In Canada Goose’s first investor conference since going public in March, Dani Reiss, president and CEO, railed against many of the “fake brands” in the active space while asserting Canada Goose remains in the early stages of growth.
At the Baird 2017 Consumer, Technology and Services Conference in New York City, Reiss said that when he joined the company in 1997, Canada Goose was generating $3 million in sales and it recently reported annual sales of $400 million. The company was offering 20 styles in the late nineties versus 200 styles now.
Reiss said its range of styles now include lightweight, hybrid styles that have “really diversified our outerwear portfolio” beyond its core parka offerings, and recently its spring collection has been “performing great.” Over the next three years, Canada Goose expects to drive growth by bringing innovation to core categories as well as accessories and expanded spring offerings. A knitwear line is being launched this fall that the company is “very excited about.”
But new product categories won’t “disproportionately” drive gains over the next three years with growth largely driven by its core categories further expanding across geographies, according to Reiss.
Many regions in the U.S. remain largely un-penetrated while Canada is still a growth market. The brand is also just getting started in Europe, is underdeveloped in Japan and Korea and only does a small wholesale business in China. Reiss said that if Canada Goose was able to achieve half the penetration it has in Canada in other key regions, its volume would triple. And that excludes China and Russia as well as any new categories.
“I think the runway is tremendous and the white space we can go into is tremendous. And the bigger we’ve gotten, the more apparent that is to me,” said Reiss.
Strong growth is expected to come from its newish direct-to-consumer business, which started three years ago with the launch of e-commerce in Canada, followed by online expansion elsewhere in the last two years, and the opening of its first two stores last year. Overall, DTC has expanded from less than 5 percent of sales two years ago to 27 percent in its latest fiscal year.
Reiss said its online business has been “very successful” while the company has been “very happy” with how its stores in New York City and Toronto have performed. Overall, Reiss said DTC enables to the company to “control our own destiny and have our own relationship with consumers, which is important to us.”
Reiss said its two stores have also attracted tourists from 31 countries. Along with international visitors to its websites, the DTC expansion has underscored the broad appeal of Canada Goose. Said Reiss, ”What’s amazing to me how globally recognized this brand is.”
Nonetheless, Reiss said Canada Goose’s DTC approach will always be “led by e-commerce” and the company doesn’t want “to be burdened down by too many brick & mortar locations.” By 2020, it expects to have between 15 to 20 stores. For the current fiscal year, three stores are expected to open. Locations in Chicago and London have been announced so far.
Regarding wholesale, Reiss said that while the brand remains selective, “we haven’t locked the door for expansion” with new retailers. He stressed wholesale “remains an important part of our business and our strategy.” And while brick & mortar retailers in general have been underperforming recently, “that’s not the case for us. We’re the shining star in that landscape and we do very well with all of our wholesale partners.”
Reiss said the stores recognize that having Canada Goose helps drive traffic and the brand continues to collaborate with its wholesale partners on building in-store shops and other initiatives.
Reiss believes that part of its success is the quality of its product that in part comes from keeping its production in Canada. But he also said being Canada-made helps from a marketing standpoint. He likens the impact to “making a Swiss watch in Switzerland” and believes consumers highly value authenticity in brands these days. Said Reiss, “There has been a lot of fake brands with fake stories that have to make stuff up and we don’t have to make stuff up. I think people want real things.”
The company owns five factories in Canada and makes 30 percent of its product through those factories and the remainder through sub-contractors. Production in its own factories is expected to expand in the years ahead and is expected to support higher margins.
From a marketing standpoint, Reiss said he believes the brand, with its small marketing budget in its early days, was helped by consumers in urban centers “learning about our functionality” and a “snowball effect” led them to encourage their peers to try the brand.
Another benefit has been its long connection to the film industry, in which the brand is often seen as the “unofficial outerwear provider” of film sets in cold conditions, again because film crews recognized the functional warmth of their parkas. That also helped the brand wind up in movies since film directors wanted “authenticity” in their films when shooting frigid scenes and supported the brand’s bigger exposure to pop culture. Canada Goose focuses much of its marketing budget on digital these days to continue to tap influencers.
Asked about pricing, Reiss believes the brand is “well priced” although “not inexpensive” with the average price point on its outerwear at $800 to $900 and some items above $1,000. He said the products level of functionality and being made in Canada supports a higher price but he also said there are other brands on selling floors that are more expensive. Added Reiss, “We believe there’s an opportunity to make products even more expensive than that ones we already have.”
Reiss also several times stressed that the company is a seasonal business and takes a “year-long bias” in planning the business. Any store expansion will depend on finding the right locations and other moves, such as extending into other categories, will receive the same measured approach. Said Reiss, “We’ve been a public company for two months and our company has not changed and we’re not starting to run the company differently. We’re focused on long term and sustainable growth and doing it in a way that we’re all going to proud of many years from now.”
Photo courtesy Canada Goose