Toronto-based outdoor apparel company Canada Goose (GOOS
68.08, +9.50, +16.22%) trades to all-time highs today in reaction to better than
expected second quarter results and a fiscal 2019 guidance raise.
Simply put, GOOS reported both solid results and upped guidance. Specifically, earnings of CAD$0.46 and revenue growth of 33.7% on healthy inventory levels to CAD$230.3 mln were enough to beat market expectations on both counts. Management also highlighted that relative to last year, the Canadian dollar depreciated in comparison to the U.S. dollar, euro, and pound, benefiting the company’s reported top line.
Breaking those results down, Canada Goose reported wholesale revenue of CAD$179.9 mln from CAD$152.1 mln. Management attributes the increase to higher order values from existing partners, earlier shipment timing relative to last year, and favorable foreign exchange rate fluctuations. What’s more, direct-to-consumer (DTC) revenues doubled to CAD$50.4 mln from CAD$20.2 mln. The company stated that strong performances from well-established retail stores and e-commerce sites as well as incremental revenue from four new retail stores opened in the quarter contributed significantly to this segment’s revenue growth.
Additionally, gross profit increased to CAD$128.5 mln, with a gross margin of 55.8%, compared to CAD$87.1 mln and a gross margin of 50.6% in the prior year quarter. Canada Goose suggested that the increase in gross margin was driven by a greater proportion of DTC revenue as well as underlying gross margin expansion at the respective channel levels.
Unallocated corporate expenses rose to CAD$34.2 mln, compared to CAD$16.2 mln. In part due to expansion into China, the company noted that the increase was due to investments to support growth including marketing, corporate headcount, and IT as well as higher professional fees and other costs relating to public company compliance.
Based on the strength of performance across the business, with a particularly significant contribution from the DTC channel, Canada Goose is raising its fiscal 2019 financial guidance; the company now expect annual revenue growth of at least 30%, adjusted EBITDA margin expansion of at least 150 basis points, and annual growth in adjusted net income per diluted share of at least 40%. This compares to the company’s prior forecast of at least 20%, 50 basis points, and 25%, respectively. The company’s revised guidance also assumes annual wholesale growth in the high single digits as well as the opening of five new retail stores.
In terms of adjusted EBITDA margin expansion, Canada Goose continues to expect a positive but less pronounced increase relative to last year. This is due to the SG&A growth investments in IT in the company’s Greater China's business unit as well as variable SG&A fees that it pays to its operating partners on incremental revenue from both Tmall and its retail stores in Hong Kong and Beijing.
Into the print shares of GOOS were up about 85.6% YTD vs modest 6.6% gains in the XRT.
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