Luxury apparel company Canada Goose Holdings Inc. intends for gross margins on new products to reach those of its down-filled parkas over the long term and its upcoming footwear products should also deliver best-in-class profits. That’s according to an interview CEO Dani Reiss gave to IPO Edge Wednesday after the company posted its fiscal first quarter results. While the company reported a scorching 59% increase in revenue, some observers were concerned about margins coming in light due to sales of more spring items, which aren’t quite as profitable as its heavy coats. But as IPO explained in a detailed financial analysis earlier this week “Why Investors Should Embrace Canada Goose’s Maverick Style,” it is a mistake to focus too much on individual quarters from the company during the offseason, when Canada Goose is busy building up winter inventory that won’t translate to revenue for at least a few months. The full interview is below:
IPO Edge: Do you expect all three geographies, North America, Asia, and EMEA, to grow at the same pace in the long run?
Mr. Reiss: By and large, yes. But it’s also a function of where we open stores during any time period. We may decide to open more stores in one region versus another, and that’s important to keep in mind.
Over time, there is lots of white space available across regions and we have an opportunity. But as I’ve said before, we can’t be linear in our growth.
IPO Edge: E-commerce is attractive for a number of reasons, namely because of the minimal overheard compared with operating a physical store. Right now, you’ve got 12 national websites, but is it possible to add more countries without introducing stores at all?
Mr. Reiss: When we begin in a country, we start out with online only. The playbook is to start online, then open a store when appropriate. Our strategy is not to have hundreds and hundreds of stores like other brands do. And remember, the web gives us lots of data which is very valuable.
IPO Edge: When you consider offering even more luxurious products at higher prices, do you believe your current customer base will be receptive? And can margins on products like springwear match down parkas over time?
Mr. Reiss: Historically, we have had a lot of success with [price increases] in our brand. They’ve worked really well so there’s no reason why we wouldn’t continue to do it.
For new categories, our objective is to reach similar margins over time. As these categories grow, our intention is for them to come into line with our down-filled product. For footwear, we will also want best in class margins.
IPO Edge: It appears that some investors may read these smaller offseason quarters the wrong way. But what are the most important takeaways if you had to choose them?
Mr. Reiss: We are a seasonal business. But I saw very strong global demand with [direct to consumer] growing 50%, which shows year-round resilience in our product offering. That’s also underpinned by our investment in manufacturing, which should help us grow to be a billion dollar business and beyond.
We made a lot of upfront investments that will pay dividends later. We are a manufacturer as well and people need to take that into account. It means that a lot of the inventory on our balance sheet isn’t ready to be shipped yet.
John Jannarone, Editor-in-Chief