply chain challenges has resulted in significant gross margin expansion. The company is on track to deliver record-high gross margins for the full year, thanks to strategic investments and optimization efforts. Moreover, YETI's ongoing efforts to diversify its supply chain have reduced its reliance on China. The company aims to produce half of its Drinkware outside China by 2025. This diversification mitigates geopolitical risks and positions YETI to manage future tariff scenarios more effectively.
Strategic Community and Brand Building: YETI continues to build its brand through strategic partnerships and community-focused initiatives. The company’s partnerships with the U.S. Equestrian and Caddie Network have expanded its reach across diverse markets, including golf and equestrian communities. The company’s presence in global sporting events, such as the Summer Olympics, further solidifies its brand relevance and reach. Its direct-to-consumer channels, retail expansion and strong wholesale partnerships provide a balanced approach to market penetration, ensuring continued demand across categories.
Concerns for YETI Stock
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Shares of YETI Holdings have declined 24.5% so far this year against the industry’s growth of 4.1%. The downside can be blamed on a challenging macroeconomic environment. There is considerable uncertainty regarding the potential impact of macroeconomic factors, such as persistently high inflation and elevated interest rates, on consumer demand.
Recent disruptions in container shipping traffic through the Red Sea and surrounding waterways have also caused delays and increased freight costs for goods manufactured in Asia and shipped to Europe, with a lesser impact on the Americas. Furthermore, freight rates rose industry-wide toward the end of the second quarter of 2024. The company remains cautious in this regard as the continuation or worsening of these conditions could materially affect YETI’s financial results for the remainder of the year.
Conclusion
YETI is well-positioned to drive growth through its focus on product innovation, international expansion and supply-chain diversification. The company’s ability to adapt to shifting market demands, along with strategic brand-building efforts, provides a solid foundation for long-term success. However, macroeconomic challenges, including inflation, higher interest rates and shipping disruptions, remain concerns.
Despite these headwinds, YETI's strong demand for its products and proactive strategies suggest that investors may consider retaining the stock as the company navigates these challenges and capitalizes on growth opportunities ahead.
YETI’s Zacks Rank and Stocks to Consider
YETI Holdings currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Norwegian Cruise Line Holdings Ltd. NCLH, DoubleDown Interactive Co., Ltd. DDI and Carnival Corporation & plc CCL, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Norwegian Cruise Line has a trailing four-quarter earnings surprise of 5.7%, on average. The stock has rallied 36.3% in the past year. The Zacks Consensus Estimate for NCLH’s 2024 sales and earnings per share (EPS) calls for growth of 9.8% and 125.7%, respectively, from the year-ago levels.
DoubleDown Interactive has a trailing four-quarter earnings surprise of 26%, on average. The stock has surged 59% in the past year. The Zacks Consensus Estimate for DDI’s 2024 sales and EPS indicates an increase of 12.6% and 15.8%, respectively, from the year-ago levels.
Carnival has a trailing four-quarter earnings surprise of 320.4%, on average. The stock has increased 35.9% in the past year. The Zacks Consensus Estimate for CCL’s 2025 sales and EPS indicates an increase of 4.6% and 28.8%, respectively, from the year-ago levels.
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