Canada Goose is taking a slow and steady approach to growth and it seems to be paying off.
The luxury outerwear — and soon to be knitwear — company posted revenue of 28.2 million Canadian dollars, or $22.2 million at current exchange, for its first fiscal quarter ended June 30, a 44 percent boost over the same period last year. It also cut its net loss to 12.1 million Canadian dollars from 14 million Canadian dollars.
Canada Goose attributed its growth in part to a change in wholesale timing that drove sales up to 19.9 million Canadian dollars, a 27 percent jump over 14.4 million Canadian dollars at the start of last year. Direct-to-consumer sales also grew considerably to 8.3 million Canadian dollars from 1.3 million Canadian dollars through e-commerce growth in North America, the launch of e-commerce in France and the U.K., as well as new stores in Toronto and New York.
Wall Street didn’t get too excited about the results and pushed the company’s stock down 3.3 percent to $18.32, its lowest price since May.
Speaking to the wholesale timing, president and chief executive officer Dani Reiss said during a call with analysts that performance has been strong “across all geographic regions” and noted “many retailers are specifically asking us to accelerate shipments so they can get our product on the floor earlier.”
While Reiss said this shift is not expected to have a big impact on wholesale performance overall, he admitted it increases the possibility of more reordering as the year goes on.
Reiss declined to give any updated guidance for the year or the second fiscal quarter, saying Canada Goose intends only to offer annual guidance. Earlier this year, the company projected annual revenue growth in the mid-to-high teens after reporting fiscal 2017 revenue of 403.8 million Canadian dollars.
Nevertheless, Canada Goose is set to open five stores this fiscal year as part of its expansion plan that initially proposed only three locations. New stores will be opened in Chicago, Boston, London, Calgary and Tokyo, the only location that will be operated by a distribution partner.
“Japan is a strong market,” Reiss said during a call with analysts. “Tokyo in particular is very strong. Profits have been strategic for a long time. We’ve been growing for a long time. And it’s such an exciting opportunity to be able to open a retail store there. So it’s something we’ve been working on for a little while and it’s been in my thoughts for a long time.”
Longer term, the company expects to operate upward of 30 stores and pull in revenue of $1 billion.
Reiss added that when it comes to choosing what markets to enter, whether with a physical retail location or online, consumer data and online traffic trends play a big role.
“We definitely look at where our traffic is coming from when we decide which markets to enter, where to open web sites,” Reiss said.
China seems to be next in line for Canada Goose and Reiss said the company is working on its internal “go-to-market strategy playbook” for the region.
“Certainly, we consider there to be a large opportunity there,” he added.
Expansion is happening with product as well, and Canada Goose is set to roll out its first knitwear line next week, and Reiss said its new lightweight outerwear offerings are “very much in demand at retail,” but declined to break down sales by-product category.
“There’s no question that there’s a lot of demand for that product,” he added. “And I believe it’s going to be a product line that continues to grow for us.”
The company is also set to add product to its core outerwear line and even work in some higher price points, Reiss said. Canada Goose is best known for its hooded down jackets, which retail between $600 and $1,000.
“We’re going to continue to innovate in our core as well as in our newer categories,” Reiss said. “There’s lots of newness.”
Such positive momentum in only its second quarter as a public firm left analysts similarly positive about the future of Canada Goose.
“Despite its 60-year history, we see Canada Goose as in the early stages of its growth trajectory, particularly in the fragmented and growing premium outerwear market,” Brian Tunick of RBC Capital Markets said of the company’s results. “In a global discretionary environment desperate for growth, we see multiple levers for a high-teens top line for the next three to five years.”
Those levers include room for store openings in North America and internationally, expanding into more e-commerce markets and continued growth of wholesale.
If its growth goes according to plan, Tunick said Canada Goose will be “on an accelerated track to reach their ultimate $1 billion revenue goal.”
Christian Buss of Credit Suisse was also “encouraged” by the company’s performance, which he said “validates our view that the company has successfully created a ‘next-generation’ brand.”
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