Outdoor lifestyle products brand (NYSE: YETI) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 3.8% year on year to $445.9 million. Its non-GAAP profit of $0.66 per share was 20.4% above analysts’ consensus estimates.

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StockStory’s Take

YETI’s second quarter results did not meet Wall Street’s sales expectations, with revenue declining year over year and the market responding negatively. Management attributed the shortfall to ongoing consumer caution and softer demand from retail partners, especially in the U.S. Drinkware segment. CEO Matt Reintjes emphasized that macroeconomic uncertainty and a highly promotional market environment weighed on top-line performance, while noting, “We are making excellent progress on our long-term strategic priorities, driving innovation, expanding our global presence, and broadening our customer base.”

Management’s updated outlook for the remainder of the year is underpinned by confidence in new product launches, ongoing supply chain improvements, and international momentum, especially in Europe and Japan. CFO Mike McMullen highlighted that tariff relief on China-sourced goods and disciplined cost management are supporting higher non-GAAP EPS expectations, stating, “This improvement is due to changes in tariff rates since our last update as well as our ability to drive cost efficiencies while undergoing a significant transformation of our supply chain.” YETI’s leadership continues to focus on innovation and market expansion as primary levers for future growth.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to cautious consumer behavior, inventory constraints during a major supply chain transition, and a highly competitive promotional environment in Drinkware.

• Supply chain transformation: YETI’s accelerated move to diversify manufacturing away from China is nearly complete, with less than 5% of cost of goods sold expected to be exposed to U.S. tariffs by year-end. This transition caused some temporary inventory constraints but is intended to enhance long-term agility and reduce geopolitical risk.

• Product innovation momentum: Over 30 new products are slated for launch this year, with notable early success in the bags and packs category. The Thailand Innovation Center is set to open later this month, enabling round-the-clock product development and supporting a robust pipeline for upcoming quarters.

• Drinkware market challenges: The U.S. Drinkware market remains highly promotional, leading to cautious ordering by retail partners and inventory imbalances. Management expects stabilization and a return to growth in this segment later in the year as innovation and market cleanup take effect.

• Bags and Camino surge: The Camino tote and other bags have experienced heightened consumer demand, going viral on social media and selling out across channels. Management is investing in expanding inventory and innovation in this segment, aiming for bags to become a larger share of the business.

• International growth strength: Europe, Japan, and Australia delivered strong end-consumer demand, with Europe leading international growth. Management highlighted new distribution partnerships in Japan and successful marketing initiatives as key contributors to international expansion.

Drivers of Future Performance

YETI’s guidance is driven by an expanded innovation pipeline, ongoing international growth, and supply chain cost efficiencies, but faces risks from ongoing tariff uncertainty and cautious U.S. consumer trends.

• Innovation-driven recovery: Management expects a return to revenue growth in Drinkware by the end of the year, fueled by new product launches, increased supply availability, and a broader assortment tailored to evolving consumer preferences.

• International expansion focus: The company is maintaining a target of 15-20% growth in international markets for the year, particularly emphasizing success in Europe and a major retail rollout in Japan. Management believes international direct-to-consumer channels will be key growth drivers.

• Margin pressures and tariff risks: While gross margins are expected to benefit from lower China tariffs and ongoing supply chain efficiencies, uncertainties remain around future trade policy. Management is cautiously optimistic but highlighted that new tariffs on other regions and ongoing promotional activity in the U.S. could impact profitability.

Catalysts in Upcoming Quarters

In future quarters, our analysts will be watching (1) whether innovation in Drinkware and bags translates into sustained sales growth, (2) the pace and impact of international expansion, especially in Europe and Japan, and (3) execution of supply chain transformation and resilience against evolving tariff policies. Progress in optimizing inventory and broadening the product portfolio will also be key indicators.

YETI currently trades at $32.44, down from $36.44 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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