Good morning, everyone, and thanks for joining us to discuss YETI Holdings' Second Quarter 2021 Results. Before we begin, we would like to remind you that some of the statements that we make today on this call, including those statements relating to the impact of the COVID-19 pandemic on our business, may be considered forward-looking. And such forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. For more information, please refer to the risk factors detailed in our most recently filed quarterly report on Form 10-Q and the Form 8-K filed with the SEC earlier this morning along with the associated press release. 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. During our call today, we'll be discussing certain non-GAAP measures pertaining to completed fiscal periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release issued this morning. We use non-GAAP measures as a lead in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. Today's call will be led by Matt Reintjes, President and CEO of YETI; and Paul Carbone, CFO. Following our prepared remarks, we'll open the call for your questions. And with that, I'll turn the call over to Matt.

Thanks, Tom, and good morning. YETI had a remarkable second quarter with sales increasing over 40% for the second straight quarter. This performance continues the trend of high demand for the brand during the start of summer and the gift-giving celebrations of moms, dads, and grads. This Q2 was punctuated by the broader return to some pandemic-disrupted activities such as travel and the continued trend in people looking for active outdoor adventures. Several key elements continue to drive our results. It all starts with our unrelenting focus on designing products to deliver performance, durability, and versatility to support new activities since the pandemic and for the activities disrupted during the pandemic. Great products come alive through relevant and impactful brand and product storytelling. Our incredibly talented team of in-house creatives continues to find unique and meaningful ways to build connections with customers globally and across a wide range of outlets from digital to in-person experiences, amplifying the strength and heritage of the brand. Finally, in an increasingly digital-led world, we continue to make strategic investments in data analytics and our technology stack to better personalize the consumer journey and engagement with YETI. As we turn to the second quarter, our 45% net sales growth was ahead of our expectations with strength in the quarter across all our channels. Those channels most impacted by the prior year's COVID-19 disruptions as well as channels such as YETI.com that saw incredible strength in the year-ago period delivered in the second quarter. In DTC, we posted 48% growth on top of last year's increase of 61%. This included strong performance through Mother's Day and Father's Day as we highlighted the range and relevance of our product portfolio while also earning impactful media placement across key outlets from The New York Times and Chicago Tribune to Vanity Fair, Vice, and CNN. We saw significant growth during the quarter in wholesale, where we continue our efforts to replenish inventory to support the ongoing strong demand in the channel. Finally, we tripled our international revenues in what was our largest net sales quarter to date for this business as we continue to see the penetration of the brand even amidst the ongoing pandemic challenges in many of the international locations. This top-line performance drove better-than-planned profitability with adjusted operating margins expanding 160 basis points and adjusted EPS growth of 66%. Importantly, this top-to-bottom performance was driven by the dedication, creativity, and passion of our employees and partners powering through the ongoing pandemic, resulting in another strong quarter for YETI. Before we touch on progress around our four strategic growth priorities, I want to provide some color on our focus for the balance of 2021. What we unequivocally believe today is that overall brand demand is incredibly strong. We're capitalizing on a continuing influx of new customers and returning brand advocates. And we're better equipped than ever to reach new global customers. At the same time, global supply chains remain incredibly challenged and strained. Despite the ongoing supply chain disruptions, including cost and transportation pressures, our team continues to do a remarkable job managing and mitigating to minimize the impact while we continue to focus on growth. Most recently, we have seen the government-mandated shutdowns at one of our soft cooler suppliers in Vietnam as a result of the ongoing impacts of COVID. While our prior work to drive supplier redundancy in key product areas helps our ability to absorb this type of temporary disruption, the shutdown does underscore the inherent volatility that lingers globally. As evidenced by our results and updated outlook, we're managing through this overall backdrop well, and we'll continue to tighten our grip on what we can most directly control. We remain focused on servicing the tremendous momentum heading into the balance of this year to ensure we drive growth this year and beyond. As it relates to our key growth priorities, I'd first like to discuss our brand efforts. For the quarter, we continued our multi-faceted depth and breadth marketing strategy, partnering with incredibly talented ambassadors and organizations to support our depth in a wide variety of active outdoor pursuits, magnified by breadth across our online and offline media partnerships and our recently restarted in-person activations, which connects us directly with consumers. We believe the uniqueness of this approach spanning broad reach efforts and very directed and specific consumer engagement is part of the continued advantage of YETI's brand effectiveness. Looking at some examples. We once again celebrated National Barbecue Month in May. This includes sharing YETI ambassadors tips from the pit and recipes ranging from pork belly burnt ends to spare ribs on our social channels and the highly anticipated return of Memphis in May Barbecue Festival. The success of Mother's Day and Father's Day showcased how we built upon last year's efforts that spotlight special occasions through gift curation, storytelling, and product customization. As we did in 2020, we once again highlighted our small, independent wholesale partners through our mom-and-pop shops campaign. And this year, we released a short film of YETI Co-Founder Roy Seiders interviewing one of our first retail partners, Tackle Box Outfitters in San Antonio, Texas. We also began to see a return to in-person consumer experiences and brand activation this quarter. In June, we attended the Mountain Games in Vail for the first time since 2019, displaying and selling products to the 56,000 consumers who attended while promoting the reduction of single-use plastic in the process. In addition to our mobile retail store, we also featured two large water silos that distributed over 600 gallons of water throughout the four-day event, equivalent to 4,000 20-ounce plastic bottles. With the February launch of our Crossroads Bags Collection, we engaged our ambassador network to support the launch through the development of social content and videos. In addition, we partnered with Hypebeast to develop content and brand placement of bags featuring our first skate ambassador, Geoff Rowley, and showcasing product highlights including our Tuffskin Nylon. Our YETI Dispatch magalog continues to be a powerful and productive tool to showcase our product and tell YETI experience stories. This spring, we expanded our initial April mailing of 1 million magalogs with an additional 1 million unit run in May targeting prospects. This content serves as a great introduction to the brand and product portfolio while driving conversion. The return on this catalog investment continues to remain meaningfully above industry standards. Moreover, we continue to find ways to bring this amazing print to life digitally with content available across our social channels and on YETI.com. And finally, we were excited and honored to kick off our Austin FC partnership as the official jersey sponsor of Austin FC in their inaugural season in Major League Soccer. This partnership is an important and impactful way to support YETI's hometown while driving reach and exposure as the front-of-jersey brand. Our visibility on the verde and black jerseys has already carried us to audiences in seven key urban markets throughout the U.S. and has been shown on seven nationally televised matches. On the product side, our second quarter focus was on amplifying our 2020 and Q1 2021 product introduction while working with our supply chain partners on ramping supply. Demand for hard coolers, including our Roadie 24, which launched in the first half of 2020, continued to outpace supply. We remain focused on building inventory across both hard and soft coolers and anticipate these levels will continue to be pressured as demand outstrips supply throughout the second half of the year. Drinkware growth accelerated in the quarter, supported by strong demand, improved inventory positioning, and great momentum in our corporate sales business. In the current quarter, we had a full online and offline marketing launch of our fall colors. Along with the products, we have some incredible digital stories about the inspiration for these colors that will be rolled out through our digital properties and social. We introduced YETI Thin Ice in July, which is optimized to fit into our soft cooler. And we have two new iterations of Drinkware with the Rambler 18-ounce HotShot and the larger-sized Rambler 64-ounce Bottle coming in August. In the weeks ahead, we're excited to reintroduce our Travel Mug, now delivered in 20- and 30-ounce sizes, including an updated lid. We are also introducing a great functional update to our highly regarded top-selling Camino Carryall tote with enhanced organization from a new pocket and two deployable dividers on each side of the bag. We will also officially occupy our new soft goods design office in Vancouver next month, which will provide full sample-making, patterning and prototyping capability for our design team. Supporting our brand and product efforts, we continue to leverage our channel strategy to achieve the growth we expect from DTC and wholesale, with each exceeding 40% growth in the quarter. DTC represented 55% of our sales mix for the quarter, and we saw a range of positive gains across our direct business given the varying comparisons from last year's COVID-impacted period. YETI.com delivered very solid growth on top of triple-digit increases last year, including growth across all domestic regions. As it relates to our data analytics progress, first, we greatly enhanced our data platform. With the ongoing shift to a digital-first customer, we have made the investment in talent and capabilities over the past two years to create a data framework to better understand our customer behavior. Second, we are using this platform to gather key insights into the business. High-level data shows our Q2 online business was driven by an increase in both unique customers to the site and revenue per customer. In addition, the quality of our new and returning customers is strong both in terms of retention rates and in the average value of each customer. This is yielding both higher sequential and year-over-year customer lifetime value. Finally, an enhanced data platform enables more sophisticated approaches to interact with our customers. This includes leveraging machine learning to understand the most relevant purchase journey. We are ramping up our efforts here and have already seen promising results this quarter in terms of optimized customer reach, expanded product consideration, and conversion. Ultimately, we expect customers to receive an enhanced personalized experience that will drive both improved engagement and conversion for the brand. Across the rest of DTC, the Amazon Marketplace business continued to perform well particularly as we cycled against some of last year's disruptions. Corporate sales capitalized on increasing trends seen in back to work and employee giving. Our increased customization capacity, expanded color options, and an enhanced service structure also supported our success here. Finally, international DTC and strength in YETI-owned retail continue to build momentum and are beginning to more meaningfully contribute to the overall business. At wholesale, we remain focused on driving inventory replenishment and merchandising productivity with our existing partners. Consumer demand in the channel was very strong in the quarter. While overall channel inventory has improved slightly, this progress continues to be offset by stronger-than-anticipated demand in certain product areas such as hard and soft coolers. While we expect channel inventory to continue to improve throughout the year, our current visibility pushes these full replenishment actions into 2022. YETI's international business continued to show great progress that we believe will support long-term sustainable growth. All of our regions are showing strong demand, and we will continue to focus on these markets to ensure scale, first, to maximize the currently active markets and then, ultimately, to replicate in new markets. Canada had an excellent quarter, underscoring the continued growth opportunity. We saw strong DTC traction here through both yeti.ca and local corporate sales. In addition, we lapped significant COVID-related wholesale disruptions from last year even as varying degrees of store restrictions remain in place throughout this year's quarter. Overall, our team is doing a phenomenal job of investing in and driving local relevance and channel consistency, helping to ensure relevant engagement with the Canadian customer. The outstanding success in Australia continues as we are executing significantly above plan. We still believe in the tremendous opportunity ahead as we drive deeper distribution across the larger coastal markets and further build out localized marketing support. In Europe, we recently opened our new subsidiary in Amsterdam. And we continue to make strides as consumers are discovering the brand through strong word-of-mouth. We are particularly encouraged by the significant interest in hard coolers across the region. In addition to the five new local language websites launched early in the year, we have now added nearly 250 additional targeted wholesale doors across the region. We were excited by our recent retail execution at Selfridges in London. Our presence at this historic premium location in the heart of London has been extended several times from its debut in June, and we believe it is driving incremental brand awareness and consideration. Before handing the call over to Paul, I would like to give a quick thanks to Dave Schnadig, who stepped down as Chair of the Board and Chair of our Nominating and Governance Committee at our Annual Shareholder Meeting in May. Dave held the Chair role for nearly nine years, partnering with YETI through much of its early growth and maturation, both as an investor and adviser to our Founders. And Dave was a champion of our growth as we went through the IPO process. Dave was reelected to our Board at the May Shareholder Meeting and will continue to provide his unique insight and experience to our Board as Bob Shearer takes on the role of Chair of the Board. In closing, I want to reiterate that we remain focused on providing unique and inspiring brand and product experiences, and we'll continue investing to ensure that we meet the global consumer wherever they choose to shop. I continue to be proud of our YETI team and thank our customers and partners for all they do to support us as we address both the challenges and the incredible opportunities before us. And now I would like to turn the call over to Paul.

Thanks, Matt, and good morning. YETI continued to see outstanding brand momentum and performance during the second quarter, and I'll add my sincere thanks to the incredible efforts of our team that are driving these results. I will start with a review of the quarter followed by thoughts on the balance of the year and our updated outlook. We will then open the call up for your questions. Net sales increased 45% to $357.7 million compared to $246.9 million in the prior year period. While this growth compares against COVID-impacted results last year, it represents the fourth straight quarter we have generated a two-year compounded annual growth rate in the low to mid-20% range. Direct-to-consumer net sales grew 48% to $196.9 million compared to $133 million in the same period last year. Direct-to-consumer performance was driven by strength in both our Drinkware and Coolers & Equipment categories. All direct-to-consumer channels grew in excess of 20% during the period. YETI.com drove another impressive quarter even against last year's triple-digit strength. And we experienced sharp recoveries in our corporate sales and YETI retail businesses. Overall, our direct-to-consumer mix increased slightly to 55% of net sales for the period compared to 54% last year. Wholesale net sales increased 41% to $160.8 million compared to $113.9 million last year. Wholesale performance was driven by both our Drinkware and Coolers & Equipment categories with particular strength in Drinkware. As Matt mentioned, channel demand remains strong, and we have made some replenishment progress. However, we have significant opportunity ahead with wholesale channel inventory still down year-over-year. By category, Drinkware net sales increased 69% to $192.9 million compared to $114.3 million last year. This strength reflects broad-based demand across our Drinkware lineup, improving product availability, and the strong recovery of our corporate sales business. We continue to see great results in our Rambler Tumbler business with strong growth from heritage sizes, incrementality from newer options, and improved functionality led by MagSlider Lids now standard across the line. Colster showed impressive growth considering the lapping of its successful launch last year. In bottle, growth outperformed the broader Drinkware category, benefiting from underlying demand momentum and the inclusion of the HotShot Cap as a standard lid. Supporting the overall category, customization remained in high demand for both YETI.com and corporate customers. On the Coolers & Equipment side, net sales increased 23% to $157.8 million compared to $128.6 million during the same period last year. Strong soft cooler momentum led by our Hopper M30 in backflip styles helped drive the overall category even as hard cooler growth was more limited during the period due to ongoing inventory constraints. Within bags, driving broader customer awareness as well as consistent in-stocks were second quarter priorities. We remain encouraged by the customer response to our bag collection and the opportunity to build out this category. Internationally, net sales more than tripled to $33 million, reaching 9% of total net sales. This performance was led by a recovery in Canada following last year's extensive retailer restrictions due to the COVID-19 pandemic as well as strong contributions from Australia, the U.K., and Europe. Gross profit increased 52% to $209.1 million, or 58.5% of net sales compared to $137.5 million, or 55.7% of net sales in the same period last year. The 280 basis point year-over-year expansion was driven by the following favorable factors: 110 basis points from channel mix; 90 basis points from product cost improvements; 80 basis points from lapping higher noncore inventory reserves last year; 40 basis points from fewer promotions in our direct-to-consumer channel; and 70 basis points from all other impacts. These gains were partially offset by 90 basis points from higher duties related to the expiration of the GSP program at the beginning of the year and 30 basis points from higher inbound freight. Adjusted SG&A expenses for the second quarter increased by 49% to $131.7 million or 36.8% of net sales as compared to $88.2 million or 35.7% of net sales in the same period last year. The increase of 110 basis points as a percent of net sales was driven by non-variable expenses increase as a percent of net sales by 190 basis points primarily driven by higher marketing expenses. Excluding marketing, the expense rate decreased for the period as a strong rate of revenue growth outpaced more normalized spending following last year's cost curtailment efforts in response to COVID-19. Variable expenses decreased by 80 basis points as sales growth across our two channels was more balanced in the quarter. Adjusted operating income increased 57% to $77.4 million, expanding approximately 160 basis points to 21.6% of net sales compared to $49.3 million or 20% of net sales during the same period last year. Our effective tax rate was 20.4% during the quarter compared to 25.2% in last year's second quarter, with the lower rate reflecting a discrete income tax benefit related to stock compensation. Adjusted net income increased 68% to $60 million or $0.68 per diluted share compared to $35.6 million or $0.41 per diluted share in the prior year period. Now turning to our balance sheet. As of July 3, 2021, we had cash of $233.8 million compared to $127.5 million in the year-ago period. Inventory increased 60% to $221.7 million compared to $138.8 million during the same quarter last year. Inventory growth on a two-year compounded annual growth basis was 11%, slightly below our plan given the better-than-expected top-line results. Total debt, excluding unamortized deferred financing fees and finance leases, was $123.8 million compared to $292.5 million at the end of last year's second quarter. During the quarter, we made principal payments of $5.6 million. Now onto our updated thoughts for the full year, where we are again raising both the top and bottom line outlooks. We now expect full-year net sales to increase between 26% and 28% compared to fiscal 2020. The higher range incorporates the outperformance from the second quarter as well as implied mid- to high-teens growth for the second half of the year on top of the strong 27% growth comparison from the second half of last year. By quarter, third-quarter net sales growth is expected to be somewhat higher than fourth-quarter growth. We continue to expect flat gross margins for the year from the record 57.6% level last year. This reflects similar year-over-year margin contraction expected in both the third and fourth quarters given the exceptionally strong comparisons from last year, the impact of the non-renewal of GSP, and higher inbound freight expense. On the GSP front, we continue to assume no renewal for the balance of the year and have yet to see alignment to move this bill through Congress. Looking at SG&A, we expect expense dollar growth to continue to trend in line with sales growth. Non-variable expenses overall for the year are still expected to trend slightly below our revised total sales growth, while variable expenses tied most directly to our faster-growing and higher gross margin direct-to-consumer channel will grow slightly faster than total sales. As we continue to normalize from last year's cost containment efforts, we expect the rate of adjusted SG&A growth to ease sequentially in the third quarter and then again to a greater extent in the fourth quarter. More pointedly, we expect the third-quarter adjusted SG&A growth rate to be slightly below the 36% growth from the first quarter before dropping to single-digit growth in the fourth quarter. Our full-year adjusted operating margin outlook remains at approximately 20.5%, which is also consistent with the prior year. We expect the adjusted operating margin rate to be lower year-over-year in the third quarter and slightly higher year-over-year in the fourth quarter. The effective tax rate for fiscal 2021 is now expected to be approximately 23% given the slight benefit to plan recorded in the second quarter. Based on full-year diluted shares outstanding of approximately 88.6 million, we expect adjusted earnings per diluted share to grow 29% to 32% to between $2.42 and $2.46 compared to $1.87 in fiscal 2020. Our use of cash is also consistent as we move into the back half of the year primarily focused on our inventory replenishment efforts. Inventory levels are expected to build significantly year-over-year during the next two quarters as we continue to focus on replenishing our channels to meet demand and look to mitigate potential supply chain disruptions. Our CapEx outlook continues to be between $55 million and $60 million for the year, primarily reflecting technology upgrades including enhancements to SAP, website optimization, and expanded data analytics capabilities as well as more traditional spending in product development. Overall, our year-to-date performance has been outstanding. As our increased outlook would indicate, we are positioned for a strong second half of the year. We are managing our business thoughtfully through this period of uncertainty as the pandemic continues to evolve around the world. Managing through these pieces is difficult, and we remain confident in the execution of our team as we continue to capitalize on the incredibly strong demand that we have seen for our brand. With that, I would now like to turn the call back over to the operator to take your questions.

Our first question comes from Robby Ohmes of Bank of America.

This is Alex on for Robby. Just first, can you talk to us a bit more about the channel inventory levels at your largest accounts? When would you sort of expect channel partners to be back at sort of appropriate inventory levels? It seems like maybe the replenishment has gotten pushed out a bit, so just trying to get a little more color there.

This is Paul. Thank you for the question. One of the main factors in restocking the channel is demand, which is very strong. As we mentioned, we made some progress during the second quarter, although inventory levels in the channel are still down compared to last year. I believe it will normalize across different categories. Drinkware will likely be restocked first, while hard coolers will take the longest. I anticipate that it will take until 2022 to fully restock the channel, but we are pleased with the demand and are working to meet it across all channels.

Perfect. That's really helpful. And just my second question, can you just give us a bit more color on the supply chain disruption that you're seeing? I think you called out soft cooler bag production being impacted? Are you also seeing that in the hard cooler side as well? And what sort of mitigation strategies are you looking at to try to offset this? Are there opportunities to ramp production elsewhere?

Yes, that's a great question. I'll start with the hard cooler situation. In the Philippines, Poland, and North America, we are facing a capacity issue with hard coolers, and we are producing as many as we can. The extended transportation times are also a concern, but primarily, it is a capacity issue. The Philippines, in particular, has a low vaccination rate, which we are monitoring. In Vietnam, as mentioned, we are currently in the third week of a government-mandated shutdown. One positive aspect is our ability to dual source, especially for hard coolers and bags in the Philippines. We also have second sourcing options to compensate for some production losses. However, these uncertainties are challenges we continue to face as we move into the latter half of the year.

Our next question comes from Sharon Zackfia of William Blair.

I guess a question on gross margin, Paul. So I think the implication is for something like 150 basis points like sequential degradation in the back half. Can you kind of break that down to the components because there's a lot of moving parts there? And I think previously, you had talked about flattish gross margin in the fourth quarter. Is that still the case? Are we going to see most of this kind of occur in the third quarter?

Thank you, Sharon. Our guidance suggests a gross margin of around 57% in the second half of the year, evenly distributed between Q3 and Q4, which is different from what we have seen in the past. At the end of Q1, we anticipated a flat gross margin for the year, and we are still holding that outlook. However, changes in inbound freight and other costs have increased the gross margin by approximately $8 million, impacting product costs. We are offsetting this increase to maintain a flat gross margin for the year with some overperformance in Q2 and additional fixed cost leverage due to increased revenue. We still expect DTC to provide a slight advantage in the latter half of the year. While we are experiencing some cost increases in inputs, these are likely to be less significant in the back half of the year and will be counterbalanced by GSP and inbound freight.

One follow-up, too. I guess, given the low inventory uplift that you have, are you able to kind of stock up at all on inventory? Do you have like more safety stock? It doesn't really sound like that's the case right now, but just curious if there's any opportunity there.

We are purchasing as much inventory as we can. Inventory was up 60%, but over a two-year period, it increased by only 11%, which translates to an 11% compound annual growth rate. In line with Alex's question and my previous responses, we are focused on building up our inventory to meet strong demand. We still expect inventory levels to rise significantly in the latter half of the year, benefiting from a recovery compared to significant declines last year. By product category, similar to the wholesale channel, we anticipate improvements in Drinkware, soft coolers, and hard coolers as we move forward.

Our next question comes from Camilo Lyon of BTIG.

Congratulations on a great quarter. I was curious if you could discuss what you're observing either in domestic markets or internationally regarding the Delta variant. Have you noticed any impact on demand in these areas? Any updated thoughts on that would be appreciated.

Camilo, it's Matt. As we look across our domestic regions and our global regions, one of the things that we learned from the disruption last year is how we shift channels based upon what's happening and what those dynamics are. Obviously, there are parts of the world, and we talked about Canada and Australia on the prepared remarks around continued disruption around wholesale openings and closings, different parts of those particular markets that are applying different rules around the COVID broadly, specifically to Delta variant being the driver. What we've seen is an ability, if wholesale is disrupted, how we manage it and push resource towards the direct-to-consumer and engaging the consumer. But as we said on the call, we've seen broad-based strength in demand across all regions in the U.S. and across our emerging but now more significant international regions. So we feel great about our ability to reach the consumer. We feel great about our ability to continue to stoke excitement for the brand and ultimately drive that demand.

That's great. My follow-up is actually two parts. Regarding the channel replenishment in wholesale, can you confirm if there's capacity to fulfill demand for spring of '22? Are your wholesale partners trying to get ahead of this, and could you start taking spring receipts earlier, perhaps at the end of Q3 or Q4 instead of the usual Q1? Is that feasible given the supply constraints? Also, looking at your long-term sales outlook, you've averaged over 20% growth for the past 4 years. Brand momentum is strong in the U.S. and internationally. What is stopping you from maintaining this 20% growth trajectory?

I will address the question regarding the channel replan first, and then Paul can provide insights on our perspective regarding the impressive growth exceeding 20%, as you mentioned. Currently, our primary focus is on meeting the existing demand by collaborating with our suppliers on immediate capacity planning, while also considering how to prepare for demand in 2022 and beyond. In the short term, our emphasis on hard coolers, soft coolers, and Drinkware is to ensure we supply enough to meet the current market demand. We do not have plans to prepare for 2022 in 2021 because we expect to maintain strong demand this year and will continue to increase supply to meet that demand. Our supply chain team is exceptional and has exceeded our initial expectations for the first half of the year due to the high demand. They are managing both immediate replenishment needs and the strategy to build up supply for 2022, as Paul noted.

In terms of sales, while we won't provide a forecast for 2022, we anticipate that outdoor leisure trends will persist. This is certainly positive for YETI as life and commuting resume, and in-person events return, which is also advantageous. Whether this continues at a rate of 20% is uncertain, but we believe the overall trends are very encouraging for us.

Our next question comes from Peter Benedict of Baird.

So I guess my first question is just around any plans you have or how you think about using price as a lever to offset some of the rising cost pressures that are out there in the market.

Peter, obviously, we talked about this quite a bit through the tariff challenges of a couple of years ago, some of the supply disruptions in last year, where we had supply disruptions but obviously saw incredible strength in demand in 2020. We use price as a last lever. We think there's some real benefit to the consistency of our pricing in the market for our consumers and also for the consistency of how we tell the stories. Where we look at price very strategically is as we introduce new products, as we expand product families, we would selectively look at price. But we look at addressing the cost pressures across the range of opportunities in front of us. And some of those are working with our supply partners on price negotiations that offset some of the increases because of the volume we're driving. Some of it may be selectively, as we introduce new products looking and bringing enhanced benefits and features to the product, we look at how we can bring price into it. But price as a broad-based lever is not something we've historically done. It's always something that's there, and we continue to watch how we manage and mitigate and contain the near-term cost pressures.

Okay. Got you. That makes sense. And then, Matt, you talked earlier in your prepared remarks about your customer retention efforts. It really sounds like those are starting to scale here. Maybe, I don't know, can you expand on it a little bit? Are there any metrics you could share on maybe progress to date where you stand today, where the opportunity lies in terms of driving this more personalized engagement with consumers and driving repeat orders, et cetera?

Yes, Peter, this is an incredibly exciting area for us. We've discussed our investments in people, technology, and processes, and how we can channel the passion for the YETI brand to engage consumers in a way that resonates with them during their consideration phase, encouraging them to make a purchase. While we can't share specific details today, the feedback we've received regarding consideration, conversion, and order sizes has been very encouraging. Our team is continuously improving through advanced analytics, allowing us to adapt and test new strategies. Our main goals are to attract talent and resources to leverage the ongoing digital evolution, use data to understand consumer behaviors, and adopt a data-driven approach to enhance digital engagement and customer experiences. For example, we've optimized our customer outreach by tailoring our contact frequency and the information we provide based on their position in the consideration process, using purchase propensity models. We're excited about the richness of our data and the team that can implement these strategies, leading to more personalized and directed communications with our customers. Ultimately, this will enhance their experience on our digital platforms and guide them through the YETI journey.

Our next question comes from Brooke Roach of Goldman Sachs.

A lot of ground has been covered, but Matt, I'd like to follow up on the international momentum. Can you discuss the profile of your international customers in relation to the data and analytics you've been implementing? How does the international customer base compare to the U.S. in terms of awareness and adoption? Also, what progress have you made on building out the international ambassador program?

There's a lot of valuable information here. To start, our data analytics and advanced analytics focus primarily on our U.S. domestic customers, where we have the largest data set. After 15 years, our understanding of the U.S. market is more advanced, while our international insights are still developing. However, what we've learned about international customers doesn't differ significantly from our U.S. consumers based on their interests and demographics. Awareness is lower internationally compared to the U.S., but we're observing that our early-adopting international customers are purchasing in ways similar to our early adopters in the U.S., aligning closely with our current U.S. mix. We're seeing robust adoption of our products such as hard coolers in Europe and Australia, and drinkware is performing very well. We are beginning to adapt our marketing strategies to resonate with these consumers in a way that reflects the YETI brand while also incorporating local relevance. Recently, we launched a colorway called Highlands, inspired by the Scottish Highlands, marking our first international product story based on color that has global appeal. We are pleased with this progress. Regarding our ambassador program, we intend to replicate the successful strategies we've employed in the U.S. internationally. We have seen positive results from this approach over the past three years in Australia and Canada, and we are starting to see similar early success in Europe. Our international ambassador roster continues to expand, with many original ambassadors already recognized globally, such as John Florence in surfing and Geoff Rowley in skateboarding. This established group is beneficial as we add new ambassadors and enhance our program.

Paul, can you elaborate on what you're observing in transportation and logistics, and how YETI is addressing those challenges in light of factory closures in other parts of the world?

We are observing a few key issues related to transportation. The time taken from our manufacturer to our distribution centers has not increased significantly since the end of the first quarter, but it is notably longer compared to last year. This presents time-related challenges. Additionally, transportation costs are rising, which is a major concern that we've discussed frequently. Our focus is on securing containers and space on ships to ensure product delivery. From the perspective of our manufacturing suppliers, particularly regarding hard coolers, we need to add capacity since we are operating at full capacity. Our goal is to enhance efficiency as we expand. For Drinkware, the focus is on boosting production to keep pace with demand, as there’s available capacity to do so. Soft coolers fall somewhere in between these categories. This framework guides our focus as we navigate these challenges.

Our next question comes from Joe Altobello of Raymond James.

Just want to go back to the international business for a second. It sounds like the customer demographics and the usage occasions are similar to what you guys saw in the U.S. in the early days of the business. But can you talk about the competition that you're seeing internationally? How much does it differ by market? How does it differ from the competition that you see in the U.S.? Is that primarily at the lower end or the higher end of the category from a pricing standpoint?

Joe, that's a great question. When considering demographic and usage occasions, there are certain activities that are more common globally than in the U.S., and vice versa. This informs our positioning strategy. However, the core concept of large active outdoor markets remains consistent, and we have successfully engaged with a range of wholesale partners in Europe. Our collaborations span well-established sporting goods stores, culinary shops, and even butcher shops in Germany. This reflects our YETI-like strategy of connecting with people in various aspects of their lives. As we look towards growth and expansion, we will focus on individuals who resonate with our brand and can help generate word-of-mouth excitement. We are pursuing this digitally through our e-commerce and direct-to-consumer strategy internationally, as well as through these strategic wholesale partnerships we are establishing.

Got it. Okay. Just one follow-up on that in terms of how you're thinking about YETI from a growth standpoint. I think early in the year, the thinking was that cooler growth would slightly outpace Drinkware. Is that still the case?

So as you can appreciate, we don't give it to that level. Certainly, the very strong first half of C&E being up 34%, Drinkware is up 51% because of the strong second quarter. So I would say, as I think about this overall, as we've talked about between the two categories for the year, they're similar, as we've said in the past.

Our next question comes from Xian Siew of Exane BNP Paribas.

I would like to understand your current approach to marketing, especially considering the strong demand we are experiencing. Are you planning to capitalize on this opportunity now, and do you anticipate a normalization in 2022? Any insights you could provide on this would be appreciated.

Yes, it's a great question. And as a reminder, in Q2 last year, when the early dark days of COVID, we made some very quick decisions to make sure we thoughtfully created cost containment if the world wasn't going to resume in the way it did. We were fortunate, obviously, as we talked about in Q2 last year, that particularly in our digital channels, it resumed very quickly. And then our wholesale partners, they were deemed essential, which allowed us to deliver a strong Q2 2020 amidst that and then continuing on through the year. This year, what you see is a little bit of rebuild in that marketing. We haven't changed our marketing approach. We haven't loosened up anything around our expectations of how our marketing returns, whether that's our direct performance marketing through our digital channels or our brand-building efforts. But 15 years into our history, with the kind of growth we're producing, with the kind of new customers we're acquiring, we still consider ourselves in a brand awareness, growth mode, customer acquisition mode, but we want to do it in a highly profitable way. And so we use our marketing as an incredible asset and an incredible lever to do that. But I wouldn't say the quarter would show anything that we fundamentally changed about how we run a very disciplined brand-building marketing, performance marketing program.

From a numbers perspective, we have reduced our marketing spend year-to-date based on what Matt mentioned regarding our tighter control at the end of Q1 last year, particularly in the last few weeks of Q1 and then into Q2. Looking ahead, we anticipate a further reduction in Q3 since we didn't fully ramp up until Q4. We expect Q4 to see an increase in spending since that's when we made adjustments last year. Overall, we estimate that marketing will be around 8% of sales. We didn't reach that level last year, but we will get closer this year. While our Head of Marketing would always want to spend more, the strong sales performance will likely hinder our ability to return to that 8%. Our goal remains the same, and we are building on the actions taken last year.

Okay. Got it. That's very helpful. And maybe just as a follow-up on the flip side of expenses. I think you mentioned variable expenses leverage this quarter, typically with the DTC channel growing faster, it delevers. I think you said it was just more maybe a balanced growth between wholesale and DTC. I just want to make sure there's no maybe inflection point here where you're starting to see better efficiencies on the variable expenses.

No, it's really that more balanced growth and driving the variable to leverage slightly this quarter.

Okay. So I guess, longer term, are there opportunities to change that? Or how are we thinking about it?

I believe that in the long term, we expect direct-to-consumer growth to outpace wholesale. This could still lead us to a scenario with reduced variable expenses, which we welcome due to the higher gross margin associated with the direct-to-consumer channel.

Our next question comes from Wendy Nicholson of Citi.

Just I think two kind of quick housekeeping items. First, just as you think about capital allocation, I know you want to invest obviously more in inventory and working capital to build up your safety stocks and all of that. But you're still building a lot of cash on the balance sheet. So what's the current thinking about either a dividend or a share repurchase program? And then second of all, any date on the timing of expanding luggage into wholesale beyond the Panga Duffel?

Wendy, it's Matt. Thanks for the questions. As we think about capital allocation, and it's a great question, one obviously this business is focused on, driving high-quality revenue that ultimately produces a strong cash position for the business. One of the things that we've said is, as we've worked with our Board on the best ways to think about returning value to our shareholders is that we're a growth-oriented company, and so first and foremost, as you said, investing in inventory, investing in capital expenses that we think, whether those are technology as we talked about advanced analytics or the innovation engine. The other thing that we've talked about is we would look at strategic M&A as an innovation accelerant and things that we think, whether it's technologies, materials, processes, things that we think help continue to drive what we believe is a very long growth story for YETI. As it relates specifically to expansion of bags and channel expansion, when we launched these products, we said one of the things we want to do is we want to make sure we ramp it the right way, we tell the right stories, we build the awareness in the channel, and that's really what we've done. The pandemic has provided some additional challenges with ramping suppliers, in some cases, some new suppliers, from a remote perspective. And so that's what led us to the idea that we're not betting on bags and luggage to carry the year for YETI. We're going to keep driving the productivity of our existing portfolio. We're going to launch it through our dot-com only. We're going to learn. We've had some great consumer feedback on it. The receptivity has been strong, and we continue to learn. And I think as that portfolio expands, we believe that is a significant category opportunity for YETI. And then we'll look at channels as they present themselves and as they make sense for the product portfolio and then makes sense for the brand.

Yes, I'll address that. What we've mentioned before is that as we progress through COVID, we will continue to monitor developments in physical retail. This year, we have a couple of our temporary sites transitioning to permanent locations. Specifically, our second site in Austin, the location in Dallas, and our Fort Lauderdale site next year will become permanent. Starting with the strategy of temporary locations to gauge the market before moving into permanent sites has proven effective for us. We are also considering a few additional stores that may open this year, but we are proceeding cautiously to observe traffic trends. I’m pleased to report that our seven retail stores have performed excellently this quarter, with a strong emphasis on operations and customer service. We're truly satisfied with how the stores are performing.

We have time for one final question from Peter Grom of UBS.

Was there any impact from Prime Day in the quarter considering the better-than-expected growth compared to your expectations? Additionally, I've heard from some competitors in the Drinkware space that the initial feedback on back-to-school is very positive. I understand that the situation is fluid and can change quickly, but I would like to know what insights you're getting from your customers regarding back-to-school and how that shapes your outlook for Q3 and the rest of the year.

Thanks, Peter. To address your question about Prime Day, the short answer is no. We wouldn't attribute much to Prime Day since we didn't run a prime deal and continued to operate our business at full price. As we've mentioned before, our Amazon Marketplace presence is consistently a full-price channel. This is particularly important during times when we're transitioning products, like we discussed with the Camino. It remains a key aspect of our direct-to-consumer approach and continues to perform well, but we wouldn't link any of that performance to Prime Day. Regarding back-to-school, although we typically don't comment on intra-quarter developments, looking back at Q2, we saw notable growth in our Drinkware segment, which remains highly relevant and robust. Specifically, our bottles business showed impressive performance within the broader Drinkware portfolio. Thank you, and thank you all for joining us today. We look forward to speaking on our third-quarter call and wish everyone a wonderful week.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.