Canada Goose(GOOS) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased by 50.2% to $399.3 million, with adjusted EPS growing by 65.5% to $0.96 per diluted share [11][40] - Consolidated gross margin expanded to 64.4% from 63.6%, driven by a higher proportion of DTC revenue [37] - DTC operating income was $141.4 million, with an operating margin of 60.1%, compared to $79.1 million and 60% last year [38] Business Line Data and Key Metrics Changes - DTC revenue increased to $235 million from $131.7 million, with strong performance from new stores and e-commerce [34] - Wholesale revenue grew to $164 million from $134.2 million, driven by higher order values and earlier shipment timing [35] - Both DTC and wholesale channels outperformed, with neither channel impeding the growth of the other [27] Market Data and Key Metrics Changes - Revenue in Canada grew by 38%, the U.S. by 45%, and the rest of the world by 75.4% [105] - The brand's presence in Greater China is expanding, with strong demand evidenced by lineups outside stores [55] Company Strategy and Development Direction - The company is focused on building Canada Goose into an enduring brand, with significant investments in marketing and retail experiences [10][30] - Plans to open a second production facility in Québec, creating over 300 new jobs, highlighting a commitment to Canadian manufacturing [28] - The company aims to continue expanding its DTC footprint while also growing wholesale, indicating a balanced approach to distribution [66] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term success of the brand, noting strong consumer connection and brand awareness [10][12] - The company anticipates annual revenue growth in the mid-to-high 30s percentage range, refining guidance based on strong year-to-date performance [42] - Management acknowledged the importance of localization in retail and the need for continuous improvement in customer experiences [23][24] Other Important Information - The company launched Project Atigi, a parka collection designed by Inuit seamstresses, showcasing a commitment to social entrepreneurship [46] - The company is focused on maintaining a strong inventory position to meet future demand, with a significant portion of inventory built for the next fiscal year [52][53] Q&A Session Summary Question: Gross margin evolution and inventory levels - Management indicated that gross margins have forward potential, with improvements expected from production efficiency and scale benefits [50] - Inventory levels are higher due to planned growth for future seasons, with a focus on meeting demand without disappointing customers [52][53] Question: Performance in China and Tmall - Management remains optimistic about the Chinese market, noting strong demand and plans for continued expansion [55] Question: Wholesale channel performance and product assortment - The company is pleased with wholesale performance and is working closely with partners to optimize store environments and product assortments [59] Question: Direct-to-Consumer sales growth potential - Management believes there is significant runway for DTC sales to increase as a percentage of overall revenue while still growing wholesale [66] Question: Tourist business impact - The tourist business remains strong across all geographies, with no negative impact from the opening of stores in China [85] Question: Margin structure in China - Initial margins in China are lower due to higher SG&A costs, but overall performance is strong [89] Question: Future store openings - Management is excited about future store openings and will provide more details in the next quarterly update [81]