Global demand takes flight, boosting Q4 profit

Shares of Canada Goose Holdings Inc. jumped as much as 31 per cent on Friday after the luxury parka maker posted surprise Q4 earnings on the back of surging global demand and widening margins from direct-to-consumer sales.

Canada Goose turned estimates on their head in the fourth quarter, reporting adjusted profit per share of nine cents — virtually a mirror image of the nine cent loss that analysts surveyed by Bloomberg were expecting.

For its first fiscal year as a public company, earnings increased 95 per cent, easily beating the 35-per-cent target issued just seven months ago. The blowout earnings prompted management on Friday to raise fiscal 2019 guidance for sales and earnings growth by about five percentage points, to 20 and 25 per cent respectively.

Shares of the Torontobased retailer ended the day at $78.01, up 30 per cent in Toronto trading.

In a conference call, CEO Dani Reiss attributed most of the sales growth to the firm’s shift away from wholesale and toward direct-to-consumer (DTC) retail, where the company now enjoys margins of more than 70 per cent.

The strategy, launched four years ago, has seen numerous branded outlets open up across North America and in tourist destinations globally, such as Chicago and London. In fiscal 2018, DTC revenue grew to 43.1 per cent of overall sales, and the company expects a 50/50 split next year.

“We have built this from scratch in just under four years while also growing wholesale faster than planned. This is unprecedented in our space,” said Reiss. “We did not expect that we would be able to grow our direct consumer channels as fast as we did.”

Asked whether Canada Goose could continue to grow its DTC channels, Reiss pointed to other apparel brands that pull 70 to 80 per cent of sales from online and branded storefronts. “I see no reason why over time we can’t post those,” he said.

Management also highlighted Canada Goose’s move beyond luxury outerwear, introducing windbreakers and knitwear, as the company looks to capitalize on the brand’s growing popularity with teenage and millennial consumers.

Demand from China — the biggest luxury market in the world — has been particularly strong, and the company has responded by building a new regional head office in Shanghai, along with new outlets expected to open in Beijing and Hong Kong by the peak winter selling season.

Reiss made clear that the firm wasn’t trying to exploit a fashion craze by leveraging into the Chinese market. Rather, management aims to build long-term brand presence by launching a regional office and working with local partners.

In Canada production capacity is growing to meet international demand, as the company announced the imminent launch of a third Winnipeg facility. Financial Post