Canada Goose Sees Momentum Overseas in Q4
Canada Goose, lifted by strengthening sales in China and Europe, the Middle East and Africa, reported a 31.4 percent revenue gain and 16.3 percent increase in operating income for its fiscal fourth quarter.
However, costs related to personnel, interest hikes, brick-and-mortar store expansion, the Japan joint venture, and other areas led to a higher net loss of $10 million Canadian in the quarter ended April 2, compared to a loss of $9.1 million in the year-ago period.
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Revenues last quarter reached $293.2 million versus $223.1 million in the year-ago period. The company lost 3 cents per diluted share, versus a loss of 9 cents per share a year ago.
Soft sales in the U.S. had a negative impact on the company’s shares, which on Thursday fell $2.14, or 10.5 percent, to $18.30. Shares were reported in U.S. dollars. Sales in the U.S. dropped to $67.5 million Canadian last quarter compared to $70.7 million in the year-ago quarter. But sales in other regions showed increases. Canada accounted for $55.2 million in sales, compared to $39.1 million in the year-ago period; Asia-Pacific, $114.1 million Canadian versus $69 million Canadian, and the EMEA, $56.4 million Canadian against $44.3 million Canadian. The lifting of COVID-19 restrictions spurred sales in the Asia-Pacific region.
“We had a very strong performance in our fourth quarter. Stores in every market performed well especially in APAC and EMEA, and adjusted earnings were above expectations,” Dani Reiss, chairman and chief executive officer of Canada Goose, told WWD on Thursday, right after the financial results were issued.
In the U.S., sales were a bit softer compared to other regions of the world, Reiss said. While U.S. stores performed well, the performance was somewhat offset by the e-commerce results, though Reiss said the U.S. business began accelerating at the end of the quarter and that the momentum is continuing in the current quarter to date. He cited macro economic headwinds and a drop in consumer confidence for the U.S. results and said e-commerce dragged down the overall picture as consumers opted for more experiential shopping.
Looking ahead, Reiss said, “We’re very excited about fiscal 2024. It’s going to be a great year with strong top-line and bottom-line growth. At the same time, we are continuing to invest in our business.” The company is expecting revenue growth of between 15 and 20 percent, and has a long-term goal of 30 percent earnings before interest and taxes margins.
Last quarter, “Consumers responded to our new women’s apparel categories. We’re happy to see that our apparel sales are doing really well around the world, APAC in particular,” Reiss said, citing knitwear and fleece as particular standouts.
Going forward, Canada Goose is reallocating its marketing spend. “We are going to move a little bit from performance marketing to brand marketing,” Reiss said. There will also be a stronger focus on CRM and personalization, and less on value.
The company plans to double its store count from 51 at the end of the last fiscal year to more than 100 by fiscal 2028, with 16 openings planned for the current fiscal year. Units are planned for Las Vegas, Seattle, Atlanta, Philadelphia, Los Angeles as well as China, Australia, and the brand’s first store in Tokyo. Ten stores were opened last year.
While doubling the store base sounds aggressive, Reiss pointed out that compared to other brands that have hundreds of stores, Canada Goose’s brick-and-mortar network is still relatively modest in size. The company does not publicly break out brick-and-mortar versus online sales, though with the store openings ahead, some shift in the balance toward brick-and-mortar will occur.
On the merchandise front, Reiss said eyewear, luggage, home and sneakers will be added to the assortment, with sneakers “targeting the discerning sneaker head” expected to launch sometime this summer. The other upcoming categories are works in progress for the midterm, Reiss said during the interview.
“Now everything we do is done in-house. Brand purity is first and most important,” said Reiss. While keeping everything in-house is preferred, the CEO noted that in some areas where the company lacks expertise, licensing could be a possibility.
Reiss also said in a statement that “In early fall, new collections of hyper-feminine styles, ultra-flattering shaping and silhouettes as well as comfortable and new fabrics designed to perfectly transition throughout the fall and winter seasons are anticipated.”
Last quarter, Canada Goose launched its “transformation program,” involving accelerating consumer-focused growth, in particular with women, Gen Z, intensified CRM (customer relationship marketing) and personalization, and leveraging customer data. The program also called for doubling the retail footprint by the end of fiscal 2028, growing the digital presence, launching new categories and expanding existing ones.
“By the end of fiscal 2023, we diversified our product mix such that non-heavyweight down sales represented 42.9 percent up from 38.5 percent in fiscal 2022,” Reiss stated. “We expect continued growth in all categories including in heavyweight and lightweight down and accelerated growth of newer categories such as rainwear, apparel and footwear as well as the addition of further categories including eyewear, luggage and home. We expect to launch sneakers this summer.” Reiss believes that consumer trends are beginning to normalize.
Looking ahead, in Canadian dollars, the company expects total revenues of $1.4 billion to $1.5 billion for fiscal 2024, compared to $1.22 billion for the year ended April 2.
For the first quarter of fiscal 2024, Canada Goose company expects total revenue of $70 million to $80 million, compared to $69.9 million in the year-ago period. The company generates about 5 percent of its revenue in its fiscal first quarter, 20 percent in the second, 50 percent in the third and 25 percent in the fourth.
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