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Canada Goose Expansion Will Come From These Categories

Canada Goose says it’ll ramp up its foothold in apparel while breaking into promising new categories.

Apparel, accessories and footwear are on “very accelerated growth curves,” Woody Blackford, Canada’s Goose’s chief product officer, said Tuesday at the company’s Investor Day event. By 2028, “just over half of our revenue will be in the core pack parka category,” he continued. “And that’s great because it means we’ll be getting more product in more categories to market even faster.”

The apparel business today is expected to reach close to 6 percent of total revenue in Fall-Winter 2023. “In Spring 2023, we are ramping up our expansion into apparel tops. We’re starting with T-shirts which are available in select retail locations now,” with other products, such as polos, to follow, he said.

Blackford said Canada Goose will expand into sneakers. “This is a true unlock for our seasonal relevance with a 12 month broad appeal,” he said, adding that puffer mules are on deck. The company has started testing home goods including blankets, home accessories and fragrances. “We see tremendous opportunity ahead of us especially in the lux ski lodge settings like Vail, Aspen [and] St. Moritz,” he said.

Canada Goose is targeting 3 billion Canadian dollars ($2.23 billion) in revenue with “adjusted EBIT [earnings before interest and taxes] margin of 30 percent, all within the next five years,” Dani Reiss, chairman and CEO, said regarding financial outlook for Fiscal 2028..

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The company’s five-year strategic growth plan includes growing its customer base with a focus on women and Gen Z, building the direct-to-consumer (DTC) retail footprint and digital presence, going bigger in newer categories—such as rainwear, apparel and footwear, including sneakers— and creating new ones, adding eyewear, home, and bags and luggage.

Reiss wants women to represent 60-plus-percent of sales, the luxury average, versus the 48 percent Canada Goose has now.

Canada Goose allows “annual price increases,” but “we do not discount,” Reiss said. “Our supply chain is vertically integrated. Our DTC margins reflect that we control our distribution and we create [product] icons.”

Preserving Made-in-Canada production sets Canada Goose apart, he said. The company also works with contracted Canadian facilities and 14 mostly European international manufacturing partners.

Canada Goose sells in 62 countries, and the Fall-Winter 2022 line was “sold through over 1,500 wholesale points of distribution,” Reiss said, adding that the company has 51 retail stores, and a digital presence in 57 countries.

“Since 2017, we have grown a direct-to-consumer business from 29 percent of total revenue to nearly 70 percent of expected revenue in Fiscal 2023, and we can go even further than that. Engaging with our customers directly, where and how they want to shop, has deepened our relationships with them, driven higher profitability for our business and ultimately has strengthened our brand,” Reiss said.

The five-year plan forecasts a compound annual growth rate of 20 percent in revenue, and 900 million Canadian dollars ($669.3 million) in adjusted EBIT, up from 180 million Canadian dollars ($133.9 million) expected in Fiscal 2023.

Canada Goose aims to be net zero carbon for Scope 1 and 2 emissions by the end of this year. In 2021 it gained RDS certification and is “committed to 100 percent sustainable packaging by the end of 2025,” Reiss said.

The newly created chief digital officer role, responsible for all consumer-facing digital platforms, will report directly to Reiss.

Other investor day presenters include Jonathan Sinclair, vice president and CFO, who said, “We believe Japan and Korea have the potential to reach the size of Mainland China,” adding that Hong Kong, Macau, Taiwan and Australia are currently underrepresented markets. “We plan to grow our store base in key cities to accelerate our women’s business and to expand our e- commerce omni channel presence,” he said. Sinclair also said that in North American, expansion opportunities are in key cities in the Western U.S. markets.

In Fiscal 2028, Canada Goose expects DTC revenue to reach about 2.4 billion Canadian dollars ($1.78 billion), or 80 percent of total revenue, “up from the high 60s expected in Fiscal ’23,” Sinclair said.

Penney Brooke, chief marketing and experience officer, who said that the luxury consumer is getting younger, with “Gen Z expected to represent up to 30 percent of the luxury market in 2023. So engaging is this younger generation, and maintaining our relevance with them, is of a top priority to us.”

According to Brooke, more than half of the brand’s client base is under the age of 35. What’s more, “repeat customers spend 2.3 times more with Canada Goose in their lifetime versus a one time purchaser,” adding that repeat customers are more likely to purchase non-heavyweight down following their first purchase. “Thirty percent of global customers are repeat customers,” Brooke said.

As for re-commerce, the second hand market for Canada Goose product is “robust and growing,” said Carrie Baker, company president. “Our research shows that online year-over-year searches in the U.S. for secondhand Canada Goose have grown by 50 percent,” she pointed ouot.

The company plans to add 20 locations worldwide, “contributing significantly more than than $100 million in the long term. We plan to open three to five locations within the next fiscal year starting with the largest travel hubs. Our initial expansion will be focused in Asia and India, followed soon after by North America,” Baker said.

The company also cautioned that its projections on financial outlook for Fiscal 2028 is based on certain assumptions, including its ability to increase its permanent retail store count to between 130 and 150 doors, increase store productivity and e-commerce sales on year-round product assortments, optimize wholesale and other distribution including introduction of travel retail and the buyback of key distributor markets, and DTC revenue representing 80 percent of total revenue for Fiscal 2028.

Also key will be Canada Goose’s ability to achieve and maintain in Fiscal 2028 DTC gross margin in the mid-70 percent range, and wholesale gross margin in the mid-to-high 40 percent range with “heavy weight down, light down and other product categories representing approximately 50 percent, 25 percent and 25 percent of revenue, respectively.”

Third-quarter results

Canada Goose last Thursday posted third quarter results that were impacted by the timing of wholesale shipments, lower revenue in Mainland China due to Covid-19 disruptions and slowing momentum in North America. The company warned about its China challenges in November when it posted second-quarter results.

Net Sales: Revenue for the three months ended Jan. 1 slipped 2.0 percent to 576.7 million Canadian dollars ($428.8 million) from 586.1 Canadian dollars ($435.8 million).

By region, revenue in the U.S. rose 11.3 percent, driven by higher revenues from existing stores and continued retail expansion. However, the company posted a revenue decrease in Canada and EMEA (Europe, Middle East and Africa)—down 6.8 percent and 8.4 percent, respectively—because of earlier timing for wholesale shipments and lower e-commerce performance, partially offset by increased sales within existing stores. In its APAC (Asia Pacific) operation, revenue declined 5.2 percent mostly due to Mainland China’s Covid-19 disruptions, but that was partly offset by an uptick in sales due to tis Japan Joint Venture. The joint venture was formed nearly a year ago with Sazaby League Ltd., replacing their previous distribution agreement as the duo looked to build up the outerwear firm’s direct-to-consumer business online and in stores.

Earnings: Net income for the quarter fell 9.0 percent to 137.5 million Canadian dollars ($102.2 million), or a diluted share of 1.28 Canadian dollars ($0.95), from 151.3 Canadian dollars ($112.5 million), or 1.40 Canadian dollars ($1.04), in the year-ago period.

On an adjusted basis, net income for the quarter was down 11 percent to 134.9 million Canadian dollars ($100.3 million), versus 151.3 million Canadian dollars ($112.5 million) in the same year-ago period.

Growth accelerated in Mainland China toward the end of the quarter, and there are signs of a strong local rebound to date. However, the Covid disruptions and slowing momentum in North America resulted in company revising its annual guidance.

For the fourth quarter, total revenue was guided to the range of 251 million Canadian dollars ($186.6 million) to 271 Canadian dollars ($201.5 million), with an adjusted dilute share range between 0 Canadian cents ($0.00) to 12 Canadian cents ($0.09).

For the year, Canada Goose now expects total revenue between 1.175 billion Canadian dollars ($873.6 million) to 1.195 billion Canadian dollars ($888.5 million), versus prior guidance of 1.20 billion Canadian dollars ($892.2 million) to $1.30 billion Canadian dollars ($966.6 million) when the company posted second-quarter results. Adjusted diluted earnings per share was guided to the range of 92 Canadian cents ($0.68) to 1.03 Canadian dollars ($0.77), versus prior guidance in the range of 1.31 Canadian dollars ($0.97) to 1.62 Canadian dollars ($1.20).