COOK

Traeger (COOK) Q4 2023 Earnings Call Transcript

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Traeger (NYSE: COOK)
Q4 2023 Earnings Call
Mar 07, 2024, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good afternoon, ladies and gentlemen. Thank you for joining today's Traeger fourth quarter and full-year 2023 conference call. My name is Tia and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

[Operator instructions] I will now pass the call over to Nick Bacchus, vice president of investor relations. Please proceed.

Nick Bacchus -- Vice President, Investor Relations

Good afternoon, everyone. Thank you for joining Traeger's call to discuss its fourth quarter and full-year 2023 results, which were released this afternoon and can be found on our website at investors.traeger.com. I'm Nick Bacchus, vice president of investor relations at Traeger. With me on the call today are Jeremy Andrus, our chief executive officer; and Dom Blosil, our chief financial officer. Before we get started, I want to remind everyone that management's remarks on this call may contain forward-looking statements that are based on current expectations but are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied herein.

We encourage you to review our annual report on Form 10-K for the year ended December 31st, 2023, and our other SEC filings for a discussion of these factors and uncertainties, which are also available on the Investor Relations portion of our website. You should not take undue reliance on these forward-looking statements which speak only as of today, and we undertake no obligation to update or revise them for any new information. This call will also contain certain non-GAAP financial measures, including adjusted EBITDA, adjusted net loss, adjusted net income per share, adjusted EBITDA margin, adjusted net loss margin, and total net debt, which we believe are usual supplemental measures. The most directly comparable GAAP financial measures and reconciliations of the non-GAAP measures contained herein such GAAP measures are included in our earnings release, which is available on the Investor Relations portion of our website at investors.traeger.com.

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Please note that our definition of these measures may differ from similarly titled metrics presented by other companies. Now, I'd like to turn the call over to Jeremy Andrus, chief executive officer of Traeger.

Jeremy Andrus -- Chief Executive Officer

Thank you, Nick, and good afternoon, everyone. On today's call, I will discuss our fourth-quarter results and give an update on our execution against our strategic pillars. I will also provide some perspective on our outlook for 2024. I will then turn the call over to Dom to discuss our quarterly financial performance and to provide more details on our 2024 financial guidance. 2023 was an important year for Trager.

Against the challenging backdrop of soft consumer demand for high-ticket goods, our organization executed against our strategic plan to navigate the current environment, putting the company in what we believe is a substantially improved position to drive our long-term strategy to increase household penetration. I am pleased with our fourth-quarter results with our sales up 18% versus the same period last year, exceeding our expectations and allowing us to surpass the high end of our full-year revenue and adjusted EBITDA guidance. Overall, for fiscal 2023, adjusted EBITDA grew 47% versus 2022, and we exceeded the midpoint of our initial revenue and adjusted EBITDA guidance ranges by approximately 5% and 22%, respectively. These better-than-expected results were enabled by our organizational focus on driving progress against the near-term strategic priorities we first laid out in mid-2022. At that time, it became evident that post-pandemic consumer spending has shifted dramatically, and that this shift, along with gross-margin degradation, would put pressure on our financial results. Given these pressures, we communicated three tactical priorities to ensure financial flexibility and to improve profitability: first, reduce costs; second, rightsize inventories in channel and on our balance sheet; and third, drive gross margins. We made significant progress on all three of these strategic priorities in 2023.

Following the implementation of our cost-savings plan in mid-2022, which reduced run rate expenses by more than $20 million, our operating expenses were tightly controlled in 2023. In terms of inventories, we ended 2023 with our fourth-quarter balance sheet inventories appropriately positioned and down $57 million versus the fourth quarter of 2022. Channel inventories were in line with our targeted ranges at the end of the year, a substantial improvement compared to the end of 2022 when retailers had too much of our product. Finally, in fiscal year 2023, we grew gross margin by 200 basis points, and we implemented a number of margin-enhancing initiatives, which we expect to contribute to gross margin expansion in 2024 and beyond. Despite making significant progress on our initiatives to drive profitability and improve financial flexibility, we face a difficult grill industry backdrop throughout 2023.

Fourth-quarter sell-through for our core grill business remained below prior year. We believe the U.S. grill industry was down in the high single-digit range for 2023 at retail as consumers continue to shift their spending to services and leisure and away from the high-ticket durable goods they over-indexed on during the pandemic. Stepping back, we firmly believe that the grill industry will return to its historical trend of consistent growth. Americans love to cook outdoors in the pandemic-accelerated trend that was already in place: cooking at home and enjoying a meal outdoors with one's family and friends. We believe our brand's superior cooking experience, innovative product, and engaged community uniquely position Traeger to be the favorite outdoor cooking solution for consumers and to ultimately benefit from an improved grill market. It is also important to remember that we have a portfolio of products with our consumables and accessories businesses representing north of 50% of revenues in fiscal 2023.

Our strategy to sell our consumers an entire cooking solution, including the wood pellets to fuel the grill, sauces and rubs to flavor the protein, Traeger accessories, and MEATER Smart thermometers, creates diversity in our revenue streams. In the fourth quarter, our consumables business was slightly positive, and our accessories business outperformed our internal expectations. MEATER, in particular, had a very successful holiday season with strong growth versus the prior year and a very successful launch of its new MEATER 2 Plus. While we have been focused on near-term strategies to navigate the environment, we continue to execute on our long-term plans to drive product innovation and to stoke engagement and passion for the Traeger brand. The key points of our story remain in place. We have an evangelical community of consumers in the Traegerhood with a grill industry-leading NPS score that is materially higher than our largest competitors.

Our user base remains highly engaged with our brand, and we ended 2023 with nearly 2.6 million followers across social channels, also leading the grill industry and up 15% from 2022. In terms of our products, we continue to innovate and launch new grills. In addition to MEATER's highly successful MEATER 2 Plus launch, we also entered into the grill category in 2023 and launched our highly innovative Ironwood XL. Lastly, our company's culture remains a key competitive advantage. Traeger was recently certified as a great place to work for the third year in a row.

The award is based entirely on what current employees say about their experience working at Traeger, and the results speak to our unique culture and reinforce our ability to retain and attract the best talent in our industry. Turning to our fiscal year 2024 outlook. Our 2024 sales guidance of $580 million to $605 million represents a year-over-year decline of 4% at the low end to approximately flat growth at the high end. 2024 adjusted EBITDA guidance of $62 million to $71 million represents growth of 1% to 16%. Our guidance for 2024 balances our favorable view of gross margins with our near-term caution on grill industry demand. Our outlook assumes that the grill industry will continue to experience headwinds in 2024.

Specifically, we expect that the shift in consumer share of wallet from big-ticket home-related products, such as grills, toward experiences, services, and leisure will continue to 2024. From a profitability perspective, I'm pleased with our ability to project growth in adjusted EBITDA and adjusted EBITDA margins in 2024 driven by an expected improvement in gross margins. Next, I'd like to provide an update on our progress and our four strategic growth pillars in the fourth quarter, as well as to provide some color on our 2024 plans. Our first strategic growth pillar is driving brand awareness and penetration in the United States. We ended 2023 with estimated U.S.

household penetration of 3.5%. This remains well below our most penetrated markets, and we continue to believe there is substantial potential to increase this number. In the fourth quarter, our content and brand activation focused on Traeger-ing for the holidays. During Thanksgiving, our network of social media influencers was extremely active sharing recipes and techniques for an incredible Traeger Smoked Thanksgiving Turkey. Many of these posts went viral, including Bennie Kendrick's Juicy Turkey and Frog-style Turkey posts. Total impressions from influencers in Q4 nearly doubled compared to the same period in 2022.

Our network of influencers and community ambassadors remains an important part of our social media presence, and the millions of impressions they generate drive awareness and energy to our brand. In December, we posted our six tips for the ultimate prime rib, providing a guide to make an incredible holiday rib roast cooked on a Traeger. The post went viral with 2.1 million views on Instagram alone. Traeger is certainly not just a summer grilling device, and our strong community engagement and amazing content in the fourth quarter demonstrates that Traeger is viewed by consumers as a year-round outdoor cooking solution. Driving awareness and penetration of Traeger by elevating the experience at retail is core to our strategy. The fourth quarter capped a momentous year for Traeger positioning at The Home Depot.

In Q4, we added another 275 Traeger Islands at The Home Depot, ending the year with more than 1,100 Traeger Islands in Home Depot locations across the US, more than doubling the number of our elevated merchandising fixtures versus 2022. Home Depot locations with the Traeger Island continue to outperform the balance of the chain. We expect to have another year of meaningful enhancements of our merchandising at The Home Depot in 2024 with anticipated growth in Traeger Islands complemented by many other merchandising initiatives. In 2024, driving improved selling execution of Traeger products and retail floors will be a key initiative, one that we internally refer to as upgrading the ground game. This includes expanding the team of retail sales specialists. These specialists are Traeger experts who visit retail locations, drive improved merchandising and Traeger product, coach and educate store associates, and demo Traeger grills.

We believe that investing in the maximization or selling experience at retail is one of our highest-returning activities, and that our in-store merchandising and service-oriented upgrades will be key factors in increasing market share and awareness over time. Near term, we are highly focused on retail execution and customer experience in the field, particularly as we enter peak grilling season over the next several months. Our second growth pillar is disrupting outdoor cooking with product innovation. On November 6th, 2023, we launched the MEATER 2 Plus in time for the holiday season. MEATER 2 Plus brings significant innovation to the meat thermometer market, and we believe it's the best wireless meat probe available to consumers today. MEATER 2 Plus had a strong launch and performed well over the holiday period. We launched MEATER 2 Plus with a dual-channel digital strategy with distribution on meater.com and Amazon.com, and we have plans to expand distribution to retail locations.

On the Traeger side, in the fourth quarter, we continue to build out our product development function. We recently rolled out a new product organization structure under our new EVP of engineering, including standing up our previously discussed platform R&D team. Our product team remains highly focused on new product development, sustaining engineering for cost-down opportunities and innovation to drive our future product road map. Investing behind our product development engine is a key area of focus in 2024 and is critical to our long-term success as a disruptor and innovator in the outdoor cooking industry. In 2023, our product team nearly doubled in size, underscoring our commitment to long-term innovation. Next, I'll provide an update on our third strategic pillar: driving recurring revenues through our consumables business.

At the consumer level, our pellets business remained healthy in the fourth quarter. In fact, two of our largest retail partners had their highest pellet volume weeks ever during the Thanksgiving holiday week. From a distribution perspective, we continue to expand the footprint of grocery stores selling Traeger pellets. Overall, for 2023, we added talent distribution to more than 300 grocery stores, continuing to make progress against our goal of selling pellets where the consumer shops every week, not just where they bought the grill. We recently gained distribution with KeHE, United Natural, and Lipari, three of the largest grocery distributors in the U.S., who, together, service more than 45,000 independent grocery stores. We expect these distribution relationships to have meaningful upside over time as we look to drive sales into the independent grocery channel. On the food consumable side, we introduce our new and improved barbecue sauces which we relaunched earlier this year at The Home Depot.

We expect to see additional distribution and retail outlets in 2024. Consumer reaction to the improved packaging, more competitive pricing, and the easy-to-use squeeze bottle has been positive thus far. Our fourth and final strategic growth pillar is to expand globally. In the fourth quarter, our international business showed sequential improvement. In Canada, we saw improved holiday sales during the fourth quarter at The Home Depot and RONA, as well as improved e-commerce sales during Canadian Thanksgiving in October and Black Friday. In Europe, we saw solid growth in Germany and the U.K., which are our direct markets in the region.

Both markets had improved holiday sell-through, and with leaner channel inventories, replenishment activity was healthy. Our distributor markets in the EU, Australia, and New Zealand were negatively impacted by continued destocking activity, resulting in selling pressure. We expect distributor inventories in our international markets to normalize in 2024 as they continue to clear excess inventories. On the MEATER side, fourth quarter had very strong international growth driven by MEATER's B2B distribution initiatives. This includes MEATER's partnership with Vorwerk.

Vorwerk is a German manufacturer and distributor of the Thermomix Multicooker, and MEATER is providing a digital smart thermometer add-on to the Thermomix Multicooker that both integrates into the guided cooking app and enhances the Thermomix cooking experience. Overall, we have made significant progress on our key strategic initiatives in 2023 and ended the year exceeding our revised guidance in the fourth quarter. We have realigned our cost structure, rightsized inventories, and are demonstrating progress on recapturing gross margin. While we expect the consumer shift and share of wallet away from big-ticket goods will likely continue to create headwinds for the outdoor cooking industry in the near term, we are focused on the factors we can control in order to drive growth in adjusted EBITDA while investing behind our key long-term pillars. As we head into the peak selling season for 2024, my confidence in the long-term potential of our brand remains as high as ever.

I'd like to thank the Traeger team for their enormous efforts in executing our plan in 2023. And with that, I'll turn the call over to Dom.

Dom Blosil -- Chief Financial Officer

Thanks, Jeremy, and good afternoon, everyone. I am pleased with the progress we made in 2023, particularly given the difficult industry backdrop that we faced during the year. Despite lower sales compared to 2022, our adjusted EBITDA grew 47% year over year with our adjusted EBITDA margin up 380 basis points. Our inventories ended the year down 37% versus the prior year, and we believe that both our balance sheet inventories and channel inventories are appropriately positioned for the current demand outlook. In 2023, we executed on several gross margin-enhancing initiatives which we expect will position us for margin growth going forward.

Last, we generated $64 million in cash flow from operations in 2023, driven by improved EBITDA and working capital efficiencies. Shifting now to fourth-quarter results. Fourth-quarter revenues increased 18% to $163 million. Grill revenue increased 24% to $60 million. Grill revenue benefited from higher unit volumes as we lapped aggressive retailer destocking from the prior year, offset by lower average selling prices.

Consumables revenues were $25 million, up 1% to the prior year. Our fourth-quarter consumables performance represents a material improvement compared to the first half of the year as we have fully lapped the declines driven by the introduction of a private-label pellet offering by a large customer in 2022. Accessories revenue increased 21% to $79 million driven by strong MEATER growth. Fourth-quarter revenues were modestly ahead of our expectations and exceeded the high end of our full-year revenue guidance range by $6 million, with the majority of the upside driven by stronger-than-expected revenue growth at MEATER. Geographically, North American revenues increased 13%, while our rest of world business was up 59% versus the prior year, driven by strong growth in MEATER's wholesale revenues internationally. Gross profit for the fourth quarter increased to $60 million from $48 million last year.

Gross profit margin was 36.8%, compared to 34.5% in the prior year, or 34.9% when excluding restructuring costs incurred in the fourth quarter of last year. Please note that our fourth-quarter 2023 gross margin was negatively impacted by 100 basis points related to the voluntary recall of our Flatrock griddle in December. The increase in gross margin was driven by: one, lower supply chain costs which benefited gross margin by 410 basis points; two, improved pellet margins that we achieved through the optimization of our pellet mill capacity, which drove 150 basis points of margin; three, a higher mix of direct import business, which contributed 50 basis points to margin; four, lapping restructuring costs from the fourth quarter of the prior year, which benefited margin by 40 basis points; and five, other positive factors worth 40 basis points. These margin drivers were offset by: one, inventory obsolescence of 150 basis points; two, grill mix which negatively impacted margin by 110 basis points; three, grill pricing which negatively impacted margin by 100 basis points; and four, costs related to the recall of Flatrock, which negatively impacted margin by 100 basis points. Selling and marketing expenses were $33 million, compared to $28 million in the fourth quarter last year. The increase was driven by higher variable costs and increased demand creation expense at MEATER. General and administrative expenses were $26 million, compared to $24 million in the fourth quarter of last year. The increase was driven by higher professional service fees and employee expense, offset by lower stock-based compensation expense.

As a result of these factors, net loss for the fourth quarter was $24 million, as compared to net loss of $29 million in the fourth quarter of last year. Net loss per diluted share was $0.19, compared to a loss of $0.24 in the fourth quarter of last year. Adjusted net loss for the quarter was $9 million, or $0.08 per diluted share, as compared to adjusted net loss of $13 million, or $0.11 per diluted share in the same period last year. Adjusted EBITDA was $13 million in the fourth quarter, as compared to $7 million in the same period last year. Fourth-quarter adjusted EBITDA was modestly ahead of our expectations, allowing us to exceed the high end of our full-year guidance by approximately $2 million. Moving on to the balance sheet.

At the end of the fourth quarter, cash and cash equivalents were $30 million, compared to $39 million at the end of the previous fiscal year. We ended the fourth quarter with $404 million of long-term debt. As at the end of the quarter, the company had drawn down $28 million under its receivables financing agreement, resulting in total net debt of $402 million. We ended the year with total liquidity of $157 million, up materially relative to the end of last year when we had $95 million in liquidity. Inventory at the end of the fourth quarter was $96 million, compared to $153 million at the end of the fourth quarter last year and $102 million at the end of the third quarter. I am pleased with the significant progress we made in 2023 to rightsize our balance sheet inventories and believe inventory levels are appropriately aligned with demand.

In terms of channel inventories, our retail partners are in a substantially improved position relative to a year ago and ended the fourth quarter with weeks of inventory on hand at targeted levels. Next, let me discuss our full-year 2024 guidance and provide some context around our operating assumptions. For the year, we are guiding to revenue of $580 million to $605 million, or down 4% to approximately flat compared to 2023. Our top-line outlook is generally informed by the following themes: First, we expect that the consumers' shift away from big-ticket home-related expenditures will continue in 2024, and are planning that grill industry growth remains negative. Second, in the first half of 2024, we are lapping the loading of our new Ironwood grills and our Flatrock griddle, which will create some pressure on our year-over-year sales comparison. Additionally, in the second half, we expect to sunset a number of grills ahead of our expected product launches in 2025, which will also be a negative contributor to revenue growth. Finally, we are anticipating declines in grill average selling prices, partially driven by the expansion of our direct import program, which results in lower wholesale selling prices but higher gross margins that result from lower transportation costs.

These factors are driving our expectation for a high single to low double-digit decline in our grill revenue in full-year 2024. We are expecting gross margins of 39 to 40% for full-year 2024, up 210 to 310 basis points compared to full-year 2023. I am pleased with our ability to meaningfully grow gross margin in 2024, which is being driven by both macro factors as well as internal initiatives. In terms of external drivers, inbound transportation costs had moderated substantially since their peak in 2022.

While transportation rates declined in 2023, higher-cost inventory was still flowing through our cost of goods for much of the year. As we move into 2024, we will have largely worked through the higher-cost inventory, thus creating a material tailwind to gross margin. Additionally, we expect to see gross margin expansion from initiatives we implemented in the last 18 months. For example, we are expecting improved gross margins in our pellet business driven by the rationalization of pellet mill capacity in early 2023, as well as improved margin related to the expansion of our direct import program, which leverages the scale of certain retail customer supply chains, thus reducing our transportation costs. From the timing perspective, we expect stronger year-over-year gross margin gains in the first half of the year compared to the back half. We expect full-year 2024 adjusted EBITDA of $62 million to $71 million.

This represents an adjusted EBITDA margin of 10.7% to 11.7%, or up 60 to 170 basis points versus 2023. We expect that growth in adjusted EBITDA margin will be driven by the anticipated gain in gross margin, offset by some expected expense deleverage as we annualize certain investments from 2023 and as we invest behind key strategic pillars in 2024. For the first quarter of 2024, we are anticipating revenue of $140 million to $145 million, which represents a decline of 5% to 9% versus Q1 of 2023. We are anticipating first-quarter adjusted EBITDA of $21 million to $24 million. First-quarter sales are expected to be negatively impacted by a shift in the timing of shipments into the second quarter.

Overall, I am pleased with our execution against our plan in 2023, with the year ending substantially better than we had originally guided to and adjusted EBITDA growing by 47% versus 2022, While we are planning 2024 top line cautiously, given the expected continued pressure on big-ticket spend, we are entering the year with healthy inventories on balance sheet and in channel and are positioned to have significant gains in gross margins going forward. We expect this will allow us to invest into our growth initiatives while making gains in our adjusted EBITDA. I believe our strategy positions us extremely well to drive long-term value, and I remain highly confident in the thesis for Trager. And with that, I'll turn the call over to the operator. Operator?

Questions & Answers:


Operator

We will now begin the QA session. [Operator instructions] The first question comes from the line of Megan Alexander with Morgan Stanley. Please proceed.

Megan Alexander -- Morgan Stanley -- Analyst

Hey, good afternoon. Thanks for taking our question. Was hoping we could just start with grill demand, and maybe you can give us some context for how sell-through trended during the holiday season relative to your expectations and then what you're seeing now as you get into the spring selling season. And maybe with that shift, Dom, you just talked about into the second quarter, is that more related to doing more direct import, or is there, you know, a change in how retailers are taking on inventory?

Dom Blosil -- Chief Financial Officer

Yeah, thanks for the question, Megan. So, I'd say that, you know, sell-through, generally, you know, met our expectations in the quarter. If not, we're slightly above what we were expecting. So, we're happy with how sell-through is really up stabilized even though they're still tracking roughly in line with prior year as you -- as measured by 2023.

I think, you know, our forecast for 2024 really informs a key underpinning of how we measure and -- and forecast demand in '24. And I think the key takeaway here really is the fact that we still expect pressure on high-ticket items, right? So, that's really a fundamental underpinning of how we're forecasting demand over the course of the year. And although there may be, you know, some -- some shifts in terms of the negative decline in grills from quarter to quarter, we do expect each quarter to be down over the course of the year. I think there's some nuances to that with respect to, you know, which quarters maybe see a larger decline and/or maybe splitting it up between first half, second half. And I think really the dynamic at play, in addition to a -- a negative forecast on sell-through, is the fact that we have a unique comp in H1 and H2. So, in H1, we're comping the load-in of some new product that we launched last year.

And in H2, we're forecasting a bleed-down of end-of-life SKUs ahead of inventory build and, ultimately, sales of new product that we plan to launch in 2025. So, there are two kind of nuances that contribute to what is ultimately a greater decline in grill sales, as reported, compared to what we're -- what we're -- we're forecasting in sell-through, which I think is good news. These are just sort of one-time items that we have to address now and again based on comp dynamics. And then, the third piece is really around ASP.

So, we're -- we're seeing, you know, better performance in unit volumes relative to dollar volumes. Those dollar volumes are being pressured by ASP, which, in part, is connected to a deliberate, you know, change to our pricing strategy where we brought prices across the portfolio of grills back to pre-pandemic levels. Additionally, you know, we've been talking a lot about operational excellence and how we unlock profit pools across our supply chain to optimize gross margin, one of which is direct import business. And as that business grows, it does take some ASP investment. That's just how these contracts are structured. And correspondingly, we see an uplift in gross margin.

So, in essence, we're sharing in this profit pool that we can unlock via the scale of our retailers' supply chain. In turn, it does come at the cost of some ASP but a lift in gross margin. So, that's really the dynamic at play.

Megan Alexander -- Morgan Stanley -- Analyst

OK, got it. That's really helpful. And then, I guess, you know, maybe bigger picture, just trying to understand how you're thinking about managing the business. You've been somewhat constrained, been candid, you know, in terms of your top-of-funnel marketing just given the challenges in the industry.

So, you know, if the category does end up being better than you expect, how should we think about whether you look to take that upside and reinvest it back into the business and to some top-of-funnel marketing and go after share, versus maybe letting it flow through to the bottom line and, you know, allowing you to deleverage a bit.

Dom Blosil -- Chief Financial Officer

Sure, it's a good question. I'll let Jeremy follow -- follow up.

Jeremy Andrus -- Chief Executive Officer

Oh, good. Yeah, why don't I get that? I was just going to say, first of all, you know, over the last couple of years, as working capital has been scarce, there are things that we've continued to invest in the business that we think are really important to keep the long-term thesis intact, which is around growth and disruption. We've -- we've continued to invest meaningfully in product development, feel good about that pipeline. That -- that's a longer -- longer-lead-time investment.

You know, in terms of -- of -- of marketing and thinking about reinvestment, we continue to invest in brand. As we see industry headwinds start to turn to tailwinds, we will slowly lean into top-of-funnel marketing. You know, as we think about the opportunity that we have with low unaided brand awareness in most markets where we have high -- high unaided awareness, we have high -- high penetration household penetration in this market. So, you know, we are -- I would say we are not in a hurry to reinvest in top-of-funnel marketing because we don't know that the return is sufficient at this moment in time, but it's something that we have the ability to turn on fairly quickly.

And to the extent that we believe we get we -- we -- we get returns on our investment in a fairly -- fairly near-term period of time, then we -- we can -- we can fairly quickly pivot into that -- into that changing environment.

Megan Alexander -- Morgan Stanley -- Analyst

All right. Super helpful. Thank you.

Operator

Thank you. The next question comes from the line of Brian McNamara with Canaccord. Please proceed.

Brian McNamara -- Canaccord Genuity -- Analyst

Hey, good afternoon, guys. Can you -- can you provide a little more color on this bleed-down of the older SKUs ahead of your new product launches in 2025? Is this typical? And in particular, what is being phased out, and what should investors be getting excited for in 2025?

Dom Blosil -- Chief Financial Officer

Yeah, it's -- it's typical within the context of our product life-cycle strategy. And so, you know, typically, if it's an incremental SKU -- SKU that we're launching, you know, you wouldn't see a corresponding bleed-down of product. In certain situations, if there's an adjustment to our product strategy and/or, you know, we're -- we're sort of introducing new innovations at similar price points, well, we will bleed down the -- the old SKU fairly -- fairly methodically with the goal to sort of strike a balance between not starving demand but also ensuring we don't -- we're not left with too much inventory when we launch the new product. And, you know, this is -- this is a part of our strategy. We've been doing this since the beginning of time.

And, you know, we're pretty good at sort of managing and kind of balancing those two dynamics. And so, yes, we'll start to kind of bleed down, obviously managing in-channel inventories to protect demand in channel while we ramp up production for the new product. And then, when we launch that product, ideally, we're at a point where we have minimal to no inventory left that -- for those -- for those SKUs that are end of life.

Brian McNamara -- Canaccord Genuity -- Analyst

Yeah, I guess, like, the -- the question I expect to get is, you know, your -- your -- your grills were down -- grill sales are down, what, 16% last year, and you're expect to be down high singles and low doubles this year. You are a grill company, so I feel, like, the expectation is you would see kind of flat to up kind of growth this year. So, could you kind of quantify your expectation for the grill market declines in 2024? Kind of what's embedded in your outlook and how that's maybe influenced your annual revenue guidance? Thank you.

Dom Blosil -- Chief Financial Officer

Yeah, so we are forecasting the category be down in 2024. And in excess of that, the dynamic in the first half where we're comping product load-in from last year, which is showing some -- some excess, you know, declines in grills above the demand -- or the -- the -- the category forecast that's built into our model, and then, the second half nuance where we're bleeding down inventory, which -- which puts some pressure on sell-in. These are sort of two nuances to the year that are ultimately creating a larger decline in our forecast from a grill sales standpoint than what's built into our forecast from a sell-through/category modeling standpoint.

Brian McNamara -- Canaccord Genuity -- Analyst

Thank you.

Operator

Thank you. [Operator instructions] The next question comes from the line of Justin Kleber with Baird. Please proceed.

Justin Kleber -- Robert W. Baird and Company -- Analyst

Hey, good afternoon, everyone. Thanks for taking the questions. First, I just wanted to try to assess market share trends. You mentioned grill industry was down high singles at retail in '23. Just curious how that compared to your sell-through.

Jeremy Andrus -- Chief Executive Officer

Yeah, so we -- we -- we believe, based on the industry reports and -- and the work that we've done that -- that, first of all, Traeger is -- is relatively flat in terms of share. And, you know, this is -- this is something that we -- we -- we -- we track on a -- on a quarterly basis. And as we think about, you know, what -- what drives growth and share and how we think about this year and years going forward, our expectation is that our share will remain relatively flat. And as we lean back in the top of funnel and launch some of the products in our pipeline that the combination of these two factors will -- will drive growth and share as they have during many of the years pre-pandemic before we pulled back on top of -- top-of-funnel marketing spend.

Justin Kleber -- Robert W. Baird and Company -- Analyst

Got it. OK. Thanks for that, Jeremy. And then, just a kind of a multi-part question on promotions.

I was hoping you could talk about maybe your promotional plans. As we approach kind of the peak grilling season this year relative to last year, should we expect, you know, less promotional intensity just given inventory is in a much better shape? And then -- and then, bigger picture, you know, given the promotional activity across the broader industry the past few years, do you guys think the ability to kind of sell grills at full price, has there to be structural changes to that at all versus kind of how the industry operate, you know, prior to the pandemic?

Jeremy Andrus -- Chief Executive Officer

It's a good question. The industry certainly has been more promotional over the last couple of years. Our -- our -- our belief is that promotions for a -- for a premium brand like Traeger's can be used but -- but -- but -- but sparingly. We have typically had three promotional periods, during the year. We -- we deviated from -- from that -- from that cadence once in 2022 as we were -- as we were working on channel-level inventories, getting them healthy.

Again, inventories and channel, our healthy balance sheet inventories are healthy. And so, 2023, we -- we returned to our more traditional promotional cadence, and that's our -- that's our intent in 2024 as well.

Justin Kleber -- Robert W. Baird and Company -- Analyst

All right, very helpful. Thank you, guys. Best of luck.

Jeremy Andrus -- Chief Executive Officer

Thanks.

Operator

Thank you. The next question comes from the line of Joe Feldman with Telsey Advisory Group. Please proceed.

Joe Feldman -- Telsey Advisory Group -- Analyst

Yeah, hi, guys. Good afternoon. Thanks for the question. Wanted to ask, how should we think about accessories in 2024? I mean, MEATERs had some really strong run as of late and, you know, with the new product.

And I'm just wondering, do we -- should we expect that same kind of double-digit-type growth again in '24, or maybe you could share some thoughts there?

Jeremy Andrus -- Chief Executive Officer

Look, I would say we're -- we're not -- we're not -- we're not guiding specifically to accessories. But -- but as -- as Dom and I both alluded to in -- in our comments, our accessory business -- accessories and consumer businesses have been robust. MEATER -- MEATER has been a strong grower. As I mentioned, we launched the MEATER 2 Plus, which was a very successful launch.

It's -- it is -- there's a lot of innovation in that product, something that we've been working on for many years, even -- even pre-acquisition. And so, you know, accessories are an important part of our business, and we continue to invest in them, lean into them from -- from a product mix perspective and believe that, not only provides diversification, but it's a nice opportunity, to -- to drive margin over time.

Joe Feldman -- Telsey Advisory Group -- Analyst

Now that's helpful. Thank you. And then, anything to note on the -- you know, for those customers that are shopping and buying new grills from you guys, anything to note with regard to what they're buying? Are they still gravitating toward the newer product, the -- the product with the more fully featured items?

Dom Blosil -- Chief Financial Officer

Yeah, I can jump in on that. So --

Jeremy Andrus -- Chief Executive Officer

I -- I --

Dom Blosil -- Chief Financial Officer

Oh, go ahead, Jeremy. Oh, yeah. So, just -- just from what kind of we're seeing directionally, there's been a little bit more pressure on, you know, premium price points, above $1,000, than we normally see, which is consistent with our comments earlier on just the continued pressure on big-ticket items. That said, I mean we are still continuing to see appetite for our -- our -- our -- our key innovations, And I think that the reception for these innovations has been strong.

And, you know, as we've kind of watch the mix between connected grills and unconnected grills evolve over time, I think our installed base is now, you know, over-indexing to the connected grill where we're embedding more innovation. And certainly, that's the case on a quarter-to-quarter basis. And so, I think there's a growing appetite for innovations. We continue to see strong reception there, but there has been, as of late, some pressure, above $1,000, just again aligned to I think what we're seeing in -- in kind of the broader consumer around big-ticket items.

Joe Feldman -- Telsey Advisory Group -- Analyst

OK. Thanks, guys. Good luck with this quarter. Thank you.

Dom Blosil -- Chief Financial Officer

Thanks.

Operator

Thank you. [Operator instructions] [Operator signoff]

Duration: 0 minutes

Call participants:

Nick Bacchus -- Vice President, Investor Relations

Jeremy Andrus -- Chief Executive Officer

Dom Blosil -- Chief Financial Officer

Megan Alexander -- Morgan Stanley -- Analyst

Brian McNamara -- Canaccord Genuity -- Analyst

Justin Kleber -- Robert W. Baird and Company -- Analyst

Joe Feldman -- Telsey Advisory Group -- Analyst

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