Canada Goose Holdings said further price increases are on the table, even as shoppers rethink their spending choices amid high inflation and higher interest rates over the past two years.
These financial pressures are creating what Chairman and CEO Dani Reiss called a “challenging consumer environment” globally. But the luxury clothing company believes there is still room to raise prices for parkas, which can already exceed $2,000.
“We actually think there’s a lot of room, whether it’s introducing new categories, new styles within a category, at much higher price points,” said Carrie Baker, president of brand and commercial affairs at Canada Goose. With luxury products,… we create desire. »
Mme Baker also emphasized that the company aims for a wide range of prices to suit different income brackets. She made the point after Baird analyst Jonathan Komp noted that some parkas “have gone well beyond the price levels they were set at four or five years ago.”
Sales climb in Asia
The company’s third quarter provided evidence of continued demand, particularly across the Asia Pacific region. Its sales soared in Asia after China lifted pandemic restrictions, even as revenues fell sharply in North America and Europe.
In-store shopping in Macau and Hong Kong led the way, boosted by tourism from mainland China — where store traffic also doubled. Sales in Asia jumped 62% year over year in the quarter ended Dec. 31, fueled by purchases of the Expedition parka, which sold for $1,725 in Canada.
“The strength in (Asia-Pacific) reflects both colder weather in China in the third quarter as well as (the end of) store closures last year due to COVID-19 restrictions,” said Mr. Reiss to analysts in a conference call Thursday.
The ramp-up in the Asia-Pacific region fueled a total year-over-year revenue increase of 6% in the third quarter.
However, closer to home, the Toronto company recorded a slide in sales. Warmer weather in the fall and early winter, combined with weaker consumer demand caused by high inflation and high interest rates, pushed incomes down nearly 14% in Canada and in the USA.
“Where we saw the pressure was just that consumers were feeling this pinch — a little less free with their wallets,” said Ms.me Baker.
“The weather didn’t help,” she said. Winter just didn’t come for them. So they didn’t have the same kind of incentive to get their typical winter jackets. »
Many of those who bought winter clothes opted for cheaper clothes from other brands, she added.
For those who stuck with Canada Goose, the women’s Shelburne Parka and the men’s MacMillan Parka — $1,500 and $1,225, respectively — were the best-selling in the U.S. and Europe.
In Europe, the Middle East and Africa — the segment that accounts for the smallest share of Canada Goose’s profits — revenue fell 26%.
Revision of profit forecasts
The mixed consumer environment prompted the company to lower the upper end of its profit forecast, Chief Financial Officer Jonathan Sinclair said.
For its full 2024 fiscal year, Canada Goose forecasts total sales of between $1.28 billion and $1.31 billion, compared to a previous forecast of $1.2 billion to $1.4 billion.
The company said adjusted net income per share would likely be between 82 cents and 92 cents, compared with prior guidance of between 60 cents and $1.40 and a full-year result of $1.05.
Although the company is opening three new permanent stores this quarter, bringing its total to 68, it plans to curb its significant expansion of physical locations.
“We have opened many stores over the past few years that have been in challenging environments. So we haven’t seen the productivity that we know they are capable of. That’s really our short-term goal,” said M.me Baker.
The company also expects wholesale revenue to decline substantially this year — after falling 29% year-over-year last quarter — as retailers reduce orders.
The company expects fourth-quarter revenue of $310 million to $330 million and adjusted earnings of between 2 cents and 13 cents per share.
On Thursday, the company reported net income attributable to shareholders of $130.6 million for its third quarter.
Earnings were $1.29 per share for the quarter ended December 31, compared to net income attributable to shareholders of $134.9 million or $1.28 per share a year earlier, when it there were more shares outstanding.
Revenues for the quarter totaled 609.9 million, compared to 576.7 million for the same period a year earlier.
On an adjusted basis, Canada Goose said it earned $1.37 per share in its most recent quarter, up from adjusted earnings of $1.27 per share a year earlier and roughly in line with expectations. analysts, according to financial markets data firm Refinitiv.