Canada Goose Holdings Inc. on Wednesday announced an adjusted net loss for the fiscal first quarter ended June 2019 of $22.8 million, or 21 cents per basic and diluted share, missing Wall Street’s estimates by 3 cents. Revenue of $71.1 million marked a 59.1 percent jump from the same period a year ago.
“Fiscal 2020 is off to a great start with a strong performance in our first quarter, which delivered growth in every geography. As we continue to invest in capacity, we are well-positioned to capitalize on the strong demand we see across our business,” stated Dani Reiss, president and CEO. “The affinity and desire we have seen for our seasonally relevant lightweight offerings tell us our product expansion is working, and combined with the volume of highly engaged consumers looking to get ahead of the upcoming Fall / Winter season, we believe our business has never been stronger as we report our smallest fiscal quarter.”
First Quarter Fiscal 2020 Business Highlights (Compared to First Quarter Fiscal 2019)
- Robust growth in every geographic region, with revenue increasing by 40.4 percent in Canada, 15.8 percent in the United States and 79.7 percent in Europe and Rest of World.
- In Asia, revenue nearly tripled to $18.1 million from $6.6m. This includes earlier shipments to international distributors in Japan and South Korea and the incremental contribution of DTC operations in Greater China.
- Increased flexibility through expanded in-house manufacturing capacity to proactively manufacture and ship wholesale orders in Europe and Asia earlier in the year, in response to customer requests.
- Alongside strong pent-up demand for sought after Fall / Winter icons, non-parka revenue nearly doubled, rising to one-third of total DTC revenue in the quarter.
First Quarter Fiscal 2020 Results (in Canadian dollars, compared to First Quarter Fiscal 2019)
- Total revenue increased by 59.1 percent to $71.1 million from $44.7 million, or 58.6 percent on a constant currency basis.
- DTC revenue increased to $34.8 million from $23.2 million. The increase was driven by incremental revenue from five new retail stores and one new e-commerce market opened during fiscal 2019.
- Wholesale revenue increased to $36.3 million from $21.5 million. This was driven by higher-order values from existing partners, coupled with customer requests in Europe and Asia for earlier order shipments relative to last year. It also reflects incremental revenue from Baffin, which was acquired in November 2018.
- Gross profit increased to $40.9 million, a gross margin of 57.5 percent, compared to $28.6m, a gross margin of 64 percent. The change in gross margin was driven by mix, with a higher proportion of wholesale revenue, and within the channel, a greater share of international distributor revenue due to earlier shipments.
- DTC gross profit was $26 million, a gross margin of 74.7 percent. This reflects the impact of a greater proportion of revenue from non-parka categories, which have lower margins, partially offset by pricing.
- Wholesale gross profit was $14.9 million, a gross margin of 41 percent. This reflects a significantly higher proportion of revenue from international distributors. In fiscal 2019, corresponding orders, which have lower margins, were shipped later in the second quarter. Within each category of customer in the channel, gross margins were at a comparable level relative to last year.
- Operating loss was $(27.5) million, compared to $(19.9) million. As expected, the increase in operating loss was primarily due to higher corporate SG&A, particularly relating to investments to support growth, and to a lesser degree, a larger retail store opening program.
- DTC operating profit was $6.5 million, an operating margin of 18.7 percent. Strong sales productivity across the channel was partially offset by a larger store opening program relative to last year. $2.3 million in pre-store opening costs were incurred for locations not yet open. Excluding pre-store opening costs in both periods, DTC operating margin increased to 25.3 percent from 21.6 percent.
- Wholesale operating income was $5 million, an operating margin of 13.8 percent. The gross margin impact of a higher proportion of shipments to international distributors was partially offset by positive operating leverage, with lower channel SG&A expenses as a percentage of revenue.
- Unallocated corporate expenses were $36.9 million, compared to $25.9 million. The increase was primarily due to increased investment in marketing, including local market activation ahead of planned retail openings, and incremental costs to support Greater China operations.
- Unallocated depreciation and amortization expenses were $2.1 million, compared to $1.5 million.
- Net loss was $(29.4) million, or $(0.27) per basic and diluted share, compared to $(18.7) million, or $(0.17) per basic and diluted share. In addition to the expected increase in operating loss, net loss was impacted by $7 million of unamortized costs triggered by the closing of the Term Loan Facility refinancing in May.
- Adjusted EBIT was $(25.9) million, compared to $(17.3) million.
- Adjusted net loss was $(22.8) million, or $(0.21) per basic and diluted share, compared to an adjusted net loss of $(16.7) million, or $(0.15) per basic and diluted share.
Fiscal 2020 Outlook
The Company reiterates the fiscal 2020 outlook and key assumptions underlying such outlook which were issued on May 29, 2019, in the press release announcing the Company’s Results for Fiscal Year 2019 under the heading “Fiscal Year 2020 and Long-Term Outlook”. Within the meaning of applicable securities laws, this outlook constitutes forward-looking information. Actual results could vary materially as a result of numerous factors, including certain risk factors, many of which are beyond the Company’s control. See “Cautionary Note Regarding Forward-Looking Statements”.
Photo courtesy Canada Goose