Yeti's First Results Show Street Was Too Pessimistic on Its Coolers

(Bloomberg) -- Shares of Yeti Holdings Inc. plunged as much as 15 percent after earlier hitting a record high, as investors studied the cooler maker’s first quarterly earnings as a public company and commentary provided on the conference call.

The Austin, Texas-based producer of coolers and other outdoor products forecast full-year adjusted earnings per share of 79 cents to 82 cents, above the consensus estimate of sell-side analysts even at the bottom of its range. Third-quarter earnings also beat estimates.

But optimism gave way to pessimism amid weak sales in the Cooler/Equipment Segment, and possibly some commentary on the call that caused investors to pause.

Yeti noted that even after backing out last year’s non-recurring disposition of end-of-life soft cooler inventories, sales in the Cooler/Equipment segment were still "slightly down" versus last year. Management cited a slower-than-expected ramp of its new Tundra cooler in the wholesale channel and the "rolling over several exciting launches from last year."

Yeti's First Results Show Street Was Too Pessimistic on Its Coolers

Jefferies analyst Randal Konik told clients in a note that shares are weak "given a slightly lower-than-Street-modeled Cooler/Equipment line, but we think this is a big overreaction."

He isn’t alarmed that some orders were "more slanted to Drinkware." He estimates Coolers/Equipment sales growth of more than 10 percent in the fourth quarter. Konik rates Yeti a buy, with a Street-high price target of $34 per share.

In addition, conference call commentary revealed that there was a change to Yeti’s revenue recognition policy with Amazon.com. "We now recognize that on sell-through versus sell-in" basis, executives said on the call. "So, in the first quarter of 2019, we will be comparing Amazon sell-through to Amazon sell-in, and that will create a little bit of a nuance."

In addition, Yeti intends to slowly increase its physical store presence beyond its one, full-price store in Austin, Texas. The plan includes opening as many as six stores per year in both 2019 and 2020. The expansion means additional capital spending above its $30 million to $35 million run-rate.

On the call, Yeti also provided a long-term sales growth target ranging from 10 percent to 15 percent, which is below its 2018 forecast of a 19 percent to 20 percent gain.

Prior to Thursday, Yeti had risen 6.7 percent above its Oct. 24 initial public offering price of $18 per share, doubling the S&P 500’s rise over the same period. Today’s volatility saw the shares advance as much as 12 percent to a record-high $21.45, only to erase that gain.

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