Q1 2021 Canada Goose Holdings Inc Earnings Call
[music].
Good morning money, Miss Denise and I'll be your conference operator today at this time I'd like to welcome everyone to be Canada Goose first quarter 2021 earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session to ask a question. Please press star one on your telephone keypad to withdraw your question press the pound Keith Please limit yourself to one question only then re queue for any additional question.
Thank you I would now like the coal over to Patrick Burke, Vice President Investor Relations you May begin your conference.
Thank you and good morning, everyone with me are Danny Rees, President and CEO, Jonathan Sinclair VP and CFO.
After prepared remarks from Daniel Jonathan We will take your questions. This call, including acuity portion includes forward looking statements.
These forward looking statement 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 an implied in making these forward looking statements.
Additional information regarding these forward looking statements factors and assumptions is available in <unk> earnings press release issued this morning.
Well isn't the risk factor section of our most recent annual report filed with the FCC and Canadian Securities regulators.
These documents are also available in the Investor Relations section of our website.
These forward looking statements made on this call speak only as of today and we undertake no obligation to update Aruba by any of these statements.
Our commentary today will include certain non <unk>.
Financial measures.
Which are reconciled in the table at the end of our earnings press release issued this morning.
Liberal on the Investor Relations section of our website.
Please note that there was a Messina line item in the reconciliation table for adjusted net income provided in our release this morning.
The full reconciliation is provided in our in DNA and this missing item will be updated shortly on our website with that I will now to turn the call over to Danny.
[music].
Thank you Patrick and good morning, everyone.
Well stay safe.
As you know corporate 19 has changed the world of ways that we never could have imagined we've seen countries locked down and economies upon pause.
Only recently, how they started to reopen.
For Canada Goose like everyone, we were forced to close but restrictions of use and as of today all of our factories and although one of our stores have resumed operations.
I have long believed that adversity demand trends drives innovation and reveals winners.
For Canada Goose that has never been more true than it is today as we begin to see signs of recovery around the world heading into our most important seasons.
We have met short term adversity was deliberate and decisive action.
And at the same time, we're rapidly accelerate at long term strategic approach.
Last quarter I spoke about our focus.
So many unknowns, we quickly responded by leaning into what we know to be true.
Now with another quarter behind us.
Protracted been galvanized what we face uncertainty, we focus on discipline and flexibility, we see opportunity we've accelerated our strategic plans.
In terms of uncertainty we set our sights on three main areas, one managing cash flow to approach and wholesale with the purpose and three maintaining flexibility with production.
Going into Q1, we set an ambitious target to reduce planted cash expenses and investments by $90 million.
Hi, timeline and a concentrated effort across every part of our business. We succeeded in doing so.
In the quarter cash impact of temporarily losing our revenue sources more than fully offset by the savings initiatives.
Swift action.
He has also been taken with distribution.
Thank you all know the impacts of Copel 19, or wholesale partners has been significant.
The call early in the pandemic to temporarily put our wholesale business on pause.
It's helped us maintain full price integrity, what became a promotional environment for many other brands.
We are grateful for how collaborative partners have been we're happy to see many of them on the road to recovery.
However, as the future remains uncertain, we were taking a purposeful approach to wholesale.
Physical doors now reopening.
We're one of the we are one of the core brands that are retail partners have indicated will drive their own recovery. This fall.
Expect the impact over a strategic and deliberate approach to managing those channel to play out in two ways. One later shipments relative to last year.
This is more in line with a just in time delivery model, we're seeing a cross channel.
In which is different from previous years, and secondly, a lower annual wholesale revenue.
When it comes to manufacturing.
Our approach to production this year will be limited flexible and deliberate specifically, we will be focusing on two areas I.
And that's to our key top performing core styles and building strategic newness and collaborations to drive brand heat and momentum.
This assortment in combination with the already healthy finished goods position that we came into the year with will enable us to build derive unfulfilled demand well drawing down on our existing inventory to end the year with a lower inventory position relative to last year.
You'll hear more on all of this from Jonathan shortly.
No, where we see opportunity we are accelerating our strategic plans.
University that Weve faced in the near term will not distract us from where we were going.
Spice it is different disruptions of the past few months, we've accelerated a number of key strategic initiatives that will do the following one enhance and expand our digital business too.
Double or retail footprint in mainland China, three set the stage of our expansion into footwear.
The first area is digital or to past few months.
Seen the already rapid adoption of.
Online shopping accelerate even faster.
To address the shifting consumer behavior, we're accelerating investments in our in house global ecommerce platform and omni channel capabilities.
This fall and winter, we will launch a cross border E Commerce solution expanded the international reach of our business and following a very successful pilot in Canada, we will expand our mobile omnichannel capabilities.
To our U.S. stores unlocking the potential over inventory across both markets.
Our vision is simple, we want Canada goose fans to be able to shop with us.
Wherever they are and whenever they want and we want some have access to our complete assortment.
The next area is mainland China, where we're concentrating our new store expansion this year doubling or retail footprint in the region for new stores.
In June we celebrated our first opened in Chengdu.
Thanks to our digital insights we knew demand in the region was strong going in and the stores performing well relative to our expectations.
Overall, the retail recovery mainland China is ahead of other regions and so serving the world's largest luxury consumer at home has become increasingly crucial we believe our strategic approach to growing or mainland China DTC business. This year has a very much on the right try.
The third area is footwear.
Recently announced the appointment of at Amicus as general manager of footwear and accessories to lead our entry into the category.
Adam comes to us with more than 20 years of global experience with a number of leading global brands.
Entrepreneurial spirit and passion for park, making me perfect, but I cannot use.
Now with Bostons, well earned reputation hhonors decades of experience and what he block for his leadership and global product strategy, we have all the pillars in place.
We've taken a deliberate approach in this category.
And now as we execute against the strategy. We expect the first expression or Kennedy was four which would be available in select markets as early as fall winter 21.
Full commercial launch in the years default.
I believe we have an incredible opportunity in front of wasn't footwear brand new perspectives, the marketplace and to find the intersection of luxury and function and the way that's never been done before I look forward to share more with you in the Stevenson comp.
To finish I want to share some thinking around todays consumer.
In times of the diversity people want products that have purpose products stand the test of time I'm trying to help them survive.
Work from home World people are gravitating to be outdoors and connecting with nature.
We expect that to continue as we get into the fall and winter months.
And we hit peak seasonal relevance.
As well now more than ever people are placing their trust and brands to drive change and to help shape the societies in which they operate.
By this fall or Canada Goose response program is on track to deliver more than 2 million units of P.P. for frontline workers all manufactured at cost.
In June we donated 20000 subscribers to Mount Sinai Health Network in New York being our first international donation.
I'm proud of our teams work, although we've been able to accomplish in support of the fight against Copa 19, both at home.
And now internationally.
In summary, we have rallied through a near total shutdown over business globally, and thanks to the Relentlessness and passion of our people and the strength of our foundation, we are well positioned for the future.
Well, we stand for either as a brand has never been more relevant and we're firmly control awareness destiny.
Thank you all for joining us and with that I will turn over to Jonathan took over the details of our financial results.
Thanks, Stephanie.
Good morning, everyone. Thank you for joining us.
Likewise, I hope you all sites and sound.
And one of the most challenging periods and all history.
The first quarter was a strong confirmation of our agility adult strategy.
We went back to basics.
An environment, where cash is king.
In challenge was how to maximize all financial flexibility.
Amidst all the unknowns, well well highest conviction opportunities for growth.
We have both of these questions and taking Swift action.
Despite the loss of nearly two thirds of all revenue.
Cash used by operations decreased by $110.4 million relative to the comparative quarter last year.
We successfully achieved all talk is to reduce planned cash expenses and investments by $19 million in a short three month window.
Like last year, and <unk> expenses decreased by 15, Oh, but said.
Sales for supported by inventory already staged.
I'm pebble tons were extended.
Thanks to the initiative and resilience try buyout teens, we still expect to be meeting free cash flow positive on an annual basis.
Moreover, we have additional coverage from $329.4 million of cash on hand, and undrawn borrowing capacity.
There was also substantial latent liquidity through our evergreen inventory position.
This will be complemented by the limited restarted production, which is designed to add commercial that in top fullness newness and to drive.
Brian <unk> for fall winter.
By the end of fiscal 21.
We intend to normalize inventory levels with the drawdown generating significant cash.
We've also holds about what's best to reallocate and accelerate our growth investments in today's environment.
He called US Omni channel mainland, China awful long standing pillars of our strategy.
We have been building foundations around these ideas.
The time to double down is right now.
Adoption of digital shopping is rising <unk>.
It is increasingly crucial to serve the world's largest luxury consumer base.
Particularly at the time with international travel is greatly restricted.
As a result.
These pillars all the biggest needle movers, we are focused on this year.
Moving on to all results in Q1 total revenue decreased by 63.3% to $26.1 million.
Starting with a full price DTC channel revenue decreased by 70% to $10 million.
This was due to temporary store closures reduced operating hours and of course lower traffic.
And its lowest seasonal period E commerce was out dominant revenue source and it was in line with a comparative quarter.
In a wholesale channel overall revenue decreased by 75.6% $8.7 million.
The travel largely closed since mall.
I did all the slowest quarter. This right. This reflects the limited international distributor shipments, which have a longer lead time due to the additional that distribution.
From a geographic perspective with the majority of our business closed in North America and Europe throughout the quarter.
Asia had the lowest revenue decline.
45.3 person.
Our DTC business in mainland China was slightly positive year over year was the decline being driven by large cobot 19 impacts on our two stores in Hong Kong as well as lower wholesale shipments across the entire region.
As you know from history.
One gross margin is a noisy them the best at times.
This was magnified by the large revenue decline we had this yet.
The important takeaway here is that the underlying full price economics of all DTC and wholesale gross margins have Nols changed.
The consolidated level, excluding the sale of P.P.E., <unk> cost and $4.3 million net overhead from temporarily closed manufacturing facilities gross margin was 47.6%.
On a reported basis it was 18.4%.
With the suspension of production all related overhead was expense true cost of goods immediately whereas they are normally first allocated two units on the balance sheet, then show up in product cost as it sells through.
With negligible revenue in both channels small accounting adjustments.
So had outsized percentage margin impacts in DTC. This was to the positive I didnt wholesale so the negative.
Within wholesale that was also the impact of distributor shipments being dominant revenue source.
We have bridged unquantified these shifts in detail you know filings fuel reference.
Adjusted EBIT was a loss of $46.5 million compared to $25.9 million last year.
Adjusted net loss per share was 35 cents compared to 21 cents last year.
Lower revenue was partially offset by the 15 into hospice and ask you in a reduction I mentioned to you.
Some contributing factors a temporary they're also significant permanent savings look of basis.
Moving on current trends.
The recovery in mainland China remains ahead of other regions.
We're in a seasonally slow period, but the signs are encouraging.
Consumers are returning to shopping in all stores, a known pocket products are resonating.
Our first a four openings.
In this region. This year in Chengdu has consistently been outperforming relative to our expectations.
We have great brand momentum and runway in this region and we are excited to begin expanding our footprint against so complex.
Unfortunately, Hong Kong continues to be a challenge.
The flow of inbound tourism remain suspended.
Tightening coded restrictions given the latest wave hub also impacted local traffic.
The result, all two stores that are still heavily and Pat.
In North America, and Europe, Reopens tools, all seeing slow stalls as a result of lower traffic in and around all locations due to the impact sometimes it pandemic.
This is as expected.
System with a live experiences in greater choice.
And he told US we are in the late innings of our slowest period.
And we are on track preparations for peak demand.
This includes the launch of a cross border solution to expand internationally access immobile omni channel capabilities in the U.S. retail stores.
Seamlessly opening and the oil inventory to brand ambassadors and install guests.
Has great potential for both experience and for conversion.
This follows a successful pilot in Canada and Australia.
Which we which originally incubated it'll show wake Dalton store here in Toronto.
Lastly in wholesale we all carefully and gradually tightening up business cycle.
We have successfully taken a Brian first approach to managing the channel through the disruptions of the pandemic.
That is going to continue.
It's great to see our partners on the road to recovery.
<unk> for all brand is strong.
Operational and financial risks remain.
We will continue to be cautious while focusing on DTC.
This means lower wholesale revenue annually.
Latest shipment timing relative to fiscal 20.
With more than in season will.
In summary, that's no doubt that we've had the benefit of coincidence with the knits hopeful shutdown the ball business globally, you know small this quarter.
We did not take that opportunity for granted.
We moved quickly to bolster what was already a strong financial position and we celebrated strategically in the right places.
Well uncertainties remain.
Business on the world around that are clearly improving.
We are heading into full wins lean flexible I'm focused.
With that I will pass over to the operator to begin the acuity.
[noise] again as a reminder, ladies and gentlemen to ask a question. Please press star one on your telephone keypad to withdraw your question press the pound key.
Please limit yourself to one question only then we keep for any additional questions. Your first question comes from Ike Boruchow with Wells Fargo. Your line is open.
Hey, good morning, everyone. Thanks for the question I guess just on the DTC channel, maybe Jonathan and talk about how many stores you talk about four in China, but there's just a clear about how many stores you're planning to open this year and then maybe at a higher level has the pandemic or anything you've noticed in your retail operations over the past several months.
Changed your longer term thinking around what your your retail footprint can look like thanks.
Good morning.
The <unk>.
From a fiscal 21 point of view with what we're expecting to opened seven vessels as yet for them and trying to three elsewhere.
A couple in and I'm.
Here in North America, and one in Europe.
The.
From a longer term point of view, we still see a physical stores as an important halt Aubrey but also the this is something we're going to keep on the constant review.
The situation continues to get involved.
Basically is the the online world is becoming increasingly important that's cool to all DTC strategy and then the worst started.
Yeah I'll jump in Hey, Thanks for question I think that.
It's important couple points I want to make that I think are important one is to remember that our store footprint. Today is is still a very modest and small store footprint. Unlike many other brands and so we we still feel that there's opportunity to do it opens doors and in and top shelf locations around the world and as we get those opportunities and plan to I also.
So want to point out and want to that I'm very excited about is the fact that we're focusing our store opens in China I think that you know as we all know global tourism is going to be affected this year and a lot of global sort of has come from China and I think that's your lot of those tourists are gonna.
Take their vacations in country, I think everybody from every country isn't likely to take different occasions.
Closer to home and I think that the fact that we're going to be able to open for news stories and fantastic locations in China The service.
His tourist in China, I think he is going to.
I think it gives us kind of momentum going to the are going to our peak selling season, I'm very excited about about or what.
For us.
[noise] Hey, your next question comes from Jonathan Komp with Baird. Your line is open.
Yeah, Hi, Thank you just wanted to follow up at discussion about lower wholesale sales for the year in terms of your outlook.
Maybe just you construct a little bit more what you're expecting within that assumption.
Yeah, just thinking through the shifts that you mentioned versus lower demand in total and maybe you just touch on what you expect for your distribution or or door count given for my closure again any any intentional actions that you might take like.
Yeah. Thanks for question and.
Hi, So I.
Well first of all cells we.
We earlier this year, we slowed down a wholesale shipments and now we're slowly and it was shut down the business in general and now we're taking a very careful approach to reopening of that and so.
No we have some very strong wholesale partners and we're very excited to work with.
They're very excited work with us as they see us out.
As a company as a brand that's going to help drive their business.
And drive their recovery and we're going to tickets that step by step in day by day. We are we're prepared for anything that comes our way no compared to lead in what the accounts that a customer the to do that are performing really well.
We have enough inventory to to chase orders.
And we also have the ability to the then with her own DTC. So we bought a number of LIBOR is open to US we're actively managing a child.
The most important thing.
Inevitably I think that it makes on mobile much more in season relative to what we've seen in recent years no. Historically as you know we've been shifting more and more to the left and this is going to be a shift back towards the right because of the environment where it.
Well, we're not providing a financial outlook, but presumably a the decreases in the in the first off will be smaller in the second though.
[noise]. Your next question comes from Omar played with Evercore ISI. Your line is open.
Thank you for taking my question. Good morning, I wanted to ask a follow up on your manufacturing and supply chain, especially the commentary around your you're going to be running at a third capacity. This year in pre cobot, you guys were kind of transitioning to do more.
Vertical manufacturing in house manufacturing and building up inventories to make sure that transition went smoothly. Maybe you can help us update that narrative, where you are on on production you know the pull back you're obviously executing this year and then where that leaves you in terms of newness do you have enough newness and the pipeline with only a third production this year and.
Is that basically assume that the carryover kind of evergreen product from last year will be prevalent in stores online. This year. Thanks guys.
Hey, Thanks for question and Yeah, I mean, we're manufacturing so we are manufacturing right now.
We restarted our production <unk> manufacturing a lot of the newness that we have planned for this year and there's lot of exciting stuff coming up we also.
Have stage inventory that we manufacture lots here for this year, which is which would shot really has put us in a really fantastic inventory position and we're very happy with the position.
Oh.
Because we both have haven't you and we have ever we need and we have the ability to to be flexible and make more if we need to or pull back if we need.
You too at the same time, our factories continue to manufactured <unk> for the Canadian government and Oh, we feel that's a very important mission as well. So overall the rest of manufacturing we feel that our flexibility.
Toward position there isn't a really really good place.
[noise]. Your next question comes from Adrian with Barclays. Your line is open.
Great. Thank you very much I want to actually thought ecommerce Jonathan It could you had said that ecommerce during the period was flattish to the comparable period. How do you think that performed relative to the prior year on comp basis for two two and three Q and then where have you cut back on advertising and where it can you redeploy.
Tightening dollar to drive that commerce Adnan Thank you very much.
So I think as we think about Q1, obviously that was a about a relatively small smart.
In India for E Commerce demand always has been but I think it's more accentuated now in a buy now wear now model.
And so.
I saw seasonal rather.
Dozens grows I think that's going to be very important versus that's also why are we getting to see the initiatives coming on line, whether we're talking about cross border on the omni channel.
And that's going to make it a more important source of revenues, we got to <unk>.
Yeah.
But to Jonathan said.
Obviously resolve those points I think that also you know for US we were able to.
Ah maintain.
And our levels of ecommerce performance at the same time, we're also able to <unk>.
For full price that's really important I think that you know I think that in times like this so Brad I attempted to to dilute the value of random and I think.
For me the most important thing for brand right now it's just a is to stay strong and two arms to secure guns and were full price brand and many brands.
Promotional I mean promotional brands became even more promotional and we did not and.
I think that to be able to do that in this environment and I made Henry comp performance I think is I actually think that.
Our next loud comment I'm very happy.
Your next question comes from Sam Poser with Susquehanna. Your line is open.
Good morning, Thanks for taking my question.
Can you.
So to put three together you do you up can you give us what can you give us some idea of how big your E. Commerce business was last year I know you don't generally do it but we're in very unusual time stood just to help us out.
[music].
Number two you know to what degree do you foresee wholesale business I know you want to guide, but what degree do you see the wholesale business down in the third quarter or the second quarter excuse me and could you give us sort of but more defined but more definition of what you mean by purposeful wholesale.
Okay.
So.
Okay.
The taking the the wholesale piece first I think.
That's that's pretty important.
As a business.
But I think what we what we are expecting.
See that is AIDS.
A transition to something of a more in season level. This is not something that we've seen in recent years, where it's been while on a more traditional lines I think that that piece is it is particularly important when it comes to the way in which we.
We run that we run the business.
When it comes up.
Purposeful wholesales about we've always talked about wholesale as being brand accretive.
And.
The importance of that is that we all.
Therefore, I, though.
Reaching.
Into locations, which is critical for the brand to be in full so I'm just.
Distribution buses or because it reaches locations where physical presence as needed.
That we aren't going to open our own stores.
Your next question comes from Kate Fitzsimmons with RBC capital markets. Your line is open.
Yes, hi, guys. Thanks for taking my question I guess, you know certainly understanding you don't have a crystal ball, but I guess when you think about the productivity rebuild in your stores you know looking out in the next you know call here and a half you know how how are you viewing that just given the importance of global toward.
For them to your store base and I I guess, that's an extension of that would be I'm gonna be look at channel margins, you know historically retail margin kind of settling in at the mid Fiftys on EBIT level no wholesale in the mid Thirtys you know how comfortable do you feel with that profile over time.
Given you know what is likely to be floater, it's lower productivity we dealt thank you.
Yeah. It's.
It's important to thing.
That many of off all stores only just reopens.
Clearly, we have something of a a more of a track record in mainland China.
Outside about that literally just Riyadh and therefore, you trying to read a truck in a very quiet time in any normal.
In the year like this.
And as I said in my prepared remarks, we are seeing sliced apples with significantly lower.
Traffic in and around all locations and they all and that traffic is a fraction of normal levels.
But then at the same time up and say we sold less in China.
As well earlier in the last continue to build steadily since I'm these continuing to grow.
So I'm from that point of view I feel the trajectory of the of the schools is very much as expected.
From a margin points of view.
Once we all through this I see no reason why doesn't return to where it was.
Because honestly the mobile remains the same and we continue to experience even in these times. Good cells density just know that levels they were on price.
And therefore, the underlying model that produces Holly.
Contribution margins channel level will retire.
In our expectation.
Your next question comes from Michael Binetti with Credit Suisse. Your line is open.
Hey, guys. Thanks for thanks to the help here.
So just a couple of modeling questions and I had a bigger question for Danny on on the gross margins in D to C. I know you reported 80, 82.7, but but there were I.
I think it was closer to 66 67, if you exclude the duty Recut duty recovery you mentioned from last year. So first smaller quarter I guess that you know it usually doesn't matter, but it seems a little bit lower than what we normally see out of the D to C anything.
There are that carries forward today.
DTC gross margins in Twoq and Threeq you that we should be aware of and then same same on on wholesale distributor shift as a thousand bases points drag I'm wondering if there'll be any impact from that in Twoq and Threeq you that you can foresee just how you see the mix.
Going forward and then I guess Danny on the [noise].
On the long on the footwear launch obviously, it's a few years away here, but yeah.
Can you give us the size of the market you see up you know that the Tam you see globally, what you're looking at it and maybe what the unmet need or a slice of the market is that you think Canada goose conservative so attractive that's unmet today.
So sanctified, but a couple of parties.
Important questions I completes a relatively straightforward offices in the sense that the underlying pricing level that exists in this business. It's no different this year than it has been in any other ya.
You have two factors affecting Tc margins in Q1, there's a little bit around product mix, you'll recall last year, so that leads into little bit more to the newer categories and that's a different.
And that fold that makes it a slightly lower margin, but the fundamental is with dealing with the lower very small numbers and it takes next to nothing to move the margin several percentages in tons is accounting adjustment. So nothing to be concerned about that and I'm disabled suffered a wholesale than in a different way in the sense. It when you open.
Shifting to you know predominantly cities to distributors the margins is bound to be lower and that's what you're saying that it bounces back later on so but the underlying economics and the underlying pricing level in the business is no different this he doesn't it was lost.
Definitely margins should should normalize.
And all to take your favorite question, you know I I mean, I've I'm very excited before.
And for going forward would very much to your own way.
And.
As always we always intermixed best in class products. In this is this is no different.
There are many relevant footwear brands in the world today with nine figure businesses. So obviously the categories very large when we take the opportunity service. They were a center, but I want to four was well I'm focused on building the foundation for an enduring franchises in the long term as always and so you know we're all looking to offer.
So to generate.
Large numbers are material numbers in the short term, but rather it's a long term thing by a long term I see it.
Very material when we commercial launch level. So therefore level when we first launch WAPA.
Limited focused collection and intention is to.
To building a pull model and.
And credit market for lasting success and Scott.
Your next question comes from Oliver Chen with Cowen Your line is open.
Thank you your comments about non parka products resonating is interesting what do you see happening there over time in terms of the consumer response, now and how you're planning on and are there implications for how your overall average unit retails indoor margins may trend as you look at that really nice market opportunity.
Study.
I would also love your thoughts on the cross border expansion of E Commerce and.
Now that they're plays with the model as well as a timing impact in inventory planning it sounds like another big opportunity.
Thanks, all for Yeah. Those are two big opportunities and spring project and off season for US are performing very well, we have a lot of newness and we've oh opportunity of the category I think that you know we're seeing a we're seeing like you know as a percentage of our overall sales I think that no.
I think the it all the I think that has the opportunity to grow as a percentage of overall sales and much like categories like my way down over time have you know we've started to small and they're going to become material percentages I think that this used categories with the products that made the right products I think they have the same opportunity and.
And we're very excited about it I think that it with regards to cross border also a very big opportunity and.
One where we're going to open up a.
Our our wholly owned E com platforms are gonna be opened up to.
Many other countries in the world this year and Oh, the opportunity to to drive that is that.
And to realize revenue through the child.
Is decide.
Your next question from some Alex I have three Alexandra well, that's with Goldman Sachs. Your line is open.
Good morning, Thanks, so much will occur and thanks for taking my question two questions for me. The first you mentioned some units coming into the collections for the full I Wonder if you could comment on anything more specific there anything I'm, particularly excited about or perhaps how you see the volume of newness.
In that holiday period as it compares to prior years.
The second question is a high level question on how you're thinking about the strategic choices in the in the U.S. and Canadian businesses as tourist spending is likely to be subdued probably for <unk> for some time and how about changing how you're thinking about the business.
Office the newness question.
Thank you for I forget I think we've I've ever you planned a lot of newness into our collection and a lot of exciting new styles and collaborations.
Yes designers.
Reinterpretation.
Thanks.
As of all these new styles that are going to becoming a new colors that everybody felt mariana.
Those are now that.
Typically drives a lot of.
Strong consumer consumer behavior.
Tumors and also with existing customers that want to.
The latest and greatest from US. So so you know we're fortunate that because of our manufacturing flexibility we're able to.
Got it manufactured products do we.
Were designed for this year and that.
Tend to merchandise in our stores and.
So I don't know.
Then when it comes to a business in North America, one of the one important things to.
Consider is that we all still relatively a the and all DTC journey in North America, we've deliberately built business not just around international intermodal surrounds domestic demand and we all.
That pool.
See leveraging the domestic consumer I'm much more these times.
That's the focus of the what we're doing whether it's around omni channel within this oil or whether it's around a rounded outreach programs consumers as we develop the.
Businesses in the individual stores.
We still have a very strong addressable market in North America.
And that's something that we expect to continue to drive the economics of the business.
Your next question comes from coming on line with BP I do your line is open.
Thanks. Good morning, she gets talked about investments you just mentioned the increased investments in omni channel.
Ill.
I'm wondering if there are other initiatives, you're taking on to specifically invest in market share gains maybe more so than what are your competitors are doing whether on the advertising trends since you're clearly maintaining full price. How do you plan to take advantage of your heavier capital position to really go after market share gains and then as if.
All up to that.
I think John you talked about yes. She may cut so you had in the first quarter some of which will come and then if you could just quantify how would you think about the permanent reductions as the your progress is a great. Thanks.
Hey, can we will take your question.
I'm afraid Mako give you ought to give you a to swear to drift my answer this I don't want to give aware trade secrets, but we absolutely have plans to leverage our.
Commerce platform and other assets that we have to to drive revenue. This year and I think we're gonna be able to do that but being able to tight exactly what those are would be unfair advantage for competition sorry.
Can't quite go there today, but.
Jonathan.
And to address your question.
So.
I just build them on one thing done he said which is.
The ROI is a clear focus for us and what we're doing and intense.
How we repositioned.
Maxing out.
Our marketing investment I think that's that's a pretty important and all of this.
Your next question Oh I'm sorry.
Sorry.
Sorry, sorry, just hold the second we will answer the last part of the commitments question.
Which with regards to assume that yeah. So the.
Yes, you in a trend.
That being down year over year is something that I think we'd expect to continue.
Obviously.
There was some onetime.
But we think it will be meeting for the down perhaps not as much has been this this quarter, but something for the down in <unk> as we go food.
This is something why we enjoy a high level of flexibility and that full where we're able to choose what we spend.
Like carefully.
Your next question comes from Mark Petri with CNBC. Your line is open.
Yeah. Good morning, just given the increasing focus on the opportunities in mainland China I just wanted to ask about your level of satisfaction with the operating partnerships there both store and online.
I'm also how you think about your own infrastructure and operations.
And potential opportunities with that.
And also how you've adjusted your marketing approach given the shift in ER in travel and shopping patterns. Thanks.
Next question Mark.
China.
Right I mean.
We feel that we will try and the right way from the start.
In China with.
On the ground in Hong Kong.
China is well end up.
And we've got great teams in both places we have great partners in both places and results in China have proven to be true. So were you don't we're continuing I didnt mean, if that is ever but China like I mentioned earlier. The fact that you know many most of our new store openings are in China, which.
He is which is.
This is.
But you know.
Further ahead and its recovery than anywhere else in the world.
Worlds largest luxury market I think leaves us in great stead and Ah.
And.
Well I'll start here a lot less for your question.
Our marketing dollars.
Yeah, I mean, I think that my general point, Oh, I get enough to give way to trade secrets from a general point of view is the times like this you know when or people are hesitant and pull back on Mark and.
I think it's an opportunity to build brand awareness and to lean into marketing I think that.
How we do that will play itself out over the year Apple we definitely are open and.
I have all sorts of ideas and plans in terms of spending wisely and a and building our brand all around the world.
I just I had that what we're just starting back to China. The quality of the real estate that we are acquiring both in terms of the units themselves. The adjacent says and locations are really quite exceptional.
For us to be achieving this.
Relatively soon after our entry into that market.
Is really a testament to the brand strength.
Your next question comes from Robby Ohmes with bank of an eight your line is open.
Hi, guys thinking thanks for taking my question I I was just I'm curious if if we can get your thoughts on a I love the shift in domestic strategy, but I would love to just get your thoughts on.
No well hold me to it but just what do you think the size of the luxury market in general is changing for the intermediate term you don't I'm just curious how you're thinking about you know what the luxury market could look like in the back half of this year in 2021, and then related to the.
Caustic focus can you give us some color on Canada versus the U.S. and if there's any differences in what you've been seeing there.
[music].
With regards to the luxury [laughter].
We make survival for us we made possible.
First products in our lifetime investments at times like this.
Historically, we performed well because people have felt like.
I felt like.
They are buying that they're investing in a profitable lesson for a long time animal work, especially I'm not sure I think.
And as far more people are looking to go outside more I think our particular products are perfectly suited for that so you know as it relates to us I don't think there's any I'll take the market is shrinking it means that I guess growing.
I think that.
Yeah, I mean, I don't think as we you know as we look forward as soon as to how this is going to Oh, you know obviously, none of this really no but I think you know the disruption. This yeah is probably likely to be more malt that.
And then.
As we as we look forward, but equally that's why we're having a focused on serving all consumer in there a mall rather than serving them.
When they travel.
When it comes to North America, we we've seen good good pickup in both both north and south the border and in terms of calendar in the U.S., but.
But I come back to the point, but that's with domestic consumption not with international consumption in each case.
[noise] [noise]. Your last question comes from Jay sole with DBS. Your line is open.
Great. Thank you so much I didn't just wanted to ask you about what you meant by production flexibility.
In the press, we said that the company currently planned to produce roughly one third of the fiscal 2020 outlets.
Is there ability to produce more if necessary or less if necessary.
Hi, Thanks for question and answer to both wasn't as yes, we're absolutely have the ability to make more or less we have that flexibility to change styles. If we see one styles doing better than under style. So we really do have a lot of flexibility here and you know that's why we built in any fashion, where we did and that's one of the competitive advantages that we enjoy.
And and so what we will who will use that to our advantage this year.
Is there anyway to sort of describe like the magnitude of the potential you know upside or if you want to flex. It down you know this year, if you see certain trends.
And there's no real what am I.
Specifically defined the order of magnitude.
<unk> said that we're oh, I'm comfortable to well, we'll be able to be able to.
To manage whatever we need.
Got it okay.
This is an extremely flexible manufacturing model model.
Well frankly today turning away from down on that nieces in times like this is a very straightforward process for us.
Okay got it thank you so much.
Yeah, no like isn't the call back over to Danny reach for closing remarks.
Right well. Thanks, so much. Thank you all as always taking the time to do with us here today.
We very much appreciate your interest for support of our company and Kennedy USAT States that they say first and foremost be well and we look forward to speaking to again soon.
Great there.
This concludes today's conference call you may now disconnect.
[noise].