Canada Goose Holdings Inc

Good morning. My name is Jacqueline and I will be your conference operator today. At this time, I would like to welcome everyone to Canada Goose first quarter 2020 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press one or star one on your telephone keypad. To remove yourself from the queue, press the pound key. Thank you. I would now like to turn the call over to Patrick Burke, Senior Director, Investor Relations. You may begin your conference.

Thank you. Good morning, and thank you for joining us today. With me are Danny Reese, President and CEO, and Jonathan Sinclair, EVP and CFO. For today's call, Danny will begin with highlights of our first quarter performance and then update you on the progress against our key priorities. Following this, Jonathan will provide details on our financial results. After our prepared remarks, we will take your questions. Before we begin, I'd like to inform you that this call, including the Q&A portion, includes forward-looking statements. Each forward-looking statement made on this call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Certain material factors and assumptions were considered and applied in making forward-looking statements. Additional information regarding these forward-looking statements, factors, and assumptions appears under the heading Cautionary Note Regarding Forward-Looking Statements and Risk Factors in our annual report on Form 20F, which is filed with the SEC and the Canadian Securities Regulatory Authorities and is also available on our Investor Relations website at CanadaGoose.com, as well as the earnings press release that we furnished today. The forward-looking statements made on this call speak only as of today, and we undertake no obligation to update or revise any of these statements. During the conference call, in order to provide greater transparency regarding Candidate Goose's operating performance, we may refer to certain non-IFRS financial measures that involve adjustments to IFRS results. Any non-IFRS financial measures presented should not be considered an alternative to financial measures required by IFRS and are unlikely to be comparable to non-IFRS measures provided by other companies. Any non-IFRS measures referenced on this call are reconciled to the most directly comparable IFRS measures in the table at the end of our earnings press release issued this morning, which is available in the investor relations section of our website. With that, I will turn the call over to Danny.

Thanks, Patrick, and good morning, everyone. Fiscal 2020 is off to a great start. Our operational execution was outstanding, and we continue to see strong demand globally from both consumers and from wholesale partners. We are moving the needle on a number of important strategic initiatives, and here are some of the things that I am most excited about. On the supply side, our continued investments in building production capacity, including our recently opened facility in Montreal, are paying dividends. giving us greater flexibility to ship wholesale orders earlier in the year and to put ourselves in the best possible position going into fall-winter. From a sales perspective, we grew significantly in all geographies compared to Q1 last year at levels that met or exceeded our expectations relative to the quarterly ebbs and flows of our business in each market. Starting with North America, in Canada, revenue increased by 40.4%, with Vancouver and Montreal putting up best-in-class performances in their inaugural first quarter. Our growth in the U.S. was 15.8%, which we feel very good about, as wholesale shipments were comparable to last year, and we added a smaller local market in Short Hills, New Jersey. We also enjoyed strong productivity online and in our existing stores, which was in line with our other markets. In Europe and rest of the world, we grew by 79.7%, with earlier wholesale shipments making a significant impact. In Asia, our top line nearly tripled to $18.1 million from $6.6 million, with wholesale growth in Japan and direct-to-consumer operations in Greater China being the two primary drivers. Building on the momentum of our spring collection performance in Q4, we reached a major milestone in the evolution of our offer, with strong contributions from lightweight down, knitwear, and rainwear, Non-PARCA DTC revenue nearly doubled relative to Q1 last year, rising to one-third of channel sales in the quarter for the first time ever. Our expansion across categories and climates with best-in-class products, which is undeniably authentic Canada goose, is clearly working. I'm proud and excited about this because it's a shift in perception of our brand, and it's a step change in year-round commercial relevance. We set out to do this, we're making great progress, and we have a lot of runway left ahead of us. Together, these factors drove exceptional growth, with total revenue increasing by 59.1% to $71.1 million compared to Q1 last year. To have such a commercially vibrant business at this time of year is something that we have worked very hard to achieve, and we are very proud of that. Looking at the results by channel, starting with wholesale, revenue increased by 68.8% to $36.3 million. As I mentioned earlier, this was driven primarily by earlier shipment timing in Europe and Asia. Last year, we prioritized strategically shifting our North American wholesale calendar to the left. This year, we were able to do the same in Europe and Asia, of which Japan is particularly relevant. The mix of styles and fits in these markets is very different. We were able to accommodate the added complexity without compromising cost efficiency or our positioning for the remainder of the year. This is grounded in our unique operating model. We're the largest manufacturer of down jackets in Canada by a very wide margin, and we are rapidly scaling that capacity. As a result, flexibility around what we make and when we ship it is growing. This has given us the ability to better position our partners going into their peak selling seasons. While on the topic, I know there's been a lot of questions around how we manage inventory, and I want to shed some light on that. As a manufacturer, we have a very different approach relative to other businesses that you may typically look at. There are two distinct elements to our inventory position, finished goods for delivery and manufacturing. They do not have the same cadence and they should be looked at separately. Commercially, we operate a selective allocation model at full price and we are not afraid of being sold out. At the same time, in manufacturing, we strategically build inventory ahead of future growth with a high degree of confidence. This is supported by a high proportion of continuative core product and a forward-looking visibility that our order book provides. Again, because of this, inventory builds of this nature show up on our balance sheet much earlier than they do for companies who outsource their manufacturing. That means they typically don't and shouldn't line up with our quarterly sales trends. To highlight the point, we are exactly where we want to be with the size and composition of our position at this stage of the year. Circling back to the wholesale demand strength we're seeing internationally, Japan was a standout performer and a key driver of our growth in Asia. In terms of both market size and influence, it is an integral part of the regional luxury landscape. In the early days, it was one of the first international markets that I brought Canada Goose to. And from those humble beginnings approximately 20 or so years ago, it has grown into one of our most strategically important and economically significant markets. We are building on the longstanding strength of our business in both distribution and provinces. In market, we are taking our presentation and experiential storytelling elements to the next level, and like in other geographies, we are seeing great momentum in non-PARCA categories. This includes a number of products and styles developed specifically with Japan in mind, which is an important trendsetter market internationally. Moving to the DTC channel, revenue increased by 50% to $34.8 million compared to Q1 last year. In addition to the strong non-parker contribution I mentioned earlier, which rose to one-third of total revenue, we also saw strong out-of-season demand for our fall and winter sales. At time of year, when the only way that most outerwear brands can get attention is through discount promotions and clearance sales, we had great engagement from fans looking to get ahead of the coming season. To add some color to this, in one weekend in June, we sold an entire drop of 1,800 highly sought-after white Expedition parkas through our own retail network. As part of this product event, we activated our global digital base camp community with an invite-only preview. This was a powerful accelerator of in-store traffic and conversion, resulting in 70% of the total allocation being pre-sold. We also had numerous examples of customers out of country on vacation electronically transferring funds to their local store, site unseen, to secure one of the sought-after expeditions. Selling out of a heavy-duty winter park in a single summer weekend is the ultimate expression of pent-up demand. Greater China was also a real difference maker for our growth in DTC. Building on the success of our first two retail stores and Tmall last week, we opened the doors to our new store in Shenyang in northeast China, located in the premier Mixi shopping mall. This city is one of the coldest places in mainland China during the winter, and not surprisingly, our decision to open there was well informed by local demand online. Despite the fact that we had a soft opening and that it was over 20 degrees Celsius in the middle of August, the store has had an exceptional start. This is yet another example of the exceptional engagement and brand affinity that we're seeing from consumers in China. From building a regional team to commercially launching DTC operations in under one year, we've hit the ground running, and we know that we have incredible white space ahead of us. Lastly, we have also made real progress on our major long-term initiative of product development. Earlier this week, we announced the appointment of Woody Blackford, who will join us later this year to lead our global design and merchandising organization. This is a foundational next step in the development of new categories including a Canada Goose footwear offering. Serving most recently as the VP of Global Design and Innovation at Columbia Sportswear Company, Woody is an innovator at heart with deep sector experience and an extensive track record in driving the commercialization of new product categories. Cold weather footwear today looks a lot like Parker's did 20 years ago. We have a massive opportunity to define and develop this market in a way that no other brand can. There is still a lot of strategic and commercial work to be done and we won't compromise quality for speed. However, adding Woody to the organization and the expertise that we already have from Baffin are important parts of the puzzle to accelerate our journey. As a globally recognized industry leader and a Canadian coming home, Woody is an important addition to our team and I'm really excited to working with him. As a brand, that now has true year-round relevance. The commercial pulse in our business has never been stronger in what we used to call our off-season. We have great momentum as we transition into the fall-winter season, and we're on track to deliver another strong year. With that, I'll turn it over to Jonathan, who will go over our financial results with you in more detail.