Strong post-Covid pandemic demand from China for parkas has helped Canada Goose beat revenue estimates for its first quarter, but the company warned of below-estimate sales in the current three months due to softer demand amid a tougher US economic backdrop.
Continued momentum in Asia
Revenue from its Asia-Pacific segment jumped 52.2 percent to C$24.5 million (€16.77m) in the quarter ended July 2, boosted by the return of Chinese tourists to key destinations like Macau and Hong Kong, which helped to drive growth. However, Canada Goose forecast second-quarter revenue of C$270 to $290 million – below estimates of about C$298.5 million – and an Ebit loss of C$20 - $30 million.
“Our fiscal ’24 outlook assumes continued momentum in Asia-Pacific balanced with a more challenged consumer backdrop in the US as noted by others in the sector,” said CFO Jonathan Sinclair.
U.S. Q1 sales were up 15.3 percent to C$18.1 million (€12.3m), as the firm’s high-end coats became popular again after a slowdown in the previous quarter. In other regions, EMEA fell 7.4 percent to C$18.7 million (€12.8m), while Canada surged 31.3 percent to C$23.5 million (€16.1m).
Group revenue rose to C$84.8 million (€58m) from C$69.9 million a year earlier and beating estimates of C$75.4 million (€51.6m). However, net losses widened to C$84 million (€57.5m) from $63.6 million in the same quarter last year.
Operating losses came in at C$99.7 million (€68.2m), compared to C$82.2 million in the first quarter of fiscal 2022/23. The wider loss was attributable to higher selling, general and administrative costs, partially offset by higher gross profit, which was up 29% to $55.2 million.
Adjusted Ebit was a loss of C$91.1 million (€67.8m), compared to a loss of C$76 million a year ago.
DTC driven by brand stores
Direct-to-consumer revenue grew 60 percent to C$55.8 million (€38.2m), driven by growth of in-store retail sales. Sales from DTC channels increased as part of the total revenue mix to 66 percent from 50 percent year on year.
Wholesale revenue decreased 18 percent to C$27.1 million (€18.5m), in line with expectations, due to the continued streamlining of wholesale relationships as Canada Goose pushed or greater DTC sales, partially offset by earlier shipments of orders to wholesale customers.
Gross margin for the quarter expanded to 65.1 percent from 61.1 percent a year ago, primarily due to a higher mix of DTC channel sales, pricing, and favorable product mix from selling higher-margin styles within its heavyweight and non-heavyweight down categories, partially offset by higher product costs due to inflation.
Three new permanent stores were also opened during the quarter, including one in Dublin, Ireland and two in North America – Las Vegas, Nevada, and Bellevue, Washington – bringing the total estate to 54 at the end of the quarter. The Beijing Sanlitun Flagship Store was relocated and redesigned, making it the company’s largest square footage store in the world.
Forecast remains stable
Annual guidance was maintained for a total revenue range of C$1.4 to $1.5 billion, a wholesale revenue decline of 6 percent as it reduces its wholesale door count by 6 percent and expands its retail store footprint, and adjusted Ebit of C$210 to C$240 million representing a margin of 15 to 16 percent.
