It’s also part of how we’re advancing some of our analytics and how we put the right offer, the right opportunity at the right time in front of the consumer. But we really like the customers that we’ve acquired over the last 3 to 4 years to complement the customers that we’ve had kind of long-standing with YETI. And we think that’s the opportunity to keep bringing innovation in form factor, keep bringing excitement in color and then keep that emotional engagement with YETI.
Anna Glaessgen: Great. And could you expand a bit? You noted that you’re reinvesting in the brand and not flowing through kind of the full gross margin expansion. Can you talk a little bit more about what’s the key priorities are with that investment?
Michael McMullen: Yes. So I’d say it’s a couple of areas. Number 1, it’s really around what we’re doing to grow YETI outside the United States. So — and you’re seeing the results of that, including this quarter, where we grew international over 30% and it’s now 19% of our business. So I think within International, it’s building out the teams we need, it’s growing the brand, building brand awareness, building the technology tools that we need, the supply chain infrastructure we need, etcetera, number 1. Number 2, as we look to kind of build out our inorganic opportunities and be able to support inorganic opportunities, there’s obviously a need to build out a team internally to do that and we talked about that last year in terms of the first steps that we were making there.
And then I think third, even domestically, as we look to expand the portfolio into new areas, that are focused on new communities, there’s an element of really driving brand awareness in those new areas and in those new product categories. So those are just some of the areas that you’ll see us continue to invest in and hopefully see the results as we go forward.
Operator: And our next question comes from Peter Benedict from Baird.
Peter Benedict: First, kind of a follow-up on one of the earlier questions. Just curious around Mystery Ranch. I mean, Matt, you mentioned it as being an accelerant to your bags innovation. I’m just curious around the timing there. Is 2025 too soon to think that you could see an acceleration in your bags innovation, leveraging some of what you’ve gotten with Mystery Ranch? Or is it going to take longer than that? Or is 2025 a good time to eye for some initial innovation? That’s my first question.
Matthew Reintjes: Peter, thanks for that. I would say, almost frankly before we even closed with Mystery Ranch, we started to work with the teams on how we bring sort of the best ingredients together of both businesses. And so they’re active and well down that path. I think as we go into 2025, we’d look to bring out some additional products that will have the results of the work of those 2 teams coming together and that’s what they’re racing towards. This is not something where I think we’re years out from seeing the benefit. And it’s the result of partnering with a great group of people, who have the talent, combined with the talent we have at YETI, that we can move really quickly on this. So we’re excited to get going and kind of put our first products out together.
Peter Benedict: Great. And then I want to pivot over to the international business. Nice to see kind of the management or the addition for the Asia region. Just remind us kind of how you’re viewing the org structure now internationally, how you plan to build that out and support the growth? And then is there any margin difference we should be thinking about with the international business relative to the U.S. as that business continues to improve its penetration? Is there any DTC to wholesale mix to think about or anything else from that angle?
Matthew Reintjes: Thanks. I’ll take the front end of that from a structural perspective and then Mike can step in on the margin. As we think about the opportunity internationally, one of the things we’ve shifted our structure, our go-to-market structure to have commercial organizations focused on each of the major regions. So the Americas, Europe and the Middle East and then Asia Pacific. And the reason being all 3 are different stages of their maturation and their development and their growth and their needs. And so to have a team that is focused on taking advantage of those opportunities, taking advantage of the opportunity we have in the Americas and taking advantage of the opportunity — the burgeoning opportunity we have in Europe and in the Middle East.
And then the opportunity we have building off the strength of an incredible business in Australia, as we called out on the call but in North Asia and in Greater Asia. And so I think that’s where we’re excited to get a leader in Naoji over that region to start really kind of stoking what we think is opportunity underneath the surface.
Michael McMullen: Peter, it’s Mike. And so a couple of things on your question. First, at a sales mix level, it really kind of — it differs by region but I would say that international, we haven’t given specifics but what we have said is that we don’t have our full D2C model outside the U.S. and in several cases, we’ve said that corporate sales is underpenetrated. We haven’t had customization at scale. And so that would imply that maybe wholesales are a slightly bigger mix, a piece of the mix internationally just because of not having the full D2C model. But we certainly believe that we’re in a position to drive that going forward and you’ll see the D2C mix internationally continue to increase. From a margin perspective, what we said once you normalize by — for channel that the gross margins are relatively the same as in the U.S. There’s some differences by region.
But for the most part, internationally, they’re pretty — versus the U.S., they’re pretty similar. Where you see the difference is on the operating margin line. So some of the more — the regions where we’ve been in market for longer, Canada and Australia, we see really strong operating margins that are accretive to YETI and newer regions that are still emerging like Europe, we’re still investing. And so you — we still got some room to sort of drive operating margins up in those countries. But as Europe continues to grow, we’ll see that benefit. That just may be offset by new regions that we enter like Asia, where we’re going to be going through a similar dynamic that we’ve been going through in Europe where the first few years are really about investing and building out the region.
Peter Benedict: Got it. So as we scale internationally, there’s nothing structural but that keeps the margins below it other than just investments in growing new markets. So — perfect.
Operator: We have a question from John Kernan from TD Cowen.
John Kernan: Just a couple of questions here. The Drinkware business accelerated the last two quarters over 12% growth close to 13% this quarter. Maybe talk to some of the drivers of that. There’s been some new entrants into the marketplace. You’ve obviously had some category expansion. Just curious, how should we think about Drinkware versus Coolers & Equipment for the end of the year?
Matthew Reintjes: Yes. Thanks, John. I’ll take the kind of the dynamic piece and then Mike can help out and take the back end of that. I would say, as Mike said in an earlier comment, we’ve always lived in a competitive market for our products. I think what YETI has done consistently is drive innovation, tell consumers why it’s relevant, put relevant products out in front of the consumer and be thoughtful about not only our form factor innovation but also color. I think the success that we’re seeing is both new and returning YETI customers responding to the product offering. And I think when you think about our product portfolio and the reason we call out the 50-plus SKUs is that in Drinkware, that diversification, giving consumers more reasons to engage with YETI products throughout the day, I think is a key part of our strategy and I think it’s a key part of the success that we’ve had.
Michael McMullen: Yes. And the only thing that I’d add, John is, Matt talked about innovation, just the growth opportunity outside the United States that we have. And then as we look forward and what we expect for the year, we said we expect C&E to outpace Drinkware growth but we do expect to have — to grow Drinkware this year kind of a similar rate that we saw last year. And we think there’s — we’re off to a good start to deliver that based on Q1.
John Kernan: Got it. Maybe then just a follow-up on 2 partners, DICK’s and Amazon, obviously, Amazon being on the DTC side and DICK’s on the wholesale side. I think the 2 channels account for almost a quarter of the company sales at this point, when you gross up the wholesale dollars it takes. Talk about, I guess, the wholesale channel, sales space there, particularly at DICK’s and then also Amazon, growth there continues to outpace the company average. I’m just curious what you’re learning on Amazon and how much more you can do with them?
Matthew Reintjes: So let me — I’ll take the DICK’s question maybe kind of expand out to wholesale broadly. And then Mike will talk about the DTC dynamics in the overall for YETI. As you think about our wholesale and we’ve said this before, we feel great about the wholesale footprint we have, we feel great about the reach we have with consumers and how we’re intersecting. As you know, we’ve been very thoughtful at how many doors and how rapidly we expand because we continue to invest in our in the productivity at the stores in which we operate and we invest in the productivity and the performance for our partners and that’s been a hallmark of YETI. We’ve commented before that our shelf space is — remained the same. Our mix on the shelf as we launch new products and as we innovate, our wholesale partners continue to find ways to merchandise us, find the space for our products.
So the biggest change we’ve seen in recent is how much of the total space within stores is committed to our categories. And I think that’s a dynamic of the consumer interest, particularly around Drinkware and particularly around hydration which we think the attention to the category, as you’ve seen in the results from YETI, only continue to benefit the strong product offering that we have there. So I’d say, as we look across our wholesale landscape in the U.S., we feel very good about the footprint we have. We feel very good about the support we have from our wholesale partners, we feel great about the receptivity to our innovation and the things that we have coming. And they continue to be a really important piece of YETI’s performance.
Michael McMullen: On Amazon, John. I mean, obviously, with our disclosures in the 10-K, it would imply we had a really strong Amazon year last year from a growth perspective. We called it out as we went through the year. It was a driver, not only our growth but also from an SG&A standpoint. What we said this quarter is that we saw good growth across all of our D2C subchannels, Amazon included. And that’s on top of having a really strong year last year. So we didn’t give specific color on Amazon or haven’t given specific color on Amazon from a guidance or outlook perspective, other than to say we think it’s a really important channel for us. It can continue to be a really important channel for us. But it’s going to be, I think, balanced with our other D2C subchannels this year.
Operator: Now let’s take a question from Peter Keith from Piper Sandler.
Peter Keith: Nice results here. Sticking on internationally. I’ve gotten a couple of questions. But with the acceleration you’ve seen in the last 2 quarters, I was hoping you could just maybe highlight where some of that acceleration is coming from? And then Mike also with the acceleration, why would the full year guide still be 20% to 25% for International? And finally, on International. I think you’ve talked about a 30% sales penetration target long term. Is there any thought that, that might be higher as we go forward?
Matthew Reintjes: Thanks, Peter. I’ll take a bit of that and then Michael weigh in a bit, too. When we look at kind of where that acceleration is coming from, we called out on the call, Australia continues to perform extremely well. We have an incredible team down there. They have a great wholesale footprint that is getting the brand out in front of consumers throughout Australia. We have a strong e-commerce business. We identified and called out the opportunity in the growing customization or personalization capabilities. They’re building a really nice corporate sales business. And then we’re a little earlier in New Zealand but New Zealand is a great market for us. It’s a market that’s a perfect fit for YETI. So I think that’s a market where we’ve got a lot of things in place to be able to build on top of the momentum and the success that, that business is at going back to 2017.
So I think that business is in the kind of build strength-on-strength mode. In Europe, we called out the U.K. and Germany, been broadly in Europe, we’re seeing the brand awareness grow. We’re seeing product placement. Our partnerships, our marketing, our ambassadors, our event activations, so running the classic YETI playbook is really starting to pay dividends. And we launched that business right before — in late-2019, right before the pandemic. So it had a little bit of a slower start with the wholesale disruption during that period. I think now we’re in a mode where wholesale partners are starting to grow. We’re getting the right kind of and thoughtful additional doors. We’re driving a strong e-commerce business. We’ve got a corporate sales business that’s really starting to turf up some really interesting opportunities that are really brand — on brand, brand right and exciting ways to get that kind of first-hand shake of product into the consumer’s hands.
