Canada Goose reported net earnings were down 9.3 percent in the third quarter ended December 27 as sales gained 4.8 percent. Both earnings and sales topped Wall Street’s consensus estimates. Total revenue increased for the first time since the onset of the pandemic.

Other highlights of the quarter include global eCommerce revenue increasing 39.3 percent and direct-to-consumer (DTC) revenue in Mainland China climbed 41.7 percent.

“The global strength of our brand and digital business has returned Canada Goose to growth in our biggest quarter. Through HumaNature, we are also rapidly advancing our sustainability and purpose-based commitments,” said Dani Reiss, president and CEO. “While we remain in an uncertain world, we are very encouraged by our strong momentum as we finish the fiscal year.”

Third Quarter Fiscal 2021 Results (Compared to Third Quarter Fiscal 2020)

  • Total revenue was $474.0 million from $452.1 million, a gain of 4.8 percent. Wall Street’s consensus estimate had been $417.9 million;
  • DTC revenue was $299.4 million from $301.8 million driven by eCommerce growth and continued store expansion in Mainland China, offset by lower retail revenue due to COVID-19 disruptions globally;
  • Wholesale revenue was $160.8 million from $145.3 million. The increase was a result of the later timing of shipments as requested from partners and international distributors relative to the comparative quarter;
  • Other revenue was $13.8 million from $5.0 million. The increase was driven by PPE sales in support of COVID-19 response efforts;
  • Gross profit was $316.4 million, a gross margin of 66.8 percent, compared to $298.4 million and 66.0 percent. The increase in gross profit was attributable to revenue growth and $4.8 million of government subsidies. The increase in gross margin was a result of higher DTC and Wholesale gross margins, partially offset by lower Other gross margins;
  • DTC gross margin of 77.9 percent, compared to 75.1 percent. The increase was attributable to higher pricing and a favorable geographic mix (+210 bps). Gross margin was also positively impacted by $1.6 million (+50 bps) of government subsidies;
  • Wholesale gross margin of 51.5 percent, compared to 48.5 percent. The increase was attributable to the net impact of higher pricing and the positive impact of volume (+180 bps) driven by parkas, partially offset by the unfavorable impact of a higher proportion of distributor sales (-80 bps). Gross margin was also positively impacted by $3.1 million (+200 bps) of government subsidies;
  • Other segments’ gross profit was $0.3 million from $1.3 million. PPE gross loss and gross margins were $(0.7)m and (6.5) percent;
  • Operating income was $153.3 million, an operating margin of 32.3 percent, compared to $161.4 million and an operating margin of 35.7 percent;
  • DTC operating margin of 55.0 percent, compared to 56.0 percent. The decrease was due to lower retail profitability from COVID-19 disruptions. This was partially offset by a higher gross margin and the positive impact of eCommerce growth;
  • Wholesale operating margin of 42.9 percent, compared to 38.0 percent. The increase was attributable to a higher gross margin and cost reduction initiatives, supplemented by $3.1 million of government subsidies;
  • Other operating loss was $(80.4) million from $(62.7) million. The increase was attributable to higher operating costs including an $8.4 million increase in marketing costs and $3.3 million of product development costs. In addition, there were $7.1 million of unfavorable foreign exchange losses partially offset by $1.3 million of government subsidies;
  • Net income was $107.0 million, or 96 cents per diluted share, compared to $118.0 million, or $1.07 per diluted share;
  • Non-IFRS adjusted EBIT was $157.9 million, an adjusted EBIT margin of 33.3 percent, compared to $163.8 million and 36.2 percent;
  • Non-IFRS adjusted net income was $111.9 million, or $1.01 per diluted share, compared to $119.7 million, or $1.08 per diluted share.
 Wall Street’s consensus estimate had been 86 cents; and
  • Cash was $469.0 million as at quarter-end, compared to $72.0 million, alongside $256.2 million of available borrowing capacity in the undrawn revolving facility. The increase in cash was driven by positive free operating cash flow and refinancing proceeds.

Outlook
Given ongoing COVID-19 disruptions and uncertainties, the company is not providing an outlook for fiscal 2021. As of the date of this release, 7 out of 28 Canada Goose retail stores, representing 25 percent of the network, are closed.

Photo courtesy Canada Goose