Canada Goose Holdings Inc

will be your conference operator today. At this time, I would like to introduce you to the Canada Goose Q3 FY24 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, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I will now hand the call over to Anna Rahman, Head of Investor Relations. Anna, you may begin your conference.

Thank you, Operator, and good morning, everyone. With me are Danny Reese, Chairman and CEO, Jonathan Sinclair, EVP and CFO, Kerry Baker, President of Brand and Commercial, Beth Clymer, President of Finance Strategy Administration, and Neil Bowden, Deputy and incoming CFO. After Danny's and Jonathan's prepared remarks, we will open it up for your questions. Our call today, including the Q&A portion, includes forward-looking statements. Each forward-looking statement, including without limitation discussion of 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, and regarding material factors that could cause actual results to differ from those projected was available in our earnings press release issued this morning, as well as in our filings with U.S. and Canadian 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 any of these statements. We report in Canadian dollars, so all amounts discussed today are in Canadian dollars unless otherwise indicated. Please note that financial results described on today's call We'll compare third quarter results ended December 31, 2023, with the same period ended January 1, 2023, unless noted otherwise. Lastly, our commentary today will also include certain non-IFRS financial measures, which are reconciled at the end of our earnings press release. With that, I'll turn the call over to Danny.

Thanks, Anna, and good morning, everyone. Our performance for the third quarter reflected strong execution in a mixed consumer environment. Sales were up 6% over the last year with adjusted EBIT of $207.2 million, or a 34% margin, in line with our guidance range. While we continue to see headwinds in North America and Europe driven by economic conditions, the strength of our results in Asia Pacific, the increase of demand for emerging product lines, and the growth we achieved during key holiday shopping days across all regions. Each clearly demonstrated our brand heat and taken together to demonstrate our differentiated luxury positioning. Our products are rooted in performance, and performance pushed far enough becomes luxury. This is what inspires us to continue to reinvent our icons, expand our categories, and introduce newness with style. In Q3, key consumer moments were strong. with sales over the Black Friday long weekend up more than 40% versus last year. In what is typically a promotional retail environment, our sales were at full price and revenue grew across all regions with record traffic in our stores. We had our best single day ever in China, outperforming our industry as a leading luxury outdoor brand on Tmall, again, at full price. This, along with our overall third quarter results in Asia Pacific, validate the strength of our brand in the region especially in the context of a highly promotional environment outside of our own channels. In Q3, we remain focused on building for the long term, guided by our three strategic pillars, driving consumer-focused growth, building our DTC network, and product category expansion. Let me take you through the progress that we've made on each of these pillars during the past quarter. First, driving consumer-focused growth. In Q3, we invested in our brand to inspire and engage customers via elevated experiences and exciting collaborations. Last quarter, I spoke about elevating the customer experience through Canadian warmth, an experience that defines the Canada goose customer journey, warmth in every interaction, expertise behind every recommendation. Early results have been promising. Our store net promoter score in Q3 improved meaningfully compared to the same period last year and on an already high base. And we saw a significant increase in the percentage of shoppers, indicating that our in-store brand and product storytelling is positively impacting their perception of the brand. I'm excited about the long-term benefits of our focus on experience. I saw this firsthand at our stores while working at our Yorkdale store in Toronto over the Black Friday weekend, as did our entire leadership team as they worked at many of our other stores around the world. And now turning to collaborations. which we leveraged to tap into new and diverse audiences. In the third quarter, we launched six, including with BAPE, Concept, OBO, The Shoe Surgeon, Piermos, and with Masai Ujiri's Giants of Africa organization, which empowers and inspires African youth through basketball to make lasting change in their communities, work that is incredibly important to Canada's youth. Our Q3 collaboration is delivered on our objectives to drive brand heat and reach new target audiences. As a result of our efforts, consumer engagement metrics and sign-ups to our own database were above our year-to-date average. Last week, our brand was featured in the most recent Vogue Business Index, an index of the world's leading luxury brands. We're pleased to see ourselves on the list again and to see our ranking improving year over year. Turning to our second pillar, building our DTC network. In Q3, we added two permanent stores, one in New Jersey's American Dream Mall and one in Kobe, Japan. We also converted our Fifth Avenue store in New York City to permanent, bringing us to 65 permanent stores at the end of the period. We also opened a permanent store in January in Nanjing, in China, where we now have 22 permanent locations. And on the wholesale front, we expanded our travel retail province of Seoul, Korea, a couple of pop-up locations, following the opening of the Frankfurt Airport store in the second quarter. I'm very encouraged by all that we're learning in our early stages of this new channel, and we believe that this will help us reach a new clientele. Q3 DTC revenue increased by 14% over the last year, reaching $514 million, primarily driven by DTC performance in Asia Pacific and specifically Greater China. The strength of our brand and product assortment combined with healthy consumer spending during key shopping moments across Greater China contributed to the stronger online and offline sales in Q3 versus the previous year. Our results demonstrate that our investment in China is gaining traction. From our expanding retail province to our local brand initiatives, like our fifth anniversary event that we celebrated in Shanghai last October, our brand is strong in China. As a result of our continued investment, we saw both growth both inside and outside mainland China. We intend to continue managing our expansion in China prudently, focusing on initiatives that elevate our brand and achieve optimal ROI. North America and European sales grew robustly over the Black Friday shopping weekend. However, we believe the delayed onset and cold weather through December contributed to softer domestic demand for our heavyweight down products in Q3, dampening category sales in these regions. Direct-to-consumer comparable sales, which include our brick and mortar and online stores, were down 1.6% year-over-year in Q3. Store-only comparable sales grew in the high single digits year-on-year, driven by strength anywhere in China, offset by a decrease in store and e-commerce comp sales in North America and EMEA, mainly due to lower conversion. We believe that the highly promotional environment, combined with continued pressure on consumer spend in the quarter, contributed to challenges converting our digital traffic, and to some extent, our store traffic as well, especially outside of key holiday shopping moments. As a result, the progress we made on the merchandising front was largely offset. Ahead of our Q3 peak season, and as part of our efficiency driving transformation program, we reorganized our merchandising group, focusing on centralizing our team to improve merchandise and inventory management globally across all channels and product categories. This has enhanced assortment planning and driven improvements and localized assortments for our stores. During Q3, we measured an improvement in both productivity and inventory turnover directly resulting from this initiative. While the benefits we achieved were muted due to the external environment, the improvements set us up to capture opportunities in the future. In addition to continuing our merchandising and sales planning efforts, we remain focused on enhancing our e-commerce business by reducing friction points for our customers online, on the front, and on the back end. Through this work, we expect to see improvements in cart conversion and return rates, the latter of which we're making meaningful progress against. And I look forward to continuing to share updates on the progress we make within our digital ecosystem. And now turning to our third pillar, product expansion. In Q3, we acquired Knitwear manufacturer Pala Confetti, which marks our first European manufacturing facility and supports our objective to drive growth in our apparel category. Knitwear is one of our leading segments within apparel, and we expect this acquisition will deepen our in-house expertise and enhance gross margins and supply control. We are a vertically integrated manufacturer, so this is familiar territory for us. Now in a new category, it will play an important role in driving year-round relevance for our brand. ADQ3, our non-heavyweight down category, which includes apparel, expanded its share of revenue within the overall product revenue mix compared to the same period last year. Apparel is the fastest growing product within non-heavyweight down, increasing by double digits year over year in the U.S., Canada, and EMEA, and doubling in APAC, with sales of women's apparel driving growth across all regions. Apparel has steadily gained share within the non-heavyweight down revenue mix over the past six quarters. We attribute the growth of non-heavyweight down revenue to a few factors. First, the Canada goose is increasingly resonating in the minds of consumers for products sold outside of cold weather gear. And second, that the delayed onset of cold this winter influenced the type of product consumer purchased later in the quarter. We also continue to generate year-over-year sales growth in our core heavyweight down category, which include our iconic heritage styles as well as our new styles. Heavyweight down sales were led by APAC and came in lower in both North America and Armenia. The strength in APAC reflects both the colder weather in Greater China and Q3, as well as lapping the store closures last year, relating to COVID restrictions. In mainland China, our Expedition Parka, one of our most iconic styles, was our best-selling heavyweight down product, while the Shelburne and McMillan Parkas were top sellers in the U.S. and EMEA. In closing, while our top-line results for Q3 were mixed in a challenging consumer environment, we were moving forward, focused on performance and discipline across our operations, our brand, and our product. We remain very confident in our brand and in our strategy. Customers experienced Canada use firsthand know that we deliver performance, function, quality, and style. And more than ever before, customers are discovering our performance luxury offering beyond our only cold weather products. We are excited about this opportunity and a future in which even more consumers work Canada use year round. Before I hand it over to Jonathan, I'd like to thank him for his leadership over the past five and a half years. Jonathan, I'm looking forward to the contributions you will make in your new role as president of APAC. As well, I'd like to congratulate Neil Bowden, who will transition into the role of CFO in April. I'd also like to welcome Beth Clymer, our new President of Finance, Strategy, and Administration. Beth is very familiar with our brand, our strategy, and our people, having worked closely with us through our IPO, and I'm very happy to have her on board. I plan to work closely with Beth, as I do with Kerry, and I look forward to staying very close to the commercial, financial, and operational areas of the business And at the same time, spending more time focused on our product and our brand leading into the critical drivers that are the foundations of our success. Beth, I will now pass it to you to say a few words.