Q1 2025 YETI Holdings Inc Earnings Call
Speaker Change: Good morning, ladies and gentlemen and welcome to the YETI Holdings First Quarter 2025 Learning's conference call. At this time, all lines are in a lesson only mode. Following the presentation, we will conduct a questioning answers session. If at any time during this call, it required immediate assistance, please press door zero for the operator. This call is being recorded on Thursday, May 8, 2025. Thank you very much. Bye-bye.
Speaker Change: I would now like to try to conference called Uber to Maria Lycouris. Invest relations for YETI. Please go ahead.
Maria Lycouris: Good morning and thank you for joining us to discuss YETI Holdings' first quarter of fiscal 2025 results. Leaving the call today will be Matt Reintjes, President and CEO and Mike McMullen's CFO . All in our prepared remarks will open the call for your question.
Speaker Change: Before we begin, we'd like to remind you that some of the statements that we make today on this call may be considered board looking and such board looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements.
Speaker Change: For more information, please refer to the risk factors detailed in our most recently filed form 10k. We undertake no obligation to revise or update any forward looking statements made today as a result of new information, future events or otherwise, except as required by law.
Speaker Change: Unless otherwise stated, our financial measures discussed on this call will be on a non-GAAP basis. We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results for our business.
Matt Reintjes: Reconciliation of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release or in the presentation posted this morning in the investor relations section of our website at YETI.com. I now like to turn the call over to Matt. [inaudible]
Matt Reintjes: Thanks, Maria, and good morning. I want to start off today's call highlighting at these three key focus areas in this unique moment in time.
Matt Reintjes: Accelerating the pace of product innovation, materially transforming our supply chain, minimizing exposure to China, and delivering operating discipline to maintain our fortress balance sheet. [inaudible]
Matt Reintjes: Before I go into further detail on these and how YETI is positioned to win in this fast evolving and a highly volatile market, I want to first acknowledge our strong execution in the first quarter. Overall, we deliver high quality growth, strong growth in operating margins and a great balance sheet.
Matt Reintjes: These results were underpinned by excellent performance and coolers and equipment and our international business, showcasing the impact of two of our growth strategies, product innovation and global expansion.
Matt Reintjes: Specifically, in hard coolers, our longest standing product group and packs and bags are newest product group, we saw continued momentum with category innovation winning across our global channels.
Matt Reintjes: Our dynamic and growing global brand, broad and expanding product portfolio, and diverse omnichannel presence supported our performance in a face of what we believe is growing macroeconomic and consumer uncertainty.
Matt Reintjes: Our disciplined approach to operations and cost management is how we delivered better than planned profitability during the quarter, and it forms how we will manage the rest of 2025.
Matt Reintjes: Our outlook on the year, which Mike will discuss in more detail, incorporates not only our confidence in this business, but also projected headwinds. This includes the estimated direct impact of tariff and trade disruptions on our top line and profitability, and the potential for a more cautious consumer backdrop.
Matt Reintjes: But the end result is that we expect the durability of the YETI brand, the vitality of our product innovation, and the strength of our financial position, to put us in a situation where we not only navigate 2025, but also set up for 2026. [inaudible]
Matt Reintjes: While the market and geopolitical scenarios we face today are markedly different from those present during our February end of year earnings call, we are focused on winning in this environment and building upon Yeti's strength. Here's a bit more color on our three key priorities during this time.
Matt Reintjes: First, product innovation and expansion. Our product innovation pipeline is incredibly robust. Even amid significant supply chain disruption, we are on pace for a record number of new product releases and next generation products this year.
Matt Reintjes: For the year, we expect over 30 new product introductions versus 24 last year and a meaningful number of additional next-generation releases.
Matt Reintjes: However, we now expect that the full impact of this innovation on our 2025 growth will be partially offset by inventory supply disruption caused by our supply chain diversification efforts.
Matt Reintjes: Some of these new programs will initially release exclusively outside the US, and others will be supply constrained for the year.
Matt Reintjes: In addition, there are a number of programs that we had originally planned for this year that we shifted launch timing out of 2025 as we prioritize our strategic supply chain transition.
Matt Reintjes: So while the impact of innovation on our 2025 growth has changed due to shifting priorities, nothing has changed about our overall pipeline and our enthusiasm about what we have coming this year and beyond. . .
Matt Reintjes: For instance, in drinkware, on the back of the successful launch of food bowls, we have planned releases later this year across a range of hydration and food related products, including an exciting lineup of insulated sports jugs. [inaudible]
Matt Reintjes: In Cooler's Equipment, we have additional releases planned for backpacks, thermal lunch bags and boxes, our first beach chair, and an extension in our go box protective case family.
Matt Reintjes: Importantly, we are also using the urgency of the supply chain disruption to reshape our product development process by adding a new nibbleness, piecing speed to market. [inaudible]
Matt Reintjes: I'm incredibly proud of how our team is leveraging this complex time to drive meaningful rethinking and redesign of our development process, realize benefits in 2025 and beyond.
Matt Reintjes: Second, supply chain transformation. As indicated, we have accelerated our efforts to shift our drinkware production out of China.
Matt Reintjes: Our project started in 2023 as a head of plan, and we now expect 90% of our US dream board capacity to be ex-China by the end of the year.
Matt Reintjes: For context, on a go-forward basis, we expect to have less than 5% of our total cogs related to products from China for the US market.
Matt Reintjes: This is a remarkable transition due to the multi-year effort by our team and partners, materially and strategically diversifying our global supply chain and putting us in a much improved situation starting in 2026.
Matt Reintjes: Third, Operational Discipline. We continue to focus on discipline management of our PNL and maintaining the strength of our balance sheet through the following actions.
Matt Reintjes: We're working to offset costs in our supply chain and partnership with our suppliers. We're executing on a number of operating expense reduction opportunities while still making key strategic investments.
Matt Reintjes: We've taken action to protect our balance sheet and minimize our exposure to tariffs by lowering our inventory levels. And we have lowered our planned CAPEX for the year to focus our resources on targeted supply chain and innovation programs.
Matt Reintjes: While managing through this period is our primary focus in 2025, we also believe that our supply chain diversification efforts will put us in a much stronger position starting in
Matt Reintjes: For that reason, we are continuing to invest for the long term.
Matt Reintjes: I thought I'd take a moment to share a few examples of continued investment that we believe set YETI up to address our future global growth potential.
Matt Reintjes: Later this summer, we will open and staff our first Asia-based testing and innovation location to complement our Austin, Texas-based innovation center, providing additional speed and capacity for product development and testing.
Matt Reintjes: In Q1, we open our packs, bags, and luggage design, and development office in Denver, Colorado, as a complement to our Bozeman Montana based team that is focused on the wild and fire and military communities.
Matt Reintjes: To support global growth in Q1 we also established a team in Japan to start the build out of Japan and beyond. Additionally, we continued investment in our team and capabilities in the UK and Europe . [inaudible]
Matt Reintjes: All of these investments are intended to drive a near and long-term innovation and growth potential for YETI.
Matt Reintjes: Butching to our brand, we kicked off the year with a number of successful events, partnerships, and ambassador engagements that show how YETI is resonating on a global scale in our diverse and growing enthusiast communities.
Matt Reintjes: One highlight here is our deepening partnerships in sports and entertainment. On the sports side, we are building our presence at both the professional and collegiate levels in the US and abroad. In the first quarter, we launched a wide range of collegiate signature drink or cut programs. We are building our presence at both the professional and collegiate levels in the US and abroad.
Matt Reintjes: At the professional level, we recently partnered with the Chicago Cubs for the creation of the YETI yard within Rigley Field. This activation sits in center field where fans can enjoy a unique game experience in a backyard-like setting with fully stocked YETI Coolers and Drinkwear. [inaudible]
Matt Reintjes: In addition to being an official partner of the Cubs and Rigby Field, Yeti signage will be visible throughout the stadium and our souvenir Cubs branded Rambler Cubs will be available at all concession stands and in the Yetiard for purchase.
Matt Reintjes: Additionally, our signature cut program has extended further into golf, where we're seeing great traction with notable engagement around recent championship events.
Matt Reintjes: Furthermore, we're very excited to announce our first golf ambassador with the addition of American pro golfer Ricky Fowler to a roster in late April .
Matt Reintjes: Round entertainment, Yeti hosted activations at two major international country music festivals in the first quarter.
Matt Reintjes: In Europe , we made our fifth annual appearance at the country to country music festival in London, Europe's largest country music festival. In Australia, we had a large presence at the country music channel festival in Ipswich, which is widely regarded as the largest country music festival in the southern hemisphere. We are here.
Matt Reintjes: The enthusiasm for YETI was unmistakable at these events, demonstrating that our brand, community marketing, and product are resonating. Thank you very much.
Matt Reintjes: In the year ahead, we remain focused on broadening our global addressable audience and continuing to build deep and connected relationships with consumers and partners across communities and activities.
Matt Reintjes: We shift to innovation. We're seeing our product perform across price points showing the durability of demand for the brand and the portfolio. .
Matt Reintjes: 2025 is planned to be an extraordinary year for product innovation, even with meaningful and impactful trade-off decisions we have made to support a global supply chain diversification.
Matt Reintjes: In Drinkwear, a combination of new innovation and legacy product drove demand in one queue.
Matt Reintjes: With traction in our stackable cup range as well as bottles, offset by what we expected to be a broader category reset and drinkware and the highly concentrated and contested high capacity straw tumblers after the extraordinary run-up of the past couple years.
Matt Reintjes: This correction is further emphasizing the strong positioning of our portfolio and our stated strategy of driving diversity and drinkware to create durable demand.
Matt Reintjes: For example, during the quarter, we executed the full channel rollout of our Pour Over product. Since its launch, the Pour Over has garnered significant buzz, including features in Food and Line magazine, where it was dubbed a seriously high quality piece of coffee gear. [inaudible]
Matt Reintjes: Our commitment to our coffee portfolio growth is another example of how we are continuing to extend and diversify our product range beyond hydration.
Matt Reintjes: In April , we also launched our insulated food bowls, expanding our culinary offerings following our cookware debut last year.
Matt Reintjes: This expanded suite of products brings to life Yeti's outdoor kitchen offering, which blends our outdoor DNA, providing everyday, durable, and high-performance solutions for the campsite and closer to home.
Matt Reintjes: On the coolers and equipment front, Hard Coolers saw another quarter of strong growth led by the Rody 15 and in soft coolers, cube style and backpack coolers subtraction.
Matt Reintjes: Starting later in Q2, we're leaning into innovation to bring more smaller format thermal totes, lunch bags, and lunch boxes. And just in time for summer, next week, we will introduce our first premium low profile beach chair.
Matt Reintjes: Moving to packs and bags, we saw another excellent quarter with continued momentum in our crossroads packs and Camino tote bags.
Matt Reintjes: In a innovation, we launched our Ranchero backpack in the first quarter, marking our first full launch of YETI's new everyday bags, following the limited run of the Bozeman Pack in the fourth quarter. [inaudible]
Matt Reintjes: Yet he's bringing a unique point of view to this fragmented backspace, supported by our strong design, brand, and commercial engine.
Matt Reintjes: We remain very optimistic about the massive global addressable market we see in front of us across premium bags, packs in luggage. Thank you very much.
Turning to our omnichannel performance.
Matt Reintjes: As we continue to broaden our product portfolio, our diverse omnichannel is an asset, and our tracked US channels we saw positive cell through in the quarter, highlighted by strong growth and hard coolers and bags, notwithstanding previously mentioned softness in concentrated parts of our drinkware portfolio.
Matt Reintjes: Demonstrating the power of our strategy over the past two years of meaningful product diversification.
Matt Reintjes: It also highlights the continued potential for drinkware innovation, which we believe is a great setup later this year and into 2026.
Matt Reintjes: US channel inventory into the quarter in good shape. We do expect some cautious buying and inventory management from our partners in the US market as we move through 2025.
Matt Reintjes: Additionally, as our product portfolio evolves, we continue to strategically evaluate wholesale expansion opportunities that support our current go-to-market strategy geared towards addressing new consumers and new purchase occasions.
Matt Reintjes: In our DTC business, our global DTC, Amazon Marketplace, and U.S. corporate sales for standouts.
Matt Reintjes: Even though YETI.com saw strong performance in hard coolers and bags, softer traffic trends in lower conversion were correlated with lower UPT, primarily result of lower price point drinkware. [inaudible]
Matt Reintjes: In a more cautious consumer market, we are pleased with the momentum and our higher price points on Yeti.com, reinforcing the desirability of our brand, even in what we believe is a more competitive transactional and promotional market. [inaudible]
One standout is strong growth in YETI.com account creation.
Matt Reintjes: with approximately 40% of all YETI CRM contacts holding accounts as of the end of the first quarter. Importantly, we've seen over time that account holders have both a higher lifetime value and frequency of returns to the site, supporting deeper engagement and penetration within our existing customer base. [inaudible]
Matt Reintjes: As a late-store retail stores, we open our 25th store in Short Hills, New Jersey, and late April . And our 26th store opens this week in King of Prussia, Pennsylvania. Yeah.
Matt Reintjes: As we go into the back half of the year and with a premium on execution, we plan to slow the pace of new store openings to focus on the current fleet while dedicating our corporate resources on the successful execution of our supply chain transformation and product innovation expansion this year.
Matt Reintjes: Turning to our international business, we continue to see exceptional momentum in our non-US markets.
Matt Reintjes: We saw broad strength in Europe , with Germany, the Netherlands, and the UK being standouts.
Matt Reintjes: Strong results in the UK are a function of our growing brand awareness and diverse go-to-market.
Matt Reintjes: We believe this is a model that can be applied to other European markets and drive sustainable growth into the future.
In Australia, our DTC channel had a terrific quarter.
Matt Reintjes: with great momentum and our custom drink or business. The back-to-school season also supported strong, cooler and bags performance, with our smaller, cooler options like Daytrip, Flip, and Rody 15 seeing strength along with robust demand for the Communotote.
Matt Reintjes: The consistent brand traction we see reinforces our opportunity, continue to drive growth and awareness with Australian customers.
Matt Reintjes: Canada, our most mature international market, also delivered strong results across channels during the quarter, with growth in both DTC and wholesale businesses.
Matt Reintjes: In wholesale, we saw positive sell-in and even stronger sell-through with great traction across key partners. And in DTC, our e-commerce business was supported by momentum and custom drinkware and corporate sales. Much like the US, we are closely monitoring Canada for signs of demand impact with the current geopolitical backdrop.
Matt Reintjes: Overall, I'm incredibly proud of what our team in Canada is doing to support that important market and our customers and partners in Canada.
Matt Reintjes: Finally, in our newest market, Japan, we are in the early stages of executing our market expansion playbook.
Matt Reintjes: In the first quarter, we began to lay the foundation for our community marketing efforts and that faster engagement.
Matt Reintjes: We plan to kick off our sales and marketing efforts in earnest in the second quarter, and as we expect to start shipping the summer, there are several factors that underpin our confidence and YETI's position in the Japanese market. [inaudible]
Matt Reintjes: First, Japan has a strong affinity towards Americana Heritage and Brands.
Matt Reintjes: Second, the outdoor market has seen significant growth across Japan and the rest of Asia over the last ten years.
Matt Reintjes: Third, Japan is a strong culture and appreciation of craftsmanship and great product. And finally, we laid the foundation to build a strong marketplace position across our infrastructure team and key retail partners as we prepare to begin shipments this month.
Close out my comments.
Matt Reintjes: I want to reiterate that despite the macro and trade uncertainty, the resilience of our brand, our broad and innovative product portfolio, our diverse omnichannel presence, and global growth opportunity give me incredible confidence in our long-term runway.
and importantly, position us well for 2026.
Matt Reintjes: We continue to closely monitor tariff policies and execute mitigation efforts and sourcing strategies to manage through the near term. All will on team works to aggressively drive our supply chain transformation and innovation.
Matt Reintjes: I want to thank the entire Yeti team for their steadfast commitment to driving results that strengthen Yeti for now and for the long term.
Matt Reintjes: We're highly motivated by the potential in front of us in the incredible communities and pursuits we serve around the world, and we're committed to delivering exceptional brand experiences and premium products as we have since day one.
With that, I'll now turn the call over to Mike. Thank you for your time.
Mike McMullen: Thanks, Matt. Good morning, everyone. I'll start by reviewing our first quarter 2025 performance followed by an update on our outlook for the full year before opening it up to questions.
Mike McMullen: As a reminder, all results presented on today's call will be on a non-GAAP basis in order to better focus on the operating performance of the business during the quarter.
Mike McMullen: Starting now to our first quarter results, sales increased 3% to 351 million, which was inline with our expectations, led by strong growth in coolers and equipment, and continue momentum in our international business.
Mike McMullen: During the quarter, FX impacted our growth by approximately 100 basis points.
Mike McMullen: At the product category level, Coolers and Equipment Sales increase 17% to 140.2 million in Q1, our fifth consecutive quarter of double digit growth in C&E.
Mike McMullen: In hard coolers, we saw strong demand for the Rowdy 15, and in soft coolers, our portable formats, such as our backpack and flip coolers, also continue to perform well.
Mike McMullen: Bags were another highlighting Q1, with strong demand for both new and existing products.
Mike McMullen: Across roads, packs, commino totes, and sidekick, dry gearcases all posted strong growth.
Mike McMullen: But the highlight of the quarter was the successful launch of our new Ranchero backpack which we introduced in two sizes.
Mike McMullen: This is our first full launch of a product that leverages our new designs and capabilities and only reinforces our excitement about our product roadmap and the resulting opportunity that we have in bags.
Mike McMullen: Drinkware sales decreased 4% to 205.6 million during the period. As anticipated, we experienced a challenging market in the U.S. and Q1.
Mike McMullen: And as a reminder, this quarter we had a difficult compare versus the prior year quarter.
Mike McMullen: In Q1 of the prior year, we grew total drink worth 13 percent, supported by a very strong lineup of new product offerings.
Mike McMullen: This year, the cadence of our new product launch activities has been limited by our supply chain diversification efforts, which is impacting our growth.
Mike McMullen: Despite these headwinds, our new innovation launched throughout 2024 continue to perform well, particularly our stackable formats and straw bottles.
Mike McMullen: Outside of the US, our Drink Bar Business Group doubled digits and we see significant runway to continue this pace as we broaden our retail partner footprint, drive brand awareness, and expand our presence in new and existing markets.
Mike McMullen: Moving to our performance by channel, direct to consumer sales grew 4% to 196.2 million, representing 56% of total sales.
Mike McMullen: Our Amazon business outperformed again, both domestically and abroad as we strategically allocated marketing dollars during the quarter and continue to expand in European markets.
Mike McMullen: Corporate sales also displayed continued strength driven by inbound performance and international growth following our recent expansion of customization globally.
Speaker Change: I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Mike McMullen: In the wholesale channel, sales were 154.9 million, increasing 1% compared to the prior year quarter, driven by robust demand for our hard coolers and bags on both a sell-in and sell-through basis.
Mike McMullen: In the US, the diversity of our wholesale channel, in terms of size, pursuits, and location, is positioning us well to capture demand across a broad range of consumers.
Mike McMullen: And outside the US, we are continuing to drive growth with new and existing partners.
Turning to our international business.
Mike McMullen: We have started 2025 off strong with sales outside the US growing 22% to 79.9 million in the first quarter, despite an approximately 500 basis point headwind from FX. [inaudible]
All-regions saw growth led by exceptional performance in Europe .
Mike McMullen: Our initiatives to increase brand awareness, expand our distribution network, and ramp our omnichannel model, continue to deliver results.
Mike McMullen: And when combined with our entry into the Japanese market, we see significant growth opportunities ahead.
Now I'm moving down to P&L.
Mike McMullen: Gross profit increased 3% to 201.3 million, or 57.3% of sales, a 20 basis point decrease versus the prior year period.
Mike McMullen: The decrease was driven by a lower drink bar mix and an unfavorable FX impact, partially offset by a benefit from product costs.
Mike McMullen: Excluding FX, our gross margins expanded approximately 20 basis points year-to-year.
Mike McMullen: S&A expenses in the first quarter increase 6% to 166.2 million or 47.3% of sales, a 140 basis point increase compared to the prior year period driven by higher general and administrative expenses and higher employee costs to support future growth.
Mike McMullen: This increase was planned and expected as it is related to the continuation of key projects that began in 2024 and extended into the first quarter which is our lowest revenue quarter of the year. [inaudible]
Mike McMullen: However, I do want to call out that S.GNA was below our internal plan for the quarter and below the levels that we outlined on our February earnings call. This was due to overall cost management and response to the ongoing dynamic economic environment. [inaudible]
Mike McMullen: Operating income decreased 11% to 35.2 million or 10% of sales. FX had an approximately 600 basis point impact on our operating income growth in Q1.
Mike McMullen: Then income decreased 12% to 25.8 million for 31 cents per diluted share, representing a decrease of 9% versus the 34 cents per diluted share in the prior year period.
Mike McMullen: Turning to our balance sheet, we enter the first quarter with 259 million in cash, as compared to 173.9 million in the first quarter of 2024.
Mike McMullen: Inventory decreased 9% year-to-330.5 million, reflecting the strategic management of our purchases during the quarter.
Mike McMullen: Total debt, excluding finance leases and unamortized deferred financing fees was $77 million compared to $81.2 million at the end of last year's first quarter.
Mike McMullen: From a total liquidity standpoint, we ended Q1 in a substantial net cash position, and with our $300 million revolving credit facility fully available.
Now turning to our Fiscal 2025 Outlook. Welcome to our Fiscal 2025 Outlook.
Mike McMullen: We expect full-year sales to increase between 1% and 4%, as compared to fiscal 2024's adjusted net sales.
Mike McMullen: Given the recent weakening of the US dollar, we do not expect a material impact from FX for the rest of the year, or on our full-year results.
Mike McMullen: The primary driver of our revised top line outlook for the year is the impact of inventory supply disruptions in connection with our accelerated supply chain diversification efforts.
Mike McMullen: We expect this to have an approximately 300 basis point impact on our growth for the year.
Net of Pricing Actions. [inaudible]
Mike McMullen: As Matt mentioned, we are in the midst of a significant supply chain transformation as we diversify our drink we're sourcing away from China. This is impacting our available supply and thus our top-line growth in the following ways.
Mike McMullen: First, we expect to be supply constrained on new and existing drinkware products as we transition our manufacturing lines.
Mike McMullen: We also halted shipments and shut down our production in China for over three weeks at the beginning of Q2.
Mike McMullen: Second, we have made a number of go-to-market changes as we prioritize the shift of our drinkware production out of China. For instance, we have made the decision to entirely push the launch of several new products originally planned for the second half of 2025 to the first half of 2026.
Due to the expected limited supply.
Mike McMullen: In addition, we are also exclusively launching several new products outside the US for the first time.
In third.
Mike McMullen: This transition is having an overall impact on our new product qualification and launch processes across all categories, as our team has shifted resources and focused to the incredibly important task of diversifying our drinkware production out of China.
Mike McMullen: In addition to the impact on our growth from this supply chain disruption, we also believe there is greater risk that a weaker, overall consumer demand environment could materialize for the rest of the year.
Mike McMullen: We are monitoring consumer behavior and wholesale inventory purchase patterns closely.
Mike McMullen: While we see signs of strength in certain areas of our business, which we expect to continue, we also see an increased risk of an overall weaker market going forward.
Mike McMullen: In terms of phasing, we expect total sales to be flat to slightly down year over year in Q2, driven by US drinkware due to both the supply disruptions that I mentioned earlier, as well as the continuation of the softer market dynamics that we have seen the last two quarters.
Mike McMullen: At the low end of our four-year guide, we expect first half and second half growth to be relatively consistent.
Mike McMullen: This assumes the Consumer Demand Environment Weekends into the second half of the year.
Mike McMullen: At the high end of our guide, we expect second half growth to accelerate to the mid to high single digit range. This assumes more modest consumer demand softness in the second half.
Mike McMullen: From a channel perspective, we still expect our wholesale and DTC businesses to grow relatively in line with each other in 2025.
Mike McMullen: By category, we still expect C&E growth to outpace drinkware growth each quarter in 2025.
Mike McMullen: As for drinkware, we now expect first half growth to be down year by year driven by our US region as we expect many of the market dynamics that we have seen the last two quarters to continue through Q2. Thank you.
Matt Reintjes: That's dead. We still expect Drinkware Growth to resume in the second half driven by the new Drinkware Innovation that Matt mentioned.
Matt Reintjes: Next, in terms of our sales by geography, for the year we expect our US business to be in a range of flat to down low single digits year to year. Here.
Matt Reintjes: We respect our international business to grow between 15% and 20% this year at relatively consistent levels across the first and the second halves of the year.
Matt Reintjes: We remain confident in the significant opportunity we see for YETI's growth outside the US, and we are excited about the next step in our international journey with a launch of shipments in Japan later this month.
Matt Reintjes: We now expect gross margins of approximately 54%, which is a decline of approximately 450 basis points versus both the prior year and our original FY25 expectations.
Matt Reintjes: The primary driver of the decline is the impact of tariffs.
Matt Reintjes: In this outlook, we are assuming that the following tariffs on products that we import into the US are in place through the end of the year.
A 145% total tariff rate on product source from China.
Matt Reintjes: And a 10% reciprocal tariff rate on product source from all other countries where applicable to our business.
Matt Reintjes: Note that we are assuming that the current pause on higher reciprocal tariff rates on product source from non-China countries is extended to the end of 2025.
Matt Reintjes: Collectively, the gross amount of tariffs that are included in this outlook is approximately
Matt Reintjes: That is before our mitigation efforts which include pricing as well as cost offsets in partnership with our suppliers.
Matt Reintjes: Net of our mitigation efforts, the impact from tariffs that is included in this outlook is approximately 450 basis points.
Matt Reintjes: From a phasing perspective, we expect the year-to-year impact from tariffs to build as we go through the year, as the costs work their way onto our balance sheet and through our income statement. And as a result, the year-of-year decline in gross margins will increase as we go through the year. [inaudible]
Matt Reintjes: For operating expenses, we now expect approximately 30 basis points of de-leverage for the year. The primary change from our original outlook, which called for slight de-leverage in 2025, is related to our lower sales outlook for the year. [inaudible]
Matt Reintjes: Note that we are partially offsetting the loss of leverage from lower sales through a number of other cost reduction actions across our business.
Matt Reintjes: We now expect operating income to be approximately 12% of sales in 2025, a decline of slightly less than 500 basis points versus both the prior year and our original outlook. As with gross margins, the primary driver of lower operating margins is the impact of tariffs, net of our mitigation efforts.
Matt Reintjes: We expect our operating margins to be relatively consistent each quarter for the rest of the year.
Matt Reintjes: Below the operating line, we expect an effective tax rate of approximately 26%.
Matt Reintjes: This increase in rate versus the prior year and versus our prior outlook is due to lower pretext income for fiscal 2025.
Matt Reintjes: We now expect full-year diluted shares outstanding of approximately 83.7 million for fiscal year 2025. This does not assume any impact for additional share repurchases in 2025. As we go through the year, we will continue to evaluate additional capital allocation opportunities, including share repurchases.
Matt Reintjes: This results in adjusted earnings per diluted share of between $1.96 and $2.02, as compared to $2.73 in fiscal 2024, and a range of $2.90 to $2.95 in our prior outlook.
Matt Reintjes: The two primary drivers of our lower EPS outlook, our lower top line, do primarily to supply change disruption and higher tariff costs.
Matt Reintjes: We expect capital expenditures of approximately $60 million this year compared to our previous Outlook of $60 million to $70 million.
Matt Reintjes: We are closely scrutinizing our capital expenditures this year and are pausing some non-critical projects and spend.
Matt Reintjes: However, at the same time, the expected capital expenditures related to our supply chain diversification efforts have increased.
Matt Reintjes: We expect free cash flow of between 100 million and 125 million in 2025 versus our prior outlook of approximately 200 million.
Matt Reintjes: So even in a year of disruption and significant change, our ability to generate cash remains intact.
Matt Reintjes: Related to inventory, while we remain focused on new innovation, we are actively managing our exposure from China and other locations. [inaudible]
Matt Reintjes: As a result, we now expect you're an inventory to decline you every year. As we go through the year, we will assess the need for increase our inventory based on the tariff situation as well as the overall macro environment.
Matt Reintjes: Before I close, I wanted to make a few final points.
Matt Reintjes: First, clearly, there is a level of uncertainty related to tariffs right now.
Matt Reintjes: Second, I want to reiterate and emphasize the things that we are doing to mitigate the impact of tariffs.
Matt Reintjes: We are accelerating our efforts to diversify our supply chain out of China.
Matt Reintjes: We are aggressively pursuing various ways to mitigate the impact of tariffs, both on the cost front and partnership with our suppliers, as well as via pricing.
We are tightly managing our operating expenses and our cash.
Matt Reintjes: And third, I want to make sure that it is clear that by the end of this year our efforts to diversify our supply chain will put us in a much stronger position.
Matt Reintjes: On a go-forward basis, meaning, once we work through any remaining inventory purchased at higher tariff rates, products purchased from China for the US market will represent less than 5% of our total cost of goods.
Matt Reintjes: Obviously, the level of terrorists has materially changed from our last earnings call, resulting in the change in our outlook.
Matt Reintjes: But what has not changed is our commitment to our strategic priorities, the strength of the YETI brand, and the opportunity we have to deliver a sustainable, long-term growth on a global basis.
Matt Reintjes: Now, I'll turn the call back over to the operator to take your questions.
Matt Reintjes: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press store one on a telephone keypad. Should you wish to cancel your request, you may press store two.
Speaker Change: Your first question is from Randy Konik, from Jeffries. Your line is that open?
Speaker Change: Good morning, guys. Maybe you've just reminded us again that number of new product introductions expected for 25 and how that compared to...
Speaker Change: How that compares to 2024, and on that cadence, would we expect that kind of level of cadence from 25 to continue on?
Speaker Change: You know, into 26 and beyond, and relatedly to that, you know, maybe give us a little more flavor around the initial response or changes in behavior of response, you know, of these newer products in the last 12 months.
Speaker Change: versus what you probably saw, you know, a few years ago. Maybe give us a little kind of what's changed there. Any improved or accelerated product acceptance, adoption, resonating with consumers. That would be super helpful. Thanks, and then I have a follow-up.
Thanks, Randy. Good morning.
Speaker Change: You know, I'll start with incredibly excited about the setup this year for innovation and not just what's coming in 2025 but really how it sets us up for 26 and beyond. And I do think that you're going to see an up-level cadence from us as we take advantage of the brand that we think that we've built in the umbrella of that brand to build out the product portfolio. Thank you.
Speaker Change: So this year we expect about 30 new products that would be versus 24 in 2024.
Speaker Change: You know, that's obviously, as we talked about, the impact disrupted by the supply constraints, the shift in our supply chain. But what we thought was important to continue to bring innovation, continue to support the YETI brand, continue to support our partners. Thank you very much.
Speaker Change: and continue to take share and find shelf space. So we're excited about that. As we go forward, this up cadence is something that I think you're going to continue to see from us. As you heard on the call, we've made a number of investments. We've aligned resources in our team to focus around.
Speaker Change: Our drink or business and our coolers and equipment business and within that specifically our bags and soft coolers and the rest of our gear and equipment which includes our hard coolers. [inaudible]
Speaker Change: So driving focus, driving execution, using this moment of disruption to improve our process, to improve our speed to market, and drive a lot of focus. So we're excited about what's coming there.
Speaker Change: You know, I think when we think about the last couple of years...
Speaker Change: You know, the results we talked about in Q1 and we've talked about the last couple quarters, I think are evidence of the importance of innovation. The growth we talked about in hard coolers, the growth we've seen in bags. [inaudible]
Speaker Change: The things that we have indicated are coming. The recently launched food bowls continue to expand our drinkware portfolio.
Speaker Change: So, I think that innovation is an important part of what we do. But also importantly, our base is strong. We have products that continue to deliver year after year, and then we build the innovation planks to grow on top of it. So, I think that innovation is an important part of what we do, and that innovation is an important part of what we do.
Speaker Change: And that's the model that we've successfully run and I think going forward you're going to see that pace continue. Thank you.
Speaker Change: Great. And then Mike, I really appreciate you framing out all the the tariff impact, etc. And I think he quoted a hundred million dollar impact on assuming that's basically a back half. That's it.
Speaker Change: Kind of number, not an annualized number, but that being said. [inaudible]
Speaker Change: When we think about all the movement out of China, and we assume, let's say if we assume that there's going to be...
You know, less onerous tariffs outside of China.
Speaker Change: How much of that 100 million is China specific at the moment in the number you quoted just so we can get a sense of, you know, how we think through without getting guidance from you, how we think through of going into 2026 and beyond where I think the story basically sets up in a very favorable way. Thanks.
Randy, so first, appreciate the, appreciate the comment.
Speaker Change: Let me first say, you know, the tariffs will start impacting us in Q2. So it's not an annualized number. That's a 2025 impact that will start in Q2, but the impact will build as we go through the year in Q3 and in Q4. I mean, I, you know, of the 100 million that we quoted. We'll see you in the next one.
Speaker Change: I think it's safe to say that approximately 90% of that is China. So the biggest peace given the rate there. [inaudible]
Speaker Change: So, you know, 145% rate, tariff rate on China and 10% on other countries were applicable to us.
Speaker Change: You know, obviously, that puts the bulk of the impact on China specifically in which, you know, why we keep pointing back to, you know, we feel really. [inaudible]
Speaker Change: Good about the position we're going to be in at the end of the year and into 2026 with, you know, approximately 5% of our cogs exposed to goods that are that are that come from China and imported into the US. We're going to be going to the US.
Super helpful. Thanks, guys.
Speaker Change: Thank you. Your next question is from Brooke Roach from Goldman Sachs. Your line is now open.
Good morning, and thank you for taking our question.
Brooke Roach: I was hoping you could talk a little bit more about your outlook for the drinkware business. You talked a little bit about some specific categories that are underperforming. What percentage of the business is those underperforming categories? And when do you think you might get to a neutral stance there outside of the supply chain disruptions associated with tariffs? Yes.
Brooke Roach: And then what's your current outlook for wholesale and how your partners are talking to you now about forward demand? Thanks.
Speaker Change: Hi, Brooke. What I would say, I'll start with in drinkware. You know, we've been consistent over the last couple of years, is that market has had. [inaudible] consistent over the last couple of years, we've been consistent over
Rapid expansion that our strategy has been...
Speaker Change: Continue to diversify our drink, wear a portfolio, address more use cases, address more user needs. [inaudible]
Speaker Change: You know, stay with the consumer throughout their day and the week, which by definition a lot of so avoid heavy concentration risk that I think that category is. [inaudible]
is experiencing right now in the correction.
Speaker Change: I think as we look forward, we expect that to largely settle out, we think there's an underlying durable demand in that category, and we think that our product portfolio is set up to go out and address that.
Speaker Change: I think you see it in hydration vessels. They're coming, you've heard us talk, or heard us talk about a call about.
Speaker Change: Sports jugs in our excitement around what's happening in sports from youth to collegiate to professional. We think we have a lot of relevance there. I think the coffee tea bar where we're really excited about and I think there's a lot of. [inaudible]
Speaker Change: Innovation yet to come from us as we get through 2025 and really set up for 2026.
Speaker Change: and beyond. You know, I think those large format, highly, highly trend-driven elements of the Drinkware category, I think those cycle. And so what we're doing is we're really focused on a strategy that cuts through the base of that.
So, I think you'll, uh...
Speaker Change: I think you'll see us keep pushing that strategy forward. We have an incredible team working on it.
Speaker Change: Obviously, a lot of that team right now is focused on our supply chain transformation.
Speaker Change: But I think the point I wanted to make on the call was...
Speaker Change: We are also driving improvements to our underlying process that we think will yield benefits not only in the supply chain transformation, but in our innovation going forward.
Speaker Change: From a wholesale perspective, we have incredible partnerships. We continue to strengthen those partnerships. We continue to strengthen those partnerships.
Speaker Change: We talk to our partners about innovation that's coming. They share our enthusiasm about the road map. They see it much further out. Obviously, then we publicly disclose. Thank you very much.
Speaker Change: And that's what allows us to plan for our shell space. That's why we continue to extend shell space with the innovation we have. So we think it's a good, it's a good setup, you know, the macro uncertainty, the consumer uncertainty behind kind of. [inaudible]
Speaker Change: Surrounding is, you know, a little bit of an overhang on that, but otherwise we think the foundation is really strong. [inaudible]
Great, thanks so much. I'll pass it on.
Speaker Change: One few ladies and gentlemen, once again should you wish to ask a question, you may press store one. Once again, kindly limit yourself to one question and one follow up only.
Speaker Change: Your next question is from Peter Benedict from the Earth. Your line is not open.
Peter Benedict: Good morning, guys. Thanks for taking the question. First on the mitigation efforts that you guys have kind of planned and baked in here. Maybe if you could expand, expand a little bit more on the approach you're taking to pricing, we know you've already raised some price. Thank you very much.
Peter Benedict: I would call it, you know, back during the supply chain disruptions around COVID and free. You guys did not do much pricing. You started to do a little as your approach kind of the same here. So that's my first question that I have to follow.
[inaudible]
Peter Benedict: Good morning, Peter. Thanks. Thanks for the question. I'll start with.
Peter Benedict: Our focus right now and our greatest mitigation to tariffs is moving, and that's what the business is focused on is...
Peter Benedict: Gifting our supply chain and driving that transformation. I think that's what...
Peter Benedict: You know, allows us to communicate what our exposure will be, in particular to China in 2026. And I think that's a remarkable transformation that we've taken the business on through incredible effort by our team.
Peter Benedict: So I think that that first and foremost is it relates to the other mitigation efforts, you know, our suppliers are incredibly supportive. They drive participation in how we continue to get product market, but also how we manage through this, this rising cost time. Thank you very much.
Peter Benedict: I think as it relates to pricing, we've always been very targeted and thoughtful about our pricing. We like pricing that'll stick in the market. We want to make sure that we're not swinging prices around reacting to the moment in time. And know the thing that we balance against everything is we will be in a very different situation. We're going to be in a very different situation.
Peter Benedict: In 2026 from a source supply and a country of origin perspective. And so we take all those things into consideration of the moment in time versus the long term setup for the business. And so we take all those things into consideration of the moment in time versus the long term setup for the business.
Speaker Change: Yeah, that makes sense. I was like the prayer approach. My follow-up question is really on the international business. I was in ice to see the growth that's happening there. Can he talk to us about any thoughts about how you could accelerate that growth any further. I know you're launching Japan now. How should we be thinking about, you know, 26 and beyond in terms of growth initiatives from international. Thank you.
Speaker Change: Yeah, I think there's a few things going on that we're excited about internationally. One is the continued growth and stability from our established international markets.
Speaker Change: I think the things that we're seeing happen in Europe right now, I think we're nearing one of those, one of those great kind of inflection runs that YETI has when...
Brand tips over from an awareness perspective. Thank you.
Speaker Change: the partnerships, the ambassadors, all that set up to drive the durable long-term demand.
Speaker Change: We think there's incredible opportunity in front of us in the UK and Europe . The teams built out and now it's a matter of supercharging, so we're focused on...
Speaker Change: Demand creation, partnerships, wholesale reach, and driving our DTC business, which is proven successful in our longest standing international markets. I think Japan, what you're going to see from us, and we've talked about this in Japan, is Japan will bridge us into the rest of Asia.
Speaker Change: And so as we focus from Japan to the rest of North Asia and then in the greater China opportunities in Southeast Asia, we're building out a team that's going to be capable of going after those opportunities. And so we're laying those markers right now for getting Japan going and then tumbling into the into the rest of Asia.
Great. Thanks so much.
Speaker Change: Thank you. Your next question is from Peter Keith from Piper Sandler. Your line is open.
Speaker Change: Hi, this is Alexia Morganon for Peter Keith. Thanks for taking your question.
Speaker Change: My first question is just a clarification. You had mentioned you were monitoring...
Canada
Speaker Change: But I was wondering if you were seeing any impact to demand so far internationally, perhaps signaling.
Again,
The anti-American views given the current political environment.
Speaker Change: Thank you for joining us. I'm Maria Lycouris. I'll see you next time.
Speaker Change: Hi, Alexia. Thanks for the question. You know, I would say-
Speaker Change: We watch the obviously the geopolitical landscape is rapidly changing right now.
Speaker Change: All the markets in which we operate, we have teams that are local there and they're on the ground and they're highly connected to their customers.
Speaker Change: I think the thing that we've done well is we've built our brand outside the US to make sure that it's really relevant to the local audience and almost feels of the place.
Speaker Change: So, I think we're in a really good position from a affinity for YETI and a connection, and a lot of that's driven by the incredibly talented team that we have outside of the US.
Speaker Change: You know, I wouldn't call out anything of note that we've seen to date, but obviously it's a really fluid situation and we're monitoring closely on our teams. [inaudible]
Speaker Change: Locally are very focused on making sure YETI stays in front of the consumer that it has relevance, that we're talking in a voice in the regions that shows that we understand the place that we...
Speaker Change: Our passion about our customers and our consumers and that we have products that are relevant to their lives.
Speaker Change: Okay, that's great. Thank you. And then my second question is just on quarter to date, if you're able to provide any color on Q2 sale so far or anything that you're seeing as it relates to consumer demand. Thank you very much.
Speaker Change: Yeah, good morning, and thank you for the question. We generally don't talk about inter-quarter trends, but I would say it's something we're watching very closely, pointing back to some of the comments that Matt had at the beginning of the call.
Speaker Change: You know, we do think it's a relatively choppy environment out there. I think that was, you know,
Yeah, some of the backdrops for-
Speaker Change: The comment to round our outlook for the rest of the year.
Speaker Change: We expect that we could see some signs of...
Speaker Change: of wholesale caution and ordering. But one of the benefits we have is a pretty diverse wholesale channel footprint. And at the same time, we're seeing some signs of strength within our wholesale channel and more broadly, within our Amazon business, within our corporate sales business. So I think the word that we would continue to use, or words we would continue to use, or choppy, or inconsistent,
Speaker Change: But beyond that, we generally haven't, you know, we don't talk about intra-quarter trends on these calls.
Oh, he understood. Thank you.
Speaker Change: Thank you. Your next question is from Jill Altobello from Raymond James. Your line is so open.
Speaker Change: Thanks, hey guys, good morning. I guess first question on the guidance reduction, obviously, I would imagine most of this is tariff supply chain related, but how much are you building in to that EPS reduction, for example, sort of factoring in a softer consumer this year? [inaudible]
Speaker Change: Yeah, hey, Joe, it's Mike. So here's what I'd say. Hey, um.
Speaker Change: There were 300 basis points of impact that we called out that is specifically related to supply disruption.
Speaker Change: If you look at the midpoint of our prior guide, that takes you down to kind of that 3% range. Of a guide of one to four, we said that on the low end of that, that...
Speaker Change: We would expect to see, or that would imply that we have a, you know, we see consumer softness.
Speaker Change: Hear Forward on the high end, you know, things stay kind of where they are now. So I'd say that's how we bracketed it with supply being the specific call down and then the range being represented of what we could see from a from a macro or consumer spending environment. And so that's how we're going to do that.
Speaker Change: Very helpful, and just to follow up on that, obviously you're not the only one being impacted by this. How would you assess? [inaudible]
Speaker Change: Where you got your position, these are the terrorists versus let's say a sharp ninja or a Stanley for example. [inaudible]
Thank you, Matt. I think it's you know. [inaudible]
Speaker Change: Hard to comment on how others are positioned. What I would say is, this is a project, our supply chain diversification is a project that goes all the way back to 2018. And we started to move our soft coolers and our soft goods to position them in markets where we wanted to be. We wanted to be in. [inaudible]
That has continued in 2023.
We really started an earnest start drink where supply chain transformation.
Speaker Change: You saw us report through 2024 on the results of that.
Speaker Change: Our growing confidence, the impact of our efforts from our team is what's kind of led us to a position where we think we're going to be in a really good spot going into 2026.
Speaker Change: So, 2025, I would call it Transition Year, 2026 really sets us up for the global supply chain to support our global demand, and importantly our U.S. domestic demand going forward.
Speaker Change: So, I feel great about where we are and how we're positioned. And you know, supply chains or something will continue to evolve and grow. And I think that will evolve and grow with the business. And we have the team in place to execute it. [inaudible]
Okay, thank you.
Speaker Change: Thank you, your next question is from Jim Duffy from Stevole, you're a might as well open.
Speaker Change: Another related question, you mentioned adjusting POs in real time to terrorists, realistically, how nimble can you be with that as it relates to policy shifts. Thank you.
Speaker Change: Jim, I'll start with a few thoughts, and then have Mike step in, and we'll try to cover all those pieces.
Speaker Change: I would say our primary focus from a supply chain transition is we're broadening our footprint in Southeast Asia.
Speaker Change: ex-China, but moving to multiple locations in Southeast Asia, which we think is a great next phase in the diversification of our supply chain. And then our team continues to look around the globe for.
Speaker Change: kind of continued evolution of our supply chain, but that's the easiest and quickest answer on the first step. You're on the operational execution. Thank you.
Now, the good news is, [inaudible]
Speaker Change: We are already producing products across these markets, so we're not starting from zero, so we know how to do it.
We have partners that are experienced in it.
Speaker Change: And as we talked in prior calls, we're also using this not always a chance to improve our product development process.
Speaker Change: Automation, which is allowing the speed, the quality, the consistency of what we do. So it's a significant lift, it's a significant transformation of our supply chain, but we have an incredibly talented team and a really good plan to do it.
And hey, Jim, this is Mike.
Speaker Change: On the other part of your question, what we said today was we expect inventory levels to be down this year, both at year end as we go through the year. And the shift. We're going to see you in the next video.
Speaker Change: of our supply chain out of China. Two other regions is a big piece of that.
Speaker Change: You know, there are products that both new and existing that we primarily drink where there are some CNA products, but primarily drink where that we know we're going to be constrained as we go through the year.
Speaker Change: We have also had, you know, made the decision that there are certain products that it just didn't make sense to scale the supply chain in China. And so therefore we push those launch those launches out to 2026. Thanks.
Speaker Change: There are others like we said that, you know, it makes sense that we're going to go ahead and launch, but we're going to launch outside the US first and obviously, you know.
Speaker Change: 80% of our business is in the US, so that has a meaningful impact as well. And so that's all sort of wrapped into the supply driven growth impact that we called out. And so that's all sort of wrapped into the supply driven growth impact that we called out.
Speaker Change: You know, we are, I'd say we have a couple goals here and one of those is to, we want to try to minimize the impact. Thank you.
Speaker Change: That this is having on 2026 going forward. And so we are looking at things like our safety stocks, trying to minimize the mature that we're buying out of China.
Speaker Change: And so that's all kind of wrapped into the guide, but we can be nimble here as we go. We've seen the team over the last five weeks or so, the efforts of our team to react to this have been nothing sort of remarkable, and so we'll continue to do that as we go forward. We'll continue to do that as we continue to do that as we continue to do that as we go forward.
Great. Thank you. Just a follow-up you mentioned. Thank you.
Speaker Change: You know, keeping the safety stocks tight and talked about less than 5% of cost of goods from China. How do we think about that? Is that a run rate basis beginning 26 or should there be some capitalized inventory that carries into 26 perhaps making that higher in terms of its influence on the PNL? No.
Yeah, so I...
Speaker Change: You're right. I mean, there will be some bleed off into 2026. That 5% number was kind of a, that's the go-forward run rate today. I mean, there could be opportunities to reduce that further as we go forward, but sitting here today. Thanks, James.
Speaker Change: That is what we see is on a go-forward basis with the comment that there will be some caveat of of catalyzed tariff on our balance sheet that bleeds out in the first part of 2026.
Thank you for all you do.
Speaker Change: Sorry, Jim, longer term, we feel really good about how we're set up.
Great. Thanks, Matt Mike.
Thanks, Jim.
Speaker Change: Thank you, and our last question is from Anna Glaessgen, from the Rurali Securities, Your Line of Sew Open. [inaudible]
Anna Gleason: Good morning. Thanks for screwing me in. I'd like to touch on the guidance reduction and how you're planning inventory ahead. You know, it feels like, you know, the majority of the sales reduction is related to a lack of inventory to be able to meet. [inaudible]
Anna Gleason: Underlying demand. And so, as you think about how you're distributing and allocating inventory this year, amid that dynamic, can you talk about how you prioritize between CTC and wholesale and within wholesale, how you'd be allocating inventory amid that constraint? And so, as you think about how you're distributing and allocating inventory, how you'd be allocating inventory amid that constraint?
Speaker Change: And I'll take the how we think about the commercial management of the inventory constraint, if Mike wants to add anything on just the overall impact of the inventory.
Speaker Change: What I would say is, you know, when in some of this innovation and even some of our inline product, we do expect to have to have some constraints as we go into the back half of the year. Some of that.
Speaker Change: You know, new constraint meaning the product hadn't launched, so it's all new. But what we are attempting to do is make sure we can support broadly our channels. Let's, um,
Speaker Change: But what we've mentioned on the call was some things we're going to launch outside of the US because we didn't have enough to service broadly our omnichannel in the US.
Speaker Change: Some things will be supplied constrained, and so we won't be able to fill the fall-armony channel.
Speaker Change: And some things will get pushed while we build kind of more supply to be able to more fully support the demand. So I would say it's actually a multi-layer versus a we're going to bias one channel or the other domestically. It really is a. [inaudible]
Speaker Change: How much inventory do we have? How much supply can we get? What's the demand look like and then we allocate it? Really to try and support the consumer and ultimately be present and so I think the setup. [inaudible]
Speaker Change: of 2025 for 2026 from an innovation perspective. We'll give us almost a second bite at innovation that we launch in limited supply this year.
Speaker Change: The only other thing that I'd added to my earlier comments on inventory is I think one of the things that we're trying to take away from this is...
Speaker Change: you know, learning of best practices and how we apply what we're learning during this process going forward. And one of those is as we're reducing safety stocks.
Does this give us an opportunity to kind of...
Speaker Change: Ronat, lower inventory levels, going forward. There's going to be periods where we may be. We're going to be in the next episode.
Speaker Change: You know, head of launches or head of peak seasons where that may go up and down, but it's certainly something that we're focused on as we go forward and making sure we manage our working capital as effectively as we can. Thank you.
Great. Thank you.
Speaker Change: Thank you. You're new for their questions at this time. I will now hand the call back over to Mike Reintjes, or the closing remarks.