Q2 2022 Canada Goose Holdings Inc Earnings Call
[music].
Yeah.
Okay.
Welcome to the Kennedy <unk> second quarter fiscal 2022 earnings call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to breath star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.
Real.
I'd now like to hand, the conference over to your first speaker today.
Eric Burke, Vice President of Investor Relations. Please go ahead.
Thank you and good morning, everyone.
With me are Dani Reiss, President and CEO, and Jonathan Sinclair EVP and CFO.
After prepared remarks from Dani and Jonathan we will take your questions.
These will be limited to one to allow as many as possible to ask questions within the allotted time.
This call, including the Q&A portion.
<unk> forward looking statements.
Each forward looking statement, including without limitation discussion of our financial 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 as well as the risk factors section of our most annual report.
These documents are also available on the Investor Relations section of our website.
The forward looking statements made on this call speak only as of today and we undertake no obligation to update or revise 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.
And available on the Investor Relations section of our website.
With that I will turn the call over to Danny.
Thank you Patrick and good morning, everyone. Thanks for joining us today.
On today's call I will provide an overview of our strong second quarter performance, our accelerating momentum and the deliberate commercial strategy that drove those results.
Cross all channels, we see strong demand positive leading indicators and we feel very good about the business heading into peak season.
And today, we are less than a week away from yet another very exciting milestone for Canada Goose, the launch of our first ever footwear collection.
I look forward to taking you through the collection in greater detail shortly.
Yeah.
To begin I will share an overview of our business performance in the quarter.
Second quarter has exceeded our expectations.
Revenue, excluding <unk> sales from last year grew by 40% and our DTC business continues to deliver strong results with revenue growing by 80% over the last year.
This was fueled by a strong retail recovery in the quarter as well as continued growth across our digital business globally.
Wholesale also had a strong quarter up 25% showcasing the high demand for our brands from our partners.
Looking at the business globally, we are trending up and performing well in every region with mainland China, DTC being a particular standout growing <unk>, 6% versus last year.
Looking ahead, we are very optimistic as we head into our peak season as such we are pleased to be in a position to raise our financial outlook for the remainder of the year, Jonathan will share more details about our financials shortly.
We are entering our strongest selling season with the launch of an exciting also hit a new category.
Canada Goose footwear is one of the most significant milestones in our more than six decade history.
As we've discussed we are bringing a completely new perspective to the category balancing performance and luxury which is the ultimate expression of our lifestyle brand.
For launch we are bringing to innovative styles to market for both men and women.
As part of our product development process, we combine our performance driven intelligent design with rigorous extreme user testing.
Not anything to market until our global team of experts have validated.
Adventurous athletes researchers and cinematographers logged thousands of kilometers and broken ground producing content is to get us to this moment and we have tremendous confidence in our offering.
So <unk> is the most comprehensive providing extreme protection and warmth.
Like its namesake Parker.
The ultimate in performance designed for the harshest environments on Earth.
The journey.
Expertly crafted in Italy is a performance of luxury hiker designed for the trails and the demands of the city.
We know the consumers want their products to play multiple roles. So versatility is essential in this collection our boots work with two were designed with modularity in mind, allowing them to be worn in diverse trend across a wide range of temperatures and weather conditions and for a multitude of activities.
Footwear is a natural next step in our product portfolio something we have been working on for years in a category. We know our customers have been asking for.
Last week, we hosted a limited pre sale for our base camp community offering first access and a chance to shop the collection.
The resolve signal strong demand with 10% of the collection selling through and only one week.
The collection will launch globally with Akimbo campaign true to our brand through our live in the open storytelling platform over the years, we've shared stories of resilience and perseverance and with this campaign will continue to explore the real stories of real people starting next week, you'll see our heroes Romeo Beckham, certain Fox and Jordan to share their stories in a way that is.
<unk>, what it means to be a force of nature I am very excited to be at this moment and I look forward to sharing more with you next quarter.
As a function first performance luxury outerwear brand, we strive to create products that lived up to our purpose to keep planet coal and the people on it.
We've always believed that making our products, where they are supposed to be made and not chasing margins in low cost environments, what a sustainable decision.
That decision became and continues to be a competitive advantage.
And in today's environment, we have seen just how much of an advantage it truly is.
Despite losing production for three months last year, we are not short supply weaknesses of unprepared supply chain has been exposed unlike others the flexibility of our supply chain in an asset and the dynamic environment that we face today because of this we do not expect any material revenue headwinds relating to supplier or shipping constraints.
This fall or winter.
Changing gears last week, we opened our first retail store in California at the South Coast Plaza in Costa Mesa.
This new store is a testament to our expanded category offerings in our lifestyle assortment and we have seen strong demand indicators since opening.
This store is home to our first ever snow room in the United States. The Snow room is a next generation.
Lord willing quadrant it stimulates the snowstorm daily temperature, reaching as low as minus 20 degrees Celsius.
I'm really excited to bring our authentic brand experience to our fans existing and new <unk>, and California and to continue to drive experiential innovation across our stores globally.
We are.
Many of our strategic retail expansion in key markets around the world.
And as you know, we are leaning harder than ever before into our DTC business to drive our growth.
In just seven years DTC is growing exponentially to become nearly 70% of our projected total revenue this year and through the pandemic, we have purposefully accelerated that trajectory.
Retail traffic and store productivity continues to be much stronger than last year driving the lion's share of our DTC growth.
Same time.
We see strong growth across our digital business versus last year as well.
Both our retail and our digital businesses are stronger than we were at this time last year and looking forward. This October we saw a strong acceleration across our DTC network globally, we consider that as a positive indication of the months ahead.
To close our results this quarter clearly show that we have a unique value proposition. We know performance renewable for was a trend and not many brands have that advantage, we continue to see accelerated demand across all channels and all regions.
And it's clear that Canada goose lifestyle is resonating with consumers.
All over the World and I am pleased to see our business in such a good position.
Peak season.
And with that I'll turn it over to Jonathan to go over the details of our financial results and outlook.
Thanks, Doug and good morning, everyone and thank you for joining us.
The second quarter exceeded our expectations and our performance has continued to accelerate we're pleased to be in a position to raise our outlook.
Back to you on where we are today there are three key things stand out.
Firstly across our business, we see strong leading indicators of demand.
Secondly, the unique flexibility of our supply chain is an incredible advantage.
Certainly.
We have the right foundations in place for an outstanding fiscal 2022.
Starting with the top line total revenue increased by 40% to $233 million, excluding temporary PPE sales in the comparative quarter.
The demand strength, we're seeing is much more balanced than it was at this time last year.
The comments I made in China continued to be major contributors.
The rest of the business is now moving in the same direction.
Our wholesale partners are requesting product earlier than last year.
Retail stores are more active.
All of our geographies.
At a channel level wholesale revenue increased by 25% to $148 million.
This reflects a reversal of unusually late order shipments last year due to the pandemic.
In a normal operating environment fulfilling our commitments to our partners early drives a better shopping experience for the consumer as well as higher sell through.
DTC revenue increased by 80% to $83 million.
Growth from existing stores drove the majority of the increase with traffic and productivity well above last year.
Retail closures were not a significant factor in the current or the comparative period.
Our retail performance was complemented by 34% e-commerce growth.
All geographic regions delivered total revenue growth greater than 30%, excluding the impact of temporary PPE sales.
This is particularly encouraging given that the stages of retail traffic recovery are still quite varied across these markets.
Mainland China was a standout performer with DTC revenue growing by 86% on top of the strong performance last year and the degree of physical disruption.
This reflects our momentum and our runway and one of the worlds most important markets.
Moving on to gross margin wholesale came in at 49, 4%, while DTC was 73, 7%.
In wholesale we are selling in core products.
This gave us a significant uplift from pricing and mix.
We also benefited from lower distributor sales, which we had shipped earlier in the year as discussed on our last call.
DTC gross margin was lower than expected due to outperformance in earlier stage statesville product.
And our peak trading months I'll sell through mix is expected to shift back to higher margin styles.
We expect this to drive a meaningful uplift from.
From the pricing tailwind, we've already seen in the wholesale.
As a result of our expectation for DTC gross margin remains in line with annual historic levels.
As expected total SG&A was $101 million up 62% from last year.
This was driven by incremental spend and demand creation and strategic initiatives, including a timing shift from Q1.
We announced an inflection point for margin and profit.
For the remainder of the year, we expect SG&A growth will decelerate.
The incremental revenue from these investments will drive further leverage and the uplift from DTC mix shift will be more impactful.
You can already see the beginnings of this in Q2.
Despite outsized temporary SG&A growth adjusted EBIT margin was just under last year at six 9% and adjusted EPS grew 20% 12 chat.
Moving beyond this quarter, we continued to see broad based demand across our business.
As the vertical manufacturer, we are not supply constrained in today's environment.
We have a strong position and staged finished goods.
We have the flexibility of in house production.
In this way, we can quickly capitalize on upside in PTC.
And wholesale at a time, when many brands delaying and canceling orders with delivering on our commitments.
Getting products to our policy uncertainty this puts them in the best possible position for fall winter.
As we complete shipping the remainder of our order book, we are in a good position to consider high quality real demand if it let's.
Materializes.
This is being captured.
Upgraded outlook.
The resilience of our supply chain extends beyond our own manufacturing.
As Tony said, we go to the best manufacturers in the best places for treatments.
In a year with massive disruptions to global footwear production, we are proud to be bringing our first collection to market on time and as expected volumes.
This is a testament to both our team and our partners.
Finishing up with our upgraded outlook for fiscal 2022.
As we enter into a peak trading months, we now expect the following ranges for all key metrics.
Total revenue of between $1 135, and $1 $1 $75 billion. This assumes approximately 70% DTC mix with mid single digits wholesale revenue growth.
Adjusted EBIT of between 186 and $208 million.
Representing an adjusted EBIT margin of 16, 5% to 17, 7%.
And lastly, adjusted earnings per share of between $1 17.
Thats all those 33.
And the macro environment. This outlook assumes no material increase in pandemic.
Our economic disruptions relative to what we're experiencing today.
Various bulk.
In terms of what's embedded for Q3 remember the shift to DTC means accelerating growth through both Q3 and Q4.
Our wholesale order book has largely been shipped earlier this year.
We expect SG&A to grow at a rate.
Slightly less than total revenue complemented by a gross profit uplift from DTC mix.
Putting all this together it will drive significant profit growth year over year.
At the onset of the pandemic, we talked about coming out the other side stronger.
Strategically and financially we are well on our way we have rapidly advanced our DTC journey, alongside more focused and elevated wholesale distribution.
We have continuously raise the bar on price points, and we have become a true lifestyle brand in the eyes of the consumer.
Our unit basis received growth versus pre pandemic levels and looking beyond this year the recovery of international retail traffic represents huge additional upside.
We appreciate your interest and support in this journey.
Look forward to updating you on our progress in our next call.
With that I'll pass over to the operator to begin Q&A.
Thank you and as a reminder to ask a question. Please press Star then the number one on your telephone keypad again that is star one thing I'd telephony and the interest of time this being the only one question and with both.
Additional questions, we'll pause for a moment to compile the Q&A roster.
Your first question comes from the line of.
<unk> from Wells Fargo. Your line is open.
Hey, good morning, everyone.
I guess, Danny and Jonathan.
I'd love some higher level.
Especially on the <unk> two H dynamic this year I know, there's a lot of volatility over a multi year.
No.
If you look back 24 months.
First half I think the revenues were down 20% on a two year basis the implied.
Back half is up some something much more meaningful and I think up 40% to 50% can you just kind of walk us through what's giving you that confidence it just looks like a big hockey stick. So anything you can kind of tell us to get us more comfortable with where your confidence comes from that the business will be able to accelerate meaningfully in the back half. Thanks. So much.
Yes, absolutely. Thank you.
Good morning.
This is this is a major strategic change for us and it's actually a really good thing now the pandemic. It is rapidly accelerating DTC journey and alongside that we have decided to resize our wholesale business. So we do not view wholesale being in line with two years ago as a winning.
Winning strategically.
Phil.
A reasonable comparison.
So if you think about her.
How that manifests itself naturally shifted our revenue base.
Yes.
The third and fourth quarters of the fiscal which is the peak months for sell through.
Q2, as a characteristic is driven by wholesale sell it and then 70 70 pullback that we strategically limit what we sell in that channel.
As you see in our upgraded.
Our guidance for fiscal 'twenty, two we do expect revenue to be well above fiscal 'twenty, it's much more.
It comes with much higher quality distribution and an absence of international traffic, which represents as I said in my prepared remarks further upside beyond the current year.
Okay.
And your next question comes from the line of Jonathan Komp from Baird. Your line is open.
Yes, hi, good morning, Thank you.
Could follow up on the guidance.
Thinking across the channels could you maybe just share more across DTC and wholesale if one is driving more of the upside than the other how to think through that and then.
The trend Youre seeing in D. C. How is that shaping your outlook and your thoughts on that store productivity recovery and what the sustainable e-commerce growth rates could be.
Thanks, Jonathan.
I think let's start with the question about the upside so obviously within the context of the.
The guidance we've upgraded our.
Expectations on wholesale but essentially that's about.
Product was either already shipped over largely shipped within within Q3. Therefore, the range itself is really driven by by DTC before.
Now when it comes to.
To DTC.
We are clearly seeing recovery in the in the store productivity.
We're not back to pre pandemic levels.
Well on our way and Thats really important certainly compared to last year. It's like a day that said we're also consolidating on the on the E Commerce advances that we made last year.
So we're very pleased with the shape and the way in which this development.
Great. Thank you.
Thank you and your next question comes from the line of Michael Binetti from Credit Suisse. Your line is open.
Guys. Thanks for taking our questions here two two questions first Danny I'd love to hear.
How the transition to FERC is going into that is a major transition for the product.
And then maybe a jump ball, but in wholesale obviously you guys covered it nice growth there.
Eric you mentioned the wholesale accounts requesting delivery early but you also said the leading indicators look good.
How do you read the early deliveries.
<unk> shift into <unk> that might have that might come out of <unk> on the wholesale side versus just strong.
If the need is there on the wholesale side or did you bake any of that into the mid single digit growth guidance.
Jonathan or any indicators that youre that youre getting pulled on yet for incremental inventory.
Hey, Michael Thanks for your question.
Yeah.
It was very prefer I said before we're very confident that we can transition and continue to be.
The high growth company that we are now as expected our non for park.
<unk> performed well in the marketplace and we're tracking to our plan.
To build on the success that we've had for years with non wholesale accounts without giving us a lot of confidence and we are significantly increasing our outlook. This year and I think that that's a great proof point of that.
Yes, I think when it comes to wholesale obviously, we've upgraded the guidance somewhat.
The demand is very encouraging.
What we're seeing but we have also baked into the wholesale.
Sure.
We will inevitably have some reorders and therefore thats accommodated in the numbers.
Our guidance that we're giving.
Thank you. Your next question is from Oliver Chen from Cowen Your line is open.
Hi, Thank you the footwear launches very exciting if you could speak to wholesale versus direct to consumer launch plans and also as you evolve the assortment and also to help us inform our models. How do you think about the ramp up on the opportunity.
And so as well as strategically.
In terms of the assortment. Thank.
Thank you. These are we're doing this year I've been with us for a long time and we've been planning this for loss for at least three years.
It's very important for us to do it right.
Put in marketplace.
Best in class product.
No.
But designed for them will not be from a financial point of view a significant contributor this year.
It's definitely incredible move for our brand.
Since the start of something that we expect to be meaningful.
Meaningful.
Base of revenue over the long term.
<unk>.
But we can performance lifestyle brand I think we're in a unique position to help to create a new category here and put into the marketplace, something which is truly a performance. We know performance in luxury at the same time I think consumers today are looking for things that they can wear and used in multiple ways.
For purposes, and I think this is as I hope, we provided the highest possible quality level Linda.
Super excited about it.
And if we think about it from a perspective of financial characteristics.
Like whole product that.
We introduced in small volumes.
<unk> has therefore lower gross margins at the outset, it's nothing new we've been expanding into new categories for a long time, and it's something that we expected we fully funded by the tailwind. So we realized in our coal and overtime and this is certainly something where we expect the profitability of the category.
Increased meaningfully as we scale.
And when we think about how we're rolling that out.
It.
It's.
At least initially we are leaning heavily into DTC not surprisingly, but it's why we can right.
Strong mix we are in.
The reasonable number of Influencer accounts hold.
So as well, but ultimately that that low.
That distribution will mature, but <unk> because.
Because it.
Paul will be telling the story to the world to the consumer.
Your next question is from the line of Aegean Lee from Barclays. Your line is open.
Great. Thank you.
Great to hear that October is off to a nice start here.
My question is what are you seeing.
The tourist location the tourist stores by geography, obviously, China coming along very strongly but early read is that North America and European tourist locations. Thank you very much.
Yes, Thanks for your question.
Tourism obviously.
International Tourism is down at this point, we know that in <unk>.
No.
It's unclear exactly when we'll come back fully do that next year thereafter, but we view that as a.
A significant upside to our business.
It was.
International Tourism did contribute a lot of.
A lot of revenue to our overall business in the past and we expected that to come back at some point in the future.
That's not that's going to be very volatile compressed.
Alright, well, thank you very much.
Go ahead.
I was just going to add but we're seeing good growth around the world and we've seen that in the numbers.
Just described.
That's it.
Continuing trend.
Thank you. Your next question is from Omar Saad from Evercore ISI. Your line is open.
Good morning, Thanks for taking my question.
Would love it if you guys could dive into China a bit more.
It sounds like the business trends are very good it's been a controversial market and the luxury segment with different kind of external factors.
Impacting demand over there and remind us where you are on your store journey or E. Commerce journey, both owned E Commerce and Tmall.
And how we should think about that.
Business is a contributor to the overall, especially as we go through the winter and head towards the Olympics.
Yes, Tom.
Our important very strong market for us and growing and accelerating.
<unk>.
We've seen that.
Resident very well there.
Sure.
From a positioning point of view, we are still very small relatively small footprint in China compared to many other brands, we have 18 stores today and.
We're online.
Tmall and now J D as well.
Wechat e-commerce and so.
With our footprint.
Still relatively nascent relative to other luxury brands in China, and so we see a tremendous amount of runway there.
See great affinity for our products among consumers on growing brand awareness, we're still a long way to go so.
We feel that will really well position.
Yes.
Alright.
If we look at it through the lens of existing stores, new stores online, we're seeing great growth across all of them.
The new stores.
Performing exactly as we want them to and we're seeing good healthy growth in the <unk>.
Just install base as well so we're very pleased with the progress of that market.
It gives us a lot of the comparables.
Thank you. The next question is from the line of Jay sole from UBS. Your line is open.
Great. Thank you so much I'm just wondering if it would be possible to give us a little bit of a breakdown of what drove direct consumer growth in the quarter, specifically, how much growth was driven by new stores and then if you look at your existing stores that are in the comp base can you give us an idea of how sales per square foot looks in those existing stores versus prepay.
Dennis levels and then lastly, just also on footwear margins, Dan. If you can just give us a little bit of an idea. What you expect to footwear margins to look like I'm talking about gross margins over time will they be similar to the outerwear margins, whether it be below above.
And how long it would take to ramp to get there any any color would be super helpful. Thank you.
Okay.
I think we.
In DTC in the second quarter, we experienced.
As I said in my remarks, I will rebound in the stores, it's been 90 days compared to last year, where we.
We went through a period of closure and then reopening it was a lot.
We're seeing therefore by good growth in the in the.
Stores that we are in the existing base, we've been opening stores gradually through the quarter.
Therefore.
Our contribution is much much smaller but nevertheless, it's it's also very encouraging in terms of the numbers are doing versus our expectations.
When it comes to <unk>, obviously, we are not yet that pre pandemic levels unless something.
I've said before.
But we are also seeing a healthy recovery.
I think.
I've said, all along we see that as key to our margins will improve in the business.
We're encouraged by the trend.
Sure.
I think when it comes to what.
Gross margins as I said, we've got some inefficiency.
When you start off in any cash for April was no different.
And then as you scale you get the.
Benefits so that at the time.
Thank you.
We experienced in all the categories.
Let's get close to.
Hi.
Power margins, yes, I do do I expect it to be above no I don't.
That's the sort of direction of travel, but that comes at the time and right now we're just super excited with the launch and the initial consumer reaction to it I agree I think I'd like to add.
And.
We have.
We have experience and launching new categories, we have a playbook that we follow and.
Two two.
Our lightweight down started to seven or eight years ago.
<unk> launched that category margins were lower.
And then the normal at the time on today lightweight down represents over 20% of our business and our margins are very healthy and in line with the rest of the business. The same thing holds true for <unk>, which we launched you'll recall approximately four years ago.
And it's now over $45 million in revenue and 40 years and in the margin is tracking well as well. So we have a proven playbook unless it.
Turning categories into getting into them in the right way in a responsible way and authentic where there is right for our brand and.
We are applying the exact same playbook to our footwear launch them gives me a lot of confidence that we.
We are experts at doing so at this point.
Thank you and your next question is from Sam Poser from Williams trading your line is open.
Good morning, Thank you for taking my question.
Two one can.
Can you give us some idea of the magnitude of the price increases you took.
In.
For the fall season for this year and secondly wood.
Would I be.
I assume based on the way the wholesale business is flowing that youre expecting Q3 to be down more than Q4, given the early shipments in it.
And your at once business will probably happen in the fourth quarter that won't be down as much but my thinking about that right.
So I'm going to take those in reverse order just to say, yes, we're pretty aligned with what you're thinking.
Wholesale business I think.
The answer.
On.
Pricing goes to our gross margin.
And that's something that you described frequently that's no different this year.
You have headwind tailwind typically we create headwind tailwind with with pricing and with scale and efficiency.
We had deal with the headwinds.
Investing in new product development as well as <unk>.
Cost inflation.
Typically we've taken.
Pricing in the mid single digits.
Is that different than that.
Then.
Hey, there.
Got it.
<unk> this is another another.
The same experiences.
We have your next question from the line.
<unk> from Bank of America. Your line is open.
Oh, good morning, guys.
Just two quick follow ups I just.
Maybe Amy for short well either for Danny or Jonathan just your inventory position is.
It's close to as high as it's ever been.
And it sounds like demand is strengthening I'm just trying to understand.
Why wholesale.
Would be down.
Given the demand it would seem like you would have a significant opportunity for much stronger wholesale.
Wholesale and then just sort of a second question a follow up on APAC, maybe Jonathan can you can you remind us the Hong Kong store impacts and sort of how that's playing out in your thinking on APAC sales for the back half of this year.
Yes.
So let's take those in the order you also inventory for us.
Inventory to be honest, it's at a higher level at September.
At the end of Q2 than it is.
The end of Q3 Q4, because it's cyclical.
Typically you're building inventory and shipping the inventory cycle through and therefore inevitably youre at the high point. This is no different.
We're very pleased with the amount of that stay tuned as we go.
From the distribution of that inventory to support the business and make sure that we deliver.
The all of the revenue ranges that we're talking about.
Wholesale point of view remember that this is a regulation.
Regulated channel buyouts.
And never have supplies that traveled with everything in the hospital.
This to be a channel where its brand accretive because ISR.
This is in locations, where the physical presence, where we would otherwise not be all because.
It puts us with opinion leaders.
And so that's.
That's why we're in wholesale and we recognize the amount of product that because we want to make sure itself out rather than that are there.
Having created a channel where.
While we get Reorders, we think about that.
Sensitivity.
And if it makes sense, we fulfill them.
We don't because we will always privilege.
Animals over wholesale.
When it when it comes to APAC in particular your question on Hong Kong, The Hong Kong is a very quiet market at the moment.
The business.
Last year was a fraction of what is the <unk> process is starting to grow back.
It's coming from a very low base.
They're very small numbers at this point.
Now I'd like to just add on a little bit about that and not that part would come back to the inventory part.
We.
Our model of manufacturing in Canada being vertically.
Integrated has been and this time very much we feel validated in the sense that we have.
The right amount of inventory that's available.
And often experienced any inventory shortages.
Both raw material inventory and manufacturer mortgage.
For this year and for next year and also the finished goods inventory that we have on hand.
Is there.
This leaves us in a position, where we are where we are well positioned and able to deliver on our commitments and I think thats.
Really.
Happy to be in a position and it.
It's been part of our strategy for a long time and here, we see a plant plant one when it's supposed to.
Your next question is from the line of Nathan and Thats. Your line is open.
Thank you. Good morning can you just maybe talk a bit more about the initial response to some of the more recent product introductions and colors collaborations is from the line and how old are resonating with customers in North America in particular, and if you could just talk a bit about the performance in Canada, including <unk>.
And Youre seeing there maybe relative to pre pandemic levels in Q3 to date. Thank you.
Yes, our new our new cell.
Very very pleased with the way the market has responded to them.
Our.
I can speak about many different categories.
As I spoke earlier about how <unk> grown in house.
For selling selling through that.
Really really well and we have core styles new styles coming.
Every season.
Our collaborations are doing really well our most recent annual chain collaboration dropped.
As performed.
Very well.
Our Pascal collection.
Which is.
Which was a portion that.
Hit the market a few weeks ago has has also performed extremely well.
And in many many cases.
Crossing the Cypress collection, which.
An expansion on our way down collection.
We do more sustainable fabrics also has been.
Big hits and.
I'll talk about footwear as well I mean, just look at the pre sale that we did to our basecamp community to sell through 10% in one week.
Give me a tremendous amount of confidence in the demand for that product category.
Yes, I think when it comes to.
The sales performance that we're seeing.
<unk>.
When it comes to North America with very encouraged.
We've seen really strong performance.
In the U S and actually also now in Canada, it's coming it's coming back nicely.
This is pretty much in both of these markets as domestic demand expressed as either Canada in Canada or the U S. Within the U S as being the dominant.
And that is a huge testament to brand health.
Ill really comfortably above last year with very encouraged by that.
Your next question is from the line of Camilo Lyon from <unk>. Your line is open.
Thank you good morning.
<unk>.
Ask a question on the U S store opening opportunity for you.
I'm curious about that that California store opening I know, it's early days, but.
Where do you see the main infill opportunities from a store opening perspective in the U S and as you go further west.
Do those stores come online at a different margin rate than your east coast or more cold.
Snowy or markets, where there is a greater sell through of heavier parkas and higher margin markets.
Thank you for your question well, what I can tell you about our north American stores, and we do have a very healthy pipeline of potential.
Potential store openings and locations in North America, obviously, we'll disclose those as we firm up but.
Im very encouraged around look at the opportunities that we have before us.
The China traffic in the captive sales volume opportunities that we have and also the opportunity to increase brand awareness and places like that.
The West Coast in general.
Opening in South Coast Plaza.
Important milestone for us and I know, we have existing fans out there make new ones too and we have new products.
And different products for different climates as well so we don't want we don't need to be in.
Cold weather market to sell coal politically will also.
We also have.
We also have wells will have the right clothing.
For multiple kinds of markets and there is one sales force further so far has been really strong and our strengths using as a signal of a very strong demand in that marketplace.
I think when it comes to.
Thank you, Rob West coast stores versus East coast.
The West Coast.
<unk> was the Bachelor level, it's not unique climate that we have.
Those stores around the world and clients like that and we enjoyed good levels of sales that sustained global times and therefore, the margins and we don't see any reason why.
We don't see any reason why we shouldn't do.
We shouldnt see that.
In the U S and data to think about it in Canada, We've got a store in Vancouver, We're super happy with how that folds to that's clearly understood.
While the segment.
Thank you and your next question is from the line of Bill from <unk>. Your line is open.
Good morning, and thank you so much for taking our question.
And in your prepared remarks, you talked to an inflection point for both margin and profit in the second half I was wondering if you could share your thoughts on your current view on the path to recovery with 20% plus profit margin relative to this year 16, five to $17, 7% outlook and maybe.
Okay.
In relation to that can you provide a little bit more color on what youre seeing in terms of unit and raw material costs, which have been.
The topic, a talking point for aircraft across the rest of the sector. This quarter. Thank you.
Sure.
I think the.
We've got form above the 20% margin level.
We.
I mentioned, when we talked last quarter.
Paul.
Alright confidence about.
Getting that very important this is a business with.
A really powerful retail model complemented with a strong online mobile and <unk>.
That's already going to be 70% of the business. When that's firing on all cylinders. This is this is a business thats going to be very profitable and so this is this is it.
Positive step in that direction I think when we think about gross margin.
Right.
Raw material cost inflation to be honest.
As I've said before the overall gross margin, we're not seeing anything egregious and we.
We are very focused on.
Managing our channel gross margins.
The DTC.
DTC and mid to high 40 is a wholesale platform festival.
While we expect to be that's why we are and thats.
That's the way in which we manage it we're not seeing anything inquiry, just simply wont withhold it.
Yes.
Thank you we have your next question from the line of Mark Petrie from CIBC. Your line is open.
Hey, good morning.
I just wanted to ask about the product mix can you give us some more detail about the non parka mix in Q2, I know it falls from Q1, just seasonally but any commentary just with regards to the direction of that would be appreciated and do you think that this could become a bigger part of your wholesale business.
In the foreseeable future or do you think that that channel will remain very heavily skewed towards markets. Thanks.
So I think if we.
If we think about.
So the mix.
Clearly as you move through the quarter.
To move into the colder weather and therefore, Pakistan all.
All summer season doesn't install our spring season more accurately does not stop at the end of.
It's something that continues through July and August and you had a sense promise of how that mix.
Stacked up.
When we talked about our performance in Q1 and that continued for a good part of Q2, then we see deposits taken yet.
But that said still.
You still got to remember that we continue to sell the full mix mix of our.
<unk>.
Of our categories all year long in fact, the busiest months of the year for our lightweight down on offering is actually December so.
Easy to assume that some of these things only seven.
And in some months and that's not the case.
And for the same reason therefore, as we think about wholesale prices that is.
An area, where we also see.
<unk> penetration of unknown Parker.
Products as well, we don't see that as only a pocket channel how does that.
To remember.
We have more products than we have ever had before with more products that are selling really well than ever before and that makes the mix itself become more of a dynamic thing.
That is a very good thing and a very healthy thing for the business and.
And.
I think it's important to factor that in when we think about it too.
Thank you and there are no further questions I would now like to turn the call back to Daniel <unk>.
President and Chief Executive Officer for final remarks. Please go ahead.
Thank you all for joining us today.
We go on we would like to take a moment to update you on the progress we continue to make against our sustainable impact strategy as part of our human nature platform were driven by our purpose to keep the earth cold and the people on it warm and today I am pleased to let you know that we have cross another important milestone on our roadmap months ahead of schedule.
As of today, we have achieved certification under the responsible down standard.
This was a monumental endeavor.
<unk> carried out over years and throughout the pandemic with the steps we are doing other responsible down certified global manufacturers, who have made the responsible choice to embrace sustainability and animal welfare.
Thank you so much to the team in Canada use over time to make this happen and thank you all for joining us today.
Look forward to talking to you again next time.
And this concludes today's call.
Thank you all for participating you may now disconnect.
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