Canada Goose Holdings Inc. reported a profit in the second quarter ended September 26, beating Wall Street’s targets that had been calling for a loss. Total revenue increased by 19.6 percent and 40.3 percent excluding year-ago PPE sales.

Figures are in Canadian dollars.

“Our second-quarter results demonstrate our momentum,” said Dani Reiss, president and CEO. “Across all channels, we are seeing strong leading indicators of peak season demand. With accelerating DTC trends, growing lifestyle relevance and unique supply chain flexibility, we believe we have the right foundation in place for an outstanding fiscal 2022.”

Second Quarter Fiscal 2022 Business Highlights
(compared to Second Quarter Fiscal 2021)

  • Total revenue increased by 40.3 percent, excluding $28.8m of temporary PPE sales in the comparative quarter, including temporary PPE sales, total revenue increased by 19.6 percent;
  • Global e-Commerce revenue increased by 33.8 percent driven by growth in all major existing markets; and
  • Direct-to-consumer (DTC) revenue in Mainland China increased by 85.9 percent.

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

  • Total revenue was $232.9m from $194.8m;
  • DTC revenue was $83.2m from $46.2m. 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 $147.9m from $118.5m. The increase was a result of earlier order shipment timing relative to fiscal 2021. This was driven by wholesale partner requests due to a lower level of COVID-19 disruptions to its operations;
  • Other revenue was $1.8m from $30.1m. The decrease was attributable to PPE sales in the comparative quarter, which was temporarily manufactured in support of COVID-19 response efforts;
  • Gross profit was $135.0m, a gross margin of 58.0 percent, compared to $94.2m and 48.4 percent;
  • DTC gross margin of 73.7 percent, compared to 76.8 percent. The decrease was driven by a higher proportion of sales in non-parka categories with lower margins (-170 bps) and COVID-19-related government payroll subsidies in the comparative quarter (-380 bps). This was partially offset by a higher proportion of sales from retail stores (+230 bps);
  • Wholesale gross margin of 49.4 percent, compared to 47.6 percent. The increase was driven by a lower proportion of sales to international distributors (+490 bps) and pricing (+210 bps). This was partially offset by COVID-19-related government payroll subsidies in the comparative quarter (-510 bps);
  • Other segment gross profit was $0.6m from $2.3m;
  • Operating income was $11.3m, an operating margin of 4.9 percent, compared to $15.1m and 7.8 percent;
  • DTC operating margin of 25.2 percent, compared to 15.4 percent. The positive impact of revenue growth was partially offset by the decrease in segment gross margin;
  • Wholesale operating margin of 39.5 percent, compared to 37.9 percent. The increase in operating margin was attributable to higher segment revenue and gross margin;
  • Other operating loss was $(68.1)m from $(36.9)m. The increase in operating loss was attributable to $18.5m of incremental investment in marketing and strategic initiatives, the benefit of $2.7m of COVID-19-related government payroll subsidies in the comparative quarter, and $1.4m of higher performance-based compensation;
  • Net income was $9.0m, or $0.08 per diluted share, compared to $10.4m, or $0.09 per diluted share;
  • Non-IFRS adjusted EBIT was $16.1m, an adjusted EBIT margin of 6.9 percent, compared to $15.7m and 8.1 percent;
  • Non-IFRS adjusted net income was $13.2m, or $0.12 per diluted share, compared to $11.5m, or $0.10 per diluted share;
  • Cash was $98.9m as at quarter-end, compared to $156.3m. 3.8m subordinate voting shares were repurchased for a total cash consideration of $179.6m; and
  • Inventory was $416.4m as at quarter-end, compared to $417.2m.

Earnings of 12 cents a share on an adjusted basis compared with Wall Street’s consensus estimate calling for a loss of 10 cents a share. Sales of $232.9 million topped the consensus target of $206.6 million.

Revised Fiscal 2022 Outlook
On the basis of year-to-date performance and current trends, Canada Goose now expects total revenue in fiscal 2022 to exceed the outlook originally provided on May 13, 2021. For fiscal 2022, the company currently expects:

  • Total revenue $1.125B to $1.175B, compared to exceeding $1.000B;
  • Non-IFRS adjusted EBIT $186m to $208m, implying an adjusted EBIT margin of 16.5 percent to 17.7 percent; and
  • Non-IFRS adjusted net income per diluted share $1.17 to $1.33.

Previously, Canada Goose said it expected total revenue to exceed $1B in fiscal 2022. The company did not provide guidance on earnings. The updated outlook is based on a number of assumptions, including the following:

  • No material change in economic conditions or operation disruptions, including due to COVID-19;
  • DTC revenue at approximately 70 percent of total revenue;
  • Wholesale revenue growth in the mid-single digits, compared to wholesale revenue in line with fiscal 2021; and
  • Weighted average diluted shares outstanding of 109.3m.

Photo courtesy Canada Goose