Canada Goose ((TSE:GOOS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Canada Goose depicted a mixed sentiment, showcasing both strategic successes and notable challenges. The company celebrated strong regional performances, particularly in North America and Japan, largely driven by the Snow Goose launch. However, this was counterbalanced by a decline in wholesale revenue and ongoing challenges in Greater China and the EMEA markets. The company made strides in improving its gross margin and inventory management, but still faced declines in DTC comparable sales and elevated SG&A expenses.
Strong North America DTC Performance
North America emerged as a bright spot for Canada Goose, with a 3% growth in DTC comparable sales in Q3, bolstered by a remarkable 22% increase in December. This growth was attributed to effective marketing activation and strategic execution by the team, showcasing the company’s ability to drive consumer engagement in its home market.
Successful Snow Goose Launch
The Snow Goose capsule collection proved to be a significant success for Canada Goose, achieving a record-breaking 30 billion media impressions. Notably, 25% of buyers of this collection also purchased mainline products, and there was a three-year high in U.S. search interest, highlighting the collection’s impact on brand visibility and consumer interest.
Inventory Management Improvements
Reflecting improved planning and operational processes, Canada Goose reported a 15% year-over-year decrease in inventory for Q3. This marked the fifth consecutive quarter of inventory reduction, demonstrating the company’s commitment to efficient inventory management.
EMEA and Japan Growth
In the EMEA region, improved conversion rates were observed despite traffic challenges. Japan also showed significant improvement in DTC performance year-over-year, supported by the opening of two new stores, indicating strong growth potential in these markets.
Gross Margin Expansion
Canada Goose’s gross margin expanded by 70 basis points to 74.4%, driven by favorable pricing and reduced inventory provisions. This improvement underscores the company’s ability to manage costs and maintain profitability.
Wholesale Revenue Decline
Aligning with its strategy to reduce wholesale order volume, Canada Goose reported an 8% decline in wholesale revenue, with an anticipated full-year decline of approximately 20%. This strategic shift illustrates the company’s focus on prioritizing its DTC channels.
Challenges in Greater China
APAC revenue experienced a 2% decline, mainly due to macroeconomic factors impacting DTC in Greater China, leading to slower traffic. This highlights the external challenges the company faces in this crucial market.
DTC Comparable Sales Decline
Despite some positive trends, DTC comparable sales saw a 6% decline, with November posing particular challenges. This has led to a revised full-year outlook predicting a mid-single-digit decrease, reflecting ongoing market pressures.
SG&A Expense Concerns
SG&A expenses as a percentage of revenue remained elevated year-over-year for both Q3 and year-to-date. This was driven by increased direct costs and lower traffic, posing a challenge to the company’s cost management efforts.
Forward-Looking Guidance
Looking forward, Canada Goose provided guidance for the fiscal year, adjusting their full-year DTC comparable sales outlook to range from flat growth to a mid-single-digit decrease. They maintained their revenue guidance within a range of a low-single-digit increase to a low-single-digit decline compared to fiscal 2024. This cautious outlook reflects the company’s awareness of the current market dynamics and macroeconomic pressures.
In summary, Canada Goose’s earnings call highlighted a balance of strategic accomplishments and ongoing challenges. While the North American market and the Snow Goose launch provided bright spots, issues like declining wholesale revenue and challenges in Greater China pose significant hurdles. The forward-looking guidance suggests a cautious but proactive approach to navigating future market conditions.
