STOCK PICK: A Retail Outdoor Product That's Unbreakable
What started as a niche outdoor company is expanding to a global outdoors icon.
Two brothers raised by an entrepreneurial father got sick of drink coolers always breaking on their family fishing trips. Out of frustration, they built the world's greatest, most durable water cooler to withstand any condition. Years later the two brothers found themselves on top of a company doing over $29 million in sales and now does approximately $1.6 billion in revenue selling coolers and drinkware (as of this writing). This stock pick is none other than Yeti Holdings, Inc.
Company Overview
Yeti (NYSE: YETI) has become the “go-to” brand for reliable outdoor products including drinkware, coolers, backpacks, bags, and related accessories. Founded by two brothers Roy and Ryan Seiders in 2006 with a vision to build a better, more durable cooler for their outdoor fishing trips, Yeti began to take root when they hit $29 million in sales in 2011.
From the founders ... “Growing up, my brother and I always had a passion for the outdoors. Hunting, fishing, traveling to outdoor industry trade shows with our teacher-turned-entrepreneur-father. We were raised with an appreciation for wild game, unfamiliar territory, and high-quality gear.”
They continue … “But the coolers available at the time just weren’t up to our outdoor adventures – the handles would break, the latches would snap off, and the lids would cave in. Not only was it a hassle to replace our coolers after each season, but also these cheaply built, ordinary ice chests were limiting our good times. And that frustration led us to a solution.”1
Yeti’s mission is simple: to “build the cooler you’d use every day if it existed.”
For the long version of Yeti’s story, take a look at this article from Inc. Magazine: How 2 Brothers Turned a $300 Cooler Into a $450 Million Cult Brand
Leadership
Roy Seiders stepped down as CEO of Yeti in an effort of filling the position with a more qualified CEO. To me, that spells true leadership in a founder of a great company - to recognize when his skills may not be sufficient to maintain the company's growth. Keeping the best interest of the company in mind, Matt Reintjes filled his place while Roy maintains a spot as the company chairman to help guide the strategic direction and new product development.
Before becoming Yeti’s new CEO in late 2015, Matt Reintjes led the outdoor products line for Vista Outdoors Inc growing it to $900 million in revenue. Prior to Vista Outdoors Inc., Reintjes served as president of Danaher, a manufacturer of medical and industrial equipment and a Fortune 200 company.
Why Invest In Yeti?
Among the many reasons I believe Yeti poses an exceptional investment opportunity include its sound financial situation, powerful brand name, premium products supported by hundreds of leading industry influencers, and amazing potential for sustained growth.
Financials
As of this writing, Yeti has a market cap of $3.54 billion and growing with a current stock price of approximately $38 per share. Some exciting highlights of Yeti’s financials include: (Financial numbers as of the time of this writing)
Return on equity(ttm): 15.09%
Revenue (ttm): $1.6 billion
Total cash (mrq): $167.84 million
Total debt (mrq): $155.67 million
Levered free cash flow (ttm): $102.34 million
Powerful Brand Name
Not long ago I had a conversation with a buddy about marketing a product for one of the companies he oversees the marketing for. We discussed options for potential giveaways, and premium drinkware came up. “What about a Yeti mug with the company brand name on it?” he said. We tossed the idea around and mentioned that previously we had brought up this idea to the company CEO and he said that they already have free mugs to give away. My buddy’s response to this was “Yeah but people don’t want some cheap mug that you paid nothing for, they want a reliable mug like a Yeti that carries its brand name and reputation with it.”
Why do I bring this story up? Because it’s a perfect example that depicts how Yeti has positioned itself to be “the” brand name when it comes to outdoor drinkware, coolers, and related outdoor equipment.
One company that has served as a fantastic investment over the years that has had this same powerful brand name under its wing, is Lululemon. In fact, Lululemon positioned itself to be such a powerful and reliable name that it quickly surpassed major players like Under Armor. I see Yeti following a similar path.
Supported By Industry Influencers
Yeti has followed a unique marketing approach that has helped build up its powerful brand name. Yeti’s network of hundreds of powerful brand ambassadors helps maintain its premium brand name and reputation. Ambassadors anywhere from fishing and hunting to competitive roping support the Yeti name with loyalty. Click here to view the hundreds of ambassadors that support Yeti.
Growth Potential
Yeti is in a prime position when it comes to growth opportunities. Already the leading brand name in their respective product industries, Yeti is expanding to new products and services regularly. What started as a cooler company has grown to sell drinkware, apparel, and premium backpacks, and duffle bags. The way I see it, Yeti could easily become a major player to brand names such as The North Face or Patagonia which would open up a whole new array of potential products to expand to.
My Opinion
I watched Yeti closely for a long time before I finally decided to pull the trigger and become an investor myself. At first, I was skeptical about Yeti as an investment due to its niche focus and its smaller market cap. However, after doing research and seeing the potential that there is in this particular niche industry of retail, combined with their continual ability to surprise investors with great growth numbers, I became a loyal owner of Yeti stock.
Furthermore, have you ever used any of Yeti’s products? They’re fantastic. I find myself constantly trying to think of a reason to buy more of their products without my wife getting mad at me. I’m a loyal customer and a believer in their company - I plan to hold onto Yeti for decades.