Again benefiting from orders being pulled forward due to strong demand as well as a sterling performance from its direct-to-consumer (DTC) channel, Canada Goose Holdings Inc. reported results in the second quarter ended September 30 that handily topped Wall Street’s targets. The company significantly raised its guidance for both earnings and sales for the year.

Shares of Canada Goose rose $3.06, or 14.1 percent, to $24.79 Thursday in over-the-counter trading.

In the quarter ended September 30, revenues climbed 34.7 percent to Canadian$172.3 million.

Wholesale revenue grew 24.3 percent to C$152.1 million, driven by growth across all regions. Revenue of approximately C$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, the brand’s pull-forward revenue in the wholesale channel was approximately C$18 million.

DTC revenue more than tripled to C$20.3 million from C$5.5 million, driven by strong growth in its North American e-commerce business and incremental revenue from new retail stores and e-commerce sites not operating in the same period last year.

Gross margins improved to 50.5 percent compared to 46.4 percent in the same period year ago. Wholesale gross margin improved to 47.4 percent from 45.4 percent as a result of a shift in sales to higher margin geographies, lower cost of purchases in U.S. dollars and lower inventory reserves. DTC gross profit also improved to 73.7 percent from 69.2 percent.

SG&A expenses climbed 21.1 percent to C$36.5 million, 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 C$5.8 million on the term loan and a timing shift in marketing investments to the remainder of fiscal 2018. As a percent of sales, SG&A expenses decreased to 21.2 percent from 23.6 percent due to sales leverage.

Adjusted EBITDA improved 37.3 percent to C$46.4 million.

Net income jumped 85.5 percent to C$37.1 million, or 33 cents per share. Adjusted net income improved 26.1 percent to 29 cents a share from 23 cents a year ago and was well ahead of Wall Street’s consensus estimate of 16 cents.

Adjusted earnings mainly reflect the impact of its IPO in both periods.

Based on stronger than expected growth across the business, with a particular contribution from our direct-to-consumer segment, the company now 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.

Photo courtesy Canada Goose