Interface News Reporter | Zhu Yongling
On February 1st local time, luxury down jacket brand Canada Goose released its third quarter financial report for the fiscal year 2024 (for the three months ended December 31, 2023). The cold third quarter is particularly important for Canadian geese, as it typically contributes about half of their annual income.
In the third quarter, the annual revenue of Canadian geese increased by 6% year-on-year to 610 million Canadian dollars (approximately RMB 3.27 billion), an increase of 5% at fixed exchange rates, and the net profit attributable to the parent company decreased by 3.2% year-on-year to 131 million Canadian dollars (approximately RMB 700 million). The gross profit margin was 73.7%, a year-on-year increase of 1.5 percentage points.
The strong performance of the Asia Pacific region is the engine driving revenue growth, with Asia Pacific revenue surpassing North American revenue for the first time and also the biggest highlight of this fiscal quarter.
Looking at different regions, in the third quarter, revenue in the Asia Pacific region increased by 61.5% year-on-year, and all channels achieved growth; Other market revenues recorded double-digit declines. Canada, the United States, and EMEA (Europe, Middle East, and Africa) experienced declines of 13.1%, 13.8%, and 25.9%, respectively, mainly due to the decline in sales through e-commerce and wholesale channels.
Specifically, the Asia Pacific region contributed CAD 271 million (approximately RMB 1.46 billion), accounting for 44.4% of overall revenue; Canada, the United States, and EMEA accounted for 15.6%, 25.8%, and 14.2% of their revenue, respectively. Prior to this quarter, the North American market consisting of Canada and the United States had consistently generated revenue above the Asia Pacific region.
Canada Goose has raised its performance expectations for the 2024 fiscal year, with an expected revenue of CAD 1.285 billion to CAD 1.305 billion (approximately RMB 6.9 billion to RMB 7 billion), an increase of 5.6% to 7.2% compared to the previous year. This also means that the annual income of Canadian geese may reach a new historical high.
The growth momentum of Canadian geese has been maintained for many years. It launched a transformation from wholesale to self operated (DTC) model in 2016 and went public in 2017. From fiscal year 2018 to fiscal year 2023, its annual revenue increased from CAD 591 million to CAD 1.217 billion, with double-digit growth maintained every year except for a 5.7% decline in revenue in fiscal year 2021 due to the impact of the global pandemic.
Canada Goose aims to break through $3 billion (approximately RMB 21.5 billion) in revenue in fiscal year 2028 and achieve an adjusted pre tax profit margin of 30% - a five-year strategic growth plan it proposed in February 2023.
To achieve this goal, Canada Goose has identified three strategic growth pillars: accelerating consumer oriented growth, developing DTC direct sales networks, and expanding product categories.
The measures taken by Canada Goose in the third quarter of fiscal year 2024 also revolve around these three aspects.
Consumer oriented actions include launching collaboration series with Japanese fashion brands Bape, Canadian fashion brand OVO, designer brand Pyer Moss, and other brands. The selection of partners also reflects Dani Reiss, Chairman and CEO of Canada Goose, who previously mentioned in an interview with Economic Observer that "she focuses on the female group and Generation Z".
In terms of channel construction, Canada Goose opened 3 parent period stores during the fiscal quarter and currently has 66 parent period stores worldwide. The shift from wholesale to DTC mode has been key to driving the expansion of Canada's goose business and growth in performance (especially gross profit margin) in the past few years. In the third quarter, the channel revenue of Canada Goose DTC increased by 14% year-on-year to CAD 514 million (approximately RMB 3.69 billion), accounting for 84%, while wholesale channel revenue declined by 28%.
Category expansion has also shown results. Canada Goose mentioned in its financial report that the proportion of non heavyweight down products increased in the third quarter, with clothing still being the fastest-growing category. Behind the category expansion is the strategy of Canada Goose's transformation towards a seasonal and lifestyle brand. Currently, Canada Goose has launched shoes, accessories, and non down clothing. It also acquired a European knitting factory in the third quarter.
It can be seen that Canada Goose is gradually implementing its development plan, and the growth in the third quarter of fiscal year 2024 is largely due to this. But according to the plan to reach $3 billion in revenue in five years, Canadian geese are expected to achieve an average annual growth of 20%, while their expected growth rate for the 2024 fiscal year is only in single digits.
In addition, considering that Canadian geese are still in the stage of expanding their channels to drive growth, the resulting increase in sales expenses will also affect their profit level. In the first three quarters of fiscal year 2024, Canada Goose's revenue increased by 5.6% year-on-year, while its net profit attributable to shareholders decreased by 29.6%. The adjusted pre tax profit margin decreased by 2.5 percentage points year-on-year to 13.5%, which is also a significant gap from the 30% target.
The importance of the Asia Pacific and its Chinese market is self-evident in the Canadian Goose's $3 billion surge. According to the official website of Canada Goose, among its existing 66 parent stores, 18 are located in mainland China, with a total of 4 in Hong Kong, Macau, and Taiwan.
On the same day as the release of the third quarter report, Canada Goose also announced the appointment of Cheng Tengkuan as the President of China, while former President of China, Li Zihou, has been promoted to Chief Operating Officer of the Asia Pacific region. According to publicly available information, Cheng Tengkuan has over 15 years of experience in luxury brand management and has served as the Managing Director of China for the high-end watch brand Panerai under the Lifeng Group.
Although the growth momentum in the Asia Pacific region and the Chinese market is currently rapid, Canada Goose cannot rest assured in the future as more new players are entering.
In recent years, down jacket brands with similar positioning, such as Moose Knuckles, Mackage, and Nobis, have entered the Chinese market and started expanding. Among domestic brands, there are high-end brands such as Gofan and Skyman preparing to move offline. High end outdoor sports brands and some luxury brands are also launching down jacket products, and they will compete with Canadian geese for market share.