Canada Goose Holdings Inc. Q1 FY2026 Earnings Call

Hello, and thank you for being here. My name is Tiffany, and I will be your conference operator today. I would like to welcome everyone to the Canada Goose Quarter 1 Fiscal Year '26 Earnings Call. I will now pass the call to Neil Bowden, Chief Financial Officer. Neil, please continue.

Good morning, everyone. With me today are Dani Reiss, our Chairman and CEO; Carrie Baker, President of Brand and Commercial; and Beth Clymer, President and Chief Operating Officer. For today's call, Dani and I will start with prepared remarks, and then the four of us will take questions as usual. Today's presentation will contain forward-looking statements that are based on assumptions and, therefore, subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements, except as required by law. You can read about these assumptions, risks, and uncertainties in our filings with U.S. and Canadian regulators. These documents are also available on the Investor Relations section of our website. We report in Canadian dollars, so the amounts discussed today are in Canadian dollars unless otherwise indicated. Please note the financial results described on today's call will compare first-quarter results ended June 29, 2025, with the same period ended June 30, 2024 unless otherwise noted. With that, I'll turn the call over to Dani.

Thanks, Neil, and good morning, everyone. Since we kicked off fiscal 2026, it is clear, spring is a growth opportunity, and we are capitalizing on it in a big way. This season, we showed up differently with fresh product, bold marketing and a clear point of view that sparks new energy around the brand. And as customers engage with us, we delivered executing with strength across every channel. The first quarter marked a strong start to the year with revenue up 22% year-over-year. Our direct-to-consumer business showed positive momentum continuing since December of last year, delivering 15% D2C comparable sales growth for the quarter. This now marks a seventh consecutive month of positive comps. Our performance in North America and Mainland China were particular highlights this quarter, which gives us confidence as we enter the peak season. Our seasonally-relevant assortment, commitment to maintaining a consistent and impactful marketing presence, and our focused execution of our direct-to-consumer strategy is clearly working. On our fourth quarter call, we shared our operating imperatives with you which continue to provide the foundation for our execution. First, expanding our product offering to enhance year-round relevance. This quarter, we introduced more newness than ever before, making our stores more seasonally relevant and well positioned with the selection that resonated with consumers in the moment. The Emerson T-shirt, a new style launched this season, topped our bestsellers this quarter, followed by the Beckley Polo and Chilliwack Fleece. Apparel was our fastest-growing category in Q1, but newness and relevance across our assortment also drove higher growth in our core outerwear products as well. Second, building brand heat through focused marketing investments. In the first quarter, we continued to drive brand momentum through strategic marketing investments in our Spring-Summer and Snow Goose summer campaigns. The Spring-Summer campaign brought a fresh energy to the brand, playful and relevant with a clear message. We do summer, too. It challenged old perceptions and made people take notice, backed by more season-specific product and elevated storytelling, it sparks real momentum. The Snow Goose campaign built on that heat resonating globally and driving a strong lift in earned media reach, engagement, and follower growth, clear signals that the campaign landed. What Haider is doing is bold, is reaching deep into the DNA of Canada Goose and pulling it forward, reinterpreting our heritage in a way that feels right now. Snow Goose puts us squarely in the pop-culture conversation, creating something that speaks to longtime fans; we're capturing the attention of a whole new generation. Through channel development, we are executing across direct-to-consumer and wholesale to deliver an elevated experience at every touchpoint. Our direct-to-consumer comparable sales growth has remained positive in recent months. We're seeing strong alignment across product, marketing, and channel operations, driving store conversion higher year-over-year in every region. These are clear proof points of the progress that we are making. That said, we are not standing still. Our teams around the world continue to push for more, and we are seeing that translate into the second quarter, with July showing yet another strong month. Finally, I want to highlight the recent release of our fiscal 2025 Impact Report. We are continuously looking to improve and innovate ensuring that our efforts lead to a more sustainable future. In fiscal 2025, we achieved a 9% reduction in Scope 1 emissions and a 25% reduction in Scope 3 emissions, while additionally investing in 10 renewable energy projects to fully match our Scope 2. I'm very proud of both our progress and of our teams for their commitment every step of the way. In closing, I'm energized about the momentum we have built, especially in the uncertain economic environment. We're unlocking major growth opportunities that set Canada Goose up for continued success through the rest of the year and beyond. And with that, I'll turn it over to Neil.

Thanks, Dani. Our first quarter fiscal 2026 results are a continuation of the strong performance we delivered as we closed out fiscal '25 and the early progress we're making on our key operational priorities this year. Let me walk you through the financial results. Revenue for the first quarter was $108 million, up 22% on a reported and constant currency basis from last year's first quarter. D2C comparative sales growth of 15% on a consolidated basis was the primary contributor to our strong quarter with standout performance in both North America and APAC and across both e-commerce and stores. First, some color on channel performance before getting into the regional picture. All the figures I cite are on a constant currency basis. D2C revenue increased to $78 million, up 23%, reflecting success of our broader D2C strategy. We sharpened execution and delivered a more elevated experience alongside more newness and made a greater investment in marketing. The combination of these initiatives is translating directly into our financial results with comparable D2C sales up 15% after a growth of 7% in Q4 of fiscal '25. In wholesale, we achieved an 11% year-over-year increase in revenue both delivering on our order book, including travel retail and some wholesale replenishment activity. While timing shifts may cause quarterly fluctuations, our view for the wholesale business is stable performance this year following the channel reset over the past few fiscals. That said, we are monitoring retail health in every market. And while there are some spots of caution, we are working together to build the Canada Goose business in this critical channel. Other revenue was $12 million, up from $9 million in Q1 last year, mainly due to hosting 2 Friends & Family events this year compared to 1 in the prior year. Now commentary on the geographic revenue trends in Q1. In North America, revenue was up 27% as our D2C channel continued to deliver very strong performance. Stores led the way with double-digit D2C comp sales growth each month in the quarter, while we're very pleased with the performance in both countries; the exceptional growth in the U.S. is particularly encouraging as we head towards our peak season. In APAC, revenue increased by 27%, driven by higher revenue in both channels. Mainland China delivered strong D2C growth, driving the region's overall performance. While softer trends in Japan tempered growth, the region still achieved double-digit D2C comparable sales growth, underscoring the strength of our brand in the region. While macroeconomic challenges had an effect on traffic, our store conversion rates improved year-over-year, evidence of our operational improvements bearing fruit. We opened a new store at WF CENTRAL in Beijing late in the quarter, marking our third store in that city. In EMEA, revenue was down slightly year-over-year due to a planned decline in wholesale revenue, partially offset by higher D2C revenue. The decrease in wholesale revenue was primarily due to timing shifts to later in the year and some planned decline in the order book across the region. For the quarter, D2C comparable sales growth was low single digits negative, reflecting a U.K. consumer who remains under pressure, while the business in Continental Europe is performing at a higher rate. We're focused on ensuring our conversion and brand marketing are optimized to mitigate some of the macro factors that are weighing on performance in EMEA. Moving down the income statement, let's turn to gross profit, keeping in mind that in Q1, small dollar impacts can have an outsized effect on our gross margin figures. Gross margin expanded 170 basis points year-over-year to 61.4% favorably impacted by margin expansion from our European manufacturing facility. Pricing, product, and channel mix did not have a significant impact during the quarter. Reported SG&A expense for the quarter was $225 million and an increase of $75 million or 50% year-over-year. This included a one-time charge of approximately $44 million related to an arbitration award to a vendor in a previously disclosed commercial dispute as well as a higher earnout of $9 million linked to the purchase of our knitwear manufacturing facility in 2023. Excluding these one-time charges, our underlying adjusted SG&A was up 16% year-over-year as we made investments in important revenue-driving areas like strategic marketing spend, product creation talent, including design, merchandising, product development, talent, and store labor, which helped fuel our strong comp sales growth for the quarter. Adjusted SG&A grew at a slower pace than revenue and therefore, improved as a percentage of revenue by 850 basis points year-over-year. As a reminder, our fourth operating imperative in fiscal '26 is operating efficiently with pace and accountability and SG&A as a percentage of revenue is the key metric we are tracking to monitor our progress. We're pleased with our progress here and plan to continue to focus on this by driving revenue growth and spending SG&A efficiently and on more revenue-driving investments, leading to EBIT margin expansion over the long term. Our adjusted EBIT was a loss of $106 million for the quarter, which increased from a loss of $96 million in Q1 last year. Adjusted net loss attributable to shareholders was $88 million or $0.91 per share compared to a loss of $76 million or $0.79 per share in Q1 of fiscal '25. We ended the quarter with a balance sheet with a strong position. Inventory was $440 million, down 9% on top of a 7% reduction in Q1 of fiscal '25, driven largely by higher demand over the last 12 months and tighter inventory management. This marks our seventh consecutive quarter of year-over-year inventory declines. Our inventory turnover has improved as well, rising to 0.9x from 0.8x at this time last year. As we plan the year with the benefit of demand signals of the last few quarters, production and purchasing have returned to a more normalized level, although still down from highs a few years ago. Supply chain agility, a competitive strength of being vertically integrated and more coordination across the product creation value chain continues to be an area of focus and an exciting opportunity for us. We ended the quarter with $542 million of net debt compared with $766 million at the end of the first quarter of fiscal '25. This significant improvement reflects our strong operating cash performance including our efforts around inventory management over the past 12 months and resulted in higher cash balances and lower borrowings on our credit facilities. Our net debt leverage was 1.8x adjusted EBITDA compared with 2.8x adjusted EBITDA at the same time last year. CapEx in Q1 was higher versus the prior year as we are strategically allocating capital primarily to store openings and renovations that directly support revenue generation and brand elevation. We've started fiscal '26 in a strong liquidity position that provides flexibility to make strategic investments and navigate uncertainty in the operating environment, while maintaining an efficient capital structure. Lastly, I want to address the evolving trade environment. Consistent with what you heard from us last quarter, approximately 75% of our units are manufactured in Canada and virtually all comply with the USMCA requirements, making them currently exempt from tariffs. For our European product, we are paying modestly higher tariffs, but they will continue to have a minimal financial impact. We continue to monitor the ongoing developments as it relates to potential new U.S. tariffs on Canadian goods as well as potential second-order impacts on the consumer. In this fluid environment, our strong operational foundation and manufacturing advantages position us well to navigate the evolving trade dynamics. To close out today's remarks, we are seeing meaningful progress across our four key operating priorities to start the fiscal year, which is leading to continued momentum in our financial results. As we look ahead, we remain focused on what we can control, elevating our brand, driving operational excellence, and deepening connections with our customers around the world. On behalf of our senior leadership team, I want to thank our Canada Goose teams around the world for their continued efforts and great results. Carrie, Beth, Dani, and I will now take your questions. And with that, I'll turn the call over to our operator.

Your first question comes from the line of Brooke Roach with Goldman Sachs.

I was hoping you could talk to the drivers of the sequential acceleration in comp in a little bit more detail. How much of this is coming from some of the Snow Goose product that continued to expand this quarter versus your core? And looking ahead, how are you thinking about Snow Goose's opportunity to scale into the important winter season?

Thanks, Brooke. It's Carrie. There are three main points to discuss. First, we've been focusing on marketing investments, especially higher in the funnel, to engage consumers and attract new customers. This strategy is showing positive results. Last year, we were quieter during the summer, but our bold Spring-Summer campaign significantly increased our reach and consumer engagement, garnering strong press coverage. We can see that it resonated with consumers. Second, regarding our product, as Dani mentioned, our assortment is much more representative of a seasonally relevant collection. While we are known for our warmth, especially in winter, this campaign and collection have changed that perception, and we saw a strong response. Lastly, our execution has been vital. We ensure our products are well-placed, and our in-store brand ambassadors are focused on conversion, which has led to increased conversion rates across all regions this quarter. These three elements combined are driving our comparable sales. As for Snow Goose, it has fulfilled its role effectively. Haider's collection is designed to be bold and avant-garde, bringing freshness and excitement to the brand. It serves as a brand heat driver more than a commercial one, and while it enhances our sales, its impact on basket size has exceeded our expectations. We're viewing Snow Goose as a capsule collection that complements our main line, generating brand excitement. We had our first release in the summer, with a second drop coming soon, and we're also planning a fall release.

Great. And if I could just ask Neil, a quick question. I understood that there's a lot of changes happening with the timing and the magnitude of marketing investments as you look to reinvigorate the brand. Can you just help us understand how we should be thinking about year-on-year SG&A growth for the balance of the year? And if there's any puts and takes by quarter that we should be thinking about?

Yes, that's a good question, Brooke. I'll provide some general comments since we don't have guidance for the year. We discussed in our previous call the importance of investing in areas that we anticipate will drive revenue growth, although some benefits will take time to materialize. The marketing investment in the first quarter was significantly higher than the previous year, and we expect this trend to continue, particularly with additional Snow Goose product releases and as we enter our main selling season. We're also planning to open new stores this year, and we view the labor costs associated with these stores as a revenue-generating investment. We're focused on these key areas of investment. However, in terms of discretionary SG&A spending, we are being more disciplined about our expectations and making clearer choices regarding areas that may not immediately yield revenue. Overall, we anticipate some increase in SG&A, consistent with year-over-year growth to support this expansion, and we feel comfortable with that outlook.

Your next question comes from the line of Oliver Chen with TD Cowen.

You've been performing well in the luxury goods sector in China, which is impressive given the challenges in that market. I would love to hear about your observations and the successes you've experienced there. Additionally, regarding newness, is there a quantitative measure of the level or percentage of newness that we should be aware of, especially concerning the upcoming flows? Also, considering Haider's achievements, particularly with shows at TOM FORD, how do you plan to enhance his messaging in terms of speed and creativity related to fashion and unified messaging?

Thank you, Oliver. Let me address the first question regarding APAC and China. We are very pleased with the performance in China and the overall APAC region. Our strategy remains consistent with earlier marketing efforts, navigating a more challenging funnel, and ensuring product availability. The consumer response in APAC is strong, particularly as we adapt to the regional variations in seasons compared to North America. Customers are engaging positively with the new products we're introducing and the in-store execution led by our brand ambassadors and store teams is key. Additionally, our success in e-commerce, particularly through live streaming on platforms like Douyin and WeChat, is driving significant traffic and engagement with our brands, which is beneficial for the market. Japan, however, is seeing slightly softer performance. Moving to the second question about the impact of newness, we are excited by our strategy to nearly double the volume of new products. This includes revitalizing our heritage styles to encourage repeat purchases as well as launching entirely new styles, especially in apparel, which contributes significantly to our growth. We are eager to position Canada Goose in the minds of consumers beyond the winter season, which is thrilling for us.

One thing, Carrie, this is Beth. I'll add that our efforts to enhance newness involve a comprehensive approach across the organization aimed at improving our practices to speed up innovation and creativity. This includes merchandising, sourcing, product development, and manufacturing. We are investing in our teams and adopting new workflows to truly enhance this newness. We believe we're only at the beginning of this journey. We're excited about the new offerings in the store, and we are pleased with the commercial results stemming from this newness. However, we think the impact we will have this year and in the medium to long term is just starting to build.

Great. And then just a follow-up. In regards to the fashion show potential.

We are a very different brand than TOM FORD, so we are not trying to replicate those elements. However, having Haider and his creative vision is definitely a benefit for us. He is pushing our boundaries, and as Dani mentioned, he is bold, and what he is doing is resonating with us. This places us at the center of pop culture, exemplified by our summer drop in Utah, where we presented ourselves in a unique yet authentic way. He is not trying to transform us into a fashion brand, which is not part of our identity. We appreciate his focus on enhancing what makes us great as a brand and amplifying it. You will see this reflected in our products, marketing, and the expeditions we undertake. The impact of his approach will soon be evident in our mainline collection; although it has primarily been seen with Snow Goose so far, it will soon extend to all our collections.

Neil, lastly, just on puts and takes on gross margin that we should know about regarding any headwinds or nonrecurring? And was 2 versus 1 Friends & Family expected? Should we know anything about that as well?

Thank you, Oliver. Regarding your last point, yes, it was anticipated that there would be minimal activity, but two is obviously double one. This led to a slight increase in what was overall a small amount. Concerning the margin for the quarter, I've likely mentioned this before and will mention it again for the first quarter next year; it tends to be a small quarter, so there can be some fluctuations. One significant point we discussed about a year ago was the impact of the European knitwear manufacturer, which had a positive effect this quarter, unlike last year. This was a key factor driving margin expansion. Removing that effect, as we mentioned, pricing, product mix, and channel mix were not really influential factors. However, it is encouraging that product mix isn't an issue, considering we are transitioning significantly away from some of our core products to introduce a variety of new ones. This reflects positively on the strength of our gross margin in this business, especially in the first quarter, as we substantially grow our top line.

Your next question comes from Adrienne Yih with Barclays.

Neil, I understand that Q1 is typically a smaller quarter, but it appears that you're seeing some positive shifts in wholesale with strong trends across all regions and categories. What would be necessary for you to reaffirm the current quarter's guidance? Additionally, regarding SG&A, should we anticipate a double-digit increase to support the new product? Beth, in the fall we discussed store productivity drivers. Can you provide updates on how you've been able to enhance productivity within the stores during slower quarters?

I'll start on the guidance point, Adrienne. Thanks for your question. I think where we are in the year, I guess there's still at least from our perspective, quite a bit of uncertainty around what the trade environment looks like. And as we said a few months ago, those sort of second-order impacts on consumer health are still weighing on us, especially as we got 5% of the year done with a lot more to go. And so we need to see more, and we're clearly monitoring the Canadian-U.S. dynamic more than anything else. There seems to be some more clarity around Europe. But as we see anything can happen at any day. So we're maintaining a bit of prudence around what the outlook is for the year.

I will address the question regarding SG&A and its relation to store productivity. While we are not providing specific guidance on SG&A expectations, our approach to SG&A growth this year is centered on two main objectives. First, we aim to invest in critical areas that will drive revenue growth in both the short and long term. These areas, as Neil previously mentioned, include marketing, product development, and investments at the store level. Store-level investments encompass opening new stores as well as enhancements in labor and other store-related expenditures, which I will touch on in response to the latter part of your question. We are actively assessing our investments and the key performance indicators associated with them in real time. This will allow us to determine their effectiveness and where adjustments may be needed. Consequently, it's challenging to predict the exact rate of SG&A growth since we intend to be adaptable based on our consumer impact and commercial performance. The second aspect of SG&A involves managing the remaining controllable expenses. Our goal is to keep these expenses as streamlined as possible while striving for maximum productivity to mitigate any inflationary pressures and investments. This dual focus will shape our SG&A strategy for this year and into the future. Regarding store productivity, we are pleased with our progress in the first quarter, especially with comparable store growth and consistent performance across different regions and stores. A key contributor to our SG&A growth this quarter was a significant investment in labor for existing stores, which we emphasized last year. We ramped up our investment in store labor towards the end of last year's first quarter and into the peak season. This year, we are ahead of schedule, seeing positive results reflected in both comparable growth and increased sales productivity per labor hour. We are utilizing more labor hours while also generating higher sales outcomes from those hours, which is encouraging. Additionally, store teams have been hired and trained in advance, completing product education early and preparing for peak demand. As we approach peak season, we anticipate these investments will yield substantial benefits. Overall, we are optimistic about store productivity and believe our strategic investments are paying off.

That's very helpful. Just a quick follow-up. How should we think about the wholesale shift impact into Q1? And how does that impact Q2?

We're not necessarily focused on the quarter-to-quarter there, Adrienne. Our view is that over the year, we expect to be more or less stable, similar to last year, with a bit of growth from some earlier orders and some replenishment, though these amounts are relatively small. We do not expect any significant change in the second quarter. Our main focus is really on what the full year looks like and whether we are delivering against that order book.

This is Carrie. Yes. We're accomplishing what we set out to do. After last year's reset, things have stabilized and are now growing. The inventory is much cleaner, and our assortments better reflect the full lifestyle brand of Canada Goose, which is encouraging. Sell-through rates have improved and returns have decreased. We’re pleased with this progress. The response to the fall order collection has been very strong, and we’re also looking ahead to spring orders, which we’re bringing in early. We’ve been strategic in working with our top global accounts rather than the larger volume of accounts we previously managed, and they are responding positively to our initiatives. We're satisfied with the current outcomes.

Your next question comes from Rick Patel with Raymond James.

Can you just frame the newness that you have in stores right now? I guess how much of the floor set today would you consider to be new products that are driving year-round relevance versus what you might consider to be part of the core? And do you feel that merchandising is where it needs to be today? Or do you expect to continue leaning into having more newness to have more year-round relevance?

Great question. It's difficult to quantify the exact number, so let me share a bit about our approach to introducing new products, as it relates to your second question about our merchandising strategy. We have made a concerted effort to introduce newness earlier, aligning it with our marketing campaigns and investments. However, we are not launching all new products at once and hoping for success for the entire season. Instead, we are taking a strategic approach to ensure that we have offerings that appeal to different regions, building momentum throughout the season as we approach peak times. The newness is performing well, and we are seeing positive responses. From a full-year perspective, we have just started to release some of our fall/winter collection. Looking ahead, we are not strictly dividing our offerings into spring and fall/winter collections. We do not operate like a runway brand that showcases a collection and then moves on; instead, we strive for year-round relevance, adapting to weather conditions and regional needs as they arise. This flow is different from what it was in previous years. Regarding merchandising, we are not finished yet, and I'm not sure if we will ever reach a point of being completely done, as there are always areas for improvement. As we mentioned earlier, we brought on a new Head of Merchandising in January, and she is currently building a team to optimize our collection and processes, focusing on how to effectively introduce new products. We are intentionally avoiding simply increasing our SKUs and waiting to see how consumers react. We are approaching this with more discipline than ever before. I’m pleased with our progress, but I believe there is still much more to achieve in upcoming seasons and years.

And I know you're not giving guidance, but can you unpack the factors that drove the increase in SG&A in Q1 as we think about stores, marketing, and the merchandising areas? I guess curious about the relative size of those buckets? And as we think about the go forward, so we expect the relative size of those buckets to be consistent with where you landed in Q1? Just some color on the shape of investment would be helpful.

I'm not going to comment on the specifics of the SG&A growth, but you can assume that most of it was related to our investment areas, which are designed to be efficient and funded through productivity. The growth is strategically focused on driving revenue, and we expect this to continue throughout the year. While I can't specify how much of that was for marketing or store labor, we are actively analyzing the data and adjusting our investments based on what is effective and scaling back on what is not, ensuring we achieve optimal returns from our investment dollars.

Your next question comes from Ike Boruchow with Wells Fargo.

Questions on DTC, maybe for Neil or Carrie, not sure. Just to double click, I think you said you were double-digit comp every month of the quarter and you kind of made a comment about momentum is sustained. I think I'm just kind of curious, like I know there's no guidance, but have you seen any real slowdown in the DTC trend that you guys saw in the last quarter so far?

I believe the first part of your question may have been missed, but I understand you're asking about D2C performance. Overall, channels, both in-store and online, are performing well globally. We've seen positive double-digit comparisons in North America and APAC, while Europe is experiencing low single-digit declines. Specifically, in the U.K., we've noticed a continued trend of decreased traffic over the past year. We're focusing on what we can control, such as improving conversion through various initiatives mentioned earlier. Despite the tough traffic situation, we're pleased with the conversion rates. Another area of concern is consumer behavior in Japan. Although it was stronger early in the quarter and exiting Q4, it seems to have softened somewhat in the first couple of months. There's been some trade tension that might be affecting consumer confidence, but our long-term focus in that market remains on building the brand, enhancing our stores, and improving operations. We can handle some temporary headwinds. Overall, the positive aspects, including strong performance in channels, store operations, and conversion rates, have been evident for many months now.

I think the main point of the question, Neil, is that while I understand there isn’t any guidance and I’m not asking for a specific figure, I’m interested in whether the actions you're taking and the momentum you're experiencing, particularly with some seasonal factors involved, suggest that this trend can be maintained as you approach the more significant profit quarters in the winter months. That's what I'm trying to get a clearer picture of at a high level.

Yes, absolutely, Ike, it's Carrie. There's no reason to believe that it would change, right? We have to keep controlling the things we can control which is what product we're putting in, how are we engaging and attracting customers through our marketing investments and then at the finish line of e-com and in-store conversion. So I think the fact that we are seeing this continued momentum. This is not just a 1-month type of story, gives us a lot of confidence that, that will continue barring the macro headwinds that of course, we don't know all of them, but we're watching the ones that we already know about, that Neil just mentioned. So we've seen that continue into Q2. We're happy with the trends that we're going and no reason to believe it would change barring some outsized impact events that we don't know about.

It's crucial to consider where we have come from and where we are heading. There has been extensive work on how we perform in stores, including how we measure that performance, the traffic patterns, and how they relate to our labor. We are ensuring our labor is trained and that we are tracking in-store activities effectively to encourage desired behaviors. This foundational retail work has yielded positive results over the past year. When combined with a stronger focus on marketing and products that resonate with consumers, we are seeing successful outcomes. This gives us confidence in the sustainability of our progress, even in a challenging consumer market. We are concentrating on the aspects we can control, leading to these favorable results.

Sure. I'll just add to that very quickly is that, we are really happy to be in a position that we are in and like we'd way rather be here at the beginning of the year, having seen acceleration and momentum going into the rest of the year. I'd way rather be sitting with this situation. It gives me lots of confidence as opposed to what could be a very different situation and we're all very excited about.

Totally makes sense, Dani. And then just one more follow-up. Carrie, I think you mentioned to Adrienne's question, which you followed up on the order book. I think you used the word healthy. I guess I'm just trying to ask a simplistic question. If the wholesale door calling is largely behind you and you've got an order book that's healthy, is there a reason why the wholesale business couldn't be growing from here? I know you're not really planning it that way. That's not how you're talking about it. But I'm just trying to understand, is there a reason why that couldn't occur given the two variables that I just kind of threw out there?

We appreciate your interest in this area. While we can’t make any commitments at this time, it’s important to recognize that the wholesale market varies significantly between North America and EMEA. We want to be cautious, but the strong order book response gives us confidence that it will yield the results we anticipate over the year. There are certainly opportunities for growth, and while we believe in our potential to exceed expectations, we are not there yet. The wholesale channel is crucial for us, and the feedback we’re receiving from our partner investments aligns perfectly with our goals.

Yes. To echo what Carrie said, I believe that there will be a point in time where wholesale does continue to grow. We have not built that into this year's plans because we don't want to be irresponsible in how we do that. But wholesale over the long term is a very important channel, and I have lots of faith that it will be a strong one for us going forward.

Your next question comes from Alex Perry with Bank of America.

This is Lucas Hudson on for Alex Perry. Can you guys speak to the drivers of the sequential improvement that you expect throughout the year? And how much is expectation for better macro versus your own initiatives?

We cannot provide sequential guidance this year, so please keep that in mind when considering any comments. Our expectation has been to focus on strong comparable performance and direct-to-consumer results, as well as on the factors that influence those outcomes, whether in-store or online. These are the key areas we need to concentrate on in what is a challenging economic environment. Our strategy for this year does not involve significant industry growth; rather, it emphasizes internal improvements that yield ongoing performance. As I've mentioned previously, and as others have noted in recent quarters, we have considerable work ahead of us, but we are encouraged by the positive results we are beginning to see. However, the work is far from finished. Therefore, on a weekly and monthly basis, we are closely monitoring store conditions and the digital business to ensure continued growth in our top line.

I'll add, Lucas, this is Beth, that we're still a relatively small brand with a tremendous amount of runway. And so I think as we see challenging and volatile macro environment, we're not as intimidated by that because we know there is a lot we can do in our control to succeed even in those challenging environments. And obviously, you're seeing that with results over the last two quarters. And so certainly, macro will be what it will be. But I think we feel that we're very well positioned and have a lot of white space opportunity in front of us to continue to execute no matter what's going on in that macro context.

Great. And then just a follow-up. In regards to APAC, do you guys see APAC outside of Mainland outperforming Mainland as the remainder of the year continues?

I think that's a specific question. The business outside of APAC, mainly Japan, along with a few stores in Greater China and Australia, is relatively small. Speaking generally about Japan, particularly in Hong Kong, we have had two stores there for quite some time. There is still some pressure on traffic, and it's uncertain whether that's temporary or more lasting. We are keeping an eye on this, along with others. While it may not significantly affect the overall business, I believe that Mainland China has more potential for growth for the rest of the fiscal year compared to Greater China.

Your next question comes from Jonathan Komp with Baird.

Neil, if I could follow up just on SG&A. Typically, it looks like Q1 is less than 20% of the full year spend that ultimately happens. I'm just wondering if we should be thinking that, that will be the case again this year as it typically is. And then bigger picture, any thoughts on the revenue scale you think you need here to get back to historical levels of higher EBIT margin here?

Thanks, Jon. I'll address the second point regarding revenue trends and then return to the SG&A question. The relationship between profit and revenue growth is a critical focus for any retailer, and we are no exception. As mentioned previously, this year we are making investments that we believe will enable us to achieve revenue growth over the long term. This includes marketing investments, store-level improvements, and enhancing our product development team. The exact scale we need to reach in order to see significant margin expansion is something we will discuss at another time, as it resembles long-term guidance. However, we do believe there is substantial opportunity for growth, and with that growth, we anticipate significant margin expansion. The timing of this is something of interest, too. Regarding whether 20% of the year's SG&A is accounted for in Q1, I must reiterate that we do not provide quarterly or annual guidance. The timing of our investments is linked to when we expect them to yield the most benefit. We had a significant change with the Snow Goose capsule in the first quarter, which involved higher marketing investment compared to last year, and we believe this positively impacted our top line. Factors such as store openings and pre-lease periods also play a role. We evaluate these aspects over the entire year rather than focusing on specific quarters, and I understand that this may not be the exact precision you were hoping for, but that reflects our current situation.

Okay. That's helpful color. And then just one separately on China. I might have missed it, but did you close one store in the market there during the quarter? And then I believe last fall, you started calling out Douyin as a positive driver for traffic. Just as you look forward to anniversarying the strength there. Any thoughts on the ability to continue to drive traffic growth through the channel there?

So Douyin and WeChat livestreaming continues to be great for us, expanding. So last year really was our first test and making sure that we understood the nuance of the channel, how to optimize for that. And so we've been learning constantly and tweaking and hopefully expanding. So the products that we offer, the way we engage people with our hosts on that will continue to be a great driver. So we're really excited about the future of that platform for sure.

Regarding the store closure, we did have a lease expire in Douyin. We also opened another store there in the past year, and we felt that was a better location. Therefore, we did decide to close the store.

That concludes our question-and-answer session. I will now turn the call back over to Neil Bowden for closing remarks.

Thank you, operator, and thank you, everyone, for your interest today. Have a great rest of the summer, and we look forward to updating you on our progress here in a few months.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.