Canada Goose Holdings, Inc. reported earnings rose 49.2 percent in the third quarter ended January 2 as sales grew 26.2 percent. However, results were slightly below Wall Street’s targets, and guidance was lowered for the year due to lower than expected revenue and retail traffic in APAC and EMEA in the current quarter, alongside new variant outbreaks and restrictions.

“Canada Goose’s brand momentum and supply chain resilience drove a strong performance in our largest quarter,” said Dani Reiss, president and CEO. “Our digital business continued to exceed last year’s outsized gains, alongside a sharp improvement in retail productivity. We remain confident in our long-term trajectory for revenue growth and margin expansion, notwithstanding the emergence of temporary and unexpected COVID-19 disruptions in certain markets.”

All figures are in Canadian dollars.

Third Quarter Fiscal 2022 Business Highlights
(compared To Third Quarter Fiscal 2021)

  • Total revenue increased by 26.5 percent, excluding C$10.7m of temporary PPE sales in the comparative quarter. Including temporary PPE sales, total revenue increased by 23.6 percent.
  • Total non-parka revenue increased by 74.9 percent, reflecting growing year-round lifestyle relevance.
  • Global e-Commerce revenue increased by 28.1 percent.
  • DTC revenue in Mainland China increased by 35.1 percent.

Third Quarter Fiscal 2022 Results
(compared to Third Quarter Fiscal 2021)

  • Total revenue was C$586.1m from C$474.0m. As fiscal 2022 is a 53-week year, the additional week included in the third quarter ended January 2, 2022, provided C$40.9m of revenue.
  • DTC revenue was C$445.4m from C$299.4m. The majority of the increase was driven by higher sales from existing retail stores, complemented by e-Commerce growth and retail expansion.
  • Wholesale revenue was C$136.7m from C$160.8m. The decrease resulted from earlier order shipment timing relative to fiscal 2021, driven by wholesale partner requests.
  • Other revenue was C$4.0m from C$13.8m. The decrease was attributable to temporary PPE sales in the comparative quarter.
  • Gross profit was C$413.8m, a gross margin of 70.6 percent, compared to C$316.4m and 66.8 percent.
  • DTC gross margin of 77.1 percent, compared to 77.9 percent. The decrease was driven by a higher proportion of sales in non-parka categories (-50 bps), higher duty costs (-50 bps), government payroll subsidies in the comparative quarter (-50 bps), and an unfavorable shift in the geographic mix (-30 bps); this was partially offset by pricing (+120 bps).
  • Wholesale gross margin of 50.2 percent, compared to 51.5 percent. The decrease was driven by government payroll subsidies in the comparative quarter (-190 bps) and unfavorable impacts from product mix due to higher sales in non-parka categories (-190 bps); this was partially offset by a higher proportion of sales to wholesale partners compared to international distributors (+100 bps) and pricing (+170 bps).
  • Other segment gross profit was C$1.6m from C$0.3m.
  • Operating income was C$205.9m, an operating margin of 35.1 percent, compared to C$153.3m and 32.3 percent.
  • Direct-to-consumer (DTC) operating margin of 57.4 percent, compared to 55.0 percent. The decrease in segment gross margin partially offset the positive impact of revenue growth.
  • Wholesale operating margin of 35.6 percent, compared to 42.9 percent. The decrease in operating margin was attributable to lower gross margin and higher SG&A expenses.
  • Other operating loss was C$(98.5)m from C$(80.4)m. The increase in operating loss was attributable to incremental SG&A expenses, including C$15.3m of investment in marketing, C$7.9m of personnel costs and C$5.1m in strategic initiatives, including digital capabilities and the launch of Canada Goose footwear; this was partially offset by C$14.5m of favorable foreign exchange fluctuations.
  • Net income was C$151.9m, or C$1.41 per diluted share, compared to C$107.0m, or C$0.96 per diluted share.
  • Non-IFRS adjusted EBIT was C$206.9m, an adjusted EBIT margin of 35.3 percent, compared to C$157.9m and 33.3 percent.
  • Non-IFRS adjusted net income was C$152.6m, or C$1.42 per diluted share, compared to C$111.9m, or C$1.01 per diluted share.
  • Cash was C$407.6m at quarter-end, compared to C$469.0m. During the year, 3,865,136 subordinate voting shares were repurchased for a total cash consideration of C$187.3m.
  • Inventory was C$368.1m at quarter-end, compared to C$339.0m.

Adjusted earnings of C$1.42 were below Wall Street’s consensus estimate of $1.45. Revenues at C$586.1 million were below consensus of C$590.0 million.

Revised Fiscal 2022 Outlook
Due to lower than expected revenue and retail traffic in APAC and EMEA in the current quarter, alongside new variant outbreaks and restrictions, the company now expects the following for fiscal 2022:

  • Total revenue C$1.090Bn to C$1.105Bn, compared to previous guidance in the range of C$1.125Bn to C$1.175Bn. 
  • Non-IFRS adjusted EBIT C$165m to C$175m at an adjusted EBIT margin of 15.1 percent to 15.8 percent, compared to previous guidance in the range of C$186m to C$208m at an adjusted EBIT margin of 16.5 percent to 17.7 percent.
  • Non-IFRS adjusted net income per diluted share C$1.02 to C$1.11, compared to previous guidance in the range of C$1.17 to C$1.33; this is based on several assumptions, as follows:

    • No material change in current economic conditions and operating disruptions, including those related to COVID-19;
    • DTC revenue at approximately 68 percent of total revenue, compared to approximately 70 percent;
    • Wholesale revenue growth 6 percent to 7 percent, compared to mid-single-digits; and
    • Weighted average diluted shares outstanding 109.4m compared to 109.3m.

Photo courtesy Canada Goose