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

Thank you. Hello everyone. Thank you for joining us and welcome to the Canada Goose First Quarter 2027 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Ana Raman. Ana, please go ahead. Thank you.

Good morning, everyone, and thank you for joining us today on the Canada Goose Q1 fiscal 2027 earnings call. you'll hear from danny reese our chairman and ceo neil bowden chief financial officer carrie baker president of brand and commercial and beth kleimer president chief operating officer We'll start with prepared remarks from Danny and Neil, and then open up the call for questions. Today's presentation will contain forward-looking statements that are based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements except as required by law. Further information regarding these assumptions, risks, and uncertainties is included in our press release issued earlier today and available on the Investor Relations section of our website. We report in Canadian dollars, so the amounts discussed today are in Canadian dollars unless otherwise indicated. Please note the financial results described on today's call will compare first quarter results ended June 28th, 2026, with the same period ended June 29, 2025, and stated percentage changes are in constant currency, unless otherwise noted. Lastly, our commentary today will also include certain non-IFRS financial measures, which are reconciled at the end of our earnings press release. With that, I'll turn the call over to Danny.

Good morning everyone and thank you for joining us. Last quarter, I shared our commitment to developing profit margin expansion in fiscal 2027. We were pleased to be off to a strong start. In the first quarter, we expanded adjusted EBIT margin over 10 percentage points year over year, our strongest first quarter adjusted EBIT margin since fiscal 2020. This performance reflects meaningful progress across the business. We delivered revenue growth of 9% driven by strong demand for our expanding lifestyle product offering, including apparel, rainwear, and windwear. We also achieved healthy gross margin expansion in the season with a greater mix of spring-summer categories, while higher channel margins and disciplined cost management further supported profitability. Together, these results demonstrate that the strategic investments we have made over the past several years are translating into stronger financial performance as planned. We've identified three key priorities for fiscal 27 to continue strengthening our year-round relevance with consumers while driving sustainable growth and profitability. Our first quarter performance continues to show these priorities are working. Our first priority is to deepen brand desire through more effective marketing and translate that into increased demand. In Q1, we continued to see the investments we set in motion last year contribute to stronger consumer engagement. brand desire strengthened in mainland China and continental Europe. This highlights the positive response to the way we are bringing the brand to life through both compelling campaigns and elevated retail experiences. While traffic across parts of our store network remained lower than we would have liked, largely reflecting a soft macro environment, we continue to see encouraging indicators of consumer interest, including strong e-commerce traffic growth and healthy customer acquisitions. We also continue to see desirability and awareness outperform competitive benchmarks in key markets. Together, these key indicators reinforce the strength of the brand and its ability to connect with both existing and with new consumers. Our focus remains on deepening consumer engagement within the brand and expanding our relevance across more C events and occasions. As we continue to build demand in our spring-summer categories alongside strong engagement across established categories, we believe our planned increase in marketing investment through the second and third quarters positions us well to convert that growing interest into sales. Our second priority is to scale a repeatable product playbook across seasons and drive greater year-round relevance. We are thrilled by the response to our spring-summer collection, the largest in our history. The assortment was met with exceptional customer demand across direct-to-consumer and wholesale, with apparel, which includes fleece knitwear, shirts, and bottoms, as well as rainwear and windwear, leading category growth and expanding their share of first quarter revenue. Parallel rainwear and windwear accounted for nearly 40% of our first quarter revenue. Put that in perspective, these categories generated as much revenue this quarter as our entire company did in the first quarter eight years ago. That is a remarkable illustration of how Canada Goose has evolved. In fiscal 2022, these categories represented just 5% of our business. By fiscal 2026, they had grown to 15% of our total revenue, and we continue to see significant opportunity ahead. What is notable is that this growth is additive. Downfield Outerwear also grew in the quarter, in addition to strong customer response to both newer and established categories. This demonstrates our ability to build a more balanced business throughout the year while remaining true to what makes Canada Goose distinctive, which we believe is the right way to operate. Our third priority is to improve channel productivity and capital efficiency. made meaningful progress against this priority in the first quarter. Customers increasingly engaged through direct-to-consumer and wholesale channels, contributing to strong growth in both parts of the business. Direct-to-consumer and wholesale channel segment margins also expanded, demonstrating that we are improving both the sales productivity and profitability of our business. wholesale delivered an outstanding quarter and was one of the clearest proof points of the momentum we are seeing across the business. Revenue increased 65% year over year, driven by a strong order book and customer reorders through the quarter, as well as some shipping time. We view this as an important validation of our strategy, reflecting strong partner confidence in the brand and growing demand for our expanded product assortment. That confidence is reinforced by the strength of our spring-summer 2027 order book, which positions us well as we look ahead. Direct-to-consumer revenue increased 7% year-over-year in the first quarter, led by strong e-commerce performance across all regions. DTC comparable sales declined 3% year-over-year, driven by the traffic pressures I previously mentioned. While these pressures were seen across the luxury retail industry, our teams responded with strong in-store execution. Conversion and units per transaction increased year over year, benefiting from actions we took to better align labor investments with customer demand, ongoing staff training, product availability, and continuing to enhance the in-store experience. We also continue to strengthen our retail network, opening four new stores during the quarter, bringing our permanent store count to 92. This included our new Vancouver location, which showcases our latest design concept and further elevates the Canada Goose experience. In closing, the first quarter reflects the progress we are making to build a stronger, more diversified, and more profitable Canada Goose. We are expanding the reach of the brand, building a more balanced product portfolio, and creating new opportunities for growth across channels and occasions. The strong response to newer categories alongside continued demand for our iconic core offerings is helping drive both top-line growth and margin expansion, demonstrating that we can expand the reach of the brand while strengthening the profitability of the business. We are excited about the progress we are seeing and we will remain focused on building on that momentum through continued execution. And with that, I will turn it over to Neil.

Thanks, Danny, and good morning, everyone. As Danny noted, in a year where we expect to deliver operating margin expansion, Q1 was a solid start. growth in our D2C and wholesale channels, gross margin expansion, and an appropriate mix of investment and cost control delivered meaningful adjusted EBIT margin expansion as we navigate a mixed consumer environment. Let's get into the details. Revenue in the first quarter was 119 million, up 9% year over year with growth in both D to C and wholesale, while revenue in our other channel saw a planned decline. Excluding the impact of other revenue in both periods, total revenue increased 16% year over year. DTC was up 7% year-over-year with double-digit growth in Asia Pacific and North America. Within D2C, both our retail and digital channels grew, including double-digit growth in e-commerce. DTC comparable sales declined 3% year over year due to lower comparable store sales, partially offset by strong e-commerce growth. Store performance was impacted by softer traffic trends, particularly in EMEA, reflecting a more challenging macro environment and lower international travel. Looking ahead, we plan to increase marketing investment and continue refining the balance between upper and lower funnel activity to drive traffic, strengthen conversion, and support growth across both our store and e-commerce channels. In wholesale, revenue grew 65% year over year, driven by higher in-season demand, an increase in order book shipments, and timing of shipments in the quarter. Our momentum in wholesale serves as a meaningful indicator of our brand health and partner demand for our expanded assortment. Other revenue was down 64% year over year due to minimal activity during the quarter as planned. Starting now to regional performance. In Asia Pacific, revenue increased 35% led by strong D2C and wholesale performance. Mainland China led the region's growth with continued strength in e-commerce and improved conversion across several key stores. Wholesale revenue was also strong in the region, benefiting from shipment timing in the quarter and strength from our wholesale presence on Hainan Island and in Korea. Demand was supported by both local consumers and regional travel flows, with Chinese consumers continuing to shop in nearby destinations across Asia. In North America, revenue declined 6% year-over-year, but increased when excluding other revenue. We achieved double digit growth in each of our critical channels, D2C and wholesale. Positive performance in Canada did not offset softer store traffic in the U.S., resulting in D2C comparable sales decline of 1%. EMEA revenue declined 7% year-over-year as strengthened wholesale and e-commerce was offset by softer store sales. D2C comparable sales declined as challenging macro conditions continued to weigh in the region, consistent with the broader industry trends. Now turning to the income statement. Gross margin expanded by 100 basis points year over year to 62.4%, favorably impacted by channel and regional mix. Pricing was positive and offset modest cost inflation. SG&A expense decreased 21% year over year. In Q1 of last year, we had two items that materially increased our SG&A expense and did not recur. In Q1 of this year, we benefited from the collection of receivables from customers that we had previously determined would not occur. Normalizing for these items, SG&A expense increased 6% year-over-year, translating to which reflects progress across three areas. First, marketing is a tool Marketing spend as a percentage of revenue decreased 490 basis points year over year. This reflects both improving marketing efficiency and our deliberate approach to pacing investments throughout the year. Aligning spend with periods where we expect the strongest customer demand and return on investment. Second, higher revenue across our wholesale and D2C channels drove meaningful operating leverage, allowing us to absorb fixed costs across a larger revenue base. And finally, we manage corporate spending as planned to support our key growth initiatives. We recorded an adjusted EBIT loss in our first quarter of 104 million versus a loss of 106 million in Q1 of last year, resulting in a loss resulting in an adjusted EBIT margin of negative 87%, an improvement from negative 99% in the same period last year. This improvement was achieved despite softer D2C comparable sales, continued progress in channeled productivity, and more effective store labor management, help drive operating leverage and support margin expansion during the quarter. Critically, we've made investments in our business over the first quarter, including several stores that will open either later this year or in fiscal 28, and in our logistics network in EMEA. Balancing these investments while expanding margin remains our key focus. Adjusted net loss attributable to shareholders was $87 million or $0.89 per share, which improved from a loss of $88 million or $0.91 per share in Q1 of fiscal 26. Turning to the balance sheet. Inventory was $490 million, up 11% year-over-year, reflecting our expanded product assortment, a larger wholesale order book, and the building of a stronger stock position to support anticipated demand for fall-winter 27. Inventory turns was one-time sales up 11% over Q1 of last year and 25% over two years ago. We feel very good about the quality and composition of our inventory, which positions us well to support expected wholesale demand, maintain flexibility across channels, and execute the planned upgrade of our EMEA logistics network while continuing to serve customers and partners effectively. Net debt at quarter end was $628 million compared to $542 million at Q1 last year, reflecting an increase in store lease liabilities. We took advantage of favorable market conditions late in the quarter to reprice our term loan, delivering a 50 basis point reduction to our credit spread. Before closing, I'll briefly touch on our early view of the second quarter. Following a stronger than expected start to the year. expect first half growth to moderate somewhat from the pace delivered in Q1. The consumer environment remains mixed in the early weeks of Q2. Store traffic trends are consistent with Q1, while e-commerce remains strong. Improving store productivity continues to be an important area of focus. Against that backdrop, wholesale demand continues to track in line with our expectations. As a reminder, the first quarter benefited from executing a stronger wholesale order book than the prior year. While consumer demand remains uneven across markets, we are encouraged by the underlying strength of the brand, continued product momentum, and the progress we are making across our strategic priorities. As we told you in our fourth quarter, we are making upgrades to our logistics network in EMEA. and our e-commerce capabilities, with most of these investments expected to be completed in the first half of the year. We believe these investments will strengthen the customer experience and improve operational efficiency. This, in addition to the ramp up in marketing investments in our second quarter, is expected to modestly pressure margins in the first half of fiscal 27, consistent with what we told you in May. A brief comment on the current trade and tariff environment. Our outlook assumes the tariff environment remains consistent with fiscal 26. The announcement from the U.S. government on July 20th indicates that a portion of our products would be affected if the proposed measures were implemented. The situation remains fluid and we continue to monitor developments between Canada and the US and assess potential implications for our business. As a global business, we have successfully managed tariff and trade related changes across our supply chain and cost structure over time while materially expanding gross margin. If the announced duties were implemented as proposed and assuming no mitigating actions were taken, we estimate that the impact to our fiscal 27 operating margin would be less than 200 basis points. We are actively evaluating mitigation measures and believe we have a range of options available to help minimize potential impact. Our first quarter revenue growth, margin expansion, and the progress we made across our strategic priorities reinforce our confidence in the year ahead. we remain on track to deliver our Fiscal 27 guidance. and are focused on investing behind our brand, driving product innovation, and strengthening D2C execution as we continue to build sustainable, profitable growth. With that operator, please open the line for questions. Thank you.

We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. And if you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brooke Roach from Goldman Sachs. Please go ahead.

Good morning and thank you for taking our question. Neil, Danny, I was hoping that you could help us identify the initiatives that you have in place to improve the store comps that you're seeing across geographies and narrow the gap between the traffic trends that you're seeing in your business versus the improved e-comm and conversion results that you're seeing in the rest of your DTC business. How should we be thinking about bridging those gaps? And can you give us a little bit more detail on what you're seeing quarter to date across geographies and how that bridges into your expectations for DTC growth for the rest of the year? Thank you.

Hi, Brooke. It's Carrie. I'll take that first one. So in store, let me start actually with e-comm. So as you heard us talk in the remarks, so e-comm was extremely strong this quarter, and that reflects deliberate work and not just in the quarter, but over the last few years. So there's a few things driving that. You heard Danny talk about our expanded lifestyle assortment apparel, rainwear, windwear. That's really giving consumers a new chance to come in and shop us this season. Second, the brand building and customer acquisitions investments we've made. Those are showing up with more traffic, more engagement, and third, we've just made the digital experience better and easier to shop. some of that is also translating in store. So you've heard us talk about the training that we've that we've launched in store. We've launched clienteling and really boosted that and so that is driving significant amount and a different behavior with the way we're engaging our consumers and again there when they're coming through the stores, even though we're seeing a little bit of softer traffic when they come through it's working, they're converting, they're responding to the products. They're loving what we have to shop now, where now, and that is driving meaningful difference in terms of just how people think about Canada Goose as a relevant brand in the season. So there's a lot of things coming together, both a product is working well, the marketing is driving people to discover a different Canada Goose, and then when they come in, they're loving what they're seeing. So all of those coming together are working quite well for us. The second question on bridging traffic and conversion trends. So that's our job, right? Our job is to make sure that the underlying demand what we're driving is healthy that we are seeing. We're we're acquiring more customers. We're engaging with customers in a different way for different products. and in store they are converting. So we're not worried at all about a demand issue. This is really a softer traffic and we can do something about that. We have levers, clienteling, as we said, you heard Neil talk about how we are going to step up marketing in Q2 and Q3. That makes sense. It's aligning activity against the highest demand season.

That's that's what we're focused on, and that's what we believe will deliver. Just as it as it relates to the performance across the regions, Brooke, I'll just put some context around. First of all, around the first quarter and then sort of echo the comment that some of the comments that we made in the in Asia, negative one in the US, and you know, much more significant decline in Europe, which is probably not unexpected. that's pretty consistent with what we're looking at in the very early days of Q2 and as a reminder, we're at the build phase and so July relative to August, August relative to September are just it's just much, much smaller and so I'm not drawing any conclusions from that. Aside from the actions that carry outlined and and you know, I think we're really trying to focus on where we see definite positives. And so what were those in the first quarter? First, Increase in basket size, people buying more stuff from us. Second, the pricing that we implemented at the beginning of the year flowing through. And so we're getting more dollars on a per consumer basis. We love the acquisition rates of new customers, whether that's e-commerce or in stores. And so while we're kind of navigating lower traffic, we love what we're seeing in terms of conversion up everywhere. And in the early days here of the second quarter, those trends continue.

Great. Thanks so much. I'll pass it on. Your next question comes from the line of Rick Patel from Raymond James. Please go ahead.

Hi, this is Josh Reis on for Rick. Thanks so much for taking the questions. Is there any way that we can parse out the shift in timing of wholesale orders for Q1? Just trying to understand what that contributed to Q1 growth and what, if you will, we should expect, like, should we expect to give that back in Q2 or later in the year?.

Thank you. Yes, sure. So. Q1 was 65% growth in wholesale. A lot of that is real order book increase year over year. certainly early adoption of or broad adoption of spring. We got some of that in kind of in the early part of our quarter. And then we started as given the inventory position. the real quality work done by the supply chain team here, Canada Goose, we got product in the hands of wholesale consumers earlier than expected. And so that's good. I think our view is less than half the growth is really timing related, and that will balance out over the year. But our you know our we are really encouraged about about what the. about the response to the product. Obviously we knew what the order book was coming in, but in season reordering demanded in some pockets, as we heard, Heiden Island, Korea, really some nice underlying growth that is obviously more than just timing.

THANK YOU. IF I COULD ONE MORE. CAN YOU TALK ABOUT HOW MUCH OF THE GROWTH IN Q1 WAS DRIVEN BY PRICING VERSUS UNITS AND WHAT WAS THE PRICE pricing and was that pricing benefit more uniform across geographies or was it more centered in certain regions?.

Yes, I mean, we implemented the pricing at the beginning of the quarter. I think the assumption and the effect was about a mid single digits increase. Obviously, there's a lot of newness difference year over year, and so it's not quite a pure mid single digits, you know, growth coming from product. We had, you know, good unit, good healthy unit sales, some benefit from pricing, but.

not a meaningful mover on the revenue. I can just chime in, just not from a consumer response perspective. So to me, it's like when a brand is desired, there isn't price resistance, and we're not seeing that. Customers see the value, they see the newness, they see the style that's much cooler. It's a different Canada goose, and so we're just not seeing any resistance to that, which is a great sign from a consumer experience.

Yes, so much for the comment. I'll pass it on. Your next question comes from the line of Oliver Chen from TD Cohen. Please go ahead.

Hi, thank you. Regarding China, what are you seeing with traffic relative to conversion? You had some nice momentum there and brand desirability looks solid. Then as you think about traffic, would love your thoughts on the traffic trends in Europe relative to the US. as you look forward with the marketing spend and marketing techniques, can those be catalysts to help traffic? How are you thinking about regionally, perhaps marketing spend and or top of funnel versus more transactional marketing? Thank you.

Hey, all over. Okay, I'm going to take them one at a time. Traffic in China. So we're feeling really good about the Chinese consumer, both at home and when they travel. So inside mainland China, momentum stayed encouraging, obviously supported by improving brand awareness and desirability against some of our competitive set, which is great. We'd love to see that. And a lot of that demand obviously travels with the customer. And you heard Neil talk about markets like Korea, Hong Kong, healthy driven travel demand across APAC, as well as really strong wholesale order books. So whether they're shopping at home, whether they're shopping abroad, the through line is the same, that it's resonating with the consumer. They love the product and that gives us a lot of confidence in our trajectory. outside of APAC, I would say tourism levels continue to be a little softer at the macro level. So of course we're monitoring, but as I said earlier, the brand signals are strong and so we feel really encouraged by that. When you look at EMEA, It's different than North America, right? Each region is quite distinct picture that we saw in Q2 or Q1 North America a little traffic issue in EMEA, the operating environment itself is just more challenging. I think that's pretty consistent with what you're hearing from other companies across the industry. So it's a cautious consumer store dynamic store traffic dynamic is still there. But again, the underlying brand signals to us feel strong. The conversion is improving, clienteling, the progress that we've made with that, they improved brand desirability against our competitive set in continental Europe. Those are all reasons that we feel very good that this is not a brand issue, this is just a traffic. You heard us talk about all the mitigating effects that we will put into place Q2. When you think about marketing, can it be a catalyst for traffic? Sorry, I'm just going to address marketing specifically. Of course. So, you know, we did have a deliberate... lower spend in Q1 that's aligning just, you know, making sure every dollar works for us. And it did. We saw improved ROAS this quarter. So to me that says we can spend more efficiently while still driving a you know customer acquisition and really strong brand engagement. So yes, it will be looking. It will be a factor in how do we drive And as we step up that marketing in Q2 and Q3, we think they will have positive results.

Thank you for that. Follow up on the non-heavyweight down progress. What are your latest thoughts or parameters around pricing because there have been moments calibrating are priced too low in some cases in the past. And finally, as we look at model AI's impact across the industry, just highlights on where AI will have the earlier impact in what you're testing. Thanks a lot.

So pricing on, I mean, we look at pricing. kind of the same way, whether it's newness, whether it's carryover in our icons, whether whatever category it is, it's making sure that we're having them, it's the right price for the right product. And I know that sounds, it could sound a little trite, but it's looking at the value that it offers. So I love that you think maybe our prices are too low. We monitor it carefully. We monitor our consumer risk And that's not just globally, but it's also by category. So we know exactly where we want to be positioned in against the competitive set and what the value that we are offering and so we're looking at It's something we continue to monitor. We as I said, we have not seen any price resistance in those categories, which we feel really good about.

And Oliver, it's Beth. I'll take your question on AI. We are experimenting with AI in a number of different places across the business. I'll share a few highlights. Certainly there's a lot of opportunity in customer facing ways. So the way we engage with consumers through our call center, through warranty, the way we analyze consumer data, to identify opportunities, to speak to consumers differently in a more relevant way, there's a tremendous amount of opportunity in those customer facing ways that we're, experimenting with seeing really great traction scaling. And we're really excited about the momentum they're continuing. We're also seeing plenty of ways it's enabling our business behind the scenes. So the way we create products, finding moments to accelerate the workflow as we're really focused on bringing product to market with greater speed, we can use AI to help speed up aspects of the development process or the merchandising data analysis, et cetera. So there's a lot of opportunities. in that product creation ecosystem. And then of course, operational efficiency, the way we, you know, at our daily weekly reporting, the way we look at our daily weekly decision-making across the business, using AI to kind of speed up those, those and allow our team to spend more time on the SOA and actions and less time on the brute force analysis. So we're seeing great AI action across multiple parts of our business and really building it into the muscle we have as a business. And we're excited to see how that continues to drive impact in the orders and here's to come.