Canada Goose reported earnings rose 24.5 percent in the second quarter ended September 29 as sales grew 27.7 percent. Both earnings and sales topped Wall Street’s targets. The outerwear maker maintained its guidance for the year.
Second Quarter Fiscal 2020 Highlights (in millions of Canadian dollars):
- Total revenue increased by 27.7 percent to $294.0m
- Adjusted EBIT was $79.2m, representing a 26.9 percent margin
- Net income was $60.6m, or $0.55 per diluted share
- Adjusted net income per diluted share increased by 23.9 percent to $0.57
“Our performance in the first half reflects the strength of our brand and power of our unique business model. Through global brand equity, selective distribution and operational flexibility, we delivered another set of strong results despite continuing external uncertainties,” said Dani Reiss, President & CEO. “Alongside continued growth at home, we are making great strides internationally, and we believe we are well positioned going into our peak selling season.”
Second Quarter Fiscal 2020 Business Highlights (Compared to Second Quarter Fiscal 2019)
- Strong revenue growth in key markets, with standout performances in Asia, which nearly doubled to $48.9m from $26.6m, and the United States, which increased by 38.5 percent on a constant currency basis(1).
- The successful commercial introduction of BRANTA, a limited-edition collection marrying technical innovation with inventive silhouettes. BRANTA is an elevated interpretation of Canada Goose’s heritage, designed to inspire loyal brand fans and reach new audiences with pinnacle product.
- Increased flexibility through expanded in-house manufacturing capacity to respond to continuing requests from wholesale partners for earlier shipments.
Second Quarter Fiscal 2020 Results (Compared to Second Quarter Fiscal 2019):
- Total revenue increased by 27.7 percent to $294.0m from $230.3m, or 28.3 percent on a constant currency basis.
- DTC revenue increased to $74.2m from $50.4m, driven by incremental revenue from new retail stores.
- Wholesale revenue increased to $219.8m from $179.9m. The increase was driven by higher-order values from existing partners, complemented by customer requests for earlier shipment timing relative to last year. It also reflects incremental revenue from Baffin in its peak quarter, which was acquired in November 2018.
- Gross profit was $160.4m, a gross margin of 54.6 percent. The increase of $31.9m in gross profit was driven by revenue growth in both channels.
- DTC gross profit was $56.1m, a gross margin of 75.6 percent. The 40 bps increase in gross margin reflects the net positive impact of pricing relative to costs.
- Wholesale gross profit was $104.3m, a gross margin of 47.5 percent. The 290 bps decrease in gross margin reflects a normalization relative to the second quarter of fiscal 2019, which was elevated due to the timing of production efficiencies and reductions in import duties on goods sold in Europe.
- Operating income was $75.4m. The increase of $10.4m in operating income was driven by revenue growth in both channels.
- DTC operating income was $30.0m, an operating margin of 40.4 percent. The impact of strong sales productivity and profitability across all components of the channel was partially offset by the costs of a larger store opening program relative to last year. Pre-store opening costs of $3.6m were incurred for locations not yet open. Excluding pre-store opening costs in both periods, DTC operating margin increased to 45.3 percent in fiscal 2020 from 43.7 percent in fiscal 2019.
- Wholesale operating income was $90.9m, an operating margin of 41.4 percent. With the decrease in channel gross margin described above, the increase in operating income was driven by revenue growth.
- Unallocated corporate expenses were $43.2m, compared to $34.2m. The increase was primarily attributable to investments to support growth in marketing, people, technology and expansion in Greater China.
- Unallocated depreciation and amortization expenses were $2.3m, compared to $1.8m.
- Net income was $60.6m, or $0.55 per diluted share, compared to $49.9m, or $0.45 per diluted share.
- Adjusted EBIT was $79.2m, compared to $66.5m.
- Adjusted net income(1) was $63.6m, or $0.57 per diluted share, compared to adjusted net income(1) of $51.1m, or $0.46 per diluted share.
Adjusted earnings of 57 cents a share topped Wall Street’s consensus target of 43 cents. Revenues of $294.0 million exceeded analysts’ consensus target of $266.8 million.
Fiscal 2020 Outlook
The company reiterates the fiscal 2020 outlook and key assumptions underlying such outlook which were issued on May 29.
Photo courtesy Canada Goose