Canada Goose’s Q2 Revenues Slump 34 Percent

Canada Goose Holdings Inc. reported earnings fell 82.8 percent in the second quarter ended September 27 as revenues declined 33.7 percent.

 “We have accelerated our best strategic opportunities in today’s environment. Mainland China has already returned to growth and our digital business is accelerating in a meaningful way at the right time,” said Dani Reiss, president and CEO. “This is a strong backdrop as we head into peak Canada Goose season.”

Figures are in Canadian dollars.

Second Quarter Fiscal 2021 Business Highlights
(compared to second-quarter fiscal 2020)

• DTC revenue in Mainland China increased by over 30 percent.
• Global e-Commerce revenue increased by over 10 percent, with an acceleration of growth in September.
• Adjusted EBIT margin was positive for the first time since the onset of the pandemic, despite significant revenue disruptions. This reflects the financial resilience of Canada Goose’s high margin business model and implemented cost-saving initiatives.

Second Quarter Fiscal 2021 Results
(compared to second-quarter fiscal 2020)

• Total revenue was C$194.8m from C$294.0m. Wall Street’s consensus estimate had been C$148.3m. 
• DTC revenue was C$46.2m from C$74.2m. The decrease was driven by lower retail traffic due to COVID-19 disruptions globally. Revenue generated through e-Commerce was higher than the comparative quarter.
• Wholesale revenue was C$118.5m from C$218.1m. The decrease was a result of the continued impact of COVID-19 including the significant reduction in the planned order book and requests from partners and international distributors for later shipment timing relative to the comparative quarter.
• Other revenue was C$30.1m from C$1.7m. The increase was driven by PPE sales in support of COVID-19 response efforts.
• Gross profit was C$94.2m, a gross margin of 48.4 percent, compared to C$160.4m and 54.6 percent. The decrease in gross profit was attributable to the decline in revenue, partially offset by C$7.8m of government payroll subsidies. The decrease in gross margin was a result of a higher proportion of Other revenue, partially offset by a higher direct-to-consumer (DTC) gross margin. Excluding the impact of the sale of PPE, gross margin was 56.1 percent, 150 bps above the comparative quarter.
• DTC gross profit was C$35.5m, a gross margin of 76.8 percent, compared to C$56.1m and 75.6 percent. The decrease in gross profit was driven by the decline in segment revenue. The increase in gross margin was attributable to C$0.8m (+170 bps) of government payroll subsidies, partially offset by C$0.4m (-90 bps) of higher costs per unit as production levels were limited and also impacted by COVID-19 safety protocols at our manufacturing facilities.
• Wholesale gross profit was C$56.4m, a gross margin of 47.6 percent, compared to C$103.8m and 47.6 percent. The decrease in gross profit was driven by the decline in segment revenue. Gross margin remained flat and included C$7.0m (+570 bps) of government payroll subsidies, offset by C$3.8m (-310 bps) of higher costs per unit as production levels were limited and also impacted by COVID-19 safety protocols at our manufacturing facilities, and C$2.2m (-180 bps) resulting from a higher proportion of distributor sales relative to the comparative quarter.
• Other segment gross profit was C$2.3m from C$0.5m. PPE gross profit and gross margins were C$1.0m and 3.5 percent.
• Operating income was C$15.1m, an operating margin of 7.8 percent, compared to C$75.4m and an operating margin of 25.6 percent. The decrease in operating income and operating margin was a result of reduced revenue due to COVID-19.
• DTC operating income was C$7.1m, an operating margin of 15.4 percent, compared to C$30.0m, and an operating margin of 40.4 percent. The decrease in operating income was attributable to the decline in revenue, partially offset by C$1.7m of savings from rent abatements and C$1.6m of government payroll subsidies. Pre-store opening costs and COVID-19 related temporary store closure costs of C$2.8m and C$0.4m, respectively, were recognized. The decline in DTC operating margin reflects fixed cost deleverage resulting from lower revenue.
• Wholesale operating income was C$44.9m, an operating margin of 37.9 percent, compared to C$90.4m, and an operating margin of 41.4 percent. The decrease in operating income was attributable to the decline in revenue partially offset by cost reduction efforts in response to COVID-19 and supplemented by C$7.6m of government payroll subsidies. The decline in operating margin reflects fixed cost deleverage as a result of lower revenue.
• Other operating loss was C$(36.9)m from C$(45.0)m. The decrease in operating loss was attributable to cost saving initiatives across the business in response to COVID-19 including reductions of C$4.3m in marketing costs as well as C$2.7m of government payroll subsidies, partially offset by C$1.0m of product development costs.
• Net income was C$10.4m, or C$0.09 per diluted share, compared to net income of C$60.6m, or C$0.55 per diluted share.
• Adjusted EBIT was C$15.7m from C$79.2m.
• Adjusted net income was C$11.5m, or C$0.10 per diluted share, compared to adjusted net income(1) C$63.6m, or C$0.57 per diluted share. Wall Street’s consensus estimate had been C$0.08.

Outlook
Given continued global uncertainties, including second wave shutdowns and disruptions, the pace of retail traffic recovery and the impact of economic developments and travel restrictions, all of which are unknown, the company continues to not provide an outlook for fiscal 2021.

Photo courtesy Canada Goose