Q1 2024 Canada Goose Holdings Inc Earnings Call

August 3, 2023

Operator: Thank you for standing by, and welcome to Canada Goose's Q1 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. 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, today's program is being recorded. Now I'd like to introduce your host for today's program, Ana Raman, Vice President, Investor Relations. Please go ahead.

Thank you for standing by and welcome to Canada, Goose's first quarter 2024 earnings Conference 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'll need to press star one on your telephone.

If your question has been answered and you'd like to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program I know Robyn Vice President Investor Relations. Please go ahead.

Ana Raman: Thank you, operator, and good morning, everyone. With me are Dani Reiss, Chairman and CEO, Jonathan Sinclair, EVP and CFO, and Carrie Baker, President. After Danny's and Jonathan's prepared remarks, we will open it up for your questions. Our call today, including the Q&A portion, includes 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. Certain material factors and assumptions were considered and applied in making these forward-looking statements. Additional information regarding these statements, factors, and assumptions is available in our earnings press release issued this morning, as well as in our filings with US and Canadian securities regulators. These documents are also available on the investor relations section of our website.

Thank you operator, and good morning, everyone with me are Debbie Reed, Chairman and CEO , Jonathan Sinclair, EVP and CFO Cary Baker President.

After Danny and Jonathan's prepared remarks, we will open it up for your questions our call today, including the Q&A portion.

Forward looking statements.

Each forward looking statements, 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.

Certain material factors and assumptions were considered and applied in making these forward looking statements.

Additional information regarding these statements factors and assumptions 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.

Ana Raman: 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 report in Canadian dollars, so all amounts discussed today are in Canadian dollars unless otherwise indicated. Please note that financial results described on today's call will compare Q1 results ended 2 July 2023, with the same period ended 3 July 2022, unless noted otherwise. Lastly, our commentary today will also include certain non-IFRS financial measures which are reconciled at the end of our earnings press release. With that, I'll turn the call over to Dani.

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 discussed today are in Canadian dollars unless otherwise indicated.

Note that financial results described on today's call will compare first quarter results ended July <unk> 2023, with the same period ended July 3rd 2022, unless noted otherwise.

Lastly, our commentary today will also include certain non ISR RF financial measures, which are reconciled at the end of our earnings press release.

With that I'll turn the call over to Danny.

Dani Reiss: Thanks, Ana, and good morning, everyone. We kicked off the year with another strong quarter marked by healthy consumer demand for our products. Q1 revenue grew 21% over the same period last year to CAD 84.8 million as more consumers around the world sought out our products for their style, performance, and unmatched craftsmanship. Later, Jonathan will discuss our Q1 financial performance and our expectations for Q2. Today, I'm gonna focus on the progress we made in Q1 across our three strategic pillars: driving consumer focused growth, building our DTC network, and expanding our product categories. First, driving consumer focused growth. Revenue growth in our DTC channel was strong in Q1, up 60% year on year.

Thanks, Anna and good morning, everyone. We kicked off the year with another strong quarter marked by healthy consumer demand for our products.

Q1 revenue grew 21% over the same period last year to $84 8 million.

More consumers around the world saw out our products for their style performance and unmatched craftsmanship.

Later, Jonathan will discuss our first quarter financial performance and our expectations for the second quarter.

Today I wanted to focus on the progress we made in Q1 across our three strategic pillars, driving consumer focus growth building DTC network and expanding our product categories.

First driving consumer focused growth.

Revenue growth in our DTC channel was strong in Q1 up 60% year on year.

Dani Reiss: During the quarter, we grew the number of customers shopping at our stores across our major markets led by Asia Pacific, which doubled from the same period last year as traffic returned following the removal of COVID restrictions. We are focused on creating great customer experiences that attract new customers to our well-known brand and keep loyal fans coming back for more. In Q1, we launched AI-driven support on our e-commerce sites to offer real-time self-serve to our customers. We're already seeing benefits from this initiative with over 25% of incoming customer conversations received in the quarter positively resolved through this tool. Initiatives like this, with the unlocking of data through our CRM program, will help us better engage with customers and provide elevated experiences. Growing our women and Gen Z customer segments is a part of our consumer-focused growth plans.

During the quarter, we grew the number of customers shopping in our stores across our major markets led by Asia Pacific, which doubled from the same period last year as traffic return following the removal of Covid restrictions.

We are focused on creating great customer experiences and attracting customers, who are well known brand and keep loyal fans coming back for more.

Q1, we launched AI driven support on our e-commerce sites.

To offer real time self serve to our customers.

Already seeing benefits from this initiative with over 25% of incoming customer conversations received in the quarter positively resolved through this tool.

Initiatives like this with the unlocking of data through our CRM program will help us better engage with customers and provide elevated experiences.

Growing our women in Gen Z customer segments as a part of our consumer focused growth plans.

Dani Reiss: In Q1, the number of women shopping with us grew in the high teens over the same period last year, while revenue share from Gen Z increased slightly from an already strong base within our overall mix. We continue to apply our long-standing playbook to remain top of mind and culturally relevant to our women and Gen Z customer segments to help build momentum for our bigger selling season. In Q1, we sponsored Canada's first-ever WNBA event, which was broadcast across North America. Our pieces also appeared in front of the camera in some of the biggest film and TV programs this year through our established partnerships in the entertainment industry. These included Ted Lasso, Fast X, The Blacklist, and The Fast and the Furious franchise, and two different episodes of our popular Netflix series, Never Have I Ever, which had 11.5 million views in its first week.

In Q1, the number of women shopping with US grew in the high teens over the same period last year, while revenue share from Gen Z increased slightly from an already strong base within our overall mix.

We continue to apply our longstanding playbook to remain top of mind and culturally relevant to our women in Gen Z customer segment to help build momentum for our bigger selling season.

In Q1, we sponsored candidates first ever WNBA event, which was bought broadcast across North America.

Ah pieces also appeared in front of the camera and some of the biggest film and TV programs. This year through our established partnerships in the entertainment industry.

These included had lasso fast X the list and the fast and furious franchise in two different facilities of our popular Netflix series never have I ever which had $11 5 million views in its first week.

Dani Reiss: Moving to our next strategic pillar, building our DTC network. Q1 DTC comp sales growth was up 28% year over year and strong across all of our key markets, with especially robust performance in Macau and Hong Kong, fueled by the return of Chinese tourists. DTC growth of this order across all of our markets reinforces our confidence in our global retail network. Since our last earnings call, we opened 4 new permanent stores, bringing our permanent store count to 55 stores. These stores were in Dublin, Las Vegas, Bellevue near Seattle, and LA at the Beverly Center, which opened in July. We also reimagined and relocated our Beijing Sanlitun store to provide a new level of customer experience.

Moving to our next strategic pillar building, our DTC network.

Q1, DTC comp sales growth was up 28% year over year and strong across all of our key markets with especially a robust performance in Macau and Hong Kong fueled by the return of Chinese tourists.

DTC growth of disorder across all of our markets, where it reinforces our confidence and our global retail network.

Since our last earnings call, we opened four new permanent stores, bringing a permanent store count to 55 stores.

These stores were in Dublin, Las Vegas, BELBUCA, near Seattle, and La Beverly Center, which opened in July .

We also re imagine and relocated our paging suddenly to in store to define a new level of customer experience.

Dani Reiss: This flagship store is our largest store in the world and includes a VIP lounge featuring original Canadian art, a roof terrace garden, archive product displays, and our snow room, which features video and sound to provide a full Arctic experience. Traffic and sales have exceeded our expectations in its first few weeks of opening. We also opened two pop-up stores in the US, in Miami and Anchorage. These cities are both big tourist hubs, drawing local and international demand. We especially have a strong local following in Alaska, a state where our brand has a long history. Turning to digital commerce, our retail store strategy is part of a broader plan to create a seamless omni-channel experience, one that brings the customer journey from discovery of our brand to conversion of a sale to the post-sale experience, whether that happens on or offline.

This flagship stores, our largest store in the world and includes a VIP lounge featuring original Canadian art.

Our roof Terrace garden archived product displays and are still room, which features video and sound to provide a full arctic experience traffic.

Traffic and sales have exceeded our expectations in its first few weeks of opening.

We also opened two pop up stores in the U S and Miami and Anchorage.

These are both big tourist hubs growing local and international demand.

Especially of a strong local following Alaska, a state where our brand has a long history.

Turning to digital Commerce, our retail store strategy is 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 of the sale to the post sale experience.

Other than happens on or offline.

Dani Reiss: Digital commerce is an important part of this. We continue to invest in both our front-end and back-end e-commerce capabilities. On the front end, in Q1, we tested optimizations across mobile and desktop devices to reduce friction by helping customers more easily find the products they love and make the purchase. We're seeing some early positive conversion results, which we will continue to learn from and build on. For the back end, we are advancing initiatives to improve digital merchandising and optimization of returns process to enhance operational efficiency and the overall customer experience ahead of the main selling season in H2 of the year and beyond. Turning to our third strategic pillar, expanding product categories. In Q1, apparel accessories were among our highest growth categories, increasing their share of revenue within the overall mix by a healthy margin.

Digital Commerce is an important part of it.

We continue to invest in both our front and backend e-commerce capabilities.

On the front end in Q1, we tested optimizations across mobile and desktop devices to reduce friction by helping customers more easily find the prostate lung 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 and optimization of returns process to enhance operational efficiency.

And the overall customer experience ahead of the main selling season in the second half of the year and beyond.

Turning to our third strategic pillar expanding product categories.

Q1 apparel accessories are among our highest growth categories, increasing their share of revenue within the overall mix by a healthy margin.

Dani Reiss: Within apparel, the Hybrid Knit Jacket, hoodie, and Chilliwack Fleece Bomber were the most popular with our consumers, while our Waist Pack and Arctic Disc Toque were our top sellers within accessories. It is worth noting that our hybrids and Chilliwack styles are iterations of our core pieces that are clearly continuing to resonate with customers. As a result of this demand, Q1 year-over-year revenue growth of our non-heavyweight down product outpaced that of heavyweight down through our DTC channel. Just a couple of weeks ago, we introduced our new sneaker line, marking the next step in our footwear journey. The Glacier Trail Sneaker is a versatile piece that offers the highest levels of function, performance, and comfort that our brand is known for. With a year-round appeal, the sneaker is offered in a variety of colors for women and men.

Within apparel, the hybrid jacket, and hoodie and kilowatts, Lisa Palmer with the most popular with our consumers, while our Westpac and Arctic two.

For our top seller within accessories.

It is worth noting that our highbridge in Chilliwack styles are iterations of our core pieces that are clearly continuing to resonate with customers.

As a result of this demand.

Q1 year over year revenue growth of our non heavyweight down product outpaced that.

Of heavy way down through our DTC channel.

Okay.

Just a couple of weeks ago, we introduced our new Sneaker line, marking the next step in our footwear journey.

The Glitzier trail sneaker versus how piece that offer the highest levels of function performance and comfort that our brand is known for for the.

The year round appeal to sneakers offer it in a variety of colors for women and men.

Dani Reiss: Although early, we have seen very good sales velocity out of the gate and are excited for the opportunity ahead in this category. We also launched Generations Canada in July, expanding our ecommerce platform to more customers since our US launch in January. This nascent platform reflects the core of our DNA as a sustainable brand that stands the test of time and the elements. We are compiling learnings that we can apply across the US and Canada as we continue to expand our presence and capture a big opportunity in the circular economy. Finally, we recently released our fiscal 2023 sustainability report, which demonstrates our continued commitment to keeping the planet cool and the people on it warm. I'm pleased with the progress that we made last year across our operations, materials, and community goals.

Although early we have seen very good sales velocity out of the gate and are 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 launch in January .

Nascent platform reflects the core of our DNA as a sustainable brand that 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 circular economy.

Finally, we recently released our fiscal 2023 sustainability report, which demonstrates our continued commitment to keeping the planet coal and the people on the warrant.

I am pleased with the progress that we made last year across our operations materials and community goals.

Dani Reiss: In closing, our Q1 performance and the progress we made across our strategic pillars during the quarter continues to demonstrate that we are moving very well in the right direction. We have an internationally recognized brand. We're excited about the opportunity to bring Canada Goose into the lives of many more people around the world, all the while continuing to focus on making the highest quality products and creating memorable experiences for our customers so that anyone that our brand touches is inspired to live their authentic lives in the open. Now I'll pass over to Jonathan to discuss our financial results.

In closing our.

Q1 performance and the progress we've made across our strategic pillars. During the quarter continues to demonstrate that we are moving very well in the right direction.

We have an internationally recognized brand we're excited about the opportunities to bring Canada goose into the lives of many more people around the world.

All the while continuing to focus on making the highest quality products and <unk>.

Creating memorable experiences for our customers.

So that anyone but our brand touch it inspire delivered the authentic lives in deal.

And now I'll pass over to Jonathan to discuss our financial results.

Jonathan Sinclair: Thank you, Dani, and good morning, everyone. We are pleased with our Q1 performance characterized by strong top-line growth. Revenue for Q1 was CAD 84.8 million, up 21% year over year 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 our priority markets. DTC sales of CAD 55.8 million grew 60% or 54% on a constant currency basis from the same period last year, and that arose from continued retail store expansion and an increase in existing store sales. DTC revenue was 66% of total sales in Q1, compared to 50% in the same period last year, as we optimized for greater DTC share within our channel mix.

Thank you Donnie 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% year over year 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 our priority markets.

<unk> sales of $55 $8 million grew 60% or 54% on a constant currency basis from the same period last year.

Erosion continued retail store expansion and an increase in existing store sales.

DTC revenue was 66% of total sales in Q1 compared to 50% in the same period last year as we optimized the greater DTC share within our channel mix.

Jonathan Sinclair: Consistent with our strategy over many years, we are intentionally shifting our proportion of channel revenue sold directly to our end consumers. The right mix between DTC and wholesale channels positions us to capture new customers and retain existing ones with optimal unit economics. Q1 wholesale revenue of CAD 27.1 million was down 18% year over year or 19% on a constant currency basis. That primarily arises from the streamlining of our wholesale partners. Even so, this was above our plan due to earlier shipments to customers. We're concentrating our efforts on serving our top accounts that are brand accretive and positioning us within our target segments. Similar to others in the sector, we noted caution among the wholesale community, which is reflected in our order book.

Consistent with our strategy over many years, we are intentionally shifting our proportion of channel revenue sell directly to end consumers.

The right mix between DTC and wholesale channels.

<unk> is to capture new customers and retain existing ones with optimal unit economics.

Q1 wholesale revenue of $27 1 million.

It was down 18% year over year or 19% on the <unk>.

And currency basis.

That primarily.

<unk> from the streamlining of our wholesale partners.

This was above our plan due to early shipments to customers.

We are concentrating our efforts on serving our top accounts. So the brand accretive are positioning us within our target segments.

Similar to others in the sector, we noted caution amongst the wholesale community, which is reflected in our order book.

Book.

Jonathan Sinclair: Q1 revenue increased across our key regions year-over-year as more customers shopped at our stores in North America, Asia Pacific, and EMEA. North America revenue was up 24% to CAD 41.6 million, up 20% on a constant currency basis, driven by continued retail expansion and an increase in existing store sales. Canada DTC comparable growth was faster than the US, up by double digits in most stores. This indicates continued brand momentum in our most established market, which benefited from a return to tourism. The US experienced 15% year-over-year growth from existing and new store sales. We saw a higher proportion of new and existing consumers entering our non-heavyweight down categories and demonstrating significantly higher interest in apparel. We also gained traction with women in the US, which is one of our top markets for this segment.

Q1 revenue increased across all key regions year over year.

As more customers shopped at all stores in North America, APAC and EMEA.

North America revenue was up 24% $41 6 million.

20% on a constant currency basis driven.

Driven by continued retail expansion and an increase in existing store sales.

Canada, DTC comparable growth was faster than the U S up by double digits in most stores.

This indicates continued brand momentum in our most established market.

<unk> benefited from a return to insurers.

The U S experienced 15% year over year growth from existing and new store sales.

We saw a higher proportion of new and existing consumers entering our northern heavyweight down categories.

<unk> significantly higher interest in apparel.

We also gained traction with women in the U S, which is one of our top markets for this segment.

Jonathan Sinclair: Share of revenue increased within the country's mix compared to the same period last year, with our rain, everyday, and lightweight down pieces resonating with women. Our progress in Q1 further strengthens our belief in our long-term US retail expansion strategy, while also continuing to grow DTC comps as we continue to navigate the uncertain economic environment. Turning to Asia Pacific. This region had a stellar quarter, with revenue increasing 52% year over year to CAD 24.5 million, up 43% on a constant currency basis. We saw broad-based growth across each of our key markets, including mainland China, where lifting of COVID restrictions has led to a strong rebound in domestic spending in stores as well as in e-commerce. As Dani mentioned, we had especially strong performance in our stores in our ex-mainland China, Asia Pacific markets with the return of Chinese tourism.

Sheriff revenue increase within the countries mix compared to the same period last year with our rain everyday lightweight down piece is resonating with women.

Our progress in Q1 further strengthens our belief in our long term U S. Retail expansion strategy, while also continuing to grow DTC comps as we continue to navigate the uncertain.

Economic environment.

Turning to Asia Pacific.

This region had a stellar quarter with revenue, increasing 52% year over year to $24 $5 million up 43% on a constant currency basis.

We saw broad based growth across each of our key markets, including mainland China. We're lifting of Covid restrictions has led to a strong rebound in domestic spending in stores as well as any covenants.

As Danny mentioned, we had especially strong performance in our stores.

<unk> maintenance in China Asia Pacific markets with the return of Chinese tourism.

Jonathan Sinclair: Our stores in Japan also saw strong growth this quarter, led by domestic and tourist demand. It's worth reminding you that there may be significant upside to our top and bottom line should Chinese tourism return to a more normalized level in the West this year, as we've not considered this in our guidance. Asia Pacific consumers continue to purchase our non-heavyweight down offerings such as apparel and accessories, which grew triple digits this quarter over the same period last year in the region. Finally, EMEA revenue was down 7% year-over-year to CAD 18.7 million, or 6% down on a constant currency basis, as lower wholesale revenue was partially offset by growth in our DTC channel. Our stores have continued to benefit from more tourism from the US, from the Middle East, and more recently from China.

Our stores in Japan also saw strong growth this quarter led by domestic and tourist demand.

It's worth reminding you that there may be significant upside to our top and bottom line should Chinese tourists and return to a more normalized level in the west this year as we have not considered this about guidance.

Asia Pacific consumers continue to purchase our non heavy weight down offerings, such as apparel and accessories, which grew triple digits. This quarter over the same period last year in the region.

Finally, EMEA revenue was down 7% year over year to $18 $7 million or.

Four 6% down on a constant currency basis as lower wholesale revenue was partially offset by growth in our DTC channel.

Our stores have continued to benefit from more tourism.

The U S from the middle East and more.

Recently from China.

Jonathan Sinclair: Most of our European stores registered double-digit comparable sales growth year-over-year in Q1 as they benefited from a more normalized operating environment. Despite the hot weather, our heavyweight down collection saw notable growth in EMEA in the quarter, almost doubling as compared to the same quarter last year as more wholesalers gravitate to our iconic parkas. Given the outsized impact of wholesale in the region, it was most impacted by the dynamic in our wholesale order book. Moving to gross profit. Q1 gross profit grew 29% year-over-year to CAD 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 due to a higher mix of DTC sales as well as favorable product mix and pricing.

Most of our European stores registered double digit comparable sales growth year over year in Q1.

As they benefited from a more normalized operating environment.

Despite the weather our heavyweight down collections saw notable growth in EMEA in the quarter, almost doubling as compared to the second quarter last year.

Wholesalers gravitate to a colleague pockets.

Given the outsized impact of wholesale in the region. It was most impacted by the dynamic in our wholesale order book.

Moving to gross profit.

First quarter 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 due to <unk>.

Higher mix of DTC sales as well as favorable product mix and pricing.

Jonathan Sinclair: The increase in the gross margin of our products was seen across all categories, with non-heavyweight down outpacing margin expansion of our established heavyweight down segment. DTC gross margin expanded to 73% in Q1, while wholesale gross margins increased to 51%, up 40 and 30 basis points respectively compared to Q1 of last year. Gross margins were favorably impacted by pricing, product mix due to the higher proportion of heavyweight down sales, and lower freight costs. These margins are entirely consistent with our long-term expectation of mid-seventies DTC and mid-to-high forties wholesale gross margins on an annual basis. The adjusted EBIT loss increased to CAD 91.1 million compared to Q1 of last year. That primarily arises from increased SG&A expenses.

The increase in the gross margin of our products, we are seeing across all categories with non heavyweight doubt outpacing margin.

Pension established heavyweight down segment.

DTC gross margin expanded to 73% in Q1, while wholesale gross margins increased to 51% up 40, and 30 basis points respectively.

To the first quarter of last year.

Gross margins were favorably impacted by pricing product mix due to the higher proportion of February down sales and lower freight costs.

These margins are entirely consistent with our long term expectation.

7% is DTC mid to high Forty's wholesale gross margins on an annual basis.

The adjusted EBIT loss increased $91 $1 million compared to Q1 of last year.

Primarily arises from increased SG&A expenses.

Jonathan Sinclair: Our adjusted EBIT loss in the quarter was favorable compared to our first quarter guidance range, mainly as a result of strong revenue growth. SG&A increased 24% year-over-year to CAD 154.9 million, largely associated with higher costs associated with the expansion of our retail network, and strategic investments in technology, and of course our transformation program, which we expect will enable operational efficiencies across the organization to support sustainable growth and profitability. Adjusted net loss attributable to shareholders was CAD 73.1 million, and an adjusted loss of CAD 0.70 per basic share. Moving to our balance sheet. We ended Q1 of fiscal 2024 with inventory of CAD 522.1 million, up 3% from CAD 504.7 million at the end of the same period last year.

Our adjusted EBIT loss in the quarter was favorable compared to our first quarter guidance range, mainly as a result of strong revenue growth.

SG&A increased 24% year over year to $154 $9 million largely associated with higher costs associated with the expansion of our retail network and strategic investments.

In technology and of course, our transformation program, which we expect will enable operational efficiencies across the organization to support sustainable growth.

But let's see.

Adjusted net loss attributable to shareholders was $73 $1 million and an adjusted loss of <unk> 70.

Basic share.

Moving to our balance sheet. We ended Q1 of fiscal 'twenty four with inventory of $522 1 million.

Up 3% from $504 7 million at the end of the same period last year.

Jonathan Sinclair: As expected, year-over-year growth in inventory decelerated for the second consecutive quarter as we more closely align the supply of product with anticipated demand and utilize the evergreen product we have on hand. During our Q1, we stopped production at one of our two Montreal facilities, consolidating production into our other facilities. We also brought more production in-house to introduce greater flexibility and improve overhead leverage. In Q1, approximately 75% of our domestically produced jackets were manufactured in-house compared to 58% in Q4 of fiscal 2023. We expect the planned deceleration of inventory growth and a shift to in-house production to continue to support further gross margin expansion.

As expected year over year growth in inventory decelerated for the second consecutive quarter as we more closely aligns the supplier product with anticipated demand and utilize the evergreen product we have.

During our first quarter, we stopped production one about to Montreal for facilities consolidated production into other facilities. We also brought more production in house to introduce.

Greater flexibility and improved overhead leverage.

In Q1, approximately 75% default domestically produced jackets were manufactured in house compared to 58% in the fourth quarter of fiscal 'twenty three.

We expect the planned deceleration of inventory growth and the shift to in house production to continue to support.

Further gross margin expansion.

Jonathan Sinclair: During Q1, we bought back approximately 1.16 million shares for a total cash consideration of CAD 26.3 million, ending the quarter with CAD 48 million of cash on our balance sheet compared to CAD 81.8 million at the end of Q1 fiscal 2023. Since the commencement of our buyback program, the NCIB, we have repurchased 2.7 million shares, or approximately 50% of the amount authorized under this program. We're very comfortable with net debt coverage of 2.7x adjusted EBITDA at the end of the quarter.

During the first quarter, we bought back approximately $1, one 6 million shares for a total cash consideration of $26 3 million.

Ending the quarter with $48 million of cash about balance sheet compared to $81 8 million.

Fiscal 'twenty three.

Since the commencement of our buyback program at the NCI B, we have repurchased two 7 million shares or approximately 50% the amount authorized under this program.

We're very comfortable with net debt leverage of two seven times adjusted EBITDA at the end.

Quarter.

Jonathan Sinclair: In Q1, we extended our revolving facility through 2028, solidifying the balance sheet. Canada Goose is investing across multiple fronts to position ourselves for long term growth, represented by our three strategic pillars and our transformation program, the latter of which we expect will strengthen our foundation and add greater efficiencies into our operating model to support long term growth and the associated margin expansion. In Q1, we lay the groundwork for our transformation program and are now focused on beginning implementation across a number of initiatives, including enhancing store productivity and optimizing production and procurement. Stay tuned for further updates on this front as we advance these initiatives into implementation. Turning to our outlook. We had a strong Q1 and are pleased with the progress we have made to achieve our full year plans. Our outlook contemplates an uncertain macroeconomic environment together with foreign currency volatility.

In Q1, we extended our revolving facility through 2028, solidifying our balance sheet.

Canada Goose invest.

Investing across multiple fronts to position ourselves for long term growth represented by our three strategic pillars and our transformation program. The latter of which we expect will strengthen our foundation.

Greater efficiencies into our operating model to support long term growth and the associated margin expansion.

In Q1, we lay the groundwork for our transformation program and are now focused on beginning implementation across a number of initiatives, including in hosting store productivity.

And optimizing production and procurement.

Stay tuned for further updates on this front as we advance these initiatives into implementation.

Turning to our outlook we.

We had a strong first quarter at all pleased with the progress we have made to achieve our full year plans.

Our outlook contemplates an uncertain macroeconomic environment together with foreign currency volatility.

Jonathan Sinclair: We continue to plan against a range of scenarios, and our guidance represents our assessment of market conditions and the most likely consumer impacts. Our fiscal 2024 outlook assumes continued momentum in Asia Pacific, balanced with a more challenged consumer backdrop in the US, as noted by others in the sector. Our priorities for fiscal 2024 remain unchanged. We intend to continue investing in our strategic pillars and, of course, in our transformation program to build for the long run. We remain confident that this is the right path to achieve sustainable growth and improved profitability. As such, we are reiterating our full year fiscal 2024 guidance. We expect total revenue to be in the range of CAD 1.4 to 1.5 billion for the full year.

We continue to plan against a range of scenarios and our guidance represents our assessment of market conditions and the most likely consumer impacts.

Our fiscal 'twenty outlook.

Assumes continued momentum in Asia Pacific balance with a more challenged.

<unk> backdrop in the U S as noted by others in the sector.

Our priorities for fiscal 'twenty four remains unchanged.

We intend to continue investing in our strategic pillars and of course in our transformation program to build for the long run.

We remain confident this is the right path to achieve sustainable growth and improved profitability.

Jonathan Sinclair: Our revenue guidance assumes DTC revenue in the mid- to high-70s as a percentage of total revenue, driven by mid-single digits to mid-teens comp sales growth, and continued store expansion as we continue to plan to open at least 16 new permanent stores in the year, of which four are already open. We also continue to expect wholesale revenue to decrease by 6% year over year as we maintain our visibility over our order book, and our delivery, comprising the vast majority of the year's wholesale business. We expect non-IFRS adjusted EBIT to be in the range of CAD 210 to 240 million in fiscal 2024, representing an operating margin in the range of 15% to 16%.

Jonathan Sinclair: This assumes gross margin percentage to be in the high 60s% on a full year basis, with DTC and wholesale gross margins in the mid-70s% and mid- to high-40s%, respectively. We are not including any benefits from the transformation program in the fiscal 2024 guidance. We expect non-IFRS adjusted net income per diluted share in the range of CAD 1.20 to 1.48. This assumes an effective tax rate in the low 20s% as a percentage of income before taxes, and weighted average diluted shares outstanding of 106.3 million for fiscal 2024. Consistent with this annual guidance, our guidance for Q2 is as follows. We expect revenue to be in the range of CAD 270 to 290 million.

That'd be gross margins in the mid seventies mid to high 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 diluted chair in the range of $1.20 to $1.48 cents.

This assumes an effective tax rate in the low twenties as a percentage of income taxes.

Weighted average diluted Chaz outstanding Hunt.

106.3 million for fiscal 2004.

Consistent with this annual guidance are guidance for Q2 is as follows.

We expect.

Revenue to be in the range of 272 $290 million.

Jonathan Sinclair: Our revenue range reflects the earlier shipments of wholesale orders that took place in Q1 that will no longer be included in Q2. We expect non-IFRS adjusted EBIT to be in the range of CAD -20 to -30 million, reflecting the impact of our expanded store network in the summer quarter, in terms both of the number of new stores we are operating, and the number of stores we're planning to open in our Q2, as well as the planned timing of marketing spend, which is later this year than last. We expect non-IFRS adjusted net loss per basic share to be in the range of CAD 0.17 to 0.24. In conclusion, we had a strong start to the year. More new and existing customers are returning to our stores. We're showing up in more places and people love our products.

Revenue range reflects the earliest shipments of wholesale orders it took.

Q1 that will no longer be included and cute too.

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, where our pricing and the number of stores were planning to open in the second quarter.

As well as the plan timing of marketing spend which is later this year than last.

We expect <unk> adjusted net loss per basic track to be in the range of <unk>.

17 24 cents.

In conclusion, we had a strong stopped the move.

<unk>, new and existing customers are returning to our stores were showing up in more places and people love all products.

Jonathan Sinclair: Customers are shopping with Canada Goose, seeking the very best in craftsmanship, style, and performance. We're pleased with the progress we've made across all fronts in our Q1 to position us well for long term growth and improving profitability as we continue to execute against our strategic pillars and our reiterated annual guidance. With that, operator, please open up the lines for questions.

Customers are shopping with <unk> seeking the very best in Crossman trip style and performance. We're pleased with the progress we've made across all fronts and offers cool Sir the physician 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.

Operator: Certainly. One moment. We will now be opening up the line for your questions. On today's Q&A portion of the call, Jonathan Sinclair and Carrie Baker will be taking your questions. One moment for our first question. Our first question comes from the line of Brooke Roach from Goldman Sachs. Your question please.

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 Roach from Goldman Sachs. Your question. Please.

Brooke Roach: Good morning, and thank you so much for taking our question. Dani, I was hoping you could talk a little bit more about your updated thoughts on how the Canada Goose brand is resonating with the Chinese consumer now that you're a few months further into the reopening. Perhaps for Jonathan, can you elaborate on the outlook that you now see for China following a strong fiscal Q1? How does the trend that you're seeing this quarter impact your view on the recapture ability of the CAD 160 million of lost China revenue from the prior year? Thank you.

Good morning, and thank you so much for taking our questions. 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 every opening.

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 of the $160 million of lost China rattling from the prior year. Thank you.

[laughter].

Jonathan Sinclair: Okay, thanks, Brooke. As Dani's not on the call, Carrie's gonna take the question on China, and I'll revert on the second question on the outlook.

Okay. Thanks.

<unk> is that is not on the coal carries gotta take the question on trying to an hour with us on the second second question on the outlook.

Carrie Baker: Hi, Brooke. Yeah, we had stellar results in Asia Pacific. In mainland China, we saw strong rebound in spending across our DTC channels. Mostly that's because we're seeing people come back into stores. We saw especially robust performance in Macau and Hong Kong, and that's really because of the return of tourism to Chinese mainland. Japan also saw strong growth, both from locals and from tourists. We're really energized by what we're seeing, and we expect that to continue.

How about so yes.

<unk> <unk> in mainland China with a strong rebound.

Crawford channels, mostly that.

Seeing people come back into stores.

Especially robust appointment in Ireland, Hong Kong, and not really because of the return it to us and to change Chinese Enron, and then Japan <unk> sounds.

Sounds like a sore thumb locos and future. So we're really energized by what we're singing and.

No.

Jonathan Sinclair: I think as we think about the outlook for China, the key thing to think about is when it was most impaired last year. We've already said at the beginning of this year that we are expecting progressive improvement. We've obviously had a very good start to that. China was at its most disrupted in Q1 and Q3 last year. That's when I'd expect to see the growth at its strongest. If you recall, what we said was, we have not included in our guidance an assumption that we recover the whole of the hit that we took last year, but we're seeing progressive improvement towards it, as you can see here.

And I think as we think about the outlook.

China.

The.

The key thing to think about is when it was most imped last year. So we we've already said at the beginning of this year.

But we are expecting progressive improvement, we got to see how the very good stop to that.

Trying to resist its most disrupted and shoe woman to three last year 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 at no guidance, an assumption that we would cover the whole.

Last year, but listening progressive improvement tools as you can see.

Brooke Roach: Thank you very much. I'll pass it on.

Thank you very much I'll pass on.

Jonathan Sinclair: Thank you.

[noise]. Thank you [noise].

Operator: Thank you. As a reminder, ladies and gentlemen, we ask that you please limit your questions to one question and one follow-up. You may get back in the queue as time allows. One moment for our next question. Our next question comes from the line of Robert Holmes from Bank of America. Your question, please.

And as a reminder, ladies and gentlemen, we ask that you. Please limit your questions to one question and one follow up you might 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.

Robert Holmes: Oh, good morning. You know, thanks for taking my question. Jonathan, I think you know, maybe my first question is just, can you give us any help on the pricing tailwind, you know, to Q1 sales? How significant was the pricing increase benefit?

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 was the pricing increased benefit.

Jonathan Sinclair: Thanks for the question, Bobby. I think from my point of view, you know, we always said we're sort of around the same mid-single digits or so, in pricing. This year's not been any different than that. You know, you'll have heard me talk a number of times about the relatively scientific way in which we go about this, both in terms of architecture in any one market and the application of it across multiple markets, and that this year has been no different than that. We've maintained the model. From what we can see, the international pricing matrix is alive and well and operating across the sector.

So 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 and pricing. This year has not been any different than that we hardly talk a number of times about the relatively scientific way in which we go about this both in terms of an architect with any one market and the application of it across.

Multiple markets.

And that this year's been no different in that we maintain the bubble from what we can see the international pricing matrix. It's July .

Well no pricing.

Across the sector.

Jonathan Sinclair: Therefore, you know, we've obviously had pricing benefit in our numbers, as we would expect, and in line with the sort of rate we've experienced in previous years.

And therefore, we we've obviously had pricing benefits and all others as as we would expect and in line with the sort of right we've experienced in previous years.

Robert Holmes: That's great. Just a quick follow-up on inventory. It's great that the growth of it is slowing. Will you ever go through a period where inventory levels that you carry could be worked down a little? Because obviously they've gotten a little bloated, you know, during COVID, and I thought maybe they would, you know, work down somewhat.

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 the rubber <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 you know.

Work down somewhat.

Jonathan Sinclair: So if we think about inventory, I mean, what we've said is that it would. The year-over-year growth would reduce progressively, and you saw that in March, and you see it again now. We have worked very hard to tailor what we produce, what we buy to our sales expectations. We act very responsibly on that. We've always said in the past, you know, we're not afraid to be sold out if that's what it takes. Therefore, it is conceivable over time that inventory is, you know, vacillates around the level that we're at. It's conceivable it could be slightly lower, it's conceivable it could be slightly higher.

Yes, so if we think about inventory well what we've said is it would <unk> would reduce progressive lane and you saw that in March you say it again now.

We have worked very hard to tell you that.

What we produce what we buy to ourselves expectations, we are very responsibly.

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 conceivable over time that the inventory is.

Vacillates around the <unk> the level of <unk> conceivably could be slightly luck with a super recently, alright, but in and around last year's level is where we think is the right places for us to be against the guidance.

Jonathan Sinclair: In and around last year's level is where we think is the right places for us to be against the guidance that we're giving on revenue growth. Clearly, you know, we work hard to make sure it's as efficient as it can be. Let's remember, so much of it is continuative that it maintains its value over time. It doesn't represent margin risk, it doesn't represent obsolescence risk, and therefore, we're able to work our way through it and satisfy demand where it's there.

That we're giving old revenue growth.

Clearly you know we work hard to make sure. This is sufficient is it 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.

I'm satisfied to Butler.

Robert Holmes: Great. Thank you, Jonathan.

Mmm, great. Thank you Jonathan.

Jonathan Sinclair: You're welcome.

You're welcome.

Operator: Thank you. One moment for our next question. Our next question comes to the line of Sam Poser from Williams Trading. Your question, please.

Thank you one moment for our next question.

And our next question comes from the line of Sam Poser from Williams trading your question. Please.

Sam Poser: Good morning. Thank you for taking my question. I just have a question about the DTC business and the evolution to getting to around 35% in H1, so you can sort of become more profitable in total with your DTC. Can you tell me where you are in that, towards that long-term target and how you're thinking about it, 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.

Towards that long term target and and <unk> and and how you're thinking about it. Please.

Jonathan Sinclair: Yeah. I think, you know, we talk about 35% of the total business being in H1 rather than just DTC, but we're obviously working toward that. We're seeing good growth in our non-heavyweight down business. That's important in the context of relevance in H1 of the year, when the temperatures are somewhat higher. I think it's something that we are making excellent headway on. You see that in the rate of growth that we've experienced in DTC in H1, which is really quite strong, Q1 rather.

Yeah, I I I think.

Yeah.

We talk about 75% of the total business being an H one uhm just CCC, 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.

And.

You see that in the rates of growth that we've experienced in D. C. C. In the in the first half, which is really fights festival, which is really quite strong.

Sam Poser: You mentioned part of this, I believe, in your prepared remarks, but within that I guess within the portions of non-heavyweight down. It sounded like Asia Pacific performed the best in that category, followed by Canada, followed by US, followed by Europe. Is that accurate? Am I thinking about that right? Did I get that right?

And you mentioned part of this I believe in your prepared remarks, but hum.

In that I guess within the portions of non heavyweight down <unk>.

Sounded like Asia Pacific was the.

Perform the best in that category, followed by Canada, followed by you.

U S followed by Europe is that accurate.

Thinking about that right I got that.

Jonathan Sinclair: Well, certainly our standout performance was Asia-Pacific. That's not a surprise in the context, it's the fastest growing region in the quarter either. It really is outsized performance, and we're delighted to see the progress there. I will say we're making good progress both in North America and in Europe, in those categories. It's not like it's purely one geography and not another. We're actually seeing good growth around the world with just the outsized growth in Asia-Pacific generally, meaning that we're making more headway this quarter in that region compared to the others.

Alright, but Sunday I'll I'll stand up performance Wisdom heavy was was I Asia Pacific.

That's all a surprise in the context as the fastest growing region in the Boulevard.

But it really is outsize performance somewhere 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 .

In those categories and so it's not like it's it's purely one geography and also another we're actually saying good growth around the world.

With just the outsides growth in Asia Pacific generally, meaning we're making more halfway this quota.

<unk> compared to the others, yeah, if I can just add some color in terms of the category. So yeah, let's.

Carrie Baker: Yeah, if I could just add some color too in terms of the category. Yeah, as you heard us talk about apparel and accessories among the fastest growing categories. It's great. What I like to see about that is that, you know, people are coming in, they're buying a broader assortment of Canada Goose. They might even be entering the brand through some of those categories. Especially, you know, we've launched our footwear is climbing year over year this quarter. We just launched our Glacier Trail Sneakers, which are, you know, the consumer response has been phenomenal to that. It's for us, there's just so much more to offer. We have way more seasonally relevant products that people are buying now to wear now.

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 and buying a broader assortment of Canada. They might even be entering the branch with some of those.

<unk> and especially we launched our footwear hunting you over here this quarter, which is lunch or Appalachia transmitters, which are my responses nominal for that so it's perhaps there's just so much more to offer with <unk> uhm seasonally relevant product that people are buying now to where now.

Sam Poser: Thank you very much.

Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Oliver Chen from TD Cowen. Your question please.

Thank you one moment for our next question.

And our next question.

Comes from the line of all of our 10 from T. D. Cowan your question. Please.

Katie: Hi there. Thanks for taking our question. This is Katie on for Oliver. Our first question is around the wholesale channel. Do you plan to take any action that would give you more control over selling in that wholesale channel, such as, you know, for example, bringing in a Canada Goose sales associate?

Katie Cowles: Hi there. Thanks for taking our question. This is Katie on for Oliver. Our first question is around the wholesale channel. Do you plan to take any action that would give you more control over selling in that wholesale channel, such as, you know, for example, bringing in a Canada Goose sales associate?

Hi, there. Thanks for taking my question. This is Katie on for all of our our first question is is a animal style channel do you plan to take any action that would give you more control over selling in at wholesale channel.

For example, paint and my candidate sales associate.

Carrie Baker: Thanks, Katie, for your question. Great question. We already do, I think depending on the account or the door that we're talking about, so whether that's providing sales associates robust training programs. We work really hand in hand with all of our partners to make sure that that experience is as close to a Canada Goose experience as we possibly can get it, even though it's inside somebody else's doors. I think what you're seeing, and I know we spoke to this in the remarks, but what you're seeing in wholesale is mostly a result of our just continued streamlining. Of course, EMEA has a different impact just given the size of the wholesale business in that market in this quarter.

Thanks to repeat your question Great question, we we already do Uhm I think depending on the the account or the way that we're talking about whether that providing sales associate robust training program work really hand in hand, with all of our partners to make sure that that experience is as close to that candidate with experience.

Hopefully they can get it even though it inside somebody else adores, So I think what you're seeing.

<unk> in that market in the order of.

Carrie Baker: There is, of course, some caution from wholesale partners. You're seeing that across the sector. It's every brand. Mostly it's a result of us, you know, looking at the partners, looking at most which ones are, you know, brand enhancing, which ones are going along this journey with us in terms of representing who we are best and, you know, us making choices as a result of that.

Of course, some caution compulsive partners and you're seeing that across the sector at every branch, but mostly at the results of that 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 your choices are edited off of that.

Katie: Okay, great. Thank you. As a follow-up, could you just touch on sort of productivity of the new stores that you're seeing and how does that compare relative to your legacy stores, as well as your expectations? Thank you.

Katie Cowles: Okay, great. Thank you. As a follow-up, could you just touch on sort of productivity of the new stores that you're seeing and how does that compare relative to your legacy stores, as well as your expectations? Thank you.

Okay, great. Thank you and then as a follow up could you just touch on productivity as a new store that you're seeing and how does that compare relative pier legacy store. It it's always the expectation. Thank you.

Jonathan Sinclair: We've opened, as you've heard, Katie, 4 stores so far this year. We are delighted with the performance that we're seeing to date. We've seen consumers react really well. We've seen good traffic flows in those stores. We've picked them very carefully to make sure that we've got the right environment, the right adjacencies. We're getting what we expected at this point, and we're very pleased with it.

<unk> as you put.

Dozens fulfills snowfall this yeah.

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 tools, we've picked them very very carefully to make sure that we've got the right <unk> and so we're getting what we expect it at this point, we're very pleased with it.

Carrie Baker: If I could just add, too, the thing that also encourages us, as we've talked a lot and you've heard my famous line of go west, but you know, when you look at the stores we're opening, you know, talking about Vegas, we're talking about Seattle, LA, these are, you know, non-winter warmer climates, and the response has been equally strong. Again, that just gives us more confidence that our strategy is working, consumers are responding, and we have a lot of opportunities, particularly when you look at the US. We're just, we're so early in our journey that we have many more stores to open and expect them to perform as we've seen so far.

Okay just out to you. It also encourages assessment chuckle I entered my <unk>.

<unk>, but you know when you look at the stars for opening and shutting down.

Protecting the Seattle L. A DS or you know non wintered uhm warmer climate and the response has been equally strong and so again that just gives us more confidence that our strategy is working things are responding and we have a lot of opportunity, particularly when you look at the last week or so early in our journey that we have many more starts to open up and.

Expect them to perform assistant.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jay Sole from UBS. Your question please.

Thank you one moment for our next question.

And our next question comes from the line of J stole from UBS. Your question. Please.

Jay Sole: Great. Thank you so much. Jonathan, if you could talk about the DTC growth you're expecting this year. Do you have some idea of how much of that growth you expect to come from the new stores versus how much you expect to come from e-commerce versus how much would come from stores that maybe were closed last year, they're up this year, versus how much of like for like growth you expect this year from your stores that were open last year that are also gonna be open again this year?

Great. Thank you so much Jonathan if you talk about the D. T C 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 last you they're up this year versus how much of like like for like growth you expect to hear from your stores. They were open last year that are also gonna be able to get this year.

Jonathan Sinclair: Okay. To try and give you some flavor of that, obviously you've got our core guidance assumption in terms of the overall DTC comp growth. That's an important element in its own right. That excludes sales being made this year on days when the stores were closed last year. That's additional. Obviously there's a significant proportion of that growth. You see some of that contained in the gap between the DTC comp growth and the aggregate growth of DTC. The other piece then obviously is new stores. We've got 16 new stores coming online. You could assume that they're there for half the year, and you know our sales density and therefore can make, I think, a good stab at that as a result.

Okay. So.

To try and give you some flavour all of that obviously, you've got off a cold guidance sumption in terms of.

Oh D. G C. <unk>. So that's an important element in its own right.

And that excludes sales and met being made this year on days when the stores were closed last year. So that's additional.

And obviously, there's a there's a significant proportion of that crowd 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, and so is coming online you could assume that the that for half the year and you know ourselves density and therefore can make I think a good stomach.

Jonathan Sinclair: I think it's, you know, we've got a good crop of stores coming online this year. They're gonna be around for most of the productive period of the year, H2, and therefore you can assume that, you know, there's a healthy contribution from those stores. Online, we've been doing a lot of work, as you've heard from Dani's prepared remarks around where we're heading. We're very optimistic about what that can bring. We see it as complementary. We're looking forward to our first peak season with omni-channel in the UK, which we haven't done before, as well as continuing to refine it in other markets. Our chief digital officer has been doing a ton of work around this.

We've been doing a lot of work because you've heard from from from <unk> prepared for miles around.

Heading with very optimistic about what that can bring we say it is complimentary we're looking forward to our first uhm peak sees them with Omnichannel in the.

The UK, which we haven't done before as well as continuing to refine it doesn't markets treat digital offices been doing a ton of work around this we can see a lot of opportunity and <unk> uhm real upside that.

Jonathan Sinclair: We can see a lot of opportunity, and we think there's a real upside there. Hope that gives you a good flavor for this.

Hope that gives you a good flavor for this.

Jay Sole: It does. If I can just follow up with one more. Can you talk about what you're seeing from tourist traffic trends, you know, especially in different geographies, you know, like Europe, for example, or even in North America?

Can you talk about what you're seeing from tourist traffic trends, you know, especially different geographies like Europe for example, or even in the in North America.

Jonathan Sinclair: Yeah, sure. I mean, we're seeing some tourism return. It's interesting because it's very different by region. I called out in my own remarks that, you know, what we're seeing in Southeast Asia, in the outperformance of the non-Mainland China Southeast Asia markets, where we are definitely seeing a return. As you look beyond that, it's much more gentle, I think partly because, you know, we saw some early recovery last year. Frankly, travel from Asia to the rest of the world is a little bit more muted. Some of that's flight slots, some it's about people getting back into it.

Yeah sure Uhm, I mean with with seeing some tourism returned it's interesting because it's very different by region.

I called that <unk>, what we're seeing in southeast Asia, and the outperformance at the <unk>.

Trying to Uhm Southeast Asia markets, where we are definitely seeing.

As you look beyond that it's much more it's much more.

Gentle I think policy because.

We saw some early recovery lost you and frankly.

Travel from Asia to the rest of the World is is a little bit more muted some last flights 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 upside.

Jonathan Sinclair: It will just take a little time, and that's what we've said, and that's why we've not included that upside in our guidance assumptions at this point. Now, if it happens, great, and that's got the potential to be an upside.

Outside at all in our guidance assumptions.

At this point now if it happens great and that's spelled with sexual speed up sorry.

Jay Sole: Got it. Thank you very much.

Got it thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jonathan Komp from Baird. Your question, please.

Thank you one moment for our next question.

And our next question comes from the line of Jonathan come from your.

Your question please.

Jonathan Komp: Yeah. Hi. Thank you. Good morning, everyone. Jonathan, if I could just follow up on the Q1 results. It looked like a pretty solid bottom-line EBIT upside quarter relative to the revenue upside. Could you just, and sorry if I missed this, you know, share any more details on the profitability flow-through that you saw? Would you extrapolate any of those observations to the full year, or is it just too small of a quarter to impact the full year view at all?

Yeah, Hi, Thank you good morning, everyone Uhm, Jonathan if I could just follow up on that the first quarter results and it looked like a.

Pretty pretty solid hop bottom line EBIT.

Side corner relative to the revenue upside so could you just I'm sorry, if I missed you know share any more details on the.

Profitability flow 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 corner to impact before your view at all.

Jonathan Sinclair: I think, John, it is a small quarter, but nevertheless, the momentum and the narrative around it is positive. That's very much how we'd like to start the year. We were pleased with the performance. We've found some cost efficiency in the business as the quarter's progressed, and that's been helpful to the bottom line for sure. With that level of comp growth at these sorts of gross margins, inevitably there's a profit flow through from that, and we're very pleased with it. It is a small quarter, and therefore we feel that it's appropriate at this point to reiterate the full year guidance rather than do anything else, in light of it.

So.

I think John <unk>.

It is a small quota.

But nevertheless, the momentum and the narrative around it is it is positive.

Very much I'll be like Salvia, we were pleased with the performance we've got.

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 lives of it but it's.

Jonathan Sinclair: It's set us up well. I think I'd draw attention to the gross margins being slightly ahead. I think the comp growth is comfortable and positive. I think we've got a good landscape at this point.

It's set us up well I think a draw attention to the gross margins being slightly ahead.

<unk> is comfortable a positive.

We've got a good landscape at this point.

Jonathan Komp: Yeah, that's an encouraging and helpful color there. Thank you. One follow-up I had just on inventory. Could you maybe share a little bit more? You touched on this, but just share a little more on what you're thinking, if you could quantify some of the production cuts you're making, either the magnitude or the duration or both. As we think forward about the costing of the inventory that you produce, is there any sort of future concerns about, you know, lower utilization impacting your cost of goods or anything like that? Just more color on the inventory moves you're making.

Yeah, that's an encouraging and helpful color. There. Thank you and then one follow up I had just done 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 their production costs here, making either the magnitude or the duration or both.

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 color on my on my inventory moves you're making.

Jonathan Sinclair: Yeah. I mean, if I can sort of take it to its natural consequences there, are we worried about where the gross margin's tracking? No, we're not. Then I'll let me back up into that. That means that what we're doing is we're putting proportionately less of our production in Canada, which is, call it round sums, three-quarters to 80% of what we buy and make. We're putting proportionately less of that with our third parties and more of it through our own facilities. Actually what that does is that produces our overhead leverage. That addresses the fact, therefore, that if you're making slightly less, you don't see cost growth and therefore margin dilution coming out of it. That's one part of it.

Yeah, I mean, if I can sort of take it too it's natural consequences that I'll be worried about whether bright spots tracking the adults.

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 brown thumbs three quarters <unk>.

We're putting proportionately less of that with all set policies are morbid.

<unk> and actually what that does is that produces all I've had leverage.

And and that.

That addresses the fact that if you're making a slightly less you don't see <unk>.

<unk> coming out of it that's one part of it second bodies and we've got so bad because we've got one less facility and so if you take that southern Seattle, which is let's say 12 that all per cent. One one eighth of the the number of services then in reality you you you <unk>.

Jonathan Sinclair: Second part is, we've got less overheads because we've got one less facility. If you take that facility out, which is, let's say, 12.5%, one-eighth of the number of facilities, then in reality, you've sort of created a further tailwind there. We're not concerned about that. It still means that we I mean, we've got ample inventory to meet our needs, so it's very aligned with our expectations of revenue as mentioned in the guidance ranges. We feel pretty good about that. I think we feel like we've got the right framework coming into place now that helps us grow inventory at or below the rate of revenue growth in the longer run.

Uhm.

The tailwind that so we're not we're not concerned about that.

Still means that we we golf.

Ample inventory tomato late so it's very a line with our expectations.

Expectations, all revenue as mentioned as the Guy that's right. So we feel pretty good about that.

We we feel like we've got the right framework coming into lifestyle that helps us grow inventory.

Jonathan Sinclair: as I said, this year, staying relatively flat to last year.

Jonathan Komp: That's very helpful color. Thanks again.

That's a very helpful color. Thanks again.

Jonathan Sinclair: No problem.

No problem.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Ike Borochow from Wells Fargo. Your question please.

And our next question comes from the line of like furniture from Wells Fargo. Your question. Please.

Ike Boruchow: Hey, Jonathan and Carrie. I guess my question is on the geographic performance. Another quarter of Canada well outpacing the US. Can you maybe just talk about the dynamics in both markets? How are you expecting this trend to play out for the remainder of the year? Is this more a function of you guys outperforming in your Canadian market or underperforming in the US? Is it both? Just trying to understand a little bit more geographically in North America. Thanks.

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 can maybe just talk about the dynamics in both markets. How were 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 just trying to understand a little bit more geographic.

North America. Thanks.

Carrie Baker: Thanks, Ike. Yeah, the US experienced healthy growth, so it's, I mean, when you look at the numbers, it's up 15% year over year. It's obviously that strengthens our belief in our long-term strategy. We do still feel like it's, we're early in that market. Many more stores to open, you know, many more brand consumers to reach when you look at our brand awareness opportunity. As I think Jonathan mentioned earlier, we have great traction with women there, which is great. That is a big market for us in order to, you know, improve that mix back up to levels where we see other luxury players achieving. When you look at Canada, I mean, of course, it's our home market. We would expect it to be healthy, strong. There's the highest awareness here.

Mmk, Yeah, you'll have a <unk> I mean, when you look at the numbers at about 15 per cent you over here.

That strengthens arteries and our long term strategy.

Like an hour early in that market many more source open many more brand.

Mr reach when you look at our brand awareness opportunity.

Jonathan mentioned earlier had been tracking him with went in there which is great that is a big market for us in order to improve that next level, whereas the other luxury players uhm achieving when.

When you look at Canada and of course at the home market.

The healthy strong is the highest awareness here. It is also a strong tourism market so any probably benefited.

Carrie Baker: It is also a strong tourism market, and we probably benefited some, you know, earlier days than maybe some other markets from tourists returning to Canada. I don't think it's an either/or situation. They're just at very different stages in maturity. You see different, you know, consumer behaviors as a result, how they're coming into the whether it's stores, e-commerce, whether they're coming into old products or new products. There's just slight difference, but they're both performing quite well.

Earlier days and maybe some other markets I'm curious returning to Canada.

I don't think I can either or situation or just at very different stages.

Majority uhm any different.

Behaviors as a result, how they're coming into the whether it stores ecommerce, whether they're coming into all products or a new product, there's a slight difference that.

Quite well.

Jonathan Sinclair: What I'd add on the US is also that we've been talking about seeing sequential improvement in the performance of the US since turn of the calendar year, which was obviously difficult. That's continued. I think you know that that's also context for to think about as we reflect on our performance.

And what I would add on on the U S is a little side that we've been talking about saying sequential improvement in the performance of the U S. Since the calendar, yeah, which is obviously difficult continue so I think that.

<unk> <unk>.

To think about professional sports.

Ike Boruchow: Got it. Now again, I'm just, I'm not trying to nitpick, but I mean, your constant currency growth is 8% in the US. 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 Q4, so improvement. I was just kinda wondering, like, at what point do we hope that these kinda more realign, is that later in the year? Is that in time for holiday? That, that's kinda what I was getting at.

Got it and again I'm, just I'm not trying to nitpick, but I mean, your your constant currency growth rate 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 real line does that later in the year is that in time for.

Holiday.

What I was getting up.

Jonathan Sinclair: Yeah, the other piece that goes with it is inevitably, you know, the macroeconomic backdrop is with a level of uncertainty that everyone's working with. We're very confident what we've got, and we believe it's starting to produce the numbers in the way that you've seen here.

Yeah, and then the other piece that goes with it is inevitably.

<unk>.

Backdrop.

Is.

We're very confident what we've got.

We believe it's starting to produce.

And the way that you've seen him.

Ike Boruchow: Okay, great. Thanks.

Okay, great. Thanks.

Operator: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Ana Raman for any further remarks.

Thank you.

Does conclude the question and answer session of today's program I'd like the hand, the program back to Anna <unk> for any further remarks.

Ana Raman: Thank you, Jonathan. With that, this actually does conclude our Q1 2024 conference call. Thank you everyone for joining us, and goodbye.

Thank you Jonathan and with that that's actually does conclude our first quarter 2024 conference call. Thank you everyone for joining us.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Thank you ladies and gentlemen for your participation today's conference. This does conclude the program you may now disconnect good day.

[music].

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