Canada Goose Holdings has drastically lowered its guidance for the financial year ending on March 29 due to the coronavirus outbreak and its impact on sales in Mainland China. The management said that the virus is affecting retail sales of its products both in China and in stores located in popular tourist destinations for Chinese tourists, which indicates that the brand is hot among Chinese consumers.
The company’s total revenues for the year are now expected to reach 945 to 955 million Canadian dollars (about €660m-$715m), which would be equivalent to an increase of 14.5 percent, down from the 20 percent growth previously forecast.
In its third fiscal quarter ended on Dec. 29, the revenues of Canada Goose improved by 13.2 percent from the year-ago quarter to C$ 452.1 million (€315.1m-$340.9m), or by 13.7 percent on a constant-currency basis. This was driven by strong direct-to-consumer sales and a good performance in Asia.
The Lightweight down and the Lodge hoody were among the best-sellers. The management also highlighted the brand’s expanded line of knitwear, which is growing fast and accounts for almost 10 percent of total revenues in many retail outlets.
In constant currencies, revenues from the wholesale business declined by 8.1 percent to C$ 150.3 million (€104.8m- $113.4m) during the period, because orders for parkas were brought forward from the fiscal third quarter to the second quarter. This was better than the company anticipated, and Canada Goose also benefited from the acquisition in November 2018 of Baffin, the Canadian footwear producer. The gross margin remained flat at 47.7 percent in the company’s wholesale operations.
Revenues from the direct-to-consumer (DTC) segment, which includes e-commerce, increased by 28.3 percent in constant currencies to reach a level of C$ 301.8 million (€210.3m-$227.6m), driven by strong reorders late in the period. The management said that, while most other outdoor brands were discounting frequently throughout the season to drive their businesses, Canada Goose did not, but still recorded strong sales on Black Friday and Cyber Monday. The gross margin in the segment declined by 1.0 percentage points to 75.1 percent, due to higher input costs and freight, partially offset by higher prices.
Overall, the company reported a quarterly sales decline of 12 percent in Canada, weighed down by weak wholesale revenues and a challenging market overall. The company said that over 8,000 consumers completed “The Journey in December,” visiting its new retail concept in Toronto, which combines a guided tour of digital content, interactive displays and a personalized shopping experience featuring the full Canada Goose assortment online and same-day home delivery.
In local currencies, revenues went up by 10.0 percent in the U.S. They climbed by 11.9 percent in Europe, where DTC performed well, driving growth, and they more than doubled in Asia, despite lower traffic and reduced store hours in Hong Kong owing to the political protests there. China was the biggest contributor, and e-commerce traffic and revenues grew significantly there. Canada Goose was the top-performing brand by revenues on Tmall’s Luxury Pavilion during the Singles Day and Double 12 shopping festivals.
Overall, the company’s gross margin rose by 1.5 percentage points to 66.0 percent in the quarter, benefiting from the higher DTC sales. The operating margin expanded by 0.7 percentage points to 35.7 percent.
The adjusted operating profit (Ebit) improved by 13.2 percent to C$ 163.8 million (€114.2m-$123.5m), and net income jumped by 14.1 percent to C$ 118.0 million (€82.2m-$89.0m). Page 14
