Canada Goose Holdings, Inc. reported a strong profit earnings uptick in the fiscal fourth quarter that ended April 2 as double-digit growth in Canada, EMEA and Asia Pacific offset a slight decline in U.S. sales that jumped 31 percent. Sales and EPS exceeded company guidance, and revenues are forecasted to climb 19 percent on average for the current fiscal year.

Figures are in Canadian dollars.

In the fourth quarter, sales grew 31.4 percent to C$293.2 million (U.S. $218 mm) from C$223.1 million. Company guidance had called for sales in the range of C$251 million to C$271 million. Sales grew 30.1 percent on a constant currency revenue basis.

Adjusted EBIT surged 122.6 percent to C$27.6 million from C$12.4 million. Company guidance had called for EBIT in the range of C$19 million to C$35 million.

Adjusted net income catapulted 267.5 percent to C$14.7 million, or C$14 cents a share, from C$4.0 million, or C$4 cents, a year ago. Company guidance had called for adjusted income in the range of break-even to 12 cents a share.

On a reported basis, the loss of C$3.1 million, or C$3 cents a share, compared with a loss of C$9.1 million, or C$9 cents, a year ago.

“I am pleased with our fourth quarter results, particularly the strong revenue results generated in Greater China and EMEA,” said Dani Reiss, chairman and CEO. “This is a testament to the strength of the brand and this momentum has continued alongside early encouraging results in North America in fiscal 2024 year to date. Lastly, I am excited by the progress our global teams have made in advancing our strategic growth pillars– to accelerate consumer-focused growth, build out DTC, and create new and expand product categories, rapidly. We remain confident in our ability to execute and leverage these pillars, and we continue to build our brand strength to generate profitable growth sustainable over the long term.”

Revenue By Segment
DTC revenue grew 22.6 percent (22.1 percent on a currency-neutral basis) to C$227.5 million, largely due to continued retail store expansion and improved growth and performance within its existing store network. Canada Goose ended Q4 2023 with 51 permanent stores compared to 41 permanent stores at the end of the comparative quarter. DTC comparable sales grew 6.9 percent driven by growth within the existing store network more than offsetting lower e-commerce business as consumers return to experiential shopping.

Wholesale revenue increased 30.4 percent (27.2 percent on a currency-neutral basis) to C$45.5 million due to an increase in order value globally and an increased volume of shipments from prior quarters being realized in Q4 2023 relative to the comparative quarter.

Other revenue increased to C$20.2 million from C$2.6 million primarily due to higher product availability to employees, friends and family.

Revenue By Geography
Revenue increased in Canada, EMEA and Asia Pacific compared to the comparative quarter resulting from an increase in DTC revenue. Revenues in Canada rose 41.2 percent to C$55.2 million.

Asia Pacific revenues totaled C$114.1 million against C$69 million, up 65.4 percent on a reported basis and ahead 66.5 percent on a currency-neutral basis. EMEA sales were up 27.3 percent (24.2 percent on a currency-neutral basis) to C$56.4 million. Re-opening in Asia Pacific after the lifting of COVID-19 restrictions and strong growth in both channels in EMEA positively impacted results.

Revenue in the U.S. totaled C$67.5 million, down 4.5 percent on a reported basis and 7.9 percent on a currency-neutral basis. The revenue decline in the United States, amid a challenging macroeconomic backdrop, was partially offset by retail expansion and consumers returning to experiential shopping.

Gross Profit and Gross Margin
Gross profit increased 23.5 percent to C$190.3 million from C$154.1 million. Gross margins eroded 420 basis points to 64.9 percent from 69.1 percent. The gross profit increase was primarily due to higher revenue, partially offset by lower gross margins. Gross margins were unfavorably impacted by an increase in obsolete raw material provisioning, higher product costs and the unfavorable impact of the fair value adjustment for inventory acquired through the Japan Joint Venture, partially offset by pricing.

Operating Income and Adjusted EBIT
Operating income totaled C$17.2 million against C$900,000 a year ago. Operating income increased largely due to higher gross profit. The increase was partially offset by higher operating costs related to incremental personnel costs driven by headcount, higher costs related to expanded store networks, higher fees in support of strategic activities including the Transformation Program and costs associated with the Japan Joint Venture. The increase in operating expenses was partially offset by lower impairment charges in Q4 2023 compared to the prior-year quarter. Adjusted EBIT increased primarily due to higher gross profit partially offset by incremental personnel costs driven by headcount, the increased store network and the operating costs of the Japan Joint Venture.

Net Income and Adjusted Net Income
Net loss was higher than the comparative quarter primarily due to higher net interest, finance and other costs, as well as higher income tax expense, partially offset by higher operating income. Adjusted net income was higher than the prior-year quarter due to higher operating income partially offset by higher income tax expense.

Fiscal 2023 Results
Sales in the year grew 10.8 percent to C$1.22 billion from C$1.1 billion the prior year. Net income declined 27.2 percent to C$68.9 million, or C$69 cents a share, from C$94.6 million, or C$87 cents, a year ago. Adjusted EBIT improved 2.2 percent to C$175.1 million from C$171.3 million a year ago. Adjusted net income declined 5.1 percent to C$110.7 million, or C$1.05 a share, from C$116.7 million, or C$1.07, a year ago.

Balance Sheet Highlights
Cash was C$286.5m as at Q4 ended April 2, 2023, compared to C$287.7m as at Q4 ended April 3, 2022. During the fourth quarter of fiscal 2023, the company repurchased 407,421 subordinate voting shares for a total cash consideration of C$10.0m.

Inventory was C$472.6m as at Q4 ended April 2, 2023, compared to C$393.3m as at Q4 ended April 3, 2022. Higher inventory levels are attributable to lower-than-expected sales in the Asia Pacific region due to COVID-19 disruptions for most of fiscal 2023 and production planning. Inventory of C$27.3m was acquired through the Japan Joint Venture, and the inventory level was C$19.2m as at April 2, 2023. We monitor the levels of inventory in each of our sales channels and across geographic regions and aim to align with the demand that the company forecasts in each region.

Strategic Update
Canada Goose said, “As part of its strategic plan for fiscal 2028, the company intends to execute on the following three strategic growth pillars first introduced at its Investor Day on February 7, 2023:

  1. Accelerate Consumer-Focused Growth: We have a significant opportunity to grow the lifetime value of our longstanding and new customers with a focus on women and Gen Z. Through authentic storytelling and unique experiences, we plan to intensify our customer relationship marketing to build stronger connections with our clients and to bring new consumers to our brand. We plan to reallocate marketing investments to drive greater return on investment, conversion and ultimately lifetime value. And in fiscal 2024, we will begin to further unlock our CRM opportunities, leveraging our customer data platform to segment and personalize engagement with our clients through all touchpoints more meaningfully.
  2. Build Our DTC Network: We expect to more than double our retail footprint from the 51 permanent stores at the end of Q4 fiscal 2023 by the end of fiscal 2028 while continuing to grow our digital presence, both through omnichannel and online. In fiscal 2024 we are targeting 16 new permanent store openings, concentrated in Mainland China, the USA and Japan, the vast majority of which we expect to be operational in the second half of the year. As it applies to our store network, we are laser-focused on enhancing store performance and we are looking to digital to help support this goal by driving more traffic to the stores, helping our stores to better know and connect with their high-value clients and optimizing our inventory allocations around the globe. We will continue to grow our digital presence and enhance our capabilities including Omnichannel.
  3. Create New and Expand Existing Categories, Rapidly: We intend to deliver year-round relevance consistent with Canada Goose’s position as a performance luxury lifestyle brand. By the end of fiscal 2023, we diversified our product mix such that non-heavy-weight-down sales represented 42.9 percent up from 38.5 percent in fiscal 2022. We expect continued growth in all categories including in heavyweight and lightweight down and accelerated growth of newer categories such as rainwear, apparel and footwear as well as the addition of further categories including eyewear, luggage and home. We expect to launch sneakers this summer, targeting the discerning sneakerhead, though broader customers will also enjoy a shoe that can be worn all year round. And in early fall, new collections of hyper-feminine styles, ultra-flattering shaping and silhouettes as well as comfortable and new fabrics designed to perfectly transition throughout the fall and winter seasons are anticipated.

In the fourth quarter, we launched our Transformation Program to support the strategic pillars described above. This multi-phase program will work to increase operational efficiencies by optimizing production and procurement, developing people and resources, and focusing on our consumers to allow sustainable growth, profitability and long-term value.”

Full-Year and First Quarter Fiscal 2024 Outlook

For fiscal 2024, the company expects:

  • Total revenue C$1.400Bn to C$1.500B, up 18.9 percent at the midpoint against C$1,22 billion;
  • Non-IFRS adjusted EBIT C$210m to C$240m, representing a margin of 15 percent to 16 percent; and
  • Non-IFRS adjusted net income per diluted share C$1.20 to C$1.48, against C$1.05 to C$1.07.

For the first quarter of fiscal 2024, the company currently expects:

  • Total revenue C$70m to C$80m;
  • Non-IFRS adjusted EBIT loss C$(115)m to C$(105)m; and
  • Non-IFRS adjusted net loss per basic share C$(0.89) to C$(0.82).

Photo courtesy Canada Goose