Q1 2020 Earnings Call
Ladies and gentlemen, today's conference will begin in momentarily until that time your lines will again be placed on hold thank you for your patience.
Please press, one or star one on your telephone keypad term if yourself from the queue press the pound key.
Thank you I would now like to turn the call over to Patrick Burke Senior Director Investor Relations. You May begin your conference. Thank you. Good morning, and thank you for joining US today with me are Danny Rees, President and CEO and Jonathan Sinclair SVP and CFO for today's call Danny will begin with highlights of our first quarter performance and then update you on the progress against our key priorities. Following this Jonathan will provide details on our financial results. After our prepared remarks, we will take your questions.
Before we begin I'd like to inform you that this call, including the Q and a portion includes forward looking statements.
Each forward looking statement made on this call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.
Certain material factors and assumptions were considered an applied in making forward looking statements.
Additional information regarding these forward looking statements factors and assumptions appears under the heading cautionary note regarding forward looking statements and risk factors in our annual report on form 20-F, which was filed with the FCC and the Canadian Securities regulatory authorities and is also available on our Investor Relations website at Canada Goose Dot com.
As well as the earnings press release that we furnished today.
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.
During the conference call in order to provide greater transparency regarding Canada Goose is operating performance, we may refer to certain non I FRS financial measures that involve adjustments to I first results.
Any non IRS financial measures presented should not be considered an alternative to financial measures required by a for us and are unlikely to be comparable to non IRS measures provided by other companies.
And he non I for us measures reference on this call are reconciled to the most directly comparable IRS measures in the table at the end of our earnings press release issued this morning, which is available in the Investor Relations section of our web site.
With that I will turn the call over to Danny.
Thanks, Patrick and good morning, everyone.
Fiscal 2020 is off to a great start.
Operational execution was outstanding we continue to see strong demand globally for both consumers and from wholesale partners.
We're moving the needle on a number of important strategic initiatives.
And here are some of the things that I am most excited about.
On the supply side, our continued investments in building production capacity, including our recently opened facility in Montreal are paying dividends, giving us greater flexibility to ship wholesale orders earlier in the year end to put ourselves in the best possible position going into fall winter.
From a sales perspective, we grew significantly in all geographies compared to compared to Q1 last year at levels that met or exceeded our expectations relative to the quarterly ebbs and flows of our business business in each market.
Starting with North America in Canada revenue increased by 40.4% with Vancouver, and Montreal, putting a best in class performance in their inaugural first quarter.
Our growth in the U.S. was 15.8%, which we feel very good about as wholesale shipments were comparable to last year and we added a smaller local market in short Hills, New Jersey.
We also enjoyed strong productivity online and in our existing stores, which was in line with our other markets.
In Europe , and rest of world grew by 79.7% with earlier wholesale shipments, making a significant impact.
In Asia, our topline nearly tripled to $18.1 million from $6.6 million with wholesale growth in Japan.
And direct to consumer operations in greater China being the two primary drivers.
Building on the momentum of our spring collection performance in Q4, we reached a major milestone in the evolution of our offer.
With strong contributions from lightweight down knitwear and rainwear non park, a DTC revenue nearly doubled relative to Q1 last year rising to one third of chain of channel sales in the quarter for the first time ever.
Our expansion across categories and climates with best in class products, which is undeniably authentic Kennedy figures is clearly working I'm proud next so excited about this but it was a shift in perception of our brand and just step change.
On a year round commercial relevance, we set out to do this we are making great progress and we have a lot of runway left ahead of us.
Together these factors drove exceptional growth with total revenue, increasing by 59.1% to $71.1 million compared to Q1 last year.
To have such a commercially vibrant business at this time of year is something that we have worked very hard to achieve and we're very proud of that.
Looking at the results by channel starting with wholesale revenue increased by 68.8%.
The $36.3 million.
As I mentioned earlier this was driven primarily by earlier shipment timing in Europe , and Asia last year, we prioritize strategically shifting our north American wholesale calendar tool to the left this year, we were able to do the same in Europe , and Asia, which Japan is particularly relevant.
The mix of styles and fits in these markets is very different we were able to accommodate the added complexity without compromise and cost efficiency or our position for the remainder of the year.
This is grounded in our unique operating model, we are the largest manufacturer of down jackets in Canada by a very wide margin.
And we're rapidly scaling that capacity.
As a result flexibility around what we make and when we ship it is growing.
This has given us the ability to better position our partners going into their peak selling seasons.
While on the topic I know there has been a lot of questions around how we manage inventory and I want to shed some light on that.
As a manufacturer we have a very different approach to route relative to other businesses that you made typically look at.
There are two distinct elements to our inventory position.
Finished goods for delivery for delivery and manufacturing.
They did.
They do not have the same cadence and they should be looked at separately commercially we operate a selective allocation model at full price and we're not afraid of being sold out at the same time in manufacturing, we strategically build inventory ahead of future growth with a high degree of confidence. This is supported by a high proportion of continued of core product and the forward looking visibility that our order book provides.
Again because of this inventory builds of this nature show up on our balance sheet much earlier than they do for companies outsource or manufacturer.
That means they typically does that mean, they typically don't and shouldn't line up with our quarterly sales trends to highlight the point, we are exactly where we want to be with the size and composition of our position at this stage of the year.
Circling back to the wholesale demand strength, we are seeing internationally, Japan, Japan was a standout performer and a key driver of our growth in Asia.
In terms of both market size and influence is an integral part of the reason a luxury landscape.
In the early days when it was one of the first international markets I brought Canada used to.
And from those home humble beginnings approximately 20 or so years ago, then grown into one of our most strategically important and economically Sydney significant markets.
We are building on the longstanding strength of our business in both distribution and problems.
In market, we are taking a presentation and experience will storytelling elements to the next level. Unlike in other geographies, we're seeing great momentum in Nonprime Parker categories.
This includes a number of products and styles developed specifically with Japan to mine, which is an important trend setter market internationally.
Moving to the DTC channel revenue increased by 50%.
The $34.8 million compared to Q1 last year.
In addition to the strong non partial contribution I mentioned earlier, which rose to one third of total revenue. We also saw.
Strong out of season demand for our fall winter and what your sales.
At time of year, when the only way that most of our brands to get attention is through discount promotions and clearance sales. We had great engagement from fans looking to get ahead of the coming season.
To add some color to this one weekend in June we sold an entire drop of 1800 highly sought after white expedition parkas through our own retail network.
As.
As part of this product event, we activated our global digital base camp community with an invite only preview.
This was a powerful accelerator of in store traffic and conversion, resulting in 70% percent of the total allocation being pre salt. We also had numerous examples of customers out of 100 on vacation electronically transferring funds to their local store sight unseen secure one of the softer expeditions.
Selling out of heavy duty, which are part of a heavy duty winter parka in a single summer weekend is the ultimate expression of pent up demand.
Greater China was also a real difference maker for our growth in DTC.
Building on the success of our first two retail stores and Tmall last week, we opened the doors.
To our new store in Shenyang, and North East China.
Located in the Premier Mixie shopping mall. This city is one of the coldest places in mainland China during the winter and not surprisingly our decision to open there was well informed by local demand online. Despite the fact that we had a soft opening and that it was over 20 degrees Celsius in the middle of August the store has had an exceptional start.
This is yet another example of the exceptional engagement and brand affinity affinity that we're seeing from consumers in China.
From building a regional team to commercially launch the DTC operations under one year, we have hit the ground running and we know that we have incredible white space ahead of us.
Lastly.
We have also made real progress on our major long term initiative of product development earlier. This week, we announced the appointment of Woody Blackford, who will join US later this year to lead our global design and merchandising organization.
This is a foundational next step in the development of new categories, including a candidate use for footwear offerings.
Serving most recently as the VP of global design and innovation at Columbia Sportswear Company would he is an innovator at heart with deep sector experience and an extensive track record in driving the commercialization of new product categories.
Cold weather footwear today looks a lot like park has did 20 years ago, we have a massive opportunity to define and develop this market in a way that no other brand can.
There is still a lot of strategic and commercial work to be done and we won't compromise quality for speed. However, adding what is of the organization and the expertise that we already have from Bafin are important parts of the puzzle to accelerate our journey.
As a globally recognized industry leader and the Canadian coming home Woody is an important addition to our team and I'm really excited to working with him.
As a brand.
That now has true year round relevance the commercial Pos in our business has never been stronger and what we used to call our off season.
We have great momentum as we transition into the fall winter season, and we are on track to deliver another strong year.
With that I'll turn it over to Jonathan who will go over our financial results with you in more detail.
Thanks, Andy.
Good morning, everyone and thanks for joining us.
As you've just heard we have started the on highway smallest pools.
We were able to fully satisfy part the request for additional ones and then exceptional in season to mold.
All the while putting ourselves in the best possible position for the upcoming fall winter season.
This is a direct result of the scalability and flexibility of both in house manufacturing.
And that foundational to the power of our unique operating.
With that backdrop as a starting point I'm going to walk you through our numbers for the quarter.
As usual please remember that all figures quoted are in Canadian dollars.
Turning to revenue.
Revenue grew by 59.1% to $71.1 million.
58.6% on a constant currency basis.
Across all channels geographies and products the diversity of our growth in the quarter was remarkable.
Starting with wholesale revenue grew 68.8%.
$36.3 million now, that's obviously well above our expectations the annual wholesale growth.
In response to.
A stronger order book.
And customer requests we were able to ship greater portion of our order book.
In our smallest quarter revenue quarter of the year.
Timing had an outsized impact on October .
Equally hub higher order values and the incremental contribution Bafin also posted contributors.
DTC revenue grew 50%.
$234.8 million.
We continued with strong productivity from an established retail stores and e-commerce .
About five new retail stores also had great quarters in line with the new adds in comparable markets in previous years.
With that we also experienced this with timo.
Our unique ability to activate consumers and drive traffic highly sought after fall winter product out of season.
Together with the rising contributions of lightweight down knitwear hammering with.
It's a real testament to the around the strength of our DTC business.
As Danny mentioned known poker revenue nearly doubled to roughly one third of total channel revenue.
That's a great strategic milestone in the evolution of our off.
Moving on to geography.
We're very pleased to have grown significantly in all markets.
Increased flexibility shifted.
Timing in Europe , and Asia to that which we address last year North America.
Our international customers have wanted to earlier flow of goods at this time of year and it's great to be in a position, where we can satisfy that efficiently.
Without compromising of the commercial objectives.
As a result of this year the growth rates by region, where we have broken out Asia for the first time on an apples to apples.
So let's start with Asia.
Here are taught by nearly tripled to $18.1 million.
A few international comes.
Distributors.
Well, Jeff the Japan market is particularly relevant a concentrated in this region.
In the prior year their initial fall winter shipments occurred largely during Q2 and the shift towards Q1 was the largest single contributor to growth.
The addition of DTC operations in greater China to a revenue base, which is otherwise almost entirely wholesale also had a significant impact.
In Europe , and the rest of world and though which is another wholesale centric market revenue growth was 79.7%.
With a stronger order book and earlier timing again being important drivers.
In North America growth in Canada was 14.4%.
While the U.S. came in at 15.8.
The growth rate in U.S. reflects a comfortable level of shipments to last year.
And one additional store in short Hills, New Jersey.
Compared to two additional stores in Vancouver, Montreal, Canada.
Now turning to gross margin.
Consolidated gross margin was 57.5%.
This reflects a greater proportion of wholesale revenue.
Compared to last year and within that significant changes in the wholesale customer mix.
Wholesale gross margin was actually better than expected at 41% there was a shift in distributor shipments, which have lower margins into the first quarter from the second quarter last year within each category of customer.
Wholesale gross margins were comparable to last year.
Wholesale operating income was $5 million.
And that represents an operating margin of 13.8%.
The gross margin shift just described was fully offset by positive operating leverage.
With lower channel SGN, a as a percentage of revenue.
DTC gross margin was 74.7% and that reflects a greater proportion of non political revenue.
And.
To achieve gross margin at this level alongside such substantial new product growth.
It's frankly, a great outcome.
The tailwinds that we get in our coal from pricing and efficiencies fund measured investments in product expansion when margins are somewhat low.
We also concentrate and newness in DTC, where we can best tell the story and I'm full retail margins.
As a result, the economics of how we evolve all year round offerings already quite unique.
DTC operating income was six and a half million dollars, an operating margin of 18.7%.
Strong underlying sales productivity hopefully.
Was offset by a larger store opening program.
We incurred $2.3 million in pre store opening costs and that relates primarily to rent for locations not yet.
Excluding these preopening pre store opening costs in both periods DTC operating margin increased to 25.3% from 21.6.
Unallocated corporate expenses.
But 36.9 million compared to 25.9 million last year, while unallocated depreciation was 2.1 million compared to 1.5 million.
The increase in corporate SDMA was primarily driven by increased investment.
Investment in marketing, including activation ahead of.
Plants 2019, retail openings and of course incremental spend to support greater China, which you'll recall was not in the cost base at this point last year.
Combined this results in a total operating loss of 27.5 billion compared to 19.9.
On a non IRS basis.
Adjusted EBIT was 25.9 million loss compared to a loss of $17.3 million last year.
The net loss was 29.4 million or 27 cents per basic and diluted share compared to eight and loss of $18.7 million or 17 cents a share last year.
Adjusted net loss, which excludes $7 million of amortized cost triggered by the closing of the term loan refinancing in may was $22.8 million or 21 cents per basic and diluted share compared to $16.7 million loss or 15 cents a share loss.
As we expected as we outlined in our guidance assumptions, we had a materially larger loss in the quarter.
And that was driven by our corporate SGN a growth investments as well as.
The larger store opening program.
I'd also note that the adoption of AI FRS 16 standard for lease accounting is not material to year over year comparisons of adjusted earnings.
The income statement items, where there are more meaningful impacts like depreciation and amortization interest I encourage you to look at our table in the Mdna, which describes them in detail.
Turning to the balance sheet, we ended the quarter with net debt of $494.1 million, which includes $208.7 million of capitalized lease liabilities average net debt to EBITDA. They are under high for a 16 for the trailing 12 month period, There's no 0.9 times or two times on a spot basis.
Net working capital was $335.6 million, reflecting the planned seasonal build of inventory for future growth.
We're in a very clean position in market and we're also right, where we want to be relative to the upcoming fall winter season.
This includes a meaningful element element of staging.
For both greater China, and Europe , which is where we are expanding our DTC footprint and that on the naturally longer lead times to get products into these geographies compared to North America.
So while fiscal 2020 has just started we're really encouraged by what we've seen so far.
The relevance of our brand has never been stronger at this time of year and we're fully on track operationally with our preparations for the upcoming fall winter season.
We're really excited about what lies ahead I look forward to updating you on our progress on our next call.
Now I'll turn it back to Stanley some closing remarks.
Thank you Jonathan.
As I said before we are very pleased with our start to the year.
I encourage you all to checkout live into the open our new Global AD campaign for fall Winter season, if features three inspiring stories of artist.
Alicia Pasquini expedition guide an actor.
Good job in the first.
Anyway, HR player to two who have all bravely broken new ground and are driven to give back to the people in places who inspire them.
The global three part series will begin its first leg in shortly in Italy.
Which we are activating a head over Milan retail openings.
And there's a lot more to come. So please stay is stay tuned and with that I'll turn it over to the operator to begin our Q and a session.
Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad. Please limit yourself to one question and one follow up question to ask further questions. Please re queue.
Well pause for just a moment compiler Kenny roster.
Your first question comes from Omar Saad from ISI. Your line is open.
Good morning, Thanks for taking my question congrats on the progress.
We're we're a little surprised that China is already 25% of revenue can you talk a little bit about where you see that revenue.
By geography landing in the longer term with China in mind and I also wanted to ask about pricing or anything you're doing on the pricing of five given the kind of continued really strong demand for the brand as we look ahead to future season. Thanks.
Yep.
Thanks, Emma I think the thing to remember is that the first quarter is a small revenue quarter.
And.
There are significant shifts in timing in Europe , and Asia and on that basis.
I wouldn't get too fixated on these percentages as being representative.
Whether its numbers ultimately land is brilliant outputs fast strategy, nor the target in its own right now said and if you look at luxury.
Spending globally it splits roughly a third a third a third between the Americas Asia and EMEA.
Relative to to Canada, where in an earlier stage of developing our international markets.
Measured by addressable consumers and luxury apparel spend they'll see represent lot larger long term opportunities our international DTC expansion is central to unlocking this potential.
Certainly over the long run hundreds now that you would expect sales outside.
Full to grow.
To larger proportions.
That said and as you can see now Canadian business is also growing.
Very healthily and we feel good about our runway.
Canada is also becoming an increasingly important international shopping destination.
I think in the end what matters to US is that we continue to grow our top line in all markets, including home were truly a global story, we're executing against that.
I think when it comes to pricing and as we've said before we do follow the international pricing matrix, we've been able to take pricing mid single digits and that's something that we don't see check.
Thank you.
Your next question comes from Kate Fitzsimmons from RBC capital market. Your line is open.
Yes, Hi, good morning, guys and my question would be on the outlook for fiscal 20.
Reiterated for 40 basis points of EBIT margin improvement any sense of how we should frame the drivers between gross margin and operating expenses, particularly as we deepen at the mid shift any on the gross margin line and then secondly, just on that gross margin. If you could just dig into how you see gross margin evolving this year and by channel that would be helpful. Thank you.
Okay.
I mean, I think you know.
Within our within the guidance that we've given which as you can see we are reiterating now we're looking at.
EBIT margin expansion will receive 40 basis points, but looking at.
Revenue growth of at least 20%.
We enjoy.
Margins, which are very much.
Gross margins very much where they should be over a 12 month period. So if you think about.
Wholesale you know last year, we closed just a shade over 48.1, very happy with that that sort of place. It belongs. Similarly mid seventys is a good place for the DTC margin space very much in line with the SEC from what we believe they should be.
And that that Ive talked before that that Fordham for Lumentums tailwinds that come from pricing tailwinds that come from efficiency and positive reinvestment as you've seen here.
In in new product.
That's something that we think will continue.
I think shake wise in that if you look at last year, you'll see that the.
The margin was above where we ended the year in the first half and.
The m. below in the second I think you know you can see we will it's the other way round. This year and I think that's that's fine it doesn't offer our perspective on the air and so I think when it comes to our expenditure we are consciously investing in the business both in capability and in marketing.
We're very.
Clear that.
Head of the key seasons, which is typically Q3 includes Q4 from us from a consumer perspective, we had invest heavily in.
Marketing to make sure that we're ready for the stores were as and when they open.
And the reaction we get when we opened the new stores and as we develop our existing markets beds Bears Testament to that.
Great guys best of luck.
Thank you.
Your next question comes from Oliver Chen from Cowen and company. Your line is open.
Hi, Thank you will.
Definitely noticed a lot of that non Parker innovation across our networks and other categories. What are your thoughts on how you manage breadth versus depth.
And also your thoughts on markdowns as there could be a different kind of fashion risk versus the parkas.
And would love your longer term thoughts on brand segmentation as you think about black label and international markets and how the brand may involve as your product assortment products. Thank you.
Thanks Oliver.
It's Danny I do an.
[laughter].
What we.
We're really excited about the progress of our new styles and how our off season counter seasonal styles and strengths bring some spring sales have done this quarter and.
They've outperformed their best ever in their 30% of our sales across all channels, which is great.
The way, we think about it you know we're very careful how we manage our inventory and as you know.
Our our products are almost never marked down and we have no discount outlet stores and we have no strategy to ever have those so unlike most brands.
And the way we achieved that is by making sure that we don't make too much stuff, we make the right staff them at the right products other amount of products and we have some new products are we.
You know weve build the new categories slowly and responsibly I, which is why it's great to see.
This quarter.
That continuation of that the growth of those categories are and.
And then we go deeper in categories that are there are stable on the week, where we have tried tested and true classics that we know that endure.
Season to season.
And that's that's how we do that is that is how we manage our our new styles and that is how we avoid.
Finding ourselves in a situation where were two different styles of Wi.
That we don't we don't want to be.
In terms of segmentation and and new sales going forward I mean, we're going to continue to diversify obviously you know it's important to us that we always make styles that are that are authentic to Canada goose.
And every style we make every product we make is very important is a best in class product. That's always been something we believed and that's why our pace of adding new stuff is very thoughtful and measured.
Our next the next I mean, we're on course to the categories were already and we're going to continue to develop into design new products into the.
In order to that there is a lot of excitement around footwear I'm certainly very exciting grant for I think we really have a tremendous opportunity there and we're going to make sure that we build it in the right way and the right at the end and do so at the right time, we now have.
We've announced no timelines at this point ill now we're working on it diligently certainly adding someone like woody to our team has.
Deep experience in footwear is going to be really important piece of our puzzle and.
And.
Help us get there.
At the right time and in the right way.
[noise].
Your next question comes from Michael Binetti from Credit Suisse. Your line is open.
Hey, guys. Thanks for all the help here and congrats on the quarter.
And can I just continuing on the footwear I know you don't want to.
To close on timing, but is the first time, you kind of zeroed in on a on the Canada Goose brand for footwear is that is that something though that we should we should still not think about this calendar year more of a long term maybe next winter and then maybe just how youre initially thinking about the.
The the price points that you think your brand can exist out there to help us think about the competitive set and the Tam that you're that you're looking at for that opportunity.
Yes, well, you're right, we have not yet put out.
Any timeline on that and we're we're not we're not prepared to do that because we want to.
Is going to be at the right time like we'd like to do as soon as we can but that doesn't help you.
Your question about next year and I was in office is not going to be this year.
We have nothing to announce and there's certainly nothing imminent on the horizon.
Well as I said in my remarks is a lot of commercial and strategic work that we saw so there still has to be done and it's really important that we don't compromise quality for speed.
We're definitely on it and I look forward, how we want to tell you about it when the time is right and that includes price points and you know I mean I think that.
When you look at the general profile of our brand and then infer from that where where our prices will be when it comes before.
Gotcha.
Jonathan could I, maybe ask a follow up on a little bit of help on the model is there any way you could help us contextualize the size of the wholesale shift and then also.
A little more detail on the gross margin question from earlier on D to C. In particular, I think you said that it's it's kind of an area, where it should be but it was down a bit in the first quarter.
You did it you are pretty helpful and telling US look a lot of this is coming from the success. We're having in some of these non parka categories that carry lower margin, it's a little tough for us to understand how that dynamic plays out obviously, you will be selling more part because as we get into the colder weather.
But it seems like it seems like those categories should be bigger as a percent of mix each quarter, but if you think the grosses and D to C.
Our about where they should be or implied a flat. It also suggests that one of the quarters needs to go positive to offset the first quarter. So I'm just trying to reconcile a few of the comments you made on to help us with the modeling. Thank you.
Okay.
I think.
Thanks for the.
The taking the wholesale first no we risk we are reiterating guidance.
What does that mean that means in reality that we have.
We have as one of our core assumptions that we talked about high single digits.
Growth this year in wholesale.
So obviously, we are way way ahead of that in the quarter.
And therefore, you will expect that to reverse gradually as we go through the year.
But.
That's also a function of when.
Customers take their inventory in from us so.
We'll see how that unfolds as the year goes on.
But as far as on so we've made a good start and that's important.
When it comes to.
The DTC gross margin.
But if you look at it over the course of the we've always said our gross margins don't downtime shouldn't move very much in any 12 month period.
The fact that we happen to be a little bit lighter. This this period with a big proportion of the business.
Being non Parker.
Allows you to to derive sort of.
A margin mix and you would correctly assume that we will sell a greater proportion of Paul because as we come into the colder season.
As we move through the year.
Towards Q3, and Q4, which is the peak peak consumer demand for cold weather product.
[noise].
Your next question comes from Alexandria, Wallace from Goldman Sachs. Your line is open.
Hi, This is rosalie on behalf of Alex on tourist spend you mentioned strong sales from existing stores I wonder if you've seen any impact at all if softer tourist trends that are impacting some of the other brands are you not seeing that.
Oh.
Is your question I'll.
We Oh, we're not we're not seeing that we're seeing our global tourist business is very strong and no profit across our entire network is very strong as it relates to both local local in market and tourists from there.
In global tourist and.
We're really happy with our ongoing performance of our of our DTC channel.
Thank you.
Your next question comes from Jonathan Komp from Baird. Your line is open.
Yes, hi, Thank you just wanted to maybe follow up on your outlook for the DTC channel and I know, there's some tendency that maybe look at the results relative to the store growth and assume that.
At your DTC business that had existing stores in e-commerce might be slowing and I'm. Just curious as you look to the year ahead, and what you've embedded in guidance. How you think about kind of same store a like for like growth versus.
New contribution from from the stores are opening.
Yeah, I mean, I think we have a good fleets of stores that youre aware, we have today.
Relatively immature stores.
In the sense that we we've only opens.
The stores in the last two or three years.
And we haven't announced an opening program this year, which is greater than we have done in any previous year. So I think.
From that point of view, it's you know we we look.
So the impact to those new stores as being very significant this year.
Alongside the continued productivity of our existing fleet.
Yeah, I agree with that and I'd say that Oh the.
The fact that we are now our DTC sales accelerated to 50% and this is our smallest quarter was this is a great leading indicator and a you know to John's point and the stores, the where the stores and extend increased ecommerce presence and online presence.
It is a really exciting prospect for us and we're really looking forward to rare.
Okay, Great and then just for the overall business when you look at the year I'm curious from a geographic standpoint.
Hi, I think you are if you have any insight kind of from a shape perspective how.
How you expect North America growth versus.
Asia, and Europe , and other countries to play out.
When you look over the next few quarters.
Well the thing I think what you've heard from US here is that we we all enjoying the diversity of growth.
Geographically with growth in every region.
Clearly way you open more stores in a in a in a lot more large the wholesale.
Base.
You'll have a disproportionate impact as the impact of the store openings and to that point I'd highlight the fact that we've said we've gotten three stores in greater China. This year, we'll we've announced that we're opening a store in their long story.
Paris all of those openings.
Oh in regions outside of North America, and therefore, you would expect that impact to be slightly more pronounced.
Yeah, I'll just add onto that dot withdrawn. His remarks are I mean interest to the point of what we expect for the rest of the year. We saw really strong global demand in our first quarter were that was really I was very encouraging continued strong global demand from all geographies. We continue to see the were relevant year round and.
As I mentioned earlier, the counter seasonal business being so strong this quarter was great and.
We're excited to see the evolution of that as well and it really points to the fact that our manufacturing investments over the past few years, a paid off and you know we're we're.
We're very optimistic about the rest of the year and about our future for the long term towards becoming a billion dollar brand to more.
And your last question comes from Michael Purcell from Wells Fargo. Your line is open.
Hey, good morning, everyone two questions.
So just just to stick with the wholesale and the gross margin as Jonathan is there any chance you could quantify what that shift was that you're calling out on our distributor business. Just so we know how to think about wholesale growth in the second quarter, just trying to tease that apart and then because the way you are describing which makes sense that it's a lower margin business does that mean that inherently Q2 wholesale gross margins has some tailwind to it maybe should even should we expect some expansion based on that still show up just trying to understand that dynamic quarter to quarter.
So I think the way to look at the health of this Oh on the wholesale gross margin is to consider what the margin looked like last time, we had a strong distributor mix in Q1.
And that's two years ago, and then the margin was 35%. So you can see that there is.
Good underlying progression in the wholesale gross margin.
When you adjust for that mix I think as we as we look to the you know as I said before we have we we all.
Using the signpost all last years wholesale gross margin is a good indicator.
But I just think the C O builds as year goes on rather than starts with a head of state and therefore you would.
Not to expect it to be as high as last year.
In this quarter I'm frankly, all next because they can Pat was way above the full year.
Got it thanks, and then just one quick one is or can you give us some guidance on just inventory levels. Just so we know kind of what you guys are baking into your plan in terms of how inventory should slow for the remainder of the year.
I think when it when it comes to inventory you know we.
I had from both from from Elliott, maybe this morning about our approach.
Two inventory and why they why they simply don't line up with with revenue trends.
I think we don't in the change of strategy and we will efficiently build ahead to future growth in manufacturing.
While we have.
A really high degree of.
Confidence.
And this we.
You know it clearly you'll see some seasonality because as we get into larger sales quarters in Q2 and Q3.
There is.
We are taking in that somebody shifting out.
Now that said, if you compare us to other fast growing seasonal businesses and so the sector.
And you adjust for the fact, where manufacturer you'll also find that I'll stop turns are pretty much in line.
Yep.
I agree completely and I think that you know it's important to highlight that our inventories is after we want to be and.
Yeah, we're not concerned whatsoever by we're really excited with the the the position of it in the opportunity. It provides for us for the rest of the year and.
Yeah.
I will now turn the call back over to Danny Reis for closing remarks.
Well. Thank you all for your questions and thank you all for your time and taking time to be with US today. We appreciate your interest in and your support of Canada Goose.
I look forward to updating you on our progress when we report our second quarter results.
In the second quarter. Thank you.
This concludes today's conference call you may now disconnect.