Industry Disruption Due to Global Trade and Tariffs
The company observed a surge in imports across key markets, contrary to expectations of import redirection due to tariffs.
Tariffs began to be collected in early May, but import surges persisted into the second quarter, driven by speculation and supply chain delays.
Management expects import levels to decline in the third quarter as the discourse around tariffs stabilizes, but potential new tariffs in Europe remain a concern.
Goodyear Forward program contributed $195 million in benefits during the quarter.
Gross margin declined by 360 basis points, with segment operating income at $159 million.
Net debt declined by over $600 million, supported by asset sales and working capital management.
Net income increased to $254 million, driven by a gain on the sale of the Dunlop brand.
Price/mix contributed $91 million benefit but was $44 million below prior guidance due to commercial truck headwinds and lower mix in the Americas.
Rationalization charges of $59 million impacted results; adjusted loss per share was $0.17.
Raw material costs were a $174 million headwind; inflation and other costs added $127 million in headwinds.
Second quarter sales were $4.5 billion, down 2% year-over-year due to lower volume and the sale of the Off-the-Road (OTR) business, partially offset by price/mix increases.
Unit volume declined 5%, impacted by global trade disruptions affecting OE production and consumer sell-out trends.
YETI is executing a major transformation of its supply chain, with a focus on diversification to reduce reliance on China, aiming for less than 5% of COGS exposed to U.S. tariffs by year-end.
The company has made significant progress, with a multi-country sourcing strategy fully in place, supporting resilience and agility for 2026 and beyond.
Tariff costs, which impacted gross margins by approximately 220 basis points, are expected to decrease due to recent tariff rate reductions from 145% to 30% on Chinese goods, but uncertainty remains.
Supply chain transition has caused temporary inventory constraints and limited product launches, especially in Drinkware, affecting sales performance.
The company remains confident that supply chain efficiencies and cost management will help recover margins and support long-term growth.
Tariff and Trade Environment Impact and Mitigation Strategies
The company expects around $10 million in tariff-related costs for the full year, with most impact in Q4, due to inventory pre-exposure and sourcing adjustments.
Central has reduced China purchases by nearly 50% in Q3, shifting sourcing to mitigate tariff impacts, and is working on pricing strategies to offset cost increases.
Management highlighted ongoing efforts to work with customers and suppliers to limit margin erosion, with a cautious outlook on future tariff developments.
Dafinchi
