Canada Goose Holdings Inc. (GOOS) Earnings Call Transcript & Summary

Good morning, and welcome to another session of the Goldman Sachs Global Retailing Conference. My name is Brooke Roach, and I cover the apparel brands and consumer discretionary sector here at Goldman Research, and I'm thrilled to introduce our next session with Canada Goose. Here with me today are Neil Bowden, CFO; and Beth Clymer, President of Finance, Strategy, Admin and Operations. Welcome, Neil. Welcome, Beth.

Thanks, Brooke.

Thanks, Brooke. We're glad to be here.

Great to be here, and thank you, everyone, for taking interest in Canada Goose. I'll just start with a few sort of overall remarks about who we are as a brand and where we've come from, and then we'll take some questions from Brooke. Okay. So let's get past the legal. And so I'll talk a little bit about where we finished fiscal '24, which ended at the end of March. And in our commentary with Brooke, we'll cover some first quarter comments. So this is a brand that's been a public company for just over 7 years. And since it's our first year as a public company, we've grown at 19% per year, and we ended the year at about $1.3 billion of revenue. We started very much as a wholesale business, making the iconic Parka and selling those Parkas in some of the great wholesale businesses, first in North America and then around the world. And that's evolved into product lines like fleece, lightweight down, we're into footwear now. We make t-shirts, polos, et cetera. And so the growth in the brand and the growth in the product has really come from the protection and the luxury experience that a consumer who wants to be outdoors wants. And we are just very excited about our ability to move from that wholesale business into a retail business. And so some of the key financial metrics are here on the board. I'll just cover a few of them. So going from our first store, which opened in October of 2016 to now, we're at 68 stores. A few more have opened thus far in our fiscal '25. We've shifted our wholesale mix from -- our channel mix from 100% wholesale to more than 70% in the year that just finished. We went from a business that was entirely heavyweight down, not that long ago, maybe 15 years ago, to that being just more than 50% of our revenue. And so the business has just moved substantially into the luxury consumers' closet in a way that excites us and certainly provides for what we think is a lot of potential. Gross margins are strong at 69%. That's been both with a migration away from heavyweight down into other product categories and with a pretty significant channel mix. We know there's opportunity on further expansion in markets. I'll talk about that in a little bit, but that earnings model is very powerful. Unfortunately, that hasn't necessarily translated into the EBIT that we would expect. And so our EBIT number at 13%, while that's a good number maybe in absolute terms, it's well below where we were as a historical -- at a historical level. And the business has undergone a lot of transformation over the last few years. And both Beth and I, and Carrie and Dani are not here, know that we can drive that business back to where it needs to get to. I'll just cover off a few of the reasons how. And so strong competitive advantages that we've got. One, resilient business model. We know that this is a very cash-generative business. Our store productivity is high. We know there's opportunity there, but the unit economics are very strong. Second, brand health and the brand love around the world continues to be high with an opportunity to expand the mind share outside of just warmth. And while we're recognized around the world very much for the heavyweight down products and the Parkas, we know that we can build that into the rest of the product line. Third, vertically integrated. We own all of our -- the vast majority of our Canadian manufacturing. We've got a footprint in Europe, which makes knitwear. And so having that vertical integration gives us a lot of flexibility and controls really the end-to-end supply chain. And last, talent, which underpins really our ability to deliver. This year, we've got 3 very critical operating imperatives, and the focus is very much on how do we get the business in shape for the next phase of growth. So first of all, what are we doing around brand and product? Most exciting thing there is Haider Ackermann has become our Creative Director, and that was announced in May. A lot of interest in the campaign that just got off, and we're very excited about the product capsule that will be coming here in the fall. Secondly, I talked a little bit about our movement from wholesale to D2C. We have a ton of opportunity around how we execute in our stores. And so how do we get the right inventory in the right place at the right time, how do we train our folks in stores to really drive that luxury experience as well as some basic tackling and blocking around sales? And then the last thing is really about simplicity. So how do we do fewer things for a greater return? It's been -- as we've grown, we've probably put a lot of eggs in a number of different baskets, and so concentrating on those baskets and getting the most out of them is a critical focus for us here in this fiscal year. That's it.

Great. Well, thank you so much for those introductory remarks. Maybe we could dive a little bit deeper into these operating imperatives that you outlined for FY '25. Can you talk about some of the early signs of success that you've already achieved? And then what metrics should we look at to help gauge success as you move along in that progress?

Sure. I'll just go from left to right on the page. First, we'll talk about our brand and product evolution. As you heard Neil describe, we started as a business with these iconic warm Parkas that we're really, really well known for. But our product line has expanded a tremendous amount since then, and we don't necessarily get enough consumer credit for it. And that's on us. We have not done a good enough job of evolving the way we talk about brand with consumers and getting our windwear, our fleece, our footwear into the [indiscernible] the same way. Our historical heavyweight down business have. And similarly, there's actually been a tremendous amount of innovation within the down-filled outerwear business that we've not done a good enough job of getting credit for it, and we have a lot more opportunity to infuse creativity. So Haider's appointment as Creative Director is a huge part of that. For those of you who have not seen the news, he also, yesterday, was actually announced as the Creative Director of Tom Ford, which is hugely exciting for us. Haider, for those of you who know him, incredibly well respected in the space. It's been rumored for a long time, he takes some very big luxury shop, creates [indiscernible] position, but Tom Ford's role is one that for us is actually quite exciting. It's a -- Tom Ford actually -- I didn't know this until week, describes his creation of the brand as the first true 21st century luxury brand, and it's a North American-American luxury brand. We're also basically a 21st century luxury brand in North America and Canada. So there's a lot of parallels there. So Haider's design aesthetic, his luxury credentials will just continue to infuse a level of excitement into our product line that will resonate really well with consumers. And then there's a tremendous amount of work underway about how we speak to consumers from a marketing perspective to get credit for that. So how should you measure success? You should measure success by looking at how our product line evolves. If you haven't had a chance to visit our stores in a long time, we'd encourage you to do so. There's one right on -- in Soho and then Fifth Avenue, so not too far from here, where I expect if you haven't seen one of our stores, in even the last 2 or 3 years, you'll be really excited to see the breadth of what the product looks like. And so you should measure and continue to hold us accountable for that breadth as well as how our product assortment from a revenue perspective grows that you should continue to -- expect continue to see growth in the non-heavyweight down portions of our business. And on the brand and product evolution side, you should measure and hold us accountable for how Canada Goose is talked about in the industry, what you see from us on social media, on earned as well as paid media and whether you continue to see our brands both be more present and also be more broad in ways I talked about in the market. And if we achieve those objectives, we'll be very thrilled with our progress on brand and product evolution. So it's important to note, these changes are -- these are multiyear priorities. This is -- we work on this for 6 months and then we're done and we move on to the next thing, evolving and elevating our product. And our brand will be a continuous priority for us in the quarters and years to come. Do you want to talk about retail, Neil?

No. No, I think you can cover it.

Okay. All right. So retail execution, Neil alluded to this. What we have built in the past 8 years in terms of retail is amazing. We have now upwards of 70 stores globally, built from scratch. It's unbelievable. But we've not good enough retailers. And those of you who have been to our stores, I would expect you've had that experience. Maybe the experience when you were greeted wasn't exactly what you expected or maybe someone didn't do a good enough job of educating you on our brand or product or maybe you found a product you really liked and we didn't have it in our store and we couldn't figure out a way to seamlessly get it to you. We have a lot more we need to do on retail execution, a lot of which is quite candidly kind of basic retail 101, what's the data you look at every Monday morning and how do you manage the performance at the store level. It's not surprising when you think about the breadth and scale that was built relatively quickly, by the way, with the global pandemic in between that we're not perfect at this, but we know we're not perfect. And so our second pillar is all about improving execution and success, and that will be measured with sales per square foot growing due to comps are growing and the margin expansion. A really attractive flow-through, we'll get as that occurs. Lastly, operating with simplicity. We are blessed with a lot of high-return opportunities. But as you all have seen at fast-growing businesses, high-return opportunities, sometimes spread you too thin, and you heard Neil talk about this. And so we've done significant organizational restructuring, one in August of last year and one in March of this year, to reduce our corporate headcount base and get a lot more efficient. That's great because it lowers costs. But more importantly, it requires us to do fewer things and do them more fully. And so there's a lot of work underway in that regard. And Brooke your question on how to measure, you should see success here with us continuing to pursue a lot of high-return growth activities, but do so with our SG&A base staying flat and then shrinking as a percent of sales as we drive operating leverage through the business while continuing to accomplish our objectives.

I have a couple of questions on each one of those pillars. So let's start with brand and product. One of the questions we get most frequently from investors is how to think about the margin profile of your product expansion into non-heavyweight down. And you've already had some pretty strong successes into non-heavyweight down. Every single one of you is wearing those items today. So what's the next phase of growth in the journey? Is it deepening the category expansion? Or how should we be thinking about that?

Yes. I'll take the first point on I think you mean gross margin per product. So heavyweight down products skew more favorably in terms of our gross margin profile. But we've maintained gross margin in the channel in the mid-70s for a number of years as we move from effectively kind of 80% heavyweight down into a much lower percentage. And so we've been able to accommodate either from a -- we've been able to accommodate expansion of those other categories, and we'll continue to do so by driving -- by creating the right value for the consumer. And so both the product pricing and costs are in the right spot in order to balance that out. Now I think there's opportunity on cost as well as we move into further integration, vertical integration. And so there's been a long history there of us maintaining gross margin at the right level, category expansion.

Sorry, what was that?

Any specific areas where you think that you see the most opportunity in non-heavyweight?

In existing categories or categories not yet, or both?

Exactly. I guess the question is you've got a lot of non-heavyweight already. What is the biggest near-term opportunity that you see?

So we have seen very strong consumer resonance in apparel. And apparel for us is very broad, sweaters, fleece, T-shirts, Polos, et cetera. So frankly, even within each of those categories, there's a tremendous amount of TAM. So that's an area we feel incredibly bullish about the potential. Similarly, other forms of noninsulated outerwear, rainwear, windwear have been very successful categories for us with a lot of consumer resonance. We have a lot of really exciting kind of very stylish products that are selling out in those areas. So we see a tremendous amount of runway. I mean, remember, we're only a $1.3 billion Canadian brand. These product categories in total are about half of our revenue. So these are still very small relative to total TAM available. And the consumer resonance we see, despite still being in the early innings of building consumer brand awareness about these categories, fill us with a lot of excitement. And then obviously, there's plenty of other categories that we can imagine entering into over time, think luggage, eyewear, and you can imagine the product categories you've seen other luxury brands successfully expand to. We have a lot of consumer data to suggest we have permission to win in those as well. We're just trying to be very deliberate about how we pace those in a responsible manner.

Let me follow up because I think there's a really core piece of the earnings model here that I just want to make sure we underscore. And so polos to me is a great example where this is the first year we had polos broadly available. There are 2 colors. And we didn't make a lot of them because we are very disciplined when we enter new categories about how many products that we have so that we can control the inventory. Those products did very well. And even if the margin profile, for instance, is less than what our sort of reported average is, we can still drive store productivity in off-season by having those products or drive UPT, units per transaction, up in season when you're buying that as a gift for Christmas. And so I just think the understanding around how powerful our earnings model can be compared to the level of productivity we're at today is important.

And then in your core for heavyweight down, do you expect units to continue to grow? What are you doing to make sure that, that product category remains strong, especially in the markets where your penetration is already high?

I certainly expect units to grow over time, but I think it's incumbent on us to ensure that we are continuing to drive desire in the consumer. And so we've got a very strong core base of heavyweight down styles that have had a long history of success. And as we've introduced new products, we need to make sure that those complement and are as performative as the existing core. We know that Haider is going to bring a lot of excitement across the entire line, and heavyweight down for us is what we're known for. It's our bread and butter, and we absolutely expect that we will continue to grow that even in markets that are mature.

It's certainly though is a much more competitive space, right? We really frankly helped prove the market for a high-end, very warm winter jacket. And so we need to continue to raise our game in the way Neil described to continue to maintain and grow share in that increasingly competitive market.

Very helpful. Let's move on to retail execution, which was something that you outlined as an area of a lot of opportunity. As we think about those opportunities, do you have the systems in place today, whether that's systems or technology, to implement the improvements that you've outlined? And how should we be thinking about the near-term drivers of productivity improvement that you see?

I'll start with just framing the current state. We have a highly productive store base, in the ballpark of $4,000 per square foot store, very attractive unit economics in terms of payback period on the capital to build the store in terms of EBIT margins. This is a store base and an economic profile of the store base people would salivate over. Yet here we are saying, we're not good enough of being retailers. So, and that's for us, we did not have the strong comp as we wanted to have last year. And how do you drive continued leverage out of that store base, you do it by driving positive comps. And so that's where our focus is. I think you work your kind of systems processes and there is a lot about retail. That's just a management playbook. And we are really in the early innings of putting that management playbook in place, kind of what does the regional management structure look like? How are they spending their time on a weekly, monthly, quarterly basis with their teams? How do you build store plans, not by quarter or by month but by day and day part and manage success around that, particularly when you're a relatively seasonal business? And so what happens on a week in October is actually much more important than what happens in the month of April, right? So there's a lot of that, but to be honest, it doesn't require a big investment in the systems, the processes, but require the level of management rigor and talent investment that we're well underway in getting in place, but we're probably not fully there yet, but we're certainly not fully there in reaping the benefits of it yet. So that's one area of focus is that kind of management rigor. Second is just in-store practices. So we've just recently put in place new store incentive plans to really reward our best brand ambassadors that are the best at building their business with really good Canada Goose consumers. We put -- we're putting in place new receiving flows in the back room to make things much more efficient and free up more labor hours to spend on the floor. We're reflowing the way we do scheduling to better match the labor hours with on the weekend when we get more customer traffic, right? So again, a lot of just rigor around the systems and processes that, again, we're I think making really good progress in putting those things in place. But you all know, having covered retail businesses for a long time, that change takes time in a distributed network to have its full impact. And you've got one store manager, who adopts it really quickly and it has impacted the next day, and you've got one that it takes a couple of quarters to see it through. And so there's a lot in that regard. And then there are certainly some more IT systems and opportunities that we do not yet have in place. Client telling is a big area of opportunity for any luxury business, including us. And that's something we're incredibly tech-enabled on today. Something, we will be tech-enabled on that. But right now, we are intentionally going a bit slower on some of those IT system investments to make sure that we have the management rigor and the business processes in place. And then we use the tech to enable it rather than thinking that the tech is going to solve the kind of management rhythm problem.

As we think about what that means in practice, this year, you've guided to positive low single-digit comps for your DTC business in aggregate. And yet last quarter, things were a little tougher than that. Can you speak to the drivers of the sequential improvement that you expect throughout the year? How much of the guidance improvement is a function of an embedded assumption in macro versus your own idiosyncratic initiative?

So I think I'll just repeat basically what Beth said about a week in October could be the same as a whole month of April. And so the first 5 months or so of our D2C year are very immaterial relative to the total. And so certainly, we would like to have positive trends in the first part of the year, but we don't look at those as necessarily really strong leading indicators. And I'll go to last year where we had a -- that's exactly what happened, and yet the opposite was true in the back half of the year, obviously, unfortunately. What we -- I'll separate the macro for a moment from all the really good stuff that we're doing in stores to be prepared. And so do we have the inventory in place? Yes, we do. Are we implementing as much training as possible? Do we have the comp structure in place? Yes. So we are attempting to be as prepared as possible. And as Beth alluded to, some of that is going to take longer over a longer period of time, but we do expect that to pay dividends. I think the macro environment, and when we talked about this, Brooke, a little bit in the first quarter earnings call, if my memory serves, you asked about this, is certainly a broad concern. I think we would all acknowledge that whether that's China or whether it's the U.S., it feels like the luxury consumer is under some pressure. I think our perspective is we need to control what we can control, and that's the focus and that's where the energy is right now.

Given that you brought up some of the recent trends that you're seeing from a macro perspective, I'm wondering if we could dive a little bit deeper into some of those by geography. How are you seeing consumers engage with the brands in your business, whether that's traffic conversion or willingness to spend relative to some of the softness that we've seen in the global luxury environment recently across geographies? And how does your guidance accounts for that?

So maybe I'll just work my way from North America, East. So we had in the first quarter, again, small quarter, strong positive comps in Canada, in Japan and in Mainland China. And so Canada has been a pretty resilient market for us, strong. It's our home market, obviously, strongest market in terms of brand awareness and probably closest to home, gives us opportunity to test in stores quicker. I think the U.S., our guidance, while it's not specific to any particular markets, assumed -- or assumes a pretty conservative level of recovery. And so we're more or less where we thought we'd be in the U.S. I think there continues to be opportunity there. My view, I don't know, Beth, if you have a different view, is that the consumer is under pressure there and that seems to have been going on for a while. We did not assume that, that would correct materially. Europe for us was not as strong early in the first quarter. There's a little bit of recovery towards the back half of the year, back half of the first quarter. We'll continue to monitor that. It's the smallest market. And our job there is mainly to get wholesale as clean as possible so that our D2C presence can operate with the best experience for the consumer. If I go to the -- if I go to APAC, Mainland China had a strong first quarter. Japan had a very strong first quarter. And so the movement of tourism, in particular, into Japan is good. We've got strong brand awareness in Japan, but we're in the early days of that sort of joint venture and our expansion into Japan. And so we certainly see opportunity over the long term there. That consumer has been a long fan of the brand. And so we feel pretty good about what that looks like for this year. Greater China is under pressure. Hong Kong, Macau, Taiwan, traffic in those stores through the first quarter was lower than it was a year ago. The comps were pressured. I think about if we zoom out, they're certainly mixed, but we've been conservative about what we expect for the year.

And just to put a bow on some of these macro comments, one of the questions we're asking all companies at our conference today is their view on expectations for the environment in the second half of '24 relative to your own recent results. Do you expect things to be same, better or worse?

Do you want to take that?

I do not think we see it better, whether it's the same or worse, unclear. Certainly, I think some of the macro data that we read and see, the same thing you all see, is admittedly a bit daunting. And as Neil said before, we tried to just stay super focused on what's within our control, and we are a small enough share player that we hope that we can continue to succeed regardless of, frankly, the macro environment around us. But certainly, we would be delighted to be upside surprised and have a stronger macro environment in the back half of the year than we did in the first half, or then we think it's likely in the second half.

One other focus area for investors, especially given some of the choppier macro trends is just what's happening in wholesale. We've seen some wholesale partners, see much weaker trends than their DTC counterparts. And you've been focused on optimizing relationships in wholesale, accruing to brand-accretive partners. Can you elaborate on what inning we're in, in this strategy and how we should think about a return back to growth in the wholesale channel?

Do you want to take that?

Sure. So I think we're reasonably far through our wholesale cleanup journey. For those of you who've been following us, we've intentionally shrunk wholesale over the past couple of years, that include exiting of doors -- or sorry, include exiting of entire partnerships, include exiting of doors with some partners and includes rationalizing the order book with partners in certain doors as well. And that's really a collaborative effort between us and the partners to ensure that we are showing up in a very brand right way across wholesale. Wholesale is really important to us. It is how a lot of consumers will meet us for the first time or will learn about new things we offer. It's a highly strategic part of our portfolio, but it was a very large part of our portfolio, and to be frank, we didn't have the right partnerships across the business and we're far too often showing up in the back of the outerwear floor with a bunch of Banff Parkas instead of the way we show up in our best wholesale accounts, think Selfridges, Harrods, some of the doors of Nordstrom, Mainland, et cetera, where you really -- it looks like you're walking into many one of our stores. And so that's the journey we've been on. We feel that we're very well through that journey. We guided to a decrease in wholesale revenue this year. And the hope would be that we're close to that nadir and begin to regrow from there. But the pace of how we grow is both within our control. So the better we do on the brand and product evolution and excite and create more desire, the stronger that is going to resonate not only in our DTC channels, but in wholesale, and that will allow us to regrow there. But it also depends a lot on the health of the wholesale channel, which as you alluded to, is uncertain. And so I think we have operated in an environment where our wholesale partners were much more risk on. And when they're a little more risk on, they're very excited to buy a slightly broader set of our apparel assortment. And when they do that, then the consumers buy it and then they buy more of it, and it becomes a bit self-fulfilling and we're not currently in an environment where anyone is risk on, we're quite the opposite. And so I think how quickly the wholesale channel, particularly in North America, resets to health will also be a big driver of how soon we move from this nadir to a reacceleration of growth.

The only thing I'd add to that is, Europe is still our major, our largest wholesale market, and that's an area where we've been pretty aggressive about reducing accounts but also about developing really deep partnerships in some of the most influential wholesale stores in the world, places like Harrods, Selfridges, Galeries Lafayette, et cetera, where the introduction of Haider and the expansion of the products has been really in desired from those partnerships for a long period of time. And now that we feel like we're there, starting to move into a more luxury adjacent spot. And those we know to be very influential places for people who travel to shop in places like Paris or Munich or London or what have you. And so we -- I think the aspects that Beth's talking about in terms of how we're dealing with the market cleanup in inventory in the channel versus how do we show up in the wholesale partners and the strategic nature of those relationships, that second part is really, really important, and that's a spot where we've made some real strong headway.

That's great to hear. Thank you for the color. One other topic that's been on investors' minds has been China. And you mentioned a little bit with -- when we were talking about the macro, but Canada Goose has seen strong expansion in the Chinese marketplace over the past couple of years. The Chinese consumer is shopping in different places at different times. So I was wondering if we could zoom out and speak about the total Chinese consumer cluster that engages with the brand. What are you seeing there today? And what is your outlook for growth with the Chinese consumer in aggregate, regardless of whether or not they spend in Japan or Macau or Hong Kong?

Yes. I mean I'll start with all of our consumers are important and all of our clusters are important, whether those are domestic or whether they're shopping domestically or shopping when they're traveling. Clearly, the Chinese consumer is a material part of our business. They have historically shopped in places like Toronto or VAN for Vancouver, now Seattle in North America, in the U.S., et cetera. So I think the general comment, I think, still applies that there feels like -- it feels like a challenging backdrop in terms of the macro of the Chinese consumer, what does that means they're traveling but not shopping, not traveling or not necessarily shopping as frequently in the market. That's a general comment. As it relates to our stores, we have 25 stores or 26 stores in Greater China. It's just a very low level of penetration in our view based on what we think the total size of that market could be. We know that when the consumer leaves China and goes to places like Western Europe or Japan, they shop in our stores. I think we feel like they will continue to be an important part of our business, whether that's domestically or while they travel, but ensuring that we have a healthy domestic or local business in every one of our markets is just as critical as ensuring that one particular consumer set is taken care of.

Very clear. Let's pivot to margins. You've guided for about 100 basis points of margin expansion this year. How are you thinking about the potential drivers of improvement in the near to medium term? And what are the drivers of leverage?

I think there's 2 main drivers of margin improvement. One is going to be scale. So how do we get more higher level of revenue, whether that is through comp store growth, which is really critical, and Beth alluded to the fact we've got highly productive stores at $4,000 a square foot. That is still below where we were historically. We know that we have opportunity there. And so getting more out of the existing stores as well as growing stores gives us some revenue scale, and that starts to expand margins. The second, alongside the operate with simplicity pillar is how do we keep a lid on costs. We've got a broad business around the world. We have invested heavily in certain areas, particularly talent. We need to make sure that, that cost growth is less than the growth in revenue so that we can start to expand margins and get ourselves back to where we know we need to be. Those are the 2 biggest pieces.

Canada Goose is unique because you have a different cost structure than others, given your own manufacturing, your own facilities. One of the questions we are asking every company today is how they're thinking about the cost outlook into 2025. Are you expecting some of the cost pressures that have been in the industry today, freight, materials, labor tariffs or otherwise, to be the same, better or worse into 2025?

There are some aspects, both of our vertical integration, but frankly, also our Canadian manufacturing footprint that actually makes some of those cost headwinds less material for us than they have been for other companies. So for example, tariffs, less of an issue given a significant portion of our product is made in Canada. Similarly, freight, a lot of the pressures that folks have felt getting their goods from Asian manufacturing to European and U.S. destinations are subject to going in the other direction. So we haven't seen the same inflationary pressures that others have seen in that regard. So that's been helpful to us recently, and we expect will continue to be helpful for us in terms of mitigating some of those inflationary pressures. But there are, of course, others. Minimum wage trends in Canada will create inflationary pressure that's unique to us. And so we see some of those pressures. We don't think an inflationary environment is going to go away. But fortunately, we also see the really strong culture we have and have always had of continuous improvement and productivity in our manufacturing and our supply chain organization as creating really good room for productivity that can help offset those inflationary pressures. We've seen that so far, we saw that last year, seeing that so far this year, and we expect that will continue. And as you think about the learning curve, that we introduced a new product line and it resonates with consumers, it stays in the line. And we have carryforward styles that stay with us for years. You can really get much more efficient on how you manufacture that style over time that can often more than offset the inflationary pressures you get. You can buy the raw materials volume at greater scale, that can more than offset the inflationary pressures you get. So I think we see our vertically integrated manufacturing as a real asset that helps us offset some of those inflationary pressures perhaps more than other brands.

Putting it all together, prepandemic, Canada Goose used to do a 20% plus operating margin. You've outlined a number of initiatives that are set to improve the top line as well as your efficiencies and your margin structure. How should we be thinking about the pace of reinvestment in the brand as you go after some of those opportunities versus the flow-through and the cadencing of expansion back to a stronger operating margin over time?

We are extremely committed to a steady expansion of operating margin. And so the answer to your question of pace of reinvestment will, in large part, be how much productivity are we driving through cost productivity and sales productivity. And the faster that productivity we drive, the more opportunity we have to reinvest in high-returning investments while still expanding margin. But our commitment is steady margin expansion, which obviously, as you say, we have not delivered on these past few years, and we are going to be very judicious at those investment dollars, following the growth in the margin expansion rather than leading it to be sure that we can deliver on that steady improvement.

I could not agree more.

Excellent. Well, with that, I'm afraid we are out of time. Thank you, Neil. Thank you, Beth, and thank you for all of those who joined in on the audience today.

Thanks so much.

Thank you, Brooke. Thank you so much for your time.