Canada Goose reported flat earnings on an adjusted basis in the fourth quarter ended March 31 while revenues rose 25.1 percent.
All figures are in millions of Canadian dollars.
In the quarter, revenues reached $156.2m, up from $124.8 million a year ago. Adjusted net income was flat at $10.0m, or 9 cents. Net income came to $9.0 million, or 8 cents a share, against $8.1 million, or 7 cents, a year ago.
Adjusted EBITDA declined 6.4 percent to $20.4 million from $21.8 million. Reported EBITDA came to $19.1million down from $19.7 million.
Fiscal 2019 Highlights (in millions of Canadian dollars):
- Total revenue increased by 40.5 percent to $830.5m
- Net income was $143.6m, or $1.28 per diluted share
- Adjusted EBITDA margin expanded by 240 basis points to 27.6 percent
- Adjusted net income per diluted share increased by 61.9 percent to $1.36
“I am extremely proud of Canada Goose’s many strategic accomplishments in fiscal 2019. We entered the year with a very ambitious agenda of global growth, and we have surpassed it with flying colours,” said Dani Reiss, president and CEO. “We have come a long way in a short time and we have done it the right way – by preserving the purity of our brand and building for the future. Our business and our people have never been stronger. I believe that we are still just scratching the surface of our long-term potential as we continue to define performance luxury globally.”
Fiscal 2019 Business Highlights
- Growth in every geographic region, with annual revenue increasing by 28.2 percent in Canada, 36.3 percent in the United States and 60.5 percent in Rest of World.
- Successfully launched DTC operations in Greater China, the world’s largest luxury market.
- Proportion of total revenue generated in Rest of World (34.5 percent) was in-line with Canada (35.3 percent) for the first time.
- Global footprint of 11 directly-operated retail stores and 12 national e-commerce markets increased DTC sales to over half of total revenue at 51.9 percent.
- Established new generations of hero products in nascent rainwear and knitwear categories, alongside continued innovation in parkas and lightweight down collections.
- Acquired Baffin, which will provide valuable expertise and infrastructure to develop a stand-alone Canada Goose footwear offering in the years to come.
- Eight in-house manufacturing facilities, including two opened during the year, produced 47 percent of total down-filled jacket volume.
Fiscal 2019 Results (in Canadian dollars, compared to Fiscal 2018):
- Total revenue increased by 40.5 percent to $830.5m from $591.2m, or 39.0 percent on a constant currency basis(1).
- Wholesale revenue increased to $399.2m from $336.2m. This was driven by higher order values from existing partners. Incremental revenue from Baffin, which was acquired in November 2018, and favourable foreign exchange fluctuations also contributed positively.
- DTC revenue increased to $431.3m from $255.0m, representing 51.9 percent of total revenue compared to 43.1 percent. The increase was primarily attributable to incremental revenue from five new retail stores and one new e-commerce market. This was complemented by strong performances from established e-commerce markets and retail stores.
- Gross profit increased to $516.8m, a gross margin of 62.2 percent, compared to $347.6m, a gross margin of 58.8 percent. The increase in gross margin was driven by a greater proportion of DTC revenue, and to a lesser degree, incremental gross margin expansion at the respective channel levels.
- DTC gross profit was $324.6m, a gross margin of 75.3 percent, compared to $189.8m, a gross margin of 74.4 percent. The increase in gross margin was primarily driven by pricing, partially offset by manufacturing labour cost increases.
- Wholesale gross profit was $192.2m, a gross margin of 48.1 percent, compared to $157.8m, a gross margin of 46.9 percent. The increase in gross margin was primarily attributable to pricing, partially offset by manufacturing labour cost increases. To a lesser degree, wholesale gross margin also benefitted from production efficiencies in manufacturing overhead, partially offset by changes in product mix.
- Operating income was $196.7m, compared to $138.1m. The increase in operating income was driven by revenue growth and gross margin expansion, partially offset by SG&A growth investments.
- Unallocated corporate expenses were $169.1m, compared to $107.8m. The increase was primarily due to investments to support growth in marketing, corporate headcount and IT, including Greater China operations. Professional fees and other costs relating to public company compliance also increased.
- Unallocated depreciation and amortization was $18.0m, compared to $9.4m, driven by the retail store opening program.
DTC operating income was $234.6m, an operating margin of 54.4 percent, compared to $134.7m, an operating margin of 52.8 percent. This was driven by gross margin expansion, strong sales productivity across the channel and lower pre-opening costs, partially offset by incremental SG&A fees to operating partners in Greater China.
- Wholesale operating income was $149.2m, an operating margin of 37.3 percent, compared to $120.6m, an operating margin of 35.9 percent. The increase in operating margin was largely driven by gross margin expansion.
- Net income was $143.6m, or $1.28 per diluted share, compared to $96.1m, or $0.86 per diluted share. The increase in net income was due to higher operating income and a lower effective tax rate.
- Adjusted EBITDA was $229.6m, a margin of 27.6 percent, compared to $149.2m, a margin of 25.2 percent.
- Adjusted EBIT was $206.9m, a margin of 24.9 percent, compared to $136.4m, a margin of 23.1 percent.
- Adjusted net income was $151.6m, or $1.36 per diluted share, compared to adjusted net income(1) of $94.1m, or $0.84 per diluted share.
Fiscal Year 2020 and Long-Term Outlook
For fiscal 2020, the company currently expects the following:
- Annual revenue growth of at least 20 percent
- Adjusted EBIT margin expansion of at least 40 basis points
- Annual growth in adjusted net income per diluted share of at least 25 percent
Key assumptions underlying the fiscal 2020 outlook above are as follows:
- Wholesale revenue growth in the high-single-digits on a percentage basis
- Eight new retail stores in operation by the end of the winter selling season
- One new digital concept store in operation by the end of the winter selling season, which will be an experiential showroom to drive local e-commerce sales in the Greater Toronto Area. It is not expected to generate revenue or operating income at a level consistent with the company’s traditional retail store format.
- Materially larger losses in adjusted EBIT and adjusted net income per diluted share during the fiscal first quarter, due to a larger number of retail stores operating during off-peak periods and higher corporate SG&A investments to support growth, including local market activation ahead of planned retail openings, new product and Greater China operations.
- Capital expenditures of $75 million including investments in new retail stores, IT and manufacturing capacity
- Weighted average diluted shares outstanding of 112.4 million shares
- An effective annual tax rate approximately in-line with fiscal 2019
Over the next three fiscal years, the company currently expects the following:
- Average annual revenue growth of at least 20 percent
- Annual adjusted EBIT margin expansion of at least 100 basis points in fiscal 2022, relative to fiscal 2019
- Average annual growth in adjusted net income per diluted share of at least 25 percent
- The long-term outlook assumes, among other things, a continuation of current economic conditions and execution of the growth strategies outlined under the heading “Business Overview” in our Annual Report on Form 20-F for the fiscal year ended March 31, 2019.
On May 10, 2019, the company refinanced its debt to support the growth of the business and enhance financial flexibility. The capacity of the existing Revolving Facility was increased to $300.0m, with a seasonal increase to up to $350.0m during peak working capital periods, and the maturity was extended to June of 2024. Concurrently, the maturity of the existing USD $113.8m Term Loan Facility was extended to December of 2024.
Photo courtesy Canada Goose