YETI Holdings Inc (NYSE: YETI) US$45.47

YETI delivered a strong second-quarter result, with earnings and margins comfortably ahead of expectations, but shares fell ~10% on softer drinkware growth and a second-half outlook that looks a little light relative to consensus.

Key results:

• Sales of US$483.9 million, up 8.5% and broadly in line with the US$483.4 million expected.
• Adjusted EPS of US67c, well ahead of the US54c expected.
• Adjusted gross margin of 59.5%, comfortably ahead of the 55.8% expected.
• Wholesale sales of US$218 million, up 10% and slightly ahead of expectations.
• Direct-to-consumer sales of US$265.9 million, up 6.9% and broadly in line.
• Coolers & Equipment sales of US$232.4 million, up 16% and ahead of the US$222.5 million expected.
• Drinkware sales of US$241.4 million, up just 2.1% and below the US$248.6 million expected – this was the main negative in the result.

The weakness in the stock was not about the quarter itself but more about the shape of growth. Coolers & Equipment performed well, but drinkware slowed materially from the first quarter and remains the key concern given its importance to the broader franchise.

Management lifted FY26 adjusted EPS guidance to US$2.94–3.00, from US$2.83–2.89, but the implied second-half earnings are still a little below current market expectations. At the same time, inflationary pressures worsened during the quarter and YETI continues to assume tariff rates ease back toward around 20% in the second half.

The geographic picture remains more encouraging. Management expects US growth in the low-to-mid single digits, but international growth in the high teens to around 20%, providing an important diversification benefit.

MM’s view: The underlying result was strong, particularly on margins and Coolers & Equipment, but the market was already positioned for more after a strong run into the print. Drinkware growth is the main area to watch, while the second-half setup looks a little softer than the headline guidance upgrade suggests. We continue to own YETI and still like the medium-term story, particularly the international growth opportunity and the strength of the brand. We did trim our position last week, which has proven sensible,  and the company now needs to show that slower US drinkware demand is temporary rather than the start of a more persistent slowdown.