Canada Goose Holdings, Inc. delivered a bullish outlook for the current fiscal year after reporting a better-than-expected fiscal fourth quarter ended April 3.
“Despite the challenges in today’s environment, I’m proud that we are closing the year with record sales breaking the $1 billion mark for the first time,” said Dani Reiss, chairman and CEO, on a call with analysts. We are also ending fiscal 2022 with confidence and conviction in our brand, business and team.”
In the quarter, sales increased 6.8 percent to Canadian $223.1 million ($174 mm), just ahead of Wall Street’s consensus estimate of C$222.7 million. The latest quarter included one less week than the year-ago period due to a 53-week fiscal year. Using the same trading weeks as the comparative quarter in both periods, revenue would have climbed 23.8 percent.
DTC revenue advanced 8.0 percent to C$185.4 million as higher revenue from existing stores offset a 12.3 percent decrease in e-commerce revenue. Using the same trading weeks as the comparative quarter in both periods, DTC revenue would have grown 27.8 percent, with e-commerce growth of 1.2 percent. A year ago, the comparative quarter reported e-commerce growth was 123.2 percent.
Wholesale revenue grew 3.5 percent to C$35.1 million, and higher-order values drove the increase. Using the same trading weeks as the comparative quarter in both periods, wholesale revenue gained 7.7 percent.
From a geographic perspective, retail performance in North America was the company’s biggest growth driver.
“Consumer confidence remains strong, and shoppers have returned to pre-pandemic trends,” Reiss said. “We saw a similar environment in the U.K., which drove the immediate increase. In the Rest of Europe, we saw softer local and international traffic trends. APAC was the only region that declined due to ongoing COVID restrictions, including store closures in Mainland China. The Chinese government has a strong track record of being very proactive in containing COVID outbreaks. We do not expect the prevailing circumstances to have a meaningful impact on results in our busiest season, which is reflected in our outlook.”
Gross margins in the quarter improved to 69.1 percent from 66.4 percent a year ago. The increase was attributable to pricing (+180 basis points) and a higher proportion of sales to wholesale partners compared to international distributors (+110 bps), partially offset by higher sales in non-parka categories, which typically carry lower margins.
SG&A expenses grew to 68.7 percent of sales from 62.9 percent.
Operating income was C$0.9 million, an operating margin of 0.4 percent, compared to C$7.2 million and 3.4 percent. Operating margin decreased due to higher operating costs and lease impairment costs, partially offset by gross margin expansion and a higher wholesale operating margin.
The net loss was C$9.1 million, or C9 cents per share, compared to C$2.5 million, or C2 cents per share. On an adjusted basis, net income was C$4.1 million, or C4 cents per share, compared to C$0.7 million, or C1 cent, a year ago and ahead of Wall Street’s consensus target calling for a loss of 1 cent.
Adjusted EBIT jumped 160 percent to C$12.5 million, with an adjusted EBIT margin of 5.6 percent, from C$4.8 million, or 2.3 percent, a year ago.
For the full year, sales reached C$1,098.4 million against C$903.7 million a year ago, a gain of 21.5 percent. Earnings were C$94.6 million, or 87 cents a share, against C$70.3 million, or 63 cents, a year ago. On an adjusted basis, EPS came to C$1.09 against 78 cents a year ago.
Reiss said Canada Goose continues to benefit from its Canadian manufacturing capabilities. “Recently, many peers have pointed to continued production and supply chain challenges, as well as logistical delays. This was not a factor for us in the quarter, nor do we expect it to affect the year ahead. We continue to be uniquely insulated against supply chain issues due to our Canadian manufacturing, which accounted for 84 percent of our total units in calendar 2021,” he said.
For the current fiscal year, Canada Goose expects total revenue of C$1.300 billion to C$1.400 billion, representing growth between 18.4 percent and 27.5 percent. Wall Street’s consensus estimate had been C$1.30 billion.
Non-IFRS adjusted EBIT is expected in the range of C$250 million to C$290 million, representing a margin of 19.2 percent to 20.7 percent. That compares to C$174.6 million, or 15.9 percent, in 2021.
Non-IFRS adjusted net income is projected in the range of C$1.60 to C$1.90, up between 46.8 percent and 74.3 percent from C$1.09. Wall Street’s consensus estimate had been C$1.61.
For the fiscal first quarter, total revenue is expected in the range of C$60 million to C$65 million, non-IFRS adjusted EBIT between a loss of C$80 million to C$75 million, and non-IFRS adjusted net loss per diluted share from C64 cents to C$60 cents.
Photo courtesy Canada Goose/Reuters