Canada Goose (NYSE: GOOS) reported Q3 EPS of Cdn$1.08, versus Cdn$0.96 reported last year. Revenue for the quarter came in at Cdn$452.1 million, versus Cdn$399.3 million reported last year.

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

• Total revenue increased by 13.2% to $452.1m from $399.3m, or 13.7% on a constant currency basis(1).
  • DTC revenue increased to $301.8m from $235.3m, driven by incremental revenue from new retail stores. Retail revenue in Hong Kong was severely impacted by disruptions to tourism and retail traffic, together with frequent reductions to regular store operating hours and unplanned store closures.
  • Wholesale revenue decreased to $150.3m from $164.0m. The decrease was driven by a higher proportion of total order shipments occurring in the first half of fiscal 2020 relative to last year.
• Gross profit was $298.4m, a gross margin of 66.0%. The 150bps increase in gross margin was driven by channel mix, with a higher proportion of DTC revenue.
  • DTC gross profit was $226.7m, a gross margin of 75.1%. The 100bps decrease in gross margin reflects higher input costs and freight and duties from international sales, partially offset by pricing.
  • Wholesale gross profit was $71.7m, a gross margin of 47.7%. Gross margin remained flat relative to last year, with the positive impact of pricing offset by higher input costs and product mix.
• Operating income was $161.4m. The increase of $21.5m in operating income was driven by revenue growth.
• DTC operating income was $168.9m, an operating margin of 56.0%. Pre-store opening costs of $1.8m were incurred for locations not yet open. Excluding pre-store opening costs, DTC operating margin was 56.6% in fiscal 2020 compared to 58.8% in fiscal 2019. This reflects the decline in gross margin described above, and lower profitability for current year store openings.
  • Wholesale operating income was $56.5m, an operating margin of 37.6%. The 240bps decline in operating margin reflects the shift in wholesale revenue timing described above, coupled with an increase in headcount and other fixed costs.
• Unallocated corporate expenses were $61.4m, compared to $61.3m. This reflects an increased investment in marketing, offset by cost efficiencies and higher non-recurring costs in the prior year related to the Baffin acquisition and a secondary offering.
• Unallocated depreciation and amortization expenses were $2.6m, compared to $2.5m.
• Net income was $118.0m, or $1.07 per diluted share, compared to $103.4m, or $0.93 per diluted share.
• Adjusted EBIT(1) was $163.8m, compared to $144.7m.
• Adjusted net income(1) was $119.7m, or $1.08 per diluted share, compared to adjusted net income(1) of $107.2m, or $0.96 per diluted share

“We delivered robust growth in the third quarter, notwithstanding geopolitical headwinds and an expected revenue timing shift in our wholesale business. Our DTC expansion continues to unlock and accelerate our development in major international markets.” said Dani Reiss, President & CEO. “From the frequent lines outside our stores to the response to new experiential innovations, consumer engagement was consistently strong across all geographies during peak season. While we recognize that we are now navigating a period of heightened uncertainty due to the coronavirus health crisis, we remain confident in our strategy and long-term potential.”

GUIDANCE:

Canada Goose sees FY2020 EPS of Cdn$1.33-Cdn$1.37, versus the consensus of Cdn$1.76.

The coronavirus outbreak is having a material negative impact on performance in the current fiscal quarter ending March 29, 2020. As a result, the Company has revised its outlook for fiscal 2020, which was last reiterated with the release of second quarter fiscal 2020 results on November 13, 2019. The health crisis has resulted in a sharp decline in customer traffic and purchasing activity. Retail stores and e-commerce across Greater China have and continue to experience significant reductions in revenue. Due to global travel disruptions, retail stores in international shopping destinations in North America and Europe are also affected. No supply chain interruptions have occurred. The Company believes that this is a temporary change in consumer behavior due to health precautions in extraordinary circumstances. However, the extent and duration of the disruptions remain uncertain and prolonged disruptions may also negatively impact future fiscal periods. Canada Goose’s brand and business momentum in Greater China remain strong, as reflected in the doubling of revenue in Asia in the fiscal third quarter prior to the outbreak.

For fiscal 2020, the Company currently expects:

• Annual revenue growth of 13.8% to 15.0% implying revenue of $945m to $955m, compared to at least 20%
• Adjusted EBIT margin(1) contraction of 330 basis points to 280 basis points implying adjusted EBIT margin of 21.6% to 22.1%, compared to expansion of at least 40 basis points
• Annual growth (decline) in adjusted net income per diluted share(1) of (2.2)% to 0.7% implying adjusted net income per diluted share of $1.33 to $1.37, compared to at least 25%

Key assumptions underlying the fiscal 2020 outlook above are as follows:

• Wholesale revenue growth of 9.0% to 11.0% on a percentage basis, compared to high-single-digits
• Capital expenditures of approximately $75 million including investments in new retail stores, IT and manufacturing capacity, unchanged
• Weighted average diluted shares outstanding of 110.9 million, compared to 112.4 million
• Effective annual tax rate approximately in-line with fiscal 2019, unchanged

For earnings history and earnings-related data on Canada Goose (GOOS) click here.