Canada Goose Holdings Inc

Thank you, Operator, and good morning, everyone. With me are Danny Reese, our Chairman and CEO, Neil Bowden, Chief Financial Officer, Kerry Baker, President of Brand and Commercial, and Beth Clymer, President of Finance, Strategy, and Administration. We will make forward-looking statements on our call today that are based on assumptions and therefore subject to risks and uncertainties, that could cause actual results to differ materially from those projected. In addition, the outlook that we provide today supersedes all prior financial outlook statements made by Canada Goose. We undertake no obligation to update these statements, except as required by law. You can read about these assumptions, risks and uncertainties in our press release this morning, as well as in our filings with US and Canadian regulators. These documents are also available on the Investor Relations section of our website, along with our Form 20F for Fiscal 2024, in which you will find additional information and new disclosures that we believe will strengthen your understanding of our business strategy, business model, and performance. 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 will compare fourth quarter results ended March 31, 2024, but the same period ended April 2, 2023, unless otherwise noted. Lastly, our commentary today will also include certain non-IFRS financial measures, which are reconciled at the end of our earnings press release. For today's call, Danny, Neil, Kerry, and Beth will deliver prepared remarks, following which we will open the call to take questions. With that, I'll turn the call over to Danny.

Thanks, Anna, and good morning, everyone. Canada Goose reported a solid fourth quarter, growing revenue and adjusted EBIT by 22% and 51%, respectively, year over year. Our performance in the quarter surpassed our expectations and capped off an important year of execution across our strategic pillars. For fiscal 2024, we delivered $1.33 billion in total revenue, up nearly 10% over last year, and adjusted EBIT of $171.8 million. I'm extremely proud of the business we are building, of our rich heritage and craftsmanship, and the progress we've made towards transforming our business to achieve sustained rates of growth in the future. The year included several noteworthy accomplishments. Let me share some of those highlights. We expanded our global retail footprint to 68 permanent stores in our key markets, more than triple the number that we had five years ago. We successfully expanded our product offering with our new sneaker line. And importantly, we implemented our transformation program to improve our operational infrastructure and set the foundation for our future growth. As part of this work, we realized cost savings, lowered inventory, and simplified how we work while reorganizing our management team and placing the right leaders in the right roles to improve collaboration, speed to market, and the efficiency with which we operate. While we accomplished a lot in fiscal 24, we didn't make as much financial progress as we would have liked. Some of this was due to external factors outside of our control, such as the ongoing challenging consumer environment and the warm winter. But after a period of rapid growth and retail expansion, We also recognize that our resources were spread across too many priorities, impacting our ability to deliver our ambitious near and long-term targets. To this end, our leadership team began our fiscal 25 planning process with the goal of operational excellence in mind. We exited this process with the three strategic growth pillars we communicated last year intact. As a reminder, these were building a DTC network, driving consumer-focused growth and product expansion. We also emerged from that process with three critical operating imperatives for this fiscal year, which focus on us doing fewer things really, really well. These things are, number one, setting the foundation for the next phase of our product and brand evolution. Two, implementing best-in-class luxury retail execution. And three, simplifying our business and the way we operate. Our first imperative Focus on product and brand is underway as we welcome our first ever creative director, Heider Ackerman, to our company. Heider is influential in the luxury space and will lead the evolution of our product vision as we reach an inflection point in our brand's growth. When I met Heider, it was clear that he understood our heritage and our vision to be an enduring luxury brand that leads with function, craftsmanship, and style. With Heider on board, we intend to elevate the Canadeus brand and take our offer into another level. From our new design studio in Paris, Haider will be working closely across our teams to integrate Canada use values and vision in innovative ways over the coming seasons. While his first seasonal capsule collection will be available in the 2024 fall winter season, his mark on our company is already visible with renewed excitement and energy across the entire organization. Yesterday, along with our announcement of Haider's appointment, we launched a new hoodie he designed, benefiting Polar Bears International, a long-standing partner to raise awareness of the impact of global climate change. This launch features an integrated marketing campaign with Academy Award-winning actor, producer, author, and activist Jane Fonda, with proceeds from the sale of the sweatshirt going to PBI to find vital conservation research and education that they do. We are super excited to have Heider on board and to see his vision unfold across our product. product portfolio. On our call today, we will discuss our fourth quarter results and accomplishments and share more details on our key operating imperatives for fiscal 2025 as we prepare for the next phase of our growth. Before I pass over to Neil to discuss our financial performance, I want to thank our exceptionally talented and hardworking team. You are the backbone of our company, and we truly value your passion and your contributions. And to the investor community, we are still only a $1.3 billion Canadian revenue brand in a space with significant market potential, and we are just getting started. You will hear from us today that we have work to do, but also that we have a strong team in place, an incredible brand, and a plan we are all confident in delivering this year. We are super energized to unleash our potential.

Thanks, Danny. Stepping into the CFO role at this moment is exciting and I look forward to sharing more about the financial performance of this iconic brand today and on future earnings calls. I'll first provide a review of our Q4 financial performance and later discuss our outlook for fiscal 25. Revenue in our fourth quarter increased 22% year over year or 23% on a constant currency basis to $358 million. DTC sales of 271.5 million grew 19% or 21% on a constant currency basis over the same period last year. Our DTC performance was driven by strong retail sales in Asia Pacific supported by healthy traffic in advance of Lunar New Year and in North America as online traffic increased in January with the later onset of more seasonal weather versus last year. Breaking this down further. First, From a sales channel perspective, store comps were relatively flat while e-commerce experienced outsized positive performance, mainly on the strength of improved return levels this year compared to last year. Store sales represented over 70% of our overall D2C revenue, both in Q4 and for the full fiscal year. Second, at the regional level, both North America and Asia Pacific delivered comparable sales growth in the mid single digits during the quarter. This performance was noteworthy, especially in Asia Pacific, as the region comped against a very good Q4 in fiscal 2023. EMEA experienced a more promotional environment among both competitors and wholesalers, which challenged our D2C execution. A note on our sales per square foot. For the year ending March 31st, Average sales per square foot for stores open for the full 52 weeks in fiscal 24 was $3,963 per square foot, which was relatively flat to the average sales per square foot of stores open for the same period of time in the prior fiscal year. While this is a very strong sales per square foot baseline that we are proud of, it is below historical levels. as higher sales per square foot in Asia Pacific during the fiscal year was offset by lower sales per square foot in both North America and EMEA. You've heard us talk about the $4,000 per square foot threshold with regards to our store economics, and we expect to work towards this as a key performance indicator in our D2C segment as we improve the efficiency and execution of our retail operations. Carrie will share some of the detailed tactics that we expect will deliver results shortly. In Q4, wholesale revenue of $41.4 million was down 9% year-over-year or 8% on a constant currency basis. This reflected our strategy to tighten supply to wholesale partners in a softer wholesale business environment and the continued winnowing of partners that are not aligned with our brand positioning. Q4 revenue in our other segment was $45.1 million compared with $20.2 million in the same period last year. As a reminder, this segment comprises revenue from sales to employees, friends and family sales, and third-party sales from our newly acquired knitwear facility. The year-over-year growth in this segment is primarily the result of additional friends and family sales conducted versus the fourth quarter last year, which is in line with our inventory management strategy, as Beth will detail shortly. Less of a factor but still meaningful was our employee sales program that was implemented this past fiscal year and allows our people to purchase product at a significant discount, empowering them to be brand ambassadors around the world. Moving to a brief regional overview. In Q4, Asia Pacific was our fastest growing region with revenue up 33% on a constant currency basis over the same period last year, supported by domestic shopping in mainland China, and mainland Chinese tourists driving strong growth in Hong Kong and Macau, reflecting positive consumer response to our ongoing product planning and merchandising efforts. Online and in-store sales in the period were bolstered by our Lunar New Year marketing campaign and complemented by a longer peak selling period, given the later date of Lunar New Year compared to last year. We also saw a significant increase in tourists from mainland China shopping at our Japan stores in Q4, contributing to double-digit sales growth in that country. Overall, Chinese clients increased spending with us both domestically and outside of their home market, reflecting the strength of our brand with this important consumer cohort, and despite macro and economic pressures impacting that market. North America revenue increased 24.2% on a constant currency basis over the same period last year, with each of Canada and the United States delivering more than 20% year-over-year growth on the strength of new stores in the US, D2C comparable sales across the region, and successful execution of friends and family events. EMEA grew 2.7% year-over-year on a constant currency basis, supported by sales from our new stores and friends and family sales during the quarter, but continued to contend with pressured consumer spending and an intense promotional environment. On product, Q4 provides a unique opportunity for our consumers to experience the full range of our product assortment. We started the quarter with strong performance from heavyweight down, owing to more typical seasonal temperatures as well as Lunar New Year. As the quarter proceeded and much of the world embraced spring, we saw significant growth in apparel, specifically fleece and sweats, and our everyday collection, which includes windwear. These categories have increased materially over the past few years as we have broadened our offering. Turning to gross profit. Our fourth quarter gross profit grew 22% year over year to $233 million, driven by higher D2C and other revenue, leading to 20 basis points of gross margin expansion. Q4 D to C gross margin increased 60 basis points to 73.9% due to pricing, favorable freight and duty, and product mix, partially offset by an inventory adjustment related to our generations business. Wholesale gross margin rose 400 basis points to 39.6%, mainly due to raw material provisions taken in Q4 of fiscal 23 that did not recur this year. partially offset by a lower proportion of heavyweight down sales in our product mix during the quarter. D2C operating income increased by $14.4 million year over year in Q4 to $104.8 million. Operating margin, however, declined 110 basis points despite modest gross margin improvement due to the number of new store additions despite D2C comparable sales growth. Wholesale operating income was $3.9 million with an operating margin of 9.4%, up 0.2 million and 130 basis points respectively over last year, due to the improvement in wholesale gross margin, partially offset by operating deleverage and lower wholesale revenue during the quarter. Adjusted EBIT was $40.1 million, up from $26.6 million in Q4 last year due to higher gross profit, partially offset by higher SG&A spend. the increase in SG&A spend was primarily due to costs associated with the expansion of our retail network. While SG&A costs related to our transformation program are excluded from adjusted EBIT, we wound down our consulting engagements and associated costs related to the program in Q4. We also took an $11.1 million severance charge as a result of the workforce reduction completed in March, which has been adjusted. Finally, Q4 adjusted net income attributable to shareholders was $19.3 million, or $0.19 per diluted share, with some EPS benefit realized through our active buyback program during fiscal 2024, when we repurchased approximately 7.8 million shares throughout the year, including $1.7 million in Q4 alone. Turning to our balance sheet. At year end, inventory was $445.2 million, down 6% year over year, driven by a notable decrease in finished goods and raw materials, offset by an increase in work and process as we onboarded our new knitwear facility. We ended the year with $584.1 million of net debt on our balance sheet, compared with $468.1 million at the end of the fourth quarter of fiscal 23. Our net debt leverage at the end of Q4 of two times adjusted EBITDA was well within our acceptable range, down slightly compared to 2.1 times at the end of Q3, but up from 1.7 times at the end of Q4 of fiscal 23 to the lower cash levels on hand at the end of this fiscal year. Now, on to our transformation program. In February 2023 we shared a target of achieving $150 million of transformation program benefits as a reminder this target was a combination of hard cost takeout store and marketing productivity, which means higher revenue and improved operating margin on that revenue and future cost avoidance. In fiscal 24. we realized approximately $30 million of in-year benefits related to the transformation program that is captured in our annual results that we are reporting today, split evenly between cost savings, including headcount, and productivity. It is not lost on us, however, that while delivering $30 million of benefits is a significant achievement, we have also reported flat adjusted EBIT compared to our last fiscal year. This is simply not good enough. To build on these efforts and improve operating leverage, which is the ultimate goal of this program, we are rolling the workstreams of our transformation program into the operating imperatives Danny mentioned earlier. We believe this will lead to lower SG&A as a percentage of revenue through measurable and observable cost reduction and improvements in our D2C comp sales. The first concrete step which simplified our organizational structure and will lead to immediate improvement in the cost base, was the reduction of our workforce at the end of fiscal 24. That wraps up the financial summary for our fourth quarter. I'll now hand it to Kerry and Beth to discuss our three operating imperatives for the year, and I'll be back after that to share our fiscal 25 financial outlook.