Canada Goose raised its guidance following a strong performance in both the direct-to-consumer (DTC) and wholesale channels for its second fiscal quarter ended Sept. 30. Shares in the company jumped by 14.1 percent after the release of the results, which topped Wall Street's expectations by a significant margin.
Sales climbed by 34.7 percent from the year-ago quarter to 172.3 million Canadian dollars (€116.4m-$135.9m). Wholesale revenue grew by 24.3 percent to C$152.1 million (€102.8m-$119.9m), with growth across all regions. Exceptionally, Canada Goose also benefited from a shift of about C$13 million (€8.8m-$10.2m) in revenues pulled forward from the third quarter as a result of increased efficiency in manufacturing and sales planning, which allowed the company to accelerate the timing of deliveries in response to requests from retail partners approaching their peak selling season.
The gross margin in the wholesale segment advanced by 2 percentage points to 47.4 percent, due to proportionately more sales in higher-margin geographies, lower cost of purchases in U.S. dollars and lower inventory reserves.
Meanwhile, the company's revenues from the DTC channel rocketed by 269.1 percent to C$20.3 million (€13.7m-$16.0m), driven by strong growth in its North American e-commerce business and incremental revenues from new retail stores and e-commerce sites that were not operating at the same period last year. The gross margin in the DTC channel jumped by 4.5 percentage points to 73.7 percent.
The management said the performance reflects a disciplined approach to executing its growth strategies. Canada Goose has opened e-commerce sites in all seven of the new markets planned for fiscal 2018 – Austria, Belgium, Germany, Ireland, Luxembourg, the Netherlands and Sweden - and remains on-track to have seven retail stores in operation in the third quarter of fiscal 2018, including its recently opened stores in Chicago and Tokyo.
Lighter-weight styles performed well and the new knitwear collection introduced during the quarter sold well at wholesale and retail. To keep up with the growing demand, the company is boosting capacity at its factories in Ontario and Quebec, hiring and training more sewers, while improving manufacturing processes.
Overall, the group's gross margin improved by 4.1 percent to 50.5 percent. The adjusted Ebitda rose by 37.3 percent to C$46.4 million (€31.7m-$36.6m), while net income jumped by 85.5 percent to C$37.1 million (€25.1m-$29.3m). Adjusted net income, which reflects the impact of the recent stock market listings, advanced by 26.1 percent to 29 cents a share, well ahead of Wall Street's consensus estimate of 16 cents.
The management now expects annual revenue growth of at least 25 percent versus the previous expectation of a growth rate in the mid-to-high teens. The adjusted net income per diluted share should go up by at least 35 percent instead of 20 percent.
The Canadian brand of down-filled outerwear went public on the stock exchanges of New York and Toronto in March. The operation gave the company a market value of about C$2.3 billion (€1.5bn-$1.8bn). It has now risen to more than C$3.5 billion (€2.4bn-$2.7bn).