Canada Goose cut its guidance for the full year, citing lower-than-expected revenues and retail traffic in EMEA and APAC regions in the ongoing fourth quarter of its financial year due to new restrictions imposed in the wake of outbreaks of the Omicron coronavirus variant.
The company now expects to post an adjusted Ebit margin of 15.1 to 15.8 percent on total revenues of 1,090 million Canadian dollars (€751.1m-$861.2m) to C$1,105 million (€761.3m-$873.2m), below previous guidance for an adjusted Ebit margin of 16.5 to 17.7 percent on sales of C$1,125 million to C$1,175 million. The company now sees its DTC business accounting for 68 percent of total revenues versus previous expectations of 70 percent. Its wholesale revenue growth is seen at 6 to 7 percent compared to previous guidance of mid-single-digit growth.
The more pessimistic outlook comes as Canada Goose reported results for the third quarter ended Jan. 2, which showed that total revenues grew by 23.6 percent compared to the year earlier to C$586.1 million (€403.8m-$463.2m). Excluding the exceptional revenues from personal protective equipment recorded in the same period a year ago, comparable sales increased by 26.5 percent.
“Canada Goose’s brand momentum and supply chain resilience drove a strong performance in our largest quarter,” said Dani Reiss, president and CEO. “Our digital business continued to exceed last year’s outsized gains, alongside a sharp improvement in retail productivity. We remain confident in our long-term trajectory for revenue growth and margin expansion, notwithstanding the emergence of temporary and unexpected Covid-19 disruptions in certain markets.”
In the third quarter, DTC revenues jumped to C$445.4 million (€306.9m-$352.0m) from C$299.4 million, mainly due to higher existing retail sales, complemented by a 28.1 percent increase in e-commerce sales globally and retail expansion. The company highlighted a 35.1 percent increase in DTC revenues in mainland China.
Wholesale revenues declined to C$136.7 million (€94.2m-$108.1m) from C$160.8 million in the third quarter of the previous fiscal year, as shipments were brought forward due to wholesale partner requests.
The overall gross margin improved to 70.6 percent from 66.8 percent the year earlier. In the DTC channel, the gross margin decreased to 77.1 percent from 77.9 percent, driven by negative contributions of 0.5 percentage points each from an increase in non-parka sales, higher duty costs and government payroll subsidies in the comparative quarter and a 0.3 point negative contribution from an unfavorable shift in geographic mix. These factors were partially offset by a favorable 1.3 percentage point impact from pricing.
The gross margin decreased to 50.2 percent from 51.5 percent in the wholesale channel. The decrease was attributed to a 1.90 percent point negative impact from government payroll subsidies in the comparative quarter and a 1.90 percent unfavorable impact from product mix due to higher sales in non-parka categories. This was partially offset by a 1.00 percent point positive impact from the company’s higher proportion of sales to wholesale partners compared to international distributors and a 1.70 point positive impact from pricing.