Q1 2024 Canada Goose Holdings Inc Earnings Call
Thank you for standing by and welcome to Canada Goose first quarter 2024 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation that will be a question and answer session to ask a question. During this session you'll be depressed star one one on your <unk>.
On the phone if your question has been answered and you'd like to remove yourself from the queue simply press Star One one again as a reminder of today's program is being recorded and now I'd like to introduce your house with today's program at Robin Vice President Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone with me or January Chairman and C. O. Jonathan So Claire E V. P. N C F O and Kari Baker precedent.
After Danny and Jonathan's prepared remarks, we will open it up for your questions are called today, including Q&A portion includes forward looking statements.
Each forward looking statements, including without limitation discussion of our financial outlook is subject to risks and uncertainties that could cause the actual results to differ materially from those projected.
Certain materials factors and assumptions were considered and applied and making these forward looking statements.
Additional information regarding these statements doctors and assumption is available in our earnings press release issued this morning as well as in our filings with the U S and Canadian Securities regulators.
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.
We reported in Canadian dollars. So all amounts to discuss today are in Canadian dollars unless otherwise indicated.
Please note that financial results described on today's call will compare first quarter results and did July 2nd 2023 with the same period ended July 3rd 2022, unless noted otherwise.
With that I'll turn the call over to Danny.
Thanks, and good morning, everyone shuts off the year with another strong automatically healthy consumer demand for our products.
Q1 revenue grew 21% over the same period last year to $84.8 million as more consumers around the world saw out our products for their style performance and unmatched passenger.
Later, Jonathan will discuss our first quarter financial performance and our expectations for the second quarter.
Today I want to focus on the progress we've made in Q1 across our three strategic colors, probably consumer focus growth building our D. C C network and expanding our product category.
New growth underneath your channel with strong and two one up 60% year on year.
During the quarter, we grew the number of customers shopping in our stores across our major months, but it is a specific which doubled from the same period last year as traffic return all of the removal of Covid restrictions.
We are focused on creating great customer experiences that attracted customers, who are well known brand and keep loyal fans coming back for more.
Two one we launched AI driven support e-commerce sites.
To offer real time self serve to our customers.
Already see benefits from this initiative with over 25% of incoming customer conversations received and a quarter positively resolved through this tool.
Initiatives like this would be unlucky enough data through a CRM program will help us better engage with customers and provide elevated experiences.
Are women in January customer segments, as a part of a consumer focus growth plans.
You wanted the number of women shopping with a screw in the high teens over the same period last year, a revenue share from January increased slightly from an already strong base within our overall mix.
We continue to apply our long standing for a boat to remain top of mine and culturally relevant to our women <unk> customer segments to help build momentum for a bigger selling season.
And Q1, we sponsored Canada's first ever W. N B a event, which was brought broadcast across North America.
Pieces also appeared in front of the camera and some of the biggest film and T V programs. This year.
Stablish partnerships and entertainment industry.
These include it had lost so fast X the lettuce and the fast and furious franchise in two different servers are are popular Netflix series never have I ever had 11.5 million views in its first week.
Moving to our next strategic pillar building, our DTC network.
<unk> D T C com sales growth was up 28% year over year and strong across all of our key markets with especially a robust performance Macau and Hong Kong fuelled by the return of Chinese tourists.
Did you see growth of this order across all of our markets <unk> reinforces our confidence and our global retail network.
Cause they're lost earnings call, we open for new permanent stores screaming are permanent store count to 55 stores.
These stores are in Dublin Las Vegas.
I'll be with near Seattle.
At the Beverly Center, which opened in July .
We also re imagine and relocated or Beijing suddenly to the store to provide a new level of customer experience.
This flagship stores, our largest store in the world and includes a VIP lounge feature an original Canadian art.
Roof Terrace Garden archive practice place and are still room, which features video and sound to provide a full arctic experience <unk>.
Traffic and sales have exceeded our expectations and his first few weeks of opening.
We also open to pop up stores in the U S Miami and Anchorage.
These are both big tourist I was running a local and international demand.
Especially of a strong local following Alaska state, where our brand has a long history.
Turning to digital Commerce, a retail store strategy as part of a broader plan to create a seamless omnichannel experience.
One to three of the customer journey from discovery of our brand to converted a a sale to the post cell experience.
That happens on for offline.
Digital Commerce is an important part of it.
We continue to invest in both our front and back and ecommerce capabilities.
On the front end in Q1, we tested optimizations across mobile and desktop devices to reduce friction helping customers more easily find the process love and make the purchase.
We're seeing some early positive conversion results.
Which will continue to learn from and Bill for.
For the backend.
Advancing initiatives to improve digital merchandising industrialization overturns process to enhance operational efficiency.
And the overall customer experience head of the main selling season, and the second half of the year and beyond.
Turning to our third strategic pillar expanding product categories.
One appeared all accessories, Vermont, our highest gross categories, increasing their share of revenue within the overall mix by a healthy margin.
Within apparel, the highbridge that jacket in a hurry and Chilliwack police bomber with the most popular with our consumers are waste an artist too.
For our top salary and accessories.
It is worth noting that are highbridge in chilliwack styled are iterations of our core pieces that are clearly continuing to resonate with customers.
As a result of this demand.
Q1 year of of your revenue growth over Nonheavy way down product Okay style.
Heavyweight down through our <unk>.
Okay.
Just a couple of weeks ago, we introduced our new sneaker line, marking the next step forward.
Could you list here trail steger versus how pleased would offer the highest levels of function performance and comfort that our brand is known for for the.
A year round appeal the speakers offer it in a variety of colors for women and men.
Although worthy we have some very good sales velocity out of the gate and I'm excited for the opportunity ahead in this category.
We also launched generations, Canada in July expanding our re commerce platform to more customers since our U S loss of January .
Nathan platform reflects the core of our DNA as a sustainable brand stands the test of time and the elements.
We are compiling learning that we can apply across the U S and Canada as we continue to expand our presence and capture a big opportunity and the Searcher Con.
Finally, we recently released our fiscal 2023 sustainability report, which demonstrates our continued commitment to keeping the planet call and the people on a warm.
I'm pleased with the progress that we made last year across our operations materials and community goals.
In closing.
Q1 performance in the progress we've made a cross our strategic pillars. During the quarter continues to demonstrate that we're moving very well in the right direction.
Of an internationally recognized brand or excel.
But the opportunities to bring Canada goose.
Many more people around the world.
All the while continuing to focus on making the highest quality products.
Memorable experiences for our customers.
So that anyone but our brand touch it is inspired to live with our authentic lives in the <unk>.
And now a passover to Jonathan to discuss our financial results.
Thank you Danny and good morning, everyone.
We are pleased with our first quarter performance characterized by strong top line growth.
Revenue for the first quarter was $84.8 million up 21 cent.
Or 18% on a constant currency basis above the high end of our guidance range.
Growth was driven by healthy demand for our products across a priority markets.
G C sales $55.8 million grew 60% or 54% on a constant currency basis from the same period last year.
Ah Rose shrink continued retail store expansion and an increase in existing stole says.
D G C revenue.
With 66% total sales in Q1 compared to 50% in the same period last year as we optimized for Gretchen D T seizure within our channel mix.
The system with a strategy over many years, we are intentionally shifting our proportion of channel recommended sell directly to consumers.
The right mix between T T C and wholesale travels physicians is to capture new customers and retain existing ones with optimal.
Economics.
Q1 wholesale revenue of $27.1 million was down 18 cents euro, but yeah or 19 cent on a constant currency basis.
Primarily arises from the <unk> of a wholesale office.
So this was above all plan <unk> earliest shipments to customers.
And tried to <unk> efforts on <unk>, so the Brian Decretive positioning us with another target seconds.
Similar to others in this sector, we noted caution amongst the wholesale community, which is reflected in our order book.
Q1 revenue increased across all key regions Eurabia.
More customers shopped at our stores in North America, APAC and Amir.
North America revenue was up 24% $41.6 million up 20% of a constant currency basis.
Driven by continued reach of expansion add an increase in existing stole sales.
Heather DTC comfortable growth was fostered in the U S <unk>.
<unk> double digits by stools.
This indicates continue brown momentum in almost establish market, which benefited from overturning chairs.
The U S experienced 15% year over year growth from existing and new stole sales.
We saw a higher proportion of new and existing consumers entering all normally heavy weight down categories are demonstrating significantly higher interest in apparel.
We also getting traction with women in the U S, which is one of our top markets for the second.
Sheriff revenue increase within the country's mix compared to the same period last year without rain everyday lightweight down piece is resonating with with it.
Ah progress in Q1 further strengthens our beliefs and our longterm U S retail expansion strategy, while also continuing to grow GTC cops as we continue to navigate the uncertain economic environment.
Turning to Asia Pacific.
This region <unk> with revenue, increasing 52% year over year to $24.5 million.
43% on a constant currency basis.
We saw a broad based growth across each block the heat markets, including mainland China were lifting of Covid restrictions has led to a strong rebound in domestic spending.
<unk> as well as in the covers.
As dining mentioned, we had especially strong folks at our stores.
X maintenance and try the Asia Pacific market with the return of Chinese tourism.
Ah stores in Japan also so strong growth this quarter led by domestic and tourist involved.
Reminding you that there may be significant upside to all top and bottom line should Chinese tourism return to a more normalised level in the west this year as we've not considered this about guidance.
Asia Pacific consumers continue to purchase a known heavy weight down offerings, such as apparently the accessories, which grew triple digits <unk> over the same period last year in the region.
Finally, he may have revenue was down 7% year over year to 18.7, $8 or 6% down on a constant currency basis.
You have a wholesale revenue was partially offset by growth DTC trouble.
Our stores have continued to benefit from all tourism.
From the U S and the Middle East Ah more recently from China.
Most of our European stores Register double digit comparable sales growth euro per year in queue wall.
I'd say benefited from a more normalized operating in Barbara.
Despite the hot weather a heavyweight down collection. So notable growth of the <unk> in the quarter.
Doubling as compared to the same quarter last year.
Wholesalers gravitate to all our clinic pockets.
Given the outsized impact of wholesale.
Region. It was most impacted by the dynamic in a wholesale order book.
Moving to gross profit.
First quoted gross profit grew 29% year over year to $55.2 million, primarily driven by higher revenue and gross margin expansion.
Q1, gross margin increased 400 basis points to 65.1% compared to last year.
Hi, a mix of D. G C sales as well as five both product mix in pricing.
The increase in the gross margin about products are the same across all categories with no heavyweight doubt outpacing margin expansion of all established heavyweight down segment.
D. G C gross margin expanded to 73% in Q1, while wholesale gross margins increased to 51%.
40, and 30 basis points, respectively, compared to the first quarter of last year.
Gross margins with favorably impacted by pricing.
Mixed use a high proportion of heavyweight down sales Angela freight costs.
These margins are entirely consistent with our long term expectation mid seventies D. G C mid to high forties wholesale gross margins on an annual basis.
The adjuster EBIT loss increased $91.1 million compared to Q1 last year.
That primarily arises from increased SG&A expenses.
Are adjusted EBIT lost in the quarter was favorable compared to all first quarter guidance range.
As a result of strong revenue growth.
S G&A increased 24% year over year to $154.9 million largely associated with higher costs associated with the expansion of all retail network.
Strategic investments.
In technology and of course, all transformation program, which we expect will enable operational efficiencies across the organization to support sustainable growth and profitability.
A trusted net loss attributable shareholders was seventy-three $1 million.
Justin loss 70 cents.
Basic check.
Moving 12 balance sheet, we ended Q1, a physical 24 with inventory of $522.1 million.
Three per cent from $504.7 million at the end of the same period last year.
As expected euro via growth in inventory decelerate it for the second consecutive quarter as we more closely align the supply of product with anticipated demand and utilize the evergreen product we have a pet.
During our first quarter, we stop production one about to Montreal for the services.
Solid writing production into all of the services. We also brought more production in the house to introduce.
Great flexibility and improve overhead leverage.
And Q1, approximately 75% of all domestically produced jackets were manufactured in the house compared to 58 cents in the fourth quarter of fiscal twenty-three.
We expect the plant deceleration of infantry growth at the shift to enhance production to continue to support.
Gross margin expense.
During the first quarter, we bought back approximately 1.16 million chest for total cash consideration of $26 $3 million.
Reporter with $48 million of cash on the balance sheet compared to $81.8 million at the end of fiscal 23.
Since the commencement of a buyback program CIP, we have repurchased 2.7 million chess or approximately 50% the amount authorized under this program.
We're very comfortable with <unk> 2.7, so I've suggested <unk>.
Quarter.
And Q1, we extended a revolving so let's see through 2028 solidifying your balance sheet.
Canada Goose is investing across multiple fronts to position ourselves for long term growth represented by all three strategic pillows and all transformation program, the lesser of which we expect will strength No foundation.
Greater efficiencies into our uprising bubble, the sport longterm growth and the associated margin expansion.
And Q1, we lay the groundwork for transformation program.
Now focused on beginning implementation across a number of initiatives.
<unk> <unk> <unk> <unk> <unk>.
And optimizing production Q of it.
Tuned for further updates on this front as we had fallen sees initiatives into implementation.
Turning to Apple.
Had a strong first quarter at all pleased with the progress we have made to achieve awful yeah plans.
<unk> <unk> contemplates and uncertain macroeconomic environment together with foreign currency followed <unk>.
We continue to plan against the range of scenarios about guidance Rep says arrow assessment of market conditions, and the most likely consumer impacts.
Our fiscal 24 outlook.
Assumes continued momentum in Asia Pacific balance with our more challenged.
<unk> backdrop in the U S as noted by others in the sector.
Our priorities for fiscal 24 remained unchanged.
We intend to continue investing in a strategic pillows out of course, and all transformation program to build for the long run.
We remain confident this is the right path to achieve sustainable growth and improved profitability.
As such we all reiterating a full physical 24 guidance.
We expect total revenue to be in the range of $1.4 billion to $1.5 billion for the <unk>.
Ah revenue guidance assumes DTC revenue in the mid to high seventies is essentially totaled up please.
Driven by mid single digits to mid teens <unk> sales growth and continued store expansion as we continue to plan to open at least 16, new permanent stores and the year of which four already open.
We also continue to expect wholesale revenues decrease by 6% year over year as we maintain visibility <unk> order book and out of the three comprising the vast majority of the wholesale business.
We expect no no FRS adjusted EBIT to be in the range of 210.
$40 million in fiscal 24, representing an uprising Welch is the range of 15 16 cents.
This assumes gross margin percentage to be in the high sixties or the full year basis with D. G. C. In wholesale gross margins in the mid seventies admit to I forties, respectively.
We are not including any benefits from the transformation program and the physical 24 guidance.
We expect no no FRS adjusted net income per diluted share in the range of dollars 42 $1.48 cents.
This assumes an effective tax rate in the low twenties as a percentage of incumbent full Texas.
<unk> average diluted Chaz outstanding of $106 3 million the physical 24.
Consistent with this annual guidance are guidance for Q2 is as follows we.
We expect.
Revenue to be in the range of 272 $290 million.
Revenue range reflects the earliest shipments of wholesale orders. It took place in Q1 that will no longer be included in Q2.
We expect no no FRS adjusted EBIT to be in the range of $20 million to $30 million loss, reflecting the impact Abbas expanded stole network in the stomach.
In terms of both of the number of new stores.
Pricing and the number of stores were planning to open it all second call.
As well as the plan timing boxing spend which is later this year than last.
We expect <unk> adjusted net loss per basic chat to be in the range of <unk>.
17 24 cents.
In conclusion, we had a strong start the <unk>.
<unk>, new and existing customers are returning 12 stores were showing up in more places and people love products.
Customers are shopping with <unk> seeking the very best and crosses trip style and performance. We're pleased with the progress we've made across all fronts and offers cool Sir the position as well for long term growth.
And improving profitability as we continue to execute against our strategic pillows and reiterated annual guidance.
With that operator, please open up the lines for questions.
Certainly one moment.
We will now be opening up the line for your questions on today's Q&A portion of the Com, Jonathan Sinclair and Kari Baker will be taking your questions. One moment for our first question.
And our first question comes from the lineup wrote from Goldman Sachs. Your question. Please.
Good morning, and thank you so much for taking our question Danny I was hoping you could talk a little bit more about your updated thoughts on how the Kennedy brand is resonating with the Chinese consumer now that you are a few months further into the reopening.
Hi, Jonathan can you elaborate on the outlook that you know C for China. Following a strong fiscal first quarter, how does the trend that you're seeing this quarter impact your view on the recapture ability it'd be $160 million lost China revenue from the prior year. Thank you.
[laughter].
Okay. Thanks.
<unk> that is not on the call carries gotta take the question on trying to run out with US on the second second question on the outlook.
How about so yeah.
<unk> and attack them in mainland China with a strong rebound.
Crawford channels, mostly that we're seeing people come back into stores.
Especially robust appointment in Ireland, Hong Kong, and not really because of the return it <unk> Chinese Enron, and then Japan, <unk> Comcast both locals and future. So we're really energized by what we're seeing any accent.
Oh.
And I think as we think about the outlook.
China.
The.
The key thing to think about is when it was most imped lost yet so we we've already said at the beginning of the show that we are expecting progressive improvement, we got to see how the very good stop to that.
Trying to resist its most disrupted in Q1, two three lost Ya.
And so that's what I'd expect to see the growth of the strongest.
And if you recall, we what we said was we we have not included in our guidance an assumption that we would cover the whole of the hate that we took last yet, but we're seeing progressive improvement tools as you can see it.
Thank you very much I'll pass on.
Thank you.
And as a reminder, ladies and gentlemen, we ask that you. Please limit your questions to one question at one follow up you may get back in the queue as time allows one moment for our next question.
And our next question comes from the line of Robert Holmes from Bank of America. Your question. Please.
Oh good morning, Thanks for taking my question I, Jonathan I think maybe my my first question is just the.
Can you give us any help on the pricing tailwind two one Q sales, how how significant with the the pricing increase benefit.
So it's it's thanks for the question about me I I I think from from my point of view.
We've always said with with sort of around the site mid single digits also.
In pricing this year has not been any different than that <unk>, you'll pardon me talk a number of times about the relatively scientific way in which we go about this both sides of it architecture in any one market and the application of it across multiple markets.
And that this year's been no different in that we've maintained the bubble from what we can see the international pricing matrix is alive and well they'll pricing.
Across the sector.
And therefore, we obviously have pricing benefited all of those as as we would expect and in line with the soda right we've experienced in previous years.
That's great and then just a quick follow up uhm on inventory <unk>. It it's great that you're the growth of it is slowing is there ever <unk> will you ever go through a period, where inventory levels that you carry it could be work down a little because obviously they've gotten a little bloated you know during COVID-19 and I thought maybe they would.
Work down somewhat.
Uhm, yes, so if we think about inventory I mean, what we said.
Is it would <unk> would reduce progressive lane and you saw that in March and you say it again now uhm. We have worked very hard to tell you that what we produce what we buy to ourselves expectations.
<unk>, we've always said and the policy that we're not we're not afraid to to be sold out if that's what if that's what it takes and therefore it is can see below the time that the inventory.
Vacillates around the <unk> the level of <unk> conceivably could be slightly luck with the CVV slightly odd but in and around last year's level is where we think is the right places for us to be against the guidance.
We're giving a revenue growth.
Clearly we work hard to make sure. This is sufficient is it.
Can be it but that's remember so much of it is continuous it that it can it maintains its value over time, it doesn't represent Belgium risk it doesn't represent obsolescence risks and therefore, we're able to work our way through it.
<unk>.
Mmm, great. Thank you Jonathan.
You're welcome.
Thank you one moment for our next question.
And our next question comes from the line Ozanne Poser from Williams trading your question. Please.
Good morning. Thank you for taking my question Uhm I just have a question about the D. T C business in the evolution to getting to around 35% in the first half of the year.
So you can sort of become more profitable in total with your D. T. C. Can you tell me where you are in that I'm.
Sorry towards that longterm target and and <unk> and and how you're thinking about it. Please.
Yeah, I I I think.
We we talk about 75% of the total business being an H one uhm just G. C C. But we are obviously, we're working toward that were saying good growth in non heavyweight down business and that's important in the context all relevant.
In the first half the when when the temperature is a symbol.
But I think it's it's something that we are making excellent <unk> and.
You see that in the rates of growth that we've experienced in D. C C. As in the in the first half, which is really fights with <unk>, which is really quite strong.
And you mentioned part of this I believe in your prepared remarks, but uhm within that I guess within the portions of non heavyweight down <unk>.
Sounded like Asia Pacific was the <unk>.
Perform the best in that category, followed by Canada, followed by you.
U S followed by Europe is that accurate.
<unk> thinking about that right I got that.
Alright, but Sunday I'll I'll stand up <unk> was was I Asia Pacific.
That's all a surprise in the context as the fastest growing region in the cold arrive.
But it really is outsize performance with a lie to to see the progress that.
But I will say, we're making.
Good progress both in North America and in Europe .
With just the outsides growth in Asia Pacific generally, meaning that we're making more hip way this quarter.
<unk> compared to the others, yeah, if I can just add some color scheme in terms of the category. So yeah you heard.
Talk about apparel and accessories and on the fastest growing category, that's great, but I'd like to see about that is that people are coming in there buying up the ladder of certain kennedys, they might even be entering the branch <unk> and especially yeah, we launched our.
Footwear coining you over here, that's quicker, which is lunch or Appalachia transmitters, which are <unk> off of that so it's perhaps there's just so much more to offer me away uhm.
Only relevant product that people are buying now two ran out.
Thank you very much.
And our next question comes from the line of Oliver 10 from T. D. Cowan Your question. Please.
Hi, there. Thanks for taking my question. This is Katie on for all of their my first question is is around the wholesale channel do you plan to take any action that would give you more control over selling.
Wholesale channel essentials.
For example, pain Candy K Sandwich S. Yet.
Can you repeat your question Great question, we we already do Uhm I think depending on the the account or the door that we're talking about or whether that providing sales associates robust training program for Ya.
Hand in hand, with all of our partners to make sure that that experience is as close to the candidates experience as it possibly can get it even though it inside somebody else's doors, so I think what you're seeing.
I know we're supposed to this number Max that what you're seeing a costa is mostly uhm. A result of our just continued streamlining of course, India has a different impact.
<unk> <unk> <unk> <unk> <unk> <unk> in the corner. There is a question <unk>, you're seeing that across the sector at every branch, but mostly as a result of that you know looking at the partner is looking at <unk>, which ones are you know Brandon, helping which ones that are going along this journey with us in terms of representing who we are.
Fast and you know ethnic you choices.
Okay, great. Thank you and then as a follow up could you just touch on it so that productivity has any store that you're seeing and how does that compare relative to your legacy store. It it's always the expectation. Thank you.
<unk> as you've heard <unk> postal snowfall this yet.
And we are delighted with the performance it was saying Tonight.
We sing consumers repartee, well, we've seen good good perfect clothes and those stores, we pick them very very carefully to make sure that we've got the right environment. The right. Jason says sorry, we're getting what we expected at this point, we're very pleased with it.
Okay just out to Ya.
It also encourages assessment chuckle I entered my <unk>.
<unk>, but you know when you look at the stars were opening at <unk>.
For checking that Seattle L. A D that can you know non winter uhm warmer climate and the response has been equally strong and so again that just gives us more confidence that our strategy is working and things are responding and we have a lot of opportunity, particularly when you look at your the last four or so early in our journey that we have many more starts to open up and.
Expect them to perform as we've seen so far.
Thank you one moment for our next question.
And our next question comes from the line of J stole from UBS. Your question. Please.
Great. Thank you so much Jonathan if you talk about the D. G C growth drug you're expecting this year you have some idea of how much that growth you expect to come from the new stores versus how much do you expect to come from.
Uhm.
e-commerce versus how much would come from stores that maybe we're closed nice to their up this year versus how much I would like like for like growth you expect to hear from your stories. They were open last year that are also gonna be up again this year.
Okay. So.
To try and give you some flavour all of that obviously, you've got off a cold guidance sumption in terms of.
D. G C. <unk>. So that's an important element in its own right.
And.
Excludes sales and being made this year on days when the store closed last year. So that's additional.
And obviously, there's a there's a significant proportion of that <unk> and you see some of that contained in the gap between the D. C C come growth in the aggregate grocery <unk>.
The other pizza <unk> new stores, we got 16, so it was coming a line you could assume that the that for half the year and you know ourselves density and therefore can make I think a good stab at <unk>.
As a result, I think it's <unk>, we've got a good Crawford stools coming online. This yeah, they've gotta be around for most of the <unk>. The most of the productive period of the second half.
Four you can assume that there's.
Healthy contribution some vegetables online.
We've been doing a lot of work because you've heard from from from <unk> prepared for awhile, so around where we're heading with very optimistic about what that can bring we say it is complimentary we're looking for 12 first.
See some with Omnichannel in.
K, which we haven't done before as well as continuing to refine it doesn't markets.
Street digital officers been doing a ton of work around this we can see a lot of opportunity and <unk> uhm real upside that.
Hope that gives you a good flavor for this.
It does it does and if I could just follow up with one more.
Talk about what you're seeing from tourist traffic trends, you know, especially the different geographies.
<unk> I call that <unk>, what we're saying in southeast Asia and the outperformance of the.
Mainland China.
<unk> asked.
Gentle I think partly because.
So some early recovery lost yet and frankly.
Travel from Asia to the rest of the World is is a little bit more muted something that slides salt. Some some it's about people getting back into it. It will just take a little time and that's what we've set and that's why we can also included that uhm upside at all in our guidance assumptions at this point that that happens <unk>.
<unk> and that's spelled with sexual speed up side.
Got it thank you very much.
Thank you one moment for our next question.
And our next question comes from the line of Jonathan come from <unk>. Your question. Please.
Pretty pretty solid hop Bottomline EBIT upside corner relative to the revenue upside. So could you just <unk> sorry, if I missed you know sharing any more details on the.
Profitability float through that you saw him in would you extrapolate any of.
Any of those observations to the four year or is it just too too small of a quarter to impact your view at all.
So.
I think John <unk>.
It is a small quota.
But nevertheless, the momentum and the narrative around it is is positive.
Yes.
Very much I'll be like Salvia.
We were pleased with the performance we've got we found some some cost efficiency in the business as a as a cold is progressive that's been helpful to the bottom line for sure and with that level of growth of these sorts of gross margins inevitably does that's appropriate for it through for that we're very pleased.
With it but it is a small quota and therefore, we feel that it's appropriate at this point to reiterate for the guidance for all of them do anything else in the light of it but it's it's set us up well I think I draw attention to the gross margins being slightly ahead.
Called grocery Scott is comfortable a positive.
We've we've got a good landscape at this point.
Yeah, that's an encouraging and unhelpful color there. Thank you and then one follow up I had just done an inventory could you could you maybe share a little bit more he touched on this but just share a little more on what you're thinking if you could quantify some of the production cuts here, making either.
<unk>, what are the duration or both and and so we think for and about the costing of the inventory that you produce is there any sort of future concerned about you know lower utilization impacting your cost of goods or anything like that just mark Martin.
On my on my own inventory moves you're making.
Yeah, I mean, if I can sort of take it too it's natural consequences that I'll be worried about whether the bright spots it's tracking the adults uhm.
Uhm and then I'll I'll, let me back up into that so that that means that what we're doing is we're putting proportionately less about production in Canada, which is called it around some streak oversight incentive we buy my uhm, we're putting proportionately less of that with all set.
Policies are more of it through our <unk> and actually what that does is that produces I've had leverage.
And that and that.
That addresses the fact that if you're making a slightly that she doesn't see uhm cost broken level margin dilation coming out of it. That's one part of it second bodies and we've got less overhead because we've got one less facility. So if you take that southern Seattle, which is let's say 12 per cent one one eighth of the the number for <unk>.
This is then in reality you you you <unk>.
It says a tailwind that so we're not we're not concerned about that.
Still means that we we golf.
Ample inventory tomato late Ali so, it's very alive with our expectations.
Expectations, all revenue as mentioned it the guy that's right. So we feel pretty good about that I think we we feel like we've got the right framework coming it's lifestyle that helps us grow inventory at or below the.
Revenue growth in the Lola run and as I said this yep uhm staying relatively class last year.
No problem.
Thank you one moment for our next question.
And our next question comes from the lines of like furniture from Wells Fargo. Your question. Please.
Hey, Jonathan and carry I guess my question is on is on the the geographic performance so another quarter of Canada.
Well outpacing the U S mail.
Maybe just talk about the dynamics in both markets. How are you expecting this trend to play out for the remainder of the year and then is this more a function of you guys outperforming and you're Canadian market or underperforming in the U S is it both I'm just trying to understand a little bit more geographically in North America.
Yeah, you have a <unk> I mean, when you look at the numbers at about 15 per cent you over here.
Obviously that strengthen our long term strategy.
They'll feel like it at work early in that market <unk> Uhm, how many more brand excuse me Mister reach when you look at our brand awareness opportunity.
I mentioned earlier.
<unk> Uhm with women, there, which is great that is a big market for us in order to improve that next.
Whereas the other luxury players uhm achieving when.
When you look at Canada and of course, if the home market, we would expect it to be healthy strong is the highest awareness here. It is also a strong tourism market so any probably benefited.
You know earlier days and maybe some other markets I'm curious returning to Canada.
I don't think I could either or situations are just very different stages in.
In maturity uhm any different yeah <unk>.
<unk> behaviors as a result, how they're coming into the whether it stores e-commerce, whether they're cutting into <unk>, all products or any product, there's a slight difference that <unk>.
Quite well.
And what I'd add on on the U S is a little side that we'd be talking about <unk> sequential improvement in the fullness of the U S. Since the calendar, yeah, which is obviously difficult I've asked continue so I think that that's also complex but.
To think about as we protection officer.
Got it again I'm, just I'm not trying to nitpick, but I mean, your your constant currency groceries the per cent in the U S. It's over 30 in Canada I just wasn't sure. If there's something that's you know it's better than the negative that you had in queue for so improvement I was just kind of wondering at what point do we hope that these kind of more realign does that later in the year is that in time for.
A holiday that that's kind of what I was getting out.
Yeah.
Yeah. The other piece that goes with it is inevitably.
Alright.
Backdrop.
Is.
Is.
With an a level of uncertainty that everyone's working please.
We're very confident what we got.
We believe it's starting to produce the numbers and the way that you've seen him.
Okay, great. Thanks.
Thank you. This does conclude the question and answer session of today's program I have like the hand, the program back to <unk> for any further remarks.
Thank you Jonathan and with that this actually does conclude our first quarter 2024 conference call. Thank you everyone for joining us goodbye.
Thank you ladies and gentlemen for your participation today's conference. This does conclude the program you may now disconnect good day.
Okay.
Mmm.
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