Canada Goose Holdings Inc

Thank you for standing by. Welcome to the Canada Goose second quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear a message that your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Amy Schwamm, Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. With me are Danny Reese, Chairman and CEO, Jonathan Sinclair, EVP and CFO, and Kerry Baker, President. Our call today, including the Q&A portion, contains forward-looking statements. Each forward-looking statement, including our financial outlook, is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Certain material factors and assumptions were considered and applied in making these forward-looking statements. Additional information regarding these statements, factors, and assumptions is available in our press release issued this morning, as well as the risk factors section of our most recent annual report filed with the securities regulators. These documents are also available on the investor relations section of our website. The forward-looking statements made on this call speak only as of today, and we undertake no obligation to update or revise them. Lastly, our commentary includes certain non-IFRS financial measures, which are reconciled at the end of our press release. With that, I will turn over the call to Danny.

Thanks, Amy, and good morning, everyone. I'll start by saying that we are heading into our most important season and we are well positioned across our business to drive and capture demand globally. There is no doubt that the macroeconomic backdrop continues to present challenges, but I'm very confident that the strong underlying fundamentals of our business will help us navigate them well. This morning, we released our results for the second quarter of fiscal 2023, which beat our expectations. However, despite our strong performance in the quarter, we are not seeing the level of improvement we had assumed in mainland China. COVID-related disruptions, including mall closures, lockdowns, and travel restrictions continue to impact traffic. And as we head into our most meaningful quarter, we are seeing these disruptions affect an increasing number of cities in which we operate. As a result, we have updated our outlook for the year, which Jonathan will cover in further detail shortly. Let me be clear, our brand remains strong in mainland China, regardless of the temporary headwinds. We saw this brand strength during the holiday period, Golden Week in October, and more recently leading up to Singles Day in November, where both traffic and sales trended positive across our network. These holidays have historically been meaningful shopping events, and that has continued for our brand. This gives me confidence in our long-term vision, demand, and brand strength as we move forward. Regardless of temporary challenges we may face, our focus for the remainder of the year is clear. We will continue to execute against our long-term strategy, growing our DTC mix, deepening our presence in new and existing markets, and growing our performance luxury offerings. Now, turning back to the quarter, top-line revenue grew 19% to just over $277 million. On a constant currency basis, Revenue growth was 22% ahead of last year. Our strong top line flowed through to meaningful bottom line returns. We significantly exceeded our adjusted EBIT expectations as well as earnings per share. This performance demonstrates the margin strength of our business when we are in season and delivering. Turning to channel and regional highlights. Overall, our performance on our second quarter was driven by strong wholesale performance continued strength in north america our strong wholesale performance was driven by two factors one our ability to fulfill requests from wholesale partners to ship orders earlier in the season and second an increase in order book value driven by higher units and price particularly in europe this shift in wholesale timing not only allows our consumers the ability to shop the full assortment of Canada gives earlier in the season, but also opens the door to potential reorders later in the season. In North America, where our DTC retail network was a particular standout, the strong performance has continued beyond our second quarter, accelerating as we would expect to see heading into our peak season. In EMEA, we saw our top line growth 34% and by 44% on a constant currency basis. This was largely driven by wholesale, while our stores benefited from increased tourist traffic, mainly from the United States. And lastly, in APAC, our results were impacted by performance in mainland China, which, as I mentioned earlier, continued to be affected by COVID restrictions. Outside of mainland China, we continued to execute against our regional diversification strategy. In South Korea, through our new distributor, Latte Group, and in Japan, through our recent joint venture. Moving from the quarter to an update on progress against our growth strategy. The four key tenets of our strategy include, number one, growing our direct-to-consumer mix overall. Two, increasing our penetration in key markets. Three, re-envisioning our product offering. And finally, expanding our margins. We are at the early stage of development in the majority of our large international markets, and we are driving our penetration higher in the U.S., EMEA, and APAC. including greater China, Japan, and South Korea. Last quarter, we spoke about our plans to open more stores in China in the leading shopping districts with excellent adjacencies. The fact that we are renewing leases and securing new leases for stores is a testament to the brand strength we've built in China. Our DTC progress in China also demonstrates the confidence we have in the long runway ahead of us, especially compared to many other luxury brands. As I've said before, we are investing in China for the long term. This week, we will unveil our pavilion at the fifth annual China International Import Expo, the preeminent event for foreign business in China. At the event, we plan to highlight our China-specific programs, collections, and investments. I'm excited that our brand is showing up so strongly at such an important event in China. In Japan, through our joint venture, we opened a store in Osaka in October. The performance of the Osaka store has been very encouraging. Also, we are on schedule to open in Ginza, one of the most prestigious shopping districts in Tokyo this December. Not only are we expanding our preference in Japan, but I'm pleased to see our brand elevating as we open in some of the most influential luxury retail locations in the country. In South Korea, in partnership with our new distributor, Latte Group, we opened 14 new shop and shops. Our performance has already exceeded our expectations and gives us confidence not only in our partnership with Latte, but in our strategy and the opportunity ahead of us in this highly influential market. In North America, we've begun our quest west in the United States as we deepen our penetration in key markets across the western United States. there remains so much potential across many cities in the U.S. As we mentioned on our last call, we will open the Wynn in Las Vegas in the coming days, followed shortly by a new store at Cherry Creek in Denver. We also plan to open two more temporary stores this fall, one in Aspen and a second in Detroit. In Europe, we opened a new permanent store in Manchester in October. The store sits on New Cathedral Street in the heart of the city's luxury retail district. We'll continue to look for further strategic opportunities across the UK and the continent for this fiscal year. Our DTC strategy is working. Excluding mainland China, we generated 28% DTC revenue growth, and our DTC comparable sales growth excluding China was 3.2%. I think it's also important to point out the relative newness of our DTC store network. Since the onset of the pandemic, we've opened 25 stores, and for many, we are yet to see their full potential. We continue to see tremendous opportunity across our existing store network globally. Moving from our DTC business, I'd like to give an update on key product launches heading into peak season. Enhancing our product offering and expanding categories is a core competency for our brand and a key pillar in our long-term strategy. Our new collections and collaborations are resonating with consumers, driving traffic and buzz around the world. On our last call, we spoke about the opportunity we have to increase the share of our women's business. We plan to grow our women's business from the 50% we currently see to more closely aligned with the industry at approximately 60%. We are taking meaningful steps to do just that while continuing to build on the strength of our highly successful men's business. For example, last quarter, We spoke about our new fall-winter collection with styles and silhouettes designed with this in mind. Annie Leibovitz shot the campaign, which featured a cast of amazing women. The response to the campaign and collection has been tremendous. Despite having only launched in September, we're making meaningful progress against the objectives we set for this collection, motivating our target consumer, Gen Z and millennial women, and drawing awareness for our women's business. As of today, Gen Z and Millennial Women make up the core customer for the collection. Combined, they represent two-thirds of the collection's consumer. As well, our first-ever all-female campaign is reaching and resonating with new audiences, with more than 60% of purchasers being first-time buyers. I'm happy to see this new collection deliver so strongly against its objectives as we push our women's business to new heights. We also see an opportunity to deliver on our goal to grow our women's business through collaboration. reaching new audiences with influential partners. In December, we plan to launch a new collaboration which will lean into a more feminine expression of Canada Goose's functionality. This collaboration will offer a fresh perspective of the brand, exactly the type of disruptive design that will help us capture consumers' attention and their imagination. Our most recent collaboration with Shanghai-based Feng Chen Wang was unveiled in September during Paris Fashion Week. In October, we hosted impactful launch events in both Hong Kong and Shanghai to celebrate the launch. The multi-dimensional head-to-toe assortment leans into Fang's innovative and deconstructed approach to design, an exciting interpretation of our brand, and initial reaction has been strong, especially in APAC. As part of our growth strategy, we continue to re-envision our offering and expand into new product categories. In Q2, non-heavyweight down sales grew by 46% to 44% of total sales. This is up from 36% of total sales in the prior year quarter. Following their success in Q1, fleece and knitwear sales continued to perform very well, growing more than 60% from the comparative quarter last year. Fleece was the standout with sales growth of almost 170%. We continue to make meaningful progress against our strategy to expand our product categories and I'm excited about the opportunity ahead of us. This November also marks the one-year anniversary of our launch event of Footwear. We continue to grow the category adding two styles earlier this year in August with another three set to launch before the end of the year. The opportunity we have in front of us in Footwear is meaningful and we will continue to execute against the strategic playbook to build the business for the long term. Importantly, this category expansion has not come at the expense of gross margin. Our Made in Canada vertically integrated operating model continues to benefit our business. Specifically, we've been largely insulated against the expedited freight costs and supply chain issues we have seen impact gross margin across the industry. Before I pass it over to Jonathan to go over our results and outlook in more detail, I sincerely want to thank our teams around the world for their laser-focused efforts on driving our brand success. I am confident, heading into our most important season, that we have the right product to capture consumers' imagination and attention and, therefore, drive traffic, stores in some of the most exciting retail locations in the world, and the right team and partners to deliver a stellar experience for our customers across our channels globally. We continue to see massive growth potential across our business, and we will continue to drive growth even in today's macroeconomic environment. As I have said before, our business has grown through every recession, save the first wave of COVID, and this year will be no exception. And with that, I'll turn it over to Jonathan to go over our results and outlook in more detail.