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

Good afternoon, everyone, and welcome to another session of the Goldman Sachs 32nd Annual Global Retailing Conference. Here with me today, I am pleased to introduce our next session with Canada Goose. Here on stage, I have Beth Clymer, President and COO; and Neil Bowden, CFO. Welcome, Beth, and welcome, Neil.

Thanks for having us, Brooke.

Great. To kick it off, did you want to go through a couple of slides?

Yes. We have a few opening remarks just to set the stage, and then we'll get into some Q&A.

Amazing.

Okay. Well, thank you, Beth. It's great to be here at the Goldman Sachs Global Retailing Conference again. And thank you to everyone in the audience for your interest in Canada Goose. We'll just start with just a few facts and details about who we are as a brand. And so we have been a brand for nearly 70 years, and a public company since 2017. And over the course of those last 8-or-so years, we've gone from about $400 million of top line to $1.35 billion in the year that we just most recently finished. That represents 16% CAGR. The business has really evolved from being what was a single category parkas, a single segment, wholesale and essentially one geography, North America to being a global luxury year-round apparel brand. And so today, the business is about 75% D2C, which is about 75-store estate. I think we're 78% now. 25% of our business is -- of the D2C business is e-commerce and about 20% of the business is wholesale. The business is really backed with some pretty powerful economics. Gross margin is 70% and our operating margins in the channels are approximately 40% in D2C and 33% in wholesale. So really powerful operating margins. Where we have the biggest opportunity, though, is to drive margin expansion, and we believe we've got all the right levers in place to get back to where our historical peaks were. And so how are we going to accomplish that? First of all, resilient business model, which we've heard, geographic diversity, really increasing product diversity, especially under the creative leadership of Haider Ackermann, our first-ever Creative Director. The long-standing brand recognition and heritage that goes with being a mostly made in Canada brand. We're vertically integrated, and so we have the ability to control manufacturing for the most part in Canada, allows us to pivot. It allows us to chase. And behind the leadership of Dani Reiss, our Chairman and CEO, we've got a very talented and dedicated team around the world. In fiscal '26, our focus is very much around 4 operating imperatives. First of all, continuing that expansion of luxury products into year-round uses. Haider, again, is really alongside his Snow Goose collection is contributing to starting to grow the -- or continue the growth of the brand into many of those other categories outside of what has been the historical iconic parka. Brand heat -- and increasing brand heat through increased marketing investment, shifting the mix to the top of the funnel and driving the recognition and awareness of our product. Some channel expansion and increasingly improving our D2C qualifications, particularly our in-store operating performance. I'm sure we're going to get into a lot of that. And then operating efficiently with pace and accountability. And so specific investments around revenue-generating activities things like marketing. We've talked about things like building stores and product creation, besides that, holding the line on cost. And so how did that show up in Q1? We had revenue of 22% growth year-over-year on the back of 15% comps. That's on -- that followed a strong Q4 comp performance. Operating margin improved despite those revenue-generating investments, and the balance sheet is in a great place. Inventory improved again for the seventh quarter in a row and net debt leverage is in a great spot. And so with that, Brooke, I'd be happy to take any Q&A, including anything you'd like to know about the Toronto Blue Jays visiting the New York Yankees this weekend.

That's exactly what I was hoping to do.

Very good.

I'm glad to know that you are a Toronto Blue Jays fan. I've actually been to that stadium and watch them play. Neil, maybe I can kick it off with a little bit more discussion about some of the strategic initiatives that you have in place. You've made a lot of changes. What has been the most impactful to the business so far? And what gives you confidence that the momentum that you've recently seen is sustainable amidst a dynamic macro backdrop?

Beth, you want to start?

Sure. So Neil outlined our 4 key operating imperatives, and those have really been consistent focuses for our business, not just in this year, fiscal '26, but in last year as well. And really, the first 3, which are the revenue-driving initiatives, have all driven very significant impact on our business this year. I'll start first with products. We have a tremendous amount of opportunity to evolve and elevate our product. Many of you may still think of us as a company that makes really amazing heavyweight parkas. And we do make really amazing heavyweight parkas. But we also make so many different styles of warm winter jackets as well as an increasing number of jackets for all seasons. And we have an opportunity to not just further expand into those new product lines, but increase the freshness, the style, and the relevance of our products. The selection of Haider as our first-ever creative director, as Neil said, he's been in the business a bit over 1.5 years, has been accompanied by a tremendous amount of investment in merchandising capabilities, product development, sourcing, manufacturing design capabilities to really introduce a tremendous amount of newness, and we are seeing that really bear fruit in the strong financial results that Neil articulated in Q1 and the momentum we see into the rest of the year. There's a lot more newness in our stores now if you walk in and if you walked in this time last year, more color, more styles, more silhouettes, and we're seeing that really resonate with consumers. So we are, first and foremost, a product company and that product lever, we're really seeing bear fruit this year. Second is about how we execute. When you're -- you walk by that window, you're enticed by the product you see, you walk in the store, what is that experience in the store? Is it staffed right? Is the brand ambassadors trained? Are they not just helping you complete the transaction you're there to complete, but introducing you to the brand and helping you assemble an outfit. We've done a tremendous amount of work really overhauling our retail discipline over the past 18, 24 months to really invest in the way we execute in stores. And again, we are seeing that really bear fruit. Those efforts began in earnest about 1.5 years ago and pretty consistently through the back part of our fall season last year, beginning in December, we're seeing that really show up with conversion growth across all of our geographies and really focusing on driving great results in the areas we can control. So that's retail execution. And then lastly is marketing. We've heard actually from a few investors that we've met with today, oh, I walk by your store all the time, and I'm enticed by what I see. But what if you don't live near a store or walk by a store, how do we help you learn about what we're doing as a brand. And so this year, we're really making a big focus in marketing. Last year, we evolved how we marketed the lot, but we were focused on kind of fewer smaller bets. This year, we're much more consistent in how we market. We're talking to consumers. All year long, last year, we had some quiet periods, and that had some impact on our business. This year is much more about more marketing, more consistent, which again, we're seeing bear fruit in terms of its impact. So overall, Brooke, we really feel like those 3 operating imperatives are combining together to deliver us very strong momentum through the beginning part of this year that we look forward to continuing through the remainder of the year.

There's a lot to unpack there. Let's start with product. That was the first point you made. Haider Ackermann has been Creative Director for about a year now. What should we be expecting for year 2?

So Haider is here to help us do 2 things. One, he is here to help us accelerate the style and relevance and innovation in our product. And of course, Haider is an incredible influence of that, but that can't be done with just one individual as genius as he is. So I mentioned before all the investments we're making in the teams to support him. So you should expect to see across both our mainline product and our designer capsules, which I'll talk about in a moment, a continued elevation of our product. The fabrics look and feel different. There's more variety. There's more color. There's more unique styling in the jackets. Maybe the zippers look different, maybe the pockets look different. Canada Goose is really known for a classic silhouette, but perhaps sometimes we stayed a little too close to that classic silhouette. And Haider is really here to help us build the capabilities to push those out. So you should expect to see that mainline continue to evolve. Haider is also helping us design our first-ever designer-led capsule, which we're calling Snow Goose. Snow Goose was actually the original name of Canada Goose before it was Canada Goose and we're going back to that heritage and that history. And he is designing periodic Snow Goose capsules. There's 2 this year. We launched a spring and summer capsule over the course of the last couple of months, and we'll be launching a fall/winter capsule with a couple of drops later this year. So in that, you can expect to see some pretty Avant-Garde exciting edgy stuff, small contributor to revenue. This isn't a big volume piece, but really generating a lot of brand buzz. These are the products that are getting covered in Vogue and all of these really Avant-Garde places. And that's a big fuel of the relevance of the brand and really helping consumers think about us differently. So that's what's to come on product. We're just getting started. We feel great about the assortment that's in the stores today. It's significantly improved versus where it was last year, but we're just getting started.

You've mentioned a couple of times how the core consumer used to think of Canada Goose as a core heavyweight down brand. Non-outerwear or non-down outerwear is really driving a lot of momentum for your business right now. What's your expectation for category mix progression for the rest of fiscal '26? How does that impact your broader product strategy? And then -- as an aside, can you also talk a little bit about the health of your heavyweight down?

You want to take that one, Neil?

Yes. So I think for the rest of fiscal '26, obviously, we're transitioning from -- into our peak season. And so the time will now be for our icons to really come to play. We've got lots of interesting marketing campaigns coming around supporting some icons, which I'm sure I'm not yet allowed to divulge. Having said that, what we have started to see and that excites us and some of what is fueling those other categories growing are consumers either buying at a higher level of units per transaction or returning on a more frequent basis. And so alongside the elevation and the newness that's coming alongside the carryover products in our peak, we're really excited about all the other things that are there to complement them and things that can be available year-round and can be worn in multiple climates. When we look beyond fiscal '26, we're certainly look excited about that newness and the progression of the newness beyond heavyweight down, but heavyweight down and downfield outerwear more generally, so lightweight down as well is still the core of our business. We expect that to continue to be a growth area for us, even if it doesn't grow at the same pace as some of these other categories.

Very clear. In D2C, retail execution has been something that you've been investing in for a while. Can you elaborate on the impact that some of these actions have had? And how much runway do you see to further improve execution in stores?

We have a tremendous amount of opportunity. We think we're still in the pretty early innings of improving D2C execution. And you all know, being a retailer is hard, and we opened our first store in fall of 2016. So we've only been a retailer for 9 years. We operate almost 75 stores, very widely distributed across the globe and managing a store in a mall in Beijing versus a stand-alone store somewhere in North America. These are very different retail playbooks. So over the past 2 years, we've really been focused on standardizing the execution of that playbook, localize where appropriate, of course, but really making sure we're looking at the right metrics to support retail execution. We've got the store staffed right. We're hiring earlier before peak season. So brand ambassadors are trained before the season really gets started, really across the gamut, non-glamorous retail execution, but the things that you all as retail investors know are critically important to driving consistent results. And so that's the work we've been doing. The way we see it manifesting the primary metrics we look at are retail comp store sales growth and conversion. Conversion is the primary element that we can control, certainly the primary element that the stores can control. And we're seeing very strong performance on both of those dimensions pretty consistently. Again, we've -- we had a positive comp in December of last year and the 2 quarters we've released since then. And a lot of that is driven by this stronger, more consistent in-store execution and the conversion that comes along with it. But this takes time. This doesn't happen overnight. We started this exercise in April of last year, and the snowball is building. And so we think even though the work has been underway for some period of time, there is still much more of it for us to reap this year and beyond.

I'd just add that, I mean, the data points that we're looking at here in terms of store productivity are about CAD 4,000 a square foot in-store productivity. That's below where we have been historically. And so we love that metric and know that it can improve materially beyond that. And I'd add to that, that the 4-wall EBIT at 40% is also a strong margin to go back to the point about this being a resilient business model and again, opportunity for improvement. And so we've talked a lot about where those levers are, but we just know that we're okay with where we're at with the knowledge that there's a lot more to go.

Really helpful. Let's switch to the wholesale channel. It appears that the reset actions are now in the rearview mirror. Can you provide an update on the health of the wholesale channel? Do you anticipate any additional actions? And have you seen any changes in partner willingness to take inventory in the last couple of months?

So I think broadly speaking, when we talk about wholesale, we're probably talking about kind of the traditional wholesalers, whether that's here in the U.S. and Canada, so North America or in Europe. Our wholesale business extends beyond that to include markets where we've got just a distributor like Korea, Japan is more similar to North America and Europe. So I'll just talk sort of generally about the health of retailers. I'd say in Continental Europe, things feel like they're in a pretty reasonable spot. And I'll say that, that also applies to Canada and Japan in terms of retailer health and what is a stable order book for this year. We have taken some reduction in terms of number of accounts in Europe this year that was factored into our plans. And so that's the sort of the last of the -- as you referred to, the sort of rearview mirror reductions. In the U.S. and in the U.K., those are 2 areas where we're still monitoring sort of health of the channel and how risk on those -- some of the major players are. We've got good long-standing relationships in both places. The product shows up well. But I think there's still a degree of uncertainty in the consumer behavior that we're monitoring. I don't think there's anything else to add on the channel.

The only thing I'd add on wholesale, there's no reason wholesale doesn't become a growth channel for us again. This reset is about getting wholesale brand right, controlling inventory that's in the channel so that we don't have wholesalers taking significant markdowns. Last year, December, January, February time period, we saw almost no markdowns compared to prior years where there was more inventory in the channel. We saw some more challenging price behavior. So we now feel like inventory is in a cleaner position. The brand is showing up right in a lot of our key wholesale partners. When you walk in, you see more product assortment. It's not just a roll of Black Parkas. And so now that we've reset that, we can regrow it. Exactly what pace growth, lots of things in our control and outside of our control that will moderate that pace, but we absolutely believe it can be a growth lever for us over time.

Very clear. You mentioned a little bit of the geographic trends that you're seeing for wholesale, but maybe we can broaden that out to include your D2C channel. Can you provide an update on key North America KPIs? How has this informed your outlook for the region over the near to medium term? And then maybe within that, one of the questions we're asking all companies at our conference today is their outlook for the health of the consumer into the back half. Do you expect it to be the same, better or worse than recent trends?

So on the North American business in general and specifically our D2C performance, we're very happy with what we've seen here now for sort of through our first quarter. I think we said that also July was strong. And so it -- I think perhaps we had the most opportunity there in terms of D2C performance execution to improve and it's closest to home. And so some of the impacts that we've seen elsewhere, we maybe had the most to catch up with in the U.S. in particular, but let's just say North America in general. And so the things that we can control, which are what happens when you're in the store, conversions are in a great spot and improving. Product is where it needs to be, the quality of the staffing and matching staffing to traffic, those types of things that are all directly within our control have all improved, and that has fueled positive comp performance in North America for now what has been like 7 months. Our view of the consumer, I think, in the U.S. or in North America is that in most recent sort of luxury reporting, the general consumer weakness seems to be a consistent trend. We would say that we have not necessarily seen that in our brand. And obviously, the comps are strong. And so perhaps that's us just delivering on some of that execution improvement and not necessarily, let's say, bucking the overall weakness trend. And so while we're very satisfied with where we are, I don't think we're necessarily bullish yet on the consumer. I think if you read the news, there seems to be some mixed sentiment. And so perhaps, the luxury consumers may be a little more protected, but for the time being, we're still being a little bit cautious.

Is there any reason to expect that, that might change into 2026?

In calendar '26. At least from our standpoint, I mean, I think our considerations around what does the tariff environment look like and more generally, what does the global trade environment look like and what indirect effects do those have on the consumers' willingness to travel, their health when they're traveling, where they're spending their dollars. I don't necessarily have a view yet on '26 given how short-term changes seem to be, but I'm cautious still.

Very clear. Let's go to the other side of the world, China. You've seen a really nice reacceleration in that business for the last couple of quarters. Can you contextualize the drivers of that? And how are you thinking about the key drivers of why that should be sustainable on a go-forward basis?

Our brand shows up incredibly well in China. It is probably the place where we show up most mature in terms of our luxury positioning with our store placement with the consumer perceiving us as a multi-season brand. It's just we entered that market later and therefore, really had a chance to put a really wonderful foot forward, and we've seen great results from that since that market entry. And you're right, we've seen very strong recent performance there. A lot of it driven by the same execution levers we've talked about that are impacting us globally store execution, product evolution and marketing, product evolution, particularly when it comes to more non-downfilled product matters a particular amount in China because it's just better for the climate there. There's a lot of climates where for years, people have been asking us, can I get a lightweight jacket that protects me from the sun or can I get a T-shirt? And we now have a lot more of those than we've ever been able to offer before. So they're probably getting some disproportionate boost from the product evolution. But for the most part, it's just a strong brand that's quite relevant and loved by the local consumer and us taking advantage of all the execution opportunity we have.

Great. As we think about some of the near-term dynamics, you mentioned tariffs a moment ago. You're uniquely positioned in that you are USMCA compliant at this point. How are you thinking about Goose's ability to benefit from this tariff disruption near term given that your competitors are paying a higher price?

We think about pricing much more strategically than just tariffs, right? We look at the architecture of our price and make sure that we have a wide variety of beautiful and well-made products that can cater to consumers across the price spectrum. Certainly, tariffs disproportionately affecting competitors maybe makes it a little bit easier. We're marginally better price positioned -- if our competitors have taken more aggressive pricing action this year in response to tariffs, perhaps they might continue to do that going forward. If they do, that would allow us to be marginally better price positioned. But if I'm honest, the way we're going to drive great long-term growth of this brand is about desire, and it's about relevance. And so the price position doesn't hurt. Don't get me wrong. I'll take the relative advantage, but that isn't going to be the way that we get you to buy that second or fourth or fifth piece in your closet that isn't going to be the way that we get you to buy a Canada Goose Fleece for the first time. It's about the beauty of the product. And so that's really where we're focusing on our energy more so than price.

I'd also say that just to add to that, that the investments that we're making around the product creation team give us a lot more flexibility and particularly having a Chief Merchant with much more is oriented towards sort of a retail environment forces a lot more consideration around demand, forces some supply chain flexibility that we probably haven't either had or needed to implement. And so the ability to chase in season, respond to demand signals, shift production around if we need to is just a muscle that has coincided with some of this disruption, but I think it positions us well to sort of stomach some of these near-term changes.

Very helpful. One follow-up on that, that we're asking every company at our conference is, are you seeing any pushback or elasticity as a result of recent pricing actions? And what are your pricing plans for the rest of the year and into '26?

So our pricing approach this year as well as most years is to make one price change a year. We did that in the middle of May, which is a little bit later than we typically do. We had been waiting for sort of what was going to happen on, I don't know, the 1st of March, 1st of April, 1st of May. In the end, we decided that a sort of low single-digit price increase across the board was the right -- not across the board, but on average was the right approach for us. That led to very low increases on carryover, in some cases, none. Some more strategic increases on some of the noncarryover product. And as we start to introduce newness, we're slotting things alongside sort of input from the merchandising team in different spots. And so is there opportunity to elevate? Is there opportunity to fill some gaps in, et cetera? But for the time being, our approach has been to very closely tie it to what we think the consumer, how the consumer feels about the product and our ability to generate the desire as opposed to what does the tariff math say?

Very clear. Tying that into gross margins, your gross margins hit a record high last year. Do you see incremental room for expansion? And how do you elaborate -- can you elaborate on the key puts and takes on a longer-term basis?

You'd like to take a shot...?

We certainly believe we have long-term margin expansion opportunity, but our focus is frankly more about gross margin dollar expansion than it is gross margin. So for example, some of our non-down-filled outerwear categories do have a slightly lower margin than our down-filled outerwear. But if we are able to successfully attach those products to expand the consumer's basket, that is much, much better for our aggregate P&L. So we're not necessarily managing towards a specific margin expansion target versus a growing the pie of gross margin dollars. That said, levers to drive gross margin expansion over time are driving more efficiency in what we manufacture and what we purchase and driving more consumer desire that allows us to command a higher price premium and just overall scaling the product that we produce, and we think there's opportunities on all of those fronts that we continue to work on very aggressively.

I have to comment on the takes. We also have to consider what kind of cost inflation there might be and is newness something that will potentially drive some more complexity in manufacturing and those sorts of things. Team does an excellent job absorbing those. And obviously, over time, we've evolved the product category materially from this single kind of product, these parkas into lots of other things without any real consequence to gross margin. But as that gets more complicated and potentially as we have smaller runs of products or those sorts of things, we're going to have to consider how that absorbs. But I completely agree that the focus around driving gross profit dollars makes a material difference to our ability to leverage corporate costs and drive EBIT expansion.

Can we dive a little deeper on SG&A? One of the biggest debates on the stock has been the fact that these strategic investments have limited the flow-through from the stronger top line that you've seen year-to-date. How are you thinking about the ability to leverage SG&A into the back half of this year and into 2026?

Yes. So for sure, the flow-through for a period of time has not been favorable to the overall consolidated profit margin. Our view is the long-term health of this business and our ability to reach the economic potential is going to require some level of investment in marketing and product creation and channel expansion, things we've talked about. We're at a time where we know that we are not at the level of margin that we want to be, but we need to make some investments. And so we have been very deliberate about choosing those investments. We will continue to make investments that may not pay off within a short period of time but are necessary for long-term health of the brand. The things that are less revenue driving, headcount, corporate-type expenses, we've made some tough decisions over the last 18 months. We see benefits of that. Some of that we've reinvested. But that is an area where cost discipline has been necessary. I think we've taken some good action around that as painful as it has been. And ultimately, that will lead to margin expansion as we grow the top line. And I mean it can't be understated that the top line growth is ultra-critical to the long-term margin expansion profile.

We don't have any long-term guidance out at the moment, but there is nothing that leads us to believe that we can't return to our historical margin levels and beyond. The way that gets done is with scale and efficiency. And so the trade-off that Neil is describing of how much do we make these investments that are going to drive scale might short term hurt efficiency, but are going to get us to scale faster versus focus on efficiency. Those are the trade-offs that we're making every day, the 2 of us, but also our colleagues on the executive team to really find that right balance between fuel for growth but efficiency wherever possible to drive that expansion of margin back to historical levels and beyond.

There have been some recent media reports speculating around a potential take private. Is there anything you can share on that?

Has there been anything in the news in the past 6 hours since we've been in our meeting? No, those are truly nothing but rumors. We have -- obviously, it's not our policy, don't comment on rumors, but there's nothing we as a company are working on regarding any kind of take private or transaction at this point in time.

Excellent. I wanted to quickly touch on marketing before we ran out of time. That's been a big driver of the change in the business overall, and there's been some cadencing around that this year. Is there any way to help us unpack the drivers of marketing in the first half of the year versus the back half given the cadencing year-on-year and how we should expect that to play out longer term?

So if we rewind the clock a little bit to a year ago, we had an announcement of Haider as the Creative Director in May, a summer campaign and then a fairly quiet period of time leading into our period of time with little marketing heading into peak season. The Haider launch occurred at the end of November, and so there was a sort of a big brand moment in early October and then the really big launch of Snow Goose. Following that, we had Lunar New Year. We then did a rain campaign centered around the Sea Mantra, which drove really interesting commercial outcomes on rainwear, which is a product category we haven't done a lot in over a period of time, not a lot of newness. That translated into spring, into summer, and into Snow Goose collection, too. And so the first half investment in marketing this year versus last year, you can hear it, is much different in terms of activity. And we've said we're going to be investing more dollars this year than we did a year ago. And we've said that a lesson that we learned over the past 12 to 18 months has been the consistency matters, the momentum matters and contributes to brand heat. And so where are we going to spend those dollars? Much more at the top of the funnel, driving awareness and recognition, much more on the brand heat, which, again, may not deliver results this year or may not deliver everything this year, but goes to a longer-term view of how we want to grow the brand. The other sort of funnel activity as you get further down, the paid media, the things that are necessary in order to drive commercial outcomes, we will certainly spend there, but the proportion is going to be more heavily weighted towards the top of the funnel.

Very clear. Beth, we're about out of time. Are there any topics or focus areas that you'd like to leave with the audience before we conclude?

The only thing I'll add is that we feel like the jackets, Neil and I are wearing today, they're available on our website. I've got a few comments already. So we never lose the -- everyone's in sales, our President of North America says, so -- but in seriousness, if you haven't spent any time with the brand lately, I would encourage you to stop in the store. I would encourage you to check out the website. It's really gratifying when we're at sessions like this when we hear from people like I went in the store, the product is so much different than I remembered. It's so much different than I expect. It's really gratifying for us to hear that. We hear that from consumers a lot. And so I would encourage you to go check it out if you have a chance to do so.

Great. Thank you, Neil. Thank you, Beth.

Thank you, Brooke.

Thank you, Brooke.