Solo Brands CEO: Innovation on the way for Black Friday, Cyber Monday

Solo Brands Q2 earnings beat estimates, while net sales slipped year-over-year. Solo Brands CEO John Merris joins Yahoo Finance Live to discuss the company outlook, retail industry, new product line, and the state of the consumer.

Merris says, "Overall we're right where we want to be for the back half of the year. We see a lot of strength in Q4 as we approach holiday season. We also have a big innovation pipeline in the back half of the year."

Video Transcript

JARED BLIKRE: Direct-to-consumer company Solo Brands is in focus today after posting an earnings beat in the second quarter. This is despite showing a 3.7% dip in net sales year over year as it navigates a difficult macro environment. John Merris, Solo Brands CEO joins us now. And John, thank you for being here today. Just give us a big picture overview of your company's earnings please?

JOHN MERRIS: Yeah, absolutely. It's been, you know, really to plan exactly what we thought that was going to happen this year. At the beginning of the year, we talked about leaning into wholesale. This year we expected some short-term pressure on our DTC business as we sell in or load in to those retailers. And that's exactly what's happening.

So front half of the year, we saw really meaningful momentum in our wholesale-retail partnerships in business really at a time that retailers and wholesalers have been talking about scaling back on inventory. So they're loading in and sending us orders while they're still having to pare back inventory from other brands.

But meanwhile, we have seen some pressure on our DTC businesses. We've done so. Interestingly enough, while our revenue pressure on DTC has existed, we are seeing actually increases in order count in our DTC business. So what we have intended to do was drive customers from retailers back to our sites.

For accessory purchases, our Mesa Fire Pit at Solo Stove has been doing quite well for us. So we're acquiring customers at a faster rate than last year. But again, as we sell fire pits into wholesalers, as we're loading that inventory in, it has created some short-term pressure. So overall, we're right where we want to be for the back half of the year. We see a lot of strength in Q4 as we approach holiday seasons. We also have a big innovation pipeline in the back half of the year. So right now we feel like things are teed up for a good second half and a good full year.

JARED BLIKRE: I want to jump on that innovation pipeline. Tell us what we can expect in terms of products in the coming quarters, please?

JOHN MERRIS: Yeah, so it'll start here in the next couple of weeks. In Q3, we've got a really nice lineup. We have not indicated or tipped our cards quite yet on exactly what that innovation is, but Solo Stove will lead the charge with a series of innovation that will come out that is all about creating good moments and lasting memories and helping people enhance their experiences outdoors.

So Q3, you'll see some of that innovation come out. It will continue through the first part of Q4 as we approach our holiday selling season, Black Friday, Cyber Monday. So keep an eye out, especially for Solo Stove. When gifting season comes around, we've got some new stuff coming out that, I think, you're going to really like.

JARED BLIKRE: All right. Keep an eye out. I want to talk about something you alluded to earlier and that is the difficulty planning. We have an incredibly challenging macro environment where things seem to change from week to week. But it sounds like you're being somewhat nimble. In fact, you were just saying how you were able to get some incremental, I guess, sales from other people's customers as they dwindle their inventories. Just wondering what some of your strategies are around planning for the next six months, for the year, is that possible even?

JOHN MERRIS: Yeah, you know, historically Solo Brands has been a really heavy direct-to-consumer business. Even today, this year, we're 70% direct-to-consumer and 30% wholesale-retail. There is easier planning to be done in your retail business because you obviously get POs. You get orders before you're shipping them. So you get visibility to the future.

As we have navigated this and increased our wholesale business, it actually is improving our ability to forecast and to predict our business in the future. Direct-to-consumer has been less predictable in the past. So we like where we're at.

We think again, this transition to a more omnichannel approach, a more balanced approach, being where our customers want us to be, increasing eyeballs on our brands is allowing us to be more predictable in our forecasting. As we look to the back half of the year, we feel very, very confident in the guidance that we provided for the year.

JARED BLIKRE: Talk to us about some of the trends that you've noticed evolve and maybe change quite a bit over the pandemic, change in consumer preferences, we've had a housing boom small bust and now it looks like the housing market is on fire again. But you've got people locked in their homes because they've got low mortgages, they want to renovate. Lots going on. What kinds of consumers are you attacking here?

JOHN MERRIS: Yeah, you're hitting on all the hot buttons for us, no pun intended, with Solo Stove. But the reality is that, I think, the biggest trend that we're seeing and you're hearing this from others as well is that consumers care about value. They're looking for brands that are going to give them the biggest bang for their buck for their hard earned dollars. They need those dollars to stretch.

What we've been focused on is innovation that creates high amounts of value. We are an experiential brand. We're a house of brands that really help you create good moments and lasting memories, as I mentioned. And so if you can trade down from, say, a $5,000 vacation to a backyard experience with friends and family and still create those same types of memories and put smiles on your faces, those are the types of activities that we see consumers attracted to.

And so right now that's what we're focused on is creating an immense amount of value through the products and innovation that we're launching and giving consumers something to be excited about and hopeful for at this time where they need their dollars to stretch.

JARED BLIKRE: Really interesting. You're selling goods, but at the same time, it's really experiential, and we've seen the services side of the economy just really hold on here. We got time for one more. Quickly anything that we didn't cover here, give you the floor.

JOHN MERRIS: Yeah, absolutely. We've got a lot of innovation, like I've talked about. You leaned into this back half of the year. But acquisition has been really interesting for us as well. We acquired a brand a couple of months ago called TerraFlame. It allows us to bring the fire inside or bring s'mores indoors. We're really excited about that and the trend that could create again, back to the value that we're trying to create for consumers.

But as we look to this back half of the year, I think the brands that win are going to be the brands that are really focused on delivering great customer experience and creating great value, and that's what Solo Brands is all about. And, of course, for us being that we're still 70% or so direct-to-consumer, just the free cash flow generation.

We're a business right now that's generating high amounts of free cash flow. We're able to reinvest that capital into the business for growth and into that innovation. And I think as you look at our story and continue to follow us, that's the type of thing that you'll see us investing in.

JARED BLIKRE: S'mores indoors, that's something I can get behind. So thank you. Really great to talk with you, John Merris, Solo Brands CEO.