As Q3 sales jump, Canada Goose performs ‘a little bit of the magic’
Premium parka maker happy to sell out inventory to maintain allure of brand
Instead of risking its future TORONTO inventory levels rushing to sell more parkas in the middle of a vicious winter, Canada Goose Holdings Inc. is content to watch its wares sell out this season, says chief executive Dani Reiss. Plus, it adds perception of scarcity surrounding his brand — “a little bit of the magic” behind his company’s success selling coats for more than $1,000 each.
In its third quarter, reported on Thursday, Canada Goose’s revenue rose by 50 per cent to $399 million. The growth, Reiss said, was accomplished with Canada Goose competing in two of the biggest discount shopping holidays without having actually a sale.
Instead of a sale on Black Friday, Canada Goose released a new jacket. “At a time when consumers are bombarded with promotional messages and brands are competing on the lowest price, we chose to cut through the noise with a high-impact product moment,” Reiss told analysts. For China’s Singles’ Day in November, “we were one of the top 10 brands in our space despite offering no promotions,” he said.
As part of its push into the Chinese market, Canada Goose opened flagships in Hong Kong and Beijing, as well as a partnership with Alibaba’s Tmall platform — well before Canada’s relations with China soured over the detention of Huawei executive Meng Wanzhou. “We leave politics to the politicians,” Reiss told Bloomberg News on Thursday. “We’re really happy with our Chinese business plan and the way we plan to approach it. It’s been executed really well.”
Canada Goose is in the middle of an ambitious global expansion, shifting from its roots as a wholesaler to open its own stores. And because of that growing fleet of stores, Reiss said, Canada Goose’s inventory is growing as well. In its quarterly update, the company reported that inventory had soared by 75 per cent — a number that startled Wells Fargo analysts, who wrote Thursday that the inventory level was “slightly concerning.”
But Reiss assured analysts on a conference call the high level was part of the company’s growth plan to build inventory for the future. “It’s for next year,” he said. “We’re right where we want to be.” Canada Goose on Thursday announced it will continue to expand its ability to build inventory through Canadian production network by opening a new production facility in Montreal.
One analyst, Omar Saad of Evercore ISI, noted that Canada Goose “seems like it’s continually a supply-constrained brand, which is obviously a great situation to be in.”
Indeed, several Canada Goose winter parkas appeared to sold out on its website in certain size-colour combinations. The $1,295.00 Pembina coat in the Bordeaux colour, for instance, was only available in small, extra-small and double-extra-small on Thursday. It was puzzling perhaps, since now is the time for an expensive parka, especially in the parts of Canada that saw intense bursts of snow and ice this week.
“It’s amazing to be in a position where there’s perceived scarcity for our brand,” Reiss said on the call. “There is a lot of scarcity. It’s hard to find our product. But our year-over-year growth percentages continue to be as strong as they are. And I think those things together create a little bit of magic, which is why we continue to do so well.”
Saad then asked about all that inventory Canada Goose was building. “That’s inventory you could sell now if you wanted to,” he said. “But you want to build it for next year. Is that the right way to think about your strategy?”
Yes, Reiss said, Canada Goose could “cannibalize” some of that inventory and sell it now — but it won’t.
“We don’t want to disappoint our customers next year at all, so we don’t.”