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.

Thanks, Danny. Good morning, everyone, and thanks for joining us. As you've just heard, we've started the year on a high in our smallest quarter. We were able to fully satisfy partner requests for earlier shipments and in exceptional in-season demand, all the while putting ourselves in the best possible position for the upcoming fall winter season. This is a direct result of the scalability and flexibility of our in-house manufacturing, and that's foundational to the power of our unique operating model. With that backdrop as a starting point, I'm going to walk you through our numbers for the quarter. As usual, please remember that all of the figures quoted are in Canadian dollars. Turning to revenue. Revenue grew by 59.1% to $71.1 million, or 58.6% on a constant currency basis. Across all channels, geographies and products, the diversity of our growth in the quarter was remarkable. Starting with wholesale, Revenue grew 68.8% to $36.3 million. Now, that's obviously well above our expectations for annual wholesale growth. In response to stronger order book and customer requests, we were able to share greater proportion of our order book earlier. In our smallest revenue quarter of the year, timing had an outsized impact on our growth. Equally, higher order values and the incremental contribution of back-end were also positive contributors. DTC revenue grew 50% to $34.8 billion. We continued with strong productivity from our established retail stores and e-commerce markets, and our five new retail stores also had great quarters. in line with the new ads in comparable markets in previous years. We also experienced this with Tmall. Our unique ability to activate consumers and drive traffic with highly sought-after fall winter product out of season, together with the rising contributions of lightweight down knitwear and rainwear, is a real testament to the year-round strength of our DTC business. As Danny mentioned, non-parker revenue nearly doubled to roughly one-third of total channel revenue. That's a great strategic milestone in the evolution of our offer. Moving on to geography, we're very pleased to have grown significantly in all markets. Increased flexibility shifted timing in Europe and Asia to the left, which we addressed last year in North America. Our international customers have wanted an earlier flow of goods at this time of year, and it is great to be in a position where we can satisfy that efficiently without compromising other commercial objectives. As a result of this shift, the growth rates by region where we have broken out Asia for the first time are not apples to apples. So let's start with Asia. Here, our top line nearly tripled to $18.1 million. A few international distributors, where the Japan market is particularly relevant, are concentrated in this region. In the prior year, their initial fall-winter shipments occurred largely during Q2, and the shift towards Q1 was the largest single contributor to growth. The addition of DTC operations in Greater China to a revenue base which is otherwise almost entirely wholesale also had a significant impact. In Europe and the rest of the world, which is another wholesale centric market, revenue growth was 79.7%, with a stronger order book and earlier timing again being important drivers. In North America, growth in Canada was 40.4%, while the US came in at 15.8%. The growth rate in the US reflects a comparable level of shipments to last year, and one additional store in Short Hills, New Jersey, compared to two additional stores in Vancouver and Montreal in Canada. Now turning to gross margin. Consolidated gross margin was 57.5%. This reflects a greater proportion of wholesale revenue compared to last year, and within that, significant changes in the wholesale customer mix. Wholesale gross margin was actually better than expected at 41%. There was a shift in distributor shipments, which have lower margins, into the first quarter from the second quarter last year. Within each category of customer, wholesale gross margins were comparable to last year. Wholesale operating income was $5 million, and that represents an operating margin of 13.8%. The gross margin shift just described, was fully offset by positive operating leverage with lower channel SG&A as a percentage of revenue. DTC gross margin was 74.7% and that reflects a greater proportion of non-Parker revenue. To achieve a gross margin at this level, alongside such substantial new product growth, is frankly a great outcome. The tailwinds that we get in our core pricing and efficiencies fund measured investments in product expansion when margins are somewhat lower. We also concentrate in newness in DTC, where we can best tell the story and earn full retail margins. As a result, the economics of how we evolve our year-round offering are really quite unique. DTC operating income was $6.5 million, an operating margin of 18.7%. Strong underlying sales productivity partially was offset by a larger store opening program. We incurred $2.3 million in pre-store opening costs, and that relates primarily to rent for locations not yet open. Excluding these pre-store opening costs in both periods, DTC operating margin increased 25.3% from 21.6%. Unallocated corporate expenses were 36.9 million compared to 25.9 million last year, while unallocated depreciation was 2.1 million compared to 1.5 million. The increase in corporate SG&A was primarily driven by increased investment. Investment in marketing, including activation ahead of plans 2019 retail openings, and of course, incremental spend to support greater China, which you will recall was not in the cost base at this point last year. Combined, this results in a total operating loss of $27.5 million compared to $19.9 million. On a non-IFRS basis, adjusted EBIT was $25.9 million loss compared to a loss of $17.3 million last year. The net loss was $29.4 million, or $0.27 per basic and diluted share, compared to a loss of $18.7 million, or $0.17 a share last year. Adjusted net loss, which excludes $7 million of unamortized costs triggered by the closing of the term loan refinancing in May, was $22.8 million, or $0.21 per basic and diluted share, compared to to $16.7 million loss or 15 cents a share last year. As we expected and as we outlined in our guidance assumptions, we had a materially larger loss in the quarter. And that was driven by our corporate SG&A growth investments as well as the largest opening program. I'd also note that the adoption of IFRS 16, the standard for lease accounting, is not material to year-over-year comparisons of adjusted earnings. For income statement items where there are more meaningful impacts like depreciation and amortization and interest, I encourage you to look at our table in the MD&A, which describes them in detail. Turning to the balance sheet, we ended the quarter with net debt of $494.1 million, which includes $208.7 million of capitalized lease liabilities. Average net debt to EBITDA are under IFRS 16 for the trailing 12-month period was 0.9 times or two times on a spot basis. Networking capital was $335.6 million, reflecting the planned seasonal build of inventory for future growth. We're in a very clean position in market, and we're also right where we want to be relative to the coming fall-winter seasons. This includes a meaningful element of staging for both Greater China and Europe, which is where we're expanding our DTC footprint. And there are naturally longer lead times to get products into these geographies compared to North America. So while fiscal 2020 has just started, we're really encouraged by what we've seen so far. The relevance of our brand has never been stronger at this time of year. and we're fully on track operationally with our preparations for the upcoming fall winter season. We're really excited about what lies ahead, and I look forward to updating you on our progress on our next call. Now I'll turn it back to Danny for some closing remarks.

Thank you, Jonathan. As I said before, we are very pleased with our start to the year. I encourage you all to check out Live in the Open, our new global ad campaign for fall winter seasons. It features three inspiring stories of artist Alice Pasquini, Expedition Guide, and actor G.I. Zhao, and the first Inuit NHL player, Jordan Tutu, who have all bravely broken new ground and are driven to give back to the people and places who inspire them. The global three-part series will begin its first leg shortly in Italy, which we are activating ahead of our Milan retail opening. And there's a lot more to come, so please stay tuned. And with that, I'll turn it over to the operator to begin our Q&A session.

Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. Please limit yourself to one question and one follow-up question. To ask further questions, please re-queue. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Omar Saad from ISI. Your line is open.

Good morning. Thanks for taking my question. Congrats on the progress. You know, we're a little surprised that China's already 25% of revenue. You know, can you talk a little bit about where you see that revenue, you know, by geography landing in the longer term with China in mind? And I also wanted to ask about pricing. Anything you're doing on the pricing front, given the kind of continued really strong demand for the brand as we look ahead to future seasons? Thanks.

Yeah. Thanks, Omar. I think the thing to remember is that the first quarter is a small revenue quarter. And there are significant shifts in timing in Europe and Asia. And on that basis, I wouldn't get too fixated on these percentages as being representative. Where those numbers ultimately land is really an output of our strategy, not the target in its own right. Now that said, and if you look at luxury spending globally, it splits roughly a third, a third, a third between the Americas, Asia, and EMEA. Relative to Canada, we're in an earlier stage of developing our international markets, measured by addressable consumers and luxury apparel spend. They obviously represent larger long-term opportunities. Our international DTC expansion is central to unlocking this potential. Certainly over the long run, and as an output of that, you would expect sales outside of Canada, therefore, to grow to larger proportions. That said, and as you can see, our Canadian business is also growing really healthily, and we feel good about our runway. Canada is also becoming an increasingly important international shopping destination. I think in the end what matters to us is that we continue to grow our top line in all markets, including at home. We're truly a global story and we're executing against that. I think when it comes to pricing, and as we've said before, We do follow the international pricing matrix. We've been able to take pricing in the mid-single digits, and that's something that we don't see changing.

Thank you.

Your next question comes from Kate Fitzsimmons from RBC Capital Market. Your line is open.

Yes, hi. Good morning, guys. My question would be on the outlook for fiscal 20. You know, reiterated for 40 basis points of EBIT margin improvement, any sense of how we should frame the drivers between gross margin and operating expenses, particularly as we, you know, see some of these mid-shifts hitting on the gross margin line? And then secondly, just, you know, on that gross margin, if you could just dig into how you see gross margin evolving this year by channel, that would be helpful.

Thank you. I mean, I think, you know, within our – within the guidance that we've given, which as you can see we're reiterating, now we're looking at either margin expansion of at least 40 basis points. We're looking at revenue growth of at least 20%. We enjoy margins which are very much – gross margins very much where they should be over a 12-month period. If you think about wholesale, you know, last year we closed just a shade over 48.1. We're very happy with that. That's the sort of place it belongs. Similarly, mid-70s is a good place for the DTC margins to be. It's very much in line with the sector and where we believe they should be. And that's, you know, I've talked before that there's forward and forward momentum, tailwinds that come from pricing, tailwinds that come from efficiency, and positive reinvestment as you've seen here in new product. That's something that we think will continue. I think shape-wise, you know, if you look at last year you'll see that the margin was above where we ended the year in the first half and below in the second. You can see it's the other way around this year and I think that's fine. It doesn't alter our perspective on the year at all. I think when it comes to our expenditure, we are consciously investing in the business, both in capability and in marketing. We're very clear that ahead of the key seasons, which is typically Q3 and Q4 from a consumer perspective, we invest heavily in marketing to make sure that we're ready for the stores as and when they open. And the reaction that we get when we open the new stores and as we develop our existing markets bears testament to that.

Great, guys. That's the book.

Thank you.

Your next question comes from Oliver Chen from Cowan & Company. Your line is open.

Hi. Thank you. Definitely noticed a lot of the non-PARCA innovation across NIFs and other categories. What are your thoughts on how you manage breadth versus depth, and also your thoughts on markdowns as there could be a different kind of fashion risk versus the PARCAs? And would love your longer-term thoughts on brand segmentation as you think about black label and international markets and how the brand may evolve. as your product assortment broadens. Thank you.

Thanks, Oliver and Sandy. How are you doing? We're really excited about the progress of our new styles and how our off-season, counter-seasonal styles and spring styles have done this quarter. They've performed their best ever, and they're 30% of our sales across all channels, which is great. The way we think about it, you know, we're very careful in how we manage our inventory. And as you know, our products are almost never marked down. We have no discount outlet stores, and we have no strategy to ever have those. So unlike most brands. And the way we achieve that is by making sure that we don't make too much stuff. We make the right stuff. We make the right products. the right amount of products. And when it comes to new products, we build the new categories slowly and responsibly, which is why it's great to see this quarter that continuation of the growth of those categories. And then we go deeper in categories that are stable and that we have tried, tested, and true classics that we know that endure from season to season. And that's how we – that is – That is how we manage our new styles and that is how we avoid finding ourselves in a situation where we're too deep in styles that we don't want to be. In terms of segmentation and new styles going forward, I mean, we're going to continue to diversify. Obviously, you know, it's important to us that we always make styles that are authentic to Canada Goose. And every style we make and every product we make, It's very important that it's a best-in-class product. That's always been something we've believed. And that's why our pace of adding new stuff is very thoughtful and measured. Of course, the categories we're already in, we're going to continue to develop into and design new products into. There's a lot of excitement around footwear. I'm certainly very excited around footwear. I think we really have a tremendous opportunity there. We're going to make sure that we build it in the right way and do so at the right time. We've announced no timelines at this point. We're working on it diligently, certainly adding someone like Woody to our team who has deep experience in footwear is going to be a really important piece to that puzzle and help us get there at the right time and in the right way.

Your next question comes from Michael Benetti from Credit Suisse. Your line is open.

Hey, guys. Thanks for all the help here, and congrats on the quarter. You know, Dan, can I just continue on the footwear? I know you don't want to get too close on timing, but it is the first time you've kind of zeroed in on a Canada Goose brand for footwear. Is that something, though, that we should still not think about this calendar year, more of a long-term, maybe next winter? And then maybe just how you're initially thinking about the the price points that you think your brand can exist at there to help us think about, you know, the competitive side and the TAM that you're looking at for that opportunity?

Yeah, well, you're right that we have not yet put out any timeline on that. And we're not prepared to do that because we want to – it's going to be at the right time. Like, you know, we'd like to do it as soon as we can. But that doesn't – you know, is your question about next year? No, it's not going to be this year. You know, we have nothing to announce. And there's certainly nothing imminent on the horizon. You know, as I said in my remarks, there's a lot of commercial and strategic work that we still – that still has to be done. And, you know, it's really important that we don't compromise quality for speed. You know, we're definitely on it. And I look forward to having more to tell you about it when the time is right. You know, and that includes price points. And, you know, I mean, I think that – but you look at the general profile of our brand and infer from that where our prices will be when it comes to footwear.

Gotcha. Jonathan, could I maybe ask a follow-up on a little bit of help on the model? Is there any way you could help us contextualize the size of the wholesale shift? And then also a little more detail on the gross margin question from earlier on D2C in particular. I think you said that it's kind of in an area where it should be, but it was down a bit in the first quarter. You're pretty helpful in telling us, look, a lot of this was coming from the success we're having in some of these non-PARCA categories that carry lower margin. It's a little tough for us to understand how that dynamic plays out. Obviously, you'll be selling more parkas as we get into the colder weather. But it seems like those categories should be bigger as a percent of mix each quarter. But if you think the grosses in D to C are about where they should be or implied at flat, it also suggests that one of the quarters needs to go positive to offset the first quarter. So I'm just trying to reconcile a few of the comments you made to help us with the modeling.

Thank you. OK. Thanks, Margaret. Taking the wholesale first. We're reiterating guidance. What does that mean? That means in reality that we have as one of our core assumptions in that that we talk about high single digit growth this year in wholesale. So obviously we're way, way ahead of that in the quarter and therefore you will expect that to reverse gradually as we go through the year. But that's also a function of when customers take their inventory in from us. So we'll see how that unfolds as the year goes on. But as far as I'm concerned, we've made a good start, and that's the important part. When it comes to the DTC gross margin, if you look at it over the course of the year, We've always said our gross margins don't and shouldn't move very much in any 12-month period. The fact that we happen to be a little bit lighter this period with a big proportion of the business, you know, a third being non-Parker, allows you to – to derive sort of a margin mix. And you would correctly assume that we will sell a greater proportion of parkers as we come into the colder season as we move through the year towards Q3 and Q4, which is the peak consumer demand for cold weather product.

Your next question comes from Alexandria Walvis from Goldman Sachs. Your line is open.

Hi, this is Rosalie. On behalf of Alex, on tourist spend, you mentioned strong sales in existing stores. I wonder if you've seen any impact at all of softer tourist trends that are impacting some of the other brands, or are you not seeing that?

Thanks for the question. We're not seeing that. We're seeing our global tourist business is very strong. And, you know, start traffic across both in-market and tourists from the global tourists. And, you know, we're really happy with our ongoing performance of our DTC channel.

Thank you.

Your next question comes from Jonathan Combs from Baird. Your line is open.

Yeah, hi. Thank you. Just wanted to maybe follow up on your outlook for the D2C channel. And I know there's some tendency that maybe look at the results relative to the store growth and assume that your D2C business at existing stores and e-commerce might be slowing. And I'm just curious as you look to the year ahead and what you've embedded in guidance, how you think about kind of same store, like-for-like growth versus new contribution from the stores you're opening?

Yeah, I mean, I think we have a good fleet of stores that you're aware we have today, relatively immature stores in the sense that we've only opened the stores in the last two or three years. And We have announced an opening program this year which is greater than we have done in any previous year. So I think from that point of view, we look to the impact of those new stores as being very significant this year alongside the continued productivity of our existing fleet.

I agree with that and I'd say that the fact that we Our DTC sales accelerated to 50% in this, our smallest quarter, which is a great leading indicator. And, you know, to Jonathan's point, the stores and increased e-commerce presence and online presence is a really exciting prospect for us, and we're really looking forward to a great year.

Okay, great. And then just for the overall business, when you look at the year, I'm curious from a geographic standpoint, how you think or if you have any insight kind of from a shape perspective, how you expect North America growth versus Asia and Europe and other countries to play out when you look over the next few quarters?

I think what you've heard from us here is that we are enjoying the diversity of growth geographically with growth in every region. clearly where you open more stores in a more largely wholesale base, you'll have a disproportionate impact of the impact of the store openings. And to that point, I'd highlight the fact that we've said we're going to open three stores in Greater China this year. We've announced that we're opening a store in Milan, a store in Paris. All of those openings... are in regions outside of North America, and therefore you would expect that impact to be slightly more pronounced.

Yeah, and I'll just add on to that, what Jonathan's remarks are. I mean, to the point of what we expect for the rest of the year, we saw really strong global demand in our first quarter. That was really very encouraging. Continued strong global demand from all geographies. We continue to see that we're relevant year-round, and as mentioned earlier, the counter seasonal business being so strong. This quarter was great. And we're excited to see the evolution of that as well. And it really points to the fact that our manufacturing investments over the past few years have paid off. And we're very optimistic about the rest of the year and about our future for the long term towards becoming a billion dollar brand and more.

And your last question comes from Mike. from Wells Fargo. Your line is open.

Hey, good morning, everyone. Two questions. So just to stick with the wholesale and the gross margin, I guess, Jonathan, is there any chance you could maybe just quantify what that shift was that you're calling out on that distributor business? Just so we know how to think about wholesale growth in the second quarter, just trying to piece that apart. And then because the way you're describing it, which makes sense, that it's a lower margin business, does that mean that inherently Q2 wholesale gross margins has some tailwind to it? Maybe should we expect some expansion based on that sales shift? Just trying to understand that dynamic quarter to quarter.

So I think the way to look at the health of the first quarter on the wholesale gross margin is to consider what the margin looked like last time we had a strong distributor mix in Q1. And that's two years ago. And then the margin was 35%. So you can see that there's good underlying progression in the wholesale gross margin when you adjust for that mix. I think as we look to the year, as I said before, we are using the signpost of last year's wholesale gross margin as a good indicator. But I just think this year it builds as the year goes on rather than starts with a head of steam and therefore you would not expect it to be as high as last year in this quarter and, frankly, all next because the compare was way above the full year.

Got it. Thanks, Jonathan. And then there's one quick one. Can you give us some guidance on just inventory levels just so we know kind of what you guys are baking into your plan in terms of how inventory should flow for the remainder of the year?

I think when it comes to inventory, you know, we – heard from Danny and me this morning about our approach to inventory and why they simply don't line up with revenue trends. I think we're not going to change our strategy in that we will efficiently build ahead of future growth in manufacturing where we have a really high degree of confidence. And as we you know, clearly you'll see some seasonality because as we get into larger sales quarters in Q2 and Q3, there is, you know, we're taking in less and we're shipping out. Now, that said, if you compare us to other fast-growing seasonal businesses in this sort of sector and you adjust to the fact we're a manufacturer, you'll also find that our stock tones are pretty much in line.

I agree completely, and I think that, you know, it's important to highlight that our inventory is exactly where we want it to be, and, you know, we're not concerned whatsoever about it. We're really excited with the position of it and the opportunity it provides for us for the rest of the year. Thank you.

I will now turn the call back over to Danny Reese for closing remarks.

Great. Well, thank you all for your questions, and thank you all for your time and taking time to be with us today. We appreciate your interest in and your support of Canada Goose. I look forward to updating you on our progress when we report our second quarter results in the second quarter. Thank you.

This concludes today's conference call. You may now disconnect.