To hear Dani Reiss tell it, Canada Goose’s march from a small family outerwear manufacturer to global power player and Wall Street darling was fueled by a simple, born-in-Canada business philosophy.
That, and a series of near accidents, steered the Toronto-based company toward higher price points, international distribution and an at-home manufacturing base primed to turn out jackets worthy of Canadian winters.
As true as all that might be, there’s much more to the story of Canada Goose than simple priorities and luck — and it starts at the top.
Reiss joined the family business in 1997 — 40 years after his grandfather, Sam Tick, founded the firm as Metro Sportswear, specializing in woolen vests, raincoats and snowmobile suits. It was a very small family business and half of its sales came from producing private label. By 2001, Reiss was president and chief executive officer and he and the brand were firmly set on its present course.
“I never planned to do this with my life,” Reiss told WWD.
And by all outward appearances, Reiss came into the business at exactly the wrong time.
“The outdoor boom had just ended,” he said. “A lot of the brands that were considered outdoor brands were at much lower price points. Had I been there 10 years earlier, maybe I would have been able to catch that wave.”
But that would have led to ultimately to a different Canada Goose.
Reiss found himself at a small coat manufacturer producing in Canada when it was an increasingly lonely enterprise.
“Pretty much everybody else had gone offshore,” he said. “We committed to stay in Canada, to try to rebuild an industry that had been decimated by globalization.
“Making our product in Canada, the cost of producing goods here is higher,” he said. “We were unable to be a part of the outdoor industry because we were inherently higher [priced] wherever we sold our product. We had no choice but to play in a different arena.”
Left out in the cold and away from his category’s mainstream, Reiss traveled the world in search of a customer that synced up with Canada Goose.
“In Europe is where we really first took off from a consumer point of view,” he said.
Canada Goose was already more expensive by virtue of its manufacturing choices and targeting Europe only made the brand more so. Selling across the Atlantic included extra costs associated with freight and distribution as well as the higher markups typical of retailers in the region.
But shoppers there liked what they saw and that the brand was made in Canada.
“The authenticity was important to consumers in Europe,” Reiss said. “Made in Canada, it means functional, it means real. People really gravitated to real things.”
The short version of this more nuanced point plays off one of the foundations of European luxury. “Making our product in Canada was like making a Swiss watch in Switzerland,” he said. “You say the word ‘Swiss’ before you say the word ‘watch.’”
That ties the brand into something larger, playing off the Canadian image of wholesomeness and the intuitive notion that people who live in that so-often frozen country must know best when it comes to a jacket that will keep one warm.
Reiss said he saw the draw of his homeland through the eyes of people he met in his travels in Europe and Japan.
“The brand of Canada is a powerful brand,” he said. “We felt that if we can hang on long enough it will become important again. If we could just last through a few more years.”
As the outdoor market moved further down market in North America, Reiss said, “The European customer was open to paying more for something that had greater value. We helped create a new category, this luxury outerwear category.”
Canada Goose did more than hold on.
The brand found its footing in Europe and waited for sentiment to shift closer to home — a change that eventually did come.
The company — and Reiss — caught the attention of Ryan Cotton at Bain Capital, which in 2013 bought control of Canada Goose, leaving Reiss to run it and with a significant minority stake.
Cotton, now managing director at Bain and a Canada Goose board member, said the brand is based in “performance, function and authenticity.”
“Every product is built right; every story is rooted in real-world performance; every customer experience delivers against the brand’s functional promise,” Cotton said. “It is the brand’s discipline and fidelity to its authentic heritage that makes it so successful. And the leader, author and protector of that brand story is Dani Reiss…Canada Goose is what it is because of Dani, his vision and his leadership.”
Bain, and Cotton, did very well with Canada Goose.
The company went public in March 2017. Its stock, priced initially at $12.78, rose 26 percent on the first day and has continued to charge forth, trading at over $47 this month — an increase of over 250 percent.
That kind of stock jump generally only comes to companies that investors see as growth machines where both sales and profits are not just inching up, but making a step change.
And that has been the case.
During the fiscal year ended March 31, Canada Goose’s revenues shot up 46.4 percent to 591.2 million Canadian dollars, while net income ballooned to 96.1 million Canadian dollars from 21.6 million Canadian dollars the prior year.
The firm’s growth has been broad. In addition to gains in stock price and on the top and bottom lines, the company has seen solid increases as well in gross profits, earnings before interest, taxes, depreciation and amortization and return on equity. All together, those gains set the company well ahead of a group of more than 50 fashion firms, easily earning Canada Goose this year’s WWD Honor for best performing large cap company.
Canada Goose might have missed the Nineties outdoor rush, but it’s now in the right place at the right time. Outerwear has become a platform for fashion in a new way. People no longer look for the coat to just keep them warm, but to make a statement, telegraphing their sense of style. Functionality also remains important on cold days.
That leaves Canada Goose in the sweet spot. And Reiss laid the groundwork to continue to capitalize on this positioning and further the company’s expansion.
The firm now has seven factories in Canada and is the largest manufacturer of its kind in the country with over 3,000 employees. That production now feeds wholesale sales, e-commerce and a growing fleet of stores around the world.
When it went public, Canada Goose had two stores, one in Toronto and one in New York. By the holidays, the brand will have 12 units.
The stores help bring the brand to life. Last year, the Tokyo location added a Cold Room, a concept that is expanding to the other sites and was included in the firm’s new door at The Mall at Short Hills, which opened in New Jersey last month. The feature feeds into retail’s rush to add experiences for shoppers and also highlights the brand’s functionality, another of fashion’s major themes.
Last year, direct-to-consumer revenues increased 121.3 percent to 255 million Canadian dollars, representing 43.1 percent of total sales. (Wholesale revenues rose 16.5 percent to 336.2 million Canadian dollars).
It remains to be seen exactly how important the brand’s own stores and e-commerce will be to its continued growth.
“We don’t have a specific target,” Reiss said. “There are other brands out there in the 70 to 80 percent range in the direct-to-consumer” portion of their businesses. “I don’t see why we can’t be in that range as well while we continue to grow wholesale in the midsingle digit range.”
Last month, the company opened its first store in Hong Kong and is also on Alibaba’s Tmall and has another door planned for Beijing.
“China is an enormous opportunity,” Reiss said. “It’s really exciting to be on the ground there.”
The brand, by virtue of its pricing and presence in outerwear, has long-invited comparisons with Moncler, which has turned selling puffer jackets at strong margins into a high-fashion art form. In China in particular, Wall Street looks to Moncler as a signpost for Canada Goose.
“While we expect Canada Goose is being conservative as it starts major investments to launch China, we see no reason why EBITDA margins can’t approach Moncler at 33.5-plus percent over time (versus 25 percent today) as initial China investments start to lever and mix continues to shift toward Canada Goose’s higher margin DTC business,” said Michael Binetti, an analyst at Credit Suisse, following the firm’s last earnings update.
Likewise, Oliver Chen, an analyst at Cowen, expects the company to keep spending to hire more workers and open stores and to market the rollout.
“We view Moncler’s first half report of double-digit organic growth in China as a positive read-through for Canada Goose’s market reception upon launch,” Chen said.
The company’s arrival in China — as a luxury brand tapping into a major consumer market — shows just how far it has come. To the vast majority of the Canadian coat makers in the Nineties, China was not a high-end growth market but a source of production and the road to moving more units, but at lower prices and lower margins.
The brand is also expanding into new categories, for instance helping shoppers with days that are only cool and not downright cold with a line of merino wool knits.
Katie Smith, retail analysis and insights director at fashion big data firm Edited, said Canada Goose has been “soaring” online. New arrivals of the brand at U.S. e-commerce sites were up 63 percent in early October compared with a year earlier.
“It’s not just stock coming in earlier due to the cold start to winter in the last few weeks — September was up by 106 percent on last year,” Smith said. “Stuff is moving too: 8.8 percent of products that arrived in the last seven weeks have already sold out.”
Growth is key — and trumps everything else when it comes to investors at large — but Reiss has worked to keep Wall Street’s animal spirits at bay from the beginning.
“It’s really important to me that we not change because we’re public,” he said. “We haven’t run the company any differently than we would if we were not public. The reason for that is, I think it’s the right way to run a company. We intend to make the right long-term decisions. I’ve been very clear about that with everybody and that sort of behavior is going to drive long-term value. We’re not interested in diluting our brand power. We have pricing power on our side. We’ve built a lot of demand for our product.”
That has come from a fidelity to the brand remaining functional, high quality and made in Canada. It has become something of an ambassador for Canada — and vice versa.
Prime Minister Justin Trudeau turned out last month when the company opened its largest facility yet, in Winnipeg, with plans to create 700 jobs. The firm also revealed plans to expand its sewing training school program within its operations. The schools help provide free sewing skills training and steer students directly into full-time employment at Canada Goose. So far, more than 750 graduates have taken on roles from sewers to supervisors at the company.
The prime minister, standing next to Reiss, was more than happy to praise the ceo and his company as home-grown heroes.
“From the streets of Stockholm to the summit of Mount Everest, consumers around the world choose this Canadian brand to keep them warm,” Trudeau beamed.
The brand has also drawn some negative publicity as a target of animal rights activists, including People for the Ethical Treatment of Animals, which has published graphic pictures of how wild coyotes are trapped, killed and skinned. PETA encouraged consumers to buy alternatives.
For its part, the company has asserted, “We do not condone any willful mistreatment, neglect, or acts that maliciously cause animals undue suffering.” Canada Goose has transparency standards requiring its suppliers to certify that the down used in its jackets come as a by-product of the poultry industry and that all fur is sourced in accordance with the Agreement of International Humane Trapping Standards in Canada and the Best Management Practices in the U.S.
“We know that wearing fur is a personal choice and we respect that,” the brand said on its web site. “In turn, we hope that people recognize our commitment to responsible use and ethical sourcing of fur.”
Despite that point of contention for some, Canada Goose has remained popular with a wide cast of consumers and largely by remembering the lesson that put the company on its growth path: making moves that would just boost sales outright — like shifting production overseas and cutting price — were not necessarily the right ones.
“People last year thought that we ran out of stock and that it was a bad thing,” Reiss said. They wanted me to have more. My answer to that was, ‘Since when was selling out a bad thing?’ The point of being in business is to make things and if you sell out, that means you’ve been successful.”
It’s a longer-term perspective that has required some explanation.
Reiss told analysts on a conference call last year: “I know the quarter is important, but we look at our business on an annual basis and on a long-term basis as well. We are a seasonal business. And we’ve been very successful looking at our business from a yearlong perspective. And we keep looking at it that way and encourage you to look at it that way, too.
“We absolutely have the ability to sell more if we need more product and to draw on our manufacturing base.…What’s important to us is we’re a pure brand. It’s important to stay pure, it’s important to make products that are best-in-class products that consumers, when they come into our stores or our wholesale partners’ stores and they see the products, they say, of course, that’s Canada Goose.”
That has also made the brand a prime target of counterfeiters. Last year, the company added a hologram label inside its coats to testify to their authenticity. And in January, as a cold wind bore down on North America, the company urged shoppers to make sure they were getting the real deal and to check its web site, which included a URL search tool that helped verify whether a particular site was an authorized dealer.
Canada Goose also urged shoppers to examine the logo patch and check for imperfect stitching or misspellings.
“Authentic Canada Goose fur ruffs look thick and luxurious,” the company said. “They are functional in that they provide ultimate protection against frostbite on the face. Counterfeit fur looks scraggly, tangled and sometimes dirty. Coyote ruffs are also much softer than commonly used alternatives such as raccoon. As well, look for poor seam quality on the hood.”
Reiss said the brand has been contending with counterfeits since it started to gain traction in Scandinavia.
“These days they’re everywhere,” Reiss said. “It’s a backhanded compliment of sorts.”
Given Canada Goose’s trajectory, it’s seems unlikely, despite its best efforts, that the brand will be free of fakes anytime soon.