Q2 2024 Canada Goose Holdings Inc Earnings Call

Good morning, and welcome to the Canada Goose Q2, 'twenty 'twenty four earnings call.

All participants are in a listen only mode. After the speaker's presentation, we will conduct a question and answer session.

Ask a question you will need to press star followed by the number one on your telephone keypad.

As a reminder, this conference call is being recorded.

I would now like to turn the call over to Ana Raman head of Investor Relations.

Please go ahead Ms Robyn.

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

After Danny and Jonathan his 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 and regarding material factors that could cause actual results to differ from those projected is available in our earnings press release issued this morning, as well as in our filings with U S and Canadian Securities regulators.

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These documents are also available on the Investor Relations section of our website.

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.

Please note that financial results described on today's call. We will compare second quarter results ended October one 2023 with the same period ended October the second 2022 unless noted otherwise.

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

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

Thanks, Anna and good morning, everyone.

<unk> solid second quarter results reflect the strength of our iconic Bryan mckeag local markets and progress across our strategic initiatives.

Our Q2 fiscal 2020 for revenue was in line with our expectation of 281 $1 million.

We exceeded the top end of our earnings guidance range as we balance investments in our growth initiatives with a focus on operational discipline, delivering $15 6 million adjusted EBIT.

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And adjusted earnings per share for.

For Q3.

Our conservative approach with regards to our expectation given the macro environment, we see across many of our markets. As a result, we are revising our full year outlook.

This reflects the moderation in sales growth and continued investment priorities balancing prudent expense actions Jonathan.

Operator: Good morning and welcome to the Canada Goose Q2 2024 earnings call. All participants are in a listen only mode. After the speakers presentation, we will conduct a question and answer session. To ask a question, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded.

Jonathan will expand on both our second quarter results and updated guidance.

In Q2, more consumers came to shop with Canada Goose.

Same period last year as our brand continues to capture the attention of shoppers around the world.

Our innovative high performance products and elevated luxury experience are resonating with our loyal consumers, who even with this high inflationary backdrop are returning to enjoy more of our offerings.

Ana Raman: I would now like to kind of call over to Ana Raman, head of investor relations. Please go ahead, Ms. Raman. Thank you, operator.

As we continue to navigate an uncertain global macro landscape our business is prepared for anticipated demand I'd missed the reduced visibility.

Ana Raman: Here and good morning, everyone.

Ana Raman: With me, our Danny Reiss, chairman and CEO, Jonathan Sinclair, EVP and CFO and Carrie Baker, president. After Danny's and Jonathan is 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 work, centered and applied in making these forward looking statements, additional information regarding these statements, factors and assumptions, and regarding material factors that could cause actual results to differ from those projected is available in our earnings press release issued this morning, as well as in our filings with US and Canadian securities regulators.

While this macro environment presents a headwind we remain focused on building for the long term chartered by our three strategic pillars.

Rivaling consumer focus growth building, PTC network, and expanding our product categories.

I will take you through the progress we've made on each of these pillars.

First driving consumer focus groups.

Q2, DTC channel revenue of $109 $4 million was up 15% compared to the same period last year.

Our priority here is investing in our brands to inspire and engage consumers and drive desirability through customer experiences.

Getting more heat campaigns and partnerships.

Starting with our distinctive elevated luxury retail experience that we call Canadian warmth, which defines the kennedys this customer journey.

In Q2, we began to rollout the Canadian one experience across our store network, which during our pilot phase two with a positive uplift in conversion.

This is important as we look to capitalize on our strong profit trends.

Ana Raman: 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 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 second quarter results ended October 1, 2023 with the same period ended October the second 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.

While the effects on conversion across our network are not expected to completely take hold immediately we are taking a test and learn approach to guide us moving this metric up into the right.

Second our brand marketing campaigns.

In September we launched our fall Winter campaign, featuring three Trailblazing women, who represent the Canada Goose. These dose all the living their authentic lives out in the open.

The early weeks of this campaign have been very successful achieving well over 1 billion media impressions.

In late October we held our largest event to date in China as we celebrated our fifth anniversary of our first brick and mortar store in the region.

We welcomed nearly 500 guests or event held at in Shanghai during which they took in our first ever fashion show in the country, which was held outdoors event was one of our most successful activations in the market, so far resulting in over $3 billion.

Ana Raman: With that, I'll turn the call over to Danny. Thanks, Danny.

Questions.

Chinese shoppers continued to be a driver of our growth both inside and increasingly outside of the country.

Danny Reiss: Good morning, everyone. We delivered solid second quarter results. We've left in the strength of our iconic brand and key global markets to progress across our strategic initiatives. Our Q2 fiscal 2024 revenue was in line with our expectations at $281.1 million and we exceeded the top end of our earnings gains range as we balance investment in our growth initiatives with a focus on operational discipline. Deliverting 15.6 million and adjusted even in 16 cents and adjusted earnings per share.

As of Q2, we had 21 stores in China position that we have opportunistically backed by strong demand for our brand in this market and knowing that this would position us well.

All of them independently.

I was in China last month for our five year anniversary celebration and visiting our stores and met with her customers and I was pleased to see the level of process in the stores and truly impressed with the guest experience our customers are receiving.

Similar approach to brand building partnerships to risks, we continue to drive cultural relevancy and tap into new audiences, one important aspect being product collaborations.

Danny Reiss: For Q3, we are seeking a more conservative approach in regards to our expectations given the macro environment we see across many of our markets today. As a result, we are revising our full year look to reflect the moderation in sales growth and continued investments in our priorities. The balance of current expense.

In September we launched a collaboration with London based fashion House rock and artist, Matt Mccormack that includes exclusive pieces for women.

Danny Reiss: Jonathan will expand on both our second world results and update guidance for it. In Q2, more consumers came to shop with Canada Goose, but in the same period last year as a brand continued to capture the attention of shoppers around the world. Our innovative high-performance products and elevated luxury experience are resonating with our loyal consumers, who even with this high inflationary backdrop are returning to enjoy more of our offerings. As we continue to navigate on certain global macro landscape, our business is prepared for anticipated demand, admitted reduced visibility. While this macro environment presents a headwind, we remain focused on building for the long term guided by our three distributive pillars, driving consumer focus growth, building our DTC network, and expanding our product categories.

Products from this collaborative features across select Canada stores in place with strategic and influential fashion retailers like Dover Street market.

In October we launched another collab with luxury streetwear brand pure mass featuring a colorful limited edition capsule and <unk>.

<unk> by the Street culture, and Brooklyn, children's both men and women.

Both clubs are seeing solid reception from our customers and more importantly, growing exciting media coverage globally and building brand awareness around the world.

Turning to our second pillar building on DTC.

In Q2, we opened six new permanent stores. In addition to the conversion of two temporary storage determinant during the quarter. We had 62 permanent stores at the end of the period.

We opened new stores in L, a Atlanta and Philadelphia in the United States.

Danny Reiss: I will take you through the progress we've made on each of these pillars. First, driving consumer focus growth. Due to DTC channel revenue of $109.4 million was up by 15% compared to the same period last year. Our top priority here is investing in our brand to inspire and engage consumers and drive desirability to customer experiences, targeting marketing campaigns, and partnerships. Starting with our distinctive elevated luxury retail experience that we call Canadian warmth, which defined the Canada Goose customer journey.

In mainland China, we opened a store in Tianjin and our second store in Shanghai and in <unk>.

We opened a second store.

With 90, new permanent stores opened so far in fiscal 'twenty four we are well positioned with consumers in our key geographies as we enter the holiday shopping season.

We also opened our first travel retail store in the Frankfurt International Airport in September.

We're just a month into his opening and the store is off to a good start receiving positive feedback from customers as they connect to this important international hub.

Probable retail as a new part of our wholesale programs and were eager to test and learn in the selling environment as we refine our growth plan and attract a branded type of clientele traveler.

Danny Reiss: In Q2, we began to roll out the Canadian warmth experience across our store network, which during our pilot phase showed a positive uplift in conversion. This is important as we look to capitalize on our strong traffic trend. While the effects on conversion across our network are not expected to completely take hold immediately, we are taking a test and learn approach to guide us and moving this metric up into the right.

Let's now talk about DTC home sales, which include both in store and online sales.

DTC comp sales were down 7% year over year as total store comp sales increased slightly offset by a decrease in the ecommerce revenue.

While profit grew significantly both online and offline and across all regions DTC comp growth was down in the U S EMEA and mainland China.

Danny Reiss: Second, our brand marketing campaigns. In September, we launched our fall winter campaign, featuring three trail living women who represent the Canada Goose Goose, boldly living their authentic lives out in the open. The early weeks of this campaign have been very successful, achieving well over a billion media impressions. In late October, we held our largest event to date in China, and we celebrated our fifth anniversary on our first brick and mortar store in the region.

Growth in Hong Kong, Taiwan, and Macau was robust fueled by the return of mainland Chinese tourists.

Canada DTC growth also increased particularly in cities with high levels of tourism, including Vancouver and Toronto.

Overall, we saw softer conversion in Q2 year over year, which we believe may be due to the macroeconomic environment, which consumers are spending closer to need exacerbated by the later onset of cold weather that many regions had been experiencing.

Danny Reiss: We welcomed nearly 500 guests or event held in Shanghai, during which they took in our first ever fashion show in the country, which was held outdoors. The event was one of the most successful activation in the market so far, resulting in over 3 billion media impressions. Chinese shoppers continued to be a driver of our growth, both inside and increasingly outside the country. As of Q2, we had 21 stores in China, positioned that we have built opportunistically, backed by strong demand for our brand in this market, and knowing that this would position as well, followed in the pandemic.

Turning to online commerce, although our stores contributed the majority of our DTC revenue in Q2 E. Commerce is an important part of our broader strategy to create a seamless omnichannel experience.

We are investing in the end to end online shopping journey to drive better conversion and minimize returns.

On the front end, we continued to implement new features such as a size and fit module, while enhancing the Bakken through improvements in merchandising navigation and site architecture and performance just to name a few initiatives.

Danny Reiss: I was in China last month for our five year anniversary celebration and visited our stores and met with hot customers, and I was pleased to see the level of profit in the stores and truly impressed with the guest experience our customers are receiving.

In Q2, we made good traction in both hot and middle of funnel activities.

Increasing visits to our product pages and additions to occur.

Danny Reiss: Our third approach of brand building is partnerships through which we continue to drive cultural relevancy and tap into new audiences, one important aspect being product collaborations. In September, we launched a collaboration with London based fashion house Brock and artist Matt McCormick, that included eight exclusive pieces for women. Products from this collab were featured across select Canada Goose stores in place of strategic and influential fashion retailers like Dover Street Market. In October, we launched another collab with luxury streetwear brand Pierre Moss featuring a colorful limited edition capsule inspired by the street culture in Brooklyn, catering to both men and women. Both collabs are seeing solid reception from our customers and more importantly, growing exciting media coverage. Globality and building brand awareness around the world.

Or overall hugely DTC comp results were non ideal our teams are actively working to change this dynamic and trajectory to drive topline growth such as converting on the strong profit trends, we have had in the quarter our cost per owned channels.

Turning to our third pillar expanding our product categories.

In Q2.

The demand for non heavyweight them Cross group expanding its share of revenue within the overall mix.

While total sales for February down were flat year over year revenue in this category grew with energy GG channel, reflecting continued strength for our core products.

Within non heavier way down rainwear was our fastest growing category in the second quarter followed by apparel.

And so our fleece bomber Huron has an hoodie and hybrid jacket with the most popular apparel pieces with our customers.

Danny Reiss: Turn into our second floor building our DTC network. In Q2, we opened six new permanent stores. In addition to the conversion of two temporary stores to permanent during the quarter, we had 62 permanent stores at the end of the period. We opened new stores in LA, Atlanta, in Philadelphia, in the United States. In mainland China, we opened a store in Tangent, in a second store in Shanghai. In Japan, we opened a second store in Tokyo.

When we look at who is purchasing of non heavyweight them products. In Q2, we see that more of a repeat customers are coming back to the branded love to purchase additional items.

This is another reason that we're focused on offering customers amazing authentic experiences that keep them returning for more.

As in our footwear category sales of our recently launched sneaker Atlanta in July ramped up and remained a consistent levels through the second quarter and I'm happy to see the category performing to our expectations.

Danny Reiss: With nine new permanent stores opened so far in fiscal 24, we were well positioned with consumers in our key geography as we enter the holiday shopping season. We also opened our first travel retail store in the Frankfurt International Airport in September. We're just a month into its opening and the store is off to a good start receiving receiving positive feedback from customers that they connect through this important international hub. Proble retail is a new part of our wholesale province and we're eager to test and learn in the selling environment that we refine our growth plan and attract a brand new type of clientele traveler.

Taking a step back we are executing on our product roadmap and we're excited with the newness we are injecting into our upcoming product Assortments CT is always top of mind for us and I and our design teams are actively working with top tier design talent to ensure the execution against our product roadmap continues during this time of transition.

In closing, Canada is first and foremost about our products, we don't compromise on our vision of being a leading luxury brand, which is defined by our high performance style and craftsmanship.

Danny Reiss: Let's now talk about DTC comm sales, which include both in store and online sales. DTC comm sales were down 7% year over year as total store comp sales increased slightly offset by a decrease in e-commerce revenue. While traffic grows significantly, both online and offline across all regions, DTC comm growth was down in the US, India, and mainland China. Growth in Hong Kong, Taiwan, and Macau was robust, fueled by the return of mainland Chinese tourists.

Although we are facing an uncertain and challenging global macroeconomic backdrop at this time, our fundamentals are strong and we look forward to see many more people enjoy Canada goose products in the months and years ahead.

Before I hand, the call over to Jonathan I want to congratulate him on his appointment to the role of president of APAC and Neil about it on taking on the role of Chief Financial Officer, both of which will be effective on April one 2020 for both.

Both Jonathan and Neil have deep experience with Canada goose, allowing for a smooth transition between role and continuity across the business, while supporting our growth and expansion in APAC.

Danny Reiss: Canada, DTC growth also increased, particularly in cities with high levels of tourism, including Vancouver, BAMF, and Toronto. Overall, we saw software conversion in Q2 year over year, which we believe may be due to the macro economic environment, which consumers are spending closer to need exacerbated by the later onset of cold weather that many regions have been experiencing.

Thank you and with that I'll hand, it over to Jonathan.

Danny and good morning, everyone.

We are pleased with our solid top and bottom line performance in the quarter, reflecting demand and strong operational discipline.

Revenues in the second quarter was $291 $1 million up 1% year over year.

Danny Reiss: Turning to online commerce, although our stores contributed the majority of our DTC revenue to e-commerce is an important part of a broader strategy to create a seamless on the channel experience. We are investing in the end-to-end online shopping journey to drive better conversion and minimize returns. On the front end, we continued to implement new features such as aside and fit module, while enhancing the back end improvements and merchandising navigation inside architecture and performance, just to name a few initiatives.

Driven by growth in our DTC channel.

On a constant currency basis revenue was down 3% year over year as the year rise strength against the Canadian dollar.

DTC sales of $109 $4 million grew 50% or just under 12% on a constant currency basis over the same period last year as a result of retail store expansion.

Danny Reiss: In Q2, we made good traction in both top and middle of funnel activities, increasing visits to a product pages and additions to cards. Overall, Q2 DTC comp results were not ideal, our teams are actively working to change its dynamic and trajectory to drive top-line growth, such as converting on the strong traffic trends we have had in the quarter to cross our own channel.

DTC revenue was 39% of total sales in Q2 compared to 34% in the second quarter last year.

That's all store footprint expanded and consumer demands increase and a more profitable DTC segment.

We continue to intentionally shift our proportion of channel revenue to sell directly to end consumers.

Danny Reiss: Turning to our third pillar, expanding on product categories, and Q2, the man for non-heavyweight down-crow's grew, expanding its share of revenue within the overall mix, while total sales were heavily down, were flat year-over-year, revenue in this category grew with energy to the channel, reflecting continued strength for our core product. Within non-heavyweight down, rain wear was a fastest-growing category in the second quarter, followed by a peril. At Shiloh, a fleece bomber, Chiron Pants, and Hoodie, and Hybrids in the jacket were the most popular apparel pieces with our customers.

Q2 wholesale revenue of $162 million was down 10% year over year or 15% down on a constant currency basis due to the planned streamlining of our wholesale partners.

Similar to Q1, we delivered earlier shipments to our wholesalers who are excited to have the products available ahead of the peak season.

We continue to see caution once the wholesale community, which is reflected in our order book across all geographies as a challenging macroeconomic backdrop continues to present headwinds.

Danny Reiss: When we look at who was purchasing a non-heavyweight down product in Q2, we see that more of our repeat customers are coming back to the brand they love to purchase additional items. This is another reason that we are focused on offering customers amazing and authentic experiences to keep them returning for more. In our footwork category, sales of our recently launched sneaker line in July ramped up and remained at consistent levels through the second quarter, and I'm happy to see the category performing to our expectations.

Moving to performance by geography.

Q2 revenue increased in Asia Pacific and in EMEA, while decreased in North America Europe It yet.

North America revenue of $124 $1 million was down 7% or eight.

8% down on a constant currency basis.

Lower wholesale revenue was partially offset by growth in our DTC channel.

Danny Reiss: Taking a step back, we are executing on our product roadmap, and we're excited with the newness we're injecting into our upcoming product assortments. Product is always top of mind for us, and I and our design team are actively working with top-tier design talent to ensure that execution against our product will wrap continues during this time of transition.

In Q2.

<unk> segment in North America grew high single digits year over year due to solid store performance.

In the U S. DTC sales grew low double digits due to new store sales.

Danny Reiss: In closing, Canada is first and foremost about our product. We don't compromise on the vision of being a leading luxury brand, which is defined by our product's high-performance style and craftsmanship. Although we are facing an uncertain and challenging global macroeconomic backdrop at this time, our fundamentals are strong, and we look forward to seeing many more people enjoy Canada's products in the months and the years ahead.

Traffic was substantially higher.

As we more than doubled our store count to 13 permanent stores.

We're taking meaningful steps to grow the female consumer while continuing to build on the success of the men's business.

In the second quarter.

The share of transactions from women remained stable year over year with pieces from a full winter of 'twenty three collection resonating in the court.

Danny Reiss: Before I hand the caller to Jonathan, I want to congratulate him on his appointment to the role of President of APEC, and Neil Bowden on taking on the role of Chief Financial Officer, both of which will be effective on April 1, 2004. Both Jonathan and Neil have deep experience with Canada use, allowing for a smooth transition between the role and continuity across the business, while supporting a growth expansion in APEC.

From a product standpoint, apparel and <unk> categories led to growth in the non heavy weight down portion of the business.

This demonstrates our ability to provide an all season relevant product offering to our customers.

Moving to Canada, our home market.

Jonathan Sinclair: Thank you and with that, I hand over to Jonathan.

Jonathan Sinclair: Thank you, Danny, and good morning, everyone. We're pleased with our solid top and bottom-line performance in the quarter, reflecting demand and strong operational discipline. Revenue for the second quarter is $281.1 million, up 1% Euro per year, driven by growth in our DTC channel. The constant currency basis revenue was down 3% Euro per year as the euros strengthened against Canadian dollar. DTC sales of $109.4 million grew 15% or just under 12% on a constant currency basis over the same period last year as a result of retail store expansion.

Just did modest DTC growth compared to the same period last year due to growth at a brick and mortar stores as revenue contributions from tourists continued to grow within the mix.

Jonathan Sinclair: DTC revenue was 39% of total sales in Q2 compared to 34% in the same quarter last year. As our store footprint expanded and consumer demand increased in our more profitable DTC second, we continue to intentionally shift our proportion of channel revenue to sell directly to our end. Consumes. Q2 wholesale revenue of $162 million was down 10% year over year, or 15% down on a constant currency basis due to the planned streamlining of our wholesale partners.

Alongside a reduced wholesale penetration.

Turning to Asia Pacific.

This region had a solid quarter with revenue, increasing 13% year over year to $63 $8 million.

On a constant currency basis.

We had especially strong performance in our stores in Hong Kong, and Taiwan and in Macau with a continued return of Chinese tourism.

Store sales rose in mainland China, we're lifting of Covid restrictions has led to a solid rebound in domestic spending.

We continue to expand those product mix and grow off known heavyweight downloads.

With <unk> apparel and footwear, representing a larger portion of total revenues on a year over year basis in the region.

Lastly, EMEA.

EMEA revenue was up 6% year over year to $93 2 million votes.

Hold down 4% on a constant currency basis.

As wholesale revenue was partially offset by softer DTC channel performance.

Jonathan Sinclair: Similar to Q1, we delivered earlier shipments to our wholesans, who were excited to have the products available ahead of the season. We continued to see caution months the wholesale community, which is reflected in our order book across all geographies as a challenging macroeconomic backlog continues to present headwinds. Moving to performance by geography, Q2 revenue increased in Asia Pacific and in decreased in North America year over year. North America revenue of 124.1 million dollars was down 7% for 8% down on a constant currency basis, as lower wholesale revenue was partially offset by gross in our DTC channel.

Wholesale out performance was led by earlier shipments of orders to our partners.

<unk> revenue was offset by lower e-commerce revenue as consumers felt with page a weakening macroeconomic conditions.

We continue to see the share of revenue from international tourism grow as a proportion of total revenues in the region.

Right.

Standout categories during the quarter growing significantly compared to last year with Europe experiencing more painful than average during the summer.

Moving to gross profit.

Second quarter gross profit grew 8% year over year to $117 $5 million driven by gross margin expansion.

Jonathan Sinclair: In Q2, our DTC segment in North America grew high single digits year over year due to solid store reports. In the US, DTC sales grew low double digits due to new store sales. Traffic was substantially higher year over year, as we more than doubled our store count to 13 permanent stores. We're taking meaningful steps to grow the female consumer while continuing to build on the success of the men's business. In the second quarter, the share of transactions from women remains stable year over year, with pieces from our full winter 23 collection, resonating in the quarter.

Q2, gross margin expanded 410 basis points.

63, 9%.

This was due to pricing a favorable product mix, even with non heavyweight doubt outpacing heavyweight download, let's say.

A higher mix of DTC sets.

The increase in the gross margin of our products was seen across nearly all categories with known heavyweight down outpacing the margin expansion of established heavy weight down segment.

DTC gross margin was 76% in Q2.

60 basis points year over year, while wholesale margins increased to 57% up 620 basis points.

Jonathan Sinclair: From a product standpoint, a power and rain cap is led to growth in the non-heavyweight down portion of the business. This demonstrates our ability to provide an relevant product offering to our customers. Moving to Canada, our home market, we registered modest DTC growth compared to the same period last year due to growth at our brick and mortar stores, as revenue contributions from tourists continue to grow within the mix, alongside a reduced wholesale penetration.

Again.

So in the second quarter of last year.

Gross margin in the DTC segment was marginally lower due to inflationary product cost and higher freight charges due to increased volume in the U S and the maintenance, China, partially offset by favorable pricing.

Wholesale margin was higher primarily due to pricing which included important.

Foreign exchange headwinds due to the strengthening of the euro relative to the Canadian dollar.

Jonathan Sinclair: Turning to Asia for sick, this region has a solid quarter, with revenue increasing 13% year over year to 63.8 million dollars, up 11 cents on a constant currency basis. We had a specially strong performance in our stores in Hong Kong, in Taiwan and in Macau, with a continued return of Chinese tourism. Store sales rose in mainland China, where lifting of COVID restrictions that has led to a solid rebound in domestic spending.

As well as a preference for higher margin styles within the heavyweight in lightweight segments by our wholesale partners.

Adjusted EBIT was $15 $6 million.

That was down compared to $26 $3 million, we made in the second quarter of last year.

But at the same time was above the top end guidance range due to strong operational execution.

This was primarily due to lower than planned SG&A spend as we drove efficiencies across the business.

Jonathan Sinclair: We continue to expand our product mix and grow our non-heavyweight down with rainware, a power and footwear, representing a larger portion of total revenues on a year basis in the region. Emea Revenue was up 6% Eurovia to 93.2 million dollars, or down 4% on a constant currency basis, as wholesale revenue was partially offset by softer DTC channel performance, wholesale app performance was led by earlier shipments of orders to our partners. DTC store revenue was offset by lower e-commerce revenue, as consumers felt the pinch of weakening macroeconomic conditions.

Or a combination of slowing hiring process improvements and automation of manual processes.

SG&A spend of $177 $2 million was largely associated with the higher cost coming from the expansion of our retail network in particular rent and employee costs as well as the timing of marketing spend onetime corporate restructuring expenses and our transformation.

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Adjusted net income attributable to shareholders was $16 $2 million or 16 cents per basic share.

Moving to our balance sheet, we ended the second quarter of fiscal 'twenty, four with inventory of $519 $7 million.

Jonathan Sinclair: We continue to see the share of revenue from international tourism, growers of proportion of total revenues in the region. Rainbow app was a standout category during the quarter, growing significantly compared to last year, with Europe experiencing more rainfall than average during the summer. Moving to gross profit, our second quarter gross profit grew 8% Eurovia to $179.5 million, driven by gross margin expansion. 22 gross margin expanded 410 basis points to 63.9%. This was due to pricing, available product mix, even with non-heavyweight down outpacing heavyweight down, I might say, and a higher mix of DTC sets.

And that was up 2% from $511 $5 million at the end of the same period last year.

As inventory growth decelerated for the third consecutive quarter.

In Q2.

We bought back approximately 136 million shares so a total cash consideration of $29 9 million.

Ending the quarter with $851 9 billion of net debt on our balance sheet compared to $774 $1 million at the end of the second quarter of fiscal 2023.

The year over year increase was due to our investment and then NCI b our share buyback program.

And higher borrowing as we prepare for our peak season.

Jonathan Sinclair: The increase in the gross margin of our products were seen across nearly all categories, with non-heavyweight down outpacing the margin expansion of our established heavyweight down segment. DTC gross margin was 76% in Q2, down 60 basis points Eurovia, while wholesale margins increased to 57% up 620 basis points. Again compared to the second quarter of last year, gross margin in the DTC segment was marginally low due to inflationary product costs and higher freight charges due to increased volume in the US and in mainland China, partially offset by favorable pricing.

Since the commencement and CIB, we have repurchased three 7 million shares or 68% of the amount authorized under the program.

As you know this is a strategic pillar in our capital allocation policy and something we keep under constant review.

We're comfortable with net debt leverage of three three times adjusted EBITDA at the end of the quarter.

Which you should remember reflects a seasonal cash low point for the business.

Based on the seasonality of the business, we expect to reduce our net debt leverage ratio by the end of the fiscal year.

During the second quarter as part of the transformation program, we took meaningful steps to identify and eliminate inefficiencies from our cost base, while enhancing customer experiences.

Jonathan Sinclair: Holesale margin was higher primarily due to pricing which included importantly foreign exchange tailwinds due to the strengthening of the Euro relative to the Canadian dollar, as well as preference for our higher margin styles within the heavyweight and lightweight segments by our wholesale parts. Adjusted EBIT was 15.6 million dollars, that was down compared to 26.3 million dollars remaining the second quarter of last year, but at the same time was above the top end of our guidance range due to strong operational exclusion.

We streamlined our corporate workforce.

Reducing non store and no manufacturing head count by approximately 10%, resulting in a more lean and centralized structure to support the next phase of growth.

We also transitioned more production in house with nearly 85% of our domestically produced jacket manufactured in house in the second quarter of fiscal 2024 compared to 58% as recently as the fourth quarter of fiscal 2023.

Jonathan Sinclair: This was primarily due to lower than planned SG&A spend as we drove efficiencies across the business through a combination of slowing hiring, process improvements and automation of your processes. SG&A spend of 177.2 million was largely associated with the higher costs coming from the expansion of our retail network in particular rent and employee costs, as well as the timing of marketing spend one time corporate restructuring expenses and our transformation program, which I'll discuss in a little bit more detail shortly.

In house production gives us greater flexibility and quality control over our manufacturing process and consequently control over inventory manage.

We also rolled out a number of initiatives to enhance store productivity touching stuffing merchandising and layouts as we seek to improve conversion and customer satisfaction.

Together.

This has resulted in estimated savings run rate of approximately 15% of the $150 million. We expect as the results of our transformation program by fiscal 2008 and that progress is ahead of our expectations.

Jonathan Sinclair: Moving to our balance sheet, we ended the second quarter of fiscal 24 with inventory of 519.7 million dollars, and that was up 2% from 511.5 million dollars at the end of the same period last year, as inventory grows decelerated for the third consecutive quarter. In Q2, we brought back approximately 1.36 million shares for a total cash consideration of 29.9 million dollars, ending the quarter with 851.9 million dollars of net debt on our balance sheet, compared to 734.1 million dollars at the end of the second quarter of fiscal 2023.

Jonathan Sinclair: The year-over-year increase was due to our investment in the NCIB, our share buyback program, and higher borrowing as we prepare for our peaks is. Since the commencement of our NCIB, we have repurchased 3.7 million shares or 68% of the amount authorized under the program. As you know, this is a strategic pillar in our capital allocation policy and something we keep under constant review. We're comfortable with net debt leverage of 3.3 times adjusted in the end of the quarter, which you should remember reflects a seasonal cash low point for the business.

Nope.

The non <unk> adjusted EBITDA <unk> adjusted net income per diluted chess a fiscal 2024.

As a result.

We are updating full yeah, 2024 <unk> <unk>.

We expect total revenue to be between 1.2 and $1.4 billion for the for Ya.

Jonathan Sinclair: Based on the seasonality of the business, we expect to reduce our net debt leverage ratio by the end of the fiscal year. During the second quarter, as part of the transformation program, we took meaningful steps to identify and eliminate inefficiencies from our cost base, while enhancing customer experiences. We streamlined our corporate workforce, reducing non-store and non-manufacturing hate count by approximately 10%, resulting in a more lean and centralized structure to support the next phase of growth.

Ah revenue guidance assumes D. T C revenue to be around 70 per cent of total revenue.

Presenting a high single digit increase to a low double digit decrease in yet the D. T C comparable sales growth.

And continued stole expansion.

We now plans to open 15, new permanent stores. This year nine of which are open as of today.

We also expect wholesale revenue to decrease your area by a low to mid teens percentage, reflecting the continued editing of a wholesale dole count, which I would remind you is 6% down.

Jonathan Sinclair: We also transitioned more production in-house with nearly 85% by domestically produced jacket manufactured in-house in the second quarter of fiscal 2024, compared to 58% as recently as the fourth quarter of fiscal 2023. In-house production gives us greater flexibility and quality control over our manufacturing process and constantly control over industry management. We also rolled out the number of initiatives to enhance store productivity, touching staffing, merchandising and layouts as we seek to improve conversion and customer satisfaction.

Revised reorder expectations and expansion Vasile retail network.

We now expect <unk> adjusted EBITDA between $135 million and $225 million in fiscal 2024, representing an operating margin of between 11 and 16%.

This is seems to gross margin percentage to be in the high sixties honestly a basis with D. T C and wholesale gross margin in the mid seventies and low fifties respectively.

Jonathan Sinclair: Together, this has resulted in estimated savings run rate of approximately 15% of the $150 million we expect as a result of our transformation programme by fiscal 28 and that progress is ahead of our expectations. Turning to our outlook, we had a solid first half of fiscal 2024, delivering on the top line, delivering on the bottom line expectations, and we're making good progress across our strategic colours and our transformation programme and seeing some early benefits of our work in the positive adjusted EBIT achieved in the second quarter.

We expect SG&A expense to grow at a mid teens sandwich right on a year over year basis.

The larger T T C network and the association operating cost space Motorize, it like cost savings initiatives, including around $15 million in savings from the transformation program and physical 2024.

We expect <unk> adjusted net income per diluted chat give me between 60 cents and $1.40.

Jonathan Sinclair: We remain confident that our strategy is the right one to achieve long-term, sustainable growth and improve profitability. All of that said, however, our outlook for the back half of fiscal 24 has come under pressure due to an increasingly challenging global macroeconomic environment that has impacted consumer decision-making and prioritisation of spend. As a result, we saw early momentum gathered in our second quarter begin to slow noticeably in September. While we began to see some improvement in late October, visibility remains reduced.

This assumes an effective tax rate in the high teens is a <unk> of income before taxes.

And a weighted average of diluted shares outstanding of 103.5 million units for fiscal 2024.

Consistent with this annual guidance are guidance for the third quarter cause as follows.

We expect revenue.

Between $575 million and $700 million <unk>.

<unk> adjusted EBIT between $190 million and 265 minutes.

<unk> adjusted net income per diluted share between $1.20 $2.76.

Jonathan Sinclair: To reflect the increased uncertainty in the macro environment, we are revising and expanding the potential range of outcomes for revenue, for non-IAFRS adjusted EBIT and for non-IAFRS adjusted net income per diluted chair for fiscal 2024. As a result, we are updating our full year 2024 guidance as follows. We expect total revenue to be between $1.2 and $1.4 billion for the full year. Our revenue guidance assumes DTC revenue to be around 70% of total revenue, representing a high single-digit increase to a low double-digit decrease in year-over-year DTC comparable sales growth and continued store expansion.

Yeah look I've provided represents almost likely range of outcomes based on the trends, we seen so phones cool Sir.

And consequently, where we believe despite <unk> quarter and the full fiscal yeah.

In summary, while the macro economic and borrow them presents challenges we remain very focused on the things we can control.

Ah brand operations.

In addition to advancing all three pillars.

We are taking clear steps to improve our operational efficiency as I was.

<unk> positive results.

I'm excited about our prospects as we continue to build on a luxury positioning and execute a strategy to drive profitable growth over the long term and the best possible results in the coming cold.

Jonathan Sinclair: We now plan to open 15 new permanent stores this year, nine of which are open as of today. We also expect wholesale revenue to decrease year-over-year by a low to mid-teens percentage, reflecting the continued editing of our wholesale door count, which I would remind you of six percent down. Revised reorder expectations and expansion of our store retail network. We now expect non-IAFRS adjusted EBIT between $135 million and $225 million in fiscal 2024, representing an operating margin of between 11 and 16.

With that operator, please open up the lines for questions.

Thank you if you would like to ask a question. Please press star followed by the number one on your telephone keypad.

Antacid time, we ask that you placed on it yourself to one question I'm like follow up question.

For additional questions. Please me trying to kill thank you.

Our first question comes from Brooke Roach from Goldman Sachs. Please go ahead. Your line is open.

Good morning, and thank you so much for taking my question.

I was wondering if we could discuss a little bit more contact on a trend that you're seeing throughout the corner as you Mister the four seasons stores and online by can see my cohort what changes are you seeing in consumer behavior.

Consumers resonating with different aspects of your <unk>.

Jonathan Sinclair: The Seams the Gross Margin percentage to be in the high 60s on a full year basis, with DTC and Hulsor Gross Margin in the mid 70s and low 50s, respectively. We expect SGNA expense to grow at a mid teens percentage rate on a year over year basis due to the larger DTC network and the associated operating cost base, moderated by cost saving initiatives, including around $15 million in savings from the transformation program in fiscal 2024.

Including a new women's collection.

Yeah.

April Thanks for other question.

We are.

So what are the trends overseas of our our mixed we received traffic afterwards is up.

<unk>.

To see that with.

You need to continue to drive conversion of that traffic it's.

Consumers are Robert and ordered a new product and it makes them consumers in our stores.

Remains wrong, there's lots of lots of high percentage of new consumers.

Well as returning consumers and now we're encouraged by that we we do continue to see we have started to see some software earlier.

Jonathan Sinclair: We expect non IFRS adjusted net income for diluted share to be between 60s and a dollar 40. This assumes an effective tax rate in the high teens as a percentage of income before taxes and a weighted average of diluted shares outstanding of 133.5 million units for fiscal 2024.

Jonathan alluded to earlier.

Earlier and October and recently, we've started to see that's getting a little bit better and it's it's hard at this point.

What.

How much of that is.

Trying to measure that continue which is why we have taken a.

Jonathan Sinclair: Consistent with this annual guidance, our guidance for the third quarter is as follows. We expect revenue between $575 million and $700 million. Non IFRS adjusted EBIT between $199 million and $265 million, and non IFRS adjusted net income per diluted share between a dollar 22 and a dollar 76 cents. The outlook I've provided represents almost likely range of outcomes based on the trends we've seen so far this quarter. And consequently, where we believe this may take us for the entire third quarter and the fourth fiscal year.

Cautious approach.

Certainly encouraged from Brian perspective to see the profit garage doors up.

I can just check in to purchase on that the spread <unk> you've heard Jonathan talk about we talked about before about how we're really trying to dial in an increase that sheriff women customers and so we saw that happen significantly in the last in Canada in India that remained pretty stable, where we thought that more changes you know genetics customers that decreased.

Within the next this corner.

Which again per line it lines up with what we're thinking a little over here and seeing in the industry in terms of the aspirational customer being a little bit more challenge right now.

Okay. Thank you and if I could just follow up with one additional question on China can you elaborate on what is now embedded in your updated for your guidance for Chinese consumer crowd, both in mainland China.

Jonathan Sinclair: And summary, while the macroeconomic environment presents challenges, we remain very focused on the things we can consult our products, our brand and our operations. In addition to advancing our three pillars, we are taking clear steps to improve our operational efficiencies and we're seeing positive results. I'm excited about our prospects as we continue to build on our luxury positioning and execute our strategy to drive profitable growth over the long term and the best possible results in the coming quarter.

<unk>.

Yes so.

When it comes to China with you know with <unk> with thing an environment, which is still somewhat challenged.

All of the economic impact on the Chinese consumer.

That said, we are coming up against very much softer combs as we go through November and December issue of cooled off good that was very different business being done at that critical time. So we.

<unk> some growth coming out of my then tried it for that reason.

Operator: With that operator, please open up the lines for questions. Thank you. If you would like to ask a question, please press star followed by the number one on your telephone team pad. In the interest of time, we ask that you please limit yourself to one question and what follow-up question. For additional questions, please rejoin the queue. Thank you.

When we looked more broadly.

What we're saying is that the Chinese consumer is starting to travel, but really it that trouble is an asian phenomenon rather than the global phenomenon. So we are definitely seeing more Chinese consumers across southeast Asia, and wishing that manifest itself, particularly in those stores and hold on.

Brooke Roach: Our first question comes from Brooke Roach from Goldman Sachs. Please go ahead to line his open. Good morning and thank you so much for taking our questions.

I'm in the account.

Thank you very much I will pass it on.

Our next question comes from <unk> from Wells Fargo. Please go ahead. Your line is open.

Danny Reiss: I was wondering if we could discuss a little bit more context on the trend that you're seeing throughout the quarter as you've missed through the fall season, both in stores and online by consumer cohort. What kind of are you seeing in consumer behavior, and how are consumers resonating with different aspects of your brand, including the new women's collection? Thank you. Hey Brooke, thanks for the question. So far, the trends that we're seeing so far are mixed, we're seeing traffic on our stores is up.

Hey, Thanks, guys two questions for me number one just at a high level of curious how is the business preparing for the the banning of P. F. As in key markets like New York for example, I'm just kind of curious how are you adjusting manufacturing what what's the conversation internally.

And then looking at the piano this quarter specifically the other the other revenue line was up to eight or 9 million from like lesson. Two last year again, just can you comment on what exactly is driving that what what's embedded in that and then what is that other line kind of forecasted to be the rest of the year as well how should we think about that thank you.

Danny Reiss: We're going to see it to see that. We've opportunity to continue to drive from burden of that traffic. It's, you know, our consumers are ravaging towards their new products and the mix of consumers and our stores. Okay, the remain strong, there's lots of high percentage of new consumers as well as repairing consumers. And, you know, we're encouraged by that. We do continue to see when we have started to see some softener earlier.

Mmm.

Finally things like on the first question so.

So this is the topic, we've been talking about for many many many years, we obviously have a robust program in our sustainability and you've seen uhm, our goals and objectives on that trajectory <unk>, while under way or I would say, we're feeling strong I had it scheduled so that's something that we look at region by region I would not say that's the only.

Danny Reiss: And as Jonathan alluded to in the earlier and not over and recently we started to see that getting a little bit better. And it's hard at this point to, you know, what, how much that is. And we're trying to continue, which is why we're taking a cautious approach. Well, we're certainly in terms of the brand perspective to see the traffic that our store is up.

After that we look at our sustainability under our human nature platform is quite robust and so that's one of our key factors and focuses as we come up with some of these deadlines, let me see I had.

Yeah.

Oh, I think it's been a really integrated supply chain them any patterns infrastructure to one of our strengths and one of our competencies and that is an area that the <unk>. We we feel that we're very much ahead of the curve when it comes to these sorts of matters.

Danny Reiss: So I can just jump into Brooke just down the split of men to women. So you, you've heard Jonathan talk about what we talked about before about how we're really trying to dial in and increase that share of women customers. And so we saw that happen significantly in the U.S. And Canada is an immediate, that remains pretty stable where we saw bit more changes, you know, gen X customers that decreased it, which in the mix this quarter. Which again, it lines up with what we're thinking and what we're here and seeing in the industry in terms of the aspirational customer being a little bit more challenge right now. Great. Thank you.

And then when it comes to the growth in the performance and in the second quarter of <unk>. So it was.

Yeah I think.

Have to remember is that for the two is all about a wholesale business daily D. G C only stuff's got going in towards.

Danny Reiss: And if I could just follow up with one additional question on China. Can you elaborate on what is now embedded in your updated for your guidance for Chinese consumer growth both in mainland China but also globally. Yes. So I think when it comes to China with, you know, we're seeing an environment which is still somewhat challenged terms of the economic impact on the Chinese consumer. That said, we are coming up against very much softer, as we go through November and into December sure cool last year.

Towards the end of the quota.

<unk> as you go through September and so as a result.

Any growth you see that doesn't really show up in the waiting and is therefore, something that's very much more about.

The wholesale business, which is we've said all along is going to be down in Europe, yeah, and inept, even though we were able to make <unk> request to ship somewhat sooner. The reality is that we we still end up down your ear and wholesale and that produces several for that picture.

The key numbers in that though it's all T. T C business is growing in double digits.

Despite the dropping combs, we're still making headway in the grass and that's in that business.

Danny Reiss: There was very little business being done at that critical time. So we do expect some growth coming out of men in China for that reason. When we look more broadly, what we're seeing is that the Chinese consumer is starting to travel. But really, that travel is an Asian phenomenon rather than the global phenomenon. So we are definitely seeing more Chinese consumers across Southeast Asia. And we're seeing that manifest result particularly in our stores in Hong Kong or Macau. Thank you very much, I'll pass it on.

Right, but what I'm asking about the other line I'm, just because of the friends and family event that happened a couple of quarters ago. I was curious as to what is going on that's driving the higher revenue in other and then what should we expect the rest of the year.

I mean again as I've said before that friends and family browsers relatively insignificant part of the type of business It was up.

Mm mm.

The.

Perhaps a salesman. Please and then friends family generally speaking.

Ike Borotow: Our next question comes from Ike Borotow from Wells Fargo. Please go ahead your line is open. Hey, thanks guys, two questions from me.

It's a level of business that is likely to them and I Hope you mirror lost yeah as as we go through the rest of the.

Danny Reiss: Number one, just at a high level curious, how is the business pairing for the banning of PFAs and in key markets like New York for example? I'm just kind of curious how are you adjusting manufacturing, what's the conversation internally. And then looking at the PNL this quarter specifically, the other revenue line was up to 8 or 9 million from less than 2 last year again. Can you comment on what exactly is driving that? What's embedded in that? And then what is that other line kind of forecasted to be the rest of the year as well? How should we think about that?

And we see it as a normal business activity.

Okay. Thank you.

Our next question comes from Oliver Chang from T. D. Cowan. Please go ahead your line is open.

Hi, Thank you on that <unk> uncertain macros in buying closer to need in cold weather.

And your guidance range it would be helpful to understand.

What's the <unk> on on the higher end of guidance as well.

The lower end then.

As you thought about this consumer that's prioritizing certain things, which parts of your assortment, where most impacted and second you may have made a lot of progress and innovation and a lot of great call out to about what's happening forward with with innovation and cultural relevance as well as product what percentage mix.

Danny Reiss: Thank you. On the first question, so PFA's. So this is a topic we've been talking about for many, many years. We obviously have a robust program in our sustainability and you've seen our goals and objectives on that trajectory. So we're well underway where I would say we're feeling strong, head of schedule. So it's something that we look at region by region. I would not say that's the only factor that we look at our sustainability under our human nature platform is quite robust.

As none heavyweight down and how should we forecast that going for given all your initiatives. Thank you.

So if I can come in on the map, obviously, we we expect a continuation of of the macro we don't we're not expecting that somebody to pick up I think what we would say is that particularly in the U S. Remember that barely we sold that fight.

Danny Reiss: And so that's one of our key factors and focuses as we come up to some of these deadlines that we see ahead. On the side of that, I think it's been a really integrated supply chain many factor in future delivery strengths. And one of our core purposes is in an area that the weeks out and we feel that we're very much ahead of the curve when it comes to this course of matters.

Quite suddenly and quite sharply as the holiday season began last year.

So we.

We sort of become a bit more comfortable with that.

Danny Reiss: Then when it comes to the growth in the performance in the second quarter, obviously, it was five year over year. I think you have to remember is that quarter two is all about our whole self business, really, and that DGC only starts get going in earnest toward the end of the quarter. And so as a result, any growth you see there doesn't really show up in the waiting and it's therefore something that's very much more about the whole self business, which, as we've said all along, is going to be down year of year.

At the bank pulse of Q3.

I think when it comes to whether you know obviously, we were coming out of a very.

Mm mm unseasonably warm.

Obviously somebody born September, which five popular record is Ah by popular couches record breaking across nice geographies.

We have not assumed and especially my winter or especially cold winter in the range of Godspeed assume normal normal weather conditions.

Whether impacts this business in the sense that it's a.

<unk> problems with us.

Old slap.

<unk> business.

Business.

Danny Reiss: And even though we were able to meet consumer request to ship somewhat sooner, the reality is that we still end up down year of year and wholesale and that produces an overall flat picture. The key numbers in that though is our DGC business is growing in double digits despite the drop in in comps was still making have went in the growth in that in that business.

It sort of reminds consume that this is the time that they they should go and.

Bye Bye <unk>.

And so the longer you wait for that the late with salt.

That is what we've experienced this yet.

When it comes to the consumers such as.

He was describing before I think jenex.

Danny Reiss: Fred, but I'm asking about the other line. I'm just thinking of the friends and family event that happened a couple quarters ago. I was curious is like what is going on that's driving the higher revenue and other and then what should we expect the rest of the year. I mean, again, you know, as I've said before, friends and family, it brought us a relatively insignificant part of the total business. It was up 8 million year over year as in terms of sales employees and friends family generally speaking. It's a level of business that is likely to, you know, be mirror last year as we go through the rest of the year. And we see it as a normal business activity.

That's really where the aspirational consumer.

Danny Reiss: Thank you.

Is most most concentrated is probably the area, which they most effective file.

When it comes to Gnome heavy weight down.

All of our business is obviously, it's fallacies that filled all the way down his bowl concentrated.

And particularly Q1 Q2 or three so this yet but as we think about it for the full year, it's still going to be over half of the business by value last year. It was I think 63 per cent, we should think about it to be in at around eight.

55, six days as a source of.

Normal place for the time being as we grow and establish that normally heavy weight categories. What I would also add is it in Q2, we saw about.

Oliver Chen: Our next question comes from Oliver Chen from TD Cowan. Please go ahead.

Five six times the growth right.

Danny Reiss: Your line is open. Hi, thank you on the call up on uncertain macros and buying closer to need and cold weather. And your guidance range would be helpful to understand what's assumed on the higher end of guidance as well as the lower end. And as you thought about this consumer, that's prioritizing certain things which parts of your assortment were most impacted. And second, you made a lot of progress in innovation and a lot of great call outs about what's happening forward with innovation and cultural relevance as well as product. What percentage of make? is non-heavyweight down, and how should we forecast that going forward given all year initiatives?

Don't heavyweight down compared to the grocery store heavyweight them understanding both of them Laura.

And I'm not really helping.

Alright, I'll get the thing that excites me about that is you know, we're we're seeing that sounds high sounds perfect. What comes of rainwear. So we're seeing that in APAC, followed by <unk> I think any preferred to this before about our police category. So we're seeing massive uptake in that you know whether it's everywhere with <unk> customers are gravitating towards the end of it you're lacking.

<unk>.

Uhm.

Really loved that all of this is that none of the category extension isn't coming at the expense of great <unk>. So.

You know as we get into new categories at different price plan first illegal.

Yeah.

Yeah.

Oh.

Danny Reiss: Thank you. So if I can comment on the fact, you know, obviously we expect a continuation of the macro, we're not expecting that something to depend on. I think what we would say is that in the US, remember that really we saw that fight slightly and quite sharply as the holiday season began last year. So we sort of become a bit more comfortable with that at the back part of Q3. I think when it comes to weather, you know, obviously we're coming out of a very unceasingly warm, unceasingly warm September, which by popular record is, by popular account is record breaking across most geographies.

All of our if I can just <unk> you know uhm I just Wanna go back to the appointment earlier about traffic uhm.

Brown.

And the traffic <unk>.

And you know.

This company has changed a lot over the years from one that was really.

Wholesale focused wanted to work now or more for D. T C than ever before which is really really good thing for us in so many ways, but also.

Pushes R. R. A revenue for them so right and.

Mmm we've.

Just talk about your guidance question of a response within.

The range of outcomes, it's it's really early to tell.

How the macro environment and apply these uncertain times and we felt responsible thing to do but regardless, how how we're feeling about Brandon.

Danny Reiss: We have not assumed and especially mild winter or especially cold winter in the range of guns, we assume normal weather conditions. Whether impacts this business in the sense that it prompts the first cold snap prompts business. It sort of reminds consumer that this is the time that they should go and by co-weathered again, and so the longer you wait for that, the later it starts. And I think that is what we've experienced this year.

We're all really really good about it.

Thank you very much a quick follow up you made progress on your E Commerce and and you have.

Really great leadership, there, but what's happening in that business in terms of what we should know.

The consumer interface looks.

Much better than the content it looks really integrated but over.

Her all across the industry, we've been seeing traffic and conversion issues.

Best regards.

Danny Reiss: I think when it comes to the consumer sense, as as carriers talk describing before, I think the gen X, the app and that's really where the aspirational consumer is most concentrated is probably the area we're seeing most effective by all. When it comes to non-heavyweight down, our business is obviously it's a fairly seasonal and therefore non-heavyweight down is more concentrated in particularly Q1 and Q2 as we saw this year. But as we think about it for the fully, it's still going to be over half of the business by value.

Yeah, Thanks, Oliver I appreciate it.

Website, you can have a spot for me at work where.

We're I'm really focused on it also see traffic being very strong.

Great and we want multiple protests going on many it'd be test.

That were currently to optimize conversion and that's where they were focusing on and.

Danny Reiss: But last year it was I think 63% and we should think about it to be in and around the high 50s, those 60s, as a sort of normal place for the time being, as we grow and establish non-heavyweight down categories. What I would also add is in Q2, we saw about five, six times a growth rate in non-heavyweight down compared to the growth that we saw in heavyweight down, understanding both of them more.

Many of those tests are working.

I expected.

Continue to see those those show progress and.

<unk> <unk> <unk>.

Thank you.

Our next question comes from <unk> from Raymond James. Please go ahead. Your line is open.

Thank you good morning, everyone. I. Appreciate you taking my question you talked about seeing more gross margin expansion and the non heavyweight down category. I was hoping you can expand on the drivers of that and how we should think about the sustainability of these margins. If you think about the puts and takes going forward.

Yeah, it's alright.

Alright.

Uhm I Oh gross margin story has been very much consistent over the years, we've been very.

Danny Reiss: [inaudible] This is not at the category expansion, it isn't coming at the expense of growth margin, so as we get into new categories at different price points, we're still able to believe. Oliver, if I can, I just want to go back to the point I made earlier about traffic, and I hope for one feeling about a brand. I've given the traffic friends and restores, and this company has changed a lot over the years, for one that was really a very old self-focused one, where now we're more DTC than ever before, which is a really, really good thing for us in so many ways, but also what it does is it pushes our revenue further to the right, and you know, we've just brought back to your guidance question about the responsible for why doesn't the range of outcomes.

Clear that you know over the longer.

We're talking about mid seventies, and eighties seem at high voltage and wholesale good we got a tailwind the effects <unk> somewhat stronger than that and wholesale but but the reality is that the the the way. We manage this is that we make sure the margins as the category grows.

Back in the.

Best today that we did in February this yet we deliberately printed the consolidated gross margin or lightweight down to illustrate besides that it's very close to the culprit margin and that's important because <unk> has built out to a meaningful second pillar in this business.

We've been able to do is to grow the gross margins back to the level that we would expect them to be as immature category. So you correctly assume the for example, footwear Balkan so not that strong bright that.

But that's okay, because we're all the trajectory and if you and if I stand back from all of it.

And I go back to call it a T mobile, but let's say, 85% of your body down and said.

That that makes us come down to sort of like low sixties emergence of stayed the same so what we've been able to do through that journey is actually manage D. O for awhile ago rhythm to accommodate those the maturing and improving gross margin outside of heavy weight down.

Danny Reiss: It's really, really to tell. I've got to ask how the macro environments on the planet in these uncertain times, and we've also thought that it's responsible to do, but in regards to how we're feeling about our brand, and overall, we're really good about it.

Violence, a tailwind simply create with the investment in product development and investment and scales and <unk>.

Danny Reiss: Thank you very much. A quick follow-up, you made progress on your e-commerce, and you have really great leadership there, but what's happening in that business in terms of what we should know, that the consumer interface looks much better, and the content looks really integrated, but overall across the industry we've been seeing traffic and conversion issues. Thanks.

<unk>.

So I hope that gives you a sense it was Sunday no change at all perspective on sustainability, if those guys Belgians, nor we expect seem to to raise the move all because one of the key components is that we continue to invest.

Development categories, we need the space to do it within their food <unk>.

Danny Reiss: That's regards. Thanks, Oliver. I appreciate the comments on our website. You call this platform. We're really focused on it. Also, seeing traffic being very strong there, as we are in storage, great. And we want multiple projects going on, many AB tests that we're working on and currently to optimize conversion, and that's what we're focusing on. Many of those tests are working, and I expect it to continue to see those photos show progress in the quarter and years.

And you also touched on an improvement in late October or can you just expand on that does that reflect marketing or product activation or is it a function of just wait wait volatility.

Rick Patel: Thank you.

I think they.

You're right. We didn't you know we do touch on the fact that.

We're seeing sequential improvement and I think that's that's obviously key inevitably there are activities that we do is we get into peak season, that's true I forget I think around US you also getting the advent of full which you'll probably seeing and feeling first hand and as.

<unk> adds that happens as well if you've got the coalescence. If you like of the activity that we're undertaking and the climate, becoming a little bit more seasonal instead of the two come together in the business Dawson to build.

Jonathan Sinclair: Our next question comes from Rick Patel from Raymond James. Please go ahead. Your line is open. Thank you. Good morning, everyone. I appreciate you taking the question. You talked about seeing more gross margin expansion in the non-heavyweight down category.

Absolutely.

Time, when we expect to see this happen. This is this is where our business is the flow of our business every year and.

Jonathan Sinclair: I was hoping you can expand on the drivers of that and how we should think about the sustainability of these margins as we think about the push and takes going forward. Yeah, it's Johnathan. Our gross margin story has been very much consistent over the years. We've been very clear, you know, over the longer run. You know, we're talking about mid-70s and DTC mid-high 40s in wholesale. At the moment, we've got a tailwind of FX.

Starting in September every week is bigger than the previous weekend.

Uhm. So this <unk> you know the the acceleration sorry to see it towards the end of October it's promising and you know it's it's it's it's.

Not enough yet.

Get a complete shift in trends, but it certainly certainly red spot and <unk> and <unk>.

Thank you very much.

Our next question comes from Robbie Arms from Bank of America. Please go ahead. Your line is open.

Jonathan Sinclair: So hence, this year is somewhat stronger than that in wholesale. But the reality is that the way we manage this is that we mature the margins as the category grows. And so, you know, back in the and Vesta Day that we did in February this year. We deliberately printed the consolidated gross margin or lightweight down to illustrate the fact that it's very close to the corporate margin and that's important because as their category has built out to a meaningful second pillar in the business, we've been able to do is to grow the gross margins back to the level of what we've expected to be as a mature category.

Oh good morning, Thanks for taking my question I.

You know I was curious if given the sort of you know change in the global operating environment. You know if you were thinking about changes in the promotional strategy for Canada Goose too you know drive better in a response from customers you know or in and also just with the weakness in the wholesale.

Channel are there any thoughts of any adjustments to strategy in wholesale you know like maybe a more of a relationship with Amazon or other distribution channels to sort of you know support revenue growth in this tougher environment.

Jonathan Sinclair: So you'd correctly assume that, for example, footwear margins are not that strong right now, but that's okay because we're on a trajectory and if I stand back for more of it and I go back to call it 2018 when we were, let's say, 85% heavyweight down and you said that that mix has come down to those 50s. Our margins have the same. So what we've been able to do through that journey is actually managed the overall algorithm to accommodate those the maturing and improving gross margins outside of heavyweight down and balance the tailwinds that we create with the investment and product development and investment in scales until that point happens.

Hey, Robert Thanks for your question, yet so from our <unk>, there's absolutely no change with regards to our strategy Uhm.

Russell brand.

Ourselves through very well at full price and the value that is inherent in the price that we build here in Canada is something the Arkansas recognize and now with the demand that we've known for a promises is it's something that we've always taken great pride and and so yeah. So now we have we have no plans to change our our fries with that.

Right.

And any thoughts on you know changes in distribution strategy, you know maybe opening up more with Amazon as an example.

No in fact, it we don't there's time will be sold through emblem. Many years ago, we decided that stopped doing that.

Jonathan Sinclair: So I hope that gives you a sense of not changing our perspective on the sustainability of those gross margins. Nor are we expecting to raise them over because one of the key components is that we continue to invest in product development and new categories. We need space to do it within the overall gross margin. And you also touched on an improvement in late October.

Decision turned out to the right, one for us and and and <unk>.

I believe that the time. So you know we feel that we have the right uhm.

Right.

The right the alchemy of.

Partners, and we're gonna stick with them yeah.

Yeah, I think that's all I got turned on that day.

Alright, just to add some color on the whole.

Jonathan Sinclair: Can you just expand on that? Does that reflect marketing or product activation? Is it a function of just week to week volatility? I think you're right. We do touch on the fact that we're seeing sequential improvement and I think that's obviously key inevitably there are activities that we do as we get into pieces and that's over here. I think around us you're also getting the advent of fall, which you're probably seeing a feeling firsthand.

Stay with the same strategy, we may add some uhm doors were not looking to add volume of two orders that strategic accounts influence or a Catholic questions change you after a year season after season.

Being a different customer that we want to reach though those are where we think about adding generally as you've heard us talk about you know <unk>.

Streamlining, let's make sure that we're doing better business day care business with the right partners that you know treat the brand right I understand that it's a full price brand full price popping proposition. So nothing on that friend has changed but I just want to clarify who we would address we did.

Jonathan Sinclair: And as that happens as well, it's you've got the color lessons if you like of the activity that we're undertaking and the climate becoming a little bit more easy and so the two come together and the business starts to build. Absolutely. That's the time when we expect to see this happen. This is where this is the flow of our business every year. And starting in September, I was weak as we're going to the previous week.

Otherwise it has to be brand creative.

And that is that's on guiding light and ultimately that's why we've even further into T. T C. In this journey.

Terrific. Thank you so much.

Our next question comes from Jonathan <unk>. Please go ahead your line is open.

Yeah, Good morning, and thank you Jonathan Congrats on the new role I wanted to ask you just about that transition and I know it will take.

Take some time to occur but could you just maybe elaborate more on the reasons for the the leadership change in the Asia Pacific Region, and then maybe more near term. If you could just talk a little bit more about separate of the easy comparisons in China. The next few months, yeah, what what your sense of the recovery for the Chinese consumer and how that sparing.

Jonathan Sinclair: And so this is the acceleration we started to see at the towards end of October. It's promising and it's it's it's it's it's not enough yet to indicate a complete shift in trends, but it's certainly a certainly respawn and we're up and we're up and we're up and we're up and we're up and we're up. Thank you very much.

Versus your expectations.

They charged for question is there anything I'll I'll, just I'll I'll set up.

Robbie Holmes: Our next question comes from Robbie Holmes from Bank of America. Please go ahead and line his open. Good morning. Thanks for taking my question.

I'll have a commentary on the.

The management changes in leadership changes, which I'm very excited about to start with.

Robbie Holmes: I was curious if given the sort of change in the global operating environment, you know, if you're thinking about changes in the promotional strategy for Canada goose to you know, drive better, you know, response from customers, you know, or and also just with the, you know, weakness in the wholesale channel, are there any thoughts of any adjustments to strategy and wholesale, you know, like maybe more of a relationship with Amazon or other distribution channels to sort of, you know, support revenue growth and this tougher environment. Hey, Robert, thanks for your question, so from our point, there is absolutely no change with regards to our strategy.

Jonathan moving to APAC, you know obviously Jonathan.

Tremendous knowledge of our business over the years and.

That goes without saying and he always he's also got tremendous knowledge of the agent market from this business in past businesses.

Been involved with them in that region, great knowledge of the retail landscape and storage in instances and that was.

It was.

<unk> also in a negotiating hundred GB room, what's your pet so Ah Jonathan purpose as soon as that wrong. It was it gives me someone another person that I that I S.

Steeply in that region and that's very important.

<unk> <unk> working I can't do it for a long time now and those are our business and our brand intimately as a protector of it and that is.

Robbie Holmes: When our professional brand, our product sells through very well, our full price, and the value that is inherent in the process we've built here in Canada is something that our consumer recognized, and now with the demand that we've built for our product is something that we've always taken very pride in, and so yes, you know, we have no plans to change our strategy. In any thoughts on, you know, changes in distribution strategy, you know, maybe opening up more with Amazon as an example.

<unk> has been <unk> has been.

We've been we've been moving him in building opt for this role and is ready to take on it is very exciting for Ross and brand new.

That.

That's [noise], we've we've reached as well we were just a moment so it's it's.

So any sign of future and.

Jonathan Dog, but.

Robbie Holmes: And I know, in fact, we don't have time, there's time when we sold through Amazon, and years ago, we decided to stop doing that, and that seems to turn out to be the right one for us, and help accelerate our own online bills at the time. So, you know, we feel that we have the right, the right, the right out of partners, and we're going to say what's up. Yeah, I think just picked up in on the, we're just to add some color on the whole state, stay with the same strategy.

So to answer that.

Thank you for your field come in so.

What's your question about mainland China.

I think that you'll recall what was happening a year ago, I think oh wait cause it's been an interesting talking to see evidence no. It's no bitten the sort of peak.

We've experienced.

<unk> <unk> <unk>.

<unk>, but you know what weird cause we look forward you know we gotta be open in November we gonna be opening in December and these all critical months is.

Robbie Holmes: We may add some doors, we're not looking to add volume of doors, but strategic accounts influencer accounts, of course, those change year after year. And after season, who, you know, are they being a different customer that we want to reach, so those are where we think about adding, generally, as you've heard a talk about, you know, it's streamlined and full sales, and make sure that we're doing better business bigger business with the right partners that, you know, treat the brand right understand that it's a full price brand, full price proper proposition.

As important as October is November is way more design, but way more of them to get and we're looking forward to food trading and all of our stores. We got all of the <unk> well staged around the region and we we believe will well positioned tight take advantage of of.

Robbie Holmes: So nothing on that front of the change, but I just want to clarify who we would add with, if we did. Otherwise, it has to be brand-creative, and that's our guiding light, and ultimately, that's why we're doing further into DTC in this journey.

Assume it to Bob and particularly as as a cooler temperatures uhm.

Robbie Holmes: Terrific, thanks so much.

<unk>, which is.

Probably that'd be just beginning to happen in China in Shanghai still very well.

That's really helpful. And then I can just ask one follow up on the margin outlook I know about lower half of the guidance this year.

Jonathan Komp: Our next question comes from Jonathan Komp from Beard. Please go ahead and line his open. Yeah, good morning. Thank you.

<unk> lower EBIT margin year over year for the four year is there any way that we look forward you can give a better sense of what S. G and a growth might look like and just any more context around I hear the multi year margin recovery potential.

Jonathan Komp: And Jonathan, congrats on the new role. I want to ask just about that transition, and I know it will take some time to occur, but could you just maybe elaborate more on the reasons for the leadership change. In the Asia Pacific region, and then maybe more near term, if you could just talk a little bit more about separate of the easy comparisons in China the next few months. What your sense of the recovery for the Chinese consumer and how that's bearing versus your expectations. Thanks, John, for the question.

Thanks again yeah.

Yes.

We remain.

Very clear.

Clear that there are three things that will drive overall margin recovery.

One is called Crows, and clearly that's a a pressure point right now the second is successful opening of stores doing the expected levels of productivity and the third is the transformation program well, we're already making headway.

Danny Reiss: Seeing you all, I'll start to give you a high-level commenter on the management changes and leadership changes, which I'm very excited about. If so, Jonathan moving to APAC, you know, obviously, Jonathan's a tremendous knowledge of our business over the years, and I go to that. And he answered market from this business and past businesses that he's been involved with. In that region, great knowledge of the retail landscape and storage agencies. And it was a key, also in the negotiating or during the debut room with Japan.

When you're hearing today that not only are we okay. We'll run rate savings you've got in your savings and the best way I can manifest operational execution to you is if you look at the upper end does the guidance now I look at some level of profitability that's been built into it it's the same level of profitability.

So we were expecting when we got to a higher level of revenue previously so we've been able to bring into the mix a significant step.

Danny Reiss: So, Jonathan's purpose is to do that role, and give me someone another person that I asked deeply in that region, and that's very important. So, Jonathan, with all regards to Neil, and Neil's been working. I can't do this for a long time. Now, those are our business and our brand intimately as a protector of it. And, you know, has been, has been, has been, we've been, we've been holding him and building him up for this role. And he's ready to take the answer. I'm very excited for Ross and Brian that we've reached this moment. So, it's, it's, it's, it's, it's.

That's important because that gives us some of the momentum we need to stop building that served leg about right before we focus on building comb crotalin continuing with the retail network development alongside.

Understood. Thanks, Thanks again.

Well.

Our next question comes from <unk> CIBC. Please check your line is open.

Yeah. Good morning. Thanks for the question I just wanted to follow up on the U S. Specifically and if you could give any more color with regards to sort of the detail on sales patterns, particularly by regions. And then also we're still store cohorts I'd appreciate any comments about the ramp up of stores opened in the last year or so.

Danny Reiss: So, it's an exciting future and I don't know how to talk about that. So, to answer this and thank you for your comments. To answer your question about men and trainers. I think that you'll recall what was happening in Eureka. I think all week has been an interesting time this year. It's not been the sort of peak that we've experienced, say, pre-CO in the years prior. But what we're, as we look forward, we're going to be opening November.

Okay perfect. So the U S. Yeah, we talked about it since I'm under some pressure obviously revenues down in your ears.

But the good news is we talked about a lot and this is our opportunity to win is traffic substantially higher so obviously download our store account, we open three new stories that center.

And then king of Prussia, So traffic is they're they're coming in engaging with the brand as I said I think there's I think there's a bit of a hit to that aspirational customer that <unk> generally.

Danny Reiss: We're opening December. And these are critical months as important as our progress. November is way more important, again. And we're looking forward to full trading in all of our stores. We've got all of the right inventory well staged around the region. And we believe we're well positioned to take a bunch of, a few minute mark. And particularly as the cooler temperatures, as settling, which is probably only just beginning to happen. So, we'll try to make sure that it's still very well.

Jonathan Komp: That's really helpful.

Generally people are just many waiting to see the urgency isn't the same as receiving in years.

Previous.

In terms of.

Recently that I mean, we we continue to succeed.

<unk> similar to Canada, where tourism is happening so you see that in the West Coast, you see that in New York area.

Mmm Mmm.

The new phenomenon for us that continue to see that new stores are opening well I would say because we're opening it in this environment, where it's a little bit more challenge, we're not seeing the same types of.

Instant line upset when you lived before I can still very happy with the traffic and the engagement in the brand bags around that but you know a little bit more tempered I would say then maybe death.

Jonathan Sinclair: And then I could just ask one follow up on the margin outlook. I know the lower half of the guidance this year. In beds lower, even margin year over year for, for the full year. Is there any way as we look forward? You could give a better sense of what SG and A growth might look like. And just any more context around, you know, the multi-year margin recovery potential. Thanks again. Yeah, I mean we, yes.

Definitely pre pandemic that maybe in the last three years. So it hasn't changed our strategy again retail stores for the long term that we know that those are the right locations. We know that that's where the traffic will essentially isn't that they will convert so we're just.

To start happening.

You know, we're seeing a good contribution from the <unk> from the store expansion to the overall business in the U S to the point, where you know as you would expect and hope, but nevertheless.

Jonathan Sinclair: And we remain very clear that there are three things that will thrive overall margin recovery. One is conquerors and clearly that's a pressure point right now. The second is successful opening of stores doing the expected levels of productivity. And the third is the transformation program where we're already making headway. You're hearing today that not only are we, can we all run rate savings that got in year savings. And the best way I can manifest that operational execution to you is if you look at the upper end of the guidance.

It's important we reaffirm we're actually seeing significant top line growth in total stools cold in the U S. Even at four with negative over the Colts.

Yep I understood. Okay, all the best in holiday take care.

Mmm.

Our next question comes from <unk> from Barclays. Please go ahead. Your line is open.

Good morning, Yeah. As I said this is Michael <unk> and I'm on for <unk> and thank you for taking my question.

So your inventory position has vastly improved but we were wondering how does your big sales guidance impact fiscal year and inventory expectations.

Jonathan Sinclair: Now, and look at the level of profitability that's in built into it. It's the same level of profitability that we were expecting when we got to a higher level. Of revenue previously. So we've been able to bring into the mix a significant first step. That's important because that gives us some of the momentum we need to start building that third leg of our growth. Or we focus on building concrete and continuing the regional network development alongside. Thanks again.

Yeah. It's.

She has a <unk> a fairly broad range the range is clearly.

Driven by.

D T C volatility and if.

If you go with that and then you'll get your going to assume that that that range has a maximum impact of 25% of that revenue number on the on the inventory.

Inventory at the end of the year.

Therefore, it is possible that we had the instead of being flat being slightly off but.

Mark Petrie: Our next question comes from Mark Petrie from CIBC. Please head to line as open. Yeah, good morning. Thanks for the question. I just want to follow up on the US specifically. And if you could give any more color with regards to sort of the detail on sales patterns, particularly by regions, and then also a list of store cohorts. And I appreciate any comments about the ramp up of stores opened in the last year or so.

You know, we working very hard to make sure that our production plans and I'll touch, saying alright arthritis is like happy to what we're saying because we we are still driving for improvements in inventory tons by the <unk>.

What you've also seen this quarter is as you note is off so it's excessive.

Cultural inventory deceleration.

And I think that's important we said we'd set it all alone we continue to expect that to be the case and obviously, we are working to make sure. We don't end up at the bottom of the revenue right in any of it.

Danny Reiss: Thanks Mark, so the US, yeah, we talked about, you know, under some pressure, obviously revenue is down near a year, 11%, but the good news as we talked about a lot, and this is what our opportunity to win is traffic substantially higher. So obviously we doubled our store count, we opened three new stores in Beth Center, in tip-faza, and then King of Prussia. So traffic is there, they're coming, they're engaging with the brand, as we said, I think there's a bit of a hit to that aspirational customer, that, you know, generally, people are just maybe waiting to see the urgency isn't the same as we've seen in years previous.

Great. Thank you and then can I ask one follow up question since we're discussing inventory. So how much more do you plan to manufacture in house this year versus last year and would you. Please repeat what you said about the improved merch margin drivers from your house manufacturing.

Yeah, I mean, so we're running at 85%.

Danny Reiss: In terms of regional, I mean, we continue to succeed a bit, similar to Canada, where tourism is happening. So you see that in the West Coast, you see that in New York area. That's, you know, the new phenomenon for us, but continue to see that. New stores are opening well. I would say, because we're opening it in this environment where it's a little bit more challenged, we're not seeing the same types of, you know, instant lineups that we would before again, still very happy with the traffic and the engagement and the brand buys around that, but, you know, a little bit more tempered, I would say, than maybe definitely pre-pandemic, but maybe in the last three years.

Now I think we were.

Memories 75, or 78 in the previous school, but with this quarter. We were 85 that sort of work loans, we'd like having complementary C. M T matter of fact.

It it allows us to put the right manufacturing in the right locations gives us flexibility could just visit <unk>.

But it's it's sort of if that helps us in terms of how we operate when it comes to the tailwind comes right. There is a Maltese tailwind.

Tailwind, but what I'm gonna think about where where it comes from because the materials coming from us. So if you think about product might've brought up Mike helping call at 47% to 40% like the 20 per cent overheads.

Danny Reiss: So it hasn't changed our strategy. Again, we build stores for the long term success. We know that those are the right locations. We know that that's where the traffic will eventually, and that they will convert. So we're just, you know, those things to start happening. And with that, we're, you know, we're seeing a good contribution from the, from the story expansion to the overall business in the US to the point where, you know, it, as you'd expect and hope, but nevertheless, you know, it's important we reaffirm. We're actually seeing significant top line growth in our total stores cohort in the US, even if it were negative on the cost. Yeah, I understand. Okay, all of us in holiday, take care.

To the extent as a profit settlement the profit elements on the Labour Neopets and all the materials because because it's C. M T.

Getting the packages of materials from us in the first place. So it's it's one of the components of tailwind, but we create alongside pricing alongside sourcing efficiencies.

But it sits within the overall mulch, an algorithm, which I was talking about before is normally being mid seventies mid to high voltage between the two he channels and there's just low fifties cause of the ethics tailwind in wholesale.

Jonathan Sinclair: Our next question comes from Michael Boo from Barclays. Please go ahead, your line is open. Good morning. Yeah, as Aubrey said, this is Michael Boo, and I'm on for Adriene and thank you for taking our question. So your inventory position has vastly improved, but we were wondering how does the update sales guidance impact fiscal year and inventory expectations? Yeah, it's, you know, obviously there's a fairly broad range of the ranges clearly driven by, CDC volatility, and if, if you go with that, and then you're going to assume that that range has a maximum impact of 25% of that revenue number on the inventory on the inventory at the end of the year.

Great. Thank you very much.

Our last question will come from J. So often you'll be asked. Please go ahead. Your line is open.

[noise] great. Thank you so much for taking the question. My question is you know Europe said, you're opening 15 stories. This year, how many leases have you committed to for next year for next year store openings. Thank you.

Yeah. We're we're relatively early isn't that journey at the moment as you'd expect them somewhere and we'd probably go with somebody with the same single digits.

And a handful of stools at this point as you would expect but obviously, we we we have all plans and we'd go that's all good location somewhere on one of them with it I go Jason. So it's it's just sort of way you would expect to find this at this point in time.

And then can you tell us how many stores do you expect to open next year.

Jonathan Sinclair: Well, therefore, it is possible that we end the, instead of being flat, being slightly up. But, you know, we're working very hard to make sure that our production plans and our purchasing are very, are as tailored as they can be to what we're seeing. Because we are still driving for improvements and inventory turns both this year and over time. And what you've also seen this quarter is, as you, you know, it's our third successive quarter inventory decelerate, and I think that's important. We set it all along. We continue to expect that to be the case and obviously we're working to make sure we don't end up with a volume of the revenue right in any of it.

It's a little early for that at the moment, because we haven't talked specifically up at plans for next year, but what I would remind you from the from the invest pay is we set off stole out for call. It 100 studied 150.

Jonathan Sinclair: Great. Thank you.

<unk> over a five year time horizon, including conversion of stores that might be under different arrangements today and tomorrow network. So that's that's the best Guide gardens quaint.

<unk> I can give you with a G and in that sense.

Gives you a sense of pacing.

Got it okay. That's helpful. Thank you so much.

Very well.

Jonathan Sinclair: And I ask one follow-up question since we're discussing inventory. So how much more do you plan to manufacture in houses here versus last year? And would you please repeat what you said about the improved merge margin drivers from in house manufacturing? Yeah, I mean, so we're running at 85%. Now, I think we've remember 75% in the previous quarter, but with this quarter we were at 85. That's sort of where it belongs.

We have no further questions I would like to turn the call back over and around and for clothing I Max.

Thanks, everyone for joining us today, if you have any questions. Please reach out to us at <unk> at <unk> Dot com have a great day. Thank you.

This concludes today's conference call. Thank you for your participation you may not disconnect.

[noise] [music].

Jonathan Sinclair: We like having complementary CMT manufacture. It allows us to put the right manufacturing in the right locations, gives us flexibility, gives us resilience. But it's sort of, it that helps us in terms of how we operate. When it comes to the tailwind that comes through it, there is a multi-tailwind tailwind, but one of the things about where it comes from because the materials come from us. So, if you think about product manufacturing, product making call it 40% material, 40% labour 20% overheads.

Mmm.

Jonathan Sinclair: To the extent, there's a profit element, the profit element on the labour and the overheads and on the materials. Because it's CMT that they're getting the packages of materials from us in the first place. So it's one of the components of tailwind that we create alongside pricing alongside sourcing efficiencies. But it sits within our overall margin algorithm. We've always talked about it before as normally being mid 70s, mid to high 40s between the two key channels. And this just low 50s because of the effects tailwind and wholesale.

Jonathan Sinclair: Great, thank you very much.

Jay Sole: Our last question will come from Jay Saul from UBS. Please go ahead, your line is open. Great, thank you so much for taking the question. My question is, you know, you're sitting your opening 15th doors this year. How many leases have you committed to for next year for next year's store openings? Thank you. Yeah, we've relatively early in that journey, as you'd expect. So when, you know, we probably got with somewhere the single digits.

Jay Sole: And a handful of stores at this point, as you'd expect. But obviously we, we have our plans and we've got our target locations and we're all well on with the negotiation. So it's just sort of where you'd expect to find this at this point in time. And yeah, I think can you tell us how many stores you expect to open next year? It's a little early for that at the moment. Because we haven't talked specifically up at our plans for next year.

Jay Sole: But what I would remind you from the, from the investor pay is that we set our store out for all it 130 to 150 stores over a five year time horizon, including conversion of stores that might be under different arrangements today. And tomorrow. Network. So that's that's the best guide guidance point I can give you, listen to you in that sense, that gives you a sense of pacing. Okay, that's helpful. Thank you so much. Very well.

Ana Raman: We have no further questions.

Ana Raman: I would like to turn the call back over to Ana Raman for closing remarks. Thanks everyone for joining us today. If you have any questions, please reach out to us at ire at Canada Goose.com. Have a great day. Thank you. This concludes today's conference call. Thank you for your participation.

Operator: You may now disconnect.