Canada Goose Reports Results for First Quarter Fiscal Year 2020

Canada Goose Holdings Inc. (“Canada Goose” or the “Company”) (NYSE:GOOS, TSX:GOOS) today announced financial results for the first quarter ended June 2019. The Company’s Management’s Discussion and Analysis and Unaudited Condensed Consolidated Interim Financial Statements for the first quarter ended June 2019 will be filed on SEDAR at www.sedar.com, the EDGAR section of the U.S. Securities and Exchange Commission website at www.sec.gov and posted on the Company’s website at investor.canadagoose.com.

“Fiscal 2020 is off to a great start with a strong performance in our first quarter, which delivered growth in every geography. As we continue to invest in capacity, we are well positioned to capitalize on the strong demand we see across our business,” stated Dani Reiss, President & CEO. “The affinity and desire we have seen for our seasonally relevant lightweight offerings tells us our product expansion is working, and combined with the volume of highly engaged consumers looking to get ahead of the upcoming Fall / Winter season, we believe our business has never been stronger as we report our smallest fiscal quarter.”

First Quarter Fiscal 2020 Business Highlights (Compared to First Quarter Fiscal 2019)

• Robust growth in every geographic region, with revenue increasing by 40.4% in Canada, 15.8% in the United States and 79.7% in Europe and Rest of World.
• In Asia, revenue nearly tripled to $18.1m from $6.6m. This includes earlier shipments to international distributors in Japan and South Korea, and the incremental contribution of DTC operations in Greater China.
• Increased flexibility through expanded in-house manufacturing capacity to proactively manufacture and ship wholesale orders in Europe and Asia earlier in the year, in response to customer requests.
• Alongside strong pent-up demand for sought after Fall / Winter icons, non-parka revenue nearly doubled, rising to one third of total DTC revenue in the quarter.

First Quarter Fiscal 2020 Results (in Canadian dollars, compared to First Quarter Fiscal 2019):

• Total revenue increased by 59.1% to $71.1m from $44.7m, or 58.6% on a constant currency basis⁽¹⁾.
  • DTC revenue increased to $34.8m from $23.2m. The increase was driven by incremental revenue from five new retail stores and one new e-commerce market opened during fiscal 2019.
  • Wholesale revenue increased to $36.3m from $21.5m. This was driven by higher order values from existing partners, coupled with customer requests in Europe and Asia for earlier order shipments relative to last year. It also reflects incremental revenue from Baffin, which was acquired in November 2018.
• Gross profit increased to $40.9m, a gross margin of 57.5%, compared to $28.6m, a gross margin of 64.0%. The change in gross margin was driven by mix, with a higher proportion of wholesale revenue, and within the channel, a greater share of international distributor revenue due to earlier shipments.
  • DTC gross profit was $26.0m, a gross margin of 74.7%. This reflects the impact of a greater proportion of revenue from non-parka categories, which have lower margins, partially offset by pricing.
  • Wholesale gross profit was $14.9m, a gross margin of 41.0%. This reflects a significantly higher proportion of revenue from international distributors. In fiscal 2019, corresponding orders, which have lower margins, were shipped later in the second quarter. Within each category of customer in the channel, gross margins were at a comparable level relative to last year.
• Operating loss was $(27.5)m, compared to $(19.9)m. As expected, the increase in operating loss was primarily due to higher corporate SG&A, particularly relating to investments to support growth, and to a lesser degree, a larger retail store opening program.
  • DTC operating profit was $6.5m, an operating margin of 18.7%. Strong sales productivity across the channel was partially offset by a larger store opening program relative to last year. $2.3m in pre-store opening costs were incurred for locations not yet open. Excluding pre-store opening costs in both periods, DTC operating margin increased to 25.3% from 21.6%.
  • Wholesale operating income was $5.0m, an operating margin of 13.8%. The gross margin impact of a higher proportion of shipments to international distributors was partially offset by positive operating leverage, with lower channel SG&A expenses as a percentage of revenue.
  • Unallocated corporate expenses were $36.9m, compared to $25.9m. The increase was primarily due to increased investment in marketing, including local market activation ahead of planned retail openings, and incremental costs to support Greater China operations.
  • Unallocated depreciation and amortization expenses were $2.1m, compared to $1.5m.
• Net loss was $(29.4)m, or $(0.27) per basic and diluted share, compared to $(18.7)m, or $(0.17) per basic and diluted share. In addition to the expected increase in operating loss, net loss was impacted by $7.0m of unamortized costs triggered by the closing of the Term Loan Facility refinancing in May.
• Adjusted EBIT⁽¹⁾ was $(25.9)m, compared to $(17.3)m.
• Adjusted net loss⁽¹⁾ was $(22.8)m, or $(0.21) per basic and diluted share, compared to adjusted net loss⁽¹⁾ of $(16.7)m, or $(0.15) per basic and diluted share.

⁽¹⁾ See “Note Regarding Non-IFRS Financial Measures”.

Fiscal 2020 Outlook

The Company reiterates the fiscal 2020 outlook and key assumptions underlying such outlook which were issued on May 29, 2019, in the press release announcing the Company’s Results for Fiscal Year 2019 under the heading “Fiscal Year 2020 and Long-Term Outlook”. Within the meaning of applicable securities laws, this outlook constitutes forward-looking information. Actual results could vary materially as a result of numerous factors, including certain risk factors, many of which are beyond the Company’s control. See “Cautionary Note Regarding Forward-Looking Statements”.

Conference Call Information

A conference call to discuss first quarter fiscal 2020 results is scheduled for today, August 14, 2020 at 9:00 a.m. Eastern Time. Dani Reiss, President and Chief Executive Officer and Jonathan Sinclair, EVP and Chief Financial Officer, will host the conference call. Those interested in participating in the call are invited to dial (844) 579-6824 or (763) 488-9145 if calling internationally. Please dial in approximately 10 minutes prior to the start of the call and reference Conference ID 4983186 when prompted. A live audio webcast of the conference call will be available online at http://investor.canadagoose.com.

About Canada Goose

Founded in a small warehouse in Toronto, Canada in 1957, Canada Goose has grown into one of the world’s leading makers of performance luxury apparel. Every collection is informed by the rugged demands of the Arctic and inspired by relentless innovation and uncompromised craftsmanship. From the coldest places on Earth to global fashion capitals, people are proud to wear Canada Goose products. Employing more than 4,000 people worldwide, Canada Goose is a recognized leader for its Made in Canada commitment, and is a long-time partner of Polar Bears International. Visit canadagoose.com for more information.

Non-IFRS Financial Measures

This press release includes references to adjusted net loss, EBIT, adjusted EBIT, adjusted EBIT margin and adjusted net loss per basic and diluted share. The Company presents these measures because its management uses these as supplemental measures in assessing its operating performance, and believes they are helpful to investors, securities analysts and other interested parties, in evaluating the Company’s performance. The measures referenced above are not measurements of financial performance under IFRS and they should not be considered as alternatives to measures of performance derived in accordance with IFRS. In addition, these measures should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. These measures have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing the Company’s results as reported under IFRS.

This press release also includes reference to constant currency revenue. The Company presents this measure because we use constant currency information to provide a framework in assessing how our business segments performed excluding the effects of foreign currency exchange rate fluctuations and believe this information is useful to investors to facilitate comparisons of operating results and better identify trends in our businesses. The constant currency measure is calculated by translating the prior year reported amounts into comparable amounts using a single foreign exchange rate for each currency calculated based on the current period exchange rates as measured by the Bank of Canada.

The Company’s definitions and calculations of these measures are not necessarily comparable to other similarly titled measures used by other companies. These non-IFRS financial measures are defined and reconciled to the most comparable IFRS measures in the tables at the end of this press release.

Cautionary Note Regarding Forward-Looking Statements

The foregoing financial information as at and for the first quarter ended June 2019 are unaudited and subject to quarter-end and year-end adjustments in connection with the completion of our customary financial closing procedures. Such changes could be material.

This press release includes forward-looking statements. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plan,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” and other words of similar meaning. These forward-looking statements address various matters including anticipated demand and our ability to capitalize on that demand, including for the Fall / Winter season and for our expanded product offerings, our outlook for fiscal 2020 and our long-term outlook, related assumptions, and our plans for strategic investments to support future growth. Each forward-looking statement contained in this press release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others, our expectations regarding industry trends, our business plan and growth strategies, our expectations regarding seasonal trends, our inventory levels ahead of these seasonal trends, our ability to implement our growth strategies, our ability to keep pace with changing consumer preferences, our ability to maintain the strength of our brand and protect our intellectual property, our ability to accurately forecast our results as well as the risks identified under the heading “Risk Factors” in our Annual Report on Form 20-F for the fiscal year ended March 31, 2019, and filed with the Securities and Exchange Commission (“SEC”), and the securities commissions or similar securities regulatory authorities in each of the provinces and territories of Canada (“Canadian securities regulatory authorities”), as well as the other information we file with the SEC and Canadian securities regulatory authorities. We caution investors not to rely on the forward-looking statements contained in this press release when making an investment decision in our securities. The forward-looking statements in this press release speak only as of the date of this release, and we undertake no obligation to update or revise any of these statements. Our business is subject to substantial risks and uncertainties, including those referenced above. You are encouraged to read our filings with the SEC, available at www.sec.gov, and our filings with Canadian securities regulatory authorities available at www.sedar.com for a discussion of these and other risks and uncertainties. Investors, potential investors, and others should give careful consideration to these risks and uncertainties.

⁽¹⁾ Adjusted net loss, adjusted net loss per basic and diluted share, EBIT, and adjusted EBIT are non-IFRS financial measures. See “Reconciliation of Non-IFRS Financial Measures” for a description of these measures and a reconciliation to the nearest IFRS measure.

The table below reconciles revenue as reported to revenue on a constant currency basis for the periods presented:

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