YETI Holdings, Inc. (YETI) Q3 2024 Earnings Call Transcript

Good morning, ladies and gentlemen. And welcome to the YETI Holdings Third Quarter 2024 Earnings Conference Call. This call is being recorded on Thursday, November 7, 2024. I would now like to turn the conference over to Maria Lycouris, Investor Relations for YETI. Please go ahead.

Good morning. And thank you for joining us to discuss YETI Holdings' third quarter fiscal 2024 results. Leading the call today will be Matt Reintjes, President and CEO; and Mike McMullen, CFO. Following our prepared remarks, we'll open the call for your questions. Before we begin, we'd like to remind you that some of the statements we make today on this call 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 recent filed Form 10-K. 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. 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 of our business. Reconciliations 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 to our Investor Relations section of our website at yeti.com. And now I'd like to turn the call over to Matt.

Thanks, Maria, and good morning. YETI wrapped another strong quarter with growing brand engagement, performance across our broadening product portfolio and outstanding growth in our international business, all driven by the consistent successful execution of our strategic priorities. Our net sales were up 10% in the quarter with growth across all channels. On the product side, innovation continues to be a catalyst with drinkware delivering several highly anticipated launches in bar and tableware, underscoring the expansion opportunities we see. In coolers and equipment, we saw good performance from both legacy and newer products, including several newly launched accessories that complement our existing lineup. On the international front, we saw our fourth consecutive quarter of over 30% growth outside of the US while also delivering solid growth in a more challenging US market where we continue to see high-quality but more discerning buyers. Taken together, YETI's brand strength, strong product innovation cadence and global growth position us to remain on track to deliver on our full-year top and bottom line outlook. As a reminder, our top line outlook takes into consideration an expectation of more intentional consumer buying in Q4 as we closely watch spending in this shortened holiday season. As it relates to our global supply chain expansion programs our previously announced efforts remain solidly on track. As a reminder, approximately 40% of our total cost of goods has historically been tied to products sourced from China, primarily related to our drinkware portfolio. This supply chain initiative gives us the opportunity to support greater global scale, target end markets for cost and service optimization and evolve our supply base. Notably, we commenced production at our second drinkware facility outside of China during the quarter and we are on pace for a third facility. We have great partners in this effort and are encouraged by the process and automation improvements over the past few years to enable these successful moves. All in all, we are pleased with the performance of this initiative and as a result, we remain confident that by the end of this year approximately 20% of our global drinkware capacity will be located outside of China and by the end of 2025, 50% of our drinkware capacity will be outside of China. This initiative is a key priority for YETI and will be actively managed to ensure we are supporting our growing global business and positioning for long-term success. We continue to have confidence in the long-term opportunity in front of YETI across geographies, channels and product expansion. In the near term, our demand drivers heading into the holiday season are underpinning the reiteration of our outlook and supporting our continued delivery of high-quality growth, strong profitability and a very sound balance sheet. Our long-term growth strategy continues to prioritize the expansion of brand reach and engagement, greater product diversification, expansion of our omni-channel approach and international.

Thanks, Matt. And good morning, everyone. I'll start by providing a brief overview of items contained in our third quarter GAAP numbers that affected both the year ago and current period results. I'll then provide a review of our third quarter performance, followed by an update on our outlook for the full year. There were two items of note that impacted our GAAP results. First, the prior year quarter's results included a $0.8 million benefit through cost of goods sold related to our product recalls. There were no adjustments made to our recall reserve in the current period. Second, similar to our two prior quarters, our GAAP results include costs associated with the acquisitions that we made earlier this year. These include the impact of purchase accounting on gross margins, as well as other minor transition costs within our operating expenses. Per our standard reporting practices, the impact of these and other non-recurring items are excluded from non-GAAP results. 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. Now turning to our third quarter results. Sales increased 10% in the quarter to $478 million. This was in line with our expectations and was driven by growth across all categories, channels, and geographies. This quarter's year-over-year growth includes an approximately 100 basis point net headwind from gift card redemptions related to our product recall. Our results this quarter include $2.7 million in gift card redemptions compared to $6.3 million in gift card redemptions in the prior year quarter. On a year-to-date basis, sales are up 10% versus the comparable period last year again across all of our categories, channels, and geographies. We believe this demonstrates the continued momentum and growth potential of the YETI brand and product portfolio with more growth available for us to go capture in new communities, new categories, and new geographies. Now moving on to our sales by product category. Coolers and equipment sales increased 12% to $193 million. We have been very pleased with the performance of C&E this year as this was the third quarter in a row with double-digit growth in the category. Hard coolers had a strong quarter supported by our recent innovation. In particular, we are thrilled with the customer feedback and sales performance of the new Roadie 15 hard cooler and believe that this product is in position to have a very successful holiday season. Soft coolers benefited from continued good demand for our line of backpack coolers. And our day trip lunch products also performed well, particularly during the key back-to-school shopping period. Within equipment our bags category had a great quarter exceeding our expectations with continued strong performance in our SideKick, Camino, and Panga product line. Finally, MYSTERY RANCH branded products continued to perform in line with our expectations. And we are excited about what the future holds as we near the launch of our YETI branded backpacks that leverage the premium design, carry, and performance tenets of MYSTERY RANCH. Drinkware sales increased 9% to $275 million, supported by our broad and diverse portfolio of products, our continued innovation and our global growth opportunity. As Matt mentioned, this quarter we continued our expansion into barware and tableware with the launch of our pitcher in two sizes, as well as the full release of our flask and shot glasses, following the very successful limited release in Q2. As we continue to expand our portfolio, we are seeing some really encouraging consumer behavior. As we launch more and more products that are intended for group sharing, like our beverage bucket, wine chiller, French press, and pitcher, we are seeing a nice lift in other parts of our portfolio, such as our lineup of stackable cups in six different sizes. We believe that this dynamic will only build as the awareness of our full portfolio continues to grow.

One final point on drinkware that we believe is often overlooked. We see a tremendous growth opportunity in drinkware outside the United States led by our expanding brand awareness and retail partner footprint. Moving on to our performance by channel. Wholesale sales were $198 million in the third quarter, up 14% versus the same period last year. In the US, we continue to benefit from the strength and diversity of our wholesale channel, diversity in terms of size, pursuits, and location. We think this positions us well to capture the demand that is in the market regardless of macroeconomic conditions. Longer term, we also believe that this puts us in a great position to grow our shelf space with our wholesale partners as we expand our product portfolio. Outside the US, wholesale dealer growth remains a focal point of our strategy as we continue to see plenty of opportunity for new partnerships around the globe. Finally, inventory in the channel remains healthy and is well positioned to support demand as we enter the holiday season. Direct to consumer sales grew 8% to $281 million, driven by good growth in both C&E and drinkware. Similar to the last quarter, all of our D2C channels posted growth in the quarter, led again by our Amazon business. Excluding the headwind from gift cards, total D2C growth was approximately 10%.

Turning now to our international business. Outside the US, sales grew 30% to $88 million, driven by exceptional growth in Europe and Australia. We are encouraged by the momentum and brand awareness we are seeing in new markets and we will continue to invest in building our presence and scaling our infrastructure and omnichannel capabilities in these geographies. One example of those capabilities is within Drinkware customization. We are now offering customers in Australia and Canada, both consumer and corporate sales, the ability to customize and personalize their YETI products. This has been a driver of our growth so far this year and we believe it will be a successful offering for us this holiday season. As it relates to margins, gross profit increased 11% to $278 million or 58.2% of sales compared to 57.8% in the third quarter last year. The drivers of this roughly 40 basis point increase in gross margins during the third quarter included lower inbound freight and lower product costs had favorable impacts of 160 basis points and 80 basis points respectively. These gains were offset by 40 basis points from higher customization costs, 40 basis points from supplier and product transition costs, 30 basis points from the strategic price decreases on certain hard coolers that we implemented during the first quarter and 90 basis points from a combination of other smaller impacts. SG&A expenses for the quarter increased 11% to $199 million or 41.7% of sales compared to 41.3% in the same period last year. Non-variable expenses increased 170 basis points as a percent of sales, primarily driven by higher employee costs and higher marketing expenses as we continue to spend into growing brand awareness and in building out our global teams to support the growth opportunity that we see looking forward.

Operating income increased 11% to $79 million or 16.6% of sales, an increase of 10 basis points over the prior year period. Net income increased 14% to $60 million and earnings per diluted share was $0.71 compared to $0.60 in the prior year period, an increase of 18%. Year-to-date, our earnings per diluted share of $1.74 is up nearly 30% versus the same period last year. Turning to our balance sheet. We ended the quarter with $280 million in cash, which was relatively flat on a year-over-year basis despite our $100 million share repurchase and our two acquisitions that were all completed in the first half of this year. Inventory increased 8% year-over-year to $370 million. As we look forward, we expect year-end inventory to be approximately flat versus the prior year as we continue to drive efficiencies in our global inventory planning. Total debt, excluding unamortized deferred financing fees and finance leases, was approximately $79 million compared to approximately $83 million at the end of last year's third quarter. Now turning to our fiscal 2024 outlook. We now expect full-year sales to increase approximately 9% compared to fiscal 2023's adjusted net sales, which is the midpoint of our prior range of 8% to 10%. We continue to take a prudently conservative approach in our demand planning for the remainder of the year. As Mike said, we believe this is the right approach given the current macroeconomic backdrop as well as the shorter shopping period between the Thanksgiving and Christmas holidays this year.

The components of our full-year sales outlook remain largely consistent. We continue to expect slightly higher performance from our wholesale channel versus D2C given our current momentum in wholesale. By category, we continue to expect coolers and equipment to outpace drinkware, supported by strong performance in hard coolers and bags. Finally, we expect international growth to remain in the 30% range with domestic growth in the mid single digits. Moving down the P&L, our 2024 gross margin target remains at approximately 58.5% versus 56.9% last year. This 160 basis point expansion for the year has not only been driven by lower inbound freight costs but also the efforts of our team to drive savings in other areas such as product costs. As we mentioned last quarter, we did see elevated surcharges on inbound freight shipments through much of the third quarter, which we managed well within our P&L. Those surcharges have started to come down, but we would expect the year-over-year benefit to our gross margins from lower inbound rates to be smaller in Q4 than in Q3.

When combined with the impact of our hard cooler price decreases and an unfavorable impact to margins from sales mix, we continue to expect fourth quarter gross margins to be relatively flat on a year-over-year basis. Moving on to SG&A, we continue to expect full-year SG&A growth to be slightly above full-year sales growth. As we have consistently said this year, we are investing a portion of the increase in gross margins that we will see in 2024 back into SG&A in order to drive future growth. Our expectations for adjusted operating margins also have not changed. We continue to expect operating margins of 16.5%, 90 basis points higher than the 15.6% that we delivered in fiscal 2023. This represents operating profit dollar growth of approximately 15%. Below the operating line, we now expect an effective tax rate of approximately 24.8% for fiscal 2024 in line with the prior year and we continue to expect full-year diluted shares outstanding of approximately 86 million. As a result, we now expect adjusted earnings per diluted share of approximately $2.65, which is the high end of our prior range and represents year-over-year growth of approximately 18%. As for cash, we now expect full-year capital expenditures of $50 million and our outlook for free cash flow remains consistent at between $150 million and $200 million. We will remain opportunistic with our capital allocation approach going forward, balancing both M&A opportunities and the remaining $200 million on our share repurchase authorization.

All in all, we are proud of our third quarter performance and the broad strength we saw across our businesses. Our top and bottom line execution in the first nine months of this year gives us confidence we can achieve our full-year guidance while also continuing to drive our strategic priorities forward. Our growing cash position gives us the opportunity to further invest in the business while also opportunistically pursuing a combination of strategic acquisitions and share repurchases. As we move into our year-end, we continue to focus on strengthening the brand, expanding our product portfolio, and driving omnichannel and international growth. Now, I'd like to turn the call back over to the operator to take your questions.

Your first question comes from the line of Peter Benedict of Baird.

First one's just kind of around the tariff question. Appreciate the efforts you're making to diversify your sourcing outside of China. I'm curious how the international supply chain works at this point. If we kind of fast forward maybe 12 to 18 months, how much of the China sourced drinkware can you just ship directly to other international markets and not bring to the United States? Is that a nuance that we should be aware of or thinking of as we try to pencil out potential tariff cost impacts on the business? That's my first question.

Absolutely. So as we go through this, any product made in China can go directly to the region. So to Europe, to Canada, to Australia. So one of the things we've talked about as we've gone through this is obviously currently primarily a US dynamic, which we feel as our international business grows sort of helps offset some of the potential cost risk that is out there.

And another question, Mike, how do we think about the pace of SG&A growth and really more of the non-variable side as we look at you? Obviously, you've mentioned you've been investing to support international growth. But as we kind of look out beyond this year and maybe have some gross margin tailwinds that maybe moderate? Or just how do you think about your ability to manage the SG&A line in the event that gross margin isn't as much of a tailwind as it has been for the last year or two?

Our comments have remained consistent. Everything we've done this year has been intentional. At the start of the year, we anticipated some gross margin benefits and saw that as an opportunity to reinvest in the business while still allowing operating margins to grow. Year-to-date, gross margins have increased by 240 basis points. We've utilized 70 basis points of that increase and still achieved a 170 basis point expansion in operating margins. The outlook we provided today suggests a gross margin expansion of 160 basis points for the year. We are reinvesting 70 basis points into SG&A while allowing for a 90 basis point increase in operating margins, which is all deliberate. As we move into next year, we plan to be very strategic in our approach. We have consistently expressed our intention to manage gross margins alongside operating margins to drive long-term growth in operating margins. While we aren't providing specific guidance for 2025 today, we remain focused on that intention as we head into next year.

Your next question comes from the line of Peter Keith of Piper Sandler.

This is Alexia Morgan on for Peter Keith, thanks for taking our question. Maybe just more on the tariff topic. So you're deemphasizing China exposure within drinkware, that's great. But how should we think about gross margin impact there? And is the facility move expected to be relatively smooth in terms of margin impact or how should we think about that?

There’s been a significant focus on the possible effects of tariffs. However, it’s crucial to recognize that many uncertainties remain. The specifics regarding the tariffs, such as amount, target products, and timing, are still unclear, making it difficult to quantify the impact beyond what we discussed last quarter and reiterated today regarding our strategy. We want to emphasize what we are doing: first, our previously outlined plan is on track. Second, we are collaborating closely with our suppliers, with whom we have strong, long-lasting relationships, to find solutions and evaluate potential new partners. Additionally, as we navigate this situation, we may consider adjusting prices to mitigate any potential tariff risks. Essentially, we are concentrating on controllable factors. I’d also like to remind everyone that we have successfully managed similar challenges in the 2018-2019 period with soft goods. We believe our current plan will enable us to overcome similar issues again, although many uncertainties persist, making it challenging to provide specific figures at this time.

Could you provide more details on the wholesale sell-through dynamics you observed in Q3 and how they compare to earlier in the year? Sales were really strong in the quarter, and you've already mentioned healthy wholesale sell-in.

So here's what I'd say. We've been very pleased with our sell-in and our sell-through this year. As we look, this year in the US. Now, one thing I do want to make sure is clear is that when we talk comparing sell-in and sell-through, when we talk sell-through that's primarily a US dynamic. And so whereas the wholesale reported number is global. And so when you look at just the US sell-in piece, they're reasonably aligned across both C&E and drinkware. And we've been really pleased with how sell-through has performed this year. And I think as we go into the holidays, we think we're in a really, really good inventory position to have a successful Q4.

Your next question comes from the line of Randy Konik of Jefferies LLC.

I guess maybe Matt for you. Considering the international business has continued to power ahead here, maybe frame up for us where are we today with bodies in the different regions in terms of employees, just infrastructure, the way everything's set up, as we think about additional growth in areas like Europe and Asia? Just to try to frame it out for us in terms of where we've been, where are we and where we're going in those markets ahead?

I would like to mention a few points. As we have discussed previously, we have established pillars for international growth over time. Specifically, Canada and Australia have developed their team infrastructure and are now in scaling mode. We highlighted Australia today due to the strong growth and execution from our exceptional team there. Europe is a few years behind in its development; however, with the team we've assembled in Europe focusing on Continental Europe and the UK, we are confident in the infrastructure we have created. There is still more investment needed as we continue to scale, but relative to the size of this market, we are still in the early stages in Europe. This is why we emphasize the opportunities in Germany and the UK, where the reception has been outstanding and our strategies are working, contributing to meaningful growth for us. Additionally, Asia is still in the early stages of development and we're working on our go-to-market strategy and resources there. Over the coming years, we anticipate that North Asia, including Japan and Korea, will become more significant. In the near term, we expect to discuss Europe and the UK more frequently as we leverage the foundation we've built to drive further growth.

Lastly, could you provide more insights into your thoughts on product evolution and innovation moving forward? You've mentioned the enthusiasm surrounding barware and shared your perspective on the investments in culinary sponsorship, which targets a different audience. It would be helpful to understand how you envision innovation in other categories or areas for the strong YETI brand going forward.

What I would emphasize is that our historical development has laid the groundwork for our current discussions and our future direction. YETI has never aimed to haphazardly expand its brand or product range. We are focused on thoughtfully developing our offerings so that they all interconnect. For instance, 2024 will showcase our commitment as we enhance our drinkware line and integrate more into food and culinary areas, expand our cooler applications, and further develop our bags and storage solutions. These elements will come together within the YETI ecosystem. Our goal is to provide consumers with more relevant use cases in their daily lives, ensuring the brand remains prominent and significant. We recognize the strength of our brand and our product philosophy, and we see ample opportunities for growth. We are particularly enthusiastic about the potential in bags, which represents a significant global market for YETI. Additionally, we are excited about the transition of drinkware from a focus on cups to a broader, solution-oriented approach encompassing barware, serveware, and tabletop connections to culinary arts. In the near to midterm future, we plan to actively expand in these areas, and you will notice how everything fits cohesively under the YETI brand.

Your next question comes from the line of Philip Blee of William Blair.

Can you talk a little bit more about your expectations for the upcoming holiday? Maybe what you're seeing in quarter-to-date trends and then any level of conservatism built in, had a peak season ability to chase? And then any impact of a potentially more promotional competitive environment?

I'd say a couple of things and I'll reiterate a little bit of what I said and Mike said. Q4 is always big for us. YETI has always been an incredible gifting solution and a highly desirable one. I'd say year to year and depending upon environments you see different behaviors in Q4, when buying starts, kind of when the season falls. So we closely monitor those. We feel great about how we're positioned for the holidays. We have incredible plans with our wholesale partners domestically and globally to address the consumer when they shop. This year there is a shortened run between the goalposts of the traditionally defined sort of holiday buying season. And so we're well primed for that. We're excited about the innovation we put into the market this year that's still undiscovered, that still has the opportunity to be a great holiday, great gifting solution. And as our history has been, we always have some things that we have for the holidays to stoke energy and demand and drive traffic and interest. So I think we're early in the quarter as it relates to the holiday. And because we go forward and get into this shortened season, we're ready to react to what the market gives. And I would say as it relates to the promotional environment we haven't seen anything outstanding and unusual in the quarter-to-date. And as we have always done our promotional cadence has continued to be consistent and similar to what we've done in the past.

And then on gross margin, outside of any potential impact of new tariffs. Can you talk about what inning you are in for some of your gross margin improvements, maybe between kind of the normalizing transportation costs that are more macro versus some of your internal initiatives on controllable and product costs? Just to kind of try and give us some sort of gauge on the go-forward rate?

It's challenging to define a specific stage in this process, as managing our COGS and gross margins is an ongoing effort for us. Each year presents different business and market dynamics that require our response. We are pleased with our gross margins in 2024, which showed a nice year-over-year expansion to 58.5%. For Q4, we expect gross margins to remain flat, as previously mentioned, but there are several factors influencing this period that may not continue into the next year, such as the reduction in hard cooler prices and shifts in our sales mix. Wholesale is growing faster than direct-to-consumer, and our customization and engraving segment is outpacing drinkware, both of which may dilute our gross margins. We aim to develop these categories in tandem and to grow direct-to-consumer faster than wholesale, which we believe will yield benefits moving forward. Additionally, our Q4 results will also be affected by the freight surcharges we've encountered. While we've managed these well, the year-over-year benefits we saw in Q3 will be lower in Q4, as many surcharges will impact our financials during this period. However, we anticipate these issues will be temporary and we are beginning to see a decrease. While we aren't providing specific guidance for 2025, we will continue to focus on managing product costs, inbound freight costs, and steadily improving our gross and operating margins over time.

And the only thing I would just add to what Mike said is, I mean, we have strong gross margins and we have strong operating margins, and we continue to work both and see opportunity. And I think when you have a situation where you drive top line growth, you have strong gross margins, you have strong operating margins, we think really good things will continue to happen in our P&L and they'll continue to strengthen what we think is already an incredibly strong balance sheet.

Your next question comes from the line of Megan with Morgan Stanley.

I wanted to just ask kind of big picture. You are talking to mid-single digit growth in the US this year. There's obviously been a lot of noise and year-over-year as it relates to gift cards, some acquisitions. So I guess when you think about kind of the go forward, is mid single digit growth in the US the right level? And is that category up low single digits and you gaining some share? And if not, maybe how do you think about that kind of growth in the US going forward?

I would say that although we are not here to provide updates on our long-term outlook during this Q3 call, I want to emphasize the positive signs we are seeing regarding the brand's potential and market opportunities. The expansion possibilities within our product portfolio continue to open new avenues for growth. The domestic growth opportunities related to our product expansion are very exciting for us. While I won't provide a specific number at this time, it's important to note that quarter-to-quarter or year-to-year, variations can occur based on market conditions and our product rollout. However, when taking a broader view, we are very optimistic about the brand and the potential for product expansion. We are pleased with consumer reception and our current partnerships that allow us to reach our audience domestically. Furthermore, this is just the beginning of what we anticipate will be significant long-term international growth. As we go through our annual guidance, we will share more details. Overall, when considering our potential, relevance, and connections between product and consumer, we are confident in our current position.

I'm sorry to ask another question about tariffs, but I have a slightly different angle. Your balance sheet looks very strong. How do you view the possibility of taking on some debt and increasing leverage to provide more flexibility on the bottom line? Are there investments in capacity that you could speed up? It's encouraging that you aim to achieve 50% outside of China by the end of 2025, but is there anything you can do from a capital perspective to potentially accelerate that even more? I would appreciate hearing more about how you're considering leveraging the balance sheet to counter some of these short-term challenges.

We have an incredibly strong balance sheet, and we feel very positive about it, particularly regarding our free cash flow generation and its implications for our operational performance. As we consider our supply chain and other strategic initiatives, we constantly seek ways to reach solutions more quickly and thoughtfully by utilizing our people, capabilities, capacity, and available capital. As we delve deeper into the specifics related to tariffs, we are open to discussions about flexibility and investment opportunities. As Mike mentioned, we will evaluate all aspects concerning tariffs, including consumer pricing, operational management, and investments in evolving our supply chain. All these topics are actively being discussed, with some actions being taken right now.

Your next question comes from the line of Joe Altobello of Raymond James.

This is Martin on for Joe. I just want to touch on 4Q again. EPS this quarter is up 18%. And if we've done the math right, you’re sort of implying flat for next quarter. I know you mentioned the shoulder buying season and you've touched a little bit on margins. I'm just wondering if there's any pull forward or any other dynamics that hadn't been mentioned yet?

No, I think we have a consistent story. When considering Q4, there are several factors related to sales, gross margin, and operating expenses. We've discussed many of these, including the environment that Matt talked about and some specific gross margin dynamics for this quarter, along with our decision to continue investing in the business using some of the gains we've made in gross margin this year. However, it's important to view everything in the context of the year, considering both our year-to-date results and our outlook. We are very pleased with how the year has gone so far and the results we're about to report, both in terms of revenue and profits. There are some unique dynamics in Q4 that we've addressed. Additionally, when we provide an outlook, we want to ensure we are confident in it, and that's what we've done today. So, there’s nothing new beyond what we have discussed.

And could you just update us on the competitive landscape and how your market share is holding up?

A couple of things on the competitive landscape, we haven't seen largely any significant changes in the competitive landscape. I think when you look at our results and how we continue to deliver quarter-to-quarter, the partnerships we have, the shelf space we continue to maintain and grow domestically, the opportunity that we're seeing globally. I think markets are competitive and you have market alternatives that come and go and some come and stay for a bit. But I think the residual kind of strength of YETI and the strength of the brand that we're building and the diversification and growth of the product portfolio, I think are all signs of kind of how we weather the market. And so I feel good about where we are. I wouldn't say we've seen any appreciable or material changes to the market.

Your next question comes from the line of Jim Duffy of Stifle.

This is Peter McGoldrick on for Jim. Just first thinking of the composition of the 30% year-over-year international revenue growth. Can you provide some insight into the contribution of new dealer growth and gains within existing customers for this quarter? And then as we look forward, how should we expect that to evolve sequentially as we look forward over the midterm?

We haven't historically given kind of a resolution down into those markets at that level of specificity. But what I would say to you is if you kind of follow how we talked about Canada and Australia, and that those markets largely built out the infrastructure, established the omnichannel and the things that we point out, customization, strong wholesale partnerships, our e-commerce businesses, that would lead you to believe that it's evolving a lot like the US. And when we talk about the playbook we run, we aren't traditionally a new door negative comp door type brand, that's not been the approach we've taken and we've taken that and exported it to the globe. Europe, obviously, we've been adding some wholesale doors, but that, as we've called out in the past, has been a really strong e-commerce business. We have a growing Amazon Marketplace. We've got a growing corporate sales custom business. And then the other dynamic in Europe is there aren't large kind of pan-European multinational retailers like you'd see in the US and Australia and Canada. And so it tends to be more picking the right doors. And so it's a much more methodical process as it relates to wholesale build out, which would lead you to kind of the conclusion that the business that we have is performing well.

And then just thinking about drinkware specifically and holiday, YETI as a giftable staple already. Can you share any figures underpinning the fourth quarter outlook as it relates to wholesale shelf space, reorder rates, etc., contribution, new products or international contribution?

I would say that we did not provide specific guidance for the year, but we expect the trends we have seen this year in the channel category and international dynamics to continue. Wholesale is growing faster than direct-to-consumer, and consumables and equipment are outpacing drinkware. I anticipate that Q4 will reflect similar patterns. Specifically for drinkware, we've launched a number of new products in the past year that we believe are highly giftable and priced well, positioning us for a strong holiday season. Therefore, I expect Q4 to maintain the same relationships between channels, categories, and international markets that we have experienced throughout the year.

For your last question, we have Brooke Roach of Goldman Sachs.

This is Savannah Sommer on for Brooke Roach. In your prepared remarks, you mentioned a lot of excitement around the expanded bags launch planned for next year. Should we think about a similar value proposition rebalancing to your existing bags and packs business ahead of the launch similar to the changes you made with your hard cooler expansion earlier this year? If so, how should we think about the breadth and depth of those price changes?

We are excited not just about the launch of these bags but also about the growth expansion it represents and the long-term potential we see in bags. This includes various categories such as everyday use, travel, sports, hiking, hunting, and water-based products, as well as all-weather bags. These categories present tremendous and natural growth opportunities for YETI in the bags, packs, and luggage segment. As we look towards the first half of next year, the new bags we are introducing will enhance and complement our existing offerings. While there is some interaction between our current market bags and the new ones, I do not anticipate significant transitions between them. Our goal is to expand our line and provide more choices for consumers in our bags and packs.

Thank you. I'd now like to turn the call back over to Matt Reintjes for final closing remark.

Thanks everybody for joining us. We look forward to speaking with you on our Q4 and full year call. Have a wonderful rest of your month.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.