Canada Goose Inc., as expected, reported a loss in the first quarter ended June 30, but sales grew 58.5 percent.
“Our strong start to the year, in our smallest fiscal quarter, is a great leading indicator. Our products and our brand continue to resonate with people around the world, and our direct-to-consumer channel was a standout performer in the quarter. Productivity across our retail store network in this off-peak period was exceptional, reducing the loss impact of our strategic growth investments and giving us a favorable tailwind for the rest of the year,” stated Dani Reiss, president & chief executive officer.
First Quarter Fiscal 2019 Results (in Canadian Dollars, Compared to First Quarter Fiscal 2018)
- Total revenue increased by 58.5 percent to $44.7m from $28.2m.
- Direct-to-consumer (“DTC”) revenue increased to $23.2m from $8.3m. The increase was primarily due to the strong performance of all existing and new retail stores, with particularly significant contributions from well-established locations. E-commerce also had a positive impact on the quarter.
- Wholesale revenue increased to $21.5m from $19.9m, driven by higher order volumes from existing retail partners.
- Gross profit increased to $28.6m, a gross margin of 64.0 percent, compared to $13.2m, a gross margin of 46.8 percent. The increase in gross margin was attributable to a greater proportion of DTC revenue and to a lesser degree, wholesale gross margin expansion.
- DTC gross profit was $17.7m, a gross margin of 76.3 percent, compared to $6.2m, a gross margin of 74.7 percent. The increase in gross margin was primarily driven by product mix and partially offset by unfavorable foreign exchange fluctuations.
- Wholesale gross profit was $10.9m, a gross margin of 50.7 percent, compared to $7.0m, a gross margin of 35.2 percent. The increase in gross margin was primarily attributable to a different wholesale mix in the quarter compared to the same quarter last year. Favorable foreign exchange fluctuations between the purchase of raw materials and the sale of product also contributed to lower unit costs, and inventory provision movements were lower in the current period.
- Operating loss was $(19.9)m, compared to a loss of $(14.8)m. The increase in operating loss was driven by higher unallocated corporate expenses in a seasonally small quarter, partially offset by larger operating income contributions from both channels.
- Unallocated corporate expenses were $25.9m compared to $13.4m. The increase was due to SG&A growth investments including marketing, corporate headcount and IT, as well as higher professional fees and other costs relating to public company compliance.
- Unallocated depreciation and amortization was $3.4m, compared to $2.2m, driven by the retail store opening program.
- DTC operating income was $6.5m, an operating margin of 28.0 percent, compared to an operating loss of $(0.3)m. The shift to a positive operating margin was driven by strong retail store productivity, as well as channel gross margin expansion and a lower level of pre-opening costs.
- Wholesale operating income was $2.9m, an operating margin of 13.5 percent, compared to $1.1m, an operating margin of 5.5 percent. The increase in operating margin was driven by an increase in channel gross margin, partially offset by higher channel SG&A as a percentage of sales, due to additions to headcount and costs for sales and operations support.
- Net loss was $18.7 million, or 17 cents per basic and diluted share, compared to a net loss of $12.1 million, or 11 cents per basic and diluted share.
- Adjusted EBITDA was a loss of $13.5 million compared to a loss of $13.6 million.
- Adjusted net loss was $17.1 million, or 16 cents per basic and diluted share, compared to an adjusted net loss of $13.3 million, or 12 cents per basic and diluted share.
Fiscal 2019 Outlook
The company reiterates the following outlook for fiscal 2019:
- Annual revenue growth of at least 20 percent
- Adjusted EBITDA margin expansion of at least 50 basis points
- Annual growth in adjusted net income per diluted share of at least 25 percent