Earnings Call Transcript - GOOS Q2 2023

Operator, Operator

Good day, and thank you for standing by. Welcome to the Canada Goose Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Amy Schwalm, Vice President of Investor Relations. Please go ahead.

Amy Schwalm, Vice President of Investor Relations

Thank you, operator, and good morning, everyone. With me are Dani Reiss, Chairman and CEO; Jonathan Sinclair, EVP and CFO; and Carrie Baker, President. Our call today, including the Q&A portion, contains forward-looking statements. Each forward-looking statement, including our financial outlook, is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Certain material factors and assumptions were considered and applied in making these forward-looking statements. Additional information regarding these statements, factors, and assumptions is available in our press release issued this morning, as well as the Risk Factors section of our most recent annual report filed with the securities regulators. These documents are also available on the Investor Relations section of our website. The forward-looking statements made on this call speak only as of today, and we undertake no obligation to update or revise them. Lastly, our commentary includes certain non-IFRS financial measures, which are reconciled at the end of our press release. With that, I will turn over the call to Dani.

Dani Reiss, Chairman and CEO

Thanks, Amy, and good morning, everyone. I'll start by saying that we are heading into our most important season, and we are well positioned across our business to drive and capture demand globally. There is no doubt that the macroeconomic backdrop continues to present challenges, but I'm very confident that the strong underlying fundamentals of our business will help us navigate them well. This morning, we released our results for the second quarter of fiscal 2023, which beat our expectations. However, despite our strong performance in the quarter, we are not seeing the level of improvement we had assumed in Mainland China. COVID-related disruptions, including mall closures, lockdowns, and travel restrictions, continue to impact traffic. As we head into our most meaningful quarter, we are seeing these disruptions affect an increasing number of cities in which we operate. As a result, we have updated our outlook for the year, which Jonathan will cover in further detail shortly. Let me be clear. Our brand remains strong in Mainland China, regardless of the temporary headwinds. We saw this brand strength during the holiday period week in October and more recently, leading up to Singles Day in November where both traffic and sales trended positive across our network. These holidays have historically been meaningful shopping events, and that has continued for our brand. This gives me confidence in our long-term vision, demand, and brand strength as we move forward. Regardless of temporary challenges we may face, our focus for the remainder of the year is clear. We will continue to execute against our long-term strategy, growing our DTC mix, deepening our presence in new and existing markets, and growing our performance luxury offerings. Now turning back to the quarter. Top-line revenue grew 19% to just over $277 million. On a constant currency basis, revenue growth was 22% ahead of last year. Our strong top line flowed through to meaningful bottom line returns. We significantly exceeded our adjusted EBIT expectations as well as earnings per share. This performance demonstrates the marginal strength of our business, and we are in season and delivering. Turning to channel and regional highlights. Overall, our performance in our second quarter was driven by strong Wholesale performance and continued strength in North America. Our strong Wholesale performance was driven by two factors: one, our ability to fulfill requests from wholesale partners to ship orders earlier in the season; and second, an increase in order book value driven by higher units and price, particularly in Europe. This shift in Wholesale timing not only allows our consumers the ability to shop the full assortment of Canada Goose earlier in the season, but also opens the door to potential reorders only. In North America, where our DTC retail network was a particular standard, the strong performance has continued beyond our second quarter, accelerating that we would expect to see heading into our peak season. In EMEA, we saw our top line growth 34% and by 44% on a constant currency basis. This was largely driven by wholesale, while our stores benefited from increased tourist traffic mainly through the United States. Lastly, in APAC, our results were impacted by performance in Mainland China, which, as I mentioned earlier, continue to be affected by COVID restrictions. Outside of Mainland China, we continued to execute against our regional diversification strategy. In South Korea through our new distributor, Lotte Group, and in Japan through our recent joint venture. Moving from the quarter to announce on progress against our growth strategy. The four key tenets of our strategy include: number one, growing our direct-to-consumer mix overall; two, increasing our penetration in key markets; three, re-envisioning our product offering; and finally, expanding our margins. We are at the early stages of development in the majority of our large international markets, and we're driving our penetration higher in the U.S., EMEA, and in APAC, including Greater China, Japan, and South Korea. Last quarter, we spoke about our plans to open more stores in China in the leading shopping districts with excellent adjacencies. The fact that we are renewing leases and securing new leases for stores is a testament to the brand strength we've built in China. Our DTC progress in China also demonstrates the confidence we have in the long runway ahead of us, especially compared to many other luxury brands. As I've said before, we are investing in China for the long-term. This week, we will unveil our participation in the Fifth Annual China International Import Expo, the preeminent event for foreign business in China. At the event, we plan to highlight our China-specific programs, collections, and investments. I'm excited that our brand is showing up so strongly at such an important event in China. In Japan, through our joint venture, we opened a store in Osaka in October. The performance of the Osaka store has been very encouraging. Also, we are on schedule to open again at one of the most prestigious shopping districts in Tokyo this December. Not only are we expanding our presence in Japan, but I'm pleased to see our brand elevating as we open in some of the most influential luxury retail locations in the country. In South Korea, in partnership with our new distributor, Lotte Group, we opened 14 new shop-in-shops. Our performance has already exceeded our expectations and gives us confidence not only in our partnership with Lotte but in our strategy and the opportunity ahead of us in this highly influential market. In North America, we have begun our Quest West in the United States as we deepen our penetration in key markets across the Western United States. There remains so much potential across many cities in the U.S. As we mentioned on our last call, we will open a new store in Las Vegas in the coming days, followed shortly by a new store at Cherry Creek in Denver. We also plan to open two more temporary stores this Fall, one in Aspen and a second in Detroit. In Europe, we opened a new permanent store in Manchester in October. The store sits on new Cathedral Street in the heart of the city's luxury retail district. We'll continue to look for further strategic opportunities across the U.K. and the Continent for this fiscal year. Our DTC strategy is working. Excluding Mainland China, we generated 28% DTC revenue growth and our DTC comparable sales growth excluding China was 3.2%. I think it's also important to point out the relative newness of our DTC store network. Since the onset of the pandemic, we've opened 25 stores and for many, we have yet to see their full potential. We continue to see tremendous opportunity across our existing store network globally. Moving from our DTC business, I'd like to give an update on key product launches heading into the quarter. Enhancing our product offering and expanding categories is a core competency for our brand and a key pillar in our long-term strategy. Our new collections and collaborations are resonating with consumers, driving traffic and buzz around the world. On our last call, we spoke about the opportunity we have to increase the share of our women's business. We plan to grow the women's business from the 50% we currently see to more closely align with the industry at approximately 50%. We are taking meaningful steps to do just that while continuing to build on the strength of our highly successful men's business. For example, last quarter, we spoke about our new Fall winter collection with 1,000 Silhouettes designed with this in mind and believe that shopping campaign, which features a cast of amazing women. The response to the campaign and collection has been tremendous. Despite having only launched in September, we're making meaningful progress against the objectives we set for the selection. Motivating our target consumer, Gen Z and Millennial Women and driving awareness for our women's business. As of today, Gen Z and Millennial Women make up the core customer for the collection, combined, they represent two-thirds of the selection of consumers. Additionally, our first-ever all-female campaign is reaching and resonating with new audiences, with more than 60% of purchases being first-time buyers. I'm happy to see this new collection deliver so strongly against its objectives as we push our women's business to new heights. We also see an opportunity to deliver on our goal to grow our women's business through collaboration, reaching new audiences with influential partners. In December, we plan to launch a new collaboration which will lead into a more feminine expression of Canada Goose's functionality. This collaboration will offer a fresh perspective of the brand, exactly the type of disruptive design that will help us capture consumers' attention and their imagination. Our most recent collaboration with Shanghai-based Feng Chen Wang was unveiled in September during Paris Fashion Week. In October, we hosted impactful launch events in both Hong Kong and Shanghai to celebrate the launch. The multidimensional head-to-toe assortment leans into fans' innovative and deconstructive approach to design, which is an exciting interpretation of our brand, and initial reaction has been strong, especially in APAC. As part of our growth strategy, we continue to re-envision our offering and expand into new product categories. In Q2, non-heavyweight down sales grew by 46% to 44% of total sales. This is up from 36% of total sales in the prior-year quarter. Following their success in Q1, fleece and wear sales continued to perform very well, growing more than 60% from the comparative quarter last year. Fleece was a standout with sales growth of almost 170%. We continue to make meaningful progress against our strategy to expand our product categories and are excited about the opportunity ahead of us. This November also marks the one-year anniversary of our footwear launch event. We continue to grow the category, adding two styles earlier this year in August, with another three set to launch before the end of the year. The opportunity we have in front of us in footwear is meaningful, and we will continue to execute against a strategic playbook to build the business for the long term. Importantly, this category expansion has not come at the expense of gross margin. Our Made in Canada vertically integrated operating model continues to benefit our business. Specifically, we've been largely insulated against the external freight costs and supply chain issues that have impacted gross margin across the industry. Before I pass it over to Jonathan to go over our results and outlook in more detail, I sincerely want to thank our teams around the world for their laser-focused efforts on driving our brand success. I am confident heading into our most important season that we have the right product to capture consumers' imagination and attention and therefore, drive traffic to stores in some of the most exciting retail locations in the world, and the right team and partners to deliver a stellar experience for our customers across our channels globally. We continue to see massive growth potential across our business, and we will continue to drive growth even in today's macroeconomic environment. As I have said before, our business has grown through every recession, except for the first wave of COVID, and this year will be no exception. And with that, I'll turn it over to Jonathan to cover our results and outlook in more detail.

Jonathan Sinclair, EVP and CFO

Thank you, Dani, and good morning, everyone. Today, I shall be comparing the second quarter ended October 3, 2022, with the prior-year quarter, which ended September 26, 2021, unless I say otherwise. I will be quoting reported growth rates as well as growth on a constant currency basis where it is meaningfully different and available. As Dani mentioned, total revenue grew 19% and 22.3% on a constant currency basis to $277.2 million in the quarter. This growth came from continued outperformance in North America as well as growth in Wholesale. DTC revenue increased 15.6% or 18.5% in constant currency to $94.8 million. We enjoyed the benefits of continued retail expansion and an increase in existing store sales in North America and in EMEA. Asia-Pacific continued to be impacted by COVID restrictions, which reduced store traffic due to store closures, restricted store hours, mass testing, and mandatory quarantines, to name a few of the factors and their consequences. DTC comparable sales declined by 4%. Excluding Mainland China, DTC comparable sales growth was 3.2%. This quarter last year, Mainland China DTC revenue was up 86% with materially fewer COVID restrictions in place. Wholesale revenue increased 21.2% or 24.7% on a constant currency basis to $180.7 million related to earlier shipments requested by customers and an increase in order book value, particularly in Europe. Fulfilling orders to our wholesale partners helps us drive a better operating experience for the end customer and, in turn, creates the potential for higher sell-through and reorders. Importantly, the earlier timing of shipments represents a full return to normalized shipping patterns pre-pandemic. Turning to performance by geography. Revenue increased in North America and in EMEA, while Asia-Pacific declined slightly. The gap between reported and constant currency growth arose with 30.3% of our revenue denominated in Canadian Dollars this quarter compared to a lower number of some 25%, which is typical in a full year. We enjoyed U.S. dollar revenue tailwinds offset by headwinds in other currencies. North America was again the standout this quarter with growth in the U.S. and Canada of 20.3% and 25.2%, respectively. We have four new stores coming online in the U.S., part of our best-performing region globally. They are opening during our peak season in a territory that's completely underpenetrated by our retail network. As Dani mentioned, EMEA grew 34.4% and 43.7% on a constant currency basis, and that's largely due to the expansion of our Wholesale business with key partners across the region and to a lesser degree, from improved productivity in existing stores compared to the prior-year quarter. To an extent, business has inevitably transferred from online to stores, even if that online business remains substantially above where it was two years ago. Europe has continued to benefit from travel corridors reopening and increased U.S. tourism. That said, the macroeconomic environment is challenging with soaring inflation. To date, however, we have not seen any material impact on demand, and the luxury consumer appears to be quite resilient, but we continue to monitor this closely. As we have said, Asia-Pacific results were impacted by COVID restrictions in Mainland China as well as the temporary closure of our Macau store. Although these challenges have been more prolonged and restrictive than anticipated, optimism about the strength of our brand in this market is unabated as evidenced by our continued investment in the region. Further, we have diversified the regional mix through our joint venture in Japan, deeper wholesale partnerships, and a revitalized distributor partnership in Korea, all of which helped offset some of the challenges in Mainland China in the second quarter. Despite very tight restrictions, particularly around Beijing, leading up to the party Congress mid-month, we saw sales momentum improve during Golden Week in the first week of October. Since then, however, we have not seen the business build in line with our expectations for our peak season. Dynamic COVID restrictions, closures, mandatory quarantines, and lockdowns in most of our key markets where we have retail distribution have curbed store traffic and consumer buying. Turning to gross profit. We grew consolidated gross profit by 22.8% to $165.8 million, primarily driven by higher revenue and gross margin expansion. Quarter two gross margins increased 180 basis points to 59.8% and were favorably impacted overall and at a channel level by pricing and by lower product costs from increased production efficiencies. We also had less distributor sales, which attract lower margins compared to the prior-year quarter following the creation of the Japan joint venture. As a result of these factors, both DTC and Wholesale gross margins expanded, coming in at 77% and 51%, respectively. We were able to deliver stronger margins compared to the prior-year quarter despite inflationary pressures and the diversification of our product mix away from a concentration in heavyweight down. Adjusted EBIT increased 70.1% to $29.6 million, well ahead of the top end of our guidance of $18 million, reflecting the impact of higher revenue as well as strong gross margins and cost control. The increase in adjusted EBIT was primarily due to higher gross profit and the timing of marketing spend, partially offset by incremental personnel costs as well as the expansion of our retail network and investments in strategic initiatives. Adjusted net income attributable to shareholders increased 63.1% to $23 million and $0.22 per diluted share, which also exceeded the top end of our guidance range of $0.14 per diluted share. Turning to our balance sheet, we ended Q2 fiscal '23 with cash of $97.1 million compared to $98.9 million at the end of the comparative quarter. Net debt, including capitalized leases, was $734.1 million compared to $582 million at the end of the prior-year quarter. The increase was driven by the timing of our buyback last year, the expansion of our retail network, the impact of foreign exchange on our U.S. dollar denominated term loan, as well as the financing needs of the Japan joint venture. We're very comfortable with net debt leverage of 2.7x adjusted EBITDA at the end of the quarter. Inventory was $511.5 million compared to $416.4 million at the end of the comparative quarter. Just over a quarter of the increase, $27.4 million was related to the Japan joint venture. Inventory levels have increased ahead of our peak selling season as domestic production gradually returns to pre-pandemic manufacturing levels. We have mitigated supply chain risks through earlier acquisition and higher volumes of offshore production in support of growth relative to the comparative quarter. Now turning to our outlook. As many of you know and appreciate, as we build in our peak season, each successive week has increased weight starting in October. After a positive shift in momentum during Golden Week, restrictions and other disruptions have worsened the trend. The reality of upholding a dynamic Zero COVID policy against the very transmissible current variants has meant fairly consistent periodic disruptions persisted. When you consider this alongside the broader global macroeconomic uncertainty, we felt it was prudent to meaningfully revise our guidance ranges. It is extremely challenging to predict the bulk of the year's trading based on merely a few weeks of visibility. But recent events impacting trends are not supportive of our original outlook. Critically, this does not change our confidence in our brand strength globally, nor in our conviction in China as a significant growth market for Canada Goose, especially given how underpenetrated we are. For all the reasons we've detailed, we remain excited about our future prospects here. We now expect total revenue of $1.2 billion to $1.3 billion compared to previous guidance of $1.3 billion to $1.4 billion. For DTC, this assumes comparable sales will be down in the low single digits at the bottom end of the range and up in the high single digits at the top end of the range. The decrease in our current assumptions from our original low teens comparable sales growth, which drove $1.3 billion revenue, reflects this larger headwind. On the other hand, we've been able to add a number of temporary store openings, which we've been able to finance through SG&A savings. Excluding the impact of these additional China headwinds, we would have been inside the ranges we previously detailed for DTC comparable growth. DTC sales are still expected to comprise 70% to 73% of total revenue, and wholesale revenue growth is maintained at 6% for the year. Roughly double the contribution we saw last year. We continue to expect $60 million to $65 million in revenue from the Japanese market, roughly split equally between our DTC and Wholesale segments. Moving to profitability. We now anticipate adjusted EBIT of $215 million to $255 million for a margin of 17.9% to 19.6%, compared to previous guidance of $250 million to $290 million for a margin of 19.2% to 20.7%. This revised outlook assumes that the revenue reductions in the DTC segment are somewhat offset by cost control measures for the balance of the fiscal year. We continue to expect a lower underlying SG&A growth rate compared to growth in fiscal '22. We assume consolidated gross margin will be in the high 60s as a percentage of total revenue. Gross margin benefits from our vertically integrated Made in Canada manufacturing model as well as from the conversion of our Japanese business from a distributor arrangement to a joint venture. This more than offsets the impact of a product mix in favor of non-heavyweight down, especially in the warmer parts of the year as we continue to expand these product categories. This complements the colder periods of the year when sales of heavyweight down are more prevalent. Flowing through, we now expect adjusted earnings per diluted share of $1.31 to $1.62 compared to the previous outlook of $1.60 to $1.90. This does not assume any incremental share buyback activity. Lastly, I will cover our outlook for the third quarter. We expect total revenue of $580 million to $660 million. This implies a split of revenue in the second half between Q3 and Q4 of 50% and 22% of the fiscal year, respectively. Remember that Q3 fiscal '22 included an extra 14th week, and that 14th week is aligned to the 13th week of Q3 in fiscal 2023. As such, the first week of Q3 last year added $24 million of revenue, which should be considered when comparing growth year-over-year. We expect adjusted EBIT of $220 million to $255 million. We're now at an inflection point for margin and profit. The incremental revenue from the investments we've made will drive further leverage, and the uplift from the DTC mix shift will be more impactful. We expect SG&A to be in the low to mid-30s as a percentage of revenue in the third quarter. This flows down to adjusted net income per diluted share of $1.47 to $1.72. In summary, we feel confident in our revised outlook, given our strong brand heat, our new collections and collaborations, and the value proposition that our products offer. While the environment presents challenges, we remain focused on the things we can control. We are closely monitoring the trends and buying behavior moving through our peak season, and we are prioritizing increased store productivity across our growing retail network. Furthermore, we are carefully assessing risk-based returns, practicing disciplined capital allocation and investment, and tightly managing non-strategic spend. Our prospects are exciting with a wealth of opportunity for our brand to grow significantly, globally over time, and we remain focused on driving profitable growth. With that, I will pass it over to the operator to begin Q&A.

Operator, Operator

Thank you. One moment for our first question. It comes from the line of Ike Boruchow with Wells Fargo. Please proceed.

Ike Boruchow, Analyst

Hey, good morning everyone. A question for Dani, and then I have one follow-up. I guess, Dani, just at a high level, the prior guidance you had indicated, I think the low end included some limited disruption in China. We're clearly getting more than that right now. I think that's pretty much a macro dynamic we're seeing with all of our brands. But I guess how do you keep a finger on the pulse of the brand heat you have over in Mainland China today? Is there anything you could talk to, to help us understand just exactly your vision for the brand overseas once these transitory pressures kind of subside?

Dani Reiss, Chairman and CEO

Yes, absolutely. Thank you, Ike, for the question. And yes, I think that there are a number of macro factors, including the ones in China that are affecting our brand and I think all brands at this time. I think our brand is very strong. I'm very confident in the strength of our brand in China and around the world in all of our markets. I can point to specific things. For example, I mean, I think Jonathan spoke to in the script, but very importantly, when the market is able to function normally, such as it was during Golden Week, our brand performed normally, as we would normally expect it to perform. Similarly, leading up to the Singles Day event of 11/11. We're seeing extremely strong signs of performance. And I think those are the sorts of things that encourage all of us that our brand continues to be strong in China. Further to that, if we talk about China specifically, we continue to sign leases with landlords in the most important malls and places, which just reaffirms their confidence in our brand and the extent to which our brand drives traffic to their malls. If that wasn't the case, they would not be signing those leases with us. So it is unfortunate that these COVID headwinds and economic headwinds impacting the world and China today are, in fact, doing so. But we all know that these macro conditions will pass, and I'm extremely confident that once they do, our brand is very well positioned and very well beloved by the global consumer to continue on its growth trajectory.

Operator, Operator

Thank you. One moment for our next question. It comes from the line of Michael Binetti with Credit Suisse. Please proceed.

Michael Binetti, Analyst

Thank you for taking my question. Could you discuss the cost control measures you mentioned for the second half? It would be helpful to highlight a few of those areas. The new guidance suggests SG&A will be between $590 million and $650 million for the year, down from $620 million to $680 million. That’s a significant reduction. I’m particularly interested in which areas might need to be reinstated next year if conditions improve. Also, I’d like to know about the stores you've opened in China. What has productivity been like in those locations when COVID restrictions are not in effect? This would help me understand how the business is performing. Thank you.

Jonathan Sinclair, EVP and CFO

Yes. Thanks, Mike. So I think when it comes to the cost control measures, all businesses have discretionary spend. We're very, very focused on making sure that we are targeting our spend on the strategic initiatives in the business to secure future growth, and that has not changed. At the same time, we are making sure that we're super careful with the decisions that we're making and that we're only investing where it's going to make a difference, either for this year or the next. And therefore, we've tightened up across the piece in that, whether you're talking about the headcount or discretionary spend, that's really a very strong focus, and it's a very strong discipline in this business. Add to that the fact that there are variable costs in the business as well, whether we're talking about rents or credit card commissions or various store labor components that typically do vary in line with revenue, and therefore, you've got a further component there. The one other thing I would say is that we are maintaining our marketing investment in this business. It's very important for the brand. It's very important that we drive demand. Otherwise, we're trying to do things that are not feasible. So that's the other component. Regarding the stores in China, when they are open, we're seeing really good productivity. We're seeing performance in line with expectations, both in our existing stores and the new ones. But unfortunately, it's just the windows when that can happen at the moment.

Operator, Operator

One moment for our next question. And it comes from the line of Oliver Chen with Cowen. Please go ahead.

Oliver Chen, Analyst

Hi, thank you. Good morning, Dani and Jonathan. As we think about China and Asia going forward, what are the things within your control? And is the guidance reset enough in terms of what you're seeing? I know it's a very dynamic situation there, a lot of uncontrollable factors. And is there any interplay with your digital footprint? And Jonathan, I would love a few thoughts on Europe as inflation is a factor. However, you expressed some optimism or a solid luxury consumer there as well? Thank you.

Dani Reiss, Chairman and CEO

Yes. Thanks for your question. Yes, I think the things that are within our control are the extent to which we deploy our marketing resources against e-commerce versus our bricks-and-mortar stores, and we're going to continue to do that. I think that one of the reasons why the range you talked about being wide is really difficult to predict the span of outcomes over the next few months in the region and even in the world with regards to the macroeconomic situation and political and geopolitical situations that exist. One thing I do not have to be true over the last 25 years of being in this business is that October is bigger than September, and November is bigger than October, and December is bigger than November. I believe that this is something that I'm going to remain true this year. The variables that will control the degree to which that is true will depend on some of the things that are outside of our control. We'll continue to focus on those things that are within our control.

Jonathan Sinclair, EVP and CFO

I think when it comes to Europe, our results were mostly in line with our expectations. We've launched a new website right at the end of the quarter, which services the European region. We're very excited about the initial performance there. We see that as having significant scope for growth. We're also looking forward to the launch of omnichannel services starting in the U.K., and we see that also as being important. When we consider the performance of the stores in the quarter, actually, each of the stores by one, and only slightly, were up. So one was slightly down, and the rest of them were all up. So we’re actually seeing really good health in the region, and we see that as grounds for optimism even as we observe the macroeconomic environment.

Carrie Baker, President

Just one point to add on that is I think one other point that looks to our confidence in the brand is just our strong wholesale order book just both in price and volume. So that is a huge sign of us in terms of their continued strength in addition to what we already saw in stores.

Operator, Operator

One moment for our next question, please. And it comes from the line of Omar Saad with Evercore ISI. Please proceed.

Omar Saad, Analyst

Good morning. Thanks for taking my question. I wanted to dive in deeper around some of your comments in North America. Are you getting indications in markets where weather is getting cold in some of that reacceleration? You also mentioned that kind of Quest West, maybe you could talk a little bit more about the balance of your business across North America from East to West? And when I kind of put some numbers around what that opportunity could mean? And then also in North America, are you seeing more new customers coming into the brand? Or is it the growth you're seeing more existing customers buying more from the brand, new categories, etc.? Thanks.

Carrie Baker, President

Thanks for the question. I think when you look at North America, the growth is happening everywhere. So I'll answer your last question first. The new customers that Dani talked about, our new campaign that focuses on women with a new collection, we're so happy to see, it's attracting a new female customer. That doesn't mean it's not resonating with the existing customers. The faster growth is happening with new customers. Our Quest West shows that our health in North America is reflecting across channels. I think we're seeing it across regions. There's just more white space opportunity as we go West and introduce our brand in a different way. Seasonality plays a factor there. They're also, I think I talked about this last quarter, people in the West are not just coming to us for the first product being a winter product. They're coming into lightweight down and other categories. So they're seeing a variety of options, and we're able to present a fuller view of what Canada Goose as a luxury lifestyle brand is, and they're picking up on that. I believe we have lots of growth in North America and hope to see that continue throughout the rest of the year.

Operator, Operator

One moment for our next question, please. And it comes from the line of Brooke Roach with Goldman Sachs. Please proceed.

Brooke Roach, Analyst

Good morning. And thank you so much for taking our question. You mentioned a wide range of outcomes that are possible over the next few months, which certainly makes sense based on the current environment. Can you help us flush out the assumptions embedded for both China and the rest of the world on like-for-like comps and contribution from new stores that drive the high end versus the low end of the updated sales guidance range? And then perhaps talk to the level of conservatism that's now embedded for China closures as a function of COVID versus some of these other unknowable macro pressures in other regions? Thank you.

Jonathan Sinclair, EVP and CFO

Thank you for the question, Brooke. It's important to understand the current situation. Essentially, we are experiencing a specific set of circumstances that differ from our initial expectations, particularly in Mainland China. This is affecting our business in that region, while the other areas, like North America and Europe, face a more challenging economic environment but are performing as we anticipated. In Mainland China, our business is declining, and we expect this trend to continue. Therefore, when considering the overall Direct-to-Consumer expectations, we fall within a range of slightly negative to slightly positive. Our previous projections, which were in the high teens, are now impacted by the significant pressures on the Chinese market. Currently, the headwind we are facing in this quarter, in like-for-like terms, is around 7%, and we expect it to increase in the future. This expectation is already factored into our assumptions.

Operator, Operator

One moment for our next question, please. And it comes from the line of Jay Sole with UBS. Please proceed.

Jay Sole, Analyst

Great. Thank you so much. Would it be possible to elaborate on sort of what your store opening plans are for next year just at a high level in terms of the stores you've already commented on some leases? And then maybe just going back to China. Can you just talk about e-commerce trends, specifically in China? I know you touched on this, but just to elaborate, what kind of growth rate you're seeing online and if you've seen any kind of transfer from stores to online as stores have been closed? Thank you.

Dani Reiss, Chairman and CEO

Thank you for your question. Regarding our store opening plans, we don't have any specific announcements about which stores we will open. However, you can expect us to continue opening stores at a similar pace as we have been this year and last year. We will always wait for the best real estate opportunities and be patient. When those opportunities arise, we will have the capacity to open a larger number of stores if needed, but we are also ready to open fewer if that makes more sense. Our focus will always be on what is best for the brand and ensuring its long-term health to remain a significant player in this market for years to come. As for China, as the busy season approaches, the willingness or ability to visit stores could lead to an increase in online sales, but this is speculative and difficult to predict. We will do our best to encourage shoppers to visit us wherever they feel comfortable and ensure they know what inventory is available.

Jonathan Sinclair, EVP and CFO

Yes. And I'd add to that, that perhaps unsurprisingly, China was by far our best performing website business within the second quarter. It has held its own at a time when the business was heavily down. That trend is something that we see continuing at the moment because, clearly, it's the most comfortable way for people to shop. Our initial steps towards 11/11 and Singles Day are very encouraging.

Operator, Operator

One moment for our next question, please. And the next question is from Mark Petrie with CIBC. Your question, please.

Mark Petrie, Analyst

Yes, thanks. Good morning. I think, Carrie, you mentioned just talking about the wholesale business a little bit. I just wanted to follow-up on that. Obviously, a point of strength in Q2, but I know a channel that you continue to manage very closely. So I guess two questions: Does the greater macro uncertainty make you think any differently about the role of Wholesale and within your business and sort of the penetration level and sort of business mix? And then specific to this fiscal year, is there any appreciable difference in both the number of doors and then also the depth that you're getting at your Wholesale accounts in terms of the assortment? Thanks.

Carrie Baker, President

Thanks, Mark. Wholesale, no. So sure, we manage it closely with our partners and in line with their expectations. But it hasn't changed fundamentally in terms of the role it plays in our ability to serve our customers where they're shopping. For us, it's always been a managed economy. We work with our partners, we don't give them everything they want, nor will we. That won't change, but I think it's a matter of working with them, making sure they're set up for a really good holiday season, which they are. We were able to pull forward and move shipments earlier. So they were very excited to have that product available. I think that there hasn't been any significant change. Again, we're always editing around the edges, but there hasn't been any sort of significant changes in terms of the number of doors or where we're playing.

Operator, Operator

One moment for our next question, please. And it comes from the line of Adrienne Yih with Barclays. Please go ahead.

Adrienne Yih, Analyst

Good morning. Thank you for taking my questions. Two questions, one on the Wholesale DTC mix and the geo mix. On the Wholesale piece of it, $180 million, how much of that was earlier shipments? And Jonathan, you said that this is the normalization - after normalizing the pattern of shipments, so from this point forward, we should expect irregularity kind of on a year-to-year basis? So that's my first question.

Jonathan Sinclair, EVP and CFO

Yes. I mean the answer is if you think about wholesale, and it's growing at 6% for the year, the reality is, therefore, that the timing difference is the component that is above 6%. That timing is on that we anticipated, and some of it got up by customers to be beyond that, and that's how we end up here. I think that when it comes to normalization, you're exactly right to interpret it the way I've said, which is that meaning this is normalized absent anything else changing, that's sort of the shape we'd expect going forward.

Operator, Operator

Thank you. And our last question, one moment please. And it comes from the line of Robert Ohmes with Bank of America. Please proceed.

Robert Ohmes, Analyst

Hi. Thanks for taking my question. My question is for Jonathan. Can you talk a little bit about the inventory levels you expect going forward? I think you guys mentioned production coming back online. You're acquiring some offshore production earlier. And obviously, the sales forecast has been lowered about $100 million. Just how should we think of inventory levels for the next couple of quarters? And then maybe connected to that, is there a scenario where you would maybe need to become a little bit more of a promotional brand or do more in the off-price channel?

Jonathan Sinclair, EVP and CFO

So I think that let's start with the fact that this is not a promotional brand, and that's a core part of the strategy of the brand. Honestly, Robby, I just don't see that changing. Our inventory is healthy. The model that we operate to here, as you'll recall, is very much one which is a continuative evergreen model. So a very high proportion of what we sell continues from season to season. That's something new. It means that it becomes a hedge against inflation. It reflects our own manufacturing as well. Our normal expectation and, to some extent, this is how we would expect this to pan out, is that revenue growth and inventory growth should move more or less in tandem. That said, of course, this year, we've got a bit of distortion from Japan. But I think that's the right way to expect this to go. Clearly, revenue volatility will have some impact. You've got to remember that the gross margins in this business are quite wide. And therefore, and what we're talking about here is DTC volatility. The most volatility that you're going to see is $25 million of cost of goods.

Operator, Operator

And with that, ladies and gentlemen, we close our Q&A and conference for today. Thank you for participating, and you may now disconnect. Good day.