Canada Goose reported an improved gross margin and a lower operating margin on a 19.6 percent increase in revenues to 232.9 million Canadian dollars (€161.9m-$187.1m) for its second quarter ended Sept. 26. Excluding the exceptional revenues from personal protective equipment recorded in the same period a year ago, comparable sales went up by 40.3 percent, but net earnings declined to C$9.0 million (€6.3m-$7.2m) from C$10.4 million in the year-ago period.
“Our second quarter results demonstrate our momentum,” said Dani Reiss, president & CEO. “Across all channels, we are seeing strong leading indicators of peak season demand. With accelerating DTC trends, growing lifestyle relevance and unique supply chain flexibility, we believe we have the right foundation in place for an outstanding fiscal 2022.”
In view of the better-than-expected results, the company raised its guidance for the full financial year, predicting that it will achieve an adjusted operating margin (Ebit) of between 16.5 and 17.7 percent on total revenues of C$1,125 million (€782,122-$903,596) to C$1,175 million (€816,977-$943,818), with 70 percent of them coming from its direct-to-consumer (DTC) operations. Wholesale revenues should increase at a mid-single-digit rate instead of being flat as previously anticipated.
In the third quarter, DTC revenues expanded by 80.0 percent to C$83.2 million (€57.8m-$66.8m) as compared to a year earlier thanks to higher sales at existing and new stores, plus an increase of 33.8 percent in global e-commerce. In particular, DTC revenues in Mainland China grew by 85.9 percent.
Wholesale revenues rose by 24.8 percent to C$147.9 million (€102.8m-$118.8m) as a result of earlier deliveries due to a lower level of Covid-related disruptions to the retailers’ operations, said Canada Goose, which manufactures most of its products at its own factories in Canada.
The overall gross margin went up by 9.6 percentage points to 58.0 percent. In the DTC channel, the gross margin declined by 3.1 percentage points to a still relatively high level of 73.7 percent, with negative contributions of 3.8 percentage points from a lack of new government subsidies and 1.7 points from a higher proportion of non-parka products in the sales mix. These factors were partially offset by a positive contribution of 2.3 percentage points due to a higher proportion of revenues from the company’s own retail stores.
In the wholesale channel, the gross margin improved by 1.8 percentage points to 49.4 percent as positive effects of 4.9 percentage points from lower sales to international distributors and 2.1 points from better pricing offset a negative effect of 5.1 percentage points from the non-recurrence of Covid-related payroll subsidies.
The company’s operating margin declined to 4.9 percent from 7.8 percent in the corresponding 2020 period. The main reason was an incremental investment of C$18.5 million (€12.9m-$18.9m) in marketing and strategic initiatives.
