Friday, 10 May 2024

Why Yeti Stock Jumped Higher Today

by BD Banks

Shares of cooler and insulated drinkware maker Yeti Holdings (NYSE: YETI) jumped higher on Thursday after the company reported stronger-than-expected financial results for the first quarter. As of 11:15 a.m. ET, Yeti stock was up 12% today.

Encouraging margin expansion

For the first quarter, Yeti generated net sales of $341 million, up 13% year over year. The company showed growth across product categories, sales channels, and geographic regions — everything came in fairly strong. That said, sales numbers were what management expected, as evidenced by its decision to keep full-year guidance the same as what it gave out in February.

Yeti’s profit margins improved in the first quarter, which is likely what investors are more excited about today. Gross margin was 57.1% compared to 53.5% in the prior-year period. And its adjusted operating margin was at 11.6%, compared to 7.2% last year.

As a premium brand, Yeti charges higher prices than competitors to achieve premium margins. When margins go up, it’s a good sign because it suggests that the brand isn’t losing its luster.

Management is giving back to shareholders

Investors are likely also encouraged with Yeti raising guidance for certain profit metrics, including its per-share numbers. Higher profits are giving management more options, and it’s choosing to do an accelerated share repurchase program worth $300 million. It has already completed $100 million of that.

The reduction in share count is boosting its per-share profit numbers, which is why management raised guidance in those areas.

Overall, it was a good quarter for Yeti. Its products continue to resonate with consumers, who are buying in stores and directly from the company online.

It’s good to always monitor margins: If its margins start slipping, it could indicate that competitive pressures are forcing it to lower prices, which would be bad. But for now, these numbers look good and should be encouraging to shareholders.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.