Canada Goose Holdings posted better-than-expected revenues and a smaller-than-expected net loss for its first quarter ended on June 30, thanks to strong demand for its high-end jackets and parkas in Europe and Asia.
Revenues jumped by 59.1 percent to $71.1 million Canadian dollars (€48.0m-$53.5m), which was well above analysts' expectations. The company's adjusted operating profit (Ebit) improved by 49.7 percent to C$ 25.9 million (€17.5m-$19.5m).
Canada Goose still made a net loss of C$ 29.4 million (€19.8m-$22.1m) for the period, down from a net loss of C$ 18.7 million for the same quarter last year.
In constant currencies, revenues from the wholesale business rose by 68.8 percent to C$ 36.3 million (€24.5m-$27.3m). This performance was due to requests for earlier shipment than last year from certain customers in Asia and Europe. Canada Goose also benefited from the acquisition of Baffin, the Canadian footwear producer, last November. Japan was a stand-out performer and a key driver of the wholesale growth in Asia.
Revenues from the direct-to-consumer (DTC) segment, which includes e-commerce, increased by 50.0 percent in constant currencies to reach a level of C$ 34.8 million (€23.5m-$26.2m). The management said it has made several investments in its DTC operations – including its e-commerce and company-owned retail outlets – in a bid to reduce its dependence on department stores, which are having a difficult time.
Growth in DTC was driven by incremental revenues from five new retail stores and one new e-commerce market opened during the fiscal year of 2019. Canada Goose also saw strong out-of-season demand for autumn and winter sales. Greater China performed well during the quarter, with the group opening the doors to a new store in Shenyang in Northeast China, building on the success of its first two retail stores in the country and on Tmall.
Non-parka revenues in the DTC channel nearly doubled to represent nearly one-third of the sales in the quarter for the first time. The management attributed this to the group's expansion efforts across categories and climates, with products including wool and lighter layers, as well as spring and summer wear.
Overall, the company reported sales increases for the year of 40.4 percent in Canada, 15.8 percent in the U.S. and 79.7 percent in Europe and the rest of the world, with earlier wholesale shipments making a significant impact. The group pointed out that revenues nearly tripled in Asia, with a good performance in Japan and South Korea, and the incremental contribution of DTC operations in Greater China, which were launched at the start of the year.
The company's gross profit margin fell by 6.5 percentage points to 57.5 percent, as the company's lightweight jackets carry lower margins than parkas. The operating margin declined by 5.8 percentage points to 38.7 percent.
The management expects revenue growth of at least 20 percent for the full financial year ending next March.