YETI HOLDINGS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes to those statements included elsewhere in this Quarterly Report on
Form 10-Q. In addition to historical financial information, the following
discussion and analysis contains forward-looking statements that involve risks,
uncertainties, and assumptions. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of many
factors, including those described in more detail in Part I "Item 1A. Risk
Factors" included in this Quarterly Report on Form 10-
Headquartered in
We distribute our products through a balanced omni-channel platform, consisting
of our wholesale and direct-to-consumer ("DTC") channels. In our wholesale
channel, we sell our products through select national and regional accounts and
an assemblage of independent retail partners throughout
The terms "we," "us," "our," and "the Company" as used herein and unless
otherwise stated or indicated by context, refer to
Impacts of the COVID-19 Pandemic
In
Remote Work Arrangements and Suspension of Operations
During March and
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Our digital commerce remains open via YETI.com, country and region-specific YETI
websites, and YETI Authorized on the
Liquidity and Outlook Actions
On
In an effort to further enhance our liquidity position and provide additional financial flexibility in response to the impact of COVID-19, we have taken steps to preserve cash, including reductions in discretionary spending, lowering capital expenditures and investments, along with ongoing management of forward inventory receipts, and reducing payroll costs.
On
Forward Looking Information
Given the novel and dynamic nature of this situation, we cannot reasonably estimate the full impact of the COVID-19 pandemic on YETI, its impact on our customers, retail partners, and suppliers, how quickly normal economic conditions will resume, or the related impact on our operations and demand for our products. Given the uncertainty of the situation, we believe that the pandemic could have a material adverse impact on our future revenue growth, financial condition, and future results of operations depending on the duration and severity of the COVID-19 pandemic, measures by federal, state and local authorities to prevent its spread and any worsening of the global economic conditions. We will continue to actively monitor the effects COVID-19 on our business. A prolonged period of store closures, changes in customer behaviors, and reductions of consumer discretionary spending would require us to re-evaluate our business assumptions and estimates. These conditions would likely result in lower future net sales, as well as, cash flow and supply chain disruptions, including manufacturing delays, product shortages, as well as product excesses if we are unable to appropriately manager our inventory levels.
Although the potential magnitude and duration of the business and economic impacts of COVID-19 are uncertain, we believe that the actions taken to date, together with our current operating plan, our strong cash position, including from cash generated from operations, inventory on hand and availability under our Revolving Credit Facility, will provide sufficient liquidity to fund our operations for at least the next twelve months.
For additional information on the impact and potential impact of the COVID-19 pandemic on YETI, see Item 1A. Risk Factors on this Quarterly Report.
General
Components of Our Results of Operations
We discuss the net sales of our products in our two primary categories: Coolers & Equipment and Drinkware. Our Coolers & Equipment category includes hard coolers, soft coolers, outdoor equipment and other products, as well as accessories and replacement parts for these products. Our Drinkware category includes our stainless-steel drinkware products and related accessories. In addition, our Other category is primarily comprised of ice substitutes, and YETI-branded gear, such as shirts, hats, and other miscellaneous products.
Gross profit. Gross profit reflects net sales less cost of goods sold, which primarily includes the purchase cost of our products from our third-party contract manufacturers, inbound freight and duties, product quality testing and inspection costs, depreciation expense of our molds and equipment, and the cost of customizing Drinkware products. We calculate gross margin as gross profit divided by net sales. Gross margin in our DTC sales channel is generally higher than that on sales in our wholesale channel.
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Selling, general, and administrative expenses. Selling, general, and administrative ("SG&A") expenses consist primarily of marketing costs, employee compensation and benefits costs, costs of our outsourced warehousing and logistics operations, costs of operating on third party DTC marketplaces, professional fees and services, non-cash stock-based compensation, cost of product shipment to our customers, depreciation and amortization expense, and general corporate infrastructure expenses.
Fiscal Year and Reporting Calendar. We operate on a 52-to 53-week fiscal year
ending on the Saturday closest in proximity to
The discussion below should be read in conjunction with the following table and our unaudited financial statements, and related notes. The following table sets forth selected statement of operations data, and their corresponding percentage of net sales, for the periods indicated (dollars in thousands).
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