Despite a tough quarter resulting from economic trends and the impact of COVID-19, Canada Goose, the Toronto-based lifestyle brand for upscale parkas, apparel and footwear, isn’t about to sway from its strategy.
“We are being cautious. There is some concern about the short term in America. There are some macro pressures, but our brand continues strong. Even in a world with economic headwinds, we will perform very well,” Dani Reiss, chairman and chief executive officer, told WWD on Thursday, just after the company released its fiscal third-quarter figures revealing top and bottom line declines, and lowered its fourth-quarter forecast.
Canada Goose’s stock price tumbled 20.8 percent to $19.52 around midday Thursday, after the company reported that its fiscal third-quarter net income dropped 10.8 percent to $134.9 million, from $151.3 million in the year-ago quarter, and that revenues slipped 1.6 percent to $576.7 million, from $586.1 million in the year-ago quarter. (All figures are in Canadian dollars.)
Operating income slipped to $194.3 million versus $205 million in the year-ago period. However, gross margin rose to 72.2 percent, up 160 basis points.
“Our third quarter was certainly challenging, but it clearly showed the strength of the brand and strategy,” Reiss said during the interview. “Through the year the market was incredibly promotional. But we are not a promotional brand and we experienced margin improvement across all categories. That’s really important. That to us is a sign of brand strength.”
On another positive note, Reiss cited a turnaround in China in January after the COVID-19-related disruptions in December caused massive slowdown. “Business in January returned to normal. The lineups [at stores] returned. People were shopping as normal,” Reiss said of the Chinese market.
Aside from the COVID-19 crisis in China, and some slowing in America, Reiss attributed part of last quarter’s sales dip to shifting some wholesale shipments into the second quarter. “We pulled forward a bunch of wholesale shipments due to requests from retailers,” he said.
For its fiscal year, which ends March 31, the company is now projecting total revenue of between $1.175 billion and $1.195 billion, compared to its previous guidance of $1.2 billion to $1.3 billion.
Adjusted earnings before interest and taxes is seen at $167 million to $182 million, representing a margin of 14.2 percent to 15.3 percent compared to previous guidance of $215 million to $255 million, representing a margin of 17 to 19.6 percent. Net income per diluted share is seen at $0.92 to $1.03 compared to previous guidance of $1.31 to $1.62.
For the fourth quarter of fiscal 2023, the company expects total revenue between $251 million and $271 million; EBIT of $19 million to $35 million, and adjusted net income per diluted share of $0.0 to $0.12
Reiss said the brand’s newer categories — apparel and footwear — “performed really well” last quarter.
Earlier this week, the company launched Canada Goose Generations, a re-commerce platform for shopping and trading in women’s, men’s, youth, kids and baby pre-owned Canada Goose products.
“We have no data to share at this point, I think the people today are very eager to engage in the circular economy. Canada Goose is a brand especially suited for this sort of economy. Our products are built for generations to wear,” Reiss said.
Vintage pieces from the brand’s 65-year-old archive will drop frequently, complementing trade-ins from consumers and refreshed products from Canada Goose. The site will launch with 2,500 items across men’s, women’s and kids’ in the U.S. and will eventually reach Canada and other countries. The condition of the garment is judged on the following scale: fair, good, very good and excellent. Eligible items would receive up to 60 percent of today’s retail price based on that scale of condition.
Although outerwear is what Canada Goose is best known for, Reiss said, “The weather has never caused us to miss or make our numbers. The weather these days is unpredictable, but we don’t believe it has a material effect on our ability to deliver results.”
Canada Goose has been steadily opening stores and there are three planned during the company’s fiscal first quarter, in Seattle, Los Angeles and Las Vegas where there will be a second store for the brand.
During a conference call with analysts, Reiss, referring to COVID-19 and macroeconomic conditions, said, “These short-term pressures will not change how we think about our business. We are and have always been building this brand for the long term. Now more than ever, we are focused on building deeper relationships with our customers, strengthening our [direct to consumer] network and continuing to expand categories, all while staying true to our luxury DNA.
“Our competitive advantages remain strong. Our made in Canada vertical integration has enabled us to so far, offset many of the cost pressures and supply chain delays facing the industry. And we have continued to deliver a steady stream of new and carryover products to our global distribution network.
Canada Goose will stage an investor day at the company’s headquarters in Toronto on Tuesday.