Highlights1:
- Better than expected revenue of $69.9m with growth of
24.2%
- North America continued strong trend with 75.0% revenue
growth
- DTC comparable sales growth2 of 10.7% as stores regained
momentum
- Gross margin grew to 61.1% from 54.5%
Canada Goose Holdings Inc. (“Canada Goose” or the “Company”)
(NYSE:GOOS, TSX:GOOS) today announced financial results for the
first quarter ended July 3, 2022 (“Q1 2023” or “Q1 ended July 3,
2022”). All amounts are in Canadian dollars unless indicated.
“Our first quarter fiscal 2023 results reflect strong early
leading indicators for the year, and we have seen encouraging
trends in store productivity,” said Dani Reiss, Chairman and CEO.
“This fall, we look forward to our planned store openings, in some
of the most exciting cities and shopping districts around the
world, as well as our upcoming collection launches, thoughtfully
curated and designed to drive brand heat and capture new consumers
globally.”
Key First Quarter Fiscal 2023 Results
CAD $ millions (except share and
per share data)
First quarter ended
$ Change
% Change
July 3, 2022
June 27, 20214
Revenue
69.9
56.3
13.6
24.2
%
Gross profit
42.7
30.7
12.0
39.1
%
Gross margin
61.1
%
54.5
%
660 bps
Operating loss
(80.7
)
(61.8
)
(18.9
)
(30.6
)%
Operating margin
(115.5
)%
(109.8
)%
(570) bps
Net loss attributable to shareholders
of the Company
(62.4
)
(57.5
)
(4.9
)
(8.5
)%
Loss per share attributable to
shareholders of the Company
Basic and diluted
$
(0.59
)
$
(0.52
)
(0.07
)
(13.5
)%
Non-IFRS Financial Measures3:
Adjusted EBIT
(75.6
)
(61.3
)
(14.3
)
(23.3
)%
Adjusted EBIT margin
(108.2
)%
(108.9
)%
70 bps
Adjusted net loss attributable to
shareholders of the Company
(58.5
)
(50.8
)
(7.7
)
(15.2
)%
Adjusted net loss per basic and diluted
share attributable to shareholders of the Company
$
(0.56
)
$
(0.46
)
(0.10
)
(21.7
)%
_______________________________ 1 Comparisons to prior year
quarter ended June 27, 2021 (“Q1 2022” or “Q1 ended June 27, 2021”)
2 See “Non-IFRS Financial Measures and Other Specified Financial
Measures” for a description of this supplementary financial
measure. 3 See “Non-IFRS Financial Measures and Other Specified
Financial Measures”. 4 The Company adopted a change in accounting
policy related to Software as a Service arrangements. See “Changes
in Accounting Policies” in the Q1 2023 MD&A.
Revenue
Q1 2023 revenue grew 24.2% on a reported basis and 24.0% on a
constant currency revenue5 basis.
Revenue By Segment
First quarter ended
$ Change
% Change
CAD $ millions
July 3, 2022
June 27, 2021
As reported
Foreign exchange
impact
In constant currency
As reported
In constant currency
DTC
34.8
29.1
5.7
(1.1)
4.6
19.6 %
15.8 %
Wholesale
33.2
26.1
7.1
1.0
8.1
27.2 %
31.0 %
Other
1.9
1.1
0.8
—
0.8
72.7 %
72.7 %
Total revenue
69.9
56.3
13.6
(0.1)
13.5
24.2 %
24.0 %
DTC revenue grew 19.6% due to improved productivity in existing
stores represented by DTC comparable sales growth of 10.7%,
continued retail network expansion, and the reopening of existing
retail stores which were closed in the comparative quarter.
Wholesale revenue grew by 27.2% due to pricing, and customer
requests for earlier shipments.
Revenue by Geography
First quarter ended
$ Change
% Change
CAD $ millions
July 3, 2022
June 27, 2021
As reported
Foreign exchange
impact
In constant currency
As reported
In constant currency
Canada
17.9
9.9
8.0
—
8.0
80.8 %
80.8 %
United States
15.7
9.3
6.4
(0.8)
5.6
68.8 %
60.2 %
Asia Pacific
16.1
22.4
(6.3)
(1.6)
(7.9)
(28.1) %
(35.3) %
EMEA6
20.2
14.7
5.5
2.3
7.8
37.4 %
53.1 %
Total revenue
69.9
56.3
13.6
(0.1)
13.5
24.2 %
24.0 %
Revenue growth in Canada was largely driven by stores that were
open in Q1 2023 which experienced closures due to COVID-19
restrictions in the comparative quarter. Q1 2023 revenue growth in
the United States was largely driven by DTC comparable sales
growth. EMEA revenue growth was largely driven by significant
retail network expansion and stores that were open in Q1 2023 but
had experienced closures due to COVID-19 restrictions in the
comparative quarter. Asia Pacific revenue declined from Q1 2022 as
eight out of 16 stores in Mainland China experienced closures due
to COVID-19 restrictions in Q1 2023. All stores in the region had
reopened as of the end of June 2022.
In addition, Q1 2023 revenue from Japan was minimal compared to
Q1 2022 revenue of $9.3m as revenue recognition in this market will
shift to later in the year due to the creation of Canada Goose
Japan Joint Venture (“Japan Joint Venture”) with Sazaby League,
Ltd. on April 4, 2022. The Japan Joint Venture agreement replaced
an exclusive national distributor arrangement between Sazaby
League, Ltd. and Canada Goose and sets the stage for the
acceleration of growth in Japan, across both the DTC and Wholesale
segments. As a result, revenue recognition for the Japan Joint
Venture is expected to shift to later in the year which is more in
line with the seasonality of the Wholesale and DTC segments for the
rest of the Company. See “Joint Venture” in the Company’s Q1 2023
Management Discussion & Analysis for more detail.
____________________________________ 5 See “Non-IFRS Financial
Measures and Other Specified Financial Measures”. 6 EMEA comprises
Europe, the Middle East, Africa, and Latin America.
Gross profit and gross margin
The increase in gross profit was largely attributable to higher
revenue as noted above and gross margin expansion. Q1 2023 gross
margin was favourably impacted by pricing, and lower product costs
due to increased production efficiencies. The gross margin in
Wholesale also benefited from product mix driven by higher parka
sales on customer requests for earlier shipments compared to Q1
2022. These benefits were partially offset by an unfavourable
region mix with higher North American revenue and lower revenue in
Asia Pacific as well as an unfavourable impact from the fair value
inventory acquisition adjustment related to the Japan Joint
Venture.
Operating loss and adjusted EBIT
Operating loss increased and adjusted EBIT decreased compared to
Q1 2022 primarily due to the timing of $12.6m in marketing
investments (which occurred earlier in the year compared to fiscal
2022) to drive brand salience ahead of our peak season, $6.9m in
higher costs related to opening new stores and running stores at
full capacity, $3.8m investment in strategic initiatives including
digital, and $2.9m in costs to support the new Japan Joint
Venture.
Net loss and adjusted net loss
Net loss and adjusted net loss was higher compared to Q1 2022 as
a result of factors described above. In addition, net loss in Q1
2022 included a $9.5m charge for acceleration of amortization costs
related to the refinancing of our term loan.
Balance Sheet Highlights
Cash was $81.8m as at Q1 ended July 3, 2022, compared to $305.9m
as at Q1 ended June 27, 2021 largely due to share repurchases in
fiscal 2022 for a total cash consideration of $253.2m, and a
greater investment in working capital.
Inventory was $504.7m as at Q1 ended July 3, 2022, compared to
$404.5m as at Q1 ended June 27, 2021. Of the increase, $27.3m was
acquired upon entering the Japan Joint Venture. Inventory levels
increased ahead of our peak selling season as domestic production
gradually returns to pre-pandemic manufacturing levels and supply
chain risks are mitigated by earlier acquisition of offshore
production than in the comparative quarter. The Company is seeing
significant growth in the proportion of non-parka inventory as
nearly 59% of our inventory units comprises non-parka compared to
nearly 44% as we broaden our collection. More inventory is being
held in Asia Pacific in the current quarter as the size of that
business grows in anticipation of peak season with more points of
distribution across the region. The Company’s management is
monitoring the levels of inventory in the sales channels and across
geographic regions and aligning with the forecasted demand in each
region.
Second Quarter and Full Year Fiscal 2023 Outlook
For fiscal 2023, the Company currently expects:
- Total revenue $1.300Bn to $1.400Bn.
- Non-IFRS adjusted EBIT $250m to $290m, representing a margin of
19.2% to 20.7%.
- Non-IFRS adjusted net income per diluted share $1.60 to
$1.90.
For the second quarter of fiscal 2023, the Company currently
expects:
- Total revenue $255m to $275m.
- Non-IFRS adjusted EBIT $8.0m to $18.0m.
- Non-IFRS adjusted net income per diluted share $0.02 to
$0.14.
This outlook is based on a number of assumptions for fiscal
2023, including the following:
- Improved traffic and lower levels of operating disruptions
globally, including mandatory closures, in both Company and partner
operated retail stores, relative to fiscal 2022.
- With respect to Mainland China’s contribution, the lower end of
the Company’s full year guidance ranges for revenue and
profitability assumes there will continue to be limited, periodic
COVID-19 disruptions in the region during our peak season and the
higher end of the ranges assumes a return to regular trading levels
during our peak season in Mainland China.
- The Company expects $60m to $65m in total revenue in fiscal
2023 from the Japan Joint Venture, which is roughly double the
contribution from the Japanese market in fiscal 2022.
- Approximate % of fiscal 2023 total revenue by quarter: Q2 20%,
Q3 50%, Q4 25%
- DTC % of total revenue 70% to 73%, driven by low to high teens
comparable sales growth and continued channel expansion.
- Wholesale revenue growth of 6%.
- Gross margin in the high 60s as a % of total revenue, with
expansion driven by DTC mix shift.
- Effective tax rate in the low 20s as a % of income before taxes
for fiscal 2023.
- Weighted average diluted shares outstanding of 107.7m for
fiscal 2023.
Within the meaning of applicable securities laws, this outlook
constitutes forward-looking information. The purpose of this
outlook is to provide a description of management's expectations
regarding the Company's financial performance and may not be
appropriate for other purposes. Actual results could vary
materially as a result of numerous factors, including the extent
and duration of operational disruptions that may affect our
business as a result of the COVID-19 pandemic and other risk
factors, many of which are beyond the Company’s control. See
“Cautionary Note Regarding Forward-Looking Statements”.
Conference Call Information
Dani Reiss, Chairman and Chief Executive Officer and Jonathan
Sinclair, EVP and Chief Financial Officer, will host the conference
call at 9:00 a.m. Eastern Time on August 11, 2022. Those interested
in participating are invited to dial (833) 634 5021 or (412) 902
4218 if calling internationally and reference Conference ID
10169358 when prompted. A live audio webcast of the conference call
will be available online at http://investor.canadagoose.com.
About Canada Goose
Founded in 1957 in a small warehouse in Toronto, Canada, Canada
Goose (NYSE:GOOS, TSX:GOOS) is a lifestyle brand and a leading
manufacturer of performance luxury apparel. Every collection is
informed by the rugged demands of the Arctic, ensuring a legacy of
functionality is embedded in every product from parkas and rainwear
to apparel and accessories. Canada Goose is inspired by relentless
innovation and uncompromised craftsmanship, recognized as a leader
for its Made in Canada commitment. In 2020, Canada Goose announced
HUMANATURE, its purpose platform that unites its sustainability and
values-based initiatives, reinforcing its commitment to keep the
planet cold and the people on it warm. Canada Goose also owns
Baffin, a Canadian designer and manufacturer of performance outdoor
and industrial footwear. Visit www.canadagoose.com for more
information.
Condensed Consolidated Interim Statements of Loss and
Comprehensive Loss (unaudited) (in millions of Canadian
dollars, except share and per share amounts)
First quarter ended
July 3, 2022
June 27, 2021
Restated
$
$
Revenue
69.9
56.3
Cost of sales
27.2
25.6
Gross profit
42.7
30.7
Gross margin
61.1
%
54.5
%
SG&A expenses
123.4
92.5
SG&A expenses as % of revenue
176.5
%
164.3
%
Operating loss
(80.7
)
(61.8
)
Operating margin
(115.5
)%
(109.8
)%
Net interest, finance and other costs
7.4
16.5
Loss before income taxes
(88.1
)
(78.3
)
Income tax recovery
(24.5
)
(20.8
)
Effective tax rate
27.8
%
26.6
%
Net loss
(63.6
)
(57.5
)
Non-controlling interest
(1.2
)
—
Net loss attributable to shareholders
of the Company
(62.4
)
(57.5
)
Weighted average number of shares
outstanding
Basic and diluted
105,234,474
110,504,248
Loss per share attributable to
shareholders of the Company
Basic and diluted
$
(0.59
)
$
(0.52
)
Non-IFRS Financial Measures:(1)
Adjusted EBIT
(75.6
)
(61.3
)
Adjusted EBIT margin
(108.2
)%
(108.9
)%
Adjusted net loss attributable to
shareholders of the Company
(58.5
)
(50.8
)
Adjusted net loss per basic and diluted
share attributable to shareholders of the Company
$
(0.56
)
$
(0.46
)
1 See “Non-IFRS Financial Measures and
Other Specified Financial Measures”.
Condensed Consolidated Interim Statements of Comprehensive
Loss (unaudited) (in millions of Canadian dollars,
except per share amounts)
First quarter ended
Notes
July 3, 2022
June 27, 2021
Restated
$
$
Net loss
(63.6
)
(57.5
)
Other comprehensive loss
Items that may be reclassified to
earnings, net of tax:
Cumulative translation adjustment loss
(8.1
)
(1.8
)
Net gain on derivatives designated as cash
flow hedges
16
1.3
0.1
Reclassification of net loss on cash flow
hedges to income
16
1.6
0.1
Other comprehensive loss
(5.2
)
(1.6
)
Comprehensive loss
(68.8
)
(59.1
)
Attributable to:
Shareholders of the Company
(67.5
)
(59.1
)
Non-controlling interest
(1.3
)
—
Comprehensive loss
(68.8
)
(59.1
)
Condensed Consolidated Statements of Financial Position
(unaudited) (in millions of Canadian dollars)
July 3, 2022
June 27, 2021
April 3, 2022
Restated
Assets
$
$
$
Current assets
Cash
81.8
305.9
287.7
Trade receivables
48.2
39.2
42.7
Inventories
504.7
404.5
393.3
Income taxes receivable
4.8
6.6
1.1
Other current assets
52.4
34.4
37.5
Total current assets
691.9
790.6
762.3
Deferred income taxes
73.9
61.5
53.2
Property, plant and equipment
110.5
119.9
114.2
Intangible assets
134.7
124.4
122.2
Right-of-use assets
253.2
240.8
215.2
Goodwill
64.7
53.1
53.1
Other long-term assets
17.8
4.4
20.4
Total assets
1,346.7
1,394.7
1,340.6
Liabilities
Current liabilities
Accounts payable and accrued
liabilities
165.6
149.6
176.2
Provisions
16.2
13.4
18.5
Income taxes payable
13.2
10.4
24.5
Short-term borrowings
30.8
10.9
3.8
Current portion of lease liabilities
59.9
49.6
58.5
Total current liabilities
285.7
233.9
281.5
Provisions
30.2
25.4
31.3
Deferred income taxes
18.3
7.7
15.8
Term loan
377.1
363.2
366.2
Lease liabilities
230.6
214.7
192.2
Other long-term liabilities
52.9
27.6
25.7
Total liabilities
994.8
872.5
912.7
Shareholders' equity
351.9
522.2
427.9
Total liabilities and shareholders'
equity
1,346.7
1,394.7
1,340.6
Non-IFRS Financial Measures and Other Specified Financial
Measures
This press release includes references to certain non-IFRS
financial measures such as adjusted EBIT, adjusted net loss and
constant currency revenue and certain non-IFRS ratios such as,
adjusted EBIT margin, adjusted net loss attributable to
shareholders of the Company and adjusted net loss per basic and
diluted share attributable to the shareholders of the Company.
These financial measures are employed by the Company to measure its
operating and economic performance and to assist in business
decision-making, as well as providing key performance information
to senior management. The Company believes that, in addition to
conventional measures prepared in accordance with IFRS, certain
investors and analysts use this information to evaluate the
Company’s operating and financial performance. These financial
measures are not defined under IFRS nor do they replace or
supersede any standardized measure under IFRS. Other companies in
our industry may calculate these measures differently than we do,
limiting their usefulness as comparative measures. Definitions and
reconciliations of non-IFRS measures to the nearest IFRS measure
can be found in our MD&A. Such reconciliations can also be
found in this press release under “Reconciliation of Non-IFRS
Measures” and, in the case of constant currency revenue, under
“Revenue”.
This press release also includes DTC comparable sales growth
which is a supplementary financial measure defined as sales on a
constant currency basis from e-Commerce sites and stores which have
been operating for one full year (12 successive fiscal months). The
measure excludes store sales from both periods for the specific
trading days when the stores were closed, whether those closures
occurred in the current period or the comparative period.
Reconciliation of Non-IFRS Measures
The tables below reconcile net loss to adjusted EBIT and
adjusted net loss attributable to shareholders of the Company for
the periods indicated. Adjusted EBIT margin is equal to adjusted
EBIT for the period presented as a percentage of revenue for the
same period.
First quarter ended
CAD $ millions
July 3, 2022
June 27, 20211
Net loss
(63.6
)
(57.5
)
Add (deduct) the impact of:
Income tax recovery
(24.5
)
(20.8
)
Net interest, finance and other costs
7.4
16.5
Operating loss
(80.7
)
(61.8
)
Unrealized foreign exchange gain on Term
Loan Facility (a)
(1.5
)
(0.9
)
Share-based compensation (b)
—
0.1
Net temporary store closure costs (c)
2.2
0.2
Pre-store opening costs (d)
0.3
0.9
Japan Joint Venture costs (g)
1.4
—
Head office transition costs (h)
1.7
—
Other (j)
1.0
0.2
Total adjustments
5.1
0.5
Adjusted EBIT
(75.6
)
(61.3
)
Adjusted EBIT margin
(108.2
)%
(108.9
)%
- The Company adopted a change in accounting policy on the
treatment of implementation costs related to Software as a Service
(“SaaS”) arrangements. See “Changes in Accounting Policies” in the
MD&A for a description of the impact from adopting the agenda
decision and the impact of retrospective application on this
quarter.
First quarter ended
CAD $ millions
July 3, 2022
June 27, 20211
Net loss
(63.6
)
(57.5
)
Add (deduct) the impact of:
Unrealized foreign exchange gain on Term
Loan Facility (a)
(1.5
)
(0.9
)
Share-based compensation (b)
—
0.1
Net temporary store closure costs (c)
(e)
2.2
0.2
Pre-store opening costs (d) (f)
0.4
1.0
Japan Joint Venture costs (g)
1.4
—
Head office transition costs (h) (i)
2.1
—
Acceleration of unamortized costs on Term
Loan Facility Repricing (k)
—
9.5
Other (j)
1.0
0.2
Total adjustments
5.6
10.1
Tax effect of adjustments
(1.4
)
(3.4
)
Adjusted net loss
(59.4
)
(50.8
)
Adjusted net loss attributable to
non-controlling interest (l)
0.9
—
Adjusted net loss attributable to
shareholders of the Company
(58.5
)
(50.8
)
- The Company adopted a change in accounting policy on the
treatment of implementation costs related to Software as a Service
(“SaaS”) arrangements. See “Changes in Accounting Policies” for a
description of the impact from adopting the agenda decision and the
impact of retrospective application on this quarter.
(a)
Unrealized gains and losses on the
translation of the Term Loan Facility from USD to CAD, net of the
effect of derivative transactions entered into to hedge a portion
of the exposure to foreign currency exchange risk.
(b)
Non-cash based compensation expense on
stock options issued prior to the Company’s initial public offering
(“IPO”) under the Legacy Plan and cash payroll taxes paid of $nil
in the first quarter ended July 3, 2022 (first quarter ended June
27, 2021 - less than $0.1m) on gains earned by option holders
(compensation) when stock options are exercised.
(c)
Net temporary store closure costs of $2.2m
were incurred in the first quarter ended July 3, 2022 (first
quarter ended June 27, 2021 - $0.2m).
(d)
Costs incurred during pre-opening periods
for new retail stores, including depreciation on right-of-use
assets.
(e)
Includes less than $0.1m of interest
expense on lease liabilities for temporary store closures for the
first quarter ended July 3, 2022 (first quarter ended June 27, 2021
- less than $0.1m).
(f)
Pre-store opening costs incurred in (d)
above as well as less than $0.1m of interest expense on lease
liabilities for new retail stores during pre-opening periods for
the first quarter ended July 3, 2022 (first quarter ended June 27,
2021 - $0.1m).
(g)
Costs in connection with the establishment
of the Japan Joint Venture including amortization of intangible
assets and the impact of gross margin that would otherwise have
been recognized on the sale of inventory recorded at net realizable
value less costs to sell.
(h)
Costs incurred for the corporate head
office transition, including depreciation on right-of-use
assets.
(i)
Corporate head office transition costs
incurred in (h) as well as $0.4m of interest expense on lease
liabilities for the first quarter ended July 3, 2022 (first quarter
ended June 27, 2021 - $nil).
(j)
Costs for legal proceeding fees including
for the defense of class action lawsuits and rent abatements
received.
(k)
Non-cash unamortized costs accelerated in
connection with the repricing amendment for the Term Loan Facility
entered into on April 9, 2021.
(l)
Calculated as net loss attributable to
non-controlling interest less $0.3m of amortization, gross margin
adjustment, and tax expense attributable to the non-controlling
interest.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements,
including statements relating to the execution of our proposed
strategy, early leading indicators and trends for fiscal 2023, our
operating performance and prospects, and the general impact of the
COVID-19 pandemic on the business. These forward-looking statements
generally can be identified by the use of words such as “believe,”
“could,” “continue,” “expect,” “estimate,” “may,” “potential,”
“would,” “will,” and other words of similar meaning. Each
forward-looking statement contained in this press release,
including, without limitation, our fiscal 2023 full year and second
quarter financial outlook and the related assumptions included
herein is subject to risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by such statement. Our business is subject to substantial risks and
uncertainties. Applicable risks and uncertainties include, among
others, the impact of the ongoing COVID-19 pandemic and the extent
and duration of related disruptions to our operations, as well as
the evolution of the global economic conditions, and are discussed
under the headings “Cautionary Note regarding Forward-Looking
Statements” and “Factors Affecting our Performance” in our MD&A
as well as in our “Risk Factors” in our Annual Report on Form 20-F
for the year ended April 3, 2022. You are also encouraged to read
our filings with the SEC, available at www.sec.gov, and our filings
with Canadian securities regulatory authorities available at
www.sedar.com for a discussion of these and other risks and
uncertainties. Investors, potential investors, and others should
give careful consideration to these risks and uncertainties. We
caution investors not to rely on the forward-looking statements
contained in this press release when making an investment decision
in our securities. The forward-looking statements in this press
release speak only as of the date of this release, and we undertake
no obligation to update or revise any of these statements.
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