Thanks to strong demand from China, Canada Goose posted an unexpected profit in the second fiscal quarter. After posting heavy losses in the first quarter, it has now returned to profits with a net income of 10.4 million Canadian dollars (€6.7-$8.0m) for the three months of its second quarter ended on Sept. 27, although it was much lower than the net profit of C$ 60.6 million of one year ago.
Sales were also better than expected, thanks to a surge in online sales and a good performance in China, where the economic recovery was stronger than elsewhere. Total revenues fell by 34 percent to C$ 194.8 million (€126.3m-$149.4m), driven by a 48 percent drop in wholesale revenues to C$ 118.5 million (€76.8m-$90.9m), due to the continued impact of Covid-19. The company mentioned a significant reduction in the planned order book and requests from partners and international distributors for later shipments. The gross margin in the wholesale segment remained flat at 47.6 percent thanks to government payroll subsidies, offset by higher costs per unit as production levels and a higher proportion of distributor sales relative to the same quarter in 2019.
Direct-to-consumer revenues fell by 38 percent to C$ 46.2 million (€30.0m-$35.4m) driven by lower retail traffic due to Covid-19 disruptions globally. The company said e-commerce revenues were higher than the year-ago quarter.
In the Other revenue segment, sales jumped to C$ 30.1 million (€19.5m-$23.0m), compared with C$ 1.7 million for the year-ago period, driven by personal protective equipment (PPE) sales in support of Covid-19 response efforts.
Overall, the gross margin fell by 6.2 percent to 48.4 percent, due to the decline in global revenues and a higher proportion of Other revenues. Excluding the impact of the sale of PPE, the gross margin was 56.1 percent, an increase of 1.5 percentage points. Meanwhile, the operating margin tumbled by 17.8 percent to 7.8 percent, as a result of lower sales.
The company did not release any guidance for the full financial year, citing prevailing global uncertainties, second wave shutdowns and disruptions, the pace of retail traffic recovery, and the impact of economic developments and travel restrictions on consumers’ discretionary spending.