Boycott. What boycott?
A push among Chinese social media users at the end of last year to stop buying Canada Goose’s pricy luxury parkas after Canadian authorities arrested a Huawei Technologies executive at the request of the U.S. government appeared not to gain any traction.
According to the Toronto-based brand’s latest earnings report, it saw Asian revenue nearly triple to 18.1 million Canadian dollars from 6.6 million Canadian dollars in the first quarter, with China accounting for around 25 percent of total revenue, while Japan also represented decent growth.
This is despite the fact that Huawei chief financial officer Meng Wanzhou remains under house arrest in Vancouver as she continues to fight extradition to the U.S. on bank fraud charges.
In addition to disproving boycott fears, Canada Goose is also pretty confident that the ongoing trade dispute between the U.S. and China won’t clip its wings as it continues its Asia push in the face of widespread concerns over a slowdown in China.
“I don’t see any negative impact from the business in China and also tourist business from China around the world. It continues to be very strong,” Dani Reiss, president and chief executive officer of Canada Goose, said.
Being a Canada-based company with a commitment to keep production of its core down jackets onshore has meant that the outerwear maker doesn’t have to worry too much about the threat of tariffs on Chinese-made goods entering the U.S., unlike many of its rivals.
In fact, it’s racing ahead with its expansion plans for the world’s second-largest economy. Having opened its Beijing flagship in December after a two-week delay — which it put down to construction reasons and not the spat over Huawei — it further expanded its footprint last week, opening a store in Shenyang to capitalize on it being one the coldest cities in the country.
“This city is one of the coldest places in Mainland China during the winter and not surprisingly, our decision to open there was well-informed by local demand online,” Reiss said. “Despite the fact that we had a soft opening and that it was over 20 degrees Celsius in the middle of August, the store has had an exceptional start. This is yet another example of the exceptional engagement and brand affinity that we are seeing from consumers in China.”
As for Hong Kong, where the main airport was shut down after being flooded by protesters this week, Canada Goose has yet to see any impact on its business there.
“We have a store in Hong Kong and it remains open,” added Reiss. “We’re monitoring the situation, but business continues and things are going well.”
And it wasn’t just Asia that performed well over the quarter, with Canada Goose reporting robust growth in every region. Revenue increased by 40.4 percent in Canada and 15.8 percent in the U.S.
That meant that total revenue jumped 59.1 percent to 71.1 million Canadian dollars in the quarter ended June 30, dwarfing Wall Street analysts’ average estimates of 54 million Canadian dollars, according to IBES data from Refinitiv.
Not everything was rosy, though, with its net loss widening to 29.4 million Canadian dollars, or 27 cents per share, compared with a loss of 18.7 million Canadian dollars, or 17 cents per share, a year ago.
This was partly driven by a widening operating loss tied to higher corporate selling, general and administrative expenses, as well as a larger retail store opening program.
On an adjusted basis, the company’s losses tallied 21 cents per share, narrower than the 24-cent loss analysts projected.
Another point of concern for investors was the company’s gross margin, which missed estimates as the brand sold more of its less-profitable lightweight products.
This along with a widespread sell-off in the market generally pushed shares of Canada Goose down 7.5 percent to $39.97.
Kate Fitzsimons, an analyst at RBC Capital Markets, called the sell-off, which sent the stock down as much as 10.6 percent, an “overreaction.”
“[The first quarter’s] gross margin miss in a lighter-volume quarter was a function of the brand thoughtfully growing the business rather than a step-change on quality,” Fitzsimons said in a note to clients.
Share price pressure will not be the only heat the company feels this week as comedian and honorary PETA director Bill Maher will call on Canada Goose to stop selling jackets made with coyote fur and down feathers during its online annual meeting for shareholders on Thursday.
Before and during the meeting, PETA supporters will also protest in front of the retailer’s headquarters in Toronto and outside its flagship in New York.
Read more here: