Canada Goose Holdings Inc 6-K, filed Nov 7, 2024
Canada Goose Holdings Inc. (GOOS)
6-K
2024-11-07
For: 2024-09-29
View Original
Added on
April 08, 2026
About this 6-K
Canada Goose Holdings Inc filed this 6-K on November 7, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2024
Commission File Number: 001-38027
CANADA GOOSE HOLDINGS INC.
(Translation of registrant’s name into English)
100 Queen’s Quay East, 22nd Floor
Toronto, Ontario, Canada
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
EXHIBIT INDEX
Exhibits 99.1 and 99.2 to this report of a Foreign Private Issuer on Form 6-K are deemed filed for all purposes under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.
Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 99.3 | ||||||||
| 99.4 | ||||||||
| 99.5 | ||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Canada Goose Holdings Inc.
| By: | /s/ Neil Bowden | ||||||||||||||||
| Name: | Neil Bowden | ||||||||||||||||
| Title: | Chief Financial Officer | ||||||||||||||||
| Date: November 7, 2024 | |||||||||||||||||
Canada Goose Holdings Inc.
Condensed Consolidated Interim Financial Statements
As at and for the second and two quarters ended
September 29, 2024 and October 1, 2023
(Unaudited)
Condensed Consolidated Interim Statements of Income (Loss)
(unaudited)
(in millions of Canadian dollars, except per share amounts)
| Second quarter ended | Two quarters ended | |||||||||||||||||||
| Notes | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| Revenue | 3 | 267.8 | 281.1 | 355.9 | 365.9 | |||||||||||||||
| Cost of sales | 6 | 103.7 | 101.6 | 139.2 | 131.2 | |||||||||||||||
| Gross profit | 164.1 | 179.5 | 216.7 | 234.7 | ||||||||||||||||
| Selling, general & administrative expenses | 162.5 | 177.2 | 312.0 | 332.1 | ||||||||||||||||
| Operating income (loss) | 1.6 | 2.3 | (95.3) | (97.4) | ||||||||||||||||
| Net interest, finance and other costs | 10 | 8.5 | 13.6 | 11.7 | 28.1 | |||||||||||||||
| Loss before income taxes | (6.9) | (11.3) | (107.0) | (125.5) | ||||||||||||||||
| Income tax recovery | (13.2) | (15.4) | (39.3) | (44.6) | ||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | ||||||||||||||||
| Attributable to: | ||||||||||||||||||||
| Shareholders of the Company | 5.4 | 3.9 | (72.0) | (77.2) | ||||||||||||||||
| Non-controlling interest | 0.9 | 0.2 | 4.3 | (3.7) | ||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | ||||||||||||||||
| Earnings (loss) per share attributable to shareholders of the Company | ||||||||||||||||||||
| Basic | 4 | $ | 0.06 | $ | 0.04 | $ | (0.74) | $ | (0.75) | |||||||||||
| Diluted | 4 | $ | 0.06 | $ | 0.04 | $ | (0.74) | $ | (0.75) | |||||||||||
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
| Canada Goose Holdings Inc. | Page 1 of 34 | |||||||
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(unaudited)
(in millions of Canadian dollars, except per share amounts)
| Second quarter ended | Two quarters ended | |||||||||||||||||||
| Notes | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | ||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||
| Items that will not be reclassified to earnings, net of tax: | ||||||||||||||||||||
| Actuarial loss on post-employment obligation | (0.7) | (0.2) | (0.7) | (0.2) | ||||||||||||||||
| Items that may be reclassified to earnings, net of tax: | ||||||||||||||||||||
| Cumulative translation adjustment gain (loss) | 12.1 | (4.1) | 17.5 | (6.5) | ||||||||||||||||
| Net (loss) gain on derivatives designated as cash flow hedges | 15 | (7.9) | (3.8) | (9.0) | 6.0 | |||||||||||||||
| Reclassification of net gain on cash flow hedges to income | 15 | — | (0.5) | (0.1) | (1.0) | |||||||||||||||
| Other comprehensive income (loss) | 3.5 | (8.6) | 7.7 | (1.7) | ||||||||||||||||
| Comprehensive income (loss) | 9.8 | (4.5) | (60.0) | (82.6) | ||||||||||||||||
| Attributable to: | ||||||||||||||||||||
| Shareholders of the Company | 8.7 | (4.3) | (64.5) | (78.1) | ||||||||||||||||
| Non-controlling interest | 1.1 | (0.2) | 4.5 | (4.5) | ||||||||||||||||
| Comprehensive income (loss) | 9.8 | (4.5) | (60.0) | (82.6) | ||||||||||||||||
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
| Canada Goose Holdings Inc. | Page 2 of 34 | |||||||
Condensed Consolidated Interim Statements of Financial Position
(unaudited)
(in millions of Canadian dollars)
| Notes | September 29, 2024 | October 1, 2023 | March 31, 2024 | |||||||||||
| $ | $ | $ | ||||||||||||
| Assets | Reclassified | Reclassified | ||||||||||||
| Current assets | ||||||||||||||
| Cash | 68.8 | 37.5 | 144.9 | |||||||||||
| Trade receivables | 5 | 143.1 | 146.5 | 70.4 | ||||||||||
| Inventories | 6 | 473.4 | 519.7 | 445.2 | ||||||||||
| Income taxes receivable | 19.0 | 17.2 | 28.0 | |||||||||||
| Other current assets | 14 | 66.9 | 82.6 | 52.3 | ||||||||||
| Total current assets | 771.2 | 803.5 | 740.8 | |||||||||||
| Deferred income taxes | 136.8 | 119.2 | 76.3 | |||||||||||
| Property, plant and equipment | 165.0 | 179.3 | 171.8 | |||||||||||
| Intangible assets | 133.9 | 132.4 | 135.1 | |||||||||||
| Right-of-use assets | 7 | 286.2 | 280.0 | 279.8 | ||||||||||
| Goodwill | 71.7 | 62.7 | 70.8 | |||||||||||
| Other long-term assets | 14 | 1.9 | 12.2 | 7.0 | ||||||||||
| Total assets | 1,566.7 | 1,589.3 | 1,481.6 | |||||||||||
| Liabilities | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable and accrued liabilities | 8, 14 | 155.4 | 210.2 | 177.7 | ||||||||||
| Provisions | 2, 9 | 44.9 | 42.7 | 49.1 | ||||||||||
| Income taxes payable | 23.6 | 7.7 | 16.8 | |||||||||||
| Short-term borrowings | 10 | 109.8 | 80.7 | 9.4 | ||||||||||
| Current portion of lease liabilities | 7 | 83.1 | 77.1 | 79.9 | ||||||||||
| Total current liabilities | 416.8 | 418.4 | 332.9 | |||||||||||
| Provisions | 2, 9 | 14.9 | 13.6 | 14.3 | ||||||||||
| Deferred income taxes | 13.0 | 15.5 | 17.2 | |||||||||||
| Revolving Facility | 10 | 60.5 | 85.0 | — | ||||||||||
| Term Loan | 10 | 385.7 | 391.4 | 388.5 | ||||||||||
| Lease liabilities | 7 | 254.8 | 253.2 | 250.6 | ||||||||||
| Other long-term liabilities | 14 | 52.1 | 56.5 | 54.6 | ||||||||||
| Total liabilities | 1,197.8 | 1,233.6 | 1,058.1 | |||||||||||
| Equity | 11 | |||||||||||||
| Equity attributable to shareholders of the Company | 357.9 | 352.2 | 417.0 | |||||||||||
| Non-controlling interests | 11.0 | 3.5 | 6.5 | |||||||||||
| Total equity | 368.9 | 355.7 | 423.5 | |||||||||||
| Total liabilities and equity | 1,566.7 | 1,589.3 | 1,481.6 | |||||||||||
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
| Canada Goose Holdings Inc. | Page 3 of 34 | |||||||
Condensed Consolidated Interim Statements of Changes in Equity
(unaudited)
(in millions of Canadian dollars)
| Share capital | Contributed surplus | Retained earnings | Accumulated other comprehensive income (loss) | Total attributable to shareholders | Non-controlling interest | Total | ||||||||||||||||||||||||||
| Notes | Multiple voting shares | Subordinate voting shares | Total | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Balance at March 31, 2024 | 1.4 | 103.5 | 104.9 | 54.4 | 252.5 | 5.2 | 417.0 | 6.5 | 423.5 | |||||||||||||||||||||||
| Tax on normal course issuer bid purchase of subordinate voting shares in fiscal 2024 | 2 | — | — | — | — | (0.6) | — | (0.6) | — | (0.6) | ||||||||||||||||||||||
| Issuance of shares | 11 | — | 3.7 | 3.7 | (3.7) | — | — | — | — | — | ||||||||||||||||||||||
| Net (loss) income | — | — | — | — | (72.0) | — | (72.0) | 4.3 | (67.7) | |||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 7.5 | 7.5 | 0.2 | 7.7 | |||||||||||||||||||||||
| Share-based payment | 12 | — | — | — | 6.0 | — | — | 6.0 | — | 6.0 | ||||||||||||||||||||||
| Balance at September 29, 2024 | 1.4 | 107.2 | 108.6 | 56.7 | 179.9 | 12.7 | 357.9 | 11.0 | 368.9 | |||||||||||||||||||||||
| Balance at April 2, 2023 | 1.4 | 117.3 | 118.7 | 28.5 | 316.5 | 5.8 | 469.5 | 8.0 | 477.5 | |||||||||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares | 11 | — | (5.7) | (5.7) | — | (50.5) | — | (56.2) | — | (56.2) | ||||||||||||||||||||||
| Liability to broker under automatic share purchase plan | 11 | — | — | — | 10.0 | — | — | 10.0 | — | 10.0 | ||||||||||||||||||||||
| Issuance of shares | 11 | — | 3.9 | 3.9 | (3.8) | — | — | 0.1 | — | 0.1 | ||||||||||||||||||||||
| Net loss | — | — | — | — | (77.2) | — | (77.2) | (3.7) | (80.9) | |||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (0.9) | (0.9) | (0.8) | (1.7) | |||||||||||||||||||||||
| Share-based payment | 12 | — | — | — | 6.9 | — | — | 6.9 | — | 6.9 | ||||||||||||||||||||||
| Balance at October 1, 2023 | 1.4 | 115.5 | 116.9 | 41.6 | 188.8 | 4.9 | 352.2 | 3.5 | 355.7 | |||||||||||||||||||||||
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
| Canada Goose Holdings Inc. | Page 4 of 34 | |||||||
Condensed Consolidated Interim Statements of Cash Flows
(unaudited)
(in millions of Canadian dollars)
| Second quarter ended | Two quarters ended | |||||||||||||||||||
| Notes | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| Operating activities | ||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | ||||||||||||||||
| Items not affecting cash: | ||||||||||||||||||||
| Depreciation and amortization | 32.2 | 30.6 | 64.9 | 59.8 | ||||||||||||||||
| Income tax recovery | (13.2) | (15.4) | (39.3) | (44.6) | ||||||||||||||||
| Interest expense | 10 | 10.8 | 12.9 | 22.6 | 20.3 | |||||||||||||||
| Foreign exchange loss (gain) | — | 4.2 | (1.9) | (0.5) | ||||||||||||||||
| Loss on disposal of assets | 0.4 | 0.1 | 0.4 | — | ||||||||||||||||
| Share-based payment | 12 | 4.0 | 4.7 | 6.2 | 7.2 | |||||||||||||||
| Remeasurement of put option | 10 | (1.2) | 2.7 | 0.9 | 10.8 | |||||||||||||||
| Remeasurement of contingent consideration | 10 | (1.1) | (2.0) | (11.8) | (3.0) | |||||||||||||||
| 38.2 | 41.9 | (25.7) | (30.9) | |||||||||||||||||
| Changes in non-cash operating items | 17 | (75.5) | (67.3) | (138.6) | (166.2) | |||||||||||||||
| Income taxes paid | (1.9) | (18.9) | (7.3) | (49.0) | ||||||||||||||||
| Interest paid | (11.2) | (12.9) | (21.7) | (20.4) | ||||||||||||||||
| Net cash used in operating activities | (50.4) | (57.2) | (193.3) | (266.5) | ||||||||||||||||
| Investing activities | ||||||||||||||||||||
| Purchase of property, plant and equipment | (3.2) | (26.0) | (5.4) | (31.2) | ||||||||||||||||
| Investment in intangible assets | — | (0.3) | — | (0.5) | ||||||||||||||||
| Initial direct costs of right-of-use assets | 7 | — | (0.1) | (0.1) | (0.4) | |||||||||||||||
| Net cash used in investing activities | (3.2) | (26.4) | (5.5) | (32.1) | ||||||||||||||||
| Financing activities | ||||||||||||||||||||
| Mainland China Facilities borrowings | 10 | 57.8 | 25.1 | 74.4 | 37.7 | |||||||||||||||
| Japan Facility borrowings | 10 | 15.2 | 7.1 | 26.0 | 15.4 | |||||||||||||||
| Term Loan repayments | 10 | (1.0) | (1.0) | (2.0) | (2.0) | |||||||||||||||
| Revolving Facility borrowings | 10 | 6.6 | 86.3 | 60.9 | 86.3 | |||||||||||||||
| Transaction costs on financing activities | 10 | 0.2 | (0.3) | — | (0.3) | |||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares | 11 | — | (29.9) | — | (57.4) | |||||||||||||||
| Principal payments on lease liabilities | 7 | (20.1) | (15.3) | (40.9) | (28.7) | |||||||||||||||
| Issuance of shares | 12 | — | 0.1 | — | 0.1 | |||||||||||||||
| Net cash from financing activities | 58.7 | 72.1 | 118.4 | 51.1 | ||||||||||||||||
| Effects of foreign currency exchange rate changes on cash | 1.8 | 1.0 | 4.3 | (1.5) | ||||||||||||||||
| Increase (decrease) in cash | 6.9 | (10.5) | (76.1) | (249.0) | ||||||||||||||||
| Cash, beginning of period | 61.9 | 48.0 | 144.9 | 286.5 | ||||||||||||||||
| Cash, end of period | 68.8 | 37.5 | 68.8 | 37.5 | ||||||||||||||||
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
| Canada Goose Holdings Inc. | Page 5 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 1. The Company
Organization
Canada Goose Holdings Inc. and its subsidiaries (the “Company”) design, manufacture, and sell performance luxury apparel for men, women, youth, children, and babies. The Company’s product offerings include various styles of heavyweight down and lightweight down jackets, rain and everyday jackets, fleece, vests, apparel, footwear, and accessories for the fall, winter, and spring seasons. The Company’s head office is located at 100 Queens Quay East, Toronto, Canada, M5E 1V3. The use of the terms “Canada Goose”, “we”, and “our” throughout these notes to the condensed consolidated interim financial statements ("Interim Financial Statements") refer to the Company.
Canada Goose is a public company listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol “GOOS”. The principal shareholders of the Company are investment funds advised by Bain Capital LP and its affiliates (“Bain Capital”), and DTR LLC ("DTR"), an entity indirectly controlled by the Chairman and Chief Executive Officer of the Company. The principal shareholders hold multiple voting shares representing 52.7% of the total shares outstanding as at September 29, 2024, or 91.8% of the combined voting power of the total voting shares outstanding. Subordinate voting shares that trade on public markets represent 47.3% of the total shares outstanding as at September 29, 2024, or 8.2% of the combined voting power of the total voting shares outstanding.
Statement of compliance
The Interim Financial Statements are prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). Certain information, which is considered material to the understanding of the Interim Financial Statements and is normally included in the audited annual consolidated financial statements prepared in accordance with IFRS Accounting Standards as issued by the IASB, is not provided in these notes. These Interim Financial Statements should be read in conjunction with the Company's audited annual consolidated financial statements for the year ended March 31, 2024.
The Interim Financial Statements were authorized for issuance in accordance with a resolution of the Company’s Board of Directors on November 6, 2024.
Fiscal year
The Company's fiscal year is a 52 or 53-week reporting cycle with the fiscal year ending on the Sunday closest to March 31. Each fiscal quarter is 13 weeks for a 52-week fiscal year. Fiscal 2025 is a 52-week fiscal year.
Operating segments
The Company classifies its business in three operating and reportable segments: Direct-to-Consumer ("DTC"), Wholesale, and Other. The DTC segment comprises sales through country-specific e-Commerce platforms available across numerous markets, which includes the recommerce platform Canada Goose Generations, currently available in the United States and Canada, and our Company-owned retail stores located in luxury shopping locations.
The Wholesale segment comprises sales made to a mix of retailers and international distributors, who are partners that have exclusive rights to an entire market, and travel retail locations.
| Canada Goose Holdings Inc. | Page 6 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The Other segment comprises revenue and costs that are not related to the Company’s DTC or Wholesale segments, such as sales to employees, friends and family sales, and results from the Paola Confectii business.
Seasonality
Our business is seasonal, and we have historically realized a significant portion of our Wholesale revenue and operating income in the second and third quarters of the fiscal year and DTC revenue and operating income in the third and fourth quarters of the fiscal year. Thus, lower-than-expected revenue in these periods could have an adverse impact on our annual operating results.
Cash flows from operating activities are typically highest in the third and fourth quarters of the fiscal year due to revenue from the DTC segment and the collection of trade receivables from Wholesale revenue earlier in the year. Working capital requirements typically increase as inventory builds. Borrowings have historically increased in the first and second quarters and been repaid in the third quarter of the fiscal year.
Note 2. Material accounting policy information
Basis of presentation
The accounting policies and critical accounting estimates and judgments as disclosed in the Company's audited annual financial statements for the year ended March 31, 2024 have been applied consistently in the preparation of these Interim Financial Statements except as noted below. The Interim Financial Statements are presented in Canadian dollars, the Company’s functional and presentation currency.
As at March 31, 2024, the Company amended the allocation basis for certain selling, general and administrative ("SG&A") expenses between the operating segments to provide more relevant information on financial performance of each operating segment. The reclassification did not impact net income, earnings per share, or the consolidated statements of financial position in the comparative year. Comparative figures have been reclassified to conform with the current year presentation.
Principles of consolidation
The Interim Financial Statements include the accounts of the Company and its subsidiaries and those investments over which the Company has control. All intercompany transactions and balances have been eliminated.
Standards issued and not yet adopted
Certain new standards, amendments, and interpretations to existing IFRS Accounting Standards have been published but are not yet effective and have not been adopted early by the Company. Management anticipates that pronouncements will be adopted in the Company’s accounting policy for the first period beginning after the effective date of the pronouncement.
| Canada Goose Holdings Inc. | Page 7 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Standards issued and adopted
In January 2020, the IASB issued an amendment to IAS 1, Presentation of Financial Statements to clarify its requirements for the presentation of liabilities in the statement of financial position. The limited scope amendment affected only the presentation of liabilities in the statement of financial position and not the amount or timing of its recognition. The amendment clarified that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and specified that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability. It also introduced a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. On October 31, 2022, the IASB issued Non-Current Liabilities with Covenants (Amendments to IAS 1). These amendments specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. These amendments are effective for annual reporting periods beginning on or after January 1, 2024.
The adoption of the amendments was recognized as a change in accounting policy in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors ("IAS 8"). The Company amended the existing accounting policies related to its presentation of liabilities in the statement of financial position as at April 1, 2024. The Company assessed the impact of the amendments and identified $23.0m of liabilities at the date of adoption, recognized as non-current liabilities on the provisions line related to warranty that can no longer be classified as such in accordance with the amendments. As a result, this balance was reclassified to current liabilities on the provisions line in the statement of financial position.
In accordance with IAS 8, retrospective application is required for accounting policy changes and comparative financial information was restated in the statement of financial position. As a result, $22.2m and $23.0m were reclassified from non-current provisions to current provisions for October 1, 2023 and March 31, 2024, respectively.
In May 2023, the IASB issued International Tax Reform, Pillar Two Model Rules, Amendments to IAS 12, Income Taxes (the “Amendments”). The Amendments provide the Company with an exception from recognition and disclosure requirements for deferred tax assets and liabilities arising from the Organization for Economic Co-operation and Development ("OECD") Pillar Two international tax reform.
The Company is within the scope of the OECD Pillar Two rules. Pursuant to these rules, the parent entity of the Company will be required to pay a tax on the profit of any subsidiary whose effective tax rate (determined in accordance with Canadian Pillar Two rules) is less than 15%, unless the jurisdiction of the subsidiary’s incorporation has implemented similar Pillar Two rules. On June 20, 2024, Pillar Two rules became law in Canada and apply to the Company from April 1, 2024.
The Company has completed an assessment of the application of the Pillar Two rules and does not currently estimate a material impact on its tax position, however it continues to monitor developments.
On June 20, 2024, the tax on normal course issuer bid purchases of subordinate voting shares was enacted in Canada. The rules pertain to transactions that occur on or after January 1, 2024. During the second and two quarters ended September 29, 2024, there were no repurchases made. However, due to repurchases made during fiscal 2024, $0.6m in taxes on normal course issuer bid purchases of subordinate voting shares was recorded in the second and two quarters ended September 29, 2024 and charged to retained earnings.
| Canada Goose Holdings Inc. | Page 8 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 3. Segment information
The Company has three reportable operating segments: DTC, Wholesale, and Other. The Company measures each reportable operating segment’s performance based on revenue and segment operating income (loss), which is the profit metric utilized by the Company's chief operating decision maker, the Chairman and Chief Executive Officer, for assessing the performance of operating segments. No single customer contributed 10 per cent or more to the Company’s revenue for the second and two quarters ended September 29, 2024 and October 1, 2023.
As at March 31, 2024, the performance measure for our Other segment was revised to exclude corporate general and administrative expenses; these expenses were presented as a reconciling item to the Company’s consolidated operating income. This change in segment reporting was made to improve the understanding of financial performance in the Other segment.
Corporate expenses comprises costs that do not occur through the DTC, Wholesale, or Other segments, including the cost of marketing expenditures to build brand awareness across all segments, management overhead costs in support of manufacturing operations, other corporate costs, and foreign exchange gains and losses not specifically associated with segment operations. Comparative figures have been reclassified to conform with the current year presentation.
The following table presents key performance information of the Company’s reportable operating segments:
| Second quarter ended | Two quarters ended | ||||||||||||||||
| September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Revenue | |||||||||||||||||
| DTC | 103.9 | 109.4 | 167.0 | 165.2 | |||||||||||||
| Wholesale | 137.3 | 162.0 | 153.3 | 189.1 | |||||||||||||
| Other | 26.6 | 9.7 | 35.6 | 11.6 | |||||||||||||
| Total segment revenue | 267.8 | 281.1 | 355.9 | 365.9 | |||||||||||||
Operating income (loss) | Reclassified | Reclassified | |||||||||||||||
| DTC | 5.6 | 16.4 | (17.5) | (1.1) | |||||||||||||
| Wholesale | 62.3 | 77.5 | 58.3 | 80.7 | |||||||||||||
| Other | 7.7 | 1.7 | 6.9 | 2.5 | |||||||||||||
| Total segment operating income | 75.6 | 95.6 | 47.7 | 82.1 | |||||||||||||
| Canada Goose Holdings Inc. | Page 9 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The following table reconciles the Company’s reportable total segment operating income to loss before income taxes:
| Second quarter ended | Two quarters ended | ||||||||||||||||
| September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Total segment operating income | 75.6 | 95.6 | 47.7 | 82.1 | |||||||||||||
| Corporate expenses | (74.0) | (93.3) | (143.0) | (179.5) | |||||||||||||
| Total operating income (loss) | 1.6 | 2.3 | (95.3) | (97.4) | |||||||||||||
| Net interest, finance and other costs | 8.5 | 13.6 | 11.7 | 28.1 | |||||||||||||
Loss before incomes taxes | (6.9) | (11.3) | (107.0) | (125.5) | |||||||||||||
The following table summarizes depreciation and amortization in SG&A expenses of each reportable operating segment and depreciation and amortization included in corporate expenses:
| Second quarter ended | Two quarters ended | ||||||||||||||||
| September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||
$ | $ | $ | $ | ||||||||||||||
| Depreciation and amortization expense | |||||||||||||||||
| DTC | 24.1 | 22.8 | 48.8 | 44.9 | |||||||||||||
| Wholesale | 1.0 | 1.1 | 1.9 | 2.0 | |||||||||||||
| Other | 0.2 | — | 0.6 | — | |||||||||||||
| Total segment depreciation and amortization expense | 25.3 | 23.9 | 51.3 | 46.9 | |||||||||||||
| Corporate expenses | 4.1 | 3.7 | 8.1 | 7.2 | |||||||||||||
Total depreciation and amortization expense | 29.4 | 27.6 | 59.4 | 54.1 | |||||||||||||
| Canada Goose Holdings Inc. | Page 10 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Geographic information
The Company determines the geographic location of revenue based on the location of its customers.
| Second quarter ended | Two quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Canada | 57.7 | 57.9 | 79.6 | 81.4 | |||||||||||||
| United States | 63.4 | 66.2 | 81.9 | 84.3 | |||||||||||||
| North America | 121.1 | 124.1 | 161.5 | 165.7 | |||||||||||||
Greater China1 | 46.4 | 43.9 | 68.3 | 63.4 | |||||||||||||
Asia Pacific (excluding Greater China1) | 19.7 | 19.9 | 28.6 | 24.9 | |||||||||||||
| Asia Pacific | 66.1 | 63.8 | 96.9 | 88.3 | |||||||||||||
EMEA2 | 80.6 | 93.2 | 97.5 | 111.9 | |||||||||||||
| Total revenue | 267.8 | 281.1 | 355.9 | 365.9 | |||||||||||||
1.Greater China comprises Mainland China, Hong Kong, Macau, and Taiwan.
2.EMEA comprises Europe, the Middle East, Africa, and Latin America.
The Company’s non-current, non-financial assets (comprising property, plant and equipment, intangible assets and right-of-use assets) are geographically located as follows:
| September 29, 2024 | October 1, 2023 | March 31, 2024 | |||||||||
| $ | $ | $ | |||||||||
| Canada | 208.9 | 229.1 | 222.1 | ||||||||
| United States | 126.1 | 129.7 | 140.7 | ||||||||
| North America | 335.0 | 358.8 | 362.8 | ||||||||
Greater China1 | 71.0 | 80.2 | 63.6 | ||||||||
Asia Pacific (excluding Greater China1) | 50.7 | 30.7 | 34.1 | ||||||||
| Asia Pacific | 121.7 | 110.9 | 97.7 | ||||||||
EMEA2 | 128.4 | 122.0 | 126.2 | ||||||||
| Non-current, non-financial assets | 585.1 | 591.7 | 586.7 | ||||||||
1.Greater China comprises Mainland China, Hong Kong, Macau, and Taiwan.
2.EMEA comprises Europe, the Middle East, Africa, and Latin America.
| Canada Goose Holdings Inc. | Page 11 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 4. Earnings per share
The following table presents details for the calculation of basic and diluted earnings per share:
| Second quarter ended | Two quarters ended | ||||||||||||||||
| (in millions of Canadian dollars, except share and per share amounts) | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||
| Net income (loss) attributable to shareholders of the Company | $ | 5.4 | $ | 3.9 | $ | (72.0) | $ | (77.2) | |||||||||
Weighted average number of multiple and subordinate voting shares outstanding | 96,724,923 | 102,468,461 | 96,666,503 | 103,089,612 | |||||||||||||
Weighted average number of shares on exercise of stock options, RSUs and PSUs1 | 1,456,274 | 1,118,081 | — | — | |||||||||||||
| Diluted weighted average number of multiple and subordinate voting shares outstanding | 98,181,197 | 103,586,542 | 96,666,503 | 103,089,612 | |||||||||||||
| Earnings (loss) per share attributable to shareholders of the Company | |||||||||||||||||
| Basic | $ | 0.06 | $ | 0.04 | $ | (0.74) | $ | (0.75) | |||||||||
| Diluted | $ | 0.06 | $ | 0.04 | $ | (0.74) | $ | (0.75) | |||||||||
1.Subordinate voting shares issuable on exercise of stock options are not treated as dilutive if including them would decrease the loss per share. For the two quarters ended September 29, 2024, 1,294,234 potentially dilutive shares have been excluded from the calculation of diluted loss per share because their effect was anti-dilutive (two quarters ended October 1, 2023 - 958,806 shares).
Note 5. Trade receivables
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | March 31, 2024 | ||||||||
| $ | $ | $ | |||||||||
| Trade accounts receivable | 124.5 | 126.3 | 57.1 | ||||||||
| Credit card receivables | 6.1 | 5.3 | 3.7 | ||||||||
| Other receivables | 14.9 | 16.0 | 12.3 | ||||||||
| 145.5 | 147.6 | 73.1 | |||||||||
| Less: expected credit loss and sales allowances | (2.4) | (1.1) | (2.7) | ||||||||
| Trade receivables | 143.1 | 146.5 | 70.4 | ||||||||
| Canada Goose Holdings Inc. | Page 12 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 6. Inventories
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | March 31, 2024 | ||||||||
| $ | $ | $ | |||||||||
| Raw materials | 42.1 | 46.8 | 48.4 | ||||||||
| Work in progress | 17.2 | 20.8 | 25.8 | ||||||||
| Finished goods | 414.1 | 452.1 | 371.0 | ||||||||
| Total inventories at the lower of cost and net realizable value | 473.4 | 519.7 | 445.2 | ||||||||
Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, or declining rate of sale.
The breakdown of the provision for inventory obsolescence is presented as follows:
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | March 31, 2024 | ||||||||
| $ | $ | $ | |||||||||
| Raw material reserves | 23.9 | 20.4 | 22.2 | ||||||||
| Finished goods reserves | 42.9 | 23.5 | 38.6 | ||||||||
| Provision for inventory obsolescence | 66.8 | 43.9 | 60.8 | ||||||||
Amounts charged to cost of sales comprise the following:
| Second quarter ended | Two quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Cost of goods manufactured | 100.9 | 98.7 | 133.7 | 125.7 | |||||||||||||
| Depreciation and amortization included in costs of sales | 2.8 | 2.9 | 5.5 | 5.5 | |||||||||||||
| 103.7 | 101.6 | 139.2 | 131.2 | ||||||||||||||
| Canada Goose Holdings Inc. | Page 13 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 7. Leases
Right-of-use assets
The following table presents changes in the cost and the accumulated depreciation of the Company’s right-of-use assets:
| (in millions of Canadian dollars) | Retail stores | Manufacturing facilities | Other | Total | ||||||||||
| Cost | $ | $ | $ | $ | ||||||||||
| March 31, 2024 | 450.3 | 44.2 | 60.9 | 555.4 | ||||||||||
| Additions | 31.8 | — | 2.2 | 34.0 | ||||||||||
| Lease modifications | 9.1 | — | 0.9 | 10.0 | ||||||||||
| Derecognition on termination | (6.4) | — | (1.5) | (7.9) | ||||||||||
| Impact of foreign currency translation | 9.2 | — | 0.4 | 9.6 | ||||||||||
| September 29, 2024 | 494.0 | 44.2 | 62.9 | 601.1 | ||||||||||
| April 2, 2023 | 396.7 | 44.9 | 58.4 | 500.0 | ||||||||||
| Additions | 20.4 | — | 0.5 | 20.9 | ||||||||||
| Lease modifications | 6.9 | — | — | 6.9 | ||||||||||
| Derecognition on termination | (4.0) | — | (1.8) | (5.8) | ||||||||||
| Impact of foreign currency translation | (5.1) | — | (0.4) | (5.5) | ||||||||||
| October 1, 2023 | 414.9 | 44.9 | 56.7 | 516.5 | ||||||||||
| (in millions of Canadian dollars) | Retail stores | Manufacturing facilities | Other | Total | ||||||||||
| Accumulated depreciation | $ | $ | $ | $ | ||||||||||
| March 31, 2024 | 229.7 | 24.0 | 21.9 | 275.6 | ||||||||||
| Depreciation | 34.7 | 2.6 | 4.3 | 41.6 | ||||||||||
| Derecognition on termination | (6.4) | — | (0.5) | (6.9) | ||||||||||
| Impact of foreign currency translation | 4.5 | — | 0.1 | 4.6 | ||||||||||
| September 29, 2024 | 262.5 | 26.6 | 25.8 | 314.9 | ||||||||||
| April 2, 2023 | 171.1 | 20.6 | 16.5 | 208.2 | ||||||||||
| Depreciation | 30.4 | 2.8 | 3.3 | 36.5 | ||||||||||
| Derecognition on termination | (4.0) | — | (1.8) | (5.8) | ||||||||||
| Impact of foreign currency translation | (2.3) | — | (0.1) | (2.4) | ||||||||||
| October 1, 2023 | 195.2 | 23.4 | 17.9 | 236.5 | ||||||||||
| Net book value | ||||||||||||||
| September 29, 2024 | 231.5 | 17.6 | 37.1 | 286.2 | ||||||||||
| October 1, 2023 | 219.7 | 21.5 | 38.8 | 280.0 | ||||||||||
| March 31, 2024 | 220.6 | 20.2 | 39.0 | 279.8 | ||||||||||
| Canada Goose Holdings Inc. | Page 14 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Lease liabilities
The following table presents the changes in the Company's lease liabilities:
| (in millions of Canadian dollars) | Retail stores | Manufacturing facilities | Other | Total | ||||||||||
| $ | $ | $ | $ | |||||||||||
| March 31, 2024 | 255.7 | 23.8 | 51.0 | 330.5 | ||||||||||
| Additions | 31.8 | — | 2.2 | 34.0 | ||||||||||
| Lease modifications | 9.0 | — | 1.0 | 10.0 | ||||||||||
| Derecognition on termination | — | — | (1.0) | (1.0) | ||||||||||
| Principal payments | (33.7) | (2.9) | (4.3) | (40.9) | ||||||||||
| Impact of foreign currency translation | 5.0 | — | 0.3 | 5.3 | ||||||||||
| September 29, 2024 | 267.8 | 20.9 | 49.2 | 337.9 | ||||||||||
| April 2, 2023 | 259.2 | 27.7 | 47.9 | 334.8 | ||||||||||
| Additions | 20.3 | — | 0.2 | 20.5 | ||||||||||
| Lease modifications | 6.9 | — | — | 6.9 | ||||||||||
| Principal payments | (28.1) | (2.7) | 2.1 | (28.7) | ||||||||||
| Impact of foreign currency translation | (3.1) | — | (0.1) | (3.2) | ||||||||||
| October 1, 2023 | 255.2 | 25.0 | 50.1 | 330.3 | ||||||||||
Lease liabilities are classified as current and non-current liabilities as follows:
| (in millions of Canadian dollars) | Retail stores | Manufacturing facilities | Other | Total | ||||||||||
| $ | $ | $ | $ | |||||||||||
| Current lease liabilities | 69.4 | 6.2 | 7.5 | 83.1 | ||||||||||
| Non-current lease liabilities | 198.4 | 14.7 | 41.7 | 254.8 | ||||||||||
| September 29, 2024 | 267.8 | 20.9 | 49.2 | 337.9 | ||||||||||
| Current lease liabilities | 64.5 | 6.1 | 6.5 | 77.1 | ||||||||||
| Non-current lease liabilities | 190.7 | 18.9 | 43.6 | 253.2 | ||||||||||
| October 1, 2023 | 255.2 | 25.0 | 50.1 | 330.3 | ||||||||||
| Current lease liabilities | 65.8 | 6.3 | 7.8 | 79.9 | ||||||||||
| Non-current lease liabilities | 189.9 | 17.5 | 43.2 | 250.6 | ||||||||||
| March 31, 2024 | 255.7 | 23.8 | 51.0 | 330.5 | ||||||||||
For the second and two quarters ended September 29, 2024, $3.4m and $6.5m, respectively, of lease payments were not included in the measurement of lease liabilities (second and two quarters ended October 1, 2023 - $3.3m and $6.1m, respectively). The majority of these balances related to short-term leases and variable rent payments, net of rent concessions, which are expensed as incurred.
| Canada Goose Holdings Inc. | Page 15 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 8. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consist of the following:
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | March 31, 2024 | ||||||||
| $ | $ | $ | |||||||||
| Trade payables | 37.3 | 64.5 | 57.6 | ||||||||
| Accrued liabilities | 76.3 | 86.1 | 73.5 | ||||||||
| Employee benefits | 27.5 | 32.9 | 38.6 | ||||||||
| Derivative financial instruments | 5.3 | 9.8 | 1.9 | ||||||||
| ASPP liability (note 11) | — | 10.0 | — | ||||||||
| Other payables | 9.0 | 6.9 | 6.1 | ||||||||
| Accounts payable and accrued liabilities | 155.4 | 210.2 | 177.7 | ||||||||
Note 9. Provisions
The Company amended the existing accounting policies related to its presentation of liabilities in the statement of financial position as at April 1, 2024 and identified warranty provisions within non-current liabilities can no longer be classified as such. As a result, $22.2m and $23.0m for October 1, 2023 and March 31, 2024, respectively, was reclassified to current liabilities on the provisions line in the statement of financial position. See "Note 2. Material accounting policy information" for more details on the reclassification.
Provisions are classified as current and non-current liabilities based on legal rights which exist as at the reporting date as follows:
| (in millions of Canadian dollars) | Warranty | Sales returns | Asset retirement obligations | Total | ||||||||||
| $ | $ | $ | $ | |||||||||||
| Current provisions | 28.6 | 16.3 | — | 44.9 | ||||||||||
| Non-current provisions | — | — | 14.9 | 14.9 | ||||||||||
| September 29, 2024 | 28.6 | 16.3 | 14.9 | 59.8 | ||||||||||
| Warranty | Sales returns | Asset retirement obligations | Total | |||||||||||
Reclassified | ||||||||||||||
| Current provisions | 29.5 | 13.2 | — | 42.7 | ||||||||||
| Non-current provisions | — | — | 13.6 | 13.6 | ||||||||||
| October 1, 2023 | 29.5 | 13.2 | 13.6 | 56.3 | ||||||||||
| Warranty | Sales returns | Asset retirement obligations | Total | |||||||||||
Reclassified | ||||||||||||||
| Current provisions | 30.3 | 18.8 | — | 49.1 | ||||||||||
| Non-current provisions | — | — | 14.3 | 14.3 | ||||||||||
| March 31, 2024 | 30.3 | 18.8 | 14.3 | 63.4 | ||||||||||
| Canada Goose Holdings Inc. | Page 16 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 10. Borrowings
Amendments to borrowings
Post June 28, 2024, Canadian Dollar Offered Rate rates were no longer being published. As a result, in the first quarter ended June 30, 2024, the Company entered into amendments for its Revolving Facility (as defined below) to transition from the Canadian Dollar Offered interest benchmarks to the Canadian Overnight Repo Rate Average ("CORRA”). There were no further amendments to borrowings in the second quarter ended September 29, 2024.
Revolving Facility
The Company has an agreement with a syndicate of lenders for a senior secured asset-based revolving credit facility ("Revolving Facility") in the amount of $467.5m, with an increase in commitments to $517.5m during the peak season (June 1 - November 30). The Revolving Facility matures on May 15, 2028. Amounts owing under the Revolving Facility may be borrowed, repaid and re-borrowed for general corporate purposes. The Company has pledged substantially all of its assets as collateral for the Revolving Facility. The Revolving Facility contains financial and non-financial covenants which could impact the Company’s ability to draw funds.
The Revolving Facility has multiple interest rate charge options that are based on the Canadian prime rate, the lenders' Alternate Base Rate, European Base Rate, SOFR rate, or EURIBOR rate plus an applicable margin, with interest payable the earlier of quarterly or at the end of the then current interest period (whichever is earlier).
As at September 29, 2024, the Company had $61.3m owing on the Revolving Facility (October 1, 2023 - $86.3m, March 31, 2024 - $nil). Included in this balance, as at September 29, 2024, $0.2m of interest and administrative fees remain outstanding (October 1, 2023 - $1.6m, March 31, 2024 - $nil). There were deferred financing charges in the amounts of $0.8m as at September 29, 2024 (October 1, 2023 - $1.3m). As at March 31, 2024, the Company had repaid all amounts owing on the Revolving Facility and related deferred financing charges in the amounts of $1.0m were included in other long-term liabilities. As at and during the two quarters ended September 29, 2024, the Company was in compliance with all covenants.
The Company had unused borrowing capacity available under the Revolving Facility of $282.1m as at September 29, 2024 (October 1, 2023 - $335.2m, March 31, 2024 - $203.7m).
The revolving credit commitment also includes a letter of credit commitment in the amount of $25.0m, with a $5.0m sub-commitment for letters of credit issued in a currency other than Canadian dollars, U.S. dollars, euros or British pounds sterling, and a swingline commitment for $25.0m. As at September 29, 2024, the Company had letters of credit outstanding under the Revolving Facility of $1.6m (October 1, 2023 - $1.5m, March 31, 2024 - $1.5m).
Term Loan
The Company has a senior secured loan agreement with a syndicate of lenders that is secured on a split collateral basis ("Term Loan") alongside the Revolving Facility. The Term Loan has an aggregate principal amount of USD300.0m, with quarterly repayments of USD0.75m on the principal amount and a maturity date of October 7, 2027. Moreover, the Term Loan has an interest rate of SOFR plus a term SOFR adjustment of 0.11448% with an applicable margin of 3.50% payable monthly in arrears. SOFR plus the term SOFR adjustment may not be less than 0.75%.
| Canada Goose Holdings Inc. | Page 17 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Voluntary prepayments of amounts owing under the Term Loan may be made at any time without premium or penalty, once repaid may not be reborrowed. As at September 29, 2024, the Company had USD288.8m (October 1, 2023 - USD291.8m, March 31, 2024 - USD290.3m) aggregate principal amount outstanding under the Term Loan. The Company has pledged substantially all of its assets as collateral for the Term Loan. The Term Loan contains financial and non-financial covenants which could impact the Company’s ability to draw funds. As at and during the two quarters ended September 29, 2024, the Company was in compliance with all covenants.
As the Term Loan is denominated in U.S. dollars, the Company remeasures the outstanding balance plus accrued interest at each balance sheet date.
The amount outstanding with respect to the Term Loan is as follows:
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | March 31, 2024 | ||||||||
| $ | $ | $ | |||||||||
| Term Loan | 390.2 | 396.2 | 393.1 | ||||||||
| Unamortized portion of deferred transaction costs | (0.5) | (0.7) | (0.6) | ||||||||
| Term Loan, net of unamortized deferred transaction costs | 389.7 | 395.5 | 392.5 | ||||||||
Mainland China Facilities
A subsidiary of the Company in Mainland China has uncommitted loan facilities in the aggregate amount of RMB510.0m ($98.3m) ("Mainland China Facilities"). The term of each draw on the loans is one, three or six months or such other period as agreed upon and shall not exceed twelve months (including any extension or rollover). The interest rate on each facility is equal to 3.1% or the loan prime rate of 1 year, minus a marginal rate of 0.5%, and payable quarterly. Proceeds drawn on the Mainland China Facilities are being used to support working capital requirements and build up of inventory for peak season sales. As at September 29, 2024, the Company had $74.4m (RMB385.8m) owing on the Mainland China Facilities (October 1, 2023 - $47.5m (RMB254.8m), March 31, 2024 - no amounts owing).
Japan Facility
A subsidiary of the Company in Japan has a loan facility in the aggregate amount of JPY4,000.0m ($38.0m) ("Japan Facility") with a floating interest rate of Japanese Bankers Association Tokyo Interbank Offered Rate plus an applicable margin of 0.30%. The term of the facility is 12 months and each draw on the facility is payable within the term. Proceeds drawn on the Japan Facility are being used to support build up of inventory for peak season sales. As at September 29, 2024, the Company had $31.4m (JPY3,300.0m) owing on the Japan Facility (October 1, 2023 - $29.1m (JPY3,200.0m), March 31, 2024 - $5.4m (JPY600.0m)).
| Canada Goose Holdings Inc. | Page 18 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Short-term Borrowings
As at September 29, 2024, the Company has short-term borrowings in the amount of $109.8m. Short-term borrowings include $74.4m (October 1, 2023 - $47.5m, March 31, 2024 - $nil) owing on the Mainland China Facilities, $31.4m (October 1, 2023 - $29.1m, March 31, 2024 - $5.4m) owing on the Japan Facility, and $4.0m (October 1, 2023 - $4.1m, March 31, 2024 - $4.0m) for the current portion of the quarterly principal repayments on the Term Loan. Short-term borrowings are all due within the next 12 months.
Net interest, finance and other costs consist of the following:
| Second quarter ended | Two quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Interest expense | |||||||||||||||||
| Mainland China Facilities | 0.2 | 0.3 | 0.2 | 0.4 | |||||||||||||
Japan Facility1 | — | — | — | — | |||||||||||||
| Revolving Facility | 1.6 | 1.4 | 2.1 | 1.5 | |||||||||||||
| Term Loan | 5.4 | 5.0 | 10.5 | 10.0 | |||||||||||||
| Lease liabilities | 4.4 | 4.0 | 8.7 | 8.6 | |||||||||||||
| Standby fees | 0.3 | 0.3 | 0.6 | 0.6 | |||||||||||||
| Foreign exchange (gains) losses on Term Loan net of hedges | (0.9) | 1.7 | 0.8 | (0.5) | |||||||||||||
| Fair value remeasurement on the put option liability (note 14) | (1.2) | 2.7 | 0.9 | 10.8 | |||||||||||||
| Fair value remeasurement on the contingent consideration (note 14) | (1.1) | (2.0) | (11.8) | (3.0) | |||||||||||||
| Interest income | (0.3) | (0.1) | (0.6) | (0.8) | |||||||||||||
| Other costs | 0.1 | 0.3 | 0.3 | 0.5 | |||||||||||||
| Net interest, finance and other costs | 8.5 | 13.6 | 11.7 | 28.1 | |||||||||||||
1.The net interest expense for the Japan Facility is less than $0.1m and less than $0.1m, respectively, for the second and two quarters ended September 29, 2024 (second and two quarters ended October 1, 2023 - less than $0.1m and less than $0.1m, respectively).
Note 11. Shareholders' equity
Share capital transactions for the two quarters ended September 29, 2024
Normal course issuer bid for Fiscal 2024
The Board of Directors authorized the Company to initiate a normal course issuer bid, in accordance with the requirements of the Toronto Stock Exchange, to purchase up to 4,980,505 subordinate voting shares over the 12-month period from November 22, 2023 and ending no later than November 21, 2024 (the "Fiscal 2024 NCIB"). Purchased subordinate voting shares will be cancelled.
| Canada Goose Holdings Inc. | Page 19 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
In connection with the Fiscal 2024 NCIB, the Company also entered into an automatic share purchase plan (the “Fiscal 2024 ASPP”) under which a designated broker may purchase subordinate voting shares under the Fiscal 2024 NCIB during the regularly scheduled quarterly trading blackout periods of the Company. The repurchases made under the Fiscal 2024 ASPP will be made in accordance with certain purchasing parameters and will continue until the earlier of the date in which the Company has acquired the maximum limit of subordinate voting shares pursuant to the Fiscal 2024 ASPP or upon the date of expiry of the Fiscal 2024 NCIB.
During the two quarters ended September 29, 2024, the Company made no repurchases under the Fiscal 2024 NCIB.
Since the commencement of the Fiscal 2024 NCIB, the Company purchased 3,586,124 subordinate voting shares for total cash consideration of $56.9m. Of the 3,586,124 subordinate voting shares purchased, 3,088,648 were purchased under the Fiscal 2024 ASPP for total cash consideration of $49.6m.
The transactions affecting the issued and outstanding share capital of the Company are described below:
| (in millions of Canadian dollars, except share amounts) | Multiple voting shares | Subordinate voting shares | Total | |||||||||||||||||||||||
| Number | $ | Number | $ | Number | $ | |||||||||||||||||||||
| March 31, 2024 | 51,004,076 | 1.4 | 45,528,438 | 103.5 | 96,532,514 | 104.9 | ||||||||||||||||||||
| Exercise of stock options | — | — | 43,484 | — | 43,484 | — | ||||||||||||||||||||
| Settlement of RSUs | — | — | 163,441 | 3.7 | 163,441 | 3.7 | ||||||||||||||||||||
| Total share issuances | — | — | 206,925 | 3.7 | 206,925 | 3.7 | ||||||||||||||||||||
| September 29, 2024 | 51,004,076 | 1.4 | 45,735,363 | 107.2 | 96,739,439 | 108.6 | ||||||||||||||||||||
Share capital transactions for the two quarters ended October 1, 2023
Normal course issuer bid for Fiscal 2023
The Board of Directors authorized the Company to initiate a normal course issuer bid, in accordance with the requirements of the Toronto Stock Exchange, to purchase up to 5,421,685 subordinate voting shares over the 12-month period which started on November 22, 2022 and concluded on November 21, 2023 (the "Fiscal 2023 NCIB").
In connection with the Fiscal 2023 NCIB, the Company had also entered an automatic share purchase plan (the “Fiscal 2023 ASPP”) under which a designated broker may purchase subordinate voting shares under the Fiscal 2023 NCIB during the regularly scheduled quarterly trading blackout periods of the Company. This Fiscal 2023 ASPP terminated on November 21, 2023, along with the Fiscal 2023 NCIB, and the liability to the broker was fully settled at the end of the plan.
During the two quarters ended October 1, 2023, the Company purchased 2,521,501 subordinate voting shares for cancellation for total cash consideration of $56.2m. The amount to purchase the subordinate voting shares was charged to share capital, with the remaining $50.5m charged to retained earnings. Of the 2,521,501 subordinate voting shares purchased, 672,644 were purchased under the Fiscal 2023 ASPP for total cash consideration of $16.2m.
| Canada Goose Holdings Inc. | Page 20 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
In addition, subordinate voting shares held for cancellation as at April 2, 2023 valued at $1.2m were settled in the first quarter ended July 2, 2023. Since the commencement of the Fiscal 2023 NCIB, the Company purchased 2,309,761 subordinate voting shares for cancellation for total cash consideration of $54.2m.
A liability representing the maximum amount that the Company could be required to pay the designated broker under the ASPP was $10.0m as at October 1, 2023. The amount was charged to contributed surplus. Subsequent to two quarters ended October 1, 2023, the Company purchased an additional 570,057 subordinate voting shares for cancellation for total cash consideration of $10.0m under the ASPP.
The transactions affecting the issued and outstanding share capital of the Company are described below:
| (in millions of Canadian dollars, except share amounts) | Multiple voting shares | Subordinate voting shares | Total | |||||||||||||||||||||||
| Number | $ | Number | $ | Number | $ | |||||||||||||||||||||
| April 2, 2023 | 51,004,076 | 1.4 | 53,184,912 | 117.3 | 104,188,988 | 118.7 | ||||||||||||||||||||
| Purchase of subordinate voting shares | — | — | (2,521,501) | (5.7) | (2,521,501) | (5.7) | ||||||||||||||||||||
| Total share purchases | — | — | (2,521,501) | (5.7) | (2,521,501) | (5.7) | ||||||||||||||||||||
| Exercise of stock options | — | — | 13,110 | 0.1 | 13,110 | 0.1 | ||||||||||||||||||||
| Settlement of RSUs | — | — | 134,020 | 3.8 | 134,020 | 3.8 | ||||||||||||||||||||
| Total share issuances | — | — | 147,130 | 3.9 | 147,130 | 3.9 | ||||||||||||||||||||
| October 1, 2023 | 51,004,076 | 1.4 | 50,810,541 | 115.5 | 101,814,617 | 116.9 | ||||||||||||||||||||
Note 12. Share-based payments
Stock options
The Company issued stock options to purchase subordinate voting shares under its incentive plans, prior to the public share offering on March 21, 2017, the Legacy Plan, and subsequently, the Omnibus Plan. All options are issued at an exercise price that is not less than market value at the time of grant and expire ten years after the grant date.
| Canada Goose Holdings Inc. | Page 21 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Stock option transactions are as follows:
| Two quarters ended | |||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||
| (in millions of Canadian dollars, except share and per share amounts) | Weighted average exercise price | Number of shares | Weighted average exercise price | Number of shares | |||||||||||||
| Options outstanding, beginning of period | $ | 33.51 | 4,608,777 | $ | 36.58 | 4,055,199 | |||||||||||
| Granted to purchase shares | $ | 17.92 | 1,000,924 | $ | 22.24 | 755,762 | |||||||||||
| Exercised | $ | 1.16 | (43,484) | $ | 3.91 | (13,110) | |||||||||||
| Cancelled | $ | 36.44 | (619,647) | $ | 29.61 | (292,448) | |||||||||||
| Options outstanding, end of period | $ | 30.28 | 4,946,570 | $ | 34.72 | 4,505,403 | |||||||||||
Restricted share units
The Company grants shares as part of the Restricted Share Unit ("RSU") program under the Omnibus Plan to employees of the Company. The RSUs are treated as equity instruments for accounting purposes. We expect that vested RSUs will be paid at settlement through the issuance of one subordinate voting share per RSU. The RSUs vest over a period of three years, a third on each anniversary of the date of grant.
RSU transactions are as follows:
| Two quarters ended | |||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||
| Number of shares | Number of shares | ||||||||||
| RSUs outstanding, beginning of period | 480,518 | 318,082 | |||||||||
| Granted | 420,634 | 375,668 | |||||||||
| Settled | (163,441) | (134,020) | |||||||||
| Cancelled | (60,393) | (36,421) | |||||||||
| RSUs outstanding, end of period | 677,318 | 523,309 | |||||||||
Performance share units
In May 2023, the Company implemented a Performance Share Unit (“PSU”) program under the Omnibus Plan. A PSU represents the right to receive a subordinate voting share settled by the issuance of shares at the vesting date. PSUs vest on the third anniversary of the award date and are earned only if certain performance targets are achieved. Shares issued per PSU at the vesting date can decrease or increase if minimum or maximum performance targets are achieved ranging from 0% to 200% of the PSU award granted. If performance targets are achieved, the Company expects that those vested PSUs will be paid at settlement through the issuance of one subordinate voting share per PSU. PSUs are treated as equity instruments for accounting purposes.
| Canada Goose Holdings Inc. | Page 22 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
PSU transactions are as follows:
| Two quarters ended | |||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||
| Number of shares | Number of shares | ||||||||||
| PSUs outstanding, beginning of period | 342,925 | — | |||||||||
| Granted | 428,121 | 397,600 | |||||||||
| Cancelled | (78,607) | (7,468) | |||||||||
| PSUs outstanding, end of period | 692,439 | 390,132 | |||||||||
Shares reserved for issuance
As at September 29, 2024, subordinate voting shares, to a maximum of 4,175,871 shares, have been reserved for issuance under equity incentive plans to select employees of the Company, with vesting contingent upon meeting the service, performance goals and other conditions of the Omnibus Plan.
Accounting for share-based awards
For the second and two quarters ended September 29, 2024, the Company recorded $4.0m and $6.2m, respectively, as compensation expense for the vesting of stock options, RSUs and PSUs (second and two quarters ended October 1, 2023 - $4.7m and $7.2m, respectively). Share-based compensation expense is included in SG&A expenses.
The assumptions used to measure the fair value of options granted under the Black-Scholes option pricing model at the grant date were as follows:
| Two quarters ended | |||||||||||
| (in millions of Canadian dollars, except share and per share amounts) | September 29, 2024 | October 1, 2023 | |||||||||
| Weighted average stock price valuation | $ | 17.92 | $ | 22.24 | |||||||
| Weighted average exercise price | $ | 17.92 | $ | 22.24 | |||||||
| Risk-free interest rate | 3.98 | % | 4.11 | % | |||||||
| Expected life in years | 5 | 5 | |||||||||
| Expected dividend yield | — | % | — | % | |||||||
| Volatility | 40 | % | 40 | % | |||||||
| Weighted average fair value of options issued | $ | 6.03 | $ | 7.51 | |||||||
RSU and PSU fair values are determined based on the market value of the subordinate voting shares at the time of grant. As at September 29, 2024, the weighted average fair value of RSUs was $18.38 (October 1, 2023 - $22.24). As at September 29, 2024, the weighted average fair value of PSUs was $18.85 (October 1, 2023 - $22.24).
Note 13. Related party transactions
The Company enters into transactions from time to time with its principal shareholders, as well as organizations affiliated with members of the Board of Directors and key management personnel by incurring expenses for business services. During the second and two quarters ended September 29, 2024, the Company incurred expenses with related parties of $0.6m and
| Canada Goose Holdings Inc. | Page 23 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
$1.1m, respectively, (second and two quarters ended October 1, 2023 - $0.1m and $0.4m, respectively) from companies related to certain shareholders. Balances owing to related parties as at September 29, 2024 were $0.4m (October 1, 2023 - $0.1m, March 31, 2024 - $0.2m).
A lease liability due to the former controlling shareholder of the acquired Baffin Inc. business (the "Baffin Vendor") for leased premises was $2.1m as at September 29, 2024 (October 1, 2023 - $2.7m, March 31, 2024 - $2.5m). During the second and two quarters ended September 29, 2024, the Company paid principal and interest on the lease liability, net of rent concessions, and other operating costs to entities affiliated with the Baffin Vendor totalling $0.5m and $0.9m, respectively (second and two quarters ended October 1, 2023 - $0.3m and $0.7m, respectively). No amounts were owing to Baffin entities as at September 29, 2024, October 1, 2023, and March 31, 2024.
The joint venture between the Company and Sazaby League ("Japan Joint Venture"), has lease liabilities due to the non-controlling shareholder, Sazaby League for leased premises. Lease liabilities were $1.7m as at September 29, 2024 (October 1, 2023 - $2.2m, March 31, 2024 - $1.9m). During the second and two quarters ended September 29, 2024, the Company incurred principal and interest on lease liabilities, royalty fees, and other operating costs to Sazaby League totalling $0.5m and $1.8m, respectively (second and two quarters ended October 1, 2023 - $0.8m and $1.9m,respectively). Balances owing to Sazaby League as at September 29, 2024 were $0.3m (October 1, 2023 - $0.2m, March 31, 2024 - $0.3m).
During the second and two quarters ended September 29, 2024, the Japan Joint Venture sold inventory of $0.2m and $0.2m, respectively to companies wholly owned by Sazaby League (second and two quarters ended October 1, 2023 - $0.1m and $0.1m, respectively). As at September 29, 2024, the Japan Joint Venture recognized a trade receivable of $0.2m from these companies (October 1, 2023 - $0.1m, March 31, 2024 - $0.1m).
In connection with the Paola Confectii business combination that occurred during the year ended March 31, 2024, subject to the controlling shareholders of Paola Confectii SRL ("PCML Vendors") remaining employees through November 1, 2025, a further amount is payable to the PCML Vendors if certain performance conditions are met based on financial results (“Earn-Out”). For the second and two quarters ended September 29, 2024, the Company recognized $0.6m and $1.5m, respectively, of remuneration costs related to the Earn-Out based on the estimated value of $7.7m for the payout. These costs have been included in other long-term liabilities on the statement of financial position, and reflects the amount owing to the PCML Vendors as at September 29, 2024.
A lease liability due to one of the PCML Vendors for leased premises was $1.2m as at September 29, 2024. During the second and two quarters ended September 29, 2024, the Company paid principal and interest on the lease liability, to one of the PCML Vendors totalling $0.1m and $0.1m, respectively. No amounts were owing to one of the PCML Vendors as at September 29, 2024.
| Canada Goose Holdings Inc. | Page 24 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 14. Financial instruments and fair value
The following table presents the fair values and fair value hierarchy of the Company’s financial instruments and excludes financial instruments carried at amortized cost that are short-term in nature:
| September 29, 2024 | |||||||||||||||||
| (in millions of Canadian dollars) | Level 1 | Level 2 | Level 3 | Carrying value | Fair value | ||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||
| Financial assets | |||||||||||||||||
| Derivatives included in other current assets | — | 10.3 | — | 10.3 | 10.3 | ||||||||||||
| Derivatives included in other long-term assets | — | 1.8 | — | 1.8 | 1.8 | ||||||||||||
| Financial liabilities | |||||||||||||||||
| Derivatives included in accounts payable and accrued liabilities | — | 5.3 | — | 5.3 | 5.3 | ||||||||||||
| Mainland China Facilities | — | 74.4 | — | 74.4 | 74.4 | ||||||||||||
| Japan Facility | — | 31.4 | — | 31.4 | 31.4 | ||||||||||||
| Revolving Facility | — | 60.5 | — | 60.5 | 61.3 | ||||||||||||
| Term Loan | — | 389.7 | — | 389.7 | 390.0 | ||||||||||||
| Derivatives included in other long-term liabilities | — | 6.8 | — | 6.8 | 6.8 | ||||||||||||
| Put option liability included in other long-term liabilities | — | — | 32.3 | 32.3 | 32.3 | ||||||||||||
| Contingent consideration included in other long-term liabilities | — | — | 5.8 | 5.8 | 5.8 | ||||||||||||
| Earn-Out included in other long-term liabilities (note 13) | — | — | 3.0 | 3.0 | 3.0 | ||||||||||||
| Canada Goose Holdings Inc. | Page 25 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
| October 1, 2023 | |||||||||||||||||
| (in millions of Canadian dollars) | Level 1 | Level 2 | Level 3 | Carrying value | Fair value | ||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||
| Financial assets | |||||||||||||||||
| Derivatives included in other current assets | — | 26.5 | — | 26.5 | 26.5 | ||||||||||||
| Derivatives included in other long-term assets | — | 12.1 | — | 12.1 | 12.1 | ||||||||||||
| Financial liabilities | |||||||||||||||||
| Derivatives included in accounts payable and accrued liabilities | — | 9.8 | — | 9.8 | 9.8 | ||||||||||||
| Mainland China Facilities | — | 47.5 | — | 47.5 | 47.5 | ||||||||||||
| Japan Facility | — | 29.1 | — | 29.1 | 29.1 | ||||||||||||
| Revolving Facility | — | 85.0 | — | 85.0 | 86.3 | ||||||||||||
| Term Loan | — | 395.5 | — | 395.5 | 432.4 | ||||||||||||
| Derivatives included in other long-term liabilities | — | 1.9 | — | 1.9 | 1.9 | ||||||||||||
| Put option liability included in other long-term liabilities | — | — | 39.5 | 39.5 | 39.5 | ||||||||||||
| Contingent consideration included in other long-term liabilities | — | — | 12.0 | 12.0 | 12.0 | ||||||||||||
| March 31, 2024 | |||||||||||||||||
| (in millions of Canadian dollars) | Level 1 | Level 2 | Level 3 | Carrying value | Fair value | ||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||
| Financial assets | |||||||||||||||||
| Derivatives included in other current assets | — | 15.1 | — | 15.1 | 15.1 | ||||||||||||
| Derivatives included in other long-term assets | — | 6.9 | — | 6.9 | 6.9 | ||||||||||||
| Financial liabilities | |||||||||||||||||
| Derivatives included in accounts payable and accrued liabilities | — | 1.9 | — | 1.9 | 1.9 | ||||||||||||
| Japan Facility | — | 5.4 | — | 5.4 | 5.4 | ||||||||||||
| Term Loan | — | 392.5 | — | 392.5 | 389.2 | ||||||||||||
| Derivatives included in other long-term liabilities | — | 5.3 | — | 5.3 | 5.3 | ||||||||||||
| Put option liability included in other long-term liabilities | — | — | 29.4 | 29.4 | 29.4 | ||||||||||||
| Contingent consideration included in other long-term liabilities | — | — | 17.7 | 17.7 | 17.7 | ||||||||||||
| Earn-Out included in other long-term liabilities (note 13) | — | — | 1.5 | 1.5 | 1.5 | ||||||||||||
| Canada Goose Holdings Inc. | Page 26 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
In connection with the Japan Joint Venture, for the second and two quarters ended September 29, 2024, the Company recorded a decrease of JPY113.7m ($0.3m, excluding translation gains of $0.8m) and a decrease of JPY1,372.8m ($11.9m, excluding translation losses of $0.1m), respectively, on the remeasurement of the contingent consideration. The Company recorded a decrease of JPY128.2m ($2.3m, excluding translation gains of $3.5m) and an increase of JPY114.3m ($2.9m, excluding translation gains of $2.0m) on the remeasurement of the put option liability during the second and two quarters ended September 29, 2024, respectively. The change in fair value of the put option liability was driven by progression through the 10-year term, whereas the change in fair value of the contingent consideration was driven by the extension in term. During the first quarter ended June 30, 2024, the Company and Sazaby League amended the Joint Venture Agreement to extend the period by which the deferred contingent consideration is payable if an agreed cumulative adjusted EBIT target is not reached through the period ended June 30, 2026 to April 2, 2028.
For the second and two quarters ended October 1, 2023, the Company recorded a decrease of JPY222.6m ($2.2m, excluding translation losses of $0.2m) and a decrease of JPY332.8m ($4.8m, excluding translation losses of $1.8m) on the remeasurement of the contingent consideration. The Company recorded an increase of JPY303.6m ($2.4m, excluding translation losses of $0.3m) and an increase of JPY1,189.1m ($7.4m, excluding translation losses of $3.4m) on the remeasurement of the put option liability during the second and two quarters ended October 1, 2023.
Note 15. Financial risk management objectives and policies
The Company’s primary risk management objective is to protect the Company’s assets and cash flow, in order to increase the Company’s enterprise value.
The Company is exposed to capital management risk, liquidity risk, credit risk, market risk, foreign exchange risk, and interest rate risk. The Company’s senior management and Board of Directors oversee the management of these risks. The Board of Directors reviews and agrees upon policies for managing each of these risks which are summarized below.
Capital management
The Company manages its capital and capital structure with the objectives of safeguarding sufficient working capital over the annual operating cycle and providing sufficient financial resources to grow operations to meet long-term consumer demand. The Board of Directors of the Company monitors the Company’s capital management on a regular basis. The Company will continually assess the adequacy of the Company’s capital structure and capacity and make adjustments within the context of the Company’s strategy, economic conditions, and risk characteristics of the business.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to satisfy the requirements for business operations, capital expenditures, debt service and general corporate purposes, under normal and stressed conditions. The primary source of liquidity is funds generated by operating activities; the Company also relies on the Mainland China Facilities, the Japan Facility, and the Revolving Facility as sources of funds for short-term working capital needs. The Company continuously reviews both actual and forecasted cash flows to ensure that the Company has appropriate capital capacity.
| Canada Goose Holdings Inc. | Page 27 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The following table summarizes the amount of contractual undiscounted future cash flow requirements as at September 29, 2024:
| Contractual obligations by fiscal year | Q3 to Q4 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | ||||||||||||||||||
| (in millions of Canadian dollars) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Accounts payable and accrued liabilities | 155.4 | — | — | — | — | — | — | 155.4 | ||||||||||||||||||
| Mainland China Facilities | 74.4 | — | — | — | — | — | — | 74.4 | ||||||||||||||||||
| Japan Facility | 31.4 | — | — | — | — | — | — | 31.4 | ||||||||||||||||||
| Revolving Facility | — | — | — | — | 61.3 | — | — | 61.3 | ||||||||||||||||||
| Term Loan | 2.0 | 4.0 | 4.0 | 380.2 | — | — | — | 390.2 | ||||||||||||||||||
Interest commitments relating to borrowings1 | 22.4 | 33.0 | 33.0 | 8.3 | — | — | — | 96.7 | ||||||||||||||||||
| Lease obligations | 58.6 | 91.0 | 81.9 | 55.1 | 45.4 | 34.7 | 69.4 | 436.1 | ||||||||||||||||||
| Pension obligation | — | — | — | — | — | — | 2.7 | 2.7 | ||||||||||||||||||
| Total contractual obligations | 344.2 | 128.0 | 118.9 | 443.6 | 106.7 | 34.7 | 72.1 | 1,248.2 | ||||||||||||||||||
1.Interest commitments are calculated based on the loan balance and the interest rate payable on the Mainland China Facilities, the Japan Facility, Revolving Facility, and the Term Loan of 2.92%, 0.64%, 5.75%, and 8.47% respectively, as at September 29, 2024.
As at September 29, 2024, we had additional liabilities which included provisions for warranty, sales returns, asset retirement obligations, deferred income tax liabilities, the Earn-Out to the PCML Vendors, the put option liability and the contingent consideration on the Japan Joint Venture. These liabilities have not been included in the table above as the timing and amount of future payments are uncertain.
Letter of guarantee facility
On April 14, 2020, Canada Goose Inc. entered into a letter of guarantee facility in the amount of $10.0m. Letters of guarantee are available for terms of up to twelve months and will be charged a fee equal to 1.0% per annum calculated against the face amount and over the term of the guarantee. Amounts issued on the facility will be used to finance working capital requirements of Canada Goose Inc. through letters of guarantee, standby letters of credit, performance bonds, counter guarantees, counter standby letters of credit, or similar credits. The Company immediately reimburses the issuing bank for amounts drawn on issued letters of guarantees. At September 29, 2024, the Company had $8.3m outstanding.
In addition, a subsidiary of the Company in Mainland China entered into letters of guarantee and as at September 29, 2024 the amount outstanding was $8.5m. Amounts will be used to support retail operations of such subsidiaries through letters of guarantee, standby letters of credit, performance bonds, counter guarantees, counter standby letters of credit, or similar credits.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.
Credit risk arises from the possibility that certain parties will be unable to discharge their obligations. The Company manages its credit risk through a combination of third-party credit insurance and internal house risk. Credit insurance is provided by a third party for customers and is subject to continuous monitoring of the credit worthiness of the Company's customers. Insurance covers a specific amount of revenue, which may be less than the Company's total revenue with a specific customer. The Company has an agreement with a third party who has insured the risk of loss for up to 90% of trade accounts receivable from certain designated
| Canada Goose Holdings Inc. | Page 28 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
customers subject to a total deductible of $0.1m, to a maximum of $30.0m per year. As at September 29, 2024, trade accounts receivable totalling approximately $65.8m (October 1, 2023 - $77.5m, March 31, 2024 - $14.8m) were insured subject to the policy cap. Complementary to the third-party insurance, the Company establishes payment terms with customers to mitigate credit risk and continues to closely monitor its trade accounts receivable credit risk exposure.
Within CG Japan, the Company has an agreement with a third party who has insured the risk of trade accounts receivable for certain designated customers for a maximum of JPY540.0m per annum subject to a deductible of 10% and applicable only to accounts with receivables over JPY100k. As at September 29, 2024, trade accounts receivable totalling $3.7m (JPY384.4m) were insured subject to the policy cap (October 1, 2023 - $4.1m (JPY450.0m), March 31, 2024 - $0.3m (JPY32.5m)).
Trade accounts receivable factoring program
A subsidiary of the Company in Europe had an agreement to factor, on a limited recourse basis, certain of its trade accounts receivable up to a limit of EUR20.0m in exchange for advanced funding equal to 100% of the principal value of the invoice. On April 12, 2024, this agreement was terminated with an immaterial impact to the Company’s trade accounts receivables.
For the two quarters ended September 29, 2024, the Company received cash proceeds from the sale of trade accounts receivable with carrying values of $0.1m which were derecognized from the Company's statement of financial position (two quarters ended October 1, 2023 - $25.9m). No fees were incurred during the two quarters ended September 29, 2024 (two quarters ended October 1, 2023 - $0.2m) and included in net interest, finance and other costs in the interim statements of income (loss). As at September 29, 2024, the outstanding amount of trade accounts receivable derecognized from the Company’s statement of financial position, but which the Company continued to service, was $nil (October 1, 2023 $12.2m, March 31, 2024 - $0.6m).
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise foreign exchange risk and interest rate risk.
Foreign exchange risk
Foreign exchange risk in operating cash flows
The Company’s Interim Financial Statements are expressed in Canadian dollars, but a substantial portion of the Company’s revenues, purchases, and expenses are denominated in other currencies, principally U.S. dollars, euros, British pounds sterling, Swiss francs, Chinese yuan, Hong Kong dollars, and Japanese yen. The Company has entered into forward foreign exchange contracts to reduce the foreign exchange risk associated with revenues, purchases, and expenses denominated in these currencies. Certain forward foreign exchange contracts were designated at inception and accounted for as cash flow hedges. During the first quarter ended June 30, 2024, the Company executed the operating cash flow hedge program for fiscal 2025.
| Canada Goose Holdings Inc. | Page 29 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Revenues and expenses of all foreign operations are translated into Canadian dollars at the foreign currency exchange rates that approximate the rates in effect at the dates when such items are recognized. As a result, we are exposed to foreign currency translation gains and losses. Appreciating foreign currencies relative to the Canadian dollar, to the extent they are not hedged, will positively impact operating income and net income by increasing our revenue, while depreciating foreign currencies relative to the Canadian dollar will have the opposite impact.
The Company recognized the following unrealized losses and gains in the fair value of derivatives designated as cash flow hedges in other comprehensive income (loss):
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||
| (in millions of Canadian dollars) | Net loss | Tax recovery | Net loss | Tax recovery | Net loss | Tax recovery | Net gain | Tax expense | |||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Forward foreign exchange contracts designated as cash flow hedges | (2.6) | 0.8 | (4.2) | 1.1 | (2.5) | 0.5 | 3.0 | (0.7) | |||||||||||||||||||||||||||
The Company reclassified the following losses and gains from other comprehensive income (loss) on derivatives designated as cash flow hedges to locations in the Interim Financial Statements described below:
| Second quarter ended | Two quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||
| Loss (gain) from other comprehensive income (loss) | |||||||||||||||||
| Forward foreign exchange contracts designated as cash flow hedges | $ | $ | $ | $ | |||||||||||||
| Revenue | (0.4) | 0.1 | (0.3) | 0.2 | |||||||||||||
| SG&A expenses | (0.2) | (0.4) | (0.4) | (0.5) | |||||||||||||
| Inventory | (0.4) | 0.1 | (0.4) | — | |||||||||||||
For the second and two quarters ended September 29, 2024, unrealized losses of $0.9m and $0.6m, respectively, (second and two quarters ended October 1, 2023 - unrealized losses of $0.4m and unrealized gains of $1.8m, respectively) on forward exchange contracts that were not treated as hedges were recognized in SG&A expenses in the interim statements of income (loss).
| Canada Goose Holdings Inc. | Page 30 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Foreign currency forward exchange contracts outstanding as at September 29, 2024 related to operating cash flows were:
| (in millions) | Aggregate Amounts | Currency | ||||||
| Forward contract to purchase Canadian dollars | USD | 67.9 | U.S. dollars | |||||
| € | 83.7 | euros | ||||||
| ¥ | 3,343.9 | Japanese yen | ||||||
| Forward contract to sell Canadian dollars | USD | 14.9 | U.S. dollars | |||||
| € | 50.0 | euros | ||||||
| Forward contract to purchase euros | CNY | 442.9 | Chinese yuan | |||||
| £ | 29.5 | British pounds sterling | ||||||
| HKD | 37.3 | Hong Kong dollars | ||||||
| Forward contract to sell euros | CHF | 2.9 | Swiss francs | |||||
| CNY | 50.2 | Chinese yuan | ||||||
| £ | 6.0 | British pounds sterling | ||||||
| HKD | 26.6 | Hong Kong dollars | ||||||
Foreign exchange risk on borrowings
The Company enters into derivative transactions to hedge a portion of its exposure to interest rate risk and foreign currency exchange risk related to principal and interest payments on the Term Loan denominated in U.S. dollars (see "Note 10. Borrowings"). The Company also entered into a five-year forward exchange contract by selling $368.5m and receiving USD270.0m as measured on the trade date, to fix the foreign exchange risk on a portion of the Term Loan borrowings.
The Company recognized the following unrealized losses and gains in the fair value of derivatives designated as hedging instruments in other comprehensive income (loss):
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||
| (in millions of Canadian dollars) | Net loss | Tax recovery | Net gain | Tax expense | Net loss | Tax recovery | Net gain | Tax expense | |||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Swaps designated as cash flow hedges | (5.3) | 1.9 | 0.4 | (0.1) | (6.5) | 2.3 | 3.0 | (1.3) | |||||||||||||||||||||||||||
| Canada Goose Holdings Inc. | Page 31 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The Company reclassified the following gains from other comprehensive income (loss) on derivatives designated as hedging instruments to net interest, finance and other costs:
| Second quarter ended | Two quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||
Gain from other comprehensive income (loss) | $ | $ | $ | $ | |||||||||||||
| Swaps designated as cash flow hedges | (0.5) | (0.4) | (0.8) | (0.9) | |||||||||||||
For the second and two quarters ended September 29, 2024, unrealized losses of $3.8m and $1.6m, respectively (second and two quarters ended October 1, 2023 - unrealized gains of $8.0m and $2.4m, respectively) in the fair value of the long-dated forward exchange contract related to a portion of the Term Loan balance were recognized in net interest, finance and other costs in the interim statements of income (loss).
Interest rate risk
The Company is exposed to interest rate risk related to the effect of interest rate changes on the borrowings outstanding under the Mainland China Facilities, Japan Facility, Revolving Facility, and the Term Loan, which currently bear interest rates at 2.92%, 0.64%, 5.75% and 8.47%, respectively.
Interest rate risk on the Term Loan is partially mitigated by interest rate swap hedges. The Company has entered into five-year interest rate swap agreements terminating December 31, 2025 to pay fixed interest rates and receive floating interest rates on notional debt of USD270.0m. The floating interest benchmark reference rate contained within the swap agreements is SOFR with the average fixed rates of 1.76%. These swap agreements fix the interest rate on the USD300.0m Term Loan. The interest rate swaps continue to be designated and accounted for as cash flow hedges.
Based on the closing balance of outstanding borrowings, a 1.00% increase in the closing interest rate during the two quarters ended September 29, 2024 would have increased interest expense on the Mainland China Facilities, Japan Facility, Revolving Facility and the Term Loan before hedging, by $0.4m, $0.2m, $0.3m and $2.0m, respectively (two quarters ended October 1, 2023 - $0.1m, $0.1m, $0.2m and $2.0m, respectively).
Until the third quarter ended December 31, 2023, the Company calculated interest rate sensitivity on debt facilities using the average balance of the facility and average interest rate in the reporting period. Following the third quarter, and applicable for the two quarters ended September 29, 2024, the Company calculated interest rate sensitivity on debt facilities using the closing balance of the facility and the closing interest rate. The Company believes this change provides more relevant information on interest rate sensitivity. The Company has recognized this change as a change in estimates and had adjusted the disclosure prospectively.
| Canada Goose Holdings Inc. | Page 32 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 16. Litigation and other contingencies
In the ordinary course of business, the Company may become subject to legal and regulatory proceedings and actions relating to its business, including matters involving its products, contractual and employment relationships. The Company records contingent liabilities when a loss related to a claim is assessed to be probable and reasonably estimable.
A mediation took place in fiscal 2024 in connection with a previously served notice of arbitration from a former supplier of the Company, seeking damages for breach of contract and for the unlawful means tort in connection with termination of a supply agreement. The claim also asserts that disclosure by the Company of information relating to the sourcing and traceability of its products constituted unlawful acts harmful to the former supplier. Such mediation did not result in a settlement of any issues and claims, and the parties are continuing to proceed with upcoming arbitration hearings to adjudicate the claims. The Company believes it has strong defences to the claim and consequently has not recorded a provision in the financial statements. However, if the arbitration is resolved in favour of the former supplier, the obligation could have a significant impact on the Company’s financial statements and results of operations.
Note 17. Selected cash flow information
Changes in non-cash operating items
| Second quarter ended | Two quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Trade receivables | (91.6) | (97.3) | (71.2) | (97.8) | |||||||||||||
| Inventories | 18.2 | 1.1 | (21.0) | (51.2) | |||||||||||||
| Other current assets | (13.8) | (11.6) | (19.3) | (16.6) | |||||||||||||
| Accounts payable and accrued liabilities | 1.9 | 37.9 | (33.1) | 2.6 | |||||||||||||
| Provisions | 4.7 | 5.7 | (3.1) | (1.9) | |||||||||||||
| Other | 5.1 | (3.1) | 9.1 | (1.3) | |||||||||||||
| Change in non-cash operating items | (75.5) | (67.3) | (138.6) | (166.2) | |||||||||||||
| Canada Goose Holdings Inc. | Page 33 of 34 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Changes in liabilities and equity arising from financing activities
| Mainland China Facilities | Japan Facility | Revolving Facility | Term Loan | Lease liabilities | Share capital | ||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| March 31, 2024 | — | 5.4 | (1.0) | 392.5 | 330.5 | 104.9 | |||||||||||||||||
| Cash flows: | |||||||||||||||||||||||
| Mainland China Facilities borrowings | 74.4 | — | — | — | — | — | |||||||||||||||||
| Japan Facility borrowings | — | 26.0 | — | — | — | — | |||||||||||||||||
| Revolving Facility borrowings | — | — | 60.9 | — | — | — | |||||||||||||||||
| Term Loan repayments | — | — | — | (2.0) | — | — | |||||||||||||||||
| Principal payments on lease liabilities | — | — | — | — | (40.9) | — | |||||||||||||||||
| Non-cash items: | |||||||||||||||||||||||
| Accrued transaction costs | — | — | 0.2 | — | — | — | |||||||||||||||||
| Amortization of deferred transaction costs | — | — | 0.2 | 0.1 | — | — | |||||||||||||||||
| Unrealized foreign exchange loss (gain) | — | — | 0.2 | (0.9) | 5.3 | — | |||||||||||||||||
| Additions and amendments to lease liabilities (note 7) | — | — | — | — | 44.0 | — | |||||||||||||||||
| Derecognition on termination of lease liabilities (note 7) | — | — | — | — | (1.0) | — | |||||||||||||||||
| Contributed surplus on share issuances (note 18) | — | — | — | — | — | 3.7 | |||||||||||||||||
| September 29, 2024 | 74.4 | 31.4 | 60.5 | 389.7 | 337.9 | 108.6 | |||||||||||||||||
Mainland China Facilities | Japan Facility | Revolving Facility | Term Loan | Lease liabilities | Share capital | ||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| April 2, 2023 | 9.8 | 13.7 | (0.5) | 395.7 | 334.8 | 118.7 | |||||||||||||||||
| Cash flows: | |||||||||||||||||||||||
| Mainland China Facilities borrowings | 37.7 | — | — | — | — | — | |||||||||||||||||
| Japan Facility borrowings | — | 15.4 | — | — | — | — | |||||||||||||||||
| Revolving Facility borrowings | — | — | 86.3 | — | — | — | |||||||||||||||||
| Term Loan repayments | — | — | — | (2.0) | — | — | |||||||||||||||||
| Transactions costs on financing activities | — | — | (0.2) | (0.1) | — | — | |||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares | — | — | — | — | — | (56.2) | |||||||||||||||||
| Principal payments on lease liabilities | — | — | — | — | (28.7) | — | |||||||||||||||||
| Issuance of shares | — | — | — | — | — | 0.1 | |||||||||||||||||
| Non-cash items: | |||||||||||||||||||||||
| Accrued transaction costs | — | — | (0.7) | — | — | — | |||||||||||||||||
| Amortization of deferred transaction costs | — | — | 0.1 | — | — | — | |||||||||||||||||
| Unrealized foreign exchange loss (gain) | — | — | — | 1.9 | (3.2) | — | |||||||||||||||||
| Additions and amendments to lease liabilities (note 7) | — | — | — | — | 27.4 | — | |||||||||||||||||
| Share purchase charge to retained earnings (note 11) | — | — | — | — | — | 50.5 | |||||||||||||||||
| Contributed surplus on share issuances (note 11) | — | — | — | — | — | 3.8 | |||||||||||||||||
| October 1, 2023 | 47.5 | 29.1 | 85.0 | 395.5 | 330.3 | 116.9 | |||||||||||||||||
| Canada Goose Holdings Inc. | Page 34 of 34 | |||||||
CANADA GOOSE HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the second and two quarters ended September 29, 2024
The following Management’s Discussion and Analysis (“MD&A”) for Canada Goose Holdings Inc. (“us,” “we,” “our,” “Canada Goose” or the “Company”) is dated November 6, 2024 and provides information concerning our results of operations and financial condition for the second and two quarters ended September 29, 2024. All figures are presented in Canadian (“CAD”) dollars, unless otherwise noted. You should read this MD&A together with our unaudited condensed consolidated interim financial statements and the related notes as at and for the second and two quarters ended September 29, 2024 (“Interim Financial Statements”) and our audited consolidated financial statements and the related notes for the fiscal year ended March 31, 2024 (“Annual Financial Statements”). Additional information about Canada Goose is available on our website at www.canadagoose.com, on the SEDAR+ website at www.sedarplus.ca, and on the EDGAR section of the U.S. Securities and Exchange Commission (the “SEC”) website at www.sec.gov, including our Annual Report on Form 20-F for the fiscal year ended March 31, 2024 (“Annual Report”).
CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This MD&A contains forward-looking statements. These statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “predict,” “project,” “potential,” “should,” “will,” “would,” and other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts. They appear in many places throughout this MD&A and include statements regarding our intentions, beliefs, or current expectations concerning, among other things, our results of operations, financial condition, liquidity, business prospects, growth, strategies, expectations regarding industry trends and the size and growth rates of addressable markets, our business plan, and our growth strategies, including plans for expansion to new markets and new products, expectations for seasonal trends, and the industry in which we operate.
Certain assumptions made in preparing the forward-looking statements contained in this MD&A include:
•our ability to implement our growth strategies;
•our ability to maintain strong business relationships with our customers, suppliers, wholesalers, and distributors;
•our ability to keep pace with changing consumer preferences;
•our ability to protect our intellectual property;
•our ability to adapt to changes to our business as a whole due to environmental, social and governance (“ESG”) considerations;
| Canada Goose Holdings Inc. | Page 1 of 40 | |||||||
•the continued absence of material global supply chain disruptions to our business, and our ability to fulfill demand and maintain sufficient inventory levels, which we continue to monitor; and
•the absence of material adverse changes in our industry or the global economy.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” section of our Annual Report and other risk factors described herein, which include, but are not limited to, the following risks:
•we may not open retail stores or expand e-Commerce access on our planned timelines;
•we may be unable to maintain the strength of our brand or to expand our brand to new products and geographies;
•unanticipated changes in the effective tax rate or adverse outcomes from audit examinations of corporate income or other tax returns;
•our indebtedness may adversely affect our financial condition, and we may not be able to refinance or renegotiate such indebtedness on favourable or satisfactory terms;
•an economic downturn and general economic conditions (for example, inflation and rising interest rates) may further affect discretionary consumer spending;
•we may not be able to satisfy changing consumer preferences;
•global political events, including the impact of political disruptions and protests, which may cause business interruptions;
•our ability to procure high quality raw materials and certain finished goods globally;
•our ability to manage inventory and forecast our inventory need, which we continue to monitor, and to manage our production distribution networks. In anticipation of our expected growth and as an important hedge against inflation, we have built up our inventory to elevated levels. If our supply exceeds demand, we may be required to take certain actions to reduce inventory which could damage our brand;
•we may not be able to protect or preserve our brand image and proprietary rights globally;
•the success of our business strategy;
•our ability to manage our exposure to data security and cyber security events;
•disruptions to manufacturing and distribution activities due to factors such as operational issues, disruptions in transportation logistic functions or labour shortages or disruptions;
•risks and global disruptions associated with geopolitical events, which may further affect general economic and operating conditions;
•fluctuations in raw material costs, interest rates and currency exchange rates;
•we may be unable to maintain effective internal controls over financial reporting; and
| Canada Goose Holdings Inc. | Page 2 of 40 | |||||||
•our ability to successfully realize expected benefits from the Company’s multi-phase program (“Transformation Program”) implemented to increase operational efficiencies by optimizing production and procurement, developing people and resources and focusing on our consumers to allow sustainable growth, profitability and long term value.
Although we base the forward-looking statements contained in this MD&A on assumptions that we believe are reasonable, we caution you that actual results and developments (including our results of operations, financial condition, liquidity and capital resources, and the development of the industry in which we operate) may differ materially from those made in or suggested by the forward-looking statements contained in this MD&A. Additional impacts may arise that we are not aware of currently. The potential of such additional impacts intensifies the business and operating risks which we face, and these should be considered when reading the forward-looking statements contained in this MD&A. In addition, even if results and developments are consistent with the forward-looking statements contained in this MD&A, those results and developments may not be indicative of results or developments in subsequent periods. As a result, any or all of our forward-looking statements in this MD&A may prove to be inaccurate. No forward-looking statement is a guarantee of future results. Moreover, we operate in a highly competitive and rapidly changing environment in which new risks often emerge. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
You should read this MD&A and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained herein are made as of the date of this MD&A, and we do not assume any obligation to update any forward-looking statements except as required by applicable laws.
BASIS OF PRESENTATION
The Interim Financial Statements are prepared in accordance with IFRS Accounting Standards, specifically International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). The Interim Financial Statements do not include all of the information required for Annual Financial Statements and should be read in conjunction with the Annual Financial Statements. Certain financial measures contained in this MD&A are non-IFRS financial measures and are discussed further under “Non-IFRS Financial Measures and Other Specified Financial Measures” below.
The Interim Financial Statements and the accompanying notes have been prepared using the accounting policies described in “Note 2. Material accounting policy information” in the Interim Financial Statements.
All references to “$”, “CAD” and “dollars” refer to Canadian dollars, “USD” refers to U.S. dollars, “GBP” refers to British pounds sterling, “EUR” refers to euros, “CHF” refers to Swiss francs, “CNY” refers to Chinese yuan, ”RMB” refers to Chinese renminbi, “HKD” refers to Hong Kong dollars, and “JPY” refers to Japanese yen unless otherwise indicated. Certain totals, subtotals and percentages throughout this MD&A may not reconcile due to rounding. This MD&A and the accompanying Interim Financial Statements are presented in millions of Canadian dollars except where otherwise indicated.
| Canada Goose Holdings Inc. | Page 3 of 40 | |||||||
All references to “fiscal 2023” are to the Company’s fiscal year ended April 2, 2023; to “fiscal 2024” are to the Company’s fiscal year ended March 31, 2024; and to “fiscal 2025” are to the Company’s fiscal year ending March 30, 2025.
The Company's fiscal year is a 52 or 53-week reporting cycle with the fiscal year ending on the Sunday closest to March 31. Each fiscal quarter is 13 weeks for a 52-week fiscal year. The additional week in a 53-week fiscal year is added to the third quarter. Fiscal 2023, fiscal 2024 and fiscal 2025 are each 52-week fiscal year.
Certain comparative figures have been reclassified to align selling, general and administrative (“SG&A”) expense allocations to conform with the current year presentation. In fiscal 2024, the Company amended the allocation basis for certain SG&A expenses between the operating segments to provide more relevant information on financial performance of each operating segment. The reclassification did not impact net income, earnings per share, or the condensed consolidated interim statements of financial position in the comparative year.
Refer to “Basis of Presentation” in the Annual Report for additional details on the updates made to the comparable period.
Refer to “Components of our Results of Operations” in the MD&A section of our fiscal 2024 Annual Report for a description of the Company’s financial measures in accordance with IFRS Accounting Standards. There have been no material changes in the Company’s components of our results of operations since March 31, 2024.
| Canada Goose Holdings Inc. | Page 4 of 40 | |||||||
SUMMARY OF FINANCIAL PERFORMANCE
The following table summarizes results of operations for the second and two quarters ended September 29, 2024, compared to the second and two quarters ended October 1, 2023, and expresses the percentage relationship to revenue of certain financial statement captions. Basis points (“bps”) expresses the changes between percentages. See “Results of Operations” for additional details.
| CAD $ millions (except per share data) | Second quarter ended | Two quarters ended | |||||||||||||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | % Change | September 29, 2024 | October 1, 2023 | % Change | ||||||||||||||||||||||||||||||||||||||||||
| Revenue | 267.8 | 281.1 | (4.7) | % | 355.9 | 365.9 | (2.7) | % | |||||||||||||||||||||||||||||||||||||||
| Gross profit | 164.1 | 179.5 | (8.6) | % | 216.7 | 234.7 | (7.7) | % | |||||||||||||||||||||||||||||||||||||||
| Gross margin | 61.3 | % | 63.9 | % | (260) | bps | 60.9 | % | 64.1 | % | (320) | bps | |||||||||||||||||||||||||||||||||||
| Operating income (loss) | 1.6 | 2.3 | (30.4) | % | (95.3) | (97.4) | 2.2 | % | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | 53.7 | % | (67.7) | (80.9) | 16.3 | % | |||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to shareholders of the Company | 5.4 | 3.9 | 38.5 | % | (72.0) | (77.2) | 6.7 | % | |||||||||||||||||||||||||||||||||||||||
| Earnings (loss) per share attributable to shareholders of the Company | |||||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | 0.06 | $ | 0.04 | 50.0 | % | $ | (0.74) | $ | (0.75) | 1.3 | % | |||||||||||||||||||||||||||||||||||
Diluted1 | $ | 0.06 | $ | 0.04 | 50.0 | % | $ | (0.74) | $ | (0.75) | 1.3 | % | |||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | March 31, 2024 | ||||||||||||||
| Financial Position: | Reclassified2 | Reclassified2 | |||||||||||||||
| Cash | 68.8 | 37.5 | 144.9 | ||||||||||||||
| Total assets | 1,566.7 | 1,589.3 | 1,481.6 | ||||||||||||||
| Total non-current liabilities | 781.0 | 815.2 | 725.2 | ||||||||||||||
| Equity | 368.9 | 355.7 | 423.5 | ||||||||||||||
1. Subordinate voting shares issuable on exercise of stock options are not treated as dilutive if including them would decrease the loss per share, or if the weighted average daily closing share price for the period was lower than the exercise price. Accordingly, for the second and two quarters ended September 29, 2024, 1,456,274 and 1,294,234, respectively, potentially dilutive shares have been excluded from the calculation of diluted loss per share because their effect was anti-dilutive (second and two quarters ended October 1, 2023 - 170,356 and 958,806, respectively, shares).
2. The Company amended the existing accounting policies related to its presentation of liabilities in the statement of financial position as at April 1, 2024 and identified warranty provisions within non-current liabilities can no longer be classified as such. As a result, $22.2m and $23.0m for October 1, 2023 and March 31, 2024, respectively, was reclassified to current liabilities on the provisions line in the statement of financial position. See "Note 2. Material accounting policy information" in our Interim Financial Statements for more details on the reclassification.
| Canada Goose Holdings Inc. | Page 5 of 40 | |||||||
FACTORS AFFECTING OUR PERFORMANCE
We believe that our performance depends on many factors, including those discussed below.
•Growth in our Direct to Consumer (“DTC”) Channel. We plan to continue executing our global strategy through retail and e-Commerce expansion, though the scale of such expansion may be delayed due to current global conditions. We continue to monitor these conditions and their potential impact on our ability to achieve positive DTC comparable sales growth1.
1.DTC comparable sales (decline) growth is a supplementary financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
•Wholesale. In fiscal 2024, we streamlined our wholesale partnerships as part of our global DTC strategy. We plan to increasingly control our distribution through progressively shifting sales from our wholesale channel to our DTC channel and this will impact the portion of revenue this channel represents in total revenue.
•New Products. We intend to continue investing in design, innovation and the development and introduction of new products, including talent development, as well as expand offerings in our existing product categories, across styles, uses, and climates that have varying margin profiles. As our product mix evolves, our gross margin may be unfavourably impacted by a lower proportion of Heavyweight Down sales, currently our highest margin products.
•Inflationary Environment. Inflationary pressures may persist in future fiscal periods and may fluctuate materially between markets. Such pressures may, among other impacts globally, have an adverse effect on our ability to maintain current gross margin and SG&A expenses as a percentage of revenue. Elevated interest rates may impact our business, including borrowing and other costs, and the markets in which we operate. In addition, inflationary pressures may affect the amount of discretionary income available for certain customers to purchase our products.
•Macroeconomic Conditions. We are subject to risks and exposures from the evolving macroeconomic environment, including supply chain disruptions, economic uncertainty, customer budgetary constraints, inflation, and resulting fears of potential economic slowdowns or recessions, all of which may negatively impact consumer demand for our products. We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results.
•Seasonality. We experience seasonal fluctuations in our revenue and operating results and have historically realized a significant portion of our annual wholesale revenue during our second and third fiscal quarters, and our annual DTC revenue in our third and fourth fiscal quarters. We generated 78.1% and 78.9% of our annual wholesale revenue in the combined second and third fiscal quarters of fiscal 2024 and fiscal 2023, respectively. Additionally, we generated 82.6% and 83.9% of our annual DTC revenue in the combined third and fourth fiscal quarters of fiscal 2024 and fiscal 2023, respectively. Because of seasonal fluctuations in revenue and fixed costs associated with our business, particularly the headcount growth and premises costs associated with our expanding DTC channel, we typically experience negative and substantially reduced net income and adjusted EBIT1 in the first and fourth quarters, respectively. As a result of our seasonality, changes that impact gross margin and adjusted EBIT1, among others can have a disproportionate impact on the quarterly results when they are recorded in our off-peak revenue periods. Business performance can also be
| Canada Goose Holdings Inc. | Page 6 of 40 | |||||||
impacted by the timing and intensity of cold weather, which may affect purchasing behaviour, including causing earlier or later purchases relative to prior periods, especially in our DTC channel.
1 Adjusted EBIT is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Working capital requirements typically increase as inventory builds. We finance these needs through a combination of cash on hand and borrowings on our revolving credit facility, the Mainland China credit facilities, and the Japan credit facility. Historically, cash flows from operations have been highest in the third and fourth fiscal quarters of the fiscal year due to revenue from the DTC channel and the collection of receivables from wholesale revenue earlier in the year.
•Global Climate Trends. A portion of our business is dependent on cold-weather seasons and patterns to generate consumer demand for our products. Consumer demand for our products may be negatively affected to the extent global climate patterns trend warmer, reducing typical patterns of cold-weather events or increasing weather volatility.
•Foreign Exchange. We sell a significant portion of our products to customers outside of Canada, which exposes us to fluctuations in foreign currency exchange rates. In fiscal years 2024 and 2023, we generated 70.5% and 70.1%, respectively, of our revenue in currencies other than Canadian dollars.
Refer to “Quantitative and Qualitative Disclosures about Market Risk - Foreign exchange risk” in the MD&A below for more details on foreign exchange.
•Global Political Events and Other Disruptions. We are conscious of risks related to social, economic, and political instability, including geopolitical tensions, regulatory matters, market volatility, and social unrest, including risks related to the upcoming elections in the United States, that are affecting consumer spending, international travel, credit markets, logistics, and foreign exchange in certain countries and travel corridors.
We remain concerned about the conflicts in Ukraine and the Middle East and continue to suspend all wholesale and e-Commerce sales to Russia. We continue to monitor these ongoing conflicts and their impacts on human life.
We have been, and may in the future be, impacted by widespread protests and other disruptions. To the extent that such disruptions persist, we expect that operations and traffic at our retail stores may be impacted.
SEGMENTS
Our reporting segments align with our sales channels: DTC, Wholesale, and Other. We measure each reportable operating segment’s performance based on revenue and operating income.
Our DTC segment includes sales to customers through our directly operated retail stores and our e-Commerce website available across numerous markets, which includes the newly launched recommerce platform Canada Goose Generations, currently available in the United States and Canada.
Through our Wholesale segment, we sell to a mix of retailers and international distributors, who are partners that have partial or full exclusive territory rights to sell our products to a particular
| Canada Goose Holdings Inc. | Page 7 of 40 | |||||||
market through their own DTC channels or local wholesalers. The Wholesale segment includes the introduction of travel retail within the second quarter of fiscal 2024.
The Other segment comprises sales and costs not directly allocated to the DTC or Wholesale segments, such as sales to employees, friends and family sales, certain SG&A expenses, and results from the newly acquired Paola Confectii knitwear manufacturing business.
During fiscal 2024, the performance measure for our Other segment was revised to exclude corporate general and administrative expenses; these expenses are now presented as a reconciling item to the Company’s consolidated operating income. This change in segment reporting was made to improve the understanding of financial performance in the Other segment.
Corporate expenses comprises costs that do not occur through the DTC, Wholesale, or Other segments, including the cost of marketing expenditures to build brand awareness across all segments, management overhead costs in support of manufacturing operations, other corporate costs, and foreign exchange gains and losses not specifically associated with segment operations
As at September 29, 2024, our DTC segment by geography included the following directly operated permanent retail stores:
| Fiscal 2025 | ||||||||||||||||||||
| March 31, 2024 | Q1 Additions | Q2 Additions | September 29, 2024 | |||||||||||||||||
| Canada | 9 | — | 1 | 10 | ||||||||||||||||
| United States | 16 | — | — | 16 | ||||||||||||||||
| North America | 25 | — | 1 | 26 | ||||||||||||||||
Greater China1 | 26 | — | 2 | 28 | ||||||||||||||||
Asia Pacific (excluding Greater China1) | 8 | — | — | 8 | ||||||||||||||||
| Asia Pacific | 34 | — | 2 | 36 | ||||||||||||||||
EMEA2 | 9 | — | 1 | 10 | ||||||||||||||||
| Total permanent stores | 68 | — | 4 | 72 | ||||||||||||||||
| Fiscal 2024 | ||||||||||||||||||||
| April 2, 2023 | Q1 Additions | Q2 Additions | Q3 Additions | Q4 Additions | March 31, 2024 | |||||||||||||||
| Canada | 9 | — | — | — | — | 9 | ||||||||||||||
| United States | 8 | 2 | 3 | 2 | 1 | 16 | ||||||||||||||
| North America | 17 | 2 | 3 | 2 | 1 | 25 | ||||||||||||||
Greater China1 | 23 | — | 2 | — | 1 | 26 | ||||||||||||||
Asia Pacific (excluding Greater China1) | 3 | — | 3 | 1 | 1 | 8 | ||||||||||||||
| Asia Pacific | 26 | — | 5 | 1 | 2 | 34 | ||||||||||||||
EMEA2 | 8 | 1 | — | — | — | 9 | ||||||||||||||
| Total permanent stores | 51 | 3 | 8 | 3 | 3 | 68 | ||||||||||||||
1Greater China comprises Mainland China, Hong Kong, Macau, and Taiwan.
2EMEA comprises Europe, the Middle East, Africa, and Latin America.
| Canada Goose Holdings Inc. | Page 8 of 40 | |||||||
RESULTS OF OPERATIONS
For the second quarter ended September 29, 2024 compared to the second quarter ended October 1, 2023
The following table summarizes results of operations and expresses the percentage relationship to revenue of certain financial statement captions. Basis points (“bps”) expresses the changes between percentages.
| CAD $ millions (except share and per share data) | Second quarter ended | $ Change | % Change | ||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||
| Revenue | 267.8 | 281.1 | (13.3) | (4.7) | % | ||||||||||||||||||
| Cost of sales | 103.7 | 101.6 | (2.1) | (2.1) | % | ||||||||||||||||||
| Gross profit | 164.1 | 179.5 | (15.4) | (8.6) | % | ||||||||||||||||||
| Gross margin | 61.3 | % | 63.9 | % | (260) | bps | |||||||||||||||||
| SG&A expenses | 162.5 | 177.2 | 14.7 | 8.3 | % | ||||||||||||||||||
| SG&A expenses as % of revenue | 60.7 | % | 63.0 | % | 230 | bps | |||||||||||||||||
| Operating income | 1.6 | 2.3 | (0.7) | (30.4) | % | ||||||||||||||||||
| Operating margin | 0.6 | % | 0.8 | % | (20) | bps | |||||||||||||||||
| Net interest, finance and other costs | 8.5 | 13.6 | 5.1 | 37.5 | % | ||||||||||||||||||
| Loss before income taxes | (6.9) | (11.3) | 4.4 | 38.9 | % | ||||||||||||||||||
| Income tax recovery | (13.2) | (15.4) | (2.2) | (14.3) | % | ||||||||||||||||||
| Effective tax rate | 191.3 | % | 136.3 | % | 5,500 | bps | |||||||||||||||||
| Net income | 6.3 | 4.1 | 2.2 | 53.7 | % | ||||||||||||||||||
| Net income attributable to non-controlling interest | 0.9 | 0.2 | 0.7 | 350.0 | % | ||||||||||||||||||
| Net income attributable to shareholders of the Company | 5.4 | 3.9 | 1.5 | 38.5 | % | ||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||
| Basic | 96,724,923 | 102,468,461 | |||||||||||||||||||||
Diluted1 | 98,181,197 | 103,586,542 | |||||||||||||||||||||
| Earnings per share attributable to shareholders of the Company | |||||||||||||||||||||||
| Basic | $ | 0.06 | $ | 0.04 | 0.02 | 50.0 | % | ||||||||||||||||
Diluted1 | $ | 0.06 | $ | 0.04 | 0.02 | 50.0 | % | ||||||||||||||||
1. Subordinate voting shares issuable on exercise of stock options are not treated as dilutive if including them would decrease the loss per share, or if the weighted average daily closing share price for the period was lower than the exercise price. Accordingly, for the second quarter ended September 29, 2024, 1,456,274 potentially dilutive shares have been excluded from the calculation of diluted loss per share because their effect was anti-dilutive (second quarter ended October 1, 2023 - 170,356 shares).
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Revenue
| Second quarter ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | As reported | Foreign exchange impact | In constant currency1 | As reported | In constant currency1 | ||||||||||||||||||||||||||||||||||
| DTC | 103.9 | 109.4 | (5.5) | (1.2) | (6.7) | (5.0) | % | (6.1) | % | ||||||||||||||||||||||||||||||||
| Wholesale | 137.3 | 162.0 | (24.7) | (3.2) | (27.9) | (15.2) | % | (17.2) | % | ||||||||||||||||||||||||||||||||
| Other | 26.6 | 9.7 | 16.9 | — | 16.9 | 174.2 | % | 174.2 | % | ||||||||||||||||||||||||||||||||
| Total revenue | 267.8 | 281.1 | (13.3) | (4.4) | (17.7) | (4.7) | % | (6.3) | % | ||||||||||||||||||||||||||||||||
1Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Revenue by geography
| Second quarter ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | As reported | Foreign exchange impact | In constant currency3 | As reported | In constant currency3 | ||||||||||||||||||||||||||||||||||
| Canada | 57.7 | 57.9 | (0.2) | (0.1) | (0.3) | (0.3) | % | (0.5) | % | ||||||||||||||||||||||||||||||||
| United States | 63.4 | 66.2 | (2.8) | (0.8) | (3.6) | (4.2) | % | (5.4) | % | ||||||||||||||||||||||||||||||||
| North America | 121.1 | 124.1 | (3.0) | (0.9) | (3.9) | (2.4) | % | (3.1) | % | ||||||||||||||||||||||||||||||||
Greater China1 | 46.4 | 43.9 | 2.5 | (0.2) | 2.3 | 5.7 | % | 5.2 | % | ||||||||||||||||||||||||||||||||
Asia Pacific (excluding Greater China1) | 19.7 | 19.9 | (0.2) | (0.2) | (0.4) | (1.0) | % | (2.0) | % | ||||||||||||||||||||||||||||||||
| Asia Pacific | 66.1 | 63.8 | 2.3 | (0.4) | 1.9 | 3.6 | % | 3.0 | % | ||||||||||||||||||||||||||||||||
EMEA2 | 80.6 | 93.2 | (12.6) | (3.1) | (15.7) | (13.5) | % | (16.8) | % | ||||||||||||||||||||||||||||||||
| Total revenue | 267.8 | 281.1 | (13.3) | (4.4) | (17.7) | (4.7) | % | (6.3) | % | ||||||||||||||||||||||||||||||||
1Greater China comprises Mainland China, Hong Kong, Macau, and Taiwan.
2EMEA comprises Europe, the Middle East, Africa, and Latin America.
3Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Revenue for the second quarter ended September 29, 2024 was $267.8m, a decrease of $13.3m or 4.7%, from $281.1m for the second quarter ended October 1, 2023. On a constant currency1 basis, revenue decreased by 6.3% for the second quarter ended September 29, 2024 compared to the second quarter ended October 1, 2023, reflecting the strengthening of the euro and the U.S. dollar relative to the Canadian dollar in the current quarter.
1.Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Revenue generated from our DTC and Wholesale segments represented 38.8% and 51.3%, respectively, of total revenue for the second quarter ended September 29, 2024 compared to 38.9% and 57.6%, respectively, for the second quarter ended October 1, 2023.
Within our product categories, non-Heavyweight Down grew compared to the second quarter ended October 1, 2023 and expanded its share of revenue and units sold within the overall mix, specifically within the apparel, everyday, and lightweight down product lines. Revenue for Heavyweight Down decreased compared to the second quarter ended October 1, 2023.
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DTC
Revenue from our DTC segment was $103.9m for the second quarter ended September 29, 2024 compared to $109.4m for the second quarter ended October 1, 2023. The decrease of $5.5m or 5.0% was driven by the following factors:
•DTC comparable sales decline1 was 13.4%, which was experienced across all regions.
•During the second quarter ended September 29, 2024, to fully support the launch of Haider Ackermann’s first capsule collection in the next quarter, we timed the majority of our brand and marketing investments to occur in our third and fourth quarters this year, which unfavourably impacted revenue in the current quarter. During the second quarter ended October 1, 2023, marketing investments for our Fall Winter brand campaign were launched to drive revenue in that quarter.
•During the second quarter ended September 29, 2024, store traffic in stores used for determining DTC comparable sales (decline) growth1 and conversion were down compared to the second quarter ended October 1, 2023, while improved traffic on our eCommerce platform was offset by decreased conversion online. In particular, we observed a decline in store traffic in stores used for determining DTC comparable sales (decline) growth1 in Greater China and the United States while traffic in EMEA increased significantly.
•Partially offsetting these results was retail expansion with two new directly operated permanent stores, two temporary stores converted to permanent in fiscal 2025, and six new directly operated permanent store openings in the prior year running for the full quarter in fiscal 2025.
1.DTC comparable sales (decline) growth is a supplementary financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Wholesale
Revenue from our Wholesale segment was $137.3m for the second quarter ended September 29, 2024 compared to $162.0m for the second quarter ended October 1, 2023. The decrease of $24.7m or 15.2% was due to a lower planned order book as a result of continued streamlining of the Wholesale segment by reducing partnerships as we elevate the quality of our partners in this channel and right-size our inventory position in this channel, particularly in EMEA.
Other
Revenue from our Other segment was $26.6m, for the second quarter ended September 29, 2024, and increased compared to $9.7m for the second quarter ended October 1, 2023. The increase of $16.9m was attributable to more friends and family events, consistent with our exit inventory strategy of management of slow moving inventory, and revenue contribution from Paola Confectii.
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Gross Profit
| Second quarter ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | Gross margin | Reported | Gross margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
| Gross profit | 164.1 | 61.3 | % | 179.5 | 63.9 | % | (15.4) | (260) | bps | ||||||||||||||||||||||||||
Gross profit and gross margin for the second quarter ended September 29, 2024 were $164.1m and 61.3%, respectively, compared to $179.5m and 63.9%, respectively, for the second quarter ended October 1, 2023. The decrease in gross profit of $15.4m was attributable to lower revenue and gross margin compression. Gross margin in the current quarter was unfavourably impacted by product mix with a higher proportion of non-Heavyweight Down revenue and increased freight and duty costs, driven by freight rates increases in the US and EMEA, as well as increased duty costs in EMEA.
SG&A Expenses
| Second quarter ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | % of revenue | Reported | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| SG&A expenses | 162.5 | 60.7 | % | 177.2 | 63.0 | % | 14.7 | 230 | bps | ||||||||||||||||||||||||||
SG&A expenses were $162.5m for the second quarter ended September 29, 2024 compared to $177.2m for the second quarter ended October 1, 2023. SG&A expenses as a percentage of revenue decreased by 230 bps to 60.7% in the second quarter ended September 29, 2024, compared to 63.0% for the second quarter ended October 1, 2023 primarily due to the significant reduction of corporate expenses.
The decrease of $14.7m or 8.3% was attributable to:
•An increase of $4.6m in costs related to our operating segments, driven by:
◦$3.7m increase in costs attributable to the continued retail expansion in the United States and Asia Pacific, as prior year store openings ran for the full quarter in fiscal 2025 and new stores. The increase in costs primarily comprises personnel costs, freight and warehouse costs, as well as depreciation and amortization from retail stores; and
◦Increased technology costs primarily for licenses and fees related to the e-Commerce infrastructure.
•A decrease of $19.3m in costs related to corporate expenses, driven by:
◦$13.2m of costs that were incurred in the comparative period related to the Transformation Program, which did not recur, including $7.7m of consultancy fees and $5.5m corporate restructuring costs, net of share-based award forfeitures associated with the reduction in workforce;
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◦$10.5m from the timing of investment in marketing, which will occur later in fiscal 2025 than in fiscal 2024, mainly due to the launch of Haider Ackermann’s first capsule collection in the third quarter; and
◦$3.6m of lower personnel costs primarily attributable to the reduction in corporate personnel that took place in the prior year.
◦Partially offsetting this decrease were unfavourable foreign exchange fluctuations of $8.0m.
Operating Income and Operating Margin
| Second quarter ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | Operating margin | Reported | Operating margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
| Reclassified | Reclassified | ||||||||||||||||||||||||||||||||||
| DTC | 5.6 | 5.4 | % | 16.4 | 15.0 | % | (10.8) | (960) | bps | ||||||||||||||||||||||||||
| Wholesale | 62.3 | 45.4 | % | 77.5 | 47.8 | % | (15.2) | (240) | bps | ||||||||||||||||||||||||||
| Other | 7.7 | 28.9 | % | 1.7 | 17.5 | % | 6.0 | 1,140 | bps | ||||||||||||||||||||||||||
Total segment operating income1 | 75.6 | 95.6 | (20.0) | ||||||||||||||||||||||||||||||||
| Second quarter ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | Operating margin | Reported | Operating margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
Total segment operating income1 | 75.6 | 95.6 | (20.0) | ||||||||||||||||||||||||||||||||
| Corporate expenses | (74.0) | (93.3) | 19.3 | ||||||||||||||||||||||||||||||||
| Total operating income | 1.6 | 0.6 | % | 2.3 | 0.8 | % | (0.7) | (20) | bps | ||||||||||||||||||||||||||
1.Total segment operating income (loss) is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Operating income and operating margin were $1.6m and 0.6% for the second quarter ended September 29, 2024 compared to $2.3m and 0.8% for the second quarter ended October 1, 2023. The decrease in operating income of $0.7m was attributable to lower gross profit as noted above, partially offset by lower SG&A costs. The decrease in operating margin of (20) bps was attributable to gross margin compression, partially offset by the significant reduction of corporate expenses.
DTC
DTC segment operating income and operating margin were $5.6m and 5.4% for the second quarter ended September 29, 2024 compared to $16.4m and 15.0% for the second quarter ended October 1, 2023. The decrease in operating income of $10.8m was attributable to higher operating costs associated with the expansion of the retail network and a decline in revenue.
| Canada Goose Holdings Inc. | Page 13 of 40 | |||||||
The decrease in operating margin of (960) bps was attributable to:
•Gross margin - unfavourably decreased by (110) bps to 75.3% in the second quarter ended September 29, 2024, compared to 76.4% for the second quarter ended October 1, 2023. The decrease in gross margin was mainly driven by product mix with a higher proportion of non-Heavyweight Down revenue.
•SG&A expenses as a percentage of revenue - unfavourably increased by (850) bps to 69.9% for the second quarter ended September 29, 2024, compared to 61.4% for the second quarter ended October 1, 2023. The increase was attributable to an increase in SG&A expenses with the investment in our retail network ahead of peak season and a decline in segment revenue. These cost increases were primarily driven by personnel costs, freight and warehouse costs, as well as depreciation and amortization in the expanded retail channel. The increase was also driven by higher technology costs in the e-Commerce channel related to licenses and fees for our e-Commerce infrastructure.
Wholesale
Wholesale segment operating income and operating margin were $62.3m and 45.4% for the second quarter ended September 29, 2024 compared to $77.5m and 47.8% for the second quarter ended October 1, 2023. The decrease in operating income of $15.2m was attributable to lower gross profit, driven by a decline in revenue from the continued streamlining of the Wholesale segment.
The decrease in operating margin of (240) bps was attributable to:
•Gross margin - unfavourably decreased by (300) bps to 54.2% in the second quarter ended September 29, 2024, compared to 57.2% for the second quarter ended October 1, 2023. The decrease in gross margin was mainly driven by product mix primarily due to a lower proportion of Heavyweight Down sales.
•SG&A expenses as a percentage of revenue - favourably decreased by 60 bps to 8.8% for the second quarter ended September 29, 2024, compared to 9.4% for the second quarter ended October 1, 2023. The decrease was primarily attributable to the rate at which SG&A expenses declined that outpaced the rate of decline in segment revenue, driven by lower warehouse and freight costs, as well as consulting fees.
Other
Other segment operating income was $7.7m for the second quarter ended September 29, 2024 compared to other segment operating income of $1.7m for the second quarter ended October 1, 2023. The increase in operating income of $6.0m was attributable to higher revenue and gross profit attributable to friends and family events related to advancing our exit inventory strategy.
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Net Interest, Finance and Other Costs
| Second quarter ended | |||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||
| CAD $ millions | Reported | Reported | $ Change | % Change | |||||||||||||||||||
| Net interest, finance and other costs | 8.5 | 13.6 | 5.1 | 37.5 | % | ||||||||||||||||||
Net interest, finance and other costs were $8.5m for the second quarter ended September 29, 2024 compared to $13.6m for the second quarter ended October 1, 2023. The decrease of $5.1m was driven by the increase in net gain of $2.9m on the fair value remeasurement of the put option (liability decrease of $0.1m, excluding translation gains of $3.7m) and contingent consideration (liability increase of $1.8m, excluding translation gains of $0.9m) related to the Company’s joint venture with Sazaby League (“Japan Joint Venture”). The change in fair value of the put option liability was driven by progression through the 10-year term, whereas the change in fair value of the contingent consideration. During the first quarter ended June 30, 2024, the Company and Sazaby League amended the agreement to extend the period by which the deferred contingent consideration is payable if an agreed cumulative adjusted EBIT target is not reached through the period ended June 30, 2026 to April 2, 2028. The decrease was also driven by favourable foreign exchange fluctuations related to the term loan facility, which is denominated in USD, net of hedging impacts, of $2.6m.
Income Taxes
| Second quarter ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | Effective tax rate | Reported | Effective tax rate | $ Change | Change in bps | |||||||||||||||||||||||||||||
| Income tax recovery | (13.2) | 191.3 | % | (15.4) | 136.3 | % | (2.2) | 5,500 | bps | ||||||||||||||||||||||||||
Income tax recovery was $13.2m for the second quarter ended September 29, 2024 compared to $15.4m for the second quarter ended October 1, 2023. For the second quarter ended September 29, 2024, the effective and statutory tax rates were 191.3% and 25.7%, respectively, compared to 136.3% and 25.7% for the second quarter ended October 1, 2023, respectively. Given our global operations, the quarter to date effective tax rate is largely impacted by our profit or loss in taxable jurisdictions relative to the applicable tax and by the fair value remeasurement of the put option related to the Japan Joint Venture.
Net Income
Net income for the second quarter ended September 29, 2024 was $6.3m compared to $4.1m for the second quarter ended October 1, 2023, driven by the factors described above.
| Canada Goose Holdings Inc. | Page 15 of 40 | |||||||
RESULTS OF OPERATIONS
For the two quarters ended September 29, 2024 compared to the two quarters ended October 1, 2023
The following table summarizes results of operations and expresses the percentage relationship to revenue of certain financial statement captions. Basis points (“bps”) expresses the changes between percentages.
| CAD $ millions (except share and per share data) | Two quarters ended | $ Change | % Change | ||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||
| Reclassified | |||||||||||||||||||||||||||||
| Revenue | 355.9 | 365.9 | (10.0) | (2.7) | % | ||||||||||||||||||||||||
| Cost of sales | 139.2 | 131.2 | (8.0) | (6.1) | % | ||||||||||||||||||||||||
| Gross profit | 216.7 | 234.7 | (18.0) | (7.7) | % | ||||||||||||||||||||||||
| Gross margin | 60.9 | % | 64.1 | % | (320) | bps | |||||||||||||||||||||||
| SG&A expenses | 312.0 | 332.1 | 20.1 | 6.1 | % | ||||||||||||||||||||||||
| SG&A expenses as % of revenue | 87.7 | % | 90.8 | % | 310 | bps | |||||||||||||||||||||||
| Operating loss | (95.3) | (97.4) | 2.1 | 2.2 | % | ||||||||||||||||||||||||
| Operating margin | (26.8) | % | (26.6) | % | (20) | bps | |||||||||||||||||||||||
| Net interest, finance and other costs | 11.7 | 28.1 | 16.4 | 58.4 | % | ||||||||||||||||||||||||
| Loss before income taxes | (107.0) | (125.5) | 18.5 | 14.7 | % | ||||||||||||||||||||||||
| Income tax recovery | (39.3) | (44.6) | (5.3) | (11.9) | % | ||||||||||||||||||||||||
| Effective tax rate | 36.7 | % | 35.5 | % | (120) | bps | |||||||||||||||||||||||
| Net loss | (67.7) | (80.9) | 13.2 | 16.3 | % | ||||||||||||||||||||||||
| Net income (loss) attributable to non-controlling interest | 4.3 | (3.7) | 8.0 | 216.2 | % | ||||||||||||||||||||||||
| Net loss attributable to shareholders of the Company | (72.0) | (77.2) | 5.2 | 6.7 | % | ||||||||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||||||||
| Basic and diluted | 96,666,503 | 103,089,612 | |||||||||||||||||||||||||||
| Loss per share attributable to shareholders of the Company | |||||||||||||||||||||||||||||
Basic and diluted1 | $ | (0.74) | $ | (0.75) | 0.01 | 1.3 | % | ||||||||||||||||||||||
1. Subordinate voting shares issuable on exercise of stock options are not treated as dilutive if including them would decrease the loss per share, or if the weighted average daily closing share price for the period was lower than the exercise price. Accordingly, for the two quarters ended September 29, 2024, 1,294,234 potentially dilutive shares have been excluded from the calculation of diluted loss per share because their effect was anti-dilutive (two quarters ended October 1, 2023 - 958,806 shares).
Revenue
| Two quarters ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | As reported | Foreign exchange impact | In constant currency1 | As reported | In constant currency1 | ||||||||||||||||||||||||||||||||||
| DTC | 167.0 | 165.2 | 1.8 | (1.5) | 0.3 | 1.1 | % | 0.2 | % | ||||||||||||||||||||||||||||||||
| Wholesale | 153.3 | 189.1 | (35.8) | (3.4) | (39.2) | (18.9) | % | (20.7) | % | ||||||||||||||||||||||||||||||||
| Other | 35.6 | 11.6 | 24.0 | — | 24.0 | 206.9 | % | 206.9 | % | ||||||||||||||||||||||||||||||||
| Total revenue | 355.9 | 365.9 | (10.0) | (4.9) | (14.9) | (2.7) | % | (4.1) | % | ||||||||||||||||||||||||||||||||
1Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
| Canada Goose Holdings Inc. | Page 16 of 40 | |||||||
Revenue by geography
| Two quarters ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | As reported | Foreign exchange impact | In constant currency3 | As reported | In constant currency3 | ||||||||||||||||||||||||||||||||||
| Canada | 79.6 | 81.4 | (1.8) | (0.1) | (1.9) | (2.2) | % | (2.3) | % | ||||||||||||||||||||||||||||||||
| United States | 81.9 | 84.3 | (2.4) | (0.9) | (3.3) | (2.8) | % | (3.9) | % | ||||||||||||||||||||||||||||||||
| North America | 161.5 | 165.7 | (4.2) | (1.0) | (5.2) | (2.5) | % | (3.1) | % | ||||||||||||||||||||||||||||||||
Greater China1 | 68.3 | 63.4 | 4.9 | (0.5) | 4.4 | 7.7 | % | 6.9 | % | ||||||||||||||||||||||||||||||||
Asia Pacific (excluding Greater China1) | 28.6 | 24.9 | 3.7 | (0.1) | 3.6 | 14.9 | % | 14.5 | % | ||||||||||||||||||||||||||||||||
| Asia Pacific | 96.9 | 88.3 | 8.6 | (0.6) | 8.0 | 9.7 | % | 9.1 | % | ||||||||||||||||||||||||||||||||
EMEA2 | 97.5 | 111.9 | (14.4) | (3.3) | (17.7) | (12.9) | % | (15.8) | % | ||||||||||||||||||||||||||||||||
| Total revenue | 355.9 | 365.9 | (10.0) | (4.9) | (14.9) | (2.7) | % | (4.1) | % | ||||||||||||||||||||||||||||||||
1.Greater China comprises Mainland China, Hong Kong, Macau, and Taiwan.
2.EMEA comprises Europe, the Middle East, Africa, and Latin America.
3.Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Revenue for the two quarters ended September 29, 2024 was $355.9m, an increase of $10.0m or 2.7% from $365.9m for the two quarters ended October 1, 2023. On a constant currency1 basis, revenue decreased by 4.1% for the two quarters ended September 29, 2024 compared to the two quarters ended October 1, 2023, reflecting the strength of the euro relative to the Canadian dollar in the current period.
1.Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Revenue generated from our DTC and Wholesale segments represented 46.9% and 43.1%, respectively, of total revenue, for the two quarters ended September 29, 2024 compared to 45.1% and 51.7%, respectively, for the two quarters ended October 1, 2023.
Within our product categories, non-Heavyweight Down grew compared to the two quarters ended October 1, 2023 and expanded its share of revenue and units sold within the overall mix across geographies except EMEA, where both revenue and units sold experienced a decline. Non-Heavyweight down had growth in both revenue and units sold within the apparel and everyday product lines.
| Canada Goose Holdings Inc. | Page 17 of 40 | |||||||
DTC
Revenue from our DTC segment for the two quarters ended September 29, 2024 was $167.0m compared to $165.2m for the two quarters ended October 1, 2023. The increase of $1.8m or 1.1% was attributable largely to:
•Retail expansion with two new directly operated permanent stores, two temporary stores converted to permanent in fiscal 2025, and six new directly operated permanent store openings in the prior year running for the full year in fiscal 2025.
•Partially offsetting these results was DTC comparable sales decline1 of 10.5%, which was experienced across all geographies.
1DTC comparable sales (decline) growth is a supplementary financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
•During the two quarters ended September 29, 2024, to fully support the launch of Haider Ackermann’s first capsule collection in the next quarter, we timed the majority of our brand and marketing investments to occur in our third and fourth quarters this year, which unfavourably impacted revenue in the current quarter. During the two quarters ended October 1, 2023, marketing investments for our Fall Winter brand campaign were launched to drive revenue in that period.
Wholesale
Revenue from our Wholesale segment for the two quarters ended September 29, 2024 was $153.3m compared to $189.1m for the two quarters ended October 1, 2023. The decrease of $35.8m or 18.9% was due to a lower planned order book as a result of continued streamlining of the Wholesale segment by reducing partnerships as we elevate the quality of our partners in this channel and right-size our inventory position in this channel, particularly in EMEA.
Other
Revenue from our Other segment for the two quarters ended September 29, 2024 was $35.6m compared to $11.6m for the two quarters ended October 1, 2023. The increase of $24.0m or 206.9% was attributable to friends and family events related to advancing our exit inventory strategy and revenue contribution from Paola Confectii.
Gross Profit
| Two quarters ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | Gross margin | Reported | Gross margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
| Gross profit | 216.7 | 60.9 | % | 234.7 | 64.1 | % | (18.0) | (320) | bps | ||||||||||||||||||||||||||
Gross profit and gross margin for the two quarters ended September 29, 2024 were $216.7m and 60.9%, respectively, compared to $234.7m and 64.1%, respectively, for the two quarters ended October 1, 2023. The decrease in gross profit of $18.0m was attributable to lower revenue as noted above and margin compression. Gross margin in the current period has been unfavourably impacted by product mix with a higher proportion of non-Heavyweight Down revenue, higher freight and duty costs and channel mix.
| Canada Goose Holdings Inc. | Page 18 of 40 | |||||||
SG&A Expenses
| Two quarters ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | % of revenue | Reported | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| SG&A expenses | 312.0 | 87.7 | % | 332.1 | 90.8 | % | 20.1 | 310 | bps | ||||||||||||||||||||||||||
SG&A expenses were $312.0m for the two quarters ended September 29, 2024 compared to $332.1m for the two quarters ended October 1, 2023. SG&A expenses as a percentage of revenue decreased by 310 bps to 87.7% in the two quarters ended September 29, 2024, compared to 90.8% for the two quarters ended October 1, 2023 primarily due to the significant reduction of corporate expenses.
The decrease of $20.1m or 6.1% was attributable to:
•An increase of $16.3m in costs related to our operating segments, driven by:
◦$11.3m increase in costs attributable to the continued retail expansion in the United States and Asia Pacific, as prior year store openings ran for the full quarter in fiscal 2025 and new stores. The increase in costs primarily comprises personnel costs, freight and warehouse costs, as well as depreciation and amortization from retail stores. The increase also included increased occupancy and maintenance costs, including higher costs from variable rent in Asia Pacific resulting from increased revenue compared to fiscal 2024;
◦Increased technology costs primarily for licenses and fees related to the e-Commerce infrastructure; and
◦Higher warehouse costs with the introduction of a new facility that opened in the comparative quarter in fiscal 2024, as well as increased freight costs due to a higher number of units sold in the e-Commerce channel and increased logistics costs.
•A decrease of $36.4m in costs related to corporate expenses, driven by:
◦$21.0m of costs that were incurred in the comparative period related to the Transformation Program, which did not recur, including $15.5m of consultancy fees and $5.5m corporate restructuring costs, net of share-based award forfeitures associated with the reduction in workforce;
◦$10.8m of lower personnel costs primarily attributable to the reduction in corporate personnel that took place in the prior year; and
◦$6.9m from the timing of investment in marketing, which will occur later in fiscal 2025 than in fiscal 2024, mainly due to the launch of Haider Ackermann’s first capsule collection in the third quarter.
◦Partially offsetting these results in corporate expenses was $3.4m of unfavourable foreign exchange fluctuations.
| Canada Goose Holdings Inc. | Page 19 of 40 | |||||||
Operating Loss and Operating Margin
| Two quarters ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | Operating margin | Reported | Operating margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
| Reclassified | Reclassified | ||||||||||||||||||||||||||||||||||
| DTC | (17.5) | (10.5) | % | (1.1) | (0.7) | % | (16.4) | (980) | bps | ||||||||||||||||||||||||||
| Wholesale | 58.3 | 38.0 | % | 80.7 | 42.7 | % | (22.4) | (470) | bps | ||||||||||||||||||||||||||
| Other | 6.9 | 19.4 | % | 2.5 | 21.6 | % | 4.4 | (220) | bps | ||||||||||||||||||||||||||
Total segment operating income1 | 47.7 | 82.1 | (34.4) | ||||||||||||||||||||||||||||||||
| Two quarters ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | Operating margin | Reported | Operating margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
Total segment operating income1 | 47.7 | 82.1 | (34.4) | ||||||||||||||||||||||||||||||||
| Corporate expenses | (143.0) | (179.5) | 36.5 | ||||||||||||||||||||||||||||||||
| Total operating loss | (95.3) | (26.8) | % | (97.4) | (26.6) | % | 2.1 | (20) | bps | ||||||||||||||||||||||||||
1.Total segment operating income (loss) is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Operating loss and operating margin were $95.3m and (26.8)% for the two quarters ended September 29, 2024 compared to $97.4m and (26.6)% for the two quarters ended October 1, 2023. The decrease in operating loss of $2.1m was attributable to lower SG&A costs, partially offset by lower gross profit as noted above. The decrease in operating margin of 20 bps was attributable to gross margin compression, partially offset by lower SG&A costs noted above.
DTC
DTC segment operating loss and operating margin were $17.5m and (10.5)% for the two quarters ended September 29, 2024 compared to $1.1m and (0.7)% for the two quarters ended October 1, 2023. The increase in operating loss of $16.4m was attributable to higher operating costs associated with the expansion of the retail network, and lower gross profit.
The decrease in operating margin of (980) bps was attributable:
•Gross margin - unfavourably decreased by (120) bps to 74.1% in the two quarters ended September 29, 2024, compared to 75.3% for the two quarters ended October 1, 2023. The decrease in gross margin was mainly driven by product mix with a higher proportion of non-Heavyweight Down revenue.
•SG&A expenses as a percentage of revenue - unfavourably increased by (860) bps to 84.6% for the two quarters ended September 29, 2024, compared to 76.0% for the two quarters ended October 1, 2023. The increase was due to higher SG&A expenses with the investment in our retail network ahead of peak season against flat segment revenue. This was driven primarily by personnel costs and freight and warehouse costs in the segment. The increase was also driven by occupancy and maintenance costs, and
| Canada Goose Holdings Inc. | Page 20 of 40 | |||||||
depreciation and amortization in the retail channel. The increase was also driven by higher technology costs in the e-Commerce channel related to licenses and fees for our e-Commerce infrastructure.
Wholesale
Wholesale segment operating income and operating margin were $58.3m and 38.0% for the two quarters ended September 29, 2024 compared to $80.7m and 42.7% for the two quarters ended October 1, 2023. The decrease in operating income of $22.4m was attributable to lower gross profit, driven by a decline in revenue from continued streamlining of the Wholesale segment, partially offset by lower SG&A expenses.
The decrease in operating margin of (470) bps was attributable to:
•Gross margin - unfavourably decreased by (380) bps to 52.5% in the two quarters ended September 29, 2024, compared to 56.3% for the two quarters ended October 1, 2023. The decrease in gross margin was mainly driven by product mix primarily due to a lower proportion of Heavyweight Down sales.
•SG&A expenses as a percentage of revenue - unfavourably increased by (90) bps to 14.5% for the two quarters ended September 29, 2024, compared to 13.6% for the two quarters ended October 1, 2023. The increase was primarily attributable to the decline in segment revenue that outpaced the reduction of SG&A expenses, driven by warehouse and freight costs, as well as consulting fees.
Other
Other segment operating income was $6.9m for the two quarters ended September 29, 2024 compared to $2.5m for the two quarters ended October 1, 2023. The increase in operating income of $4.4m was attributable to higher revenue and gross profit attributable to friends and family events related to advancing our exit inventory strategy.
Net Interest, Finance and Other Costs
| Two quarters ended | |||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||
| CAD $ millions | Reported | Reported | $ Change | % Change | |||||||||||||||||||
| Net interest, finance and other costs | 11.7 | 28.1 | 16.4 | 58.4 | % | ||||||||||||||||||
Net interest, finance and other costs were $11.7m for the two quarters ended September 29, 2024 compared to $28.1m for the two quarters ended October 1, 2023. The decrease of $16.4m was driven by the increase in net gain of $18.7m on the fair value remeasurement of the put option (liability decrease of $4.5m, excluding translation gains of $5.4m) and contingent consideration (liability decrease of $7.1m, excluding translation gains of $1.7m) related to the Japan Joint Venture. The change in fair value of the put option liability was driven by progression through the 10-year term, whereas the change in fair value of the contingent consideration was driven by the extension in term. The decrease was partially offset by unfavourable foreign exchange fluctuations related to the term loan facility which is denominated in USD, net of hedging impacts, of $1.3m.
| Canada Goose Holdings Inc. | Page 21 of 40 | |||||||
Income Taxes
| Two quarters ended | |||||||||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | Effective tax rate | Reported | Effective tax rate | $ Change | Change in bps | |||||||||||||||||||||||||||||
| Income tax recovery | (39.3) | 36.7 | % | (44.6) | 35.5 | % | (5.3) | (120) | bps | ||||||||||||||||||||||||||
Income tax recovery was $39.3m for the two quarters ended September 29, 2024 compared to $44.6m for the two quarters ended October 1, 2023. For the two quarters ended September 29, 2024, the effective and statutory tax rates were 36.7% and 25.5%, respectively, compared to 35.5% and 25.7% for the two quarters ended October 1, 2023, respectively. Given our global operations, the effective tax rate is largely impacted by our profit or loss in taxable jurisdictions relative to the applicable tax rates and by the fair value remeasurement of the put option related to the Japan Joint Venture.
Net Loss
Net loss for the two quarters ended September 29, 2024 was $67.7m compared to $80.9m for the two quarters ended October 1, 2023, driven by the factors described above.
| Canada Goose Holdings Inc. | Page 22 of 40 | |||||||
Quarterly Financial Information
The following is a summary of selected consolidated financial information for each of the eight most recently completed quarters:
| CAD $ millions (except per share data) | Revenue | % of fiscal year revenue | Net income (loss) attributable to shareholders of the Company | Earnings (loss) per share attributable to shareholders of the Company | Operating income (loss) | Adjusted EBIT1 | Adjusted net income (loss) per diluted share attributable to shareholders of the Company1 (restated) | ||||||||||||||||||||||||||||
| DTC | Wholesale | Other | Total | Basic | Diluted | ||||||||||||||||||||||||||||||
| Fiscal 2025 | |||||||||||||||||||||||||||||||||||
| Second Quarter | 103.9 | 137.3 | 26.6 | 267.8 | — | % | 5.4 | $ | 0.06 | $ | 0.06 | 1.6 | 2.5 | $ | 0.05 | ||||||||||||||||||||
| First Quarter | 63.1 | 16.0 | 9.0 | 88.1 | — | % | (77.4) | $ | (0.80) | $ | (0.80) | (96.9) | (96.0) | $ | (0.79) | ||||||||||||||||||||
| Fiscal 2024 | |||||||||||||||||||||||||||||||||||
| Fourth Quarter | 271.5 | 41.4 | 45.1 | 358.0 | 26.8 | % | 5.0 | $ | 0.05 | $ | 0.05 | 23.1 | 40.1 | $ | 0.19 | ||||||||||||||||||||
| Third Quarter | 514.0 | 81.8 | 14.1 | 609.9 | 45.7 | % | 130.6 | $ | 1.30 | $ | 1.29 | 198.8 | 207.2 | $ | 1.37 | ||||||||||||||||||||
| Second Quarter | 109.4 | 162.0 | 9.7 | 281.1 | 21.1 | % | 3.9 | $ | 0.04 | $ | 0.04 | 2.3 | 15.6 | $ | 0.16 | ||||||||||||||||||||
| First Quarter | 55.8 | 27.1 | 1.9 | 84.8 | 6.4 | % | (81.1) | $ | (0.78) | $ | (0.78) | (99.7) | (91.1) | $ | (0.70) | ||||||||||||||||||||
| Fiscal 2023 | |||||||||||||||||||||||||||||||||||
| Fourth Quarter | 227.5 | 45.5 | 20.2 | 293.2 | 24.1 | % | (3.1) | $ | (0.03) | $ | (0.03) | 17.6 | 26.6 | $ | 0.13 | ||||||||||||||||||||
| Third Quarter | 450.2 | 114.4 | 12.1 | 576.7 | 47.4 | % | 134.9 | $ | 1.28 | $ | 1.28 | 190.7 | 197.1 | $ | 1.27 | ||||||||||||||||||||
1Adjusted EBIT and adjusted net income (loss) attributable to shareholders of the Company are non-IFRS financial measures, and adjusted net income (loss) per diluted share attributable to shareholders of the Company is a non-IFRS ratio. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of these measures and ratio, and a reconciliation of the non-IFRS financial measures to the nearest IFRS Accounting Standards measure.
Revenue is highest in our Wholesale segment in our second and third quarters as we fulfill wholesale customer orders in time for their Fall and Winter retail seasons, and, in our DTC segment, in the third and fourth quarters. Our net income is typically negative in the first quarter and negative or reduced in the fourth quarter as we invest ahead of our peak season. As part of our global DTC strategy, we have been streamlining our wholesale partnerships and shifting sales to our DTC channel. We expect that the portion of revenue in our Wholesale segment will represent a smaller proportion of total revenue as we execute our DTC strategy.
Revenue
Over the last eight quarters, revenue has been impacted by the following:
•timing of store openings;
•launch and expansion of international e-Commerce sites;
•streamlining of wholesale partnerships, resulting in a lower order book;
•timing and extent of SG&A, including demand generation activities;
•increased manufacturing flexibility with higher in-house production, which has an impact on the timing of wholesale order shipments and customer demand;
| Canada Goose Holdings Inc. | Page 23 of 40 | |||||||
•timing of end-consumer purchasing in the DTC segment and the availability of new products;
•successful execution of global pricing strategy;
•shift in mix of revenue from Wholesale to DTC, which has impacted the seasonality of our financial performance;
•shift in geographic mix of sales to increase sales outside of Canada, where average unit retail pricing is generally higher;
•fluctuation of foreign currencies relative to the Canadian dollar;
•revenue generated from the Japan Joint Venture formed on April 4, 2022; and
•revenue generated from the new subsidiary Paola Confectii formed on November 1, 2023, in connection with the business combination.
Net Income (Loss)
Over the last eight quarters, net income (loss) has been affected by the following factors:
•impact of the items affecting revenue, as discussed above;
•growth of non-Heavyweight down revenue, resulting in a shift in product mix;
•increase and timing of our investment in brand, marketing, and administrative support as well as increased investment in property, plant, and equipment and intangible assets to support growth initiatives;
•increase in fixed SG&A costs associated with our business, particularly the headcount growth and premises costs associated with our expanding DTC channel, resulting in net losses in our seasonally low-revenue first and fourth quarters, respectively;
•impact of foreign exchange;
•fluctuations in average cost of borrowings to address growing net working capital requirements and higher seasonal borrowings in the first and second quarters of each fiscal year to address the seasonal nature of revenue;
•pre-store opening costs incurred, timing of leases signed, and opening of stores;
•the nature and timing of transaction costs in connection with the Japan Joint Venture and amendments to long-term debt agreements;
•impact of fair value remeasurement of the put option and contingent consideration in connection with the Japan Joint Venture;
•the proportion of taxable income in non-Canadian jurisdictions and changes to rates and tax legislation in those jurisdictions;
•increased freight costs, limitations on shipping and other disruptions in the transportation and shipping infrastructure;
•increased product costs due to cost inflation and higher interest rates;
•the repurchase of our subordinate voting shares pursuant to our normal course issuer bids;
| Canada Goose Holdings Inc. | Page 24 of 40 | |||||||
•costs associated with the formation of the Japan Joint Venture on April 4, 2022 and the business combination resulting in the acquisition of Paola Confectii on November 1, 2023; and
•costs and expenses related to the continued implementation of our Transformation Program, including consulting fees and workforce reduction costs.
NON-IFRS FINANCIAL MEASURES AND OTHER SPECIFIED FINANCIAL MEASURES
The Company uses certain financial measures that are “non-IFRS financial measures”, including adjusted EBIT, adjusted EBITDA, adjusted net income (loss) attributable to the shareholders of the Company, constant currency revenue, total segment operating income (loss), and net debt, certain financial measures that are “non-IFRS ratios”, including adjusted EBIT margin, adjusted net income (loss) per basic and diluted share attributable to shareholders of the Company and, net debt leverage, as well as DTC comparable sales (decline) growth which is a “supplementary financial measure”, in each case in this document and other documents. These financial measures are employed by the Company to measure its operating and economic performance and to assist in business decision-making, as well as providing key performance information to senior management. The Company believes that, in addition to conventional measures prepared in accordance with IFRS Accounting Standards, certain investors and analysts use this information to evaluate the Company’s operating and financial performance and its financial position. These financial measures are not defined under IFRS Accounting Standards, nor do they replace or supersede any standardized measure under IFRS Accounting Standards. Other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD $ millions (except per share data) | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBIT | 2.5 | 15.6 | (93.5) | (75.5) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBIT margin | 0.9 | % | 5.5 | % | (26.3) | % | (20.6) | % | |||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 34.7 | 46.1 | (28.6) | (16.5) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted net income (loss) attributable to shareholders of the Company | 5.2 | 16.2 | (70.9) | (56.9) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted net income (loss) per basic share attributable to shareholders of the Company | $ | 0.05 | $ | 0.16 | $ | (0.73) | $ | (0.55) | |||||||||||||||||||||||||||||||||||||||
| Adjusted net income (loss) per diluted share attributable to shareholders of the Company | $ | 0.05 | $ | 0.16 | $ | (0.73) | $ | (0.55) | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | March 31, 2024 | ||||||||||||||
| Net debt | (826.4) | (851.9) | (584.1) | ||||||||||||||
| Canada Goose Holdings Inc. | Page 25 of 40 | |||||||
Adjusted EBIT, adjusted EBIT margin, adjusted EBITDA, adjusted net income (loss) attributable to shareholders of the Company, and adjusted net income (loss) per basic and diluted share attributable to shareholders of the Company.
These measures exclude the impact of certain non-cash items and certain other adjustments related to events that are non-recurring or unusual in nature, that we believe are not otherwise reflective of our ongoing operations and/or that make comparisons of underlying financial performance between periods difficult. We use, and believe that certain investors and analysts use, this information to evaluate our core financial and operating performance for business planning purposes, as well as to analyze how our business operates in, or responds to, swings in economic cycles or to other events that impact the apparel industry.
Constant currency revenue
Constant currency revenue is calculated by translating the prior year reported amounts into comparable amounts using a single foreign exchange rate for each currency calculated based on the current period exchange rates. We use, and believe that certain investors and analysts use, this information to assess how our business and geographic segments performed excluding the effects of foreign currency exchange rate fluctuations. See “Results of Operations - Revenue” for a reconciliation of reported revenue and revenue on a constant currency basis.
Net debt and net debt leverage
We define net debt as cash less total borrowings and lease liabilities, and net debt leverage as the ratio of net debt to adjusted EBITDA, measured on a spot basis. We use, and believe that certain investors and analysts use, these non-IFRS financial measures and ratios to determine the Company’s financial leverage and ability to meet its debt obligations. See “Liquidity and Capital Resources - Indebtedness” below for a table providing the calculation of net debt and discussion of net debt leverage.
DTC comparable sales (decline) growth
DTC comparable sales (decline) growth is a supplementary financial measure defined as a rate of growth/decline of sales on a constant currency basis from e-Commerce sites and stores which have been operating for one full year (12 successive fiscal months). The measure excludes store sales from both periods for the specific trading days when the stores were closed, whether those closures occurred in the current period or the comparative period. The DTC comparable sales (decline) growth metric we report may not be equivalent to similarly titled metrics reported by other companies.
Total Segment Operating Income (Loss)
Total segment operating income (loss) is a non-IFRS financial measure defined as revenue minus cost of goods sold and SG&A expenses directly related to the operating segment. The total segment operating income (loss) metric we report may not be equivalent to similarly titled metrics reported by other companies. See “Operating Loss and Operating Margin” discussion above for reconciliation.
| Canada Goose Holdings Inc. | Page 26 of 40 | |||||||
The tables below reconcile net income (loss) to adjusted EBIT, adjusted EBITDA, and adjusted net income (loss) attributable to shareholders of the Company for the periods indicated. Adjusted EBIT margin is equal to adjusted EBIT for the period presented as a percentage of revenue for the same period.
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | |||||||||||||||||||||||||||||||||||||||||||
| Add (deduct) the impact of: | |||||||||||||||||||||||||||||||||||||||||||||||
| Income tax recovery | (13.2) | (15.4) | (39.3) | (44.6) | |||||||||||||||||||||||||||||||||||||||||||
| Net interest, finance and other costs | 8.5 | 13.6 | 11.7 | 28.1 | |||||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | 1.6 | 2.3 | (95.3) | (97.4) | |||||||||||||||||||||||||||||||||||||||||||
| Head office transition costs (a) | — | — | — | 0.8 | |||||||||||||||||||||||||||||||||||||||||||
| Japan Joint Venture costs (c) | — | 0.1 | — | 0.1 | |||||||||||||||||||||||||||||||||||||||||||
| Transformation Program costs (e) | — | 13.2 | — | 21.0 | |||||||||||||||||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (f) | 0.9 | — | 1.8 | — | |||||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 0.9 | 13.3 | 1.8 | 21.9 | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBIT | 2.5 | 15.6 | (93.5) | (75.5) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBIT margin | 0.9 | % | 5.5 | % | (26.3) | % | (20.6) | % | |||||||||||||||||||||||||||||||||||||||
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | |||||||||||||||||||||||||||||||||||||||||||
| Add (deduct) the impact of: | |||||||||||||||||||||||||||||||||||||||||||||||
| Income tax recovery | (13.2) | (15.4) | (39.3) | (44.6) | |||||||||||||||||||||||||||||||||||||||||||
| Net interest, finance and other costs | 8.5 | 13.6 | 11.7 | 28.1 | |||||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | 1.6 | 2.3 | (95.3) | (97.4) | |||||||||||||||||||||||||||||||||||||||||||
| Head office transition costs (a) | — | — | — | 0.8 | |||||||||||||||||||||||||||||||||||||||||||
| Japan Joint Venture costs (c) | — | 0.1 | — | 0.1 | |||||||||||||||||||||||||||||||||||||||||||
| Transformation Program costs (e) | — | 13.2 | — | 21.0 | |||||||||||||||||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (f) | 0.9 | — | 1.8 | — | |||||||||||||||||||||||||||||||||||||||||||
| Net depreciation and amortization (j) | 32.2 | 30.5 | 64.9 | 59.0 | |||||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 33.1 | 43.8 | 66.7 | 80.9 | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 34.7 | 46.1 | (28.6) | (16.5) | |||||||||||||||||||||||||||||||||||||||||||
| Canada Goose Holdings Inc. | Page 27 of 40 | |||||||
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | |||||||||||||||||||||||||||||||||||||||||||
| Add (deduct) the impact of: | |||||||||||||||||||||||||||||||||||||||||||||||
| Head office transition costs (a) (b) | — | — | — | 1.2 | |||||||||||||||||||||||||||||||||||||||||||
| Japan Joint Venture costs (c) | — | 0.1 | — | 0.1 | |||||||||||||||||||||||||||||||||||||||||||
| Japan Joint Venture remeasurement (gain) loss on contingent consideration and put option (d) | (2.3) | 0.7 | (10.9) | 7.8 | |||||||||||||||||||||||||||||||||||||||||||
| Transformation Program costs (e) | — | 13.2 | — | 21.0 | |||||||||||||||||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (f) | 0.9 | — | 1.8 | — | |||||||||||||||||||||||||||||||||||||||||||
| Unrealized foreign exchange (gain) loss on Term Loan (g) | (0.9) | 1.7 | 0.8 | (0.5) | |||||||||||||||||||||||||||||||||||||||||||
| (2.3) | 15.7 | (8.3) | 29.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Tax effect of adjustments | — | (3.1) | (0.4) | (4.9) | |||||||||||||||||||||||||||||||||||||||||||
| Deferred tax adjustment (h) | — | — | — | (0.5) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted net income (loss) | 4.0 | 16.7 | (76.4) | (56.7) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted net income (loss) attributable to non-controlling interest (i) | 1.2 | (0.5) | 5.5 | (0.2) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted net income (loss) attributable to shareholders of the Company | 5.2 | 16.2 | (70.9) | (56.9) | |||||||||||||||||||||||||||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||||||||||||||||||||||||||
| Basic | 96,724,923 | 102,468,461 | 96,666,503 | 103,089,612 | |||||||||||||||||||||||||||||||||||||||||||
| Diluted | 98,181,197 | 103,586,542 | 96,666,503 | 103,089,612 | |||||||||||||||||||||||||||||||||||||||||||
Adjusted net income (loss) per basic share attributable to shareholders of the Company | $ | 0.05 | $ | 0.16 | $ | (0.73) | $ | (0.55) | |||||||||||||||||||||||||||||||||||||||
Adjusted net income (loss) per diluted share attributable to shareholders of the Company | $ | 0.05 | $ | 0.16 | $ | (0.73) | $ | (0.55) | |||||||||||||||||||||||||||||||||||||||
(a)Costs incurred for the corporate head office transition, including depreciation on right-of-use assets.
(b)Corporate head office transition costs incurred in (a) as well as $nil and $0.4m of interest expense on lease liabilities for the second and two quarters ended October 1, 2023, respectively.
(c)Costs incurred in connection with the establishment of the Japan Joint Venture. This is driven by the impact of gross margin that would otherwise have been recognized on the sale of inventory recorded at net realizable value less costs to sell, as well as other costs of establishing the Japan Joint Venture.
(d)Changes to the fair value remeasurement of the contingent consideration and put option liability, inclusive of translation gains and losses, related to the Japan Joint Venture. The Company recorded gains of $2.3m and $10.9m on the fair value remeasurement of the
| Canada Goose Holdings Inc. | Page 28 of 40 | |||||||
contingent consideration and put option during the second and two quarters ended September 29, 2024, respectively (second and two quarters ended October 1, 2023 - losses of $0.7m and $7.8m, respectively). These gains and losses are included in net interest, finance and other costs within the interim statements of income (loss).
(e)Transformation Program costs include consultancy fees of $7.7m and $15.5m, as well as severance costs, net of shared-based award forfeitures of $5.5m and $5.5m, associated with the reduction in workforce for the second and two quarters ended October 1, 2023, respectively.
(f)Additional consideration payable to the controlling shareholders of Paola Confectii SRL (“PCML Vendors”) if certain performance conditions are met based on financial results (“Earn-Out”) related to the acquisition of Paola Confectii SRL, recognized as renumeration expense.
(g)Unrealized gains and losses on the translation of the term loan facility from USD to CAD, net of the effect of derivative transactions entered into to hedge a portion of the exposure to foreign currency exchange risk. These costs are included in net interest, finance and other costs within the interim statements of income (loss).
(h)Deferred tax adjustment recorded as the result of Swiss tax reform in Canada Goose International AG.
(i)Calculated as net income (loss) attributable to non-controlling interest within the interim statements of income (loss) of $1.2m and $5.5m for the put option liability and contingent consideration revaluation related to the non-controlling interest within the Japan Joint Venture for the second and two quarters ended September 29, 2024, respectively. Net income (loss) attributable to non-controlling interest within the interim statements of income (loss) of $(0.2)m and $3.7m less $(0.3)m and $(3.9)m for the gross margin adjustment and the put option liability and contingent consideration revaluation related to the non-controlling interest within the Japan Joint Venture for the second and two quarters ended October 1, 2023, respectively.
(j)Calculated as depreciation and amortization as determined in accordance with IFRS Accounting Standards, less the depreciation impact for corporate head office transition costs (a) in the second and two quarters ended October 1, 2023. Depreciation and amortization includes depreciation on right-of-use assets under IFRS 16, Leases.
| Canada Goose Holdings Inc. | Page 29 of 40 | |||||||
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following table summarizes the Company’s consolidated statement of cash flows for the two quarters ended September 29, 2024 compared to the two quarters ended October 1, 2023.
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | $ Change | September 29, 2024 | October 1, 2023 | $ Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total cash (used in) from: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating activities | (50.4) | (57.2) | 6.8 | (193.3) | (266.5) | 73.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investing activities | (3.2) | (26.4) | 23.2 | (5.5) | (32.1) | 26.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financing activities | 58.7 | 72.1 | (13.4) | 118.4 | 51.1 | 67.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effects of foreign currency exchange rate changes on cash | 1.8 | 1.0 | 0.8 | 4.3 | (1.5) | 5.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Decrease) increase cash | 6.9 | (10.5) | 17.4 | (76.1) | (249.0) | 172.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash, beginning of period | 61.9 | 48.0 | 13.9 | 144.9 | 286.5 | (141.6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash, end of period | 68.8 | 37.5 | 31.3 | 68.8 | 37.5 | 31.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash Requirements
Our primary need for liquidity is to fund net working capital, capital expenditures including new stores, debt services, and general corporate requirements of our business. Our primary source of liquidity to meet our cash requirements is cash generated from operating activities over our annual operating cycle. We also utilize the Mainland China credit facilities, the Japan credit facility, and the revolving credit facility, to provide short-term liquidity and to have funds available for net working capital. Our ability to fund our operations, invest in planned capital expenditures, meet debt obligations, and repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject, but not limited to, prevailing economic, financial, and business conditions, some of which are beyond our control. Cash generated from operating activities is significantly impacted by the seasonality of our business. Historically, cash flows from operating activities have been highest in the third and fourth fiscal quarters of the fiscal year due to revenue from the DTC channel and the collection of receivables from wholesale revenue recognized earlier in the year.
At September 29, 2024, total inventory was $473.4m, compared to $519.7m at October 1, 2023, reflecting a decrease of $46.3m. Raw materials inventory decreased by $4.7m from the comparative quarter mainly due to lower safety stock purchases. Finished goods inventory decreased by $38.0m driven by inventory management of slow moving inventory through revenue generated in the Other segment, and movement of finished goods from inventory to obsolescence resulting in higher finished goods obsolescence provisioning. Further impacting inventory position was optimization of production levels to better align the supply of product with expected demand, consolidation of our manufacturing facilities and bringing more production in-house to improve control over production levels and costs.
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As at September 29, 2024, the increase in total inventory compared to March 31, 2024 was attributable to higher finished goods which is in line with the seasonality of our business as inventory levels increase ahead of peak selling season. This was partially offset with a decrease in raw materials due to an adjustment to purchasing processes to better align supply with production needs.
We continue to monitor the levels of inventory in each of our sales channels and across geographic regions and intend to continue to align inventory with demand that we forecast in each region.
Cash flows used in operating activities
Cash flows used in operating activities were $50.4m for the second quarter ended September 29, 2024 compared to $57.2m for the second quarter ended October 1, 2023. The decrease in cash flows used in operating activities of $6.8m was due to lower taxes paid of $17.0m, partially offset by lower inventory production and lower SG&A expenses, as described above, driving lower accounts payables and accrued liabilities.
Cash flows used in operating activities were $193.3m for the two quarters ended September 29, 2024 compared to $266.5m for the two quarters ended October 1, 2023. The decrease in cash flows used in operating activities of $73.2m was due to lower taxes paid of $41.7m and lower inventory production.
Cash flows used in investing activities
Cash flows used in investing activities were $3.2m for the second quarter ended September 29, 2024 compared to $26.4m for the second quarter ended October 1, 2023. The decrease in cash flows used in investing activities of $23.2m was primarily due to lower spend from the reduced pace of retail expansion from the comparative quarter in line with the fiscal 2025 priority to strengthen our existing retail network.
Cash flows used in investing activities were $5.5m for the two quarters ended September 29, 2024 compared to $32.1m for the two quarters ended October 1, 2023. The decrease in cash flows used in investing activities of $26.6m was primarily due to lower spend from the reduced pace of retail expansion from the comparative period in line with the fiscal 2025 priority to strengthen our existing retail network.
| Canada Goose Holdings Inc. | Page 31 of 40 | |||||||
Cash flows from financing activities
Cash flows from financing activities were $58.7m for the second quarter ended September 29, 2024 compared to $72.1m for the second quarter ended October 1, 2023. The decrease in cash flows from financing activities of $13.4m was driven by lower borrowings on the revolving credit facility by $79.7m, partially offset by $29.9m of higher payments for the purchase of subordinate voting shares that were cancelled related to the Fiscal 2023 NCIB and Fiscal 2024 NCIB, that did not recur in the current quarter, as described below.
Cash flows from financing activities were $118.4m for the two quarters ended September 29, 2024 compared to $51.1m for the two quarters ended October 1, 2023. The increase in cash flows from financing activities of $67.3m was a result of no share repurchases, compared to $57.4m in the comparative period, related to the Fiscal 2023 NCIB and Fiscal 2024 NCIB, as described below, and increased borrowings of $36.7m on the Mainland China credit facilities. This was slightly offset by lower borrowings on the revolving credit facility $25.4m and increased principal payments on lease liabilities of $12.2m.
Indebtedness
The following table presents our net debt1 as at September 29, 2024, October 1, 2023, and March 31, 2024.
| CAD $ millions | September 29, 2024 | October 1, 2023 | $ Change | March 31, 2024 | $ Change | ||||||||||||||||||||||||
| Cash | 68.8 | 37.5 | 31.3 | 144.9 | (76.1) | ||||||||||||||||||||||||
| Mainland China Facilities | (74.4) | (47.5) | (26.9) | — | (74.4) | ||||||||||||||||||||||||
| Japan Facility | (31.4) | (29.1) | (2.3) | (5.4) | (26.0) | ||||||||||||||||||||||||
| Revolving Facility | (61.3) | (86.3) | 25.0 | — | (61.3) | ||||||||||||||||||||||||
| Term Loan | (390.2) | (396.2) | 6.0 | (393.1) | 2.9 | ||||||||||||||||||||||||
| Lease liabilities | (337.9) | (330.3) | (7.6) | (330.5) | (7.4) | ||||||||||||||||||||||||
Net debt1 | (826.4) | (851.9) | 25.5 | (584.1) | (242.3) | ||||||||||||||||||||||||
1Net debt is non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
As at September 29, 2024, net debt1 was $826.4m compared to $851.9m as at October 1, 2023. The increase of $25.5m was driven by an increase in borrowings on the revolving credit facility. Net debt leverage1 as at September 29, 2024 was 2.9 times adjusted EBITDA, compared to 3.3 times adjusted EBITDA as at October 1, 2023.
Net debt1 was $584.1m as at March 31, 2024. The increase of $242.3m as at September 29, 2024 was driven by a decrease in cash of $76.1m and increased borrowings on the revolving credit facility, Mainland China credit facilities and Japan credit facility, in line with the seasonality of our working capital requirements.
1.Net debt is a non-IFRS financial measure and net debt leverage is a non-IFRS ratio. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of these measures.
| Canada Goose Holdings Inc. | Page 32 of 40 | |||||||
Amendments to borrowings
Post June 28, 2024, Canadian Dollar Offered Rates were no longer being published. As a result, in the second quarter ended September 29, 2024, the Company entered into amendments to its revolving credit facility to transition from the Canadian Dollar Offered interest benchmarks to the Canadian Overnight Repo Rate Average ("CORRA”). There were no further amendments to borrowings in the two quarters ended September 29, 2024.
See “Note 10. Borrowings” in our Interim Financial Statements, “Note 17. Borrowings”, “Factors affecting performance” and “Indebtedness” in our fiscal 2024 Annual Report for detailed information on our debt facilities and seasonality of the business.
Normal Course Issuer Bids
Share capital transactions for the two quarters ended September 29, 2024
Normal course issuer bid for Fiscal 2024
During fiscal 2024, the Company renewed its normal course issuer bid in relation to its subordinate voting shares (“Fiscal 2024 NCIB”). The Company is authorized to make purchases under the Fiscal 2024 NCIB from November 22, 2023 to November 21, 2024, in accordance with the requirements of the Toronto Stock Exchange (the “TSX”). The Board of Directors of the Company has authorized the Company to repurchase up to 4,980,505 subordinate voting shares, representing 10.0% of the Public Float (as defined in the rules of the TSX) for the subordinate voting shares as at November 10, 2023. Purchases will be made by means of open market transactions on both the TSX and the New York Stock Exchange (the “NYSE”), or alternative trading systems, if eligible, and will conform to their regulations. Under the Fiscal 2024 NCIB, the Company is allowed to repurchase daily, through the facilities of the TSX, a maximum of 71,846 subordinate voting shares, representing 25% of the average daily trading volume, as calculated per the TSX rules for the six-month period starting on May 1, 2023 and ending on October 31, 2023. A copy of the Company's notice of intention to commence a NCIB through the facilities of the TSX may be obtained, without charge, by contacting the Company. The Company believes that the purchase of its subordinate voting shares under the Fiscal 2024 NCIB is an appropriate and desirable use of available excess cash.
In connection with the Fiscal 2024 NCIB, the Company also entered an automatic share purchase plan (the “Fiscal 2024 ASPP”) under which a designated broker may purchase subordinate voting shares under the Fiscal 2024 NCIB during the regularly scheduled quarterly trading blackout periods of the Company. The repurchases made under the Fiscal 2024 ASPP will be made in accordance with certain purchasing parameters and will continue until the earlier of the date in which the Company has purchased the maximum value of subordinate voting shares pursuant to the Fiscal 2024 NCIB or upon the date of expiry of the Fiscal 2024 NCIB.
During the two quarters ended September 29, 2024, the Company made no repurchases under the Fiscal 2024 NCIB.
Since the commencement of the Fiscal 2024 NCIB, the Company purchased 3,586,124 subordinate voting shares for cancellation, for total cash consideration of $56.9m.
| Canada Goose Holdings Inc. | Page 33 of 40 | |||||||
Normal course issuer bid for Fiscal 2023
Prior to the Fiscal 2024 NCIB, the Company maintained another normal course issuer bid in relation to its subordinate voting shares (“Fiscal 2023 NCIB”). The Company was authorized to make purchases from November 22, 2022 to November 21, 2023 under the Fiscal 2023 NCIB, in accordance with the rules of the TSX.
During the two quarters ended October 1, 2023, under the Fiscal 2023 NCIB, the Company purchased 2,521,501 subordinate voting shares for cancellation for total cash consideration of $56.2m.
See “Note 11. Shareholders’ equity” in our Interim Financial Statements and “Note 18. Shareholders’ equity” in our fiscal 2024 Annual Report for detailed information on the Fiscal 2024 NCIB and Fiscal 2023 NCIB.
Contractual Obligations
Refer to “Contractual Obligations” in the MD&A section of our fiscal 2024 Annual Report and “Note 15. Financial risk management objectives and policies” of our Interim Financial Statements for a summary of the significant contractual obligations and other obligations of the Company. There have been no material changes since March 31, 2024.
OFF-BALANCE SHEET ARRANGEMENTS
The Company uses off-balance sheet arrangements including letters of credit and guarantees in connection with certain obligations including leases. In Europe, a subsidiary of the Company maintained an agreement to factor, on a limited recourse basis, certain of its trade accounts receivable up to a limit of EUR20.0m in exchange for advanced funding equal to 100% of the principal value of the invoice. On April 12, 2024, this agreement was terminated. Other than those items disclosed here and elsewhere in this MD&A and our financial statements, we did not have any material off-balance sheet arrangements or commitments as at September 29, 2024.
See “Note 15. Financial risk and management objectives and policies” in the Interim Financial Statements and “Off-Balance Sheet Arrangements” in our fiscal 2024 Annual Report for detailed information on our off-balance sheet arrangements.
OUTSTANDING SHARE CAPITAL
Canada Goose is a publicly traded company and the subordinate voting shares are listed on the New York Stock Exchange (NYSE: GOOS) and on the Toronto Stock Exchange (TSX: GOOS). As at October 31, 2024, there were 45,790,918 subordinate voting shares issued and outstanding, and 51,004,076 multiple voting shares issued and outstanding.
As at October 31, 2024, there were 4,864,792 options, 661,403 restricted share units, and 688,711 performance share units outstanding under the Company’s equity incentive plans, of which 2,382,162 options were vested as of such date. Each option is exercisable for one subordinate voting share. We expect that vested restricted share units and performance share units, including any additional performance share units, vested for performance achieved above target, will be paid at settlement through the issuance of one subordinate voting share per unit.
| Canada Goose Holdings Inc. | Page 34 of 40 | |||||||
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks arising from transactions in the normal course of our business. Such risk is principally associated with credit risk, foreign currency risk, and interest rate risk.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk arises from the possibility that certain parties will be unable to discharge their obligations. The Company manages its credit risk through a combination of third party credit insurance and internal house risk. The Company has an agreement with a third-party who has insured the risk of loss for up to 90% of trade accounts receivable from certain designated customers subject to a total deductible of $0.1m, to a maximum of $30.0m per year. Moreover, within CG Japan, the Company has an agreement with a third party who has insured the risk of trade accounts receivable for certain designated customers for a maximum of JPY540.0m per annum subject to a deductible of 10% and applicable only to accounts with receivables over JPY100k.
In addition, a subsidiary of the Company in Europe managed credit risk through the agreement to factor, on a limited recourse basis, certain of its trade accounts receivable up to a limit of EUR20.0m in exchange for advanced funding equal to 100% of the principal value of the invoice. On April 12, 2024, this agreement was terminated with an immaterial impact to the Company’s trade accounts receivables.
Our exposure to credit risk has not significantly changed from the fiscal year ended March 31, 2024. See “Quantitative and Qualitative Disclosures about Market Risk” in our fiscal 2024 Annual Report for detailed information on the Company’s credit risk.
Foreign exchange risk
Foreign exchange risk in operating cash flows
Our Interim Financial Statements are expressed in Canadian dollars, but a substantial portion of the Company’s revenues, purchases, and expenses are denominated in foreign currencies, primarily U.S. dollars, euros, British pounds sterling, Swiss francs, Chinese yuan, Hong Kong dollars, and Japanese yen. Furthermore, as our business in Greater China grows, transactions in Chinese yuan, Hong Kong dollars and Taiwanese dollars are expected to increase. Net monetary assets denominated in currencies other than Canadian dollars that are held in entities with Canadian dollar functional currency are translated into Canadian dollars at the foreign currency exchange rate in effect at the balance sheet date. Revenues and expenses of all foreign operations are translated into Canadian dollars at the foreign currency exchange rates that approximate the rates in effect at the dates when such items are recognized. As a result, we are exposed to foreign currency translation gains and losses from our foreign operations into Canadian dollars. Appreciating foreign currencies relative to the Canadian dollar, to the extent they are not hedged, will positively impact operating income and net income by increasing our revenue, while depreciating foreign currencies relative to the Canadian dollar will have the opposite impact.
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We are also exposed to fluctuations in the prices of the U.S. dollar and euro denominated purchases as a result of changes in U.S. dollar or euro exchange rates. Most of our raw materials are sourced outside of Canada, primarily in U.S. dollars, and SG&A expenses are typically denominated in the currency of the country in which they are incurred. As a result, we are exposed to foreign currency exchange fluctuations on multiple currencies. A depreciating Canadian dollar relative to the U.S. dollar or euro will negatively impact operating income and net income by increasing our costs of raw materials, while an appreciating Canadian dollar relative to the U.S. dollar or euro will have the opposite impact.
As part of our risk management program, we have entered into foreign exchange derivative contracts to manage certain of our exposures to exchange rate fluctuations for future foreign currency transactions, which is intended to reduce the variability of our operating costs and future cash flows denominated in local currencies. Certain forward foreign exchange contracts were designated at inception and accounted for as cash flow hedges.
Foreign exchange risk on borrowings
We are further exposed to translation and transaction risks associated with foreign currency exchange fluctuations on foreign currencies denominated principal and interest amounts payable on the Mainland China credit facilities, the Japan credit facility, the revolving credit facility, and the term loan facility. The Company has entered into foreign exchange forward contracts to hedge 90% or USD270.0m of its exposure to foreign currency exchange risk related to principal payments on the term loan facility denominated in U.S. dollars.
See “Note 15. Financial risk and management objectives and policies” in our Interim Financial Statements, and the “Foreign exchange risk” section of our fiscal 2024 Annual Report for detailed information about the Company’s hedging program.
Interest rate risk
The Company is exposed to interest rate risk related to the effect of interest rate changes on the borrowings outstanding under the Mainland China credit facilities, the Japan credit facility, the revolving credit facility, and the term loan facility, which currently bear interest rates at 2.92%, 0.64%, 5.75% and 8.47%, respectively.
Interest rate risk on the term loan facility is partially mitigated by interest rate swap hedges. The Company has entered into five-year interest rate swap agreements terminating December 31, 2025 to pay fixed interest rates and receive floating interest rates on notional debt of USD270.0m. The floating interest benchmark reference rate contained within the swap agreements is SOFR with the average fixed rates of 1.76%. These swap agreements fix the interest rate on the USD300.0m Term Loan. The interest rate swaps continue to be designated and accounted for as cash flow hedges.
Based on the closing balance of outstanding borrowings, a 1.00% increase in the closing interest rate during the two quarters ended September 29, 2024 would have increased interest expense on the Mainland China credit facilities, Japan credit facility, Revolving credit facility and the term loan facility before hedging, by $0.4m $0.2m, $0.3m and $2.0m, respectively (two quarters ended October 1, 2023 - 0.1m, $0.1m, $0.2m and $2.0m, respectively).
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Until the third quarter ended December 31, 2023, the Company calculated interest rate sensitivity on debt facilities using the average balance of the facility and average interest rate in the reporting period. Following the third quarter, and applicable for the two quarters ended September 29, 2024, the Company calculated interest rate sensitivity on debt facilities using the closing balance of the facility and the closing interest rate. The Company believes this change provides more relevant information on interest rate sensitivity. The Company has recognized this change as a change in estimates and had adjusted the disclosure prospectively.
FISCAL 2025 OUTLOOK
A revised discussion as to our fiscal year 2025 outlook is contained in our earnings press release dated November 7, 2024 under the heading “Fiscal 2025 Outlook”. Such press release is available on the SEDAR+ website at www.sedarplus.ca under the Company’s profile, and on the EDGAR section of the SEC website at www.sec.gov.
LITIGATION AND OTHER CONTINGENCIES
In the ordinary course of business, the Company may become subject to legal and regulatory proceedings and actions relating to its business, including matters involving its products, contractual and employment relationships. The Company records contingent liabilities when a loss related to a claim is assessed to be probable and reasonably estimable.
A mediation took place in fiscal 2024 in connection with a previously served notice of arbitration from a former supplier of the Company, seeking damages for breach of contract and for the unlawful means tort in connection with termination of a supply agreement. The claim also asserts that disclosure by the Company of information relating to the sourcing and traceability of its products constituted unlawful acts harmful to the former supplier. Such mediation did not result in a settlement of any issues and claims, and the parties are continuing to proceed with upcoming arbitration hearings to adjudicate the claims. The Company believes it has strong defences to the claim and consequently has not recorded a provision in the financial statements. However, if the arbitration is resolved in favour of the former supplier, the obligation could have a significant impact on the Company’s financial statements and results of operations.
RELATED PARTY TRANSACTIONS
The Company enters into transactions from time to time with its principal shareholders, as well as organizations affiliated with members of the Board of Directors and key management personnel by incurring expenses for business services. During the second and two quarters ended September 29, 2024, the Company incurred expenses with related parties of $0.6m and $1.1m, respectively (second and two quarters ended October 1, 2023 - $0.1m and $0.4m, respectively) from companies related to certain shareholders. Balances owing to related parties as at September 29, 2024 were $0.4m (October 1, 2023 - $0.1m, March 31, 2024 - $0.2m).
A lease liability due to the former controlling shareholder of the acquired Baffin Inc. business (the "Baffin Vendor") for leased premises was $2.1m as at September 29, 2024 (October 1, 2023 - $2.7m, March 31, 2024 - $2.5m). During the second and two quarters ended September 29, 2024, the Company paid principal and interest on the lease liability, net of rent concessions, and other operating costs to entities affiliated with the Baffin Vendor totalling $0.5m and $0.9m, respectively, (second and two quarters ended October 1, 2023 - $0.3m and $0.7m, respectively). No amounts were owing to Baffin entities as at September 29, 2024, October 1, 2023, and March 31, 2024.
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The joint venture between the Company and Sazaby League ("Japan Joint Venture"), has lease liabilities due to the non-controlling shareholder, Sazaby League for leased premises. Lease liabilities were $1.7m as at September 29, 2024 (October 1, 2023 - $2.2m, March 31, 2024 - $1.9m) During the second and two quarters ended September 29, 2024, the Company incurred principal and interest on lease liabilities, royalty fees, and other operating costs to Sazaby League totalling $0.5m and $1.8m, respectively (second and two quarters ended October 1, 2023 - $0.8m and $1.9m, respectively). Balances owing to Sazaby League as at September 29, 2024 were $0.3m (October 1, 2023 - $0.2m, March 31, 2024 - $0.3m).
During the second and two quarters ended September 29, 2024, the Japan Joint Venture sold inventory of $0.2m and $0.2m, respectively to companies wholly owned by Sazaby League (second and two quarters ended October 1, 2023 - $0.1m and $0.1m, respectively). As at September 29, 2024, the Japan Joint Venture recognized a trade receivable of $0.2m from these companies (October 1, 2023 - $0.1m, March 31, 2024 - $0.1m).
In connection with the Paola Confectii business combination that occurred during the year ended March 31, 2024, subject to the controlling shareholders of Paola Confectii SRL ("PCML Vendors") remaining employees through November 1, 2025, a further amount is payable to the PCML Vendors if certain performance conditions are met based on financial results (“Earn-Out”). For the second and two quarters ended September 29, 2024, the Company recognized $0.6m and $1.5m respectively, of remuneration costs related to the Earn-Out based on the estimated value of $7.7m for the payout. These costs have been included in other long-term liabilities on the statement of financial position, and reflect the amount owing to the PCML Vendors as at September 29, 2024.
A lease liability due to one of the PCML Vendors for leased premises was $1.2m as at September 29, 2024. During the second and two quarters ended September 29, 2024, the Company paid principal and interest on the lease liability, to one of the PCML Vendors totalling $0.1m and $0.1m, respectively. No amounts were owing to one of the PCML Vendors as at September 29, 2024.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Interim Financial Statements have been prepared in accordance with IFRS Accounting Standards as issued by the IASB. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. See “Critical Accounting Policies and Estimates” in our MD&A within the fiscal 2024 Annual Report for detailed information.
CHANGES IN ACCOUNTING POLICIES
Standards issued and not yet adopted
Certain new standards, amendments, and interpretations to existing IFRS Accounting Standards have been published but are not yet effective and have not been adopted early by the Company. Management anticipates that pronouncements will be adopted in the Company’s accounting policy for the first period beginning after the effective date of the pronouncement.
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Standards issued and adopted
In January 2020, the IASB issued an amendment to IAS 1, Presentation of Financial Statements to clarify its requirements for the presentation of liabilities in the statement of financial position. The limited scope amendment affected only the presentation of liabilities in the statement of financial position and not the amount or timing of its recognition. The amendment clarified that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and specified that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability. It also introduced a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, and other assets or services. On October 31, 2022, the IASB issued Non-Current Liabilities with Covenants (Amendments to IAS 1). These amendments specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. These amendments are effective for annual reporting periods beginning on or after January 1, 2024.
The adoption of the agenda decision was recognized as a change in accounting policy in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”). The Company amended the existing accounting policies related to its presentation of liabilities in the statement of financial position as at April 1, 2024. The Company assessed the impact of the amendment and identified $23.0m of liabilities as at the date of adoption, recognized as non-current liabilities on the provision line related to warranty that can no longer be disclosed as such in accordance with the agenda decision. As a result, this balance was reclassified to current liabilities on the provisions line of the statement of financial position.
In accordance with IAS 8, retrospective application is required for accounting policy changes and comparative financial information was restated in the statement of financial position. As a result, $22.2m and $23.0m were reclassified from non-current provisions to current provisions for October 1, 2023 and March 31, 2024, respectively.
In May 2023, the IASB issued International Tax Reform, Pillar Two Model Rules, Amendments to IAS 12, Income Taxes (the “Amendments”). The Amendments provide the Company with an exception from recognition and disclosure requirements for deferred tax assets and liabilities arising from the Organization for Economic Co-operation and Development ("OECD") Pillar Two international tax reform.
The Company is within the scope of the OECD Pillar Two rules. Pursuant to these rules, the parent entity of the Company will be required to pay a tax on the profit of any of subsidiary whose effective tax rate (determined in accordance with Canadian Pillar Two rules) is less than 15%, unless the jurisdiction of the subsidiary’s incorporation has implemented similar Pillar Two rules. On June 20, 2024, Pillar Two rules become law in Canada and apply to the Company from April 1, 2024.
The Company has completed an assessment of the application of the Pillar Two rules and does not currently estimate a material impact on its tax position, however it continues to monitor developments.
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INTERNAL CONTROL OVER FINANCIAL REPORTING
Disclosure Controls and Procedures
Management, including the CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based on that evaluation, the CEO and CFO concluded that such disclosure controls and procedures were effective as of September 29, 2024 to provide reasonable assurance that the information required to be disclosed by the Company in reports it files is recorded, processed, summarized and reported, within the appropriate time periods and is accumulated and communicated to management, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the CEO and the CFO and effected by the Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards. The Company’s internal control over financial reporting includes policies and procedures that:
•Pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, the transactions and dispositions of assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS Accounting Standards and that the receipts and expenditures of the Company are made only in accordance with authorizations of management and directors; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the assets of the Company that could have a material effect on the consolidated financial statements.
There has been no change in the Company’s internal control over financial reporting during the two quarters ended September 29, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management determined that the Company’s internal control over financial reporting was effective as of September 29, 2024.
Limitations of Controls and Procedures
Due to its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Management's projections of any evaluation of the effectiveness of internal control over financial reporting as to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Exhibit 99.3
CERTIFICATION
I, Dani Reiss, certify that:
| 1. | I have reviewed the financial statements and MD&A for the second quarter ended September 29, 2024 of Canada Goose Holdings Inc.; | ||||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; | ||||
| 4. | The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and we have: | ||||
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||||||
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||||||
| c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||||||
| d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and | |||||||
| 5. | The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function): | ||||
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and | |||||||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. | |||||||
Date: November 7, 2024
By: | /s/ Dani Reiss | |||||||
| Dani Reiss | ||||||||
| Chairman and Chief Executive Officer | ||||||||
-2-
Exhibit 99.4
CERTIFICATION
I, Neil Bowden, certify that:
| 1. | I have reviewed the financial statements and MD&A for the second quarter ended September 29, 2024 of Canada Goose Holdings Inc.; | ||||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; | ||||
| 4. | The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and we have: | ||||
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||||||
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||||||
| c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||||||
| d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and | |||||||
| 5. | The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function): | ||||
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and | |||||||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. | |||||||
Date: November 7, 2024
By: | /s/ Neil Bowden | |||||||
| Neil Bowden | ||||||||
| Chief Financial Officer | ||||||||
-2-
Canada Goose Reports Second Quarter Fiscal 2025 Results
Revenue of $267.8M
Net income attributable to shareholders was $5.4m, or $0.06 per diluted share
Toronto – November 7, 2024 – Canada Goose Holdings Inc. (NYSE, TSX: GOOS) announced today financial results for the second quarter of fiscal 2025, which ended September 29, 2024. All amounts are in Canadian dollars unless otherwise indicated. The company also provided an update to its financial outlook for the full year ending March 31, 2025.
“Our second quarter performance reflected steady progress across our operating priorities, as we navigated an increasingly challenging macro environment that affected consumer sentiment,” said Dani Reiss, Chairman and CEO of Canada Goose. “We remain focused on delivering an outstanding customer experience in our DTC channel and increasing desirability for our versatile collection through focused marketing and improved distribution. We believe we are well positioned for the upcoming holiday season and are excited to bring the first capsule collection from our Creative Director, Haider Ackermann, to market at the end of November. We are confident that our plan will improve our overall business performance as we continue build a strong foundation for sustainable, long-term profitable growth.”
Second Quarter Fiscal 2025 Business Highlights:
Notable highlights from our second quarter included the following:
•Continued to expand our presence in key markets, opening two new standalone stores and converting two temporary stores to permanent, bringing the total permanent store count to 72 at the end of the second quarter of fiscal 2025.
◦We also unveiled our newly renovated store in the upscale Ginza district of Tokyo, which features our signature cold room and VIP space.
•Launched our live shopping channel on Chinese platform, Douyin, enabling us to engage in strong brand storytelling and grow awareness with a large audience in a key market.
•Launched our Fall Winter 2024 collection, featuring styles that embody a fresh aesthetic while staying true to our heritage. Lightweight down designs within this collection have been popular among consumers.
•Announced our product expansion into eyewear through our licensee partnership with Marchon Eyewear. We plan to launch our first eyewear collection in Spring 2025.
•Invested in key brand moments featuring a product campaign with global brand ambassador, Shai Gilgeous-Alexander as part of our Fall Winter 2024 campaign, and our Heritage Storytelling campaign leading into the launch of Haider Ackermann’s upcoming capsule.
Second Quarter Financial Highlights1:
All Year-Over-Year Comparisons Unless Otherwise Noted:
▪Total revenue decreased 5% to $267.8m or down 6% on a constant currency basis2.
•DTC revenue decreased 5% to $103.9m, or 6% on a constant currency basis2 with DTC comparable sales3 declining 13%, partially offset by sales from newer stores.
1 Comparisons to second quarter ended October 1, 2023.
2 Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for more information.
3 DTC comparable sales (decline) growth is a supplementary financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
1
•Wholesale revenue decreased 15% to $137.3m or 17% on a constant currency basis2 due to a planned lower order book as we continue to elevate our presence within the wholesale channel by right-sizing our inventory position and building strong relationships with brand-aligned partners.
•Other revenue increased $16.9m to $26.6m primarily due to clearing slow-moving and discontinued inventory as part of our inventory exit strategy, and contribution of incremental revenue from our knitwear facility we acquired in third quarter fiscal 2024.
▪Gross profit decreased 9% to $164.1m. Gross margin for the quarter was 61.3% compared to 63.9% in the second quarter of fiscal 2024 primarily due to a higher proportion of non-Heavyweight down revenue within the product mix.
▪Selling, general and administrative (SG&A) expenses were $162.5m, compared to $177.2m in the prior year period. The reduction in SG&A was primarily due to the non-recurrence of costs relating to the Transformation Program, a shift in timing of marketing spend to align with the launch of the first capsule from Haider Ackermann, and continued efficiencies from workforce reductions in the prior year. This was partially offset by an increase in expenses related to the expansion of our global retail network.
▪Operating Income was $1.6m, compared to $2.3m in the prior year period.
▪Adjusted EBIT4 was $2.5m, compared to $15.6m in the prior year period. The decrease in adjusted EBIT is due to the decline in gross profit in the quarter compared to the same period in fiscal 2024 and the expansion of our global retail network, partially offset by lower corporate SG&A expense and a shift in timing of marketing spend versus the same period last year.
▪Net income attributable to shareholders was $5.4m, or $0.06 per diluted share, compared with a net income attributable to shareholders of $3.9m, or $0.04 per diluted share in the prior year period.
▪Adjusted net income attributable to shareholders4 was $5.2m, or $0.05 per diluted share, compared with an adjusted net income attributed to shareholders of $16.2m, or $0.16 per diluted share in the prior year period.
Balance Sheet Highlights
Inventory of $473.4m for the second quarter ended September 29, 2024, was down 9% year-over-year, due to a combination of sales through our DTC, Wholesale, and Other channels, and a temporary reduction in production levels.
The company ended the second quarter of fiscal 2025 with net debt4 of $826.4m, compared with $851.9m at the end of the second quarter of fiscal 2024. This net debt position includes borrowings on our revolving facility which is seasonally typical for us as we build inventory in preparation for our peak selling season.
4 Adjusted EBIT, adjusted net income attributable to shareholders of the Company, and net debt are non-IFRS financial measures, and Adjusted EBIT margin, and adjusted net income per diluted share attributable to the shareholders of the Company are non-IFRS financial ratios. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for more information.
2
Fiscal 2025 Outlook5
The outlook that follows constitutes “financial outlook” and “forward-looking information” within the meaning of applicable securities laws, and is based on a number of assumptions and subject to a number of risks. The purpose of this outlook is to provide a description of management's expectations regarding the Company's annual financial performance and may not be appropriate for other purposes. Actual results could vary materially as a result of numerous factors, including certain risk factors, many of which are beyond the company’s control. Please see "Forward-looking Statements" below for more information.
Canada Goose is updating the fiscal 2025 guidance issued with fourth quarter and fiscal 2024 results published on May 16, 2024 to the following:
| All results versus prior fiscal year unless otherwise noted | Prior Outlook (reiterated as of August 1, 2024) | Current Outlook (as of November 7, 2024) | ||||||
Total Revenue Growth (%) | Low-single-digit increase | Low-single-digit decrease to low-single-digit increase | ||||||
| Non-IFRS Adjusted EBIT Margin | ‘+100 basis points | ‘-60 basis points to + 60 basis points | ||||||
| Non-IFRS Adjusted Net Income per Diluted Share growth (%) | Mid-teens digit increase | Mid-single-digit increase | ||||||
Our revised outlook reflects the increased pressure on global luxury consumer spending and incremental planned marketing spend compared to our initial outlook, as well as a more focused and strategic product assortment, along with the following assumptions:
| All results versus prior fiscal year unless otherwise noted | Prior Assumption (reiterated as of August 1, 2024) | Current Assumption (as of November 7, 2024) | Note | ||||||||
| 1H FY2025 vs 2H FY2025 revenue split | Approximate 25%/75% distribution split between 1H and 2H of fiscal 2025 | Approximate 25%/75% distribution split between 1H and 2H of fiscal 2025 | No Change | ||||||||
| DTC Comparable Sales Growth (%) | Low-single-digit increase | Low-single-digit decrease to low-single-digit increase | Now plan to open two new stores and three new concession-based shop-in-shops versus three new stores and four new concession-based shop-in-shops | ||||||||
| Pricing Increase (%) | Average mid-single digit increase | Average mid-single digit increase | No Change | ||||||||
| Wholesale Revenue Growth (%) | 20% decrease | 20% decrease | No Change | ||||||||
| Consolidated Gross Margin | Similar to Fiscal 2024 | Similar to Fiscal 2024 | No Change | ||||||||
| Weighted Average Diluted Shares Outstanding | Approximately 99 million shares | Approximately 98 million shares | |||||||||
5The Company is not able to provide, without unreasonable effort, a reconciliation of the guidance for non-IFRS adjusted EBIT and non-IFRS adjusted net income per diluted share to the most directly comparable IFRS measure because the Company does not currently have sufficient data to accurately estimate the variables and individual adjustments included in the most directly comparable IFRS measure that would be necessary for such reconciliations, including (a) income tax related accruals in respect of certain one-time items (b) the impact of foreign currency exchange and (c) non-recurring expenses that cannot reasonably be estimated in advance. These adjustments are inherently variable and uncertain and depend on various factors that are beyond the Company's control and as a result it is also unable to predict their probable significance. Therefore, because management cannot estimate on a forward-looking basis without unreasonable effort the impact these variables and individual adjustments will have on its reported results in accordance with IFRS, we are unable to provide a reconciliation of the non-IFRS measures included in our fiscal 2025 guidance.
3
Conference Call Information
The Company will host the conference call at 8:30 a.m. EDT on November 7, 2024. The conference call can be accessed by using the following link: https://events.q4inc.com/attendee/331468859. After registering, an email will be sent including dial-in details and a unique conference call pin required to join the live call. A live webcast of the conference call will also be available on the investor relations page of the Company's website at http://investor.canadagoose.com.
About Canada Goose
Canada Goose is a performance luxury outerwear, apparel, footwear and accessories brand that inspires all people to thrive in the world outside. We are globally recognized for our commitment to Canadian manufacturing and our high standards of quality, craftsmanship and functionality. We believe in the power of performance, the importance of experience, and that our purpose is to keep the planet cold and the people on it warm. For more information, visit www.canadagoose.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, including statements relating to our fiscal 2025 financial outlook, the related assumptions included herein, the execution of our proposed strategy, and our operating performance and prospects. These forward-looking statements generally can be identified by the use of words such as “believe,” “could,” “continue,” “expect,” “estimate,” “may,” “potential,” “would,” “will,” and other words of similar meaning. Each forward-looking statement contained in this press release is subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others, the impact on our operations of the current global economic conditions and their evolution and are discussed under “Cautionary Note regarding Forward-Looking Statements” and “Factors Affecting our Performance” in our Management's Discussion and Analysis ("MD&A") as well as under “Risk Factors” in our Annual Report on Form 20-F for the year ended March 31, 2024. You are also encouraged to read our filings with the SEC, available at www.sec.gov, and our filings with Canadian securities regulatory authorities available on SEDAR+ at www.sedarplus.ca for a discussion of these and other risks and uncertainties. Investors, potential investors, and others should give careful consideration to these risks and uncertainties. We caution investors not to rely on the forward-looking statements contained in this press release when making an investment decision in our securities.
Although we base the forward-looking statements contained in this press release on assumptions that we believe are reasonable, we caution readers that actual results and developments (including our results of operations, financial condition and liquidity, and the development of the industry in which we operate) may differ materially from those made in or suggested by the forward-looking statements contained in this press release. Additional impacts may arise that we are not aware of currently. The potential of such additional impacts intensifies the business and operating risks which we face, and these should be considered when reading the forward-looking statements contained in this press release. In addition, even if results and developments are consistent with the forward-looking statements contained in this press release, those results and developments may not be indicative of results or developments in subsequent periods. As a result, any or all of our forward-looking statements in this press release may prove to be inaccurate. No forward-looking statement is a guarantee of future results. Moreover, we operate in a highly competitive and rapidly changing environment in which new risks often emerge. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Consequently, all of the forward-looking information contained herein is qualified by the foregoing cautionary statements. You should read this press release and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained herein are made as of the date of this press release (or as of the date specifically indicated therein), and we do not assume any obligation to update any forward-looking statements except as required by applicable laws. For greater certainty, references herein to “forward-looking statements” include “forward-looking information” within the meaning of Canadian securities laws.
Investors: ir@canadagoose.com
Media: media@canadagoose.com
4
Condensed Consolidated Interim Statements of Income (Loss)
(in millions of Canadian dollars, except per share amounts)
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||||||||
| Revenue | 267.8 | 281.1 | 355.9 | 365.9 | |||||||||||||||||||||||||
| Cost of sales | 103.7 | 101.6 | 139.2 | 131.2 | |||||||||||||||||||||||||
| Gross profit | 164.1 | 179.5 | 216.7 | 234.7 | |||||||||||||||||||||||||
| Selling, general & administrative expenses | 162.5 | 177.2 | 312.0 | 332.1 | |||||||||||||||||||||||||
| Operating income (loss) | 1.6 | 2.3 | (95.3) | (97.4) | |||||||||||||||||||||||||
| Net interest, finance and other costs | 8.5 | 13.6 | 11.7 | 28.1 | |||||||||||||||||||||||||
| Loss before income taxes | (6.9) | (11.3) | (107.0) | (125.5) | |||||||||||||||||||||||||
| Income tax recovery | (13.2) | (15.4) | (39.3) | (44.6) | |||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | |||||||||||||||||||||||||
| Attributable to: | |||||||||||||||||||||||||||||
| Shareholders of the Company | 5.4 | 3.9 | (72.0) | (77.2) | |||||||||||||||||||||||||
| Non-controlling interest | 0.9 | 0.2 | 4.3 | (3.7) | |||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | |||||||||||||||||||||||||
| Earnings (loss) per share attributable to shareholders of the Company | |||||||||||||||||||||||||||||
| Basic | $ | 0.06 | $ | 0.04 | $ | (0.74) | $ | (0.75) | |||||||||||||||||||||
| Diluted | $ | 0.06 | $ | 0.04 | $ | (0.74) | $ | (0.75) | |||||||||||||||||||||
5
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(in millions of Canadian dollars, except per share amounts)
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | |||||||||||||||||||||||||
| Other comprehensive income (loss) | |||||||||||||||||||||||||||||
| Items that will not be reclassified to earnings, net of tax: | |||||||||||||||||||||||||||||
| Actuarial loss on post-employment obligation | (0.7) | (0.2) | (0.7) | (0.2) | |||||||||||||||||||||||||
| Items that may be reclassified to earnings, net of tax: | |||||||||||||||||||||||||||||
| Cumulative translation adjustment gain (loss) | 12.1 | (4.1) | 17.5 | (6.5) | |||||||||||||||||||||||||
| Net (loss) gain on derivatives designated as cash flow hedges | (7.9) | (3.8) | (9.0) | 6.0 | |||||||||||||||||||||||||
| Reclassification of net gain on cash flow hedges to income | — | (0.5) | (0.1) | (1.0) | |||||||||||||||||||||||||
| Other comprehensive income (loss) | 3.5 | (8.6) | 7.7 | (1.7) | |||||||||||||||||||||||||
| Comprehensive income (loss) | 9.8 | (4.5) | (60.0) | (82.6) | |||||||||||||||||||||||||
| Attributable to: | |||||||||||||||||||||||||||||
| Shareholders of the Company | 8.7 | (4.3) | (64.5) | (78.1) | |||||||||||||||||||||||||
| Non-controlling interest | 1.1 | (0.2) | 4.5 | (4.5) | |||||||||||||||||||||||||
| Comprehensive income (loss) | 9.8 | (4.5) | (60.0) | (82.6) | |||||||||||||||||||||||||
6
Condensed Consolidated Interim Statements of Financial Position
(in millions of Canadian dollars)
| September 29, 2024 | October 1, 2023 | March 31, 2024 | |||||||||
| Assets | $ | $ | $ | ||||||||
| Current assets | Reclassified | Reclassified | |||||||||
| Cash | 68.8 | 37.5 | 144.9 | ||||||||
| Trade receivables | 143.1 | 146.5 | 70.4 | ||||||||
| Inventories | 473.4 | 519.7 | 445.2 | ||||||||
| Income taxes receivable | 19.0 | 17.2 | 28.0 | ||||||||
| Other current assets | 66.9 | 82.6 | 52.3 | ||||||||
| Total current assets | 771.2 | 803.5 | 740.8 | ||||||||
| Deferred income taxes | 136.8 | 119.2 | 76.3 | ||||||||
| Property, plant and equipment | 165.0 | 179.3 | 171.8 | ||||||||
| Intangible assets | 133.9 | 132.4 | 135.1 | ||||||||
| Right-of-use assets | 286.2 | 280.0 | 279.8 | ||||||||
| Goodwill | 71.7 | 62.7 | 70.8 | ||||||||
| Other long-term assets | 1.9 | 12.2 | 7.0 | ||||||||
| Total assets | 1,566.7 | 1,589.3 | 1,481.6 | ||||||||
| Liabilities | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable and accrued liabilities | 155.4 | 210.2 | 177.7 | ||||||||
| Provisions | 44.9 | 42.7 | 49.1 | ||||||||
| Income taxes payable | 23.6 | 7.7 | 16.8 | ||||||||
| Short-term borrowings | 109.8 | 80.7 | 9.4 | ||||||||
| Current portion of lease liabilities | 83.1 | 77.1 | 79.9 | ||||||||
| Total current liabilities | 416.8 | 418.4 | 332.9 | ||||||||
| Provisions | 14.9 | 13.6 | 14.3 | ||||||||
| Deferred income taxes | 13.0 | 15.5 | 17.2 | ||||||||
| Revolving Facility | 60.5 | 85.0 | — | ||||||||
| Term Loan | 385.7 | 391.4 | 388.5 | ||||||||
| Lease liabilities | 254.8 | 253.2 | 250.6 | ||||||||
| Other long-term liabilities | 52.1 | 56.5 | 54.6 | ||||||||
| Total liabilities | 1,197.8 | 1,233.6 | 1,058.1 | ||||||||
| Equity | |||||||||||
| Equity attributable to shareholders of the Company | 357.9 | 352.2 | 417.0 | ||||||||
| Non-controlling interests | 11.0 | 3.5 | 6.5 | ||||||||
| Total equity | 368.9 | 355.7 | 423.5 | ||||||||
| Total liabilities and equity | 1,566.7 | 1,589.3 | 1,481.6 | ||||||||
7
Condensed Consolidated Interim Statements of Cash Flows
(in millions of Canadian dollars)
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||
| September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||||||||
| Operating activities | |||||||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | |||||||||||||||||||||||||
| Items not affecting cash: | |||||||||||||||||||||||||||||
| Depreciation and amortization | 32.2 | 30.6 | 64.9 | 59.8 | |||||||||||||||||||||||||
| Income tax recovery | (13.2) | (15.4) | (39.3) | (44.6) | |||||||||||||||||||||||||
| Interest expense | 10.8 | 12.9 | 22.6 | 20.3 | |||||||||||||||||||||||||
| Foreign exchange loss (gain) | — | 4.2 | (1.9) | (0.5) | |||||||||||||||||||||||||
| Loss on disposal of assets | 0.4 | 0.1 | 0.4 | — | |||||||||||||||||||||||||
| Share-based payment | 4.0 | 4.7 | 6.2 | 7.2 | |||||||||||||||||||||||||
| Remeasurement of put option | (1.2) | 2.7 | 0.9 | 10.8 | |||||||||||||||||||||||||
| Remeasurement of contingent consideration | (1.1) | (2.0) | (11.8) | (3.0) | |||||||||||||||||||||||||
| 38.2 | 41.9 | (25.7) | (30.9) | ||||||||||||||||||||||||||
| Changes in non-cash operating items | (75.5) | (67.3) | (138.6) | (166.2) | |||||||||||||||||||||||||
| Income taxes paid | (1.9) | (18.9) | (7.3) | (49.0) | |||||||||||||||||||||||||
| Interest paid | (11.2) | (12.9) | (21.7) | (20.4) | |||||||||||||||||||||||||
| Net cash used in operating activities | (50.4) | (57.2) | (193.3) | (266.5) | |||||||||||||||||||||||||
| Investing activities | |||||||||||||||||||||||||||||
| Purchase of property, plant and equipment | (3.2) | (26.0) | (5.4) | (31.2) | |||||||||||||||||||||||||
| Investment in intangible assets | — | (0.3) | — | (0.5) | |||||||||||||||||||||||||
| Initial direct costs of right-of-use assets | — | (0.1) | (0.1) | (0.4) | |||||||||||||||||||||||||
| Net cash used in investing activities | (3.2) | (26.4) | (5.5) | (32.1) | |||||||||||||||||||||||||
| Financing activities | |||||||||||||||||||||||||||||
| Mainland China Facilities borrowings | 57.8 | 25.1 | 74.4 | 37.7 | |||||||||||||||||||||||||
| Japan Facility borrowings | 15.2 | 7.1 | 26.0 | 15.4 | |||||||||||||||||||||||||
| Term Loan repayments | (1.0) | (1.0) | (2.0) | (2.0) | |||||||||||||||||||||||||
| Revolving Facility borrowings | 6.6 | 86.3 | 60.9 | 86.3 | |||||||||||||||||||||||||
| Transaction costs on financing activities | 0.2 | (0.3) | — | (0.3) | |||||||||||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares | — | (29.9) | — | (57.4) | |||||||||||||||||||||||||
| Principal payments on lease liabilities | (20.1) | (15.3) | (40.9) | (28.7) | |||||||||||||||||||||||||
| Issuance of shares | — | 0.1 | — | 0.1 | |||||||||||||||||||||||||
| Net cash from financing activities | 58.7 | 72.1 | 118.4 | 51.1 | |||||||||||||||||||||||||
| Effects of foreign currency exchange rate changes on cash | 1.8 | 1.0 | 4.3 | (1.5) | |||||||||||||||||||||||||
| Increase (decrease) in cash | 6.9 | (10.5) | (76.1) | (249.0) | |||||||||||||||||||||||||
| Cash, beginning of period | 61.9 | 48.0 | 144.9 | 286.5 | |||||||||||||||||||||||||
| Cash, end of period | 68.8 | 37.5 | 68.8 | 37.5 | |||||||||||||||||||||||||
8
Non-IFRS Financial Measures and Other Specified Financial Measures
This press release includes references to certain non-IFRS financial measures such as adjusted EBIT, adjusted net income (loss) attributable to shareholders of the Company, net debt, and constant currency revenue and certain non-IFRS ratios such as, adjusted EBIT margin and adjusted net income (loss) per basic and diluted share attributable to the shareholders of the Company. These financial measures are employed by the Company to measure its operating and economic performance and to assist in business decision-making, as well as providing key performance information to senior management. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors and analysts use this information to evaluate the Company’s operating and financial performance. These financial measures are not defined under IFRS nor do they replace or supersede any standardized measure under IFRS. Other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures. Additional information, including definitions and reconciliations of non-IFRS financial measures to the nearest IFRS financial measure can be found in our MD&A for the second quarter and two quarters ended September 29, 2024, under “Non-IFRS Financial Measures and Other Specified Financial Measures”. Such reconciliations can also be found in this press release under “Reconciliation of Non-IFRS Measures” below.
This press release also includes references to DTC comparable sales (decline) growth which is a supplementary financial measure defined as a rate of (decline) growth of sales on a constant currency basis from e-Commerce sites and stores which have been operating for one full year (12 successive fiscal months). The measure excludes store sales from both periods for the specific trading days when the stores were closed, whether those closures occurred in the current period or the comparative period.
Reconciliation of Non-IFRS Measures
The tables below reconcile net income to adjusted EBIT and adjusted net income attributable to shareholders of the Company for the periods indicated, constant currency revenue to revenue across segments and geographies, and net debt for purposes of presenting its calculation. Adjusted EBIT margin is equal to adjusted EBIT for the period presented as a percentage of revenue for the same period.
| Second quarter ended | Two quarters ended | |||||||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | ||||||||||||||||||||||||||||||||||||||||
| Add (deduct) the impact of: | ||||||||||||||||||||||||||||||||||||||||||||
| Income tax recovery | (13.2) | (15.4) | (39.3) | (44.6) | ||||||||||||||||||||||||||||||||||||||||
| Net interest, finance and other costs | 8.5 | 13.6 | 11.7 | 28.1 | ||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | 1.6 | 2.3 | (95.3) | (97.4) | ||||||||||||||||||||||||||||||||||||||||
| Head office transition costs (a) | — | — | — | 0.8 | ||||||||||||||||||||||||||||||||||||||||
| Japan Joint Venture costs (c) | — | 0.1 | — | 0.1 | ||||||||||||||||||||||||||||||||||||||||
| Transformation Program costs (e) | — | 13.2 | — | 21.0 | ||||||||||||||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (f) | 0.9 | — | 1.8 | — | ||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 0.9 | 13.3 | 1.8 | 21.9 | ||||||||||||||||||||||||||||||||||||||||
| Adjusted EBIT | 2.5 | 15.6 | (93.5) | (75.5) | ||||||||||||||||||||||||||||||||||||||||
| Adjusted EBIT margin | 0.9 | % | 5.5 | % | (26.3) | % | (20.6) | % | ||||||||||||||||||||||||||||||||||||
9
| Second quarter ended | Two quarters ended | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | September 29, 2024 | October 1, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 6.3 | 4.1 | (67.7) | (80.9) | |||||||||||||||||||||||||||||||||||||||||||
| Add (deduct) the impact of: | |||||||||||||||||||||||||||||||||||||||||||||||
| Head office transition costs (a) (b) | — | — | — | 1.2 | |||||||||||||||||||||||||||||||||||||||||||
| Japan Joint Venture costs (c) | — | 0.1 | — | 0.1 | |||||||||||||||||||||||||||||||||||||||||||
| Japan Joint Venture remeasurement (gain) loss on contingent consideration and put option (d) | (2.3) | 0.7 | (10.9) | 7.8 | |||||||||||||||||||||||||||||||||||||||||||
| Transformation Program costs (e) | — | 13.2 | — | 21.0 | |||||||||||||||||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (f) | 0.9 | — | — | 1.8 | — | — | |||||||||||||||||||||||||||||||||||||||||
| Unrealized foreign exchange (gain) loss on Term Loan (g) | (0.9) | 1.7 | 0.8 | (0.5) | |||||||||||||||||||||||||||||||||||||||||||
| (2.3) | 15.7 | (8.3) | 29.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Tax effect of adjustments | — | (3.1) | (0.4) | (4.9) | |||||||||||||||||||||||||||||||||||||||||||
| Deferred tax adjustment (h) | — | — | — | (0.5) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted net income (loss) | 4.0 | 16.7 | (76.4) | (56.7) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted net income (loss) attributable to non-controlling interest (i) | 1.2 | (0.5) | 5.5 | (0.2) | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted net income (loss) attributable to shareholders of the Company | 5.2 | 16.2 | (70.9) | (56.9) | |||||||||||||||||||||||||||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||||||||||||||||||||||||||
| Basic | 96,724,923 | 102,468,461 | 96,666,503 | 103,089,612 | |||||||||||||||||||||||||||||||||||||||||||
| Diluted | 98,181,197 | 103,586,542 | 96,666,503 | 103,089,612 | |||||||||||||||||||||||||||||||||||||||||||
Adjusted net income (loss) per basic share attributable to shareholders of the Company | $ | 0.05 | $ | 0.16 | $ | (0.73) | $ | (0.55) | |||||||||||||||||||||||||||||||||||||||
Adjusted net income (loss) per diluted share attributable to shareholders of the Company | $ | 0.05 | $ | 0.16 | $ | (0.73) | $ | (0.55) | |||||||||||||||||||||||||||||||||||||||
(a)Costs incurred for the corporate head office transition, including depreciation on right-of-use assets.
(b)Corporate head office transition costs incurred in (a) as well as $nil and $0.4m of interest expense on lease liabilities for the second and two quarters ended October 1, 2023, respectively.
(c)Costs incurred in connection with the establishment of the Japan Joint Venture. This is driven by the impact of gross margin that would otherwise have been recognized on the sale of inventory recorded at net realizable value less costs to sell, as well as other costs of establishing the Japan Joint Venture.
(d)Changes to the fair value remeasurement of the contingent consideration and put option liability, inclusive of translation gains and losses, related to the Japan Joint Venture. The Company recorded gains of $2.3m and $10.9m on the fair value remeasurement of the contingent consideration and put option during the second and two quarters ended September 29, 2024, respectively (second and two quarters ended October 1, 2023 - losses of $0.7m and $7.8m, respectively). These gains and losses are included in net interest, finance and other costs within the interim statements of income (loss).
(e)Transformation Program costs include consultancy fees of $7.7m and $15.5m, as well as severance costs, net of shared-based award forfeitures of $5.5m and $5.5m, associated with the reduction in workforce for the second and two quarters ended October 1, 2023, respectively.
(f)Additional consideration payable to the controlling shareholders of Paola Confectii SRL (“PCML Vendors”) if certain performance conditions are met based on financial results (“Earn-Out”) related to the acquisition of Paola Confectii SRL, recognized as renumeration expense.
10
(g)Unrealized gains and losses on the translation of the term loan facility from USD to CAD, net of the effect of derivative transactions entered into to hedge a portion of the exposure to foreign currency exchange risk. These costs are included in net interest, finance and other costs within the interim statements of income (loss).
(h)Deferred tax adjustment recorded as the result of Swiss tax reform in Canada Goose International AG.
(i)Calculated as net income (loss) attributable to non-controlling interest within the interim statements of income (loss) of $1.2m and $5.5m for the put option liability and contingent consideration revaluation related to the non-controlling interest within the Japan Joint Venture for the second and two quarters ended September 29, 2024, respectively. Net income (loss) attributable to non-controlling interest within the interim statements of income (loss) of $(0.2)m and $3.7m less $(0.3)m and $(3.9)m for the gross margin adjustment and the put option liability and contingent consideration revaluation related to the non-controlling interest within the Japan Joint Venture for the second and two quarters ended October 1, 2023, respectively.
11
Revenue By Segment
| Second quarter ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | As reported | Foreign exchange impact | In constant currency | As reported | In constant currency | ||||||||||||||||||||||||||||||||||
| DTC | 103.9 | 109.4 | (5.5) | (1.2) | (6.7) | (5.0) | % | (6.1) | % | ||||||||||||||||||||||||||||||||
| Wholesale | 137.3 | 162.0 | (24.7) | (3.2) | (27.9) | (15.2) | % | (17.2) | % | ||||||||||||||||||||||||||||||||
| Other | 26.6 | 9.7 | 16.9 | — | 16.9 | 174.2 | % | 174.2 | % | ||||||||||||||||||||||||||||||||
| Total revenue | 267.8 | 281.1 | (13.3) | (4.4) | (17.7) | (4.7) | % | (6.3) | % | ||||||||||||||||||||||||||||||||
Revenue by Geography
| Second quarter ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | September 29, 2024 | October 1, 2023 | As reported | Foreign exchange impact | In constant currency | As reported | In constant currency | ||||||||||||||||||||||||||||||||||
| Canada | 57.7 | 57.9 | (0.2) | (0.1) | (0.3) | (0.3) | % | (0.5) | % | ||||||||||||||||||||||||||||||||
| United States | 63.4 | 66.2 | (2.8) | (0.8) | (3.6) | (4.2) | % | (5.4) | % | ||||||||||||||||||||||||||||||||
| North America | 121.1 | 124.1 | (3.0) | (0.9) | (3.9) | (2.4) | % | (3.1) | % | ||||||||||||||||||||||||||||||||
Greater China1 | 46.4 | 43.9 | 2.5 | (0.2) | 2.3 | 5.7 | % | 5.2 | % | ||||||||||||||||||||||||||||||||
Asia Pacific (excluding Greater China1) | 19.7 | 19.9 | (0.2) | (0.2) | (0.4) | (1.0) | % | (2.0) | % | ||||||||||||||||||||||||||||||||
| Asia Pacific | 66.1 | 63.8 | 2.3 | (0.4) | 1.9 | 3.6 | % | 3.0 | % | ||||||||||||||||||||||||||||||||
EMEA2 | 80.6 | 93.2 | (12.6) | (3.1) | (15.7) | (13.5) | % | (16.8) | % | ||||||||||||||||||||||||||||||||
| Total revenue | 267.8 | 281.1 | (13.3) | (4.4) | (17.7) | (4.7) | % | (6.3) | % | ||||||||||||||||||||||||||||||||
1.Greater China comprises Mainland China, Hong Kong, Macau, and Taiwan.
2.EMEA comprises Europe, the Middle East, Africa, and Latin America.
Indebtedness
| CAD $ millions | September 29, 2024 | October 1, 2023 | $ Change | March 31, 2024 | $ Change | ||||||||||||||||||||||||
| Cash | 68.8 | 37.5 | 31.3 | 144.9 | (76.1) | ||||||||||||||||||||||||
| Mainland China Facilities | (74.4) | (47.5) | (26.9) | — | (74.4) | ||||||||||||||||||||||||
| Japan Facility | (31.4) | (29.1) | (2.3) | (5.4) | (26.0) | ||||||||||||||||||||||||
| Revolving Facility | (61.3) | (86.3) | 25.0 | — | (61.3) | ||||||||||||||||||||||||
| Term Loan | (390.2) | (396.2) | 6.0 | (393.1) | 2.9 | ||||||||||||||||||||||||
| Lease liabilities | (337.9) | (330.3) | (7.6) | (330.5) | (7.4) | ||||||||||||||||||||||||
Net debt | (826.4) | (851.9) | 25.5 | (584.1) | (242.3) | ||||||||||||||||||||||||
12