National Post (National Edition)
Lockdowns pinch Canada Goose
China sales a bright spot as coronavirus bites luxury market
Canada Goose Holdings Inc. warned of a hit to sales in Europe for its luxury parkas as countries reimpose lockdowns to curb a resurgence in virus cases, overshadowing a surprise quarterly profit on strong China and online demand.
The company's shares fell as much as 3.5 per cent on Thursday after the comments during a conference call, reversing from a gain of about five per cent at the open.
Several global luxury players have signalled a recovery in demand, largely driven by a rebound in China, but now face the threat of disruption in major markets such as France and England due to new shutdowns.
“(Progress in China) helped us manage our expectations in terms of what we might expect to see elsewhere in the world,” chief financial officer Jonathan Sinclair said on the call. “Obviously, that gets interrupted where you get local lockdowns as we're experiencing right now in Europe.”
Canada Goose said restrictions on international travel have also hurt sales at its stores around the world where affluent Chinese tourists shop, but new stores in the country and a ramp-up of its online presence have helped cushion the blow.
These efforts helped the firm post an over 30-per-cent jump in direct-to-consumer revenue in Mainland China in the second quarter ended Sept. 27, while enabling overall online sales to climb more than 10 per cent.
Total revenue slumped about 34 per cent to $194.8 million, but beat the average analyst estimate of $167.2 million, according to IBES data from Refinitiv.
Excluding items, it earned 10 cents per share, as its adjusted earnings before interest and taxes margin was positive for the first time since the onset of the pandemic. Analysts were expecting a loss of one cent.
The COVID-19 crisis forced Canada Goose to temporarily close stores from Paris to Toronto earlier this year, and sales haven't returned to pre-pandemic levels as department stores who sell the brand continue to languish.
In an echo of luxury brands like Moncler SpA and LVMH, Canada Goose is getting a boost from China, which has been more successful in containing the virus and turned into one of the few bright spots of the world economy.
“Mainland China has already returned to growth and our digital business is accelerating in a meaningful way at the right time,” chief executive Dani Reiss said.
With COVID-19 cases flaring in Europe and North America, the brand may benefit from an increased push to stay outdoors as consumers use their porches and yards well into the winter. Still, the firm said it still can't forecast how the future looks. It cited “continued global uncertainties, including second-wave shutdowns and disruptions, the pace of retail traffic recovery, and the impact of economic developments and travel restrictions, all of which are unknown.”
Online revenue grew 10 per cent,
BRAND MAY BENEFIT FROM AN INCREASED PUSH TO STAY OUTDOORS.
with momentum continuing into October, Reiss said in an interview. Traffic at brick-and-mortar stores is down at some locations in North America and Europe while “people are shopping normally” in China.
The company just expanded a store in Toronto and still sees brickand-mortar locations as “a very important strategic pillar.”
Canada Goose has been decreasing its reliance on wholesalers and focusing on its own online operations and physical stores, which are more lucrative. This year, it's also shipping parkas later in the season, to limit risks of discounts. Revenue from wholesale was cut almost in half, representing about 61 per cent of sales, down from 75 per cent a year earlier, as it focuses more on direct-to-consumer sales.
Canada Goose U.S.-listed shares were down 9.2 per cent this year through Wednesday. The stock has more than doubled from a March low of US$14.86. The firm's Canadian shares closed basically flat Thursday at $43.10 in Toronto, while the U.S.-listed shares closed at US$33.03.