Canada Goose Holdings Inc., in its first report since going public, reported a smaller-than-expected loss in its fourth quarter ended March 31 while seeing revenues expand 22 percent and a sharp hike in gross margins tied to its direct-to-consumer business.

“I am very pleased to report a strong finish to a year that included outstanding growth and significant accomplishments as we continue to build an enduring legacy. The year marked several milestones for us: we continued our rapid top and bottom line growth, opened our first two flagship retail stores – both of which far surpassed our expectations – solidified our position as a three-season brand by introducing our strongest Spring collection yet, and began our journey as a public company,” said Dani Reiss, president and CEO of Canada Goose.

“The fourth quarter represented a strong finish to an excellent year of growth, highlighted by a 22 percent increase in revenue, reflecting exceptional direct-to-consumer performance, which more than offset the shift in wholesale shipments to the third quarter and drove a 950 basis point expansion in gross margin. For the year, we grew revenue by 39 percent reflecting strong double-digit growth across all geographies, increased gross margin by 240 basis points, delivered $0.21 earnings per diluted share and a 47 percent increase in adjusted net income per diluted share,” Reiss continued. “I believe our strong performance in fiscal 2017 clearly demonstrates the tremendous power of the Canada Goose brand and continued demand for our best-in-class products around the globe as well as our ability to deliver products of the highest quality, craftsmanship and functionality. This, combined with our disciplined approach to managing the business, will be instrumental as we continue to execute our long-term growth strategy and drive increased value for our stakeholders and customers.”

Fiscal Year 2017 Results (in Canadian dollars, compared to Fiscal Year 2016 results)

  • Total revenue increased by 38.8 percent to $403.8 million from $290.8 million in fiscal 2016.
  • Wholesale revenues increased to $288.5 million from $257.8 million in fiscal 2016.
  • Direct-to-consumer (DTC) revenue, which includes e-commerce sales and company-owned retail store sales, increased to $115.2 million from $33.0 million in fiscal 2016.
  • Constant currency revenue increased by 41.6 percent.
  • Gross profit increased to $212.1 million from $145.6 million in fiscal 2016. As a percentage of total revenue, gross profit was 52.5 percent compared to 50.1 percent in fiscal 2016.
  • Wholesale gross profit increased by $3.7 million from $121.4 million to $125.1 million, and gross margin was 43.3 percent compared to 47.1 percent.
  • DTC gross profit increased to $87.0 million from $24.2 million, and gross margin increased from 73.3 percent to 75.5 percent.
  • SG&A was $165.0 million compared to $100.1 million in fiscal 2016, and as a percentage of total revenue was 40.9 percent compared to 34.4 percent in fiscal 2016. Fiscal year 2017 SG&A included $32.1 million of net non-recurring expenses, primarily related to the IPO.
  • Net interest and other financing costs were $10.0 million in fiscal 2017 and included a gain on revaluation of the term loan of $5.9 million, interest payments on the related party subordinated debt of $3.9 million, and deferred financing charges of $2.1 million written off in the fourth quarter due to the partial repayment of the term loan.
  • Net income for fiscal 2017 was $21.6 million compared to net income of $26.5 million in fiscal 2016.
  • Adjusted EBITDA for fiscal 2017 increased by 49.2 percent to $81.0 million from $54.3 million in fiscal 2016.
  • Net income per diluted share for fiscal 2017 was $0.21 based on 102.0 million shares outstanding. This compares to net income per diluted share of $0.26 based on 101.7 million shares outstanding in fiscal 2016.
  • Adjusted diluted net income per share for fiscal 2017, which excludes net non-recurring expenses, was $0.43 based on 102.0 million shares outstanding. This compares to adjusted net income per share of $0.30 based on 101.7 million shares outstanding in fiscal 2016. Adjusted diluted net income per pro forma share for fiscal 2017, which includes the effect of the IPO in the calculation of diluted number of shares outstanding as if the IPO had occurred at the beginning of fiscal 2017, was $0.41.
  • The company ended fiscal 2017 with $9.7 million in cash and cash equivalents, compared to $7.2 million at the end of fiscal 2016. Inventory at the end of fiscal 2017 increased by 5.0 percent to $125.5 million compared to $119.5 million at the end of fiscal 2016.

Fiscal 2017 Fourth Quarter Results (in Canadian dollars, compared to the same period in Fiscal 2016)

  • Total revenue increased by 21.9 percent to $51.1 million from $41.9 million in the fourth quarter of fiscal 2016.
  • Wholesale revenue was $14.6 million as compared to $28.6 million in the fourth quarter of fiscal 2016.
  • DTC revenue, which includes e-commerce sales and company-owned retail store sales, increased to $36.5 million from $13.3 million in the fourth quarter of fiscal 2016.
  • Constant currency revenue increased by 27.0 percent.
  • Gross profit increased to $27.8 million from $18.8 million in the fourth quarter of fiscal 2016. As a percentage of total revenue, gross profit was 54.4 percent compared to 44.9 percent in the fourth quarter of fiscal 2016.
  • Wholesale gross profit was $0.1 million as compared to $9.7 million in the fourth quarter of fiscal 2016.
  • DTC gross profit increased to $27.6 million from $9.1 million in the fourth quarter of fiscal 2016.
  • SG&A was $54.7 million compared to $27.3 million in the fourth quarter of fiscal 2016, and as a percentage of total revenue was 107.0 percent compared to 65.0 percent in the fourth quarter of fiscal 2016. Fourth quarter 2017 SG&A included $15.2 million of net non-recurring expenses, primarily related to the IPO.
  • Net loss for the fourth quarter was $23.4 million compared to a net loss of $9.2 million in the fourth quarter of 2016.
  • Adjusted EBITDA was $(11.4) million compared to $(7.6) million in the fourth quarter of fiscal 2016.
  • Net loss per diluted share for the fourth quarter of fiscal 2017 was $0.23 based on 103.2 million shares outstanding. This compares to net loss per share of $0.09 based on 101.8 million shares outstanding in the fourth quarter of fiscal 2016.
  • Adjusted net loss per share for the fourth quarter of fiscal 2017 was $0.15 based on 103.2 million shares outstanding compared to adjusted net loss per share of $0.08 based on 101.8 million shares outstanding in the fourth quarter of fiscal 2016.

Analysts had expected an adjusted loss of 19 Canadian cents per share and revenue of C$31.25 million,

Fiscal 2018 and Long-Term Outlook

The company expects the execution of its growth strategies to continue to drive increases in revenue, adjusted EBITDA and Adjusted net income per share over the next three fiscal years including on average:

  • Annual revenue growth on a percentage basis in the mid-to-high teens
  • Adjusted EBITDA margin expansion in excess of 75 basis points per year
  • Growth in Adjusted net income per diluted share of approximately 20 percent per year

The company’s fiscal 2018 outlook is consistent with its long-term trajectory. For fiscal 2018 the company’s expectations include:

  • Revenue growth on a percentage basis in the mid-to-high teens;
  • On a two-year basis, over fiscal 2017 and fiscal 2018, Adjusted EBITDA margin to expand an average of 75 basis points per year consistent with its long term outlook. Given the highly profitable, partial-year operations of the two high-volume retail stores opened in fiscal 2017, the company expects flat to modestly expanding Adjusted EBITDA margin in fiscal 2018 as the two stores see a normalization of profitability versus only operating in their most profitable period in fiscal 2017 and the company continues to expand its retail footprint;
  • Adjusted net income per diluted share in line with the company’s long-term expectations, when compared to adjusted net income per pro forma diluted share in fiscal 2017. Over the two-year period from fiscal 2016 through fiscal 2018, Adjusted net income per diluted share is expected to grow an average of more than 25 percent per year; and
  • The weighted average diluted shares outstanding is expected to approximate 110 million for fiscal 2018.

Photo courtesy Canada Goose