Canada Goose’s struggles in the first quarter of fiscal 2021 have the premium outdoor label rethinking its wholesale and retail strategy. Still, the north-of-the-border maker of luxury parkas and other pricey apparel is forging ahead with four new stores in Mainland China, bolstering its direct-to-consumer business and introducing a new product category late next year.
In a Nutshell: Canada Goose is accelerating DTC investments as the Covid-19 pandemic sparks a boom in e-commerce. The company launched mobile capabilities in U.S. stores, after pilots in Canada, and a cross-border solution to attract international shoppers.
The company, which operates 22 stores globally, has also reduced and refocused its retail investments. The first of four new stores in Mainland China opened in June in Chengdu, which “has consistently performed ahead of expectations,” Canada Goose said Tuesday.
Canada Goose president CEO Dani Reiss sees the coronavirus outbreak as an opportunity for reinvention. “Adversity demands change, drives innovation and reveals winners,” he said. “For Canada Goose, that has never been more true than today, as we begin to see signs of recovery around the world, heading into our most important season.”
In a call to Wall Street analysts, Reiss said that as Covid-19 restrictions have eased, “all of our factories and all but one of our stores have reopened.”
Canada Goose will take a “limited, flexible and deliberate” approach to manufacturing, he added, while shipments in the channel are planned for later in the season, closer to just-in-time delivery. The cold-weather company is planning to add depth to its key styles, “drawing down on existing inventory and [ending] with lower inventory relative to last year,” Reiss noted.
As styles perform well, Canada Goose will be poised to chase that demand. “That’s why we built our manufacturing the way we did,” Reiss told analysts of the company’s agility to ramp up production on garments that resonate with shoppers. “We’ll use that to our advantage this year.”
Touching on the forthcoming footwear introduction, Reiss said Canada Goose will bow shoes in select markets for fall/winter 2021, with a robust launch following after.
“I’m very excited about footwear and looking forward to doing it our own way…. [The] category is very large and we are taking the opportunity seriously,” Reiss told analysts. “We are looking to generate large numbers,” he added, regarding expected sales volume in footwear.
As remote work continues to be the norm for many office-based professionals, Reiss expects consumers will continuing embracing adventures in nature, which could bolster sales of the company’s outdoor fare.
Net Sales: For the three months ended June 28, total revenue fell 63.3 percent to 26.1 million Canadian dollars ($19.7 million) from 71.1 million Canadian dollars ($53.6 million).
Store closures due to the coronavirus drove DTC revenue down 70.1 percent to 10.4 million Canadian dollars ($7.8 million) from 34.8 million Canadian dollars ($26.2 million), while revenue from e-commerce was consistent with the year-ago quarter. Wholesale revenue totaled 8.7 million Canadian dollars ($6.5 million), down 75.6 percent from 35.6 million Canadian dollars ($26.8 million) as a result of lower shipments. Other revenue of 7.0 million Canadian dollars ($5.3 million) stemmed from sales of personal protective equipment to support Covid-19 response efforts.
Earnings: The net loss was 50.1 million Canadian dollars ($37.7 million), or 46 Canadian cents ($0.35), versus a net loss of 29.4 million Canadian dollars ($22.1 million), or 27 Canadian cents, ($0.20) a year ago.
The company said that while there’s been gradual sequential improvement in performance, the negative financial impacts of Covid-19 have continued into the second quarter of fiscal 2021, with a significant revenue decline expected. The wholesale channel, representing 74.2 percent of sales in the quarter, saw shipments to retail partners “continue to be materially lower” given the disruption to brick and mortar, the company said. But as retail reopenings gather steam, Canada Goose is expecting lower wholesale revenue and later shipment timing for the current fiscal year versus fiscal 2020. In DTC, product is currently misaligned to the high temperatures across North America, though Canada Goose noted that “preparations for the peak online selling season continue to remain on track.”
The company is not providing an outlook for fiscal 2021.
Canada Goose also emphasized that its liquidity and cash flow profile continue to provide “extensive coverage against ongoing external uncertainties. Measures taken to reduce anticipated cash expenses and investments by [90 million Canadian dollars ($67.6 million)] in the first quarter of fiscal 2021 were fully met. Despite the significant topline impact of temporary retail closures, net cash used in operating activities was [110.5 million Canadian dollars ($83.0 million)] lower than the comparative quarter last year.”
CEO’s Take: “Where we face uncertainty, we have practiced discipline and flexibility, and where we see opportunity, we have accelerated our strategic plans,” Reiss said.