Yeti (YETI -0.67%), known for its premium outdoor gear and drinkware, released its financial results for the second quarter of fiscal 2025 on August 7, 2025. The most significant news: although revenue (GAAP) of $445.9 million fell short of analyst expectations in Q2 FY2025, Yeti posted a better-than-expected Non-GAAP EPS of $0.66, beating Wall Street's $0.55 estimate by a wide margin, even as adjusted EPS dipped from last year. Profit margin improvements, disciplined cost management, and growth outside the U.S. helped offset softness in core U.S. drinkware and persistent supply chain bottlenecks. Overall, the quarter showed both the challenges and the strategic gains from a major supply chain transition in progress.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Key Success Factors

Yeti builds and markets premium outdoor products, including drinkware such as insulated tumblers and bottles, hard and soft coolers, and travel bags. The company has built its reputation on durability, design, and brand cachet, attracting both serious outdoor enthusiasts and everyday consumers looking for performance and style.

Recent business efforts have centered on three priorities: innovating with new products, expanding internationally, and transforming its supply chain to limit tariff exposure and improve resilience. Key success factors for Yeti include the continued rollout of new items, maintaining customer loyalty through its strong brand, optimizing distribution channels (both direct-to-consumer, or DTC, and wholesale), extending reach into international markets, and managing a complex, global supply network to balance quality, cost, and reliability.

Quarter in Review: Performance and Progress

The quarter demonstrated the impact of Yeti’s supply chain overhaul, particularly the move to shift U.S. drinkware production out of China. This strategic transition caused inventory constraints and delayed some new product launches. Despite these disruptions, Non-GAAP EPS reached $0.66, outpacing consensus estimates by roughly 20% in Q2 FY2025. This outperformance was achieved in part through improved margins and cost control, even as revenue (GAAP) slipped behind expectations and declined 4% from the prior year.

Sales in the core drinkware portfolio, which includes insulated tumblers and hydration bottles, fell 4% from the prior year as U.S. demand remained challenged by a more promotional retail environment and delayed product launches. Coolers and hard-sided equipment sales (GAAP) dipped 3%. U.S. revenue declined 5%, contrasting with international sales growth of 2% (GAAP). Notably, new markets such as Japan contributed early results, and European operations posted “exceptional performance.” For the first half of FY2025, international revenue (GAAP) was up 11%, further highlighting the resilience of non-U.S. operations despite foreign exchange pressures.

Within channels, direct-to-consumer (DTC) sales were relatively stable, down just 1% year-over-year, offering some insulation from weaknesses seen in wholesale, where sales dropped 7%. DTC represented 56% of net sales. The company reported that its allocation of limited inventory aimed to support demand across both DTC and wholesale, rather than prioritizing one over the other.

Operationally, gross margin (GAAP) improved to 57.8%, up from 57.0% in Q2 FY2024, driven by lower product costs, pricing actions, and despite higher tariffs. Operating income (GAAP) decreased by 8%, while Net income (GAAP) was up 1% to $51.2 million. Operating expenses, measured as selling, general and administrative (SG&A) costs, were down 1% year-over-year (GAAP), but increased as a percentage of sales to 43.9% due to tech investment and softer revenue. Free cash flow for the first six months of FY2025 was negative $39.0 million, an improvement over last year’s negative $69.35 million for the first six months of FY2024. The company also repurchased 0.7 million shares for $23 million.

Product innovation remained a bright spot. Bags and hard coolers drove category momentum. Approximately 30 new product launches are planned for FY2025, including the acquisition of shaker bottle intellectual property for $38 million in August 2025. However, some launches were delayed due to the supply chain transition, and new inventory constraints meant product availability issues in key markets, especially the U.S. While the innovation pipeline is robust, management signaled that the full benefit will materialize after the supply chain project concludes.

Looking Ahead: Guidance and Watch Items

Management updated its guidance for FY2025. Full-year adjusted sales are now projected to be flat to up 2%, reduced from a prior range of 1% to 4% growth for FY2025. Despite lower top-line expectations, the company raised its adjusted EPS range to $2.34–$2.48, up from $1.96–$2.02. Free cash flow guidance is $150–$200 million for FY2025, reflecting lower planned capital spending and better cash management. A roughly 300-basis-point unfavorable impact from supply chain disruptions is included in these adjusted forecasts for FY2025.

For the remainder of the year, areas for investors to track include the pace of drinkware demand recovery in the U.S, the strength of international momentum in markets like Europe and Japan, execution of new product rollouts, and the ongoing success in food and drinkware innovation. The timeline and effectiveness of the supply chain transition, especially efforts to move 90% of U.S. drinkware capacity out of China by year-end FY2025, will be pivotal for future margin improvement and tariff mitigation. The company continues to put excess cash toward share repurchases and supply chain investments.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.