Canada Goose Holdings Inc. sharply raised its outlook after reporting better-than-expected results for the second quarter ended September 30.

“Our performance reflects the power of our brand around the world and our disciplined approach to executing our growth strategies. We have opened e-commerce sites in all seven of the new markets planned for fiscal 2018 and we remain on-track to have seven world-class retail destinations in operation in the third quarter of fiscal 2018, including our recently opened stores in Chicago and Tokyo. I am also encouraged by the response to our first knitwear collection which embodies our function-first design philosophy and stays true to our authentic utilitarian aesthetic,” stated Dani Reiss, president and CEO. “With strong results across channels, geographies and categories, we continue to drive awareness and penetration while inspiring those who already know and love our brand. Most importantly, we remain deeply committed to building an enduring brand for the long term.”

Fiscal 2018 Second Quarter Results (in Canadian dollars, compared to the same period in Fiscal 2017):

• Total revenue increased by $44.4 million from $127.9 million to $172.3 million in the second quarter of fiscal 2017, representing year-over-year growth of 34.7 percent. Wholesale revenue was $152.1 million as compared to $122.4 million in the second quarter of fiscal 2017, driven by growth across all regions. In the quarter, revenue of approximately $13 million, which was originally expected to be earned in the third quarter, was pulled forward . Enabled by increased efficiency in manufacturing and sales planning, shipment timing was accelerated in response to requests from retail partners approaching their peak selling season. Through the first half of fiscal 2018, our pull-forward revenue in the wholesale channel was approximately $18 million.

Direct-to-consumer revenue was $20.3 million as compared to $5.5 million in the second quarter of fiscal 2017, driven by strong growth in our North American e-commerce business and incremental revenue from new retail stores and e-commerce sites which were not operating in the same period last year.

• Gross profit increased to $87.1 million from $59.3 million in the second quarter of fiscal 2017. As a percentage of total revenue, gross profit was 50.5 percent compared to 46.4 percent in the second quarter of fiscal 2017. Wholesale gross profit was $72.2 million, a gross margin of 47.4 percent, as compared to $55.5 million a gross margin of 45.4 percent, in the second quarter of fiscal 2017. The increase in wholesale gross margin was the result of a shift in sales to higher margin geographies, lower cost of purchases in U.S. dollars and lower inventory reserves. Direct-to-consumer gross profit increased to $14.9 million, a gross margin of 73.7 percent from $3.8 million, a gross margin of 69.2 percent, in the second quarter of fiscal 2017.

• Selling, general and administrative expenses were $36.5 million compared to $30.2 million in the second quarter of fiscal 2017, driven by the costs of retail stores in Toronto and New York which were not operating in the same period last year, as well as investments across the business to support continued growth. These increases were partially offset by an unrealized foreign exchange gain of $5.8 million on the term loan and a timing shift in marketing investments to the remainder of fiscal 2018.

• Adjusted EBITDA was $46.4 million compared to $33.8 million in the prior year, representing year-over-year growth of 37.3 percent.

• The effective tax rate was 16.8 percent compared to 20.7 percent in the second quarter of fiscal 2017 and a statutory tax rate of 25.4 percent. The decrease in the effective tax rate was primarily driven by the non-taxable portion of the $5.8 million unrealized foreign exchange gain and the timing of taxable income in jurisdictions with statutory tax rate differences.

• Net income for the second quarter was $37.1 million, or $0.33 per diluted share, compared to net income of $20.0 million, or $0.20 per share, in the second quarter of 2017.

• Adjusted net income per diluted share for the second quarter of fiscal 2018 was $0.29, based on 111.5 million diluted shares outstanding, compared to an adjusted net income per diluted share of $0.23, based on 101.7 million diluted shares outstanding in the second quarter of fiscal 2017. Wall Street’s consensus estimate had been 16 cents.

Adjusted pro forma net income per share for the second quarter of fiscal 2017, which includes the effect of the Initial Public Offering (“IPO”) in the calculation of the weighted average number of shares outstanding as if the IPO had occurred at the beginning of fiscal 2017, was $0.22 per share based on 106.3 million shares.

Revised Fiscal 2018 Outlook

Based on stronger than expected growth across our business, with a particular contribution from our direct-to-consumer segment, the company expects fiscal 2018 results to exceed the long-term and fiscal year outlook which was originally provided with the release of fourth quarter and fiscal year 2017 results on June 2, 2017.For fiscal 2018, the company currently expects:

  • Annual revenue growth on a percentage basis of at least 25 percent versus the previous expectation of mid-to-high teens; • Adjusted EBITDA margin expansion of at least 50 basis points versus the previous expectation of flat to modestly expanding; and
  • Annual growth in adjusted net income per diluted share on a percentage basis of at least 35 percent versus the previous expectation of approximately 20 percent. This assumes year-over-year comparison to adjusted net income per pro forma diluted share of $0.41 in fiscal 2017 and weighted average diluted shares outstanding of 110.9 million for fiscal 2018.

Photo courtesy Canada Goose