Canada Goose Holdings was not hit as hard as other clothing brands by the pandemic, which it attributed to the seasonal nature of its business. While it felt the impact of store closures late in its fiscal year, which ended on March 29, 2020, its peak activity time had been mostly behind by then, and the group believes that it will be able to resume normal operations by the time the seasonal demand for its cold-weather products peaks again later this year.
For the fourth fiscal quarter, the company’s sales declined by 13.7 percent in constant currencies, down to 140.9 million Canadian dollars (€93.0m-$104.2m), including drops of 7.9 percent at wholesale and 6.7 percent in direct-to-consumer (DTC) sales. Europe and Rest of the World together grew by 3.8 percent in constant currencies, while Asia gained 6.8 percent. However, major markets like Canada and the U.S. declined by 12.4 and 11.9 percent, respectively. The gross margin expanded by 0.8 percentage points to 66.4 percent, but the net income tumbled to C$ 2.5 million (€1.6m-$1.8m), compared with C$ 9.0 million for the year-ago quarter.
The group saw revenues for its full fiscal year jump by 15.4 percent on a reported basis from the previous year to C$ 958.1 million (€632.1m-$708.5m), or by 15.9 percent on a constant currency basis.
Canada Goose recorded strong sales for most of the year until the coronavirus pandemic hit. It then implemented various cost-cutting measures, shutting down part of the production and laying off 125 members of staff who represent 5 percent of its global workforce, due to stores being closed since mid-March. The management said that the negative financial impacts of Covid-19 will be more pronounced in the first quarter ending on June 28, 2020, as throughout the first seven weeks of this period, 75 percent of its retail stores in the DTC channel were temporarily closed. It noted that, while e-commerce is operational in all markets and digital engagement is strong, the present quarter tends to be a low point for consumer purchasing online. In the wholesale channel, shipments have been largely shut off since March due to disruptions from retail store closures.
Given prevailing global uncertainties, the company is not providing an outlook for fiscal 2021.
In constant currencies, revenues from the wholesale business rose at Canada Goose in the past financial year by 7.9 percent to C$ 424.0 million (€279.9m-$313.5m). This increase was mainly attributed to incremental revenues contributed by Baffin, the Canadian footwear producer that the company acquired in November 2018. Other factors were higher prices and higher order values from international distributors. As Covid-19 disruptions intensified through the fourth quarter, there was a significant reduction in deliveries that impacted wholesale revenues as well. The wholesale gross margin dropped by 2.1 percentage points to 46.7 percent, weighed down by higher costs, including both input costs and incremental costs from the expansion of in-house manufacturing capacities. The management also blamed an unfavorable product mix, with a lower proportion of sales of parkas, which carry higher margins.
Revenues from the DTC segment, which includes e-commerce, went up last year by 22.4 percent in constant currencies to reach a level of C$ 525.0 million (€346.5m-$388.3m), driven by new store openings. However, this was offset by the impact of political disruptions in Hong Kong and disruptions from the pandemic in the third and fourth quarters. The gross margin in the segment inched down by 0.1 percentage point to 75.2 percent.
Overall, the company’s annual sales remained flat in Canada. In constant currencies, they were up by 10.7 percent in the U.S, and by 80.5 percent in Asia, due to the incremental contribution from new DTC operations in Greater China, which were launched at the start of last year. Sales progressed by 8.7 percent in Europe and the Rest of the World.
Overall, the company’s gross margin fell by 0.3 percentage points to 61.9 percent, while the operating margin contracted by 3.6 percentage points to 20.1 percent. The adjusted operating profit (Ebit) remained flat at C$ 207.4 million (€136.9m-$153.4m), and net earnings fell by 2.9 percent to C$ 147.2 million (€97.2m-$108.8m).