Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Canada Goose Holdings Inc (GOOS, Financial) reported a 4% year-over-year increase in Q1 revenue, reaching $88.1 million.
- The company saw strong performance in Mainland China, driven by key shopping moments and D2C initiatives.
- Introduction of the first-ever Creative Director, Hyder Acumen, and successful launch of the PBI hoodie campaign featuring Jane Fonda.
- Significant progress in sustainability efforts, including a 6% reduction in Scope 1 and 2 emissions and 80% of materials sourced responsibly.
- Positive developments in the DTC channel, with a 13% increase in sales and strong demand for seasonal products like apparel, wind wear, and footwear.
Negative Points
- DTC comparable sales were down 4.4% year-over-year, primarily due to a shift in product sales mix and softer conversion trends in North America.
- Wholesale revenue decreased by 41% year-over-year, reflecting a planned lower order book and a soft business environment.
- Gross margin declined by 540 basis points to 59.7%, impacted by channel and product mix and the fixed cost base of the new European manufacturing facility.
- Adjusted EBIT loss increased to $96 million from $91.1 million in the same quarter last year, due to lower gross profit and higher costs associated with operating more stores.
- Inventory levels remain high at $484 million, although down 7% year-over-year, indicating ongoing challenges in inventory management.
Q & A Highlights
Q: How is Hyder Akbar, the new Creative Director, integrating into the company, and what are the expectations for non-heavyweight down products?
A: Danny Reiss, CEO: Hyder is integrating well and has already launched a successful product. His designs will add energy to our brand, with new capsule collections expected before the end of Q3. We anticipate his influence will enhance both specific products and the overall brand.
Q: Can you elaborate on the SKU reduction strategy and its impact on the model?
A: Carrie Baker, President, Brand and Commercial: We are focusing on top sellers and newness, particularly with Hyder's designs. This rationalization will help us better meet consumer demand and streamline our product offerings.
Q: What are the expectations for growth in non-heavyweight down categories this year?
A: Carrie Baker, President, Brand and Commercial: We expect significant contributions from apparel, wind wear, and footwear. Heavyweight down will also grow, but we see strong demand in these newer categories, particularly in Asia-Pacific.
Q: How should we think about the cadence of DTC comp sales for the rest of the year?
A: Neil Bowden, CFO: While we didn't provide quarterly guidance, we expect positive comps by peak season, driven by our efforts to become a best-in-class retailer.
Q: Can you discuss the impact of the European manufacturing facility on gross margins?
A: Neil Bowden, CFO: The facility contributed to a 330 basis point decline in Q1 gross margin due to its fixed cost base. However, we expect minimal impact on the full-year gross margin, which should be similar to fiscal 2024.
Q: What are your expectations for the luxury market growth this year, given the dynamic environment?
A: Neil Bowden, CFO: We anticipate lower single-digit growth for the luxury market. Despite this, we feel confident in our ability to execute our plans and achieve our targets.
Q: Can you elaborate on the differences in performance between Mainland China and other regions like Hong Kong and Japan?
A: Neil Bowden, CFO: Mainland China and Japan showed strong performance, while Hong Kong, Macau, and Taiwan faced consumer pressure. The relative weakness of the Japanese yen has driven inbound tourism and spending.
Q: Are you seeing more repeat purchases or new customers due to the shift towards lightweight products?
A: Carrie Baker, President, Brand and Commercial: We are seeing strong repeat purchase rates and attracting new customers. Our approach is to stay relevant and appeal to a wide audience, from younger generations to long-time fans.
Q: What are the opportunities for improving four-wall margins and DTC profitability during peak season?
A: Carrie Baker, President, Brand and Commercial: Our focus is on driving top-line revenue through better traffic conversion and delivering a stellar in-store experience. We expect these efforts to improve margins and profitability.
Q: Have you seen any changes in consumer response to your pricing actions this year?
A: Neil Bowden, CFO: We have been cautious with pricing and continue to monitor consumer demand. We believe our product quality and value proposition justify the prices, and we see opportunities for higher-end products, especially with new designs from Hyder.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
