Q1 2021 Canada Goose Holdings Inc Earnings Call
[music].
Good morning, My name is to meet and I'll be your conference operator today at this time I'd like to welcome everyone to be Caterina Foods 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 answer session to ask a question. Please press star one on you.
Telephone keypad to withdraw your question press the pound key please limit yourself to one question only been we keep for any additional question. Thank you I would now like to the call what you Patrick Burke Vice President Investor Relations you May begin your conference.
Thank you and good morning, everyone with me are Danny Reef, President and CEO, and Jonathan Sinclair, you'd VP and CFO after prepared remarks from Daniel Jonathan We will take your questions. This call, including the keeping a 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 our earnings press release issued this morning as as well as in the risk factor section of our most recent annual report filed with the FCC and Canadian Securities regulators.
These documents are also available on 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 or revise by any of these statements.
Our commentary today will include certain non IRS financial measures.
Which are reconciled in the cable at the end of our earnings press release issued this morning and available 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 Mdna and this is the United will be updated shortly on our website.
With that I will now could turn the call over to Danny.
Thank you Patrick and good morning, everyone. I hope that you are all doing well stay safe.
As you know corporate 19 has changed the world of ways.
Never could have imagined we've seen countries locked down and economies and put on pause.
We recently had they started to reopen.
For Canada queues like everyone, we were forced to close but restrictions abuse 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 with deliberate and decisive action.
At the same time, we rapidly accelerated long term strategic projects.
Last quarter I spoke about our focus.
With so many unknowns, we quickly responded by leaning into what we know should be true.
And now with another quarter behind US our approach has been galvanize, where we face uncertainty, we focus and discipline and flexibility.
The 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 in wholesale with purpose and threed maintaining flexibility with production.
Going into Q1, we set an ambitious target to reduce planned cash expenses and investments by $90 million.
With a timeline and a concentrated effort across every part of our business. We succeeded in doing so.
In the quarter, the cash impact of temporarily losing our revenue sources was more than fully offset by the savings initiatives.
Swift action.
Has also been taken with distribution.
Thank you all know the impact of overnight Tina wholesale partners has been significant.
The call early in the pandemic to temporarily put our wholesale business on pause.
Just help us maintained full price integrity, what became a promotional environment for many other brands.
We are grateful for how collaborative partners. As then we're happy to see many of them on the road to recovery.
However, as the future remains uncertain, we are taking a purposeful approach to wholesale.
Physical doors now reopening.
We are 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 of a strategic and deliberate approach to managing this channel to play out in two ways. One later shipments relative to last year.
This is more in line with the just in time delivery model, we're seeing a cross channel.
It which is different from previous years, and secondly, lower annual wholesale revenue.
When it comes to manufacturing.
Our approach to production this year will be limited flexible and deliberate specifically, we won't be focusing on two areas I.
Adding depth 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 this position that we came into the year with will enable us to build drive and fulfill demand while drawing down on our existing inventory in the year with a lower inventory position relative to last year.
You will hear more on all of us from Jonathan shortly.
Now, where we see opportunity we are accelerating our strategic plan.
Diversity that we face in the near term will not distract us from where we are going.
Despite this 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.
The whole or retail footprint in mainland China, three set the stage for expansion footwear.
The first area in additional over the past few months.
Since the already rapid adoption of.
Online shopping accelerate even faster.
To address the shifts in consumer behavior, we're accelerating investments in our in house global ecommerce platform and Omnichannel capabilities.
This fall and winter, we will launch a cross border E Commerce solution expanded international reach of our business and Poland, 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.
On Canada goose fans to be able to shop with us.
Wherever they are and whenever they want and we want and have access to our complete assortment.
The next area is mainland China, where we're concentrating our new store expansions as here doubling or retail footprint in the region for new stores.
In June we celebrated our first opening 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 retail recovery mainland China is ahead of other regions and so serving the world's largest luxfer consumer at home has become increasingly crucial.
We believe our strategic approach to growing our mainland China DTC business. This year has us very much on the right track.
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.
I don't promise to us with more than 20 years of global experience with a number of global brand.
Entrepreneurial spirit and passion for park make him a perfect, but Canada years.
Now with batson's, well and reputation hovers decades of experience and what he blockers leadership in global product strategy, we have all the pillars in place.
We have taken delivery approach to this category.
And now as we execute against our strategy, we expect the first expression or Kennedy, who support 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 lessening footwear brand new perspectives of the marketplace and define the intersection of luxury and function and the way that's never been done before and I look forward to share more with you in this even cycle.
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 comprised to help them survive.
No 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 programming on track to deliver more than 2 million units at PPG Port frontline workers all manufactured at cost. It in June we donated 20000 set subscribes 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 of our this 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 safe and sound.
And one of the most challenging periods in our history.
The first quarter was a strong confirmation of our agility adult strategy.
We went back to basics.
And then environment like cash is king.
Oh challenge was how to maximize all financial flexibility.
Amidst all of the on the.
Well, a 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 thoughts Hawkins, which used to planned cash expenses and investments by $19 million in a short three month window.
My question a expenses decreased by 15 to all that said.
Sales for supported by him and feel ready staged.
I'm pebble trends were extended.
Thanks to the initiative and resilience choke buyouts things, we still expect to be meaningfully cash positive on an annual basis.
Moreover.
We have additional coverage from $329.4 million of cash on hand and unfold.
Moving capacity.
There was also substantial lakes and liquidity through all evergreen inventory position.
This will be complemented by the limited restarted production, which is designed to add commercial back in top performers and newness and to drive.
Hey for for wind.
By the end of fiscal 21.
We intend to normalize inventory levels.
The drawdown generating significant cash.
We've also thoughts about what's best to reallocate and accelerate our growth investments in today's environment.
E Commerce Omni channel mainland, China, all longstanding pillars of our strategy.
We have been building foundations are bound these ideas.
And the time to double down is right now.
Adoption of digital shopping is rising.
It is increasingly crucial to serve the world's largest luxury consumer base.
Particularly at the time when international travel is greatly restricted.
As a result.
These pillars of the biggest needle movers, we are focused on this year.
Moving onto all results in Q1 total revenue decreased by 63.3% to $26.1 billion.
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.
On us without dominant revenue source and it was in line with the comparative quarter.
In our wholesale channel overall revenue decreased by 75.6% to $8.7 million.
With the channel largely closed since March.
And you know slowest quarter.
This reflects the limits it international distributor shipments.
Which have a longer lead time due to the additional that distribution.
From a geographic is effective with the majority of our business closed in North America and your throughout the quarter.
Asia had the lowest revenue decline at 45.3%.
Our DTC business in mainland China was slightly positive.
With the decline being driven by large kind of bit 19 impacts on our two stores in Hong Kong as well as lower wholesale shipments across the entire region.
I see no from history.
One gross margin is a new leasing them the best at times.
This was magnified by the large revenue declined we had this year.
The important takeaway here is that the underlying full price economics about DTC and wholesale gross margins have Nols changed.
At a consolidated level, excluding the sale of pp cost.
$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 normally first allocated two units on the balance sheet and then show up in product cost as it sells for.
With negligible revenue in both channels small accounting adjustments also had outsized percentage margin impacts in DTC. This was to the positive I didnt wholesale to the negative.
Within wholesale that was also the impact of distributor shipments being permanent residence halls.
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 billion last year.
While adjusted net loss per share was 35 cents compared to 21 cents last year.
Lower revenue was partially offset by the 15 into Hoffman said escalate reduction I mentioned earlier.
Well some contributing factors a temporary that are also significant permanent savings on the go forward 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 of returning to shopping in all stores no 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 rumbling in this region and we are excited to begin expanding our footprint and complex.
Unfortunately, Hong Kong continues to be a challenge.
The flow of inbound tourism remaining suspended.
Tightening coded restrictions given the latest wave.
Also impacted local traffic.
As a result.
Two stores that are still heavily in pet.
In North America, and Europe, we opened stores all seeing slow stops as a result of lower traffic in and around all locations due to the impacts that pandemic.
This is as expected and consistent with other live experiences in greater China.
Any told US we are in the late innings of our slowest period.
And we are on track in our preparations for peak demands.
This includes the launch of a cross border solution to expand international access immobile omni channel capabilities in a U.S. retail stores.
Seamlessly opening endless aisle infantry to brand ambassadors and install guests.
Has great potential but experience and for conversion.
This follows a successful pilot in cabotage laws.
Which we which originally incubated ill show by golf and store it dropped.
Lastly in wholesale we are carefully and gradually setting 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 is right see our partners on the road to recovery demand for our brand is strong.
<unk> operational and financial risks remain.
We will continue to be cautious while focusing on PTC.
This means lower wholesale revenue annually.
The latest shipment timing relative to fiscal 20.
With more than in season bottle.
In summary, that's no doubt that we've had the benefits of coincidence with the niche type of shutdown of our business globally, you know small this quarter.
We did not take that opportunity for project.
We moved quickly to bolster what was already a strong financial position and we celebrated strategically in the right places.
While uncertainties remain.
Our business and the world around that are clearly improving.
We are heading into full winter lean flexible I'm focused.
With that I will pass over to the operator, let's begin the Q.
[noise] began as a reminder, ladies and gentlemen, tasking question. Please press star one of your telephone keypad to withdraw your question press the pound key.
Please limit yourself to one question only then we keep for any additional question. Your first question comes from like the Bhatia with Wells Fargo. Your line is open.
Hey, good morning, everyone. Thanks for the question I guess just on the DTC channel, maybe Jonathan you talk about how many stores you talked about four in China, but it'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 corporate can look like thanks.
Good morning, and the <unk>.
From a fiscal 21 point of view with what we're expecting to open seven tools this yet for them and trying to three elsewhere.
Toppling and here in North America, and one in Europe.
The.
From a load at some point of view, we still see a physical stores as an important part of but also the this is something we gotta keep on the constant review has the situation continues to get involved.
What is clear is that the online well is becoming increasingly and that's core to all DTC strategy of indeed, where it started.
Yeah, I'll just jump in Hey, I asked the question I think that them.
<unk> couple points I want to make that I think they're important wanted to remember that our store footprint today as it is still a very modest and small store footprint. Unlike many other brands and so we we still feel that there's opportunity to get opens doors and in and top shelf locations around the world and hasn't People's opportunity to plan to.
I also.
On a point out and one thing that I'm very excited about is the fact that we're focusing our store openings in China I think that no as we all know global tourism I'm going to be affected this year in a lot of global service come from China, and I think thats your level of those tourists are going to.
If the vacation in country, I think everybody member countries in life and take the implications.
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 to service Chinese tourist in China, I think is gonna.
I think it give us kind of momentum going to you're going to.
Piece on Susan I'm very excited.
About a bullet.
[noise] thing. 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.
Could you, maybe just be construct a little bit more or what you're expecting within that assumption. They're just thinking there that the shifts that you mentioned versus lower demand in total and maybe you just catch on what you expect for their distribution or door count given to my question here again any any intentionally.
Actually the he might take like.
Yeah. Thanks for question and Yeah I saw I.
Well there was also as we.
As we earlier this year was slow 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 it back and so yeah. We have some very strong wholesale partners on the various types of work with.
They're very excited work with us is that they see us.
As a company the brand that's going to help drive their business.
And now brought their recovery and you know who got tickets that in step by step and day by day. We are we're prepared for anything that comes our way no right, Pennsylvania, and what the accounts that my customers that you do that to outperform will be well.
We have enough inventory to chase orders.
You did and we also have the ability to dealing with their own DTC. So we bought a number of lever is open to us and we're actively managing the child.
Most of.
And it inevitably I think that does it make some model much more in season relative to what we've seen in recent years.
Historically as you know we've been shifting more and more to the last and this year. This can be a shift back towards the right because of the environment where it.
Well, we're not providing the financial outlook, but presumably.
The decreases 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 you and you're going to be running at a third capacity this year.
Recall that you guys were kind of transitioning to do more our vertical manufacturing in house manufacturing and building up inventory is to make sure that transition went smoothly maybe you could help us update that narrative, where you are and on production.
You know the pullback you're obviously are executing this year and then where that lead to you in terms of newness do you have enough newness in 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.
Yeah, Hey, Thanks for your question and Yeah, I mean, we're well manufacturing. So we are manufacturing right now as we restarted production. We are we manufacture a lot of the newness that we have planned for this year and there's lot of things stuff coming up we also.
Have stage inventory that was manufactured lots here for this year, which is which would shop really has put us in a really.
Fantastic inventory position and we're very happy with the position.
Because we both have haven't yet and.
We need and with the ability to to be flexible and make more if we need to or to pull back if we need that if we need to at the same time, our factories continue to manufacture Peter you for all the King and government and Oh, we feel that's a very important mission as well so overall for us manufacturer, we feel that our flexibility and image.
Toward positions us in a really.
[noise]. Your next question comes from Andrea <unk> with Barclays. Your line is open.
Great. Thank you very much I want to sounds like ecommerce, Jonathan if you get spread that E commerce during the period with flattish to the comparable period. How do you think that performed relative to the prior year on comp basis for Q2, and three kids and then where have you cut back on advertising in breaking you redeploy adverse.
Taking dollar tried that how much that's it thank you very much.
So I think it's as we think about she wants to see that was a about a relatively small small therein.
In India for almost a month waste husband, but I think it's more accentuated now in the by now when a model.
And so I.
That's all seasonal rep relevance grows I think that's going to be very important person. That's also why we're going to see the initiatives coming on line, whether we're talking about cross border Omni Omni channel.
And that's going to make it a more important source of revenues we therefore.
Yeah.
A little bit, which often said.
Uh huh.
Obviously with all those points I think that also for US we were able to.
Maintain.
In our levels of E Commerce outperformance at the same time, we're also able to me we stayed home price Fulbright something that's really important metric that you know I 10 times like this some Brendan I attempted to dilute the value of their Brenda and I think <unk> for me. The most important thing for a brand right now.
It's a stay strong and two arms to secure gotten over a full price brand and our many brands.
Oh promotional I mean peripheral brands became even more promotional or we did not and.
I think that to be able to do that in this environment and maintain or a 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 do you do you have it 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.
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.
More definition of what you mean by purposeful wholesale.
Okay.
So.
That's it.
The taking me the wholesale.
Piece first I think you know that's that's pretty important.
As 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 run on a more traditional I think that that pace is it is particularly important when it comes to the way in which we.
We have on that we run that business.
When it comes up.
Purposeful wholesales about we've always talked about wholesale as being brand creative.
And.
The importance of that is that we all.
Therefore, I used the reaching into locations, which is critical for the brand to be in fall, so distribution, but says pool, because it reaches locations, where physical presence and made it.
Well, we own statewide Nora stores.
Your next question comes from Keith cement with RBC capital markets. Your line is open.
Yeah, Hi, guys. Thanks for taking my question I guess, you know partly understanding you don't have a crystal ball, but I I guess when you think about the productivity rebuild in your story you know looking out into next.
Yeah, and a half you know how how are you feeling that just given the importance as a global tourism to your store, Dave and I I guess, that's an extension of that would be I'm going to be look at 10, all Americans historically be tamarkin kind of settling in at the mid Fiftys on an EBIT level no wholesale net 30, you know how.
Comfortable do you feel with that profile over time.
Okay. Then you know why did likely to be north, Florida slower productivity, we dealt thank you.
Yeah, I mean, it's.
It's important to thing.
That many of our stores only just Riyadh.
So clearly we have something about a more of a track record of Magnum China.
Outside about that literally just reopened and therefore, you're trying to read a track in a very quiet time in any normal flow into your like this.
Uh huh.
I said in my prepared remarks, we all things lifestyles with significantly lower.
Traffic in and around all locations and they all and that traffic. This is a fraction of normal levels.
But then at the same time up and say we saw that's in China.
As well earlier in the a and that's continue to build steadily since at least continuing to grow.
So I'm from that point of view I feel that the trajectory of the of the schools is very much as expected.
From a margin point of view.
Once we all through as I see no reason why it doesn't return to where it was.
Because honestly the mobile remains the same and we continue to experience even in these times. Good sales density just not at the levels like right.
And therefore, the underlying model that produces high contribution margins and travel level will return and in our expectation.
Your next question comes from Michael Binetti with Credit Suisse. Your line is open.
Hey, guys. Thanks for thanks for the help here.
So just a couple of modeling questions and I had a bigger question for Danny on on the gross margins and indeed, it see I know you reported 80, 82.7, but but they were which I think it was closer to 66 67, if you exclude the duty Recut duty recovery mentioned from last year, so for smaller quarter against that you know it usually does matter, but it seemed a little bit lower.
Than what we normally see out of the D to C anything.
There that carries forward today.
DTC gross margins in Twoq and Threeq you that we should be aware of and then same same on wholesale distributor shift was 1000 basis 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.
On the long on the footwear launch obviously, it's a few years away here, but you.
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 him and maybe what the unmet need or a slice of the market is that you think introduced conservative so attractive bits on that today.
So thanks, Mike.
But a couple of Barry.
Important questions I.
He said it relatively straightforward ounces in the sense that the underlying pricing model that exists in this business is no different this year than it has been in any idea.
You'd have to factors affecting Tc margins in Q1, there's a little bit around product mix, you'll recall last year sort of means in a little bit more newer categories and that's no different and therefore that makes it a slightly like the margin, but the fundamentalists with dealing with the lower very small numbers and it take next to nothing to live.
Mark in several cents does incidences accounting adjustment so nothing to be concerned about that.
And and the same old suffered.
The wholesale in in a different way in the sense when you're only shipping.
You know predominantly cities to distributors the margins in bound to be lower and that's what I'm, saying and then it then it bounces back later on this but the underlying economics, the underlying pricing doubling the business is no different let's see hasn't it was lost.
Definitely margins should should normalize.
And all to take your favorite question, you know I mean, I I'm very excited to before.
And Oh for doing pretty much doing their own way.
And.
As always we always going to make best in class products and this is different.
There are many relevant footwear brands in the role today with a nine figure businesses. So obviously categories very large.
And the service thing we're excited about it.
Well I'm focused on building the foundation for an enduring franchises in the long term Hello.
And so no we're not looking to awesome.
Sorry.
I will generate.
Large numbers a material numbers.
<unk> <unk>.
It's a long from three mile long term I see it.
During material well many commercial launch level. So therefore level when we first last fall.
Limited hope to selection and intentions to.
To building a poll model and.
And ER credit market for lacing success.
Your next question comes from Oliver Chen with Cowen Your line is open.
Thank you your comments about non Parker products resonating.
It's interesting what 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 I would also love your thoughts on the cross border expire.
End of E commerce, and how that airplanes with the model as well as a timing in empaque and inventory planning it sounds like another big opportunity.
Hey, Savoured, yeah, those are two big opportunities and sprint project and off season for US are all performing very well, we have a lot of munis and me but.
Opportunity in the category I think that.
What we're seeing a we're seeing like you know as a percentage of our overall sales I think that you know.
I think the in <unk>. The I think that has the opportunity to grow as a percentage of Ross elvanse much like categories like another way down overtime of you know we've started small and they're going to become material percentage is this just categories with the pause to me right products I think that that's the same opportunity.
And I and we're very excited about it I think that it with regard to cross border also a very very opportunity and.
One where we're going to open up.
Our our wholly owned E. Com platforms are gonna be opened up to Oh, you know many other countries in the world This year and.
The opportunity to tend to drive that is that.
I do realize revenue can you child.
Is just right.
Your next question from some Alex I say Alexandra well, that's Goldman Sachs. Your line is open.
Good morning, Thanks, so much more color and thanks for taking the question.
Two questions for me. The first you mentioned some units coming into the collection for the full I Wonder you could comment on anything more specific there anything I'm, particularly excited about or perhaps you know how you see the volume of newness in that holiday period as it compares to prior.
Yes.
The second question is a high level question on how you're thinking about the strategic choices in the and the U.S.K. in business as has tourist spending is likely to be since you probably for <unk> for some time and how about changing how you're thinking about the business.
Office the newness question.
Oh that are thank you for asking that I think you know weve bomb I'd ever you planned a lot of newness into reflection and a lot of exciting new styles and collaborations.
Yes, designers and Ah reinterpretation.
Topics.
As of all new styles that are gonna be coming in at new colors. The there then we got Mariana.
Those are hum.
Typically drives a lot of Oh, it's wrong, because the consumer behavior.
Consumers and also with existing customers that want to.
One of acquired all the latest and greatest from US. So so you know we're fortunate that because of in any fashion, possibly we're able to.
I mean after the pasta we.
Were designed for this year and that.
Tend to merchandise in their stores and.
Right.
Then when it comes to a business in North America, one of the one important things to.
Consider is that we all still relatively early in our DTC journey in North America, we deliberately built business not just around international demand those around domestic demand and we all.
That pool.
See leveraging the domestic consumer I'm much more funds.
And that's the focus of the what we're doing whether it's around omni channel within this oil or whether it's around around outreach programs consumers as we develop the.
Businesses in the individual stores.
No we still have a very strong addressable market in North America, and that's something that we expect to continue to drive economics the business.
Your next question comes from Canada line with BP I do your line is open.
Thanks. Good morning. So you guys talked about investments you just mentioned the increased investments in omni channel style.
Wondering if there are other initiatives, you're taking on to specifically invest in market share gains maybe more so than what your competitors are doing well.
But on the advertising trends since you're clearly maintaining full price how do you plan to take advantage of here have your capital position to really go after market share gains and then as a follow up to that having Jonathan you talked about Ah. Yes. She may cut. So you had in the first quarter some of which will come in if you could just quantify how.
Do you think about the permanent production does your professor type of great. Thanks.
Hey can affect your question.
I'm a fair amount will give you you ought to give you a to swear to drift my answer this I don't Wanna get away or trade secrets, but we absolutely have plans to leverage our ecommerce platform and other assets that we have two to drive revenue. This year and I think we're gonna be other do that but being able to tell you exactly what those are would be.
Unfair advantage for competition side.
Can't quite go there today, but all I have a job.
And to address your question.
So I.
I just fill them on one thing Danny said, which is.
The ROI is a clear focus first and what we're doing in terms Oh, how we reposition them from a marketing.
Our marketing investment I think that's that's a pretty important.
Your next question Oh I'm sorry.
Sorry.
Sorry, sorry, just hold the second we will answer the latter part of commitments question.
With regards to assume that yeah. So they are they ask you an eight frames.
That being down year over year is something that I think we'd expect to continue.
Obviously that there were some one point.
But we think it will be meaningfully.
Down perhaps not as much has been just this quarter, but still being for the down and that's because food.
This is something why we enjoy a high level of flexible, let's say in that four were able to choose what we spend.
Quite carefully.
Your next question comes from Mark teaching you would see I'd be see 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 those stores and online alter how you think about your own infrastructure in operation.
And potential opportunities with that.
And also how you've adjusted your marketing approach given the shift in ER in travel and shopping patterns.
Next question Mark.
China, we're very very I mean, we feel that we feel trying to write away from the start.
In China.
On the ground in Hong Kong.
It's not as well and up.
And we've worked great teams in both places we have great partners in both places and.
Our results in China has proven that be true so we're.
We're continuing I can give me the seven is ever but China like I mentioned earlier. The fact that you know many most of our new store openings are in China, which is which is.
Which is.
But you know.
Further ahead and its recovery than anywhere else in the world.
Well the largest luxury market I think resistant gretz that and Ah.
And.
Well I feel a lot less for your question.
Our marketing dollars.
Yeah, I mean, what have I think that's my general point I get enough to give away and trade secrets from internal point of view in times like this you know when or people are hesitant and pull back on marketing 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 a plans in terms of spending wisely and ER and building our brand all around the world.
I'd, just add that way, but just starting back to try to the quality of real estate that we are acquiring both in terms of the units themselves. The adjacent system locations, a really quite exceptional and frogs to be achieving this.
Certainly soon after our entry into that market.
Is it really testaments to the brand strength.
Your next question comes from Robby Ohmes with Bank of England is open.
Hi, guys thinking thanks for taking my question I I was just I'm curious if you could get your thoughts on a I love the shift in domestic strategy, but I would love to just get your thoughts on.
No I don't hold me to it but just what do you think the size of the luxury market in general changing for the intermediate term you know and 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 you know related to the.
Stick focus can you give us some color on Canada versus the U.S. and if there's any differences from what you've been seeing there.
With regards to the luxury [laughter].
We make survival products remain volatile.
First products in our lifetime investments at times like this.
Historically, we performed well because people have felt like.
I felt when.
Our buying that investing and upon some pull on timing will work, especially as much really I think anyway.
Hi, more people well he's got side more.
<unk> products are perfectly suited for that so you know as it relates to us I don't think that.
I'll take the market is shrinking you're right that I guess grown.
I think that.
Yeah, I mean, I don't think as well as we look forward as to 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.
It is it's probably likely to be more mall.
And then.
As we as we look forward.
Bob Equaling that's why we're having a focused on serving all consumed in their own Marc Robins serving them.
When they travel.
When it comes to North America, we we've seen good you know good pickup in.
Both north and south the border in terms of come during the last Oh, no, but I come back to the point, but that's with domestic consumption.
Not with international consumption in each case.
Your last question comes from GE, So with either yes. Your line is open.
Great. Thank you so much I just wanted to ask you about what you meant by production flexibility.
In the press release that gets company currently planned to produce roughly one third fiscal 2020 output.
Is there ability to produce more if necessary or less if necessary.
Uh huh.
Great. Thanks for question and the answer to with wasn't it yes, we're absolutely have the ability to make more or less we have that possibility to change styles. If we see 1000 about another style. So we really do have a lot of possibility here and you know that's why we go through many fashion, where we did and that's one of the competitive and it will enjoy and.
And so what we will who will use that to our advantage this year.
Is there anyway to sort of described like the magnitude of the potential.
Upside or if you want to flex it down you know this year, if you see certain trends.
Understood or whatever.
Specifically defiantly order of magnitude.
I understand that we're oh I'm comfortable that we'll we'll be able to be able to.
You mentioned whatever we need.
Got it okay.
This is an extremely flexible manufacturing model, well frankly fairly concerning the went up and down on that means that in times like this is a very straightforward process for us.
Okay got it thank you so much.
I'd now like isn't the call back over to then you reach for closing remark.
Right well. Thanks, so much. Thank you all as all this particular time do with us here today.
We very much appreciate your interest for support.
Company can figure side, you know states that they say first and foremost be well and we look forward speaking to again soon.
Great there.
This concludes today's conference call you may now disconnect.