Earnings Transcript for YETI - Q4 Fiscal Year 2024

Operator: Good morning, ladies and gentlemen, and welcome to the YETI Holdings Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 13, 2025. I would now like to turn the conference over to Maria Lycouris, Investor Relations for YETI.

Maria Lycouris: Good morning, and thank you for joining us to discuss YETI Holdings' Fourth Quarter and 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 that 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 recently filed Form 10-K. We undertake no obligation to revise or update any forward-looking statements made today as a result of the 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 the Investor Relations section of our website at yeti.com. I'd now like to turn the call over to Matt.

Matthew Reintjes: Thanks, Maria, and good morning. 2024 was an excellent year for YETI, with strong top and bottom line growth fueled by our brand strength, expanding product portfolio and growing global presence. Over the past 12 months, our team has clearly executed against our strategic priorities. Starting with brand. YETI consumer and owner studies continue to show strong passion for the brand and support our product expansion strategy. In 2024, we participated in over 200 consumer events around the world, ended the year with roughly 200 global ambassadors and secured meaningful partnerships, growing our addressable market across key consumer groups. In innovation, we delivered impactful additions in drinkware, food, coolers and bags, plus expanded our color options. Within our omnichannel, we grew our DTC and wholesale across geographies, continuing to find meaningful ways to intersect with consumers where they shop. And finally, internationally, YETI's global brand resonance is unlocking tremendous white space in international markets. Additionally, YETI delivered excellent adjusted gross margin and adjusted operating margin expansion throughout the year despite a choppy macro and competitive domestic environment. We ended the year with a cash position of approximately $360 million, building on our strong balance sheet. Our momentum continued in the fourth quarter, even as we saw signs of discerning consumer buying, more promotional activity and heightened competition, particularly in the U.S. market. Innovation and product diversification continued to drive demand across YETI in the quarter, with particular strength in the Coolers & Equipment category, specifically in hard coolers and bags and with strong growth internationally. We delivered over $200 million in free cash flow for the second year in a row, and we expect another strong year in 2025. This robust cash generation gives us the flexibility to pursue a targeted capital allocation strategy, which is centered around driving long-term sustainable growth and delivering value to shareholders through 3 key levers

Michael McMullen: Thanks, Matt, and good morning, everyone. I'll start by highlighting a few items that impacted our fourth quarter GAAP results in the current and prior year periods. Then I'll provide a review of our fourth quarter and full year 2024 performance. I'll then discuss our full year 2025 outlook before opening it up to your questions. First, our GAAP results reported today include an unfavorable recall reserve adjustment of $9.9 million. This is related to the product recall that was first announced in early fiscal 2023. As we reviewed the trend of recall claims and costs in 2024 and projected out the reserve that we would need going forward, we made the determination that this reserve adjustment was necessary. In this adjustment, sales were unfavorably impacted by $8.8 million due to higher estimated consumer recall participation rates. Cost of goods benefited by $0.7 million due to lower recall-related costs, and SG&A was unfavorably impacted by $1.8 million, primarily due to higher recall claim volume. As a reminder, in the prior year period, we made a favorable recall reserve adjustment based on the trend of recall claims at that time. For our standard reporting practices, the impact of these and other nonoperational or nonrecurring items are excluded from non-GAAP results. All results discussed on today's call will be adjusted non-GAAP metrics in order to better focus on the operating performance of the business during the fourth quarter and fiscal year 2024. YETI just completed an incredibly strong year in 2024. We grew sales 9% to $1.84 billion, with growth across all of our channels, categories and geographies. We grew operating income 18% to $309 million while still investing in future growth opportunities and infrastructure. We grew our earnings per share by 21% to $2.73, which reflects the impact of $200 million in accelerated share repurchases executed during the year. We generated $220 million of free cash flow and maintained our incredibly strong balance sheet while also executing on 3 acquisitions, 2 of which contributed to growth in 2024. And we did all of that while continuing to expand the product portfolio and grow the brand in both the U.S. and around the world. Turning now to our fourth quarter results. Sales increased 7% to $555 million, which was above our expectations. We were very pleased with the execution of our teams during the quarter. Three growth highlights include strong performance in Coolers & Equipment, which grew 17%; 10% growth in our D2C channel; and continued strong momentum in our international business, which grew 27% in Q4. I'll discuss each of these in more detail as I review our performance in each of our categories, channels and geographies. First, by category. In the fourth quarter Coolers & Equipment sales increased 17% to $189 million. This was above our expectations, driven by excellent performance in hard coolers and in bags. Notably, this was our fourth consecutive quarter of double-digit growth in C&E. In hard coolers, as anticipated, our Roadie 15 performed extremely well during the holidays following its launch in late Q2. In soft coolers, our backpack coolers and smaller-sized thermal lunch bags also continued to perform well. In equipment, bags had an outstanding quarter. We saw strong demand for our Crossroads, Camino, SideKick and Panga families, and our Mystery Ranch-branded products performed in line with our expectations. As Matt said, we are incredibly excited about the upcoming launch of our new lineup of YETI-branded Mystery Ranch-inspired packs in the first half of 2025. Within cargo, our GoBox product family and accessories also contributed to our growth, and we believe there is tremendous opportunity to scale this category through both product innovation and higher overall consumer awareness in 2025 and beyond. For the full year, sales in Coolers & Equipment increased 14% to $707 million. For Drinkware, Q4 sales grew 3% to $358 million. As Matt said, the overall U.S. Drinkware market experienced higher levels of promotions and elevated competition during the quarter. Our overall Drinkware business in the U.S. was down slightly year-over-year in Q4, but we saw good performance within several areas of our portfolio, including our highly giftable barware, our stackable cups and our bottle lineup. We believe this speaks to the importance of our efforts over the last few years to broaden and diversify our Drinkware portfolio to over 60 individual products. Outside the U.S. our Drinkware business grew over 20% with significant room for further growth in both existing and new markets. For the full year, Drinkware sales grew 7% to approximately $1.1 billion, with growth in every region around the globe including the U.S. Turning to our performance by channel. Direct-to-consumer sales were $377 million, growing 10% in the fourth quarter representing 68% of total sales. We saw growth across all of our D2C channels, with notable strength in corporate sales and our Amazon business. One of the key success stories within D2C during the quarter was our drinkware customization offers, which are now live globally for both e-commerce and corporate sales customers. For the full year, D2C sales increased 9% to $1.1 billion representing 60% of our overall sales mix, in line with full year 2023. The approximate mix within D2C remained relatively consistent year-over-year, with 51% from our global YETI websites and YETI stores, 25% from the Amazon marketplace and 24% from corporate sales. In wholesale, sales increased 3% to $179 million compared to the prior year quarter. In the U.S., sell-through and sell-in grew at similar rates in Q4, both in Coolers & Equipment and in Drinkware, with particularly strong sell-through growth within C&E. For the full year, wholesale channel sales increased 10% to $743 million, driven by positive sell-in and sell-through growth in every market in which we operate, including the U.S. Shifting to our international business. We saw another quarter of excellent growth internationally, with our business outside the U.S. increasing 27% to $109 million in Q4. All of our regions grew, with Australia and Europe continuing their exceptional double-digit growth. Our efforts to drive brand awareness, grow our distribution network and roll out our omnichannel model are working. And we see significant runway ahead of us as we continue to capitalize on the global opportunity for YETI. For the full year, international sales grew 30% to $339 million, representing 18% of total sales, up from 16% of sales last year. Before wrapping up on sales, note that the fourth quarter included $1.7 million of gift card redemptions related to remedies offered to customers impacted by the product recall, compared to $6.5 million in gift card redemptions during the same period last year. On margins, gross profit increased 8% to $335 million or 60.2% of sales, which is flat versus the prior year period. Drivers of gross margin included lower inbound freight costs and lower product costs, offset by higher customization costs and a number of other smaller items within our cost of goods sold. Full year gross profit increased 13% to $1.1 billion, expanding 170 basis points to 58.6% of sales. The full year gross profit expansion was led by lower inbound freight costs and lower product costs. Before moving on to our SG&A expenses for the quarter, we would like to note that our breakout of SG&A expenses will be shifting from variable and nonvariable expenses to the following groupings

Operator: [Operator Instructions] Your first question comes from Peter Benedict with Baird.

Peter Benedict: Mike, maybe on tariffs. So was wondering if you could maybe frame for us, it looks like the 10% China tariff, maybe the one that's most certain here. I know you talked about being ahead of plan in terms of diversifying Drinkware out of China. Maybe what would that level of tariff do to kind of the outlook, assuming no offsets? And curious if you could maybe frame your exposure to some other markets on imports, places like Mexico, that have been in the news of late. That's my first question.

Michael McMullen: Peter, thanks for the question. So yes, if you took the tariff announcement on February 1 that went into effect on February 4, which is essentially the 10% tariff on goods coming out of China. We think that, that would have less than a $10 million impact on the year in terms of additional cost. We -- that is not in our outlook for a few reasons. One, it's obviously a very fluid, dynamic situation. And number two, I mean, that's a -- we view that as a manageable number that we are going to continue to work, and we're going to do that via additional cost optimization. And we're also -- as we said consistently, we are going to continue to look at price. But that kind of gives an idea of if that -- the tariff that you referenced were to stay in place for the full year, that's what we could be looking at. In terms of other regions, I guess, Mexico is the one I'd call out, but it is a far lower piece of our business than what we talked about with China. And we're running the same playbook that we're running there. We're running in Mexico as well, continue to work with our partners to find ways to offset any potential cost. But obviously, nothing has been officially announced there.

Peter Benedict: Got it. Okay. That's really helpful. My follow-up would be kind of around the acquisition that you did in the fourth quarter. Do you expect that to -- it doesn't sound like it's going to contribute to sales this year, but maybe it is a little bit. I don't know if you could maybe frame that. Or is this more of a development type situation? And Matt, just how do you -- maybe speak to how you're thinking about maintaining discipline within M&A. You obviously have a lot of cash flow. I'm sure you guys get shown anything under the sun that's even remotely tangential to your business. Just maybe talk about your approach to M&A, how you're thinking about it and how you remain disciplined on that front.

Matthew Reintjes: Peter, thanks for the question. I'll start with the powered cooler technology and IP that we acquired in the fourth quarter. We're incredibly excited about how that fits within our overall architecture of hard coolers and how that fits underneath the YETI brand and the global opportunity for it. So we're very excited about that. As you said, we don't expect it to contribute to 2025. It is an in-development program off of a platform that we had spent some time looking at and had an opportunity to bring that in to accelerate what we think will deliver a -- what we believe will deliver a unique powered cooler solution that fits alongside our Tundras and Roadies and the rest of our portfolio. So more to come on that, but we're working aggressively and actively on that program right now. I think as it relates to broader M&A, I think what I would point to is in 2024, 2 really good illustrations of how we think about M&A. We look for things that bring ingredients or bring technologies or bring know-how to accelerate stuff that very likely is already on our product road map. And it gives us a chance to accelerate those programs fitting underneath the YETI brand. So we're highly disciplined about how we think about M&A. As you said, it's -- there's a lot of things out there. We have a lot of conversations. And when we enjoy kind of getting to see all the different areas where we believe YETI could go, we'd probably spend as much time on should we go there and then how does that acquisition or how does the acquisition of the technologies, materials, capabilities, know-how accelerate our vision for the expansion of the YETI product road map.

Operator: Your next question comes from Brooke Roach with Goldman Sachs.

Brooke Roach: I was hoping you could elaborate on your comments regarding U.S. growth in 2025 and the dynamics that you're seeing, specifically in the U.S. Drinkware business. What are you seeing in wholesale versus DTC growth for U.S. Drinkware as you enter 2025? And what gives you confidence in that second half inflection to a return to stabilized growth in the U.S?

Michael McMullen: Brooke, the first part of your question was, I think, muted. So if we don't address everything you asked, please let me know. So in terms of U.S. Drinkware in 2025. So like we called out, we said -- we think in general, the U.S. will be in the mid-single-digit growth range. We think Drinkware globally will be in that range as well. We did want to provide some color really for the first time on kind of what we see at that U.S. Drinkware level. We think it will be essentially flat in the -- or Drinkware, in total, will be flat in the first half, down in Q1. But as we look to the second half, I think there's a couple of things to call out. One, we do have our -- the phasing or the pacing of our innovation is much more second half weighted this year. And I think one of the drivers of that is all the work we're doing around our supply chain and diversification of that. I mean that is -- it does have an impact on sort of our -- that did impact the pacing in our product road map this year, number one. In terms of why we're confident, because when we look at the -- what we have planned coming out in the second half, I mean, we feel like it's a robust lineup that will allow us to get back to that growth rate. The other thing I'd say is from a compare perspective, Drinkware had a strong first half of last year. I mean it grew 12% in the first quarter of 2024. And so as we look at it from a compare standpoint, there's a pretty big difference in terms of growth rate in the first half versus the second half for Drinkware. And so I think that's playing a role as well.

Matthew Reintjes: Yes, Brooke, this is Matt. The one thing I would add, early in January, I was in -- visiting our factories, the Drinkware factories that we're transitioning out of China. And I would say that piece of a big focus at YETI in the first half of the year is the successful diversification of our supply chain, which allows us to have what we think is a really exciting innovation road map in the second half within Drinkware. And so I think when you think quarter-to-quarter, there's some movement there. Overall, we feel great about the potential expansion in Drinkware, the continued adoption of our new innovation in Drinkware, both in the U.S., and then obviously, we expect continued outsized growth outside of the U.S. with incredible runway in front of it.

Brooke Roach: And if I could just follow up. Can you discuss the outlook for DTC versus wholesale dynamics in the U.S. market going forward? It seems like you've got some great momentum with ongoing legacy consumers and lovers of the brand, some good innovation coming. How does that play out in DTC versus wholesale in your core market?

Matthew Reintjes: Yes. I think in the U.S., it's been interesting as we went into the 2020 period and the hard shift to DTC, and what we've been excited about is our ability to retain the customers that we acquired through that period and build a strong DTC business. What's been as exciting is watching wholesale come back over that time. And so we think we've got a really balanced omnichannel. I think the diversification we have underneath DTC and the diversity of wholesale partners we have, I think, gives us a lot of opportunity to win and to find areas where we can continue to grow. And so I think we haven't updated any sort of long-term view on DTC versus wholesale, but I think they're working in a really complementary way right now. We have incredible wholesale partners. We have strong DTC channels. And so that's -- our focus is really how do we drive getting YETI in front of consumers when and where they want to shop. And we're following what we think has been a changing consumer dynamic on where they choose to shop.

Operator: Your next question comes from Megan Lap (sic) [ Megan Clapp ] with Morgan Stanley.

Megan Christine Alexander: Just first wanted to clarify one thing. I think you mentioned the 53rd week in the press release in 2025. I don't think that's something most in consensus were modeling. So I just wanted to clarify that the 53rd week is included in your top line. And how does that play into the first half-second half dynamics or top line growth? If I'm doing my math correctly, I think it could be kind of 4 points to the back half. So is that part of the expected acceleration in the back half as well?

Michael McMullen: Megan, thanks for the question. So I think the 53rd week for us is a relatively minor impact. It is less than 1 point of growth on the total year. The last time we saw this in 2020, we called out -- we called that less than 1 point of growth, and that was when we were much smaller than we are now. It's our lowest week of sales of the year. So minimal impact from a top line perspective. And if anything, from an operating income, it's slightly dilutive on the year. So no real impact that we would call out from that 53rd week.

Megan Christine Alexander: Okay. Great. That's super helpful. And maybe as a follow-up on Drinkware, I wanted to just ask a little bit more about the competitive environment and the promotional intensity you're seeing. Is -- did you see anything in the fourth quarter or anything year-to-date that you would describe as potentially irrational from competition? And I think you mentioned in the prepared remarks that you continued your strategy of maintaining more targeted promotions. But if you are seeing a bit more promotional intensity, how do you think about adjusting your promotional strategy or your pricing strategy in that category to make sure you're maintaining share?

Matthew Reintjes: Megan, while I won't speak to the rationality or irrational behaviors of kind of the others in the market, what I would say is we believe and we continue to show that our diversification of our Drinkware approach is working, and it's showing resonance with consumers that we can continue to use promotions as a tool for transitioning in and out of products as we drive more innovation, as we continue to up the cadence of our innovation. I don't think -- I think it's more about the market backdrop and kind of the consumer mindset than something that we're going to strongly react to. I also think, as I mentioned in my remarks, the idea that we continue to broaden and diversify the use cases and the reasons for people to buy is going against a bit of where the focus is in the Drinkware category right now, which tends to be around a pretty consolidated set of products. And so I think I feel good about our short-term strategy. I feel really good about our midterm strategy and continue to drive YETI growth and YETI relevance in Drinkware, both in the U.S. and obviously, around the world.

Operator: Your next question comes from Randy Konik with Jefferies.

Randal Konik: I guess a couple of things. Just on the -- Matt, when you talked about innovation and ramping, maybe just give us some perspective on how you think about what that looks like over the next 12 to 24 months and how that's perhaps different or the same from a [indiscernible] perspective or amount of newness that we've seen in the last couple of years. Just kind of contextualize that for us. And just on the bag side of the ledger, maybe just also give us some perspective on how big is that kind of category now and kind of what you think about the opportunity in long-term there as it relates to the innovation question.

Matthew Reintjes: Yes. Thanks, Randy. I think what I would say is you saw an up-tempo in innovation in 2024, and that was really the result of a little bit of catch-up from the 2020, 2021 period and getting back online with our partners and incredible work by our product development team. I think that pacing is going to be largely consistent going forward. We see opportunities to continue to bring vitality and expansion in our Drinkware as we've talked about a couple of times on this call. You've seen us bring vitality and expansion into our hard coolers, and we called out the success of that work. I think we see the same thing in our protective case and GoBox line of products. And I called out even some things on the call an expansion into our chair, our small chair franchise, which is really fun and a great product that, I think, is very, very YETI. I think as it relates to bags, we've talked about early this year, 2 new families of bags coming out. One of those, a direct result of what we think is our thoughtful approach to M&A. So it has some of the ingredients that we acquired in Mystery Ranch with the design and capabilities that we had at YETI. So I think it would be a great kind of new step into what we think is a really, really large global bags and travel opportunity. We haven't dimensionalized the size of our bags business today. But we did call out the strong growth in 2024, the kind of acceleration of the cadence of innovation that we have coming in 2025. And I think in that category specifically, you're going to see us do more and more of that. And that is -- and I think it fits with the YETI brand. It fits with the YETI consumer, both the existing ones and the ones we acquired. So we're very excited about what that can become.

Randal Konik: Great. Last question. Maybe it would be helpful to us if you dimensionalize international from a vantage point of, I think, you said mid-teens growth. And maybe kind of talk about what countries that's primarily coming from. And then maybe kind of looking out a few more years from now, the country opportunities of focus that you may not be in yet or maybe starting just to go into part of that growth forecast for 2025, just to kind of give us some perspective of that [ enduring ] growth opportunity in the international markets and where the markets are ahead.

Michael McMullen: Randy, so in terms of the first part of the question, I'll take. I think -- well, first of all we've got growth plan in '25 or included in the outlook in every region outside the U.S. We talked about the strength in 2024 of Europe and Australia. And I think it's fair to say that that's planned to continue in 2025 with the faster growth coming from Europe, given the size of that -- of our business there. We haven't been there as long as we've been in Canada or Australia and frankly just the overall market opportunity that we have in front of us in Europe. So that's going to be our fastest-growing region in 2025. The other thing that we talked about was Japan. We will start our commercial sales there. But it's not an overly significant impact in '25. I think really the first full year will -- we expect that to be a meaningful driver is 2026.

Matthew Reintjes: Yes, Randy, let me just add a little bit of color on that. So when we think about the U.K. and Europe alone, we're so early stage in the potential opportunity there. And we have an incredible team that's kind of building the momentum in that market that I think we're going to be talking about the U.K. and Europe as a growth driver for YETI for years to come. And I think that's got that kind of opportunity just based on product relevance, market size, what we're seeing across multiple countries, both the English speaking and the non-English speaking parts of the U.K. and Europe. In early January, I was in Tokyo for the launch of our brand there. We have partners from all over the region -- or potential partners from all over the region that showed up to a mini trade fair that we held in Tokyo. And I will tell you it felt like what I had seen when we got going in the early days in Australia, in the early days in the U.K., the early days in Germany. The energy and the potential really -- I walked away from that with our team, and we're fired up for what Asia can bring.

Operator: Your next question comes from Peter Keith with Piper Sandler.

Peter Keith: I know you talked about having a very diverse DTC customer base as well as a diverse group of wholesalers. Could you talk about some of the things you're doing just to raise customer awareness around product launches? And as you have this higher tempo of launches, does that also require maybe spending a little bit more on advertising?

Matthew Reintjes: Yes. Peter, a couple of things on that. I think what the diversity of our channels does is it -- whether that's DTC and everything from our flagship e-commerce sites to Amazon to the corporate sales is it gives us pretty efficient ways to get out in front of consumers. And so it's a cost efficient -- in many ways, a cost-efficient way of creating marketing. Our corporate sales, our partnerships, Amazon, in particular, in there. I think the thing that we're looking at and you'll start to see us shift is we're actually moving some of our marketing up funnel a bit to the mid-funnel to create that combination between brand awareness and product marketing and awareness versus lower-funnel transaction, which I think is the more contested -- the contested part of marketing spend right now. So what we're doing is we have kind of constant review between broad brand awareness spend and our performance marketing. And we're pretty dynamic period-to-period on where we're putting the pressure out there. We keep the hum of building the overall brand halo through many of the things that you're familiar with, ambassadors, partnerships, our sponsorship-type relationships. And then as we go down into the more kind of product launch awareness type mid-funnel things, we move between brand focused and product focused. So I would say I wouldn't expect a big pop in our marketing spend. It's more about the micro adjustments we make within what we think is a really thoughtful kind of marketing budget.

Peter Keith: Okay. Helpful. And then maybe just as a related question, as you're leaning into some categories that are -- whether they're new or existing like bags, cookware, chairs, are you thinking about expanding wholesale relationships maybe with some niche players? Or is this something where you leverage the existing wholesale relationships you have in place today?

Matthew Reintjes: I'll start with -- we have a -- as you called out and I mentioned earlier, we have a diverse set of wholesalers that we think can represent our product portfolio. Now as our portfolio evolves, all wholesalers aren't probably the right place for everything just based on the nature of the customer that comes in and what they represent. So one of the things we work very closely with our existing partners on is the merchandising and what makes sense inside their stores. Alongside that, and I mentioned it in the prepared remarks, we're constantly looking at partners that we think could fill in and complement our wholesale and then ultimately complement our entire omnichannel. Whether that is some more kind of homewares-type places for some of our recent launches in 2024, or as our portfolio expands, as bags expands, it creates a potential new opportunity for places for YETI in wholesale to be placed. So no different position or shift from, I think, where we've been over the last 9, 10 years, which is we want to build as strong a wholesale network and as complementary a wholesale network as we can to support the product road map that we have and the product road map that's coming.

Operator: Your next question comes from Sabrina Baxamusa with William Blair.

Sabrina Baxamusa: This is Sabrina on for Phillip Blee. Could you provide some insight into how demand trends have been tracking quarter-to-date and then any insight into sell-through or sell-in trends?

Michael McMullen: So we're not -- we don't traditionally provide sort of commentary of the current quarter when we release earnings. But in terms of sell-in and sell-through, what I'd say is first of all, we saw sell-through growth overall for the year last year in every region, including [indiscernible]. The other thing I'd say is in Q4 specifically, Q4 and sell-through and sell-in were aligned for each category. So we saw really strong growth within C&E both in sell-in and sell-through, and Drinkware sell-through kind of matched the sell-in that we saw. So I think where that's left us is we feel good about where channel inventories are. They're healthy sort of heading into the year. And we'll continue to manage that as we go into -- we go through 2025.

Sabrina Baxamusa: Great. And then going back to kind of the promotional environment, you kind of [indiscernible] competitive and promotional pressures during the fourth quarter. Do you expect those to remain elevated headwinds going forward? Does your guide embed some of that normalizing throughout the year?

Matthew Reintjes: Yes. I think that -- we do expect that Drinkware, in particular, I think some of this is related to the fact that it's a pretty consolidated assortment out there that's competing for a relatively narrow portion of the market. And I think there's a lot of competition around creating -- kind of playing into the value piece. So I wouldn't expect it to end. We contemplate all of that in our guide. I think more importantly, our expansion strategy, which we've had underway for a number of years, we think is the ultimate mid- and long-term defense to kind of the competitive environment that exists right now and, we think, will continue to persist in 2025.

Operator: Your next question comes from Joe Altobello with Raymond James.

Martin Mitela: This is Martin on for Joe. Where do you see wholesale growth coming from? Is it new doors? Or is it expanded shelf space? And additionally, you did mention wholesale expansion opportunities that address new consumers. What might that look like?

Michael McMullen: Yes. In terms of the first part of the question, I think it's a -- like Matt said, we're constantly looking at new opportunities within wholesale. We don't have a significant door expansion planned in our outlook. What I'd say is it's a combination of sell-through growth of assortment expansion as our product portfolio grows. We're having conversations with our existing wholesale partners about looking at ways to sort of accommodate that expansion. And we've seen good success there as our product portfolio grows. So I'd say it's a combination of both just overall consumer demand and us constantly looking at our footprint and optimizing our wholesale footprint.

Matthew Reintjes: Yes. And Martin, I would just add to the piece of the question about kind of expansion opportunities. I mean our focus is on where people shop for what. And as our portfolio continues to evolve, we continue to analyze our wholesale footprint and say, do those match and do we intercept the consumers in those shopping occasions? And so it's a broad range from small independents to bigger players that are the opportunities for us. I wouldn't say the opportunity set has fundamentally changed. Our analysis of them is what we kind of keep calibrating on. So nothing specific to call out, but we are focused on -- and we have been for years on we want strong wholesale partnerships that continue to grow, and we want to bring innovation to them. So we bring newness to their customers. And those are the best relationships we've had for years.

Operator: There are no further questions at this time. I will now turn the call over to Matt for closing remarks.

Matthew Reintjes: Thanks, everyone, for joining us. We look forward to speaking with you on our Q1 call.

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