Q2 2020 Earnings Call
Good morning, My name is Mariama and I will be your conference operator today at this time I would like to welcome everyone to the Canada Goose second quarter 2020 earnings calls all lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question answer session. If he would like to ask a question during that time. Please press Star then one on your telephone keypad. If he would like to withdraw your question. Please press the pound Keith. Thank you I would now like to turn the call over to Patrick Burke Senior Director Investor Relations you May begin your conference.
Thank you and good morning, everyone with me are Gamy, Rees, President and CEO and Jonathan Sinclair.
And CFO .
After prepared remarks from Danny and Jonathan will take your questions. This call, including the Q and a portion includes forward looking statements. Each forward looking statement, including discussion of our fiscal 20 outlook is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.
Certain material factors and assumptions were considered and applied in making these forward looking statements.
Additional information regarding these forward looking statements factors and assumptions is available in our earnings press release issued this morning, as what was the risk factor section of our most recent annual report filed with the FCC and Canadian Securities regulators. These documents are also available on Investor Relations section of our website for.
Looking statements made on this call speak only as of today and we undertake no obligation to update or revise any of these statements.
Or commentary today will include certain or not I FRS financial measures, which are reconciled in the table at the end of our earnings press release issued this morning and available on the Investor Relations section of our website at Canada Goose Dot com without I will turn the call over today.
Thanks, Patrick and good morning, everyone.
I'm really pleased to tell you that the power of our brand and our business model pulled through despite a challenging external environment and we delivered another strong set of results finished the first half.
And here are the highlights.
In the second quarter relative to last year revenue revenue grew by 27.7% and adjusted EPS for diluted share increased 23.9%.
Even with the unrest in Hong Kong revenue in Asia, nearly doubled to $48.9 million revenue in the U.S. increased by 38.5% on a constant currency basis.
Revenue in Canada grew by 29.9% what 29.9%.
Against tough comparisons that are most developed market. This is a strong result.
From a brand perspective, it's great to see consist customers at home embracing our let went down.
Jack It and network.
From a channel perspective wholesale [noise] wholesale led the way [laughter].
[laughter] excuse me also led the way with its largest quarter with revenue increasing by 22.9%.
This was complemented by direct to consumer growth.
47.2%.
[noise] like into first quarter, we continue to fulfill partner requests for earlier shipments on the back of increased operational flexibility.
[noise] [noise], what does the starting point there a couple of specific topics I would like to address.
Let me sort of Hong Kong as I'm sure, you're whereas the situation has intensified since our last call.
Impacts on tourism and retail traffic the performance of our store I have see has impacted it significantly.
The same goes for recently opened a location that Ocean center, which is a fifth of our nine openings this year.
With this addition, we were established in the two most important luxury retail districts in the city.
Complementing the mix of guests, we already reached through I assume.
Although we wish for the situation we wish that the situation. We're just was different today, we're developing markets and building stores for decades, not just for the next quarter.
Fortunately during our second quarter strong topline performance is in other markets offset the impact in Hong Kong.
We're watching the situation closely and evaluating actions to streamline our cost base on the ground, including negotiating accommodations from landlords.
Moving on wholesale timing is another important topic for understood on for understanding our business.
Well offer is largely as a plant economy or fall winter and spring order books ours ours set down to the color style and or well in advance and this gives us great visibility through the year the timing of when we ship. These orders can and does shift from month to month in any given year.
It comes down to a balance of one or partners want to livery and when we can manufacture their orders most efficiently. This year, we've been well positioned to fulfill customer indias earlier.
The shape of every year has always been different and some moment movements of orders between quarters or months is not reliable indicator of annual performance.
I'm really pleased that we've shipped so much of our fall winter order book earlier, which naturally means NASS, let me is less shipment to the next quarter.
It does not mean the underlying demand in the channel is changing we continue to expect wholesale revenue to grow in the high single digits in fiscal 2020.
The should this shifts it all has already impacted our numbers for Europe , and rest of world, where revenue decreased by 3.4% in constant currency.
For the same reason this is not something that I'm at all concerned about.
And it at as it is our most wholesale centric region.
India grew by 79.7% in the first quarter. So if your order shipped this quarter is a logical follow on a side.
Now did you have seen before birth rates in any given geography can vary from quarter to quarter exactly for this reason.
Lastly, I want to provide an update on inventory, which we discussed last quarter.
We've continued to build an inventory buffer ahead of growth to maximize production efficiency and long term commercial flexibility.
Going back to our IPO a key growth strategy has an increasing in house production to control our own destiny provide greater flexibility and it to increase margin. Initially this meant expanding in house capacity alongside expanding existing contractor production.
[noise] and building four factories over the last two and a half years over half of our down from production is now in house and we're at a stage, where we can actively.
<unk> reduce RCM teams in the coming here.
I continue to feel very good side and the current composition of our inventory position.
We continue to operate commercially with disciplined and selective allocation model, both at wholesale and in our own DTC channels and always at full price.
Going into next year once the rationalization and transition are complete we intend to improve inventory efficiency relative to sales and expect that our inventory levels relative to revenue will trend lower overtime.
I'm also excited to share with you.
A few things, we're doing innovation and experimentation in retail the Susan.
I believe that are I believed that our customers on our brand.
The value of our branded defined but some of their experiences innovation experimentation is an important part of that puzzle for us.
With consumers looking to use outerwear to express their own personality more and more our recent relaunch of Brent the is a great example.
Focused collection of six never to be repeated styles.
Isn't it is an elevated interpretation Kennedy uses heritage designed to inspire loyal brand fans enriched new on audiences with pinnacle product.
[noise] through versatile four and one in three in one in reversible styles that feature on artistic print and luxury fabric such as Loro Piana wall.
Brent has been a high impact centerpiece on our floors and the commercial response, so far has been incredible.
We've also introduced pilot programs to encourage to self expression, including the ability to add personal details on their jackets.
And the cut into customized for consumers to customize their jacket with new Hood brim auctions.
Offer new reflective comfort and insulated from choices consumers can tailor their jacket, where to where and how they use it in their own personal style preferences.
The customer response from this program has been extremely positive and we're learning a lot to inform future direction of both product and retail engagement.
Similar to our innovation with cold rooms and customization.
And personalization pilot programs, we continue to experiment and evolve with retail formats.
On a fast changing digital first world you cannot exceed that repeating the same store concept again and again, one boss does not fit all.
There are so many interesting opportunities out there to two micro targeting specific locations customers influences and experiences.
This year, we back to me that Weve activated and number of new direct to consumer for mass to test and learn what works, where what customers want and how we can deliver exceptional experience in new ways.
As we have done in the past, we're also utilizing pop ups to activate markets and test locations for permanent openings.
Last later this week, we'll be opening at Tysons Galleria in Washington, D.C. area.
And we're excited to degree our amazing Kennedy, who has experience to life there.
Going back to my initial remarks haven't global brand strength multiple avenues of growth and the discipline.
And focus to execute well are so important in times like these.
Winter or just kicked into high gear and I'm really encouraged by how weird, but how we're performing despite the continued external headwinds and ongoing uncertainties.
Despite that.
We continue to see long lineups, and our stores across geographies, which shows the power of great pride and exceptional experiences and with that Alison or over the Jonathan to go in to the specifics of our financial results.
Morning today.
Hi, good morning, everyone.
Thanks, David Thank you for joining us.
We delivered strong second quarter results in line with <unk> expectations.
I am proud geographic diversity and high quality distribution continues to be a winning combination.
We were able to offset the impact disruptions in Hong Kong.
With strong performances in other markets.
And extendable uncertainties executing with discipline and we're pleased to be in a position to reaffirm guidance for the it.
Now with that backdrop I'll walk you through the numbers in detail.
Please note that all them figures I'll close it in Canadian dollars.
The second quarter can pet compared to the same quarter last year revenue grew 27.7.
294, windows or 28.3% on a constant currency right.
Oh sells a standout performer and a lot to school, so with revenue growing 22.2% or 22.9% constant currency, but.
This is primarily driven by growth from existing Paul is complemented by early issue ship and timing relative to last year.
Incremental revenue from Brian Baffinland. Its peak sales schools are also NIM.
We continue to assume high single digit wholesale growth for the it.
This reflects our performance through the first off with a materially higher proportion wouldn't to old is fulfilled relative to last yet.
We also anniversary the acquisition of Boston stalls and event.
Well. These reasons, we expect wholesale revenues in Q3 to decrease in the mid teens on a percentage basis euro the yet.
This is purely a function Tony.
We feel the remaining fall winter of old as to what through and that's what drives the calls.
You know to Q4, we transitioned to the Springle book I'd like to see some fall winter.
We're pleased to satisfy all applications for all problem. This idea putting out 2000 plus points of distribution in a better position for the peak season.
But this does not change commercial discipline with which we supply and operate this channel.
DTC revenue increased by 47.2% or 47.4% on a constant currency basis.
Now due to the transition to like full full five.
Fiscal calendar this year, we lost one day in the quarter relative to last year.
Excluding the extra day in the prior period growth would have been 49.3 person.
Our established stores and E Commerce smoke has performed well I'll new store openings at good styles, with Shenyang, and Edmonton being particularly noteworthy.
Moving on geography, we made great strides in key markets alongside continued growth at home.
Starting with Asia off topline nearly doubles 48.9 billion.
Now, while Japan growth was much lower than Q1.
Britain, Todd it's still continued to be a positive him.
Positive contributor.
As with Kolstad incremental revenue from DTC operations in greater China.
And Hong Kong, specifically, all store was inevitably impacted by external just from.
That said given the effect so on tourism in traffic, we're pleased with how I see before.
We're fortunate to have a global business with them as it is to offset.
This with strong performances in other geographies.
Unfortunately in this world, where the situation in Hong Kong has intensified.
As we entered the second half of <unk>.
We also have an additional locations ocean sense.
We anniversary I have sees opening making the headwind on DTC revenue growth most significant.
As you'd expect were being also being very prudent with all the cost base and resource allocation and that includes ceiling accommodations with all laterals and stuff provides a lot.
Moving on to the United States revenue increased by 38% to 12% in constant.
This was driven by significant contribution from wholesale in its lot to schools are complemented by strong PCC performance, but online and in store.
At home in Canada revenue increased by 29.9 cents.
That's a tough comparisons comparison in the seasonally smaller pool. So we were pleased with the performance fall highly productive tt's.
Incremental bathroom revenue in its peak water was also particularly relevant kinda, though.
In Europe , and rest of world revenue decreased by 3.4% in constant currency.
You'll recall that in the growth from Q1 was very elevated 79.7 said, we called that out as being driven by earlier timing, but relative to last year.
As an output that what fuel remaining for wind to orders to ship in Q2.
And then almost wholesale centric geography. This was the fundamental drivers that decrease.
Moving on revenue consolidated gross margin was 54.6%.
The channel level wholesale gross margin came in at 47.5% as expected.
This represents normalization relative to the first off last year, which was elevated through a number of temporary timing factor.
As I've said before.
The mid to high Fortys is what right, what we want to be over annual periods and I'll comparison normal normalize in the second part of this.
Did you see gross margin came in at a strong 75.6%.
This was driven by the positive impact of pricing relative to costs, we sold the benefits of Tailwinds from our coal which are more significant at this time it yeah relative to Q1, when the mix from known Paul.
Well Jim.
Oh sell operating income was $90.9 million with an operating margin of 41.4%.
This reflects the gross margin chip versus last year as I've, just described I'm relatively flat SGN a specific revenues.
Starting to DTC and excluding pre happening.
<unk> costs in both periods operating margin increase.
<unk>, 45.3% from 43.7 Simpson with strong sales productivity and profitability of across all components of the travel.
We incurred $3.6 million in preopening costs for the locations not yet open and this compares to $1 million in the same period last year.
Including lease costs BTC operating income was $30 million, representing an operating margin of 40.4 person.
[noise] unallocated corporate expenses were $43.2 million.
Compared to $74.2 million last year, well unallocated depreciation was $2.3 million compared to $1.8 million.
Yeah.
Increase in corporate SGN, Hey was primarily driven by.
<unk> increased growth investments in marketing corporate headcount and infrastructure.
Included in greater China.
Combined this resulted in total operating income $75.4 million that compares to $65 million last year.
No no I have for us basis, adjusted EBIT was $79.2 million compared to $66.5 billion lost yet.
Net income was $60.6 million, all 55 cents per diluted share.
<unk> $49.9 billion, a 45 cents per diluted share loss here.
Adjusted net income, which excludes a 4 million.
Dollar impact from Preopening costs was $63.6 million, well 57 cents per diluted share compared to $51.1 million or 46 cents per diluted share last year.
It's also worth noting the other things in the quarter benefited from a change in the effective tax rate of 12.8% 18 point lumps and yeah.
Hi, this is largely a temporary talking about.
As it relates the differences in the transfer of inventory to specific geographies and the applicable tax rate. We continue to assume an effective tax rate for the full yet in the area of 21.3%, which is what we achieved and his team.
Turning quickly to the balance sheet, we ended the quarter with net debt $537.9 million that includes $224.2 million in least liability.
As presented on the IRS existing.
On a spot basis, it Nichols radnet that EBIT da all.
On the.
Trailing 12 month period was two point, an all time this reflects a seasonal peak in financing of our working capital cycle.
The ci through offshore facilities.
Net working capital was 300 inside the 383 million compared to 270 million in the same quarter last year.
This reflects a continuation of our planned inventory build.
And was partially offset by increases in accounts payable and accrued liabilities.
Support staging needs about international DTC expansion and maximize the efficiency of on new in house Medafor capacity coming online. We have built up buffer inventory and then you it's of course styles, but longer term commercial flexibility. This buffered gets this continuity as weve.
Rationalize the policy seventies.
Moving beyond this fiscal year once his transition is complete we expect all.
Inventory levels to begin to normalize.
In summary, we're really pleased with all went through the first off of the school Yeah, I'm, we're well positioned as we enter our busiest conventional.
Well external uncertainties are a reality, we remain confident the powerful brand and indeed, the though business more.
Against this backdrop, we've continued to deliver strong growth in revenue and earnings and we're pleased to reiterate our outlook for the.
Now I'll turn it back study for some closing remarks.
[noise]. Thanks, [noise] Thanks, Jonathan.
First year first half of the year has has truly been great and with the peak season now in full swing there are a number of exciting things on the horizon.
Well, we opened our first store in Paris on recent on arrays shortly.
This is a dream come true for me personally and I can't wait to see it up and running.
We're also launched remembers concept store I'm sure we gardens in Toronto.
Experimental experience away to engage with our local fans.
And last but not least we'll be introducing our first small format resort town location in bank.
This is one of Canada's most beautiful and popular international destinations.
And with that I'll now turn over to the operator to begin <unk> [noise].
Thank you as a reminder to ask a question you want me to press Star one on your telephone keypad to withdraw your question press the pound or Husky. Please remember to limit yourself to one question and one follow up question. If you have any further questions you may reenter the queue. Please standby, while we compile the culinary roster.
Your first question comes on the line of Kate Fitzsimmons with RBC capital markets. Your line is open.
Yes, hi, good morning, guys congratulations on the momentum.
I guess my first question as you know the growth rate then you more established markets candidate me you asked were very impressive in the quarter I'm. How do you think about what's driving the demand and the home market, particularly at the wholesale channel. It's all those growth opportunities go forward in North America, and then secondly, young age out you know obviously very impressive growth there despite that this.
Option in Hong Kong can you dig into what you're seeing in other markets as an off that and you know Danny it's been about a year since you've been in China. You know what would you say had been the more interesting enters the pricing learnings there more recently not just despite the fact that Ah what's going on in Hong Kong. Thanks, So much.
I think <unk>, they give or take your questions that I think that.
[noise] I brand he has never been stronger and it continues to grow global awareness and affinity of Iran, or great place and you can see that unresolved Oh, yeah, we were significantly significantly growing our business and in all geographies and we continue to achieve very significant pace of growth off of a much larger base today.
I think that yeah. Some anecdotes there's your <unk>.
That's gotten colder their lineups in our stores, we get again other people hampering out overnight to get some more collaborations and to make sure. They get one of them. So you know the demand for our products is as truly never been stronger across all geographies and.
You know to speak to China and.
Yeah. It was opera and every year and as it comes in the result, there's also been great. This is this quarter, we oh, almost all of our business in China and.
I think would I think there with the right approach, thereby building, but running China from China, and investing in infrastructure and offices in country and I think there was also are showing dividends are moving notwithstanding all obviously was going to Hong Kong and with.
But no problem resolves office.
I'm going to positive way for everybody, but you know maybe in the meantime, <unk> China's right demand is strong in Chinese consumers, Iran is really resonating with them.
Great guys best of luck for holiday.
Thank you your enough.
Your next question comes on the line of Omar Saad with Evercore ISI. Your line is L band.
Thanks, Good morning, nice quarter I wanted to ask about follow up in a lot of your comments around the supply chain production the inventory build looks like you're continuing to kind of build ahead of that quarterly production. How much you guys are producing obviously also doing more in house I think he said, 50% or over 50% and maybe you could talk about do you expect.
Production is still ramp whether its internal production or with your out extra all suppliers over the next year to from these levels or do you expect the production to level off at some point and also on the own manufacturing do you think you get to a level much above 50% over time or you kind of happy where it is and then you know help us think about I think there was it.
Comment around building some of the core items longer term in inventory and help us understand that dynamic and maybe you could frame it inventories per store or another metric that have that helps us understand get comfortable with how the inventory flows through the seasons and throughout the year. Thanks guys.
Oh I used the question I'll hop over to Ivanhoe, our manufacturing strategy and you know what it does go all the way back to <unk> <unk>. It was we pointed out.
As a rule in public as one of our key growth drivers that we're going to bring a lot of our manufacturing in house by either building and or acquiring new facilities and weve built.
Over the four plus facility now since then and we'd be able to bring a lot more capacity and how to the point, where I did last year was close to 50% over over manufacturing and I think that.
You know to and two point of how high can I go I think there's still room to go into higher than that I will have an absolute target, but yeah. I think I think that there's still room to grow and that you know and that is important for number of its important to be able to control our own destiny into and to have control over on its own supply chain and also obviously it will [noise].
We get to bring I haven't forgotten how should we increase our opportunity for additional margin has so so we're really excited to go to do that and and some of that has resulted in having a little bit more inventory because we obviously in our view, it's better to have more good inventory into not that they're not enough inventory and in the same whatever probably that's it.
<unk> for you know our company is that we know were different than many end that no.
Approximately two thirds, 75% remove him of inventories carryover inventory and that's the stuff that we're making so but yes, there's no excess inventory risk parents aren't risky inventory its inventory that that will be sold a full price and its inventory they'll be available and has been available for many for many years. So I think that you know I'm not worried at all but that inventory and I'm.
Very rare skin.
And the sort of inventory position.
It's something that we're used to I kinda years, even going back and 20 years or a smaller company, we have more inventory relative to the sale that wouldn't bother us at all because it's not that that's that's where.
That's why our company worse.
John I.
Yeah, I mean, just building on that you know, it's clear that we we build inventory.
In manufacturing ahead, because I'm in <unk> in co products and we've done this just described.
That means it doesn't line up okay. So sales trends and that's what we're trying to do and particularly at where we sort of with we're addressing the transition throughs CMT rationalization and that puts us in integrate position didnt new growth in fiscal 21 as well.
So on the one time, we've done that so dynamics, we necessarily expect to change in the near term, but we do expect the position to improve relative.
To to revenues once the.
Rationalization takes effect and I think I'd take you back something I said law school that.
We we look at inventory in terms of tons in this business. Once you strip house manufacturing raw materials and work in process and that level of tons on an average basis, what's is pretty much inline with where others are involves moving so highly seasonal businesses like this.
Got it thank you.
Right.
Your next question comes from the line as Michael Binetti with Credit Suisse. Your line is El pen.
Hey, guys. Good morning, Thanks for taking my questions here So I.
I guess you reiterating the guidance for wholesale the up high single digits for the year, but then you gave some color that we we think they'll be down mid teens in third quarter I.
I think that leaves us with a pretty wide range of outcomes wholesale for fourth quarter, where from positive double digits to even slightly negative, but I think Dan you described that is period when you'll start shipping for spring and also replenishing for winter can you just help us understand the upside risk the downside in that guidance that you know speak to the scenario that could result in something near the low.
Well, there even negative at fourth quarter, and then I also wanted to stay within the.
Within that guidance for wholesale revenues to be down in the third quarter. What region. Do you think will see most impacted and that is that that largely U.S. given given second quarter growth rates and we just saw thank you.
Yeah, I mean it.
We.
The way the on the wholesale business works, we come into the knowing knowing the the wholesale load of a fool all the seasons and therefore to some extent it. It's dynamic describes it as a managed and told them up to summit to some extent that full in it. We know we know yeah I'm isn't that's why we assume.
High single digits within our guidance and and and therefore, there's an inevitability that we supply it sooner.
The if we if we supply it sooner then then the reality is the order book is fulfilled now none of that stops all wholesale <unk> is coming back and asking for more but you'll you'll also recall that we operate an allocation locally.
And the allocation mobile is privileges, our installs bus and or on that already told us that we consider how replenishment of wholesale old is where it makes sense it inside and that's consistent with what we've done in the Paul.
So clearly you know, we got either as and when those those requests come through we we look at them in that context and against that model.
I think you know the reality is as you look.
Forward. Obviously, then we've got a new season with being supplied in the fourth quarter, which is spring summer and that's what it's I'm dynamics in any of it.
But no football point of view, we looked at the whole host wholesale channel.
Oh, it's important and in such a big of a very strong channel and also important didn't tons of its role it plays in the Brett.
Hi, Good group [laughter].
[laughter] that on outside the United some.
Our all in our wholesale business over the years looking only at the end up was out there were thought or whatever we're really happy about that and you know I'm actually asked about like in the range would have to downsize upsides, if there's no.
Given that we feel very confident that signed up.
Well, where we thought of what you know that that's not a there's no downside there at all it's just it's exactly what we thought yeah.
And you know we have inventory available for reorder should there be.
Does that feel should that that come into play.
Okay. Thanks.
Your next question comes on the line of Ike Boruchow with Wells Fargo. Your line is open.
[noise], Hey, Danny Jonathan Patrick Good morning, Let me add my congrats.
I guess, Jonathan or Danny I, just a question two questions on the wholesale you guys have talked about the pull forward effect. Many times in the again like the brand is so strong that you're clearly getting more orders earlier I'm just kind of curious is there anyway to quantify the pull forward to so we can kind of think about the dollars that may be shifted into Q2 from Q3.
And then Jonathan there's been some normalization on the wholesale gross margin and you've been very helpful to kinda talk us through what's going on there any color on how to think about the wholesale gross margins in the back half and specifically Q3, just busy trying to figure out if there's any more normalization or dynamics, we should keep in mind is as we model that out thanks a lot.
That's okay, you. So I think if we let start with the.
Probably because of what our customers one wants us to ship <unk> that means that we're very much in the ads and in that sense and when they all right. You know, we do all level best it to ship it.
Best way to look at this is to remember it was all fully a assumption is underpins our guidance, which is high single digits and if you look at it not context.
<unk> expenses were about flat then then that's what we thought customers seeking to getting products. It.
Well I think that's that's the best weights wants to them I think when it comes to to the wholesale gross margin no with right, where we want to be at 47 <unk> percent in Q2.
[laughter], that's that's really the right the rights will decide and for that this business comparisons inevitably with last year has distorted the read and they get easier through the remainder of the.
But but different reasons, both Q1 in Q2 last year, so have margins in that in the 50 area and we've been calling that out as atypical and you saw last year that we had it landed at 48.1%. We continue to believe that the right way to the this is mid to high fortys in in the wholesale business.
In the sector.
Great. Thank you.
But.
Your next question comes from Alex Law, that's with Goldman Sachs. Your line is open.
Good morning, Thanks, so much for taking my questions here since that's questions on me operating margin guidance, you've reiterated the guidance for that for the full year in place and expansion in the in the back half I Wonder if you could talk us through the drivers of that's between mix and then some operating leverage in each of the divisions and what side one of the <unk> co.
He components of that are you know my second question is a on the that the Bronto product I think you mentioned that this isn't intended to reach a new consumers I wonder if you can elaborate little bit on that point and are you planning to distribute said it all through turn you.
Channels, I'm going forward and how could that expand the relevance of that Brad. Thank you.
So let me let me on the the the Uh Huh.
Yes piece.
I think you know the reality is <unk>.
We've got we're guiding.
To 20% revenue growth of 25%, earning 20 at least 20% revenue that's at least 25% earnings right.
This year now as we move into the second semester.
Clearly DTC moves to the full that's good to be the principal characteristic in the second though we will continue to invest.
Heavily in marketing as we move as we move through the the particularly the third semester. So cool said, which is which is.
Very important and that will.
Allow us to.
To be leverage that kinda, which as we know it's all it's almost profitable John .
Well I think that's the fundamental dynamic that's going to.
Shift as we move into the second Oh, yeah.
Well the weight of the marketing insight into so cool is likely to mean, the that will push margin expansion and towards the end of that <unk>.
HM How's it been.
Austin talk for brand tell you know Rembrandt. There's other were relaunch again, we had to be we had to brent or or pause and a lot of number of years ago and I think we're been really with them or you know at this point, we were seeing rectitude today, we're seeing tremendous man for them, which is right. There there they continue to be obviously function first products.
Hi, There also are pinnacle process and are there really.
There are intended to define performers luxury underwear and to redefine forms are for the outperformance loss rather were not and not just to follow what's already been done I was doing a completely different way and I think that you know it's been a whole product. It's that's a aimed at the top to top of the Paramount and yeah.
Consumers, who have been came to use fans for a long time, who want the something new and different and the a and and its and its really working you know and enable us to is that our fans in new ways into reached new audiences with this kind of <unk> products. So [noise].
Not that thinking behind right hand out why we relaunched Alan or I'm I'm really happy that we did.
Your next question comes from Mark Petri with the IB see your line is open.
Yeah, I wanted to follow up actually on that or line of questioning around brand to and I guess more broadly you know you've been pushing prices up and also introducing you know newpark is a at higher price points and sort of push through some of the barriers that I think you had talked about previously so I guess you know what have you seen in terms of response.
You already addressed branch out, but I guess in terms of the core parka business and how does that impact how you think about positioning the portfolio going forward.
Oh, I think that I think that yeah, yeah. The category is behavior of Luxfer outerwear or something it hasn't didn't exist 10, or 15 years ago and the we shouldn't we help create and I think that it continues to grow I know, it's a growing category and certainly we're introducing new products have higher prices are and that is working well for us the products that we're going to them.
Good HM that are.
That are priced higher in it.
You'll have performed extremely well so I think the bodes really well for the future and we're very excited about.
And and I guess, just a follow up on the wholesale gross margin a topic a it is also down slightly from the level two years ago, presumably there is some leverage from the greater it has manufacturing. So what are the most material sort of headwinds on that on that number versus two years ago.
So I think the yeah, it's worth reminding ourselves.
The.
Smoking algorithm that we work with here well of the Tailwinds and headwinds because we do great Tailwinds, we we do that because we want to address that the headwinds tailwinds that we that we deal with of it obviously a pricing in Scotland insulting.
The factory that's that that those are the things that help us the most in terms of moving on large unfolded, we have cost inflation in labor, which was probably more significant in the second half lost in the other parts of this yeah.
And we also have calls price inflation in materials and of course, we have reinvestment in new product.
As we continue to develop the the product offering in both our existing and new categories.
And so how would you talk about sort of the product level margins in wholesale.
Oh, <unk>, but I'll, probably level, our product level margins and the whole seller find them that they absolutely where they belong there's sort of a and industry pricing structure and we were very much in line with that and ER that fall back determines wait what are your wholesale margins, So now which is.
Why we continue to say mid mid to high Fortys is exactly what they below.
[laughter]. Your last question comes on the line of Oliver Chen with Cowen Your line is open.
Hi, Good morning. This is Ross Collins on for Oliver I, just wanted to follow up on the retail formats. The pop up that you mentioned I'm just understand kind of timing of them what they'd just be if the holiday period or kind of longer term basis and then.
I'm also they kind of inventory and assortment implications of does does top up a and lastly, just geography, what I'd just be within I guess will they be with all your geography, either our justice and one or two thanks.
Thanks for your questions Yeah pop up some its you know these are these important things I think I wouldn't characterize them as a new strategy for US you know, we've done and pop ups for a number of years, both at wholesale partners and are on our own no. It's kind of have you ever catch all phrase and their use they used for a moment in the time or from for a moment.
In time brand experiences in for events and it's also the also really a useful tool and figuring out future appearance or locations. If you could show up somewhere for a brief period time and see how about works you know.
So for example, Tysons Galleria, specifically, which is broken surely it's it's about explore and testing. It's you know that you see market area and see how a fault.
The rest overboard in that marketplace and Ah I think in today's retail environment. The hot adopt pop ups drives you.
Yeah, well executed the is really important and I think that its no though the retail environment changing it's important to be nimble in a wrap with it.
Well the thing because because our experiment and because that they represent learning experiences for the financial contribution site maker of calls much less significant as opposed to reach those I think it's important to keep that in mind, there's a wide range of sizes of durations and that they represent and of course all of that.
Is back to talk about.
Got it thank you.
There are no further questions at this time I will now turn the call back over to Danny Rea for closing remark.
Thank you and take thank you all taking the time to be here with US today. We appreciate your interest and your support Canada Goose <unk>.
Yeah. This is our last earnings call for the year and in fact for the decade, we'd like to issue a great holiday season, <unk> early happy new year and I very much look forward to updating you on our progress report our third quarter results next year. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.