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

Thank you. Good morning and welcome to this next session of our 33rd Annual Global Consumer and Retailing Conference. My name is Brooke Roach and I cover the apparel, accessories, and brand sector here at GS. And I'm thrilled to welcome Neil Bowden, CFO of Canada Goose, as our next speaker. Welcome, Neil.

Thanks, Brooke. We've been here since the beginning of the pandemic, in a row. It's good to be back in New York in the fall and good to see you as well. I'll make just a short opening remarks. We don't have any slides prepared today. We're obviously a well-known brand. We just had our quarter not too many weeks ago now, although we did have some vacation in between, so it does feel like quite a ways. We're off to a good start this year, and the brand obviously has been focused over the last few years on a few core areas, which I'm sure we'll touch on. The first is really reinvigorating the brand and building out a year-round brand product playbook, which is the core of those two things has been the introduction of a Creative Director, Haider Ackermann, who has served as our Creative Director now for two years and emphasis on having amazing luxury product available 365 days a year in all of our stores, websites and and increasingly among our wholesale consumers. And so that's where we've been spending our time as a business over these last few years, really on product and on brand and then on how do we deliver that through our channels and how do we deliver the profitability that this brand has and the potential that it certainly has.

Excellent. Neil, would you like to kick it off with some opening remarks?

Yes, so I would say that, and I'll go back now a few years, We've spent time in considering both the brand and the product as obviously closely related. And so as we've gotten into the Snow Goose collection with Haider. And as we've started to elevate product beyond where it was, we focused our attention in terms of marketing dollars on upper funnel. How do we expand our reach across consumers? How do we deliver the product brand, how do we increase the buzz around the brand? Obviously, the historic, sort of iconic logo, the parkas are what we're closely associated with. And yet, today, the products are approximately 50% of the unit sales are not down product. They're things like what I'm wearing today, knitwear, they're tees, T-shirts, they're polos. So the quality of the products in some of those other areas has really, really increased as we've started to expand the line, and consumers are adopting them at a really exciting rate.

That's great to hear. There's a lot to pull on there, but maybe we can talk a little bit about marketing for a moment. Sure. As you continue to look and build the brand. You're increasing marketing this quarter and next in particular. What should we expect from the upcoming campaigns? Where are you driving incremental spend by region? And are you seeing any indicators that tell you that this is driving improvement in customer traffic and acquisition?

They don't let, unfortunately, the finance guys break any of the hot news or around exactly what the campaigns look like, so I'll just, I'll let the marketing work do the work for itself, but I will talk a little bit about where we're going to spend some time. So we're just in, our fall winter collection is in our channels now, and so we've just started to, now a couple weeks ago, we started to get into some the some of the marketing around that. We're going to quickly move into Snow Goose. We've got holiday coming after that. And we've got some exciting partnerships, which will be very interesting. I think really on brand for us and so the team's working hard at that. Much of that work is really focused on that top of the funnel. How do we increase the awareness in every market? Clearly, we've had a lot of success here over the last several years in both China and in North America, and so we're going to put some time and energy into those markets, particular brand activations in China in each market that are local and relevant to the consumer. Our global brand ambassador, Greg Hsu, who's Taiwanese, active in the very, very relevant in Asia and increasingly relevant here in North America, which is we just had a little bit of a teaser for the fall-winter campaign for him over the last few weeks, and so that's an area where we expect to, and he's been in the brand now for about 12 months, and so we expect to continue to drive some relevance that way.

Talk to me a little bit more about the product assortment and how it's evolving and where it's going next. You've now had Haider in the brand for a couple of years now. Alongside his creative contribution, you've done a lot with lighter weight products, similar to what you said earlier. What do you see as the largest product and category opportunities from here?

I mean certainly we feel confident about all categories, so I'll just make that kind of blanket statement to start. The brand obviously is really well known for our down product, whether that's sort of the parkas, and there are many iconic styles, but also some newness that we've seen come into the brand here under Haider's direction. And alongside that obviously lightweight down very popular and you know large piece of our of our portfolio increasingly the growth has come from knitwear fleece and accessories have started to round that out. As we've been thinking about what the merchandise and what the merchandising and what the assortment looks like, we've really been focused on having luxury product available all around the world for your needs state. And so, the consumers, regardless of where you are in the world, we want you to be thinking about Canada Goose, whether you're on your way to a soccer game, or having brunch with your friends, or outside at a park in the spring, or yesterday I was walking around Manhattan in the heat heavy rain with my wife in our really amazing raincoats. And so there is an opportunity for Canada Goose product 365 days of the year.

That's really great to hear. Are these category extensions driving increased purchasing frequency and spend among existing customers, or do you think that it's primarily bringing new customers into the brand? Yes.

In your last question, you sort of asked about Haider. And so Haider's been with us for about two years. He started with our pinnacle product collection called Snow Goose. And his influence is now extended into our mainline collections. And so the spring collection that we sort of just finished was the first mainline collection that Haider touched. And now the fall-winter is in place. We're seeing consumers that are new to the brand as well as repeat consumers gravitating towards those products. And really that's such a great story and a powerful part of our opportunity, we think, where we've now got products that perhaps you weren't looking at Canada Goose for one reason or another that Haider has really influenced. You've got a new color that you maybe weren't looking at. Or you have something that's just the right style that perhaps a few years ago wasn't exactly what you were looking for, you've now got a reason to come in and Haider has really brought that. If you are an existing consumer and you've got your parka and for a period of time you decided, I'm not sure I need to go back to Canada Goose, we've now see a lot more excitement around things like polos. You're there in the summer to acquire 1 or 2 colors of a polo or a T-shirt or something else that is at the standard that you expect from the brand. And so we're really seeing both that growth and repeat as well as new. That's great.

As you scale some of these warmer weather categories or non-heavyweight down categories, what's the current margin profile of those lighter weight versus heavyweight categories, and what levers do you have to offset mixed pressure?

So, you know, this is a question we have seen, we've heard, you know, a number of times, given that not surprisingly, parkas are the highest gross margin on a per unit basis. I think early on as we were getting into some of these other categories, there was a much wider, and not a major, but there was a wider difference between lower margin products and higher margin products. As we've started to evolve our sourcing function, as we've matured our merchandising function, we've really been focused on insuring that the gap between highest margin and lowest margin products tightens. There's good reason sometimes, you know, to accept maybe a slightly lower margin, let's just say lightweight down product for instance, if it's the right spot in the assortment. And we've made those, I'd say those decisions over the last few years in a much more scientific way, but generally speaking, the margins on a, at a category level have really, really tightened. And you can see that it's been one of the reasons that we've been able to expand gross margin over the last 10 years, very meaningfully as we've started to mix out of core parkas. And, you know, obviously we're getting some benefit on a channel basis because of the channel mix, but inside the channels you can see that gross margin expanding over a long period of time, and we believe that there's still opportunity to do that as the volumes get larger, even as we move into some of those other categories. And naturally you're going to see some AUR compression, but we should be able to continue.

The pace that we're at. That's really great to hear. Let's dive into another area of strategic opportunity, which is the DTC store productivity. Sure. Retail execution has been such a major area of investment for Canada Goose the last few years. What's driving some of the improvements that you're seeing in store today, and how should investors assess current store productivity? If you have any metrics you can share on per square foot, four-wall profitability, or returns on the on the stores that would be great.

Yes, I mean, I'll start with the two that we obviously look at most frequently. So 1 is sales per square foot. We have said lots of times over our time, and those who are familiar with the story will have heard this, and if you're not, here it is for the first time, our expectation is that our stores deliver CAD 4,000 a square foot. At least. And that has not always been the case. We closed we report this on an annual basis and so when we closed fiscal 26 in March, that was the first year in a few years that we had ticked above that number across the fleet. We had strong comps through fiscal 26, the back half or the last quarter for sure, fiscal 25. Getting back to that level is important. We believe there's plenty of opportunity beyond that as we start to build out more concentration in some of these periods of time that isn't necessarily what we treat as our peak period. And so there is opportunity to continue to drive that. But that is not every store, and that means that there's opportunity in those stores specifically. Secondary focus is really around per-store profitability. And so having our EBIT margin at 40% is sort of our minimum gating threshold at the moment. That is, of course, not always the case across a fleet of 90 stores. And where we're not where we expect to be, we focus on things like, which gets to the core of the question here, How do we drive the right level of labor necessary to meet the traffic? What are we doing to incent our brand ambassadors to ensure that they're delivering whatever it is that's necessary in that period of time, whether that's a heavyweight down? Or whether it's something about T-shirts or whatever the program is at for that particular week or month. And really, absolutely drilling into core behavior, consistency across the store network. We've got a head of retail now and three presidents, absolutely focused on consistency and meeting the standards everywhere in the world. It's not a perfect It's not a perfectly straight line. We didn't have, I would say, quite the performance in the first quarter that we would like, and so that obviously gears us up to continue to focus on that, but we think that store comps, and we report comps, but store comps in particular are absolutely tied to you know long-term value creation, and lots of us are spending a ton of time focused on getting better at that every day.

Let's talk a little bit more about what opportunities you have within that, within this initiative for the holiday season. What should we be expecting as you gear up into.

Into your peak selling season? We're certainly focused on a few things. So selling behavior. When you're in the store, are you feeling that Canadian warmth, is that consistent, are we showing you multiple products? Are we trying to push a UPT above 1, so units per transaction above 1? If you're going to buy a Polo, can we get you to buy 2 or 3 instead of 1 to drive that average basket size up? So that's sort of kind of the core focus. Do we have the right labor in place? Do we have the right labor to match the traffic? The last 12 or 15 months, we have talked a lot about labor investment ensuring that we've got good kind of analytics around what the traffic forecast looks like, and then how do we match manager and brand ambassador availability and the number of staff on hand in order to meet the demand. And obviously peak for us is a big period and there's lineups at the stores in lots of places, including on Fifth Avenue I'm sure soon. And then do we have the inventory in the right place? And so we talked a little bit already about making this phenomenal product. Is it there? Is it available to you? If it's not, what can we do to have that shipped to you quickly so that you've got that in your hand. And so all of those kind of three areas are places where we know we've got opportunity and I think we feel like we've got a good plan entering our peak.

Let's shift to your other major channel, which is wholesale. How are you thinking about wholesale growth on a multi-year basis? And then on a near-term basis, how has sell-in and sell-through developed? And what are you hearing from your partners regarding the health of the brand, forward orders, reorders, and.

Yes, I mean, I'll start at the back. At the last part of that question. We have just come through over the last few months our spring summer season, spring summer sell in for next year. We're delivering now this fall winter. Most of it's now delivered, although there's still usually a few weeks to go. Really, really happy with the interest in the product in particular. I think by and large there's been a desire from wholesalers as well as consumers, and obviously the wholesalers are speaking on behalf of the consumers for Canada Goose product that extends beyond just the core season, and we're seeing a lot of interest in the buyers for that product. So I think that's a great indicator of brand health. Frankly long overdue, we've talked a lot, Brooke, you and I about where the wholesale businesses come. It was the core of the business many years ago. We had a couple challenging years there through fiscal 24 and 25, stabilized over last year with a little bit of growth. And we feel like there's growth to come in wholesale this year as well. And so we really like where that's headed. I think it's probably too early really to talk a little bit about sell in or sell out. Anecdotally, it looks okay, but it's not perfect everywhere. Europe is a market that continues to be under some pressure, although I was in London and Paris for the last few weeks on vacation, but in some of those major retailers, and I liked what I saw in terms of the interest in, broadly speaking, this is a 1-day, 1-hour, but it was of interest to me that there was people in places like Galerie Lafayette or La Samaritaine or Harrods. It does seem to be that there are people willing to shop, but I don't want to draw any conclusions on that. We're too early in our season so far to really draw any strong conclusions about sellout. But I think we like where we're positioned. We like the product. We know the wholesalers like the product. So our job is just to make sure it's in their hands on time.

You mentioned the macro, so maybe we can dive a little bit deeper there. 1 of the bigger debates coming out of last quarter on Canada Goose was the traffic that you were seeing by region. You reported double-digit e-commerce growth. Customer acquisition and better conversion, but that weaker traffic really was a bit of an offset. What's your latest assessment of the macro operating environment by region, and are you seeing any signs of improvement or stabilization? Yes, so we're, as you can appreciate, we're getting a little bit deep into our quarter, so I'm going to just comment more generally rather than any specifics.

I will say, as we exited Q1, we're not really happy with where the traffic is. I think it's probably true that, we're experiencing you know not certainly true we're experiencing some declines we saw some declines in traffic in in retail in particular we saw lots of improvement in e-commerce and so understanding that relationship has been interesting clearly there's interest that that you know folks are attracted to the website and they're spending some time on our across our digital platforms regardless of where we are we're in the world and so we take that as a positive our Our wholesale traffic seemed to be pretty good as well through the first quarter, and so there was a little bit of head scratching around retail. I think as we look at the macro now, it continues to be tough in Europe, no surprise, despite what I said about you know, what I saw on the streets of Paris and London. You know, North America is okay. There are pockets where there's there's good, strong, kind of repeatable traffic. Obviously we had some experience here through kind of back to school season. but it's not perfect everywhere. And China remains a market that's a little bit mixed. Regardless of what the traffic environment is, our job is to convert. And so we're focused on obviously top of the funnel brand work. How does that translate to traffic over a period of time, as you indicated? We were a little bit lighter on marketing in the first quarter. We're expecting to ramp that up in the second quarter and have done so. And we'll continue to do that over the balance of the year. We know that's going to translate to some traffic improvement, but our core focus is on what are we doing when you arrive in our stores? What does our website look like? How well merchandised are we? Is the product available for you? that we know will translate to success.

1 question that we're asking every company at our conference today is on the health of the consumer. What are your expectations for the environment over the balance of 2026 relative to your recent results? Do you expect things to be the same, better, or worse? And then for 2027, do you expect the health of the consumer to be better, the same, or worse in 27 versus 26? Yeah, I mean on that last point, I mean if I sat here, I don't know what, we could look at the transcript.