Q2 2022 Canada Goose Holdings Inc Earnings Call
Your telephone.
Be advised that the conference is being recorded.
If you require any further assistance. Please press star zero I would now like to hand, the conference over to your first speaker today Patrick.
Burke Vice President of Investor Relations. Please go ahead.
Thank you and good morning, everyone.
With me are Dani Reiff, 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 in 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 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.
Total 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 86% 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 detail 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 style to market for both men and women.
As part of our product development process, we combine our performance driven intelligent design with a rigorous extreme user testing.
Not anything to market until our global team of experts have validated it.
Adventurous athletes researchers and cinematographers logged thousands of kilometers and broken ground tuition continents to get us to this moment and we have tremendous confidence in our offering.
<unk> is the most comprehensive providing extreme protection and warmth.
Like its namesake parka.
Ultimate performance designed for the harshest environments on Earth.
The journey.
Expertly crafted in Italy is a performance in luxury hiker designed for the trail and the demands of the city.
We know the consumers want their products to multiple roles. So versatility is essential in this collection our boots work with the 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 Basecamp community offering first access and a chance to shop. The collection early resolve signal strong demand with 10% of the collection selling through and only one week.
The collection will launch globally with a campaign 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 story of real people starting next week, you'll see our heroes Romeo Beckham, Serena Fox and Jordin tootoo share their stores in a way that is.
<unk> needs 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.
We made and not chasing margins in low cost environments, what a sustainable decision Dr.
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 and the asset and the dynamic environment that we face today because of this we do not expect any material revenue headwinds relating to supply 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 offering and 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 the next generation of our award.
Lord willing colder 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 and California and to continue to drive experiential innovation across our stores globally.
We have continued 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 has grown exponentially as it should become nearly 70% of our projected total revenue this year and through the pandemic, we are 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 at.
At the 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 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. We knew it before was a trend and not many brands have that advantage. We continue to see accelerating demand across all channels and all regions and it's clear that Canada goose lifestyle is resonating with consumers all over the <unk>.
World and I am pleased to see our business in such a good position entering 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.
Reflecting on where we are today there are three key things that stand out.
Firstly across our business, we see strong leading indicators of demand.
Secondly, the unique flexibility of our supply chain is an incredible above age.
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 are seeing is much more balanced than it was at this time last year.
E Commerce and mainland 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.
In our retail stores are more active in all of our total phase of growth.
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.
Closures were not a significant factor in the current or the comparative period.
Our strong 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 world's most important markets.
Moving on to gross margin wholesale came in at 49, 4%, while DTC was 73, 7%.
In wholesale we were selling in core products assists. The head 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 the pricing tailwind.
<unk> 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.
62% from last year.
This was driven by incremental spend in 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, we're delivering on our commitments.
Getting products to our partners earlier 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 reorder demand if it materializes.
This has been captured in our 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 not the 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.
Apartments.
Finishing up with our upgraded outlook 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 35, 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, five to 17, 7%.
And lastly, adjusted earnings per share of between $1 17.
The total of 33.
And the macro environment. This outlook assumes no material increase in pandemic.
Economic disruptions relative to what we're experiencing today.
Various markets.
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 stir.
Strategically and financially we're well on our way we have rapidly above of 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 and we look forward to updating you on our progress in IMAX Corp.
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 your telephone.
And indeed interest of time, please limit yourself to only one question and with both additional question, we'll pause for a moment to compile the queue.
Any roster.
Your first question comes from the line of Ike.
Rich <unk> from Wells Fargo. Your line is open.
Hey, good morning, everyone.
I guess, Danny and Jonathan.
I'd love some higher level.
<unk> on the <unk> dynamics at Sierra I know Theres, a lot of volatility over a multi year.
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 something much more meaningful and I think up 40% to 50% can you just kind of walk us through what's keeping you got 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.
I'll, let Phil answer that.
A reasonable comparison.
So if you think about her.
How that manifests itself naturally shifts on 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 in in the 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 revenues 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.
Thanks, guys.
And your next question comes from the line of Jonathan Komp from Baird. Your line is open.
Yes, hi, good morning, and 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 or how to think about and then.
The trend Youre seeing in D. C. How is that shaping your outlook and your thoughts on the store productivity recovery and what the sustainable e-commerce growth rates could be.
Okay.
Thanks, Jonathan.
I think let's start with the <unk>.
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 shaped with an acute within Q3. Therefore the range itself is really driven by by DTC performance.
Now when it comes to that.
DTC.
Clearly seeing recovery.
In the store productivity.
Not back to pre pandemic levels.
In a way that's really important certainly compared to last year.
Today.
That said, we're also consolidating on the only <unk>.
Commerce advances that we made last year and I'm seeing further thoughts. So we're very pleased with the shape and the way in which this is evolving.
Great. Thank you.
Thank you and your next question comes from the line of Michael Binetti from Credit Suisse. Your line is open hey.
Hey, guys. Thanks for taking our questions here two questions first Danny I'd love to hear.
How the transition to FERC is going I know thats, a major transition for the product.
And then maybe a jump ball, but in wholesale obviously you guys covered it nice growth. There you mentioned the wholesale accounts. Your question delivery early but you also said the leading indicators look good.
How do you read the early deliveries.
Potential shifts into <unk> that might have that might come out of <unk> on the wholesale side versus just strong underlying demand that you mentioned.
Being able to replenish.
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 at youre getting pulled on yet.
Incremental inventory.
Hey, Michael Thanks for the question.
It was very prefer I've said before we're very confident that we can transition and continue to be.
The high growth company that we are now as expected are known for.
<unk> performing well in the marketplace and we're tracking to our plan.
To build on the success that we've had for years with non for 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 saying, but we have also baked into the wholesale.
We will inevitably have some reorders and therefore thats accommodated in the numbers and the guide.
So we're getting.
Thank you. Your next question is from Oliver Chen from Cowen Your line is open.
Hi, Thank you the footwear launch very exciting if you could speak to wholesale versus direct to consumer launch plans and then also as you evolve the assortment and also to help us inform our models.
Do you think about the ramp up on the opportunity.
Financial as well as strategically.
In terms of the assortment.
Thanks, Oliver Yes for Us for me, it's almost the same things that we're doing this year Ivan.
With us for a long time and we've been planning this for last for at least three years.
Very important for us.
In total.
Sure.
Put in marketplace.
Best in class product.
No.
By design for US we will not be.
Financial point of view a significant contributor this year.
It's definitely move for our brand.
Since the start of something that we expect to be meaningful.
Meaningful.
Base of revenue over the long term.
Sure.
But.
Bringing 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 and multiple purposes and I think this is what we provided at the highest possible quality levels.
Linda I'm Super excited about it.
And if we think about it from a perspective of the financial characteristics.
Like whole product.
We introduced in small volumes footwear 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 that we realized in our coal and overtime.
This is certainly something where we expect the profitability of the category to increase meaningfully as we scale.
And when we think about how we're rolling that out.
It.
<unk>.
At least initially we are leaning heavily into DTC not surprisingly because while we can curate the offers.
The most strongly.
In a.
Total number of Influencer accounts.
Wholesale as well, but ultimately that that low.
That distribution will mature, but always DTC that because at some point it will be total storage as well 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 do you.
The tourist location the tourist stores by geography, obviously, China coming on very strong a little bit.
Early read 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>.
Got.
It's unclear exactly when we'll come back fully do that next year thereafter, but we view that as a <unk>.
Significant upside to our business.
It was.
International Tourism did contributed.
A lot of revenue to our overall business in the past and we expect that to come back at some point in the future.
That's not that's going to be very impressed.
Okay. Thank you very much.
Go ahead.
I was just going to add but we're saying good growth around the world and we've seen that in the <unk>.
<unk> disclosed that.
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 Chimes, very important very strong market for us and growing accelerating.
We've seen that.
This resonates very well there.
I think that.
From a physician point of view, we're still a 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 do all in Wechat E Commerce, and so now 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 amongst consumers on growing brand awareness with still a long way to go so we're.
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 in 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 will 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. They are in the comp base can you give us an idea of how sales per square foot looks in those existing stores versus pretty <unk>.
Dennis levels and then lastly, just also on footwear margins, Dan if you could just give us a little bit of an idea. What you expect the 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 would take to ramp to get there any any color would be super helpful. Thank you.
Okay. So I mean I think we.
And DTC in the second quarter, we experienced.
As I said in my remarks.
And the stores.
The 19 day compared to last year, where we went through a period of closure and then reopening it was lots left we're saying therefore by good growth in the.
The stores that we are in the existing base, we've been opening stores gradually through the quarter.
Therefore, there.
Contributions much much smaller but nevertheless.
It's also very encouraging in terms of the numbers.
<unk> versus our expectations.
When it comes to sales density obviously, we are not yet.
Okay.
I've said before.
We are also seeing a healthy recovery.
And I think.
I've said, all along we see that as key to our margins will improve in the business.
We encourage bottom trend.
Yes.
I think when it comes to footwear.
Gross margins as I said, we've got some inefficiency.
You start off and any cash for April is no different.
And then as you scale you get.
So that at the time.
That's very different than what we've experienced in other categories.
Get close to.
Sure.
Core 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 over time.
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.
Sure.
<unk>.
We have a.
We have experience and launching new categories, we have a playbook that we follow and.
Two our lightweight down started to seven or eight years ago and we.
Launch that category margins are 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.
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 and I'm watching and categories into getting into them.
The right way in a responsible way in an authentic way those rights for our brand and.
We are applying in the exact same playbook to our footwear launch them gives me a lot of confidence that where we are.
Extra students 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, what.
Would that 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 we are at once business will probably happen in the fourth quarter that won't be down as much but am I thinking about that right.
So I'm going to take those in reverse order just to say, yes, we're pretty aligned with with your thinking.
Our 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.
You can see that.
Yes.
<unk>.
Investing in new product development as well as cost inflation.
Typically we've taken.
<unk> in the mid single digits.
Is that different than that.
And then in that space.
Got it.
Fundamentally this is another another.
Yes, the same experiences.
We have your next question from the line of Rob.
The arms from Bank of America. Your line is open.
Good morning, guys, just two quick follow ups I just.
Maybe Amy well.
Well either for Danny or Jonathan just your inventory position as I think as 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 first.
Inventory to be honest.
At a higher level at September.
At the end of Q2 than it is at.
The end of Q3 Q4, because it's cyclical.
Total typically you're building inventory and shipping inventory instead of going through and therefore inevitably youre at the high point. This is no different.
We're very pleased with the amount of debt stay tuned we've got 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.
From a wholesale point of view remember this is a great.
Regulated channel buyouts.
And never have supplied the travel with everything in the hospital.
This to be a channel where it is Brian to 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.
Bob.
So we.
That's why we're in wholesale and we recognize the amount of product that because we want to make sure it felt out rather than that.
The channel where.
Why are we get Reorders, we think about.
Sensitivity.
And if it makes sense, we fulfill them.
If not we don't because we 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 process is starting to grow back.
It's coming from a very low base.
They're very small numbers at this point.
Yes ill 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.
We have the right amount of inventory that's available.
Often experienced any inventory shortages.
Both raw material inventory manufacture mortgage.
For this year and for next year and also the finished goods inventory that we have on hand.
As is.
Leaves us in a position where we are.
We are well positioned and able to deliver on our commitments I think.
Yes.
Happy to be in that position and.
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.
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 introduction colors collaborations is from the line and how old are resonating with customers in North America.
Laura.
If you could just talk a bit about the performance in Canada, including changes in there maybe relative to pre pandemic levels in Q3 to date.
Yeah, our new our new cross sell.
Im.
Very very pleased with the way the market has responded to them.
Yes.
And speaking with many different categories.
We're in as I spoke earlier to how <unk> grown and how.
We're selling selling through that.
Really really well.
We had core styles.
While shipping and receiving <unk>.
Collaborations are doing really well most recently angel Chang collaborations dropped and.
As performance.
Very well.
Pascal collection.
Which is.
Which was.
Washington that they hit.
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 the way down collection.
We will be more sustainable fabrics also has been.
Big hits and.
I'll talk about Florida, 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 too.
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, we are 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.
Just wanted at.
Ask the 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 colder.
Snowy in markets, where there is a greater sell through of heavier parka is in higher margin markets.
Thank you for your question I can't one I can't 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.
Disposal as we firm up but.
Im very encouraged around look at the opportunity that we had before us.
The kinds of traffic in the captive sales volume opportunities that we have and also the opportunity to increase brand awareness in places like.
The West Coast in general.
Opening in South Coast Plaza.
Important milestone for us and I know, we have we missed we found out that we will make new ones too and we have new products.
Different products for different climates as well so we don't want we don't need to be in.
Cold weather markets assault Covid waterfall that will also.
We also have.
We also have the <unk>.
<unk> clothing.
For multiple kinds of markets and there is one sell through further so far has been really strong and <unk> at 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.
With the West Coast is is with the Bachelor level, it's not unique climate we have.
Other stores around the world and climate slide.
We enjoyed good levels of sales that <unk> total times and that for good margins and we don't see any reason why.
We don't see any reason why we should.
We shouldnt see that.
And David if you think about it in Canada, and we've got a store in Vancouver with Super happy with how that folds to that's clearly in the civil.
Assignment.
Thank you and your next question is from the line of Rich Your line is open.
Good morning, and thank you so much for taking our question.
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.
Thank you.
We've got form above the 20% margin level.
And we.
I mentioned, when we talked last quarter.
So Paul.
We are very confident about.
Getting back to.
<unk>, 20% to 20% pop beyond 20% I think thats very important this is a business with.
Sure.
Really powerful retail model complemented with a strong online mobile and <unk>.
That's already going to be 70% of the business, but not firing on all cylinders. This is this is a business is going to be very profitable.
We also see ourselves moving comfortably into the 20 percents over time.
And so this is this is a positive step in that direction I think when we think about gross margin and <unk>.
Unit.
Raw material cost inflation to be honest as I've said before.
Overall gross margin, we're not seeing anything egregious and we we are very focused on.
Imaging all channel gross margins up to the Hill.
Historical levels mid sentence with DTC and mid to high 40 is a wholesale thoughtful festival, where we expect to be that's why we are in that.
That's the way in which we manage it we're not seeing anything ingredients, if we work with total.
Thank you we have our 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 regard 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 toward pockets.
So I think.
If we think about.
The mix clear.
Clearly as we move through the quarter.
To move into the colder weather and therefore parka stops the toughest.
All summer season doesn't stop our spring season will more accurately does not stop off the <unk>.
It's something that continued through July and August and you had a sense promise of how that mix.
Stacked up.
When we talk about our performance in Q1 and that continued for a good part of Q2, then we see deposits taking it.
And but that said still.
Still got to remember that we continue to sell the full mix mix of our.
<unk>.
Categories, all year long in fact, the busiest months of the year for our lightweight down offering is actually in December so it's.
Easy to assume that some of these things only seven months and that's not the case.
And for the same reason therefore, as we think about wholesale boxes.
An area, where we also see.
<unk> penetration of our non parka.
Products as well, we don't see that as O'meara Parka channel.
How does that.
Yes.
To remember that we have more products than we have ever had before with more products that are selling really well than ever before and that makes it the mix itself become more of a dynamic thing.
I said it 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 you think about it too.
Thank you and there are no further questions I would now like to turn the call back to Dan Mcgee, President and Chief Executive Officer for final remarks. Please go ahead.
Thank you all for joining us today before we go I 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.
We are driven by our purpose to keep the Earth cold and the people on it warm.
And today I'm 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 carried out over years.
And throughout the pandemic with the stats with you and 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 who work tirelessly to make this happen and thank you all for joining us today.
Look forward to talking to again next time.
And this concludes today's call.
Thank you all for participating you may now disconnect.
Okay.
Okay.
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Okay.
Yes.
Yes.