Canada Goose Holdings Inc 6-K, filed Feb 1, 2024
Canada Goose Holdings Inc. (GOOS)
6-K
2024-02-01
For: 2023-12-31
View Original
Added on
April 08, 2026
About this 6-K
Canada Goose Holdings Inc filed this 6-K on February 1, 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 February, 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/ Jonathan Sinclair | ||||||||||||||||
| Name: | Jonathan Sinclair | ||||||||||||||||
| Title: | Executive Vice President and Chief Financial Officer | ||||||||||||||||
| Date: February 1, 2024 | |||||||||||||||||
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Canada Goose Holdings Inc.
Condensed Consolidated Interim Financial Statements
As at and for the third and three quarters ended
December 31, 2023 and January 1, 2023
(Unaudited)
Condensed Consolidated Interim Statements of Income
(unaudited)
(in millions of Canadian dollars, except per share amounts)
| Third quarter ended | Three quarters ended | |||||||||||||||||||
| Notes | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||||||||||||
| Reclassified | Reclassified | |||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| Revenue | 4 | 609.9 | 576.7 | 975.8 | 923.8 | |||||||||||||||
| Cost of sales | 7 | 160.2 | 160.3 | 291.4 | 298.9 | |||||||||||||||
| Gross profit | 449.7 | 416.4 | 684.4 | 624.9 | ||||||||||||||||
| Selling, general & administrative expenses | 250.9 | 225.7 | 583.0 | 494.9 | ||||||||||||||||
| Operating income | 198.8 | 190.7 | 101.4 | 130.0 | ||||||||||||||||
| Net interest, finance and other costs | 11 | 14.8 | 2.4 | 42.9 | 31.9 | |||||||||||||||
| Income before income taxes | 184.0 | 188.3 | 58.5 | 98.1 | ||||||||||||||||
| Income tax expense | 52.6 | 50.8 | 8.0 | 19.2 | ||||||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | ||||||||||||||||
| Attributable to: | ||||||||||||||||||||
| Shareholders of the Company | 130.6 | 134.9 | 53.4 | 75.8 | ||||||||||||||||
| Non-controlling interest | 0.8 | 2.6 | (2.9) | 3.1 | ||||||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | ||||||||||||||||
| Earnings per share attributable to shareholders of the Company | ||||||||||||||||||||
| Basic | 5 | $ | 1.30 | $ | 1.28 | $ | 0.52 | $ | 0.72 | |||||||||||
| Diluted | 5 | $ | 1.29 | $ | 1.28 | $ | 0.52 | $ | 0.72 | |||||||||||
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 35 | |||||||
Condensed Consolidated Interim Statements of Comprehensive Income
(unaudited)
(in millions of Canadian dollars, except per share amounts)
| Third quarter ended | Three quarters ended | |||||||||||||||||||
| Notes | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | ||||||||||||||||
| Other comprehensive (loss) income | ||||||||||||||||||||
| Items that will not be reclassified to earnings, net of tax: | ||||||||||||||||||||
| Actuarial (loss) gain on post-employment obligation | (0.1) | — | (0.3) | 1.0 | ||||||||||||||||
| Items that may be reclassified to earnings, net of tax: | ||||||||||||||||||||
| Cumulative translation adjustment gain | 6.7 | 22.5 | 0.2 | 10.7 | ||||||||||||||||
| Net (loss) gain on derivatives designated as cash flow hedges | 16 | (7.5) | (4.6) | (1.5) | 4.5 | |||||||||||||||
| Reclassification of net loss (gain) on cash flow hedges to income | 16 | 0.1 | 3.4 | (0.9) | 4.9 | |||||||||||||||
| Other comprehensive (loss) income | (0.8) | 21.3 | (2.5) | 21.1 | ||||||||||||||||
| Comprehensive income | 130.6 | 158.8 | 48.0 | 100.0 | ||||||||||||||||
| Attributable to: | ||||||||||||||||||||
| Shareholders of the Company | 129.7 | 156.6 | 51.6 | 96.9 | ||||||||||||||||
| Non-controlling interest | 0.9 | 2.2 | (3.6) | 3.1 | ||||||||||||||||
| Comprehensive income | 130.6 | 158.8 | 48.0 | 100.0 | ||||||||||||||||
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 35 | |||||||
Condensed Consolidated Interim Statements of Financial Position
(unaudited)
(in millions of Canadian dollars)
| Notes | December 31, 2023 | January 1, 2023 | April 2, 2023 | |||||||||||
| Assets | $ | $ | $ | |||||||||||
| Current assets | ||||||||||||||
| Cash | 154.3 | 344.2 | 286.5 | |||||||||||
| Trade receivables | 3, 6 | 144.5 | 120.9 | 50.9 | ||||||||||
| Inventories | 3, 7 | 478.4 | 482.0 | 472.6 | ||||||||||
| Income taxes receivable | 8.1 | 5.7 | 0.9 | |||||||||||
| Other current assets | 15 | 61.0 | 58.3 | 52.3 | ||||||||||
| Total current assets | 846.3 | 1,011.1 | 863.2 | |||||||||||
| Deferred income taxes | 90.3 | 67.7 | 67.5 | |||||||||||
| Property, plant and equipment | 3 | 177.2 | 128.5 | 156.0 | ||||||||||
| Intangible assets | 132.1 | 132.9 | 135.1 | |||||||||||
| Right-of-use assets | 3, 8 | 272.7 | 275.6 | 291.8 | ||||||||||
| Goodwill | 3 | 76.5 | 65.0 | 63.9 | ||||||||||
| Other long-term assets | 15 | 6.8 | 22.2 | 12.5 | ||||||||||
| Total assets | 1,601.9 | 1,703.0 | 1,590.0 | |||||||||||
| Liabilities | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable and accrued liabilities | 3, 9, 15 | 268.8 | 262.0 | 195.6 | ||||||||||
| Provisions | 10 | 55.0 | 46.6 | 21.6 | ||||||||||
| Income taxes payable | 14.5 | 31.8 | 31.5 | |||||||||||
| Short-term borrowings | 11 | 38.7 | 52.4 | 27.6 | ||||||||||
| Current portion of lease liabilities | 3, 8 | 76.4 | 66.6 | 76.1 | ||||||||||
| Total current liabilities | 453.4 | 459.4 | 352.4 | |||||||||||
| Provisions | 10 | 37.2 | 36.7 | 36.5 | ||||||||||
| Deferred income taxes | 13.6 | 22.2 | 16.4 | |||||||||||
| Revolving Facility | 11 | — | — | — | ||||||||||
| Term Loan | 11 | 381.0 | 393.4 | 391.6 | ||||||||||
| Lease liabilities | 3, 8 | 244.9 | 250.3 | 258.7 | ||||||||||
| Other long-term liabilities | 15 | 70.9 | 42.9 | 56.9 | ||||||||||
| Total liabilities | 1,201.0 | 1,204.9 | 1,112.5 | |||||||||||
| Equity | 12 | |||||||||||||
| Equity attributable to shareholders of the Company | 396.5 | 484.1 | 469.5 | |||||||||||
| Non-controlling interests | 4.4 | 14.0 | 8.0 | |||||||||||
| Total equity | 400.9 | 498.1 | 477.5 | |||||||||||
| Total liabilities and equity | 1,601.9 | 1,703.0 | 1,590.0 | |||||||||||
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 35 | |||||||
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 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 | 12 | — | (13.6) | (13.6) | — | (96.9) | — | (110.5) | — | (110.5) | ||||||||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares held for cancellation | 12 | — | (0.3) | (0.3) | — | (2.0) | — | (2.3) | — | (2.3) | ||||||||||||||||||||||
| Liability to broker under automatic share purchase plan | 12 | — | — | — | (23.1) | — | — | (23.1) | — | (23.1) | ||||||||||||||||||||||
| Issuance of shares | 12 | — | 4.0 | 4.0 | (3.9) | — | — | 0.1 | — | 0.1 | ||||||||||||||||||||||
| Net income (loss) | — | — | — | — | 53.4 | — | 53.4 | (2.9) | 50.5 | |||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (1.8) | (1.8) | (0.7) | (2.5) | |||||||||||||||||||||||
| Share-based payment | 13 | — | — | — | 11.2 | — | — | 11.2 | — | 11.2 | ||||||||||||||||||||||
| Balance at December 31, 2023 | 1.4 | 107.4 | 108.8 | 12.7 | 271.0 | 4.0 | 396.5 | 4.4 | 400.9 | |||||||||||||||||||||||
| Balance at April 3, 2022 | 1.4 | 117.1 | 118.5 | 36.2 | 290.4 | (17.2) | 427.9 | — | 427.9 | |||||||||||||||||||||||
| Non-controlling interest on business combination | — | — | — | — | — | — | — | 10.9 | 10.9 | |||||||||||||||||||||||
| Put option for non-controlling interest | — | — | — | — | (21.5) | — | (21.5) | — | (21.5) | |||||||||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares | 12 | — | (1.5) | (1.5) | — | (14.6) | — | (16.1) | — | (16.1) | ||||||||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares held for cancellation | 12 | — | (0.2) | (0.2) | — | (1.6) | — | (1.8) | — | (1.8) | ||||||||||||||||||||||
| Liability to broker under automatic share purchase plan | 12 | — | — | — | (12.5) | — | — | (12.5) | — | (12.5) | ||||||||||||||||||||||
| Issuance of shares | 12 | — | 2.7 | 2.7 | (2.7) | — | — | — | — | — | ||||||||||||||||||||||
| Net income | — | — | — | — | 75.8 | — | 75.8 | 3.1 | 78.9 | |||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 21.1 | 21.1 | — | 21.1 | |||||||||||||||||||||||
| Share-based payment | 13 | — | — | — | 11.2 | — | — | 11.2 | — | 11.2 | ||||||||||||||||||||||
| Balance at January 1, 2023 | 1.4 | 118.1 | 119.5 | 32.2 | 328.5 | 3.9 | 484.1 | 14.0 | 498.1 | |||||||||||||||||||||||
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 35 | |||||||
Condensed Consolidated Interim Statements of Cash Flows
(unaudited)
(in millions of Canadian dollars)
| Third quarter ended | Three quarters ended | |||||||||||||||||||
| Notes | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| Operating activities | ||||||||||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | ||||||||||||||||
| Items not affecting cash: | ||||||||||||||||||||
| Depreciation and amortization | 32.2 | 27.0 | 92.0 | 79.2 | ||||||||||||||||
| Income tax expense | 52.6 | 50.8 | 8.0 | 19.2 | ||||||||||||||||
| Interest expense | 11 | 11.8 | 8.7 | 32.1 | 24.9 | |||||||||||||||
| Foreign exchange (gain) loss | (1.4) | (14.9) | (1.9) | 4.3 | ||||||||||||||||
| Loss (gain) on disposal of assets | 0.1 | — | 0.1 | (0.1) | ||||||||||||||||
| Share-based payment | 13 | 4.3 | 4.2 | 11.5 | 11.2 | |||||||||||||||
| Remeasurement of put option | 15 | 4.9 | (0.5) | 15.7 | 1.2 | |||||||||||||||
| Remeasurement of contingent consideration | 15 | (1.9) | (2.2) | (4.9) | (5.9) | |||||||||||||||
| 234.0 | 210.6 | 203.1 | 212.9 | |||||||||||||||||
| Changes in non-cash operating items | 17 | 134.0 | 154.6 | (32.2) | (48.1) | |||||||||||||||
| Income taxes paid | (7.6) | (5.6) | (56.6) | (31.9) | ||||||||||||||||
| Interest paid | (12.1) | (8.6) | (32.5) | (23.6) | ||||||||||||||||
| Net cash from operating activities | 348.3 | 351.0 | 81.8 | 109.3 | ||||||||||||||||
| Investing activities | ||||||||||||||||||||
| Purchase of property, plant and equipment | (15.1) | (12.6) | (46.3) | (22.9) | ||||||||||||||||
| Investment in intangible assets | (0.2) | (0.2) | (0.7) | (0.9) | ||||||||||||||||
| Initial direct costs of right-of-use assets | 8 | — | — | (0.4) | (0.4) | |||||||||||||||
| Net cash (outlfow) inflow from business combination | 3 | (12.3) | — | (12.3) | 2.8 | |||||||||||||||
| Net cash used in investing activities | (27.6) | (12.8) | (59.7) | (21.4) | ||||||||||||||||
| Financing activities | ||||||||||||||||||||
| Mainland China Facilities (repayments) borrowings | 11 | (38.2) | (8.4) | (0.5) | 15.7 | |||||||||||||||
| Japan Facility (repayments) borrowings | 11 | (3.7) | 3.4 | 11.7 | 13.1 | |||||||||||||||
| Term Loan repayments | 11 | (1.0) | (1.0) | (3.0) | (3.0) | |||||||||||||||
| Revolving Facility repayments | 11 | (86.3) | (55.9) | — | (0.5) | |||||||||||||||
| Transaction costs on financing activities | 11 | 0.1 | — | (0.2) | — | |||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares | 12 | (54.3) | (16.1) | (111.7) | (16.1) | |||||||||||||||
| Principal payments on lease liabilities | 8 | (21.0) | (17.2) | (49.7) | (44.5) | |||||||||||||||
| Issuance of shares | 13 | — | — | 0.1 | — | |||||||||||||||
| Net cash used in financing activities | (204.4) | (95.2) | (153.3) | (35.3) | ||||||||||||||||
| Effects of foreign currency exchange rate changes on cash | 0.5 | 4.1 | (1.0) | 3.9 | ||||||||||||||||
| Increase (decrease) in cash | 116.8 | 247.1 | (132.2) | 56.5 | ||||||||||||||||
| Cash, beginning of period | 37.5 | 97.1 | 286.5 | 287.7 | ||||||||||||||||
| Cash, end of period | 154.3 | 344.2 | 154.3 | 344.2 | ||||||||||||||||
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 35 | |||||||
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 parkas, lightweight down jackets, rainwear, windwear, apparel, fleece, 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 51.9% of the total shares outstanding as at December 31, 2023, or 91.5% of the combined voting power of the total voting shares outstanding. Subordinate voting shares that trade on public markets represent 48.1% of the total shares outstanding as at December 31, 2023, or 8.5% 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 International Financial Reporting Standards ("IFRS") 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 April 2, 2023.
The Interim Financial Statements were authorized for issuance in accordance with a resolution of the Company’s Board of Directors on January 31, 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 2024 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 newly launched 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. The Wholesale segment includes the introduction of travel retail in the second quarter of fiscal 2024.
| Canada Goose Holdings Inc. | Page 6 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The Other segment comprises sales and costs that do not occur through the DTC or Wholesale segments, such as sales to employees, friends and family sales, selling, general, and administrative (“SG&A”) expenses, and results from the newly acquired Paola Confectii business (see "Note 3. Business Combinations" for details and definitions). The Other segment includes 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 DTC or Wholesale segment operations.
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 and critical accounting estimates and judgments
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 April 2, 2023 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.
Certain comparative figures have been reclassified to conform with the current year presentation, where foreign exchange gains and losses related to the outstanding principal balance on the Term Loan, net of hedging, are reflected in the presentation of net interest, finance and other costs as outlined below (see "Note 11. Borrowings" for details and definitions); previously this was presented in SG&A expenses. This change was made to present all financing costs related to the Term Loan within the same financial statement caption in the consolidated interim statements of income. For the third and three quarters ended January 1, 2023, we reclassified foreign exchange gains of $3.6m and losses of $11.7m, respectively. This reclassification did not impact net income, earnings per share, or the consolidated interim statement of financial position in the comparative quarter.
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.
| Canada Goose Holdings Inc. | Page 7 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Standards issued and not yet adopted
Certain new standards, amendments, and interpretations to existing IFRS 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. Information on new standards, amendments, and interpretations is provided below.
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. Earlier application is permitted. The Company is assessing the potential impact of the amendment.
Standards issued and adopted
In February 2021, the IASB issued narrow-scope amendments to IAS 1, Presentation of Financial Statements, IFRS Practice Statement 2, Making Materiality Judgements and IAS 8, Accounting Polices, Changes in Accounting Estimates and Errors. The amendments require the disclosure of material accounting policy information rather than disclosing significant accounting policies and clarified how to distinguish changes in accounting policies from changes in accounting estimates. Beginning April 3, 2023, the Company adopted the amendments. The adoption of the amendments did not have a material impact on the Interim Financial Statements.
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. Upon issuance of the Amendments, the temporary exception has been adopted by the Company as at July 2, 2023. The disclosure requirements for current tax expense and the disclosures for enacted legislation but not yet effective are required for annual reporting periods beginning on or after January 1, 2023, but are not required for any interim period ending on or before December 31, 2023.
Note 3. Business combination
On November 1, 2023, a newly incorporated subsidiary of the Company, Paola Confectii Manufacturing Limited (“Paola Confectii”), acquired the business of Paola Confectii SRL, a luxury knitwear manufacturer for total cash consideration of $16.4m, subject to pricing adjustments. This acquisition is expected to enhance product margins and supply control, while deepening in-house product expertise and capability.
Management determined that the assets and substantive processes comprised a business and therefore accounted for the transaction as a business combination under IFRS 3, Business
| Canada Goose Holdings Inc. | Page 8 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Combinations using the acquisition method of accounting. Under the acquisition method, assets and liabilities of the acquiree are recorded at their fair values.
Assets acquired and liabilities assumed have been recorded at the date of acquisition as follows:
| $ | |||||
| Assets acquired | |||||
| Trade receivables | 7.1 | ||||
| Inventories | 1.6 | ||||
| Property, plant and equipment | 2.6 | ||||
| Right-of-use assets | 1.2 | ||||
| Goodwill | 13.5 | ||||
| Accounts payable and accrued liabilities | (8.4) | ||||
| Lease liability | (1.2) | ||||
| Total assets acquired, net of liabilities assumed | 16.4 | ||||
Final valuations on the fair value of certain assets and liabilities as well as the identification of intangible assets is not yet complete due to the inherent complexity associated with the valuations. Therefore, the purchase price allocation is preliminary and is subject to adjustment upon completion of the valuation process.
At the date of acquisition, goodwill of $13.5m was initially recognized as the excess of the acquisition cost over the fair value of net identifiable assets at the date of acquisition. Goodwill is mainly attributable to the strengthening of our vertically integrated supply chain and expected future growth potential of the knitwear category. The goodwill balance is preliminary and will be finalized upon completion of the valuation process. Goodwill recognized is not expected to be deductible for income tax purposes.
In connection with the business combination, 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”). The estimated value is calculated as a pre-determined percentage of net equity value, determined as a multiple of EBITDA and EBITDA margin for the fiscal year ending March 30, 2025, subject to a floor, less net debt adjustments. As at the date of acquisition, the estimated value of the payout was $6.6m. The Company recognized the amount payable to the PCML Vendors as a separate transaction that was not included in applying the acquisition method as the amount reflects remuneration for future services to be performed conditional on employment until November 1, 2025, and therefore this amount will be expensed over two years.
The Company incurred $0.8m in transaction related costs which are included in SG&A expenses in the consolidated statements of income and comprehensive income for the three quarters ended December 31, 2023.
Paola Confectii’s results are consolidated into the Company’s financial results effective from the date of acquisition and are presented in the Company’s Other operating segment. Paola Confectii's results for the three quarters ended December 31, 2023 are not considered material to these consolidated financial statements. Pro forma disclosures as if Paola Confectii was acquired at the beginning of the fiscal year have not been presented as they are not considered material to these consolidated financial statements.
| Canada Goose Holdings Inc. | Page 9 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The PCML Vendors are employed as members of key management and continue to lead and maintain regular operations at Paola Confectii. The Earn-Out to the PCML Vendors and transactions with one of the PCML Vendors in connection with the acquisition for the lease of the manufacturing facility are related party transactions as they have been retained as employees of the Company. See "Note 14. Related Party Transactions" for more details.
Note 4. 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. Our operating segments are not reliant on any single external customer.
The Company does not report total assets or total liabilities based on its reportable operating segments.
| Third quarter ended December 31, 2023 | ||||||||||||||
| (in millions of Canadian dollars) | DTC | Wholesale | Other | Total | ||||||||||
| $ | $ | $ | $ | |||||||||||
| Revenue | 514.0 | 81.8 | 14.1 | 609.9 | ||||||||||
| Cost of sales | 110.4 | 38.1 | 11.7 | 160.2 | ||||||||||
| Gross profit | 403.6 | 43.7 | 2.4 | 449.7 | ||||||||||
| SG&A expenses | 116.5 | 17.8 | 116.6 | 250.9 | ||||||||||
| Operating income (loss) | 287.1 | 25.9 | (114.2) | 198.8 | ||||||||||
| Net interest, finance and other costs | 14.8 | |||||||||||||
| Income before income taxes | 184.0 | |||||||||||||
| Third quarter ended January 1, 2023 | ||||||||||||||
| (in millions of Canadian dollars) | DTC | Wholesale | Other | Total | ||||||||||
| $ | $ | $ | $ | |||||||||||
| Revenue | 450.2 | 114.4 | 12.1 | 576.7 | ||||||||||
| Cost of sales | 99.1 | 53.8 | 7.4 | 160.3 | ||||||||||
| Gross profit | 351.1 | 60.6 | 4.7 | 416.4 | ||||||||||
SG&A expenses (reclassified)1 | 92.3 | 21.8 | 111.6 | 225.7 | ||||||||||
| Operating income (loss) (reclassified) | 258.8 | 38.8 | (106.9) | 190.7 | ||||||||||
| Net interest, finance and other costs (reclassified) | 2.4 | |||||||||||||
| Income before income taxes | 188.3 | |||||||||||||
1See "Note 2. Material accounting policy information and critical accounting estimates and judgments" for more details on the reclassification of SG&A.
| Canada Goose Holdings Inc. | Page 10 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
| Three quarters ended December 31, 2023 | ||||||||||||||
| (in millions of Canadian dollars) | DTC | Wholesale | Other | Total | ||||||||||
| $ | $ | $ | $ | |||||||||||
| Revenue | 679.2 | 270.9 | 25.7 | 975.8 | ||||||||||
| Cost of sales | 151.2 | 120.7 | 19.5 | 291.4 | ||||||||||
| Gross profit | 528.0 | 150.2 | 6.2 | 684.4 | ||||||||||
| SG&A expenses | 234.6 | 51.2 | 297.2 | 583.0 | ||||||||||
| Operating income (loss) | 293.4 | 99.0 | (291.0) | 101.4 | ||||||||||
| Net interest, finance and other costs | 42.9 | |||||||||||||
| Income before income taxes | 58.5 | |||||||||||||
| Three quarters ended January 1, 2023 | ||||||||||||||
| (in millions of Canadian dollars) | DTC | Wholesale | Other | Total | ||||||||||
| $ | $ | $ | $ | |||||||||||
| Revenue | 579.8 | 328.3 | 15.7 | 923.8 | ||||||||||
| Cost of sales | 130.4 | 158.8 | 9.7 | 298.9 | ||||||||||
| Gross profit | 449.4 | 169.5 | 6.0 | 624.9 | ||||||||||
SG&A expenses (reclassified)1 | 184.0 | 51.0 | 259.9 | 494.9 | ||||||||||
| Operating income (loss) (reclassified) | 265.4 | 118.5 | (253.9) | 130.0 | ||||||||||
| Net interest, finance and other costs (reclassified) | 31.9 | |||||||||||||
| Income before income taxes | 98.1 | |||||||||||||
1See "Note 2. Material accounting policy information and critical accounting estimates and judgments" for more details on the reclassification of SG&A.
Geographic information
The Company determines the geographic location of revenue based on the location of its customers.
| Third quarter ended | Three quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Canada | 94.9 | 109.2 | 176.3 | 185.8 | |||||||||||||
| United States | 157.5 | 182.8 | 241.8 | 272.7 | |||||||||||||
| North America | 252.4 | 292.0 | 418.1 | 458.5 | |||||||||||||
| Asia Pacific | 270.7 | 167.6 | 359.0 | 240.1 | |||||||||||||
EMEA1 | 86.8 | 117.1 | 198.7 | 225.2 | |||||||||||||
| Revenue | 609.9 | 576.7 | 975.8 | 923.8 | |||||||||||||
1EMEA comprises Europe, the Middle East, Africa, and Latin America.
| Canada Goose Holdings Inc. | Page 11 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 5. Earnings per share
The following table presents details for the calculation of basic and diluted earnings per share:
| Third quarter ended | Three quarters ended | ||||||||||||||||
| (in millions of Canadian dollars, except share and per share amounts) | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||
| Net income attributable to shareholders of the Company | $ | 130.6 | $ | 134.9 | $ | 53.4 | $ | 75.8 | |||||||||
| Weighted average number of multiple and subordinate voting shares outstanding | 100,253,473 | 105,146,788 | 102,144,232 | 105,238,509 | |||||||||||||
Weighted average number of shares on exercise of stock options, RSUs and PSUs1 | 1,055,363 | 521,820 | 981,133 | 539,842 | |||||||||||||
| Diluted weighted average number of multiple and subordinate voting shares outstanding | 101,308,836 | 105,668,608 | 103,125,365 | 105,778,351 | |||||||||||||
| Earnings per share attributable to shareholders of the Company | |||||||||||||||||
| Basic | $ | 1.30 | $ | 1.28 | $ | 0.52 | $ | 0.72 | |||||||||
| Diluted | $ | 1.29 | $ | 1.28 | $ | 0.52 | $ | 0.72 | |||||||||
1 Applicable to dilutive shares and when the weighted average daily closing share price for the year was greater than the exercise price for stock options. For the third and three quarters ended December 31, 2023, there were 4,261,724 and 4,261,724 shares, respectively (third and three quarters ended January 1, 2023 - 3,791,027 and 2,256,738 shares, respectively) that were not taken into account in the calculation of diluted earnings per share because their effect was anti-dilutive.
Note 6. Trade receivables
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | April 2, 2023 | ||||||||
| $ | $ | $ | |||||||||
| Trade accounts receivable | 129.4 | 103.3 | 30.4 | ||||||||
| Credit card receivables | 7.5 | 5.8 | 2.5 | ||||||||
| Other receivables | 9.3 | 13.5 | 19.5 | ||||||||
| 146.2 | 122.6 | 52.4 | |||||||||
| Less: expected credit loss and sales allowances | (1.7) | (1.7) | (1.5) | ||||||||
| Trade receivables | 144.5 | 120.9 | 50.9 | ||||||||
| Canada Goose Holdings Inc. | Page 12 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 7. Inventories
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | April 2, 2023 | ||||||||
| $ | $ | $ | |||||||||
| Raw materials | 48.9 | 71.3 | 60.3 | ||||||||
| Work in progress | 23.0 | 15.4 | 17.5 | ||||||||
| Finished goods | 406.5 | 395.3 | 394.8 | ||||||||
| Total inventories at the lower of cost and net realizable value | 478.4 | 482.0 | 472.6 | ||||||||
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 obsolescence is presented as follows:
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | April 2, 2023 | ||||||||
| $ | $ | $ | |||||||||
| Raw material shrink reserves | 0.2 | — | 0.2 | ||||||||
| Finished goods shrink reserves | 0.9 | 0.8 | 0.4 | ||||||||
| Raw material obsolete inventory reserves | 21.4 | 12.9 | 20.5 | ||||||||
| Finished goods obsolete inventory reserves | 28.5 | 19.0 | 22.1 | ||||||||
| Provision for obsolescence | 51.0 | 32.7 | 43.2 | ||||||||
Amounts charged to cost of sales comprise the following:
| Third quarter ended | Three quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Cost of goods manufactured | 157.2 | 157.9 | 282.9 | 291.8 | |||||||||||||
| Depreciation and amortization | 3.0 | 2.4 | 8.5 | 7.1 | |||||||||||||
| 160.2 | 160.3 | 291.4 | 298.9 | ||||||||||||||
| Canada Goose Holdings Inc. | Page 13 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 8. 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 | $ | $ | $ | $ | ||||||||||
| April 2, 2023 | 396.7 | 44.9 | 58.4 | 500.0 | ||||||||||
| Additions | 25.6 | — | 2.6 | 28.2 | ||||||||||
| Additions from business combinations (note 3) | — | 1.2 | — | 1.2 | ||||||||||
| Lease modifications | 9.8 | 0.1 | 1.5 | 11.4 | ||||||||||
| Derecognition on termination | (4.0) | — | (1.8) | (5.8) | ||||||||||
| Impact of foreign currency translation | (6.4) | — | (0.4) | (6.8) | ||||||||||
| December 31, 2023 | 421.7 | 46.2 | 60.3 | 528.2 | ||||||||||
| April 3, 2022 | 296.3 | 36.7 | 17.4 | 350.4 | ||||||||||
| Additions | 46.5 | 6.2 | 42.3 | 95.0 | ||||||||||
| Additions from business combinations | 1.5 | — | 1.8 | 3.3 | ||||||||||
| Lease modifications | 2.4 | — | — | 2.4 | ||||||||||
| Derecognition on termination | (1.8) | — | — | (1.8) | ||||||||||
| Impact of foreign currency translation | 14.6 | — | 0.7 | 15.3 | ||||||||||
| January 1, 2023 | 359.5 | 42.9 | 62.2 | 464.6 | ||||||||||
| Canada Goose Holdings Inc. | Page 14 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
| (in millions of Canadian dollars) | Retail stores | Manufacturing facilities | Other | Total | ||||||||||
| Accumulated depreciation | $ | $ | $ | $ | ||||||||||
| April 2, 2023 | 171.1 | 20.6 | 16.5 | 208.2 | ||||||||||
| Depreciation | 46.7 | 4.2 | 5.2 | 56.1 | ||||||||||
| Derecognition on termination | (4.0) | — | (1.8) | (5.8) | ||||||||||
| Impact of foreign currency translation | (2.8) | — | (0.2) | (3.0) | ||||||||||
| December 31, 2023 | 211.0 | 24.8 | 19.7 | 255.5 | ||||||||||
| April 3, 2022 | 110.1 | 15.2 | 9.9 | 135.2 | ||||||||||
| Depreciation | 40.3 | 3.7 | 5.2 | 49.2 | ||||||||||
| Derecognition on termination | (1.2) | — | — | (1.2) | ||||||||||
| Impact of foreign currency translation | 5.4 | — | 0.4 | 5.8 | ||||||||||
| January 1, 2023 | 154.6 | 18.9 | 15.5 | 189.0 | ||||||||||
| Net book value | ||||||||||||||
| December 31, 2023 | 210.7 | 21.4 | 40.6 | 272.7 | ||||||||||
| January 1, 2023 | 204.9 | 24.0 | 46.7 | 275.6 | ||||||||||
| April 2, 2023 | 225.6 | 24.3 | 41.9 | 291.8 | ||||||||||
| Canada Goose Holdings Inc. | Page 15 of 35 | |||||||
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 | ||||||||||
| $ | $ | $ | $ | |||||||||||
| April 2, 2023 | 259.2 | 27.7 | 47.9 | 334.8 | ||||||||||
| Additions | 25.5 | — | 2.3 | 27.8 | ||||||||||
| Additions from business combinations (note 3) | — | 1.2 | — | 1.2 | ||||||||||
| Lease modifications | 9.8 | 0.1 | 1.5 | 11.4 | ||||||||||
| Principal payments | (46.0) | (4.0) | 0.3 | (49.7) | ||||||||||
| Impact of foreign currency translation | (4.1) | — | (0.1) | (4.2) | ||||||||||
| December 31, 2023 | 244.4 | 25.0 | 51.9 | 321.3 | ||||||||||
| April 3, 2022 | 217.2 | 24.8 | 8.7 | 250.7 | ||||||||||
| Additions | 46.1 | 6.2 | 42.3 | 94.6 | ||||||||||
| Additions from business combinations | 1.5 | — | 1.7 | 3.2 | ||||||||||
| Lease modifications | 2.4 | — | — | 2.4 | ||||||||||
| Derecognition on termination | (0.7) | — | — | (0.7) | ||||||||||
| Principal payments | (38.8) | (3.9) | (1.8) | (44.5) | ||||||||||
| Impact of foreign currency translation | 10.8 | — | 0.4 | 11.2 | ||||||||||
| January 1, 2023 | 238.5 | 27.1 | 51.3 | 316.9 | ||||||||||
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 | 62.8 | 6.3 | 7.3 | 76.4 | ||||||||||
| Non-current lease liabilities | 181.6 | 18.7 | 44.6 | 244.9 | ||||||||||
| December 31, 2023 | 244.4 | 25.0 | 51.9 | 321.3 | ||||||||||
| Current lease liabilities | 56.1 | 5.7 | 4.8 | 66.6 | ||||||||||
| Non-current lease liabilities | 182.4 | 21.4 | 46.5 | 250.3 | ||||||||||
| January 1, 2023 | 238.5 | 27.1 | 51.3 | 316.9 | ||||||||||
| Current lease liabilities | 64.7 | 6.1 | 5.3 | 76.1 | ||||||||||
| Non-current lease liabilities | 194.5 | 21.6 | 42.6 | 258.7 | ||||||||||
| April 2, 2023 | 259.2 | 27.7 | 47.9 | 334.8 | ||||||||||
| Canada Goose Holdings Inc. | Page 16 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
For the third and three quarters ended December 31, 2023, $22.7m and $28.8m of lease payments, respectively, were not included in the measurement of lease liabilities (third and three quarters ended January 1, 2023 - $11.3m and $14.0m, respectively). The majority of these balances related to short-term leases and variable rent payments, net of rent concessions, which are expensed as incurred.
Note 9. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consist of the following:
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | April 2, 2023 | ||||||||
| $ | $ | $ | |||||||||
| Trade payables | 60.0 | 72.7 | 60.1 | ||||||||
| Accrued liabilities | 107.9 | 119.0 | 82.4 | ||||||||
| Employee benefits | 34.4 | 24.1 | 21.9 | ||||||||
| Derivative financial instruments | 3.8 | 7.4 | 3.3 | ||||||||
| ASPP liability (note 12) | 43.1 | — | 20.0 | ||||||||
| Other payables | 19.6 | 38.8 | 7.9 | ||||||||
| Accounts payable and accrued liabilities | 268.8 | 262.0 | 195.6 | ||||||||
Note 10. Provisions
Provisions are classified as current and non-current liabilities based on management's expectations of the timing of settlement, as follows:
| (in millions of Canadian dollars) | Warranty | Sales returns | Asset retirement obligations | Total | ||||||||||
| $ | $ | $ | $ | |||||||||||
| Current provisions | 7.3 | 47.7 | — | 55.0 | ||||||||||
| Non-current provisions | 23.3 | — | 13.9 | 37.2 | ||||||||||
| December 31, 2023 | 30.6 | 47.7 | 13.9 | 92.2 | ||||||||||
| Current provisions | 6.0 | 40.6 | — | 46.6 | ||||||||||
| Non-current provisions | 27.0 | — | 9.7 | 36.7 | ||||||||||
| January 1, 2023 | 33.0 | 40.6 | 9.7 | 83.3 | ||||||||||
| Current provisions | 6.0 | 15.6 | — | 21.6 | ||||||||||
| Non-current provisions | 24.4 | — | 12.1 | 36.5 | ||||||||||
| April 2, 2023 | 30.4 | 15.6 | 12.1 | 58.1 | ||||||||||
| Canada Goose Holdings Inc. | Page 17 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 11. Borrowings
Amendments to borrowings
Effective June 30, 2023, LIBOR rates are no longer published for U.S Dollars. As a result, in the first quarter ended July 2, 2023, the Company transitioned facilities and contracts denominated in U.S dollars applying LIBOR to the Secured Overnight Financing Rate published by the Federal Reserve Bank of New York (“SOFR”). At this time, the Company entered into further amendments to its Revolving Facility (as defined below), Term Loan (as defined below) and the interest rate swaps to transition to SOFR. In connection with the amendments, during the first quarter ended July 2, 2023, the Company also extended the maturity of the Revolving Facility to May 15, 2028 and incurred transaction costs of $0.7m, on the extension of the Revolving Facility, which are being amortized using the effective interest rate method over the new term to maturity. There were no amendments to borrowings in the third quarter ended December 31, 2023.
See "Note 16. Financial risk management objectives and policies" for more details on the amendments to the interest rate swaps.
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, Banker's Acceptance 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 December 31, 2023, the Company had repaid all amounts owing on the Revolving Facility (January 1, 2023 - $nil, April 2, 2023 - $nil). As at December 31, 2023, no interest and administrative fees remain outstanding (January 1, 2023 - $nil, April 2, 2023 - $nil). Deferred financing charges in the amounts of $1.0m as at December 31, 2023 (January 1, 2023 - $0.6m, April 2, 2023 - $0.5m) were included in other long-term liabilities. As at and during the three quarters ended December 31, 2023, the Company was in compliance with all covenants.
The Company had unused borrowing capacity available under the Revolving Facility of $359.4m as at December 31, 2023 (January 1, 2023 - $240.0m, April 2, 2023 - $238.4m).
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 December 31, 2023, the Company had letters of credit outstanding under the Revolving Facility of $1.5m (January 1, 2023 - $1.8m, April 2, 2023 - $1.8m).
| Canada Goose Holdings Inc. | Page 18 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
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%.
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 December 31, 2023, the Company had USD291.0m (January 1, 2023 - USD294.0m, April 2, 2023 - USD293.3m) 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 three quarters ended December 31, 2023, 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) | December 31, 2023 | January 1, 2023 | April 2, 2023 | ||||||||
| $ | $ | $ | |||||||||
| Term Loan | 385.7 | 398.2 | 396.3 | ||||||||
| Unamortized portion of deferred transaction costs | (0.7) | (0.7) | (0.6) | ||||||||
| Term Loan, net of unamortized deferred transaction costs | 385.0 | 397.5 | 395.7 | ||||||||
Mainland China Facilities
A subsidiary of the Company in Mainland China has three uncommitted loan facilities in the aggregate amount of RMB280.0m ($52.4m) ("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 the loan prime rate of 1 year, minus a marginal rate between 0.35% and 0.45%, and payable at one, three or six months, depending on the term of each draw. 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 December 31, 2023, the Company had $9.3m (RMB50.0m) owing on the Mainland China Facilities (January 1, 2023 - $15.7m (RMB80.0m), April 2, 2023 - $9.8m (RMB50.0m)).
| Canada Goose Holdings Inc. | Page 19 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Japan Facility
A subsidiary of the Company in Japan has a loan facility in the aggregate amount of JPY4,000.0m ($37.6m) ("Japan Facility") with a floating interest rate of JBA TIBOR plus an applicable margin of 0.3%. The term of the facility is twelve 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 December 31, 2023, the Company had $25.4m (JPY2,700.0m) owing on the Japan Facility (January 1, 2023 - $32.6m (JPY3,150.0m), April 2, 2023 - $13.7m (JPY1,350.0m)).
Short-term Borrowings
As at December 31, 2023, the Company has short-term borrowings in the amount of $38.7m. Short-term borrowings include $9.3m (January 1, 2023 - $15.7m, April 2, 2023 - $9.8m) owing on the Mainland China Facilities, $25.4m (January 1, 2023 - $32.6m, April 2, 2023 - $13.7m) owing on the Japan Facility, and $4.0m (January 1, 2023 - $4.1m, April 2, 2023 - $4.1m) 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:
| Third quarter ended | Three quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||
| Reclassified | Reclassified | ||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Interest expense | |||||||||||||||||
| Mainland China Facilities | 0.4 | 0.3 | 0.8 | 0.5 | |||||||||||||
| Japan Facility | 0.1 | 0.1 | 0.1 | 0.1 | |||||||||||||
| Revolving Facility | 1.3 | 0.1 | 2.8 | 0.9 | |||||||||||||
| Term Loan | 4.8 | 4.9 | 14.8 | 13.8 | |||||||||||||
| Lease liabilities | 4.2 | 2.8 | 12.8 | 8.2 | |||||||||||||
| Standby fees | 0.3 | 0.5 | 0.9 | 1.4 | |||||||||||||
| Foreign exchange losses (gains) on Term Loan net of hedges | 0.5 | (3.6) | — | 11.7 | |||||||||||||
| Fair value remeasurement on the put option liability (note 15) | 4.9 | (0.5) | 15.7 | 1.2 | |||||||||||||
| Fair value remeasurement on the contingent consideration (note 15) | (1.9) | (2.2) | (4.9) | (5.9) | |||||||||||||
| Interest income | (0.1) | (0.2) | (0.9) | (0.4) | |||||||||||||
| Other costs | 0.3 | 0.2 | 0.8 | 0.4 | |||||||||||||
| Net interest, finance and other costs | 14.8 | 2.4 | 42.9 | 31.9 | |||||||||||||
| Canada Goose Holdings Inc. | Page 20 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 12. Shareholders' equity
Share capital transactions for the three quarters ended December 31, 2023
Normal course issuer bid for Fiscal 2024
The Board of Directors has 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.
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 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 three quarters ended December 31, 2023, under the Fiscal 2024 NCIB, the Company purchased 1,862,550 subordinate voting shares for cancellation for total cash consideration of $29.5m, of which $2.3m was payable to the designated broker as at the period end. The amount to purchase the subordinate voting shares was charged to share capital, with the remaining $25.3m charged to retained earnings. Of the 1,862,550 subordinate voting shares purchased, 1,365,074 were purchased under the Fiscal 2024 ASPP for total cash consideration of $22.2m.
A liability representing the maximum amount that the Company could be required to pay the designated broker under the Fiscal 2024 ASPP was $43.1m as at December 31, 2023. The amount was charged to contributed surplus. Subsequent to the three quarters ended December 31, 2023, the Company purchased an additional 1,508,082 subordinate voting shares for cancellation for total cash consideration of $23.8m under the Fiscal 2024 ASPP. As at the filing date of this report, the remaining liability to the designated broker is $3.6m.
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 and cancel 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 three quarters ended December 31, 2023, the Company purchased 4,268,883 subordinate voting shares for cancellation for total cash consideration of $83.3m. The amount to purchase the subordinate voting shares was charged to share capital, with the remaining $73.6m charged to retained earnings. Of the 4,268,883 subordinate voting shares purchased, 1,184,152 were purchased under the Fiscal 2023 ASPP for total cash consideration of $25.3m.
| Canada Goose Holdings Inc. | Page 21 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Since the commencement of the Fiscal 2023 NCIB, the Company purchased 5,421,685, which represents the total authorized subordinate voting shares for cancellation for total cash consideration of $111.2m.
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 | — | — | (5,987,741) | (13.6) | (5,987,741) | (13.6) | ||||||||||||||||||||
| Purchase of subordinate voting shares held for cancellation | — | — | (143,692) | (0.3) | (143,692) | (0.3) | ||||||||||||||||||||
| Total share purchases | — | — | (6,131,433) | (13.9) | (6,131,433) | (13.9) | ||||||||||||||||||||
| Exercise of stock options | — | — | 36,350 | 0.2 | 36,350 | 0.2 | ||||||||||||||||||||
| Settlement of RSUs | — | — | 134,475 | 3.8 | 134,475 | 3.8 | ||||||||||||||||||||
| Total share issuances | — | — | 170,825 | 4.0 | 170,825 | 4.0 | ||||||||||||||||||||
| December 31, 2023 | 51,004,076 | 1.4 | 47,224,304 | 107.4 | 98,228,380 | 108.8 | ||||||||||||||||||||
Share capital transactions for the three quarters ended January 1, 2023
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 3, 2022 | 51,004,076 | 1.4 | 54,190,432 | 117.1 | 105,194,508 | 118.5 | ||||||||||||||||||||
| Purchase of subordinate voting shares | — | — | (670,080) | (1.5) | (670,080) | (1.5) | ||||||||||||||||||||
| Purchase of subordinate voting shares held for cancellation | — | — | (75,301) | (0.2) | (75,301) | (0.2) | ||||||||||||||||||||
| Total share purchases | — | — | (745,381) | (1.7) | (745,381) | (1.7) | ||||||||||||||||||||
| Exercise of stock options | — | — | 60,248 | — | 60,248 | — | ||||||||||||||||||||
| Settlement of RSUs | — | — | 87,034 | 2.7 | 87,034 | 2.7 | ||||||||||||||||||||
| Total share issuances | — | — | 147,282 | 2.7 | 147,282 | 2.7 | ||||||||||||||||||||
| January 1, 2023 | 51,004,076 | 1.4 | 53,592,333 | 118.1 | 104,596,409 | 119.5 | ||||||||||||||||||||
| Canada Goose Holdings Inc. | Page 22 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 13. 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.
Stock option transactions are as follows:
| Three quarters ended | |||||||||||||||||
| December 31, 2023 | January 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 | $ | 36.58 | 4,055,199 | $ | 42.99 | 2,722,690 | |||||||||||
| Granted to purchase shares | $ | 22.21 | 758,327 | $ | 24.63 | 1,580,506 | |||||||||||
| Exercised | $ | 2.83 | (36,350) | $ | 0.23 | (60,248) | |||||||||||
| Cancelled | $ | 29.54 | (303,217) | $ | 41.29 | (146,079) | |||||||||||
| Options outstanding, end of period | $ | 34.89 | 4,473,959 | $ | 36.60 | 4,096,869 | |||||||||||
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.
RSUs transactions are as follows:
| Three quarters ended | |||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||
| Number of shares | Number of shares | ||||||||||
| RSUs outstanding, beginning of period | 318,082 | 215,590 | |||||||||
| Granted | 376,543 | 209,187 | |||||||||
| Settled | (134,475) | (87,034) | |||||||||
| Cancelled | (38,599) | (14,039) | |||||||||
| RSUs outstanding, end of period | 521,551 | 323,704 | |||||||||
| Canada Goose Holdings Inc. | Page 23 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
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. The Company expects that 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.
PSUs transactions are as follows:
| Three quarters ended | |||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||
| Number of shares | Number of shares | ||||||||||
| PSUs outstanding, beginning of period | — | — | |||||||||
| Granted | 399,349 | — | |||||||||
| Cancelled | (9,491) | — | |||||||||
| PSUs outstanding, end of period | 389,858 | — | |||||||||
Shares reserved for issuance
As at December 31, 2023, subordinate voting shares, to a maximum of 5,412,655 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 third and three quarters ended December 31, 2023, the Company recorded $4.3m and $11.5m, respectively, as compensation expense for the vesting of stock options, RSUs and PSUs (third and three quarters ended January 1, 2023 - $4.2m and $11.2m, 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:
| Three quarters ended | |||||||||||
| (in millions of Canadian dollars, except share and per share amounts) | December 31, 2023 | January 1, 2023 | |||||||||
| Weighted average stock price valuation | $ | 22.21 | $ | 24.63 | |||||||
| Weighted average exercise price | $ | 22.21 | $ | 24.63 | |||||||
| Risk-free interest rate | 4.12 | % | 2.52 | % | |||||||
| Expected life in years | 5 | 5 | |||||||||
| Expected dividend yield | — | % | — | % | |||||||
| Volatility | 40 | % | 40 | % | |||||||
| Weighted average fair value of options issued | $ | 7.50 | $ | 7.86 | |||||||
| Canada Goose Holdings Inc. | Page 24 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
RSU and PSU fair values are determined based on the market value of the subordinate voting shares at the time of grant. As at December 31, 2023, the weighted average fair value of RSUs was $22.22 (January 1, 2023 - $24.63). As at December 31, 2023, the weighted average fair value of PSUs was $22.21.
Note 14. Related party transactions
The Company enters into transactions from time to time with its principal shareholders and organizations affiliated with members of the Board of Directors by incurring expenses for business services. During the third and three quarters ended December 31, 2023, the Company incurred expenses with related parties of $0.4m and $0.8m, respectively (third and three quarters ended January 1, 2023 - $0.3m and $0.8m, respectively) from companies related to certain shareholders. Balances owing to related parties as at December 31, 2023 were $0.4m (January 1, 2023 - $0.4m, April 2, 2023 - $0.4m).
A lease liability due to the former controlling shareholder of the acquired Baffin Inc. business (the "Baffin Vendor") for leased premises was $2.8m as at December 31, 2023 (January 1, 2023 - $3.3m, April 2, 2023 - $3.1m). During the third and three quarters ended December 31, 2023, 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 $0.3m and $1.0m, respectively (third and three quarters ended January 1, 2023 - $0.4m and $1.1m, respectively). No amounts were owing to Baffin entities as at December 31, 2023, January 1, 2023, and April 2, 2023.
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 $2.2m as at December 31, 2023 (January 1, 2023 - $2.8m, April 2, 2023 - $2.7m). During the third and three quarters ended December 31, 2023, the Company incurred principal and interest on lease liabilities, royalty fees, and other operating costs to Sazaby League totalling $1.3m and $3.2m, respectively (third and three quarters ended January 1, 2023 - $1.0m and $3.5m, respectively). Balances owing to Sazaby League as at December 31, 2023 were $0.1m (January 1, 2023 - $0.6m, April 2, 2023 - $0.2m).
During the third and three quarters ended December 31, 2023, the Japan Joint Venture sold inventory of $1.1m and $1.2m, respectively to companies wholly owned by Sazaby League (third and three quarters ended January 1, 2023 - $1.1m and $1.2m, respectively). As at December 31, 2023, the Japan Joint Venture recognized a trade receivable of $0.9m from these companies (January 1, 2023 - $0.7m, April 2, 2023 - $0.1m).
Pursuant to the agreement entered between the Company and Sazaby League to form the Japan Joint Venture ("Joint Venture Agreement"), during the third and three quarters ended January 1, 2023, the Company sold inventory of $0.7m and $11.9m, respectively, to Sazaby League for repurchase by the Japan Joint Venture for inventory fulfillment. There was no outstanding receivable from Sazaby League as at January 1, 2023. During the third and three quarters ended January 1, 2023, the Japan Joint Venture repurchased $0.3m and $11.5m, respectively, of inventory from Sazaby League and the Japan Joint Venture recognized a payable to Sazaby League of less than $0.1m as at January 1, 2023 in accounts payable and accrued liabilities. These transactions were measured based on pricing established through the Joint Venture Agreement at market terms and were not recognized as sales transactions. The repurchase of inventory pursuant to this Joint Venture Agreement was completed during the fourth quarter ended April 2, 2023.
| Canada Goose Holdings Inc. | Page 25 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
In connection with the business combination, for the third and three quarters ended December 31, 2023, the Company recognized $0.5m of remuneration costs related to the Earn-Out based on the estimated value of $6.6m 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 December 31, 2023.
A lease liability due to one of the PCML Vendors for leased premises was $1.2m as at December 31, 2023. During the third and three quarters ended December 31, 2023, the Company paid principal and interest on the lease liability, to one of the PCML Vendors totalling less than $0.1m, respectively. No amounts were owing to one of the PCML Vendors as at December 31, 2023.
Note 15. 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:
| December 31, 2023 | |||||||||||||||||
| (in millions of Canadian dollars) | Level 1 | Level 2 | Level 3 | Carrying value | Fair value | ||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||
| Financial assets | |||||||||||||||||
| Derivatives included in other current assets | — | 18.2 | — | 18.2 | 18.2 | ||||||||||||
| Derivatives included in other long-term assets | — | 6.7 | — | 6.7 | 6.7 | ||||||||||||
| Financial liabilities | |||||||||||||||||
| Derivatives included in accounts payable and accrued liabilities | — | 3.8 | — | 3.8 | 3.8 | ||||||||||||
| Mainland China Facilities | — | 9.3 | — | 9.3 | 9.3 | ||||||||||||
| Japan Facility | — | 25.4 | — | 25.4 | 25.4 | ||||||||||||
| Term Loan | — | 385.0 | — | 385.0 | 421.7 | ||||||||||||
| Derivatives included in other long-term liabilities | — | 12.2 | — | 12.2 | 12.2 | ||||||||||||
| Put option liability included in other long-term liabilities | — | — | 45.7 | 45.7 | 45.7 | ||||||||||||
| Contingent consideration included in other long-term liabilities | — | — | 10.6 | 10.6 | 10.6 | ||||||||||||
| Earn-Out included in other long-term liabilities (note 3) | — | — | 0.5 | 0.5 | 0.5 | ||||||||||||
| Canada Goose Holdings Inc. | Page 26 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
| January 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 | — | 18.9 | — | 18.9 | 18.9 | ||||||||||||
| Derivatives included in other long-term assets | — | 22.1 | — | 22.1 | 22.1 | ||||||||||||
| Financial liabilities | |||||||||||||||||
| Derivatives included in accounts payable and accrued liabilities | — | 7.4 | — | 7.4 | 7.4 | ||||||||||||
| Mainland China Facilities | — | — | 15.7 | 15.7 | 15.7 | ||||||||||||
| Japan Facility | — | 32.6 | — | 32.6 | 32.6 | ||||||||||||
| Term Loan | — | 397.5 | — | 397.5 | 432.3 | ||||||||||||
| Derivatives included in other long-term liabilities | — | 4.0 | — | 4.0 | 4.0 | ||||||||||||
| Put option liability included in other long-term liabilities | — | — | 22.8 | 22.8 | 22.8 | ||||||||||||
| Contingent consideration included in other long-term liabilities | — | — | 14.0 | 14.0 | 14.0 | ||||||||||||
| April 2, 2023 | |||||||||||||||||
| (in millions of Canadian dollars) | Level 1 | Level 2 | Level 3 | Carrying value | Fair value | ||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||
| Financial assets | |||||||||||||||||
| Derivatives included in other current assets | — | 12.4 | — | 12.4 | 12.4 | ||||||||||||
| Derivatives included in other long-term assets | — | 12.4 | — | 12.4 | 12.4 | ||||||||||||
| Financial liabilities | |||||||||||||||||
| Derivatives included in accounts payable and accrued liabilities | — | 3.3 | — | 3.3 | 3.3 | ||||||||||||
| Mainland China Facilities | — | — | 9.8 | 9.8 | 9.8 | ||||||||||||
| Japan Facility | — | 13.7 | — | 13.7 | 13.7 | ||||||||||||
| Term Loan | — | 395.7 | — | 395.7 | 433.1 | ||||||||||||
| Derivatives included in other long-term liabilities | — | 6.0 | — | 6.0 | 6.0 | ||||||||||||
| Put option liability included in other long-term liabilities | — | — | 32.1 | 32.1 | 32.1 | ||||||||||||
| Contingent consideration included in other long-term liabilities | — | — | 16.8 | 16.8 | 16.8 | ||||||||||||
| Canada Goose Holdings Inc. | Page 27 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
In connection with the Japan Joint Venture, for the third and three quarters ended December 31, 2023, the Company recorded a decrease of JPY196.9m ($1.5m, excluding translation gains of $0.4m) and a decrease of JPY529.7m ($6.3m, excluding translation losses of $1.4m), respectively, on the remeasurement of the contingent consideration. The Company recorded an increase of JPY518.3m ($6.2m, excluding translation gains of $1.3m) and an increase of JPY1,707.4m ($13.6m, excluding translation losses of $2.1m) on the remeasurement of the put option liability during the third and three quarters ended December 31, 2023, respectively. The change in fair values of the contingent consideration and put option liability were driven by progression through the 4-year and 10-year terms, respectively, and improvements in the cost of debt in the market.
For the third and three quarters ended January 1, 2023, the Company recorded a decrease of JPY215.7m ($1.0m, excluding translation gains of $1.2m) and a decrease of JPY603.9m ($6.0m, excluding translation losses of $0.1m), respectively, on the remeasurement of the contingent consideration. The Company recorded a decrease of JPY44.6m (an increase of $1.3m, excluding translation gains of $1.8m) and an increase of JPY130.3m ($1.6m, excluding translation gains of $0.4m), respectively, on the remeasurement of the put option liability during the third and three quarters ended January 1, 2023.
Note 16. 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 net 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 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 28 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The following table summarizes the amount of contractual undiscounted future cash flow requirements as at December 31, 2023:
| Contractual obligations by fiscal year | Q4 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | ||||||||||||||||||
| (in millions of Canadian dollars) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Accounts payable and accrued liabilities | 268.8 | — | — | — | — | — | — | 268.8 | ||||||||||||||||||
| Mainland China Facilities | 9.3 | — | — | — | — | — | — | 9.3 | ||||||||||||||||||
| Japan Facility | 25.4 | — | — | — | — | — | — | 25.4 | ||||||||||||||||||
| Term Loan | 1.0 | 4.0 | 4.0 | 4.0 | 372.7 | — | — | 385.7 | ||||||||||||||||||
Interest commitments relating to borrowings1 | 8.7 | 34.9 | 34.6 | 34.6 | 17.3 | — | — | 130.1 | ||||||||||||||||||
| Derivative contracts | — | — | 5.5 | — | — | — | — | 5.5 | ||||||||||||||||||
| Lease obligations | 21.6 | 88.6 | 66.7 | 55.9 | 41.2 | 31.3 | 76.3 | 381.6 | ||||||||||||||||||
| Pension obligation | — | — | — | — | — | — | 2.0 | 2.0 | ||||||||||||||||||
| Total contractual obligations | 334.8 | 127.5 | 110.8 | 94.5 | 431.2 | 31.3 | 78.3 | 1,208.4 | ||||||||||||||||||
1 Interest commitments are calculated based on the loan balance and the interest rate payable on the Mainland China Facilities, the Japan Facility, and the Term Loan of 3.00%, 0.34%, and 8.97% respectively, as at December 31, 2023.
As at December 31, 2023, 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 December 31, 2023, the Company had $7.4m outstanding.
In addition, a subsidiary of the Company in Mainland China entered into letters of guarantee and as at December 31, 2023 the amount outstanding was $12.9m. 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 29 of 35 | |||||||
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 December 31, 2023, trade accounts receivable totalling approximately $34.8m (January 1, 2023 - $49.5m, April 2, 2023 - $10.3m) 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 December 31, 2023, trade accounts receivable totalling approximately $5.1m (JPY540.0m) were insured subject to the policy cap (January 1, 2023 - $4.1m (JPY392.2m), April 2, 2023 - $0.7m (JPY72.8m)).
Trade accounts receivable factoring program
A subsidiary of the Company in Europe has 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.
For the three quarters ended December 31, 2023, the Company received cash proceeds from the sale of trade accounts receivable with carrying values of $43.6m which were derecognized from the Company's statement of financial position (three quarters ended January 1, 2023 - $37.3m). Fees of $0.4m were incurred during the three quarters ended December 31, 2023 (three quarters ended January 1, 2023 - $0.2m) and included in net interest, finance and other costs in the interim statements of income. As at December 31, 2023, the outstanding amount of trade accounts receivable derecognized from the Company’s statement of financial position, but which the Company continued to service, was $5.0m (January 1, 2023 - $8.5m, April 2, 2023 - $1.1m).
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 fourth quarter of fiscal 2023, the Company executed the operating cash flow hedge program for the fiscal year ending March 31, 2024.
| Canada Goose Holdings Inc. | Page 30 of 35 | |||||||
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:
| Third quarter ended | Three quarters ended | ||||||||||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||||||
| (in millions of Canadian dollars) | Net loss | Tax recovery | Net loss | Tax recovery | Net gain | Tax recovery | Net loss | Tax recovery | |||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Forward foreign exchange contracts designated as cash flow hedges | (1.5) | 0.8 | (2.8) | 0.7 | 1.5 | 0.1 | (3.0) | 0.8 | |||||||||||||||||||||||||||
The Company reclassified the following losses and gains from other comprehensive income on derivatives designated as cash flow hedges to locations in the Interim Financial Statements described below:
| Third quarter ended | Three quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||
| Loss (gain) from other comprehensive income | Reclassified | Reclassified | |||||||||||||||
| Forward foreign exchange contracts designated as cash flow hedges | $ | $ | $ | $ | |||||||||||||
| Revenue | 1.1 | 3.7 | 1.3 | 4.0 | |||||||||||||
| SG&A expenses | (0.1) | (0.4) | (0.6) | 0.3 | |||||||||||||
| Inventory | 0.4 | 0.1 | 0.4 | — | |||||||||||||
For the third and three quarters ended December 31, 2023, unrealized gains of $2.1m and $3.9m, respectively (third and three quarters ended January 1, 2023 - unrealized gains of $6.2m and $4.3m, respectively) on forward exchange contracts that were not treated as hedges were recognized in SG&A expenses in the interim statements of income.
| Canada Goose Holdings Inc. | Page 31 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Foreign currency forward exchange contracts outstanding as at December 31, 2023 related to operating cash flows were:
| (in millions) | Aggregate Amounts | Currency | ||||||
| Forward contract to purchase Canadian dollars | USD | 95.1 | U.S. dollars | |||||
| € | 133.2 | euros | ||||||
| ¥ | 2,164.7 | Japanese yen | ||||||
| Forward contract to sell Canadian dollars | USD | 35.8 | U.S. dollars | |||||
| € | 56.1 | euros | ||||||
| Forward contract to purchase euros | CHF | 0.8 | Swiss francs | |||||
| CNY | 774.6 | Chinese yuan | ||||||
| £ | 29.0 | British pounds sterling | ||||||
| HKD | 37.8 | Hong Kong dollars | ||||||
| Forward contract to sell euros | CHF | 2.7 | Swiss francs | |||||
| CNY | 43.2 | Chinese yuan | ||||||
| £ | 6.5 | British pounds sterling | ||||||
| HKD | 20.1 | 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 11. 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:
| Third quarter ended | Three quarters ended | ||||||||||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||||||
| (in millions of Canadian dollars) | Net loss | Tax recovery | Net loss | Tax recovery | Net loss | Tax recovery | Net gain | Tax expense | |||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Swaps designated as cash flow hedges | (6.0) | 1.9 | (1.8) | 0.6 | (3.0) | 0.6 | 7.5 | (2.6) | |||||||||||||||||||||||||||
| Canada Goose Holdings Inc. | Page 32 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The Company reclassified the following gains and losses from other comprehensive income on derivatives designated as hedging instruments to net interest, finance and other costs:
| Third quarter ended | Three quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||
| (Gain) loss from other comprehensive income | $ | $ | $ | $ | |||||||||||||
| Swaps designated as cash flow hedges | (0.7) | 0.2 | (1.6) | 0.6 | |||||||||||||
For the third and three quarters ended December 31, 2023, unrealized losses of $10.1m and $7.7m, respectively (third and three quarters ended January 1, 2023 - unrealized loss of $4.6m and unrealized gain of $18.8m, 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.
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, and the Term Loan, which currently bear interest rates at 3.00%, 0.34%, and 8.97%, 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. Effective June 30, 2023, the floating interest benchmark reference rate contained within the swap agreements were amended from LIBOR to SOFR and the average fixed rates were reduced from 1.97% to 1.76%. These swap agreements fix the interest rate on the USD300.0m Term Loan. Following the amendment, the interest rate swaps continue to be designated and accounted for as cash flow hedges.
Based on the weighted average amount of outstanding borrowings, a 1.00% increase in the average interest rate during the three quarters ended December 31, 2023 would have increased interest expense on the Mainland China Facilities, Japan Facility, and the Term Loan before hedging, by $0.3m, $0.2m, and $3.0m, respectively (three quarters ended January 1, 2023 - $0.1m, $0.2m, and $2.9m, respectively).
| Canada Goose Holdings Inc. | Page 33 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 17. Selected cash flow information
Changes in non-cash operating items
| Third quarter ended | Three quarters ended | ||||||||||||||||
| (in millions of Canadian dollars) | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Trade receivables | 11.1 | 36.0 | (86.7) | (75.0) | |||||||||||||
| Inventories | 45.7 | 35.3 | (5.5) | (60.0) | |||||||||||||
| Other current assets | 13.6 | 3.8 | (3.0) | (8.9) | |||||||||||||
| Accounts payable and accrued liabilities | 25.0 | 42.6 | 27.6 | 66.9 | |||||||||||||
| Provisions | 35.8 | 30.5 | 33.9 | 33.9 | |||||||||||||
| Other | 2.8 | 6.4 | 1.5 | (5.0) | |||||||||||||
| Change in non-cash operating items | 134.0 | 154.6 | (32.2) | (48.1) | |||||||||||||
Changes in liabilities and equity arising from financing activities
| 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 | (0.5) | — | — | — | — | — | |||||||||||||||||
| Japan Facility borrowings | — | 11.7 | — | — | — | — | |||||||||||||||||
| Revolving Facility borrowings | — | — | — | — | — | — | |||||||||||||||||
| Term Loan repayments | — | — | — | (3.0) | — | — | |||||||||||||||||
| Transactions costs on financing activities | — | — | (0.1) | (0.1) | — | — | |||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares | — | — | — | — | — | (110.5) | |||||||||||||||||
| Principal payments on lease liabilities | — | — | — | — | (49.7) | — | |||||||||||||||||
| Additions from business combination | — | — | — | — | 1.2 | — | |||||||||||||||||
| Issuance of shares | — | — | — | — | — | 0.1 | |||||||||||||||||
| Non-cash items: | |||||||||||||||||||||||
| Accrued transaction costs | — | — | (0.7) | — | — | — | |||||||||||||||||
| Amortization of deferred transaction costs | — | — | 0.3 | 0.1 | — | — | |||||||||||||||||
| Unrealized foreign exchange gains | — | — | — | (7.7) | (4.2) | — | |||||||||||||||||
| Additions and amendments to lease liabilities (note 8) | — | — | — | — | 39.2 | — | |||||||||||||||||
| Share purchase charge to retained earnings (note 12) | — | — | — | — | — | 96.9 | |||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares held for cancellation | — | — | — | — | — | (0.3) | |||||||||||||||||
| Contributed surplus on share issuances (note 12) | — | — | — | — | — | 3.9 | |||||||||||||||||
| December 31, 2023 | 9.3 | 25.4 | (1.0) | 385.0 | 321.3 | 108.8 | |||||||||||||||||
| Canada Goose Holdings Inc. | Page 34 of 35 | |||||||
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Mainland China Facilities | Japan Facility | Revolving Facility | Term Loan | Lease liabilities | Share capital | ||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| April 3, 2022 | — | — | (0.4) | 370.0 | 250.7 | 118.5 | |||||||||||||||||
| Cash flows: | |||||||||||||||||||||||
| Cash inflow from business combination | — | 19.5 | — | — | 3.2 | — | |||||||||||||||||
| Mainland China Facilities borrowings | 15.7 | — | — | — | — | — | |||||||||||||||||
| Japan Facility borrowings | — | 13.1 | — | — | — | — | |||||||||||||||||
| Revolving Facility borrowings | — | — | (0.5) | — | — | — | |||||||||||||||||
| Term Loan repayments | — | — | — | (3.0) | — | — | |||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares | — | — | — | — | — | (16.1) | |||||||||||||||||
| Principal payments on lease liabilities | — | — | — | — | (44.5) | — | |||||||||||||||||
| Non-cash items: | |||||||||||||||||||||||
| Amortization of deferred transaction costs | — | — | 0.3 | 0.1 | — | — | |||||||||||||||||
| Unrealized foreign exchange loss | — | — | — | 30.4 | 11.2 | — | |||||||||||||||||
| Additions and amendments to lease liabilities (note 8) | — | — | — | — | 96.3 | — | |||||||||||||||||
| Share purchase charge to retained earnings (note 12) | — | — | — | — | — | 14.6 | |||||||||||||||||
| Normal course issuer bid purchase of subordinate voting shares held for cancellation | — | — | — | — | — | (0.2) | |||||||||||||||||
| Contributed surplus on share issuances (note 12) | — | — | — | — | — | 2.7 | |||||||||||||||||
| January 1, 2023 | 15.7 | 32.6 | (0.6) | 397.5 | 316.9 | 119.5 | |||||||||||||||||
| Canada Goose Holdings Inc. | Page 35 of 35 | |||||||
CANADA GOOSE HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the third and three quarters ended December 31, 2023
The following Management’s Discussion and Analysis (“MD&A”) for Canada Goose Holdings Inc. (“us,” “we,” “our,” “Canada Goose” or the “Company”) is dated January 31, 2024 and provides information concerning our results of operations and financial condition for the third and three quarters ended December 31, 2023. 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 third and three quarters ended December 31, 2023 (“Interim Financial Statements”) and our audited consolidated financial statements and the related notes for the fiscal year ended April 2, 2023 (“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 April 2, 2023 (“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 43 | |||||||
•the continued absence of material global supply chain disruptions to our business, 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 and the COVID-19 pandemic, which may further affect general economic and operating conditions;
•follow on effects of the recent U.S. banking failures;
•fluctuations in raw material costs, interest rates and currency exchange rates;
| Canada Goose Holdings Inc. | Page 2 of 43 | |||||||
•we may be unable to maintain effective internal controls over financial reporting; and
•our ability to successfully execute our Transformation program.
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 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 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 International Financial Reporting Standards (“IFRS”), specifically International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”), and are presented in millions of Canadian dollars, except where otherwise indicated. 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 and critical accounting estimates and judgments” 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 43 | |||||||
All references to “fiscal 2022” are to the Company’s fiscal year ended April 3, 2022; to “fiscal 2023” are to the Company’s fiscal year ended April 2, 2023; and to “fiscal 2024” are to the Company’s fiscal year ending March 31, 2024.
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 2024 is a 52-week fiscal year.
Certain comparative figures have been reclassified to conform with the current year presentation, where foreign exchange gains and losses related to the outstanding principal balance on the term loan facility, net of hedging, are reflected in the presentation of net interest, finance and other costs; previously this was presented in selling, general and administrative ("SG&A") expenses. This change was made to present all financing costs related to the term loan facility within the same financial statement caption in the consolidated interim statements of income. For the third and three quarters ended January 1, 2023, we reclassified foreign exchange gains and losses of $3.6m and $11.7m, respectively. This reclassification did not impact net income, earnings per share, or the interim statement of financial position in the comparative quarter.
Refer to “Components of our Results of Operations” in the MD&A section of our fiscal 2023 Annual Report for a description of the Company’s financial measures in accordance with IFRS. There have been no material changes in the Company’s components of our results of operations since April 2, 2023, apart from the reclassification of foreign exchange gains and losses to the term loan facility, net of hedging.
| Canada Goose Holdings Inc. | Page 4 of 43 | |||||||
SUMMARY OF FINANCIAL PERFORMANCE
The following table summarizes results of operations for the third and three quarters ended December 31, 2023 compared to the third and three quarters ended January 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) | Three quarters ended | Third quarter ended | |||||||||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | % Change | December 31, 2023 | January 1, 2023 | % Change | ||||||||||||||||||||||||||||||
| Reclassified | Reclassified | ||||||||||||||||||||||||||||||||||
| Revenue | 975.8 | 923.8 | 5.6 | % | 609.9 | 576.7 | 5.8 | % | |||||||||||||||||||||||||||
| Gross profit | 684.4 | 624.9 | 9.5 | % | 449.7 | 416.4 | 8.0 | % | |||||||||||||||||||||||||||
| Gross margin | 70.1 | % | 67.6 | % | 250 | bps | 73.7 | % | 72.2 | % | 150 | bps | |||||||||||||||||||||||
| Operating income | 101.4 | 130.0 | (22.0) | % | 198.8 | 190.7 | 4.2 | % | |||||||||||||||||||||||||||
| Net income | 50.5 | 78.9 | (36.0) | % | 131.4 | 137.5 | (4.4) | % | |||||||||||||||||||||||||||
Net income attributable to shareholders of the Company | 53.4 | 75.8 | (29.6) | % | 130.6 | 134.9 | (3.2) | % | |||||||||||||||||||||||||||
| Earnings per share attributable to shareholders of the Company | |||||||||||||||||||||||||||||||||||
| Basic | $ | 0.52 | $ | 0.72 | (27.8) | % | $ | 1.30 | $ | 1.28 | 1.6 | % | |||||||||||||||||||||||
| Diluted | $ | 0.52 | $ | 0.72 | (27.8) | % | $ | 1.29 | $ | 1.28 | 0.8 | % | |||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | April 2, 2023 | ||||||||||||||
| Financial Position: | |||||||||||||||||
| Cash | 154.3 | 344.2 | 286.5 | ||||||||||||||
Net working capital1 | 353.7 | 326.5 | 328.0 | ||||||||||||||
| Total assets | 1,601.9 | 1,703.0 | 1,590.0 | ||||||||||||||
| Total non-current liabilities | 747.6 | 745.5 | 760.1 | ||||||||||||||
| Equity | 400.9 | 498.1 | 477.5 | ||||||||||||||
1Net working capital 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 5 of 43 | |||||||
FACTORS AFFECTING OUR PERFORMANCE
We believe that our performance depends on many factors including those discussed below.
•Growth in our 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.
•New Products. We intend to continue investing in 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. This includes Canada Goose footwear and Baffin branded footwear through Baffin’s own distinct sales channels.
•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 78.9% and 82.5% of our annual wholesale revenue in the combined second and third fiscal quarters of fiscal 2023 and fiscal 2022, respectively. Additionally, we generated 83.9% and 85.0% of our annual DTC revenue in the combined third and fourth fiscal quarters of fiscal 2023 and fiscal 2022, 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 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 measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Guided by expected demand and wholesale orders, we typically manufacture on a linear basis throughout the fiscal year. Net 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
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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.
•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 2023 and 2022, we generated 70.1% and 72.5%, 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 that are affecting consumer spending, international travel, credit markets, and foreign exchange in certain countries and travel corridors.
We remain concerned about the conflict in Ukraine and continue to suspend all wholesale and e-Commerce sales to Russia. We also continue to monitor the ongoing conflict in the Middle East and the impacts on human life in both regions.
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.
BUSINESS DEVELOPMENTS
Business Combination
On November 1, 2023, a newly incorporated subsidiary of the Company, Paola Confectii Manufacturing Limited (“Paola Confectii”), acquired the business of Paola Confectii SRL, a luxury knitwear manufacturer for total cash consideration of $16.4m, subject to pricing adjustments. Based in Romania, Paola Confectii SRL has been a trusted partner in manufacturing knitwear for Canada Goose since we launched the category in 2017. This acquisition is expected to enhance product margins and supply control, while deepening in-house product expertise and capability.
In connection with the business combination, 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”). The estimated value is calculated as a pre-determined percentage of net equity value, determined as a multiple of EBITDA and EBITDA margin for the fiscal year ending March 30, 2025, subject to a floor, less net debt adjustments. As at the date of acquisition, the estimated value of the payout was $6.6m. The Company recognized the amount as remuneration for future services to be performed conditional on employment until November 1, 2025, which will be expensed over two years.
Paola Confectii’s results of operations have been consolidated with those of the Company from the date of acquisition and are presented in the Other operating segment. Paola Confectii's results for the three quarters ended December 31, 2023 are not considered material to these consolidated financial statements.
See “Note 3. Business combination” in our Interim Financial Statements for detailed information on the acquisition of Paola Confectii SRL.
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Transformation Program
During the fiscal year ended April 2, 2023, the Company announced its Transformation Program. This multi-phase program is expected 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.
•During the first quarter of fiscal 2024, the Company completed the consolidation of one of our manufacturing facilities in Montreal to improve efficiencies in our supply chain.
•During the second quarter of fiscal 2024, the Company reduced its global corporate workforce by approximately 10% to improve efficiencies in the workforce and yield savings in labour costs moving forward.
•During the third quarter of fiscal 2024, the Company focused on preparing our stores for peak season and beyond, prioritizing the merchandising of our stores to further support optimal placement of product according to the demand relevant for each store location.
SEGMENTS
Our reporting segments align with our sales channels: Direct-to-Consumer (“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 market through their own DTC channels or local wholesalers. The Wholesale segment includes the introduction of travel retail within the second quarter ended 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 business.
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As at December 31, 2023, our DTC segment by geography included the following directly operated permanent retail stores:
| Fiscal 2024 | ||||||||||||||||||||
| April 2, 2023 | Q1 Additions | Q2 Additions | Q3 Additions | December 31, 2023 | ||||||||||||||||
| Canada | 9 | — | — | — | 9 | |||||||||||||||
| United States | 8 | 2 | 3 | 2 | 15 | |||||||||||||||
| North America | 17 | 2 | 3 | 2 | 24 | |||||||||||||||
| Asia Pacific | 26 | — | 5 | 1 | 32 | |||||||||||||||
EMEA1 | 8 | 1 | — | — | 9 | |||||||||||||||
| Total permanent stores | 51 | 3 | 8 | 3 | 65 | |||||||||||||||
Fiscal 2023 | ||||||||||||||||||||
| April 3, 2022 | Q1 Additions | Q2 Additions | Q3 Additions | Q4 Additions | April 2, 2023 | |||||||||||||||
| Canada | 9 | — | — | — | — | 9 | ||||||||||||||
| United States | 6 | — | — | 2 | — | 8 | ||||||||||||||
| North America | 15 | — | — | 2 | — | 17 | ||||||||||||||
| Asia Pacific | 19 | 2 | 2 | 3 | — | 26 | ||||||||||||||
EMEA1 | 7 | — | — | 1 | — | 8 | ||||||||||||||
| Total permanent stores | 41 | 2 | 2 | 6 | — | 51 | ||||||||||||||
1EMEA comprises Europe, the Middle East, Africa, and Latin America.
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RESULTS OF OPERATIONS
For the three quarters ended December 31, 2023 compared to the three quarters ended January 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) | Three quarters ended | $ Change | % Change | ||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||
| Reclassified | |||||||||||||||||||||||||||||
| Revenue | 975.8 | 923.8 | 52.0 | 5.6 | % | ||||||||||||||||||||||||
| Cost of sales | 291.4 | 298.9 | 7.5 | 2.5 | % | ||||||||||||||||||||||||
| Gross profit | 684.4 | 624.9 | 59.5 | 9.5 | % | ||||||||||||||||||||||||
| Gross margin | 70.1 | % | 67.6 | % | 250 | bps | |||||||||||||||||||||||
| SG&A expenses | 583.0 | 494.9 | (88.1) | (17.8) | % | ||||||||||||||||||||||||
| SG&A expenses as % of revenue | 59.7 | % | 53.6 | % | (610) | bps | |||||||||||||||||||||||
| Operating income | 101.4 | 130.0 | (28.6) | (22.0) | % | ||||||||||||||||||||||||
| Operating margin | 10.4 | % | 14.1 | % | (370) | bps | |||||||||||||||||||||||
| Net interest, finance and other costs | 42.9 | 31.9 | (11.0) | (34.5) | % | ||||||||||||||||||||||||
| Income before income taxes | 58.5 | 98.1 | (39.6) | (40.4) | % | ||||||||||||||||||||||||
| Income tax expense | 8.0 | 19.2 | 11.2 | 58.3 | % | ||||||||||||||||||||||||
| Effective tax rate | 13.7 | % | 19.6 | % | 590 | bps | |||||||||||||||||||||||
| Net income | 50.5 | 78.9 | (28.4) | (36.0) | % | ||||||||||||||||||||||||
| Net income attributable to non-controlling interest | (2.9) | 3.1 | (6.0) | (193.5) | % | ||||||||||||||||||||||||
| Net income attributable to shareholders of the Company | 53.4 | 75.8 | (22.4) | (29.6) | % | ||||||||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||||||||
| Basic | 102,144,232 | 105,238,509 | |||||||||||||||||||||||||||
| Diluted | 103,125,365 | 105,778,351 | |||||||||||||||||||||||||||
| Earnings per share attributable to shareholders of the Company | |||||||||||||||||||||||||||||
| Basic | $ | 0.52 | $ | 0.72 | (0.20) | (27.8) | % | ||||||||||||||||||||||
| Diluted | $ | 0.52 | $ | 0.72 | (0.20) | (27.8) | % | ||||||||||||||||||||||
Revenue
Revenue for the three quarters ended December 31, 2023 was $975.8m, an increase of $52.0m or 5.6% from $923.8m for the three quarters ended January 1, 2023. Revenue generated from our DTC channel represented 69.6% of total revenue for the three quarters ended December 31, 2023 compared to 62.8% for the three quarters ended January 1, 2023. Total revenue grew in both Heavyweight Down and non-Heavyweight Down categories year-over-year. On a constant currency1 basis, revenue increased by 3.8% for the three quarters ended December 31, 2023 compared to the three quarters ended January 1, 2023, reflecting the strength of the euro relative to the Canadian dollar in the current period.
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| Three quarters ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | As reported | Foreign exchange impact | In constant currency1 | As reported | In constant currency1 | ||||||||||||||||||||||||||||||||||
| DTC | 679.2 | 579.8 | 99.4 | (6.7) | 92.7 | 17.1 | % | 16.0 | % | ||||||||||||||||||||||||||||||||
| Wholesale | 270.9 | 328.3 | (57.4) | (9.8) | (67.2) | (17.5) | % | (20.5) | % | ||||||||||||||||||||||||||||||||
| Other | 25.7 | 15.7 | 10.0 | — | 10.0 | 63.7 | % | 63.7 | % | ||||||||||||||||||||||||||||||||
| Total revenue | 975.8 | 923.8 | 52.0 | (16.5) | 35.5 | 5.6 | % | 3.8 | % | ||||||||||||||||||||||||||||||||
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
| Three quarters ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | As reported | Foreign exchange impact | In constant currency2 | As reported | In constant currency2 | ||||||||||||||||||||||||||||||||||
| Canada | 176.3 | 185.8 | (9.5) | — | (9.5) | (5.1) | % | (5.1) | % | ||||||||||||||||||||||||||||||||
| United States | 241.8 | 272.7 | (30.9) | (6.4) | (37.3) | (11.3) | % | (13.7) | % | ||||||||||||||||||||||||||||||||
| North America | 418.1 | 458.5 | (40.4) | (6.4) | (46.8) | (8.8) | % | (10.2) | % | ||||||||||||||||||||||||||||||||
| Asia Pacific | 359.0 | 240.1 | 118.9 | (0.3) | 118.6 | 49.5 | % | 49.4 | % | ||||||||||||||||||||||||||||||||
EMEA1 | 198.7 | 225.2 | (26.5) | (9.8) | (36.3) | (11.8) | % | (16.1) | % | ||||||||||||||||||||||||||||||||
| Total revenue | 975.8 | 923.8 | 52.0 | (16.5) | 35.5 | 5.6 | % | 3.8 | % | ||||||||||||||||||||||||||||||||
1EMEA comprises Europe, the Middle East, Africa, and Latin America.
2Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
DTC
Revenue from our DTC segment for the three quarters ended December 31, 2023 was $679.2m compared to $579.8m for the three quarters ended January 1, 2023. The increase of $99.4m or 17.1% was attributable largely to:
•Retail expansion, mainly in the United States and Mainland China, with 11 new permanent stores and three temporary stores converted to permanent stores during the three quarters ended December 31, 2023, in addition to ten stores in fiscal 2023 running for the full duration of the three quarters ended December 31, 2023 compared to partial operations in fiscal 2023.
•Total revenue grew in non-Heavyweight Down categories across all geographies, while Heavyweight down categories grew in Asia Pacific compared to the third quarter ended January 1, 2023.
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•Strong performance in Asia Pacific with positive comparable sales growth due to:
◦Continued improvements in tourism in the region.
◦Return of the domestic consumer and elevated traffic across our retail network in the region; in contrast to fiscal 2023, where reduced working hours and store closures as result of COVID-19 related restrictions unfavourably impacted Asia Pacific results.
◦Strong performance in the e-Commerce channel positively impacted by Singles’ Day in Greater China.
•DTC comparable sales growth1 of (0.8%). The decrease was driven by North America and EMEA, which was partially offset by strong performance in Asia Pacific. Driving factors for results were:
◦Negative comparable sales growth in North America and EMEA, due to a continuously challenging macroeconomic backdrop, and a decline in e-Commerce revenue in North America and EMEA, despite traffic increases in the majority of stores.
•The later onset of cold weather in Asia Pacific and warmer than seasonal weather in North America and EMEA throughout the current fiscal year may have affected purchase behaviour, including causing delayed purchases for our warmest Heavyweight Down products as consumers are buying closer to need.
1DTC comparable sales 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 for the three quarters ended December 31, 2023 was $270.9m compared to $328.3m for the three quarters ended January 1, 2023. The decrease of $57.4m or (17.5)% was due to lower overall order book value as planned. We were further impacted by higher returns from our wholesale partners who were impacted by similar macroeconomic headwinds as our DTC segment as well as lower re-order levels as we exert greater control over managing our inventory. During fiscal 2024, we continued streamlining of wholesale relationships as we optimize for greater DTC sales within our channel mix, consistent with our expectations, across all geographies. We have continued to manage our wholesale relationships based on the strategic nature of our partners, inventory in the segment and DTC distribution, which contributed to the planned year-over-year decrease.
Other
Revenue from our Other segment for the three quarters ended December 31, 2023 was $25.7m compared to $15.7m for the three quarters ended January 1, 2023. The increase of $10.0m or 63.7% was attributable to increased product sales to employees, friends and family events and revenue contributed by Paola Confectii.
See “Business Developments” for detailed information on the business combination.
Gross Profit
Gross profit and gross margin for the three quarters ended December 31, 2023 were $684.4m and 70.1%, respectively, compared to $624.9m and 67.6%, respectively, for the three quarters ended January 1, 2023. The increase in gross profit of $59.5m was attributable to higher DTC
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revenue as noted above and margin expansion. Gross margin in the current period has been favourably impacted by pricing, product mix from a decrease in Baffin revenue and from the sale of higher margin styles within both the Heavyweight Down and non-Heavyweight Down categories within Wholesale and segment mix due to a higher proportion of DTC sales, partially offset by higher product costs due to input cost inflation.
| Three quarters ended | |||||||||||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Gross profit | Gross margin | Gross profit | Gross margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
| DTC | 528.0 | 77.7 | % | 449.4 | 77.5 | % | 78.6 | 20 | bps | ||||||||||||||||||||||||||
| Wholesale | 150.2 | 55.4 | % | 169.5 | 51.6 | % | (19.3) | 380 | bps | ||||||||||||||||||||||||||
| Other | 6.2 | 24.1 | % | 6.0 | 38.2 | % | 0.2 | (1,410) | bps | ||||||||||||||||||||||||||
| Total gross profit | 684.4 | 70.1 | % | 624.9 | 67.6 | % | 59.5 | 250 | bps | ||||||||||||||||||||||||||
DTC
Gross profit in our DTC segment was $528.0m for the three quarters ended December 31, 2023 compared to $449.4m for the three quarters ended January 1, 2023. The increase of $78.6m in gross profit was attributable to higher revenues as noted above and slight margin expansion. The gross margin was 77.7% for the three quarters ended December 31, 2023, an increase of 20 bps compared to 77.5% in the comparative period. During the three quarters ended December 31, 2023, gross margin was driven by the favourable impact of pricing (+160 bps), partially offset by higher product costs (-60 bps) due to input cost inflation, higher inventory obsolescence provisioning (-50 bps) and higher freight and duty (-40 bps).
Wholesale
Gross profit in our Wholesale segment was $150.2m for the three quarters ended December 31, 2023 compared to $169.5m for the three quarters ended January 1, 2023. The decrease in gross profit of $19.3m was attributable to lower revenues, partially offset by gross margin expansion. The gross margin was 55.4% for the three quarters ended December 31, 2023, an increase of 380 bps compared to 51.6% in the comparative period. During the three quarters ended December 31, 2023, gross margin benefited from pricing (+310 bps), which included positive foreign exchange results due to the strengthening of the euro relative to the Canadian dollar, product mix (+220 bps) from the sale of higher margin styles within both the Heavyweight Down and non-Heavyweight Down categories as well as a decrease in revenue from Baffin, and the lower impact of the fair value inventory acquisition adjustment on sales related to the Company’s joint venture with Sazaby League (“Japan Joint Venture”) in the current year (+80 bps), partially offset by higher product costs (-210 bps) due to input cost inflation.
Other
Gross profit in our Other segment was $6.2m for the three quarters ended December 31, 2023 compared to $6.0m for the three quarters ended January 1, 2023, due to increased revenue as described above.
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SG&A Expenses
SG&A expenses were $583.0m for the three quarters ended December 31, 2023 compared to $494.9m for the three quarters ended January 1, 2023. The increase of $88.1m or 17.8% was attributable to $37.4m in higher costs related to the expanded retail network, $26.6m of activities related to the Transformation Program and $15.5m of incremental corporate personnel costs. The increase was partially offset by the timing of marketing activities to assist with brand awareness and support our growth, which occurred earlier in the year in fiscal 2023 than planned for fiscal 2024.
| Three quarters ended | |||||||||||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | % of segment revenue | Reported | % of segment revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| Reclassified | Reclassified | ||||||||||||||||||||||||||||||||||
| DTC | 234.6 | 34.5 | % | 184.0 | 31.7 | % | (50.6) | (27.5) | % | ||||||||||||||||||||||||||
| Wholesale | 51.2 | 18.9 | % | 51.0 | 15.5 | % | (0.2) | (0.4) | % | ||||||||||||||||||||||||||
| Other | 297.2 | 259.9 | (37.3) | (14.4) | % | ||||||||||||||||||||||||||||||
| Total SG&A expenses | 583.0 | 59.7 | % | 494.9 | 53.6 | % | (88.1) | (17.8) | % | ||||||||||||||||||||||||||
Depreciation and amortization included above, was $83.4m for the three quarters ended December 31, 2023 compared to $72.1m for the three quarters ended January 1, 2023, an increase of $11.3m which is attributable to continued retail expansion, including new stores opened in fiscal 2024 and those opened in the fourth quarter of fiscal 2023, and office expansion.
DTC
SG&A expenses in our DTC segment for the three quarters ended December 31, 2023 were $234.6m, or 34.5% of segment revenue, compared to $184.0m, or 31.7% of segment revenue, for the three quarters ended January 1, 2023. The increase of 2.8% in SG&A expenses as a percentage of segment revenue was driven by higher costs in the retail network and negative DTC comparable sales growth1, attributable to performance in North America and EMEA. The increase in costs of $50.6m or 27.5% was primarily due to $37.4m of costs associated with the retail network. This was driven by the expansion of the retail network in the United States and Asia Pacific, prior year store openings running for the full period in fiscal 2024, and higher costs from variable rent in Asia Pacific resulting from increased revenue compared to fiscal 2023. This region was impacted by COVID-19 restrictions in the comparative period. There were no COVID-19 related temporary store closure costs or restrictions in the three quarters ended December 31, 2023 compared to $0.2m in the comparative period.
1.DTC comparable sales growth is a supplementary financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Wholesale
SG&A expenses in our Wholesale segment for the three quarters ended December 31, 2023 were $51.2m, or 18.9% of segment revenue, compared to $51.0m or 15.5% of segment revenue, for the three quarters ended January 1, 2023. The increase of 3.4% in SG&A expenses as a percentage of segment revenue was primarily driven by lower revenue.
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Other
SG&A expenses in our Other segment, which include unallocated corporate expenses, were $297.2m for the three quarters ended December 31, 2023 compared to $259.9m for the three quarters ended January 1, 2023. The increase of $37.3m or 14.4% was attributable to $26.6m of activities related to the Transformation Program, including $21.1m of consultancy fees and $5.5m of corporate restructuring costs, net of share-based award forfeitures, associated with the reduction in workforce, $15.5m of incremental corporate personnel costs, and $1.3m of product donations for Gansu earthquake relief. The increase was partially offset by $3.9m of favourable foreign exchange fluctuations and $2.7m of favourable timing of marketing activities, which occurred earlier in the year in fiscal 2023 than planned for fiscal 2024. In the comparative period, donations of $2.8m were made to the United Nations for Ukrainian refugees, which did not recur in the current period.
Operating Income and Margin
Operating income and operating margin were $101.4m and 10.4% for the three quarters ended December 31, 2023 compared to $130.0m and 14.1% for the three quarters ended January 1, 2023. The decrease in operating income of $28.6m and operating margin of (370) bps were attributable to higher SG&A costs noted above, partially offset by higher gross profit.
| Three quarters ended | |||||||||||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Operating income (loss) | Operating margin | Operating income (loss) | Operating margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
| Reclassified | Reclassified | ||||||||||||||||||||||||||||||||||
| DTC | 293.4 | 43.2 | % | 265.4 | 45.8 | % | 28.0 | (260) | bps | ||||||||||||||||||||||||||
| Wholesale | 99.0 | 36.5 | % | 118.5 | 36.1 | % | (19.5) | 40 | bps | ||||||||||||||||||||||||||
| Other | (291.0) | (253.9) | (37.1) | ||||||||||||||||||||||||||||||||
| Total operating income | 101.4 | 10.4 | % | 130.0 | 14.1 | % | (28.6) | (370) | bps | ||||||||||||||||||||||||||
DTC
DTC segment operating income and operating margin were $293.4m and 43.2% for the three quarters ended December 31, 2023 compared to $265.4m and 45.8% for the three quarters ended January 1, 2023. The increase in operating income of $28.0m was attributable to improved revenue and gross profit from expansion of the retail network, partially offset by higher costs as described above. The decrease in operating margin of (260) bps was attributable to higher costs associated with the expanded retail network and a decline in DTC comparable sales growth. There were no COVID-19 related temporary store closure costs in the three quarters ended December 31, 2023 compared to $3.2m in the comparative period.
Wholesale
Wholesale segment operating income and operating margin were $99.0m and 36.5% for the three quarters ended December 31, 2023 compared to $118.5m and 36.1% for the three quarters ended January 1, 2023. The decrease in operating income of $19.5m was attributable to lower gross profit. The increase in operating margin of 40 bps was attributable to the improved gross margin, driven by favourable pricing and product mix.
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Other
Other segment operating loss was $(291.0)m for the three quarters ended December 31, 2023 compared to $(253.9)m for the three quarters ended January 1, 2023. The increase in operating loss of $(37.1)m was attributable to higher SG&A expenses as discussed above.
Net Interest, Finance and Other Costs
Net interest, finance and other costs were $42.9m for the three quarters ended December 31, 2023 compared to $31.9m for the three quarters ended January 1, 2023. The increase of $11.0m, or 34.5% was driven by the increase in net loss of $15.5m on the fair value remeasurement of the put option (liability increase of $12.0m, excluding translation losses of $2.5m) and contingent consideration (liability decrease of $0.3m, excluding translation losses of $1.3m) related to the Japan Joint Venture. The increase was also due to $4.6m of higher interest related to principal payments on lease liabilities, and higher interest charges of $2.6m due to higher gross borrowings during the period on our facilities from the comparative period. The increase was partially offset by favourable foreign exchange fluctuations related to the term loan facility which is denominated in USD, net of hedging impacts, of $11.7m.
Income Taxes
Income tax expense was $8.0m for the three quarters ended December 31, 2023 compared to $19.2m for the three quarters ended January 1, 2023. For the three quarters ended December 31, 2023, the effective and statutory tax rates were 13.7% and 25.5%, respectively, compared to 19.6% and 25.3% for the three quarters ended January 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.
Net Income
Net income for the three quarters ended December 31, 2023 was $50.5m compared to $78.9m for the three quarters ended January 1, 2023, driven by the factors described above.
| Canada Goose Holdings Inc. | Page 16 of 43 | |||||||
RESULTS OF OPERATIONS
For the third quarter ended December 31, 2023 compared to the third quarter ended January 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) | Third quarter ended | $ Change | % Change | ||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||
| Reclassified | |||||||||||||||||||||||
| Revenue | 609.9 | 576.7 | 33.2 | 5.8 | % | ||||||||||||||||||
| Cost of sales | 160.2 | 160.3 | 0.1 | 0.1 | % | ||||||||||||||||||
| Gross profit | 449.7 | 416.4 | 33.3 | 8.0 | % | ||||||||||||||||||
| Gross margin | 73.7 | % | 72.2 | % | 150 | bps | |||||||||||||||||
| SG&A expenses | 250.9 | 225.7 | (25.2) | (11.2) | % | ||||||||||||||||||
| SG&A expenses as % of revenue | 41.1 | % | 39.1 | % | (200) | bps | |||||||||||||||||
| Operating income | 198.8 | 190.7 | 8.1 | 4.2 | % | ||||||||||||||||||
| Operating margin | 32.6 | % | 33.1 | % | (50) | bps | |||||||||||||||||
| Net interest, finance and other costs | 14.8 | 2.4 | (12.4) | (516.7) | % | ||||||||||||||||||
| Income before income taxes | 184.0 | 188.3 | (4.3) | (2.3) | % | ||||||||||||||||||
| Income tax expense | 52.6 | 50.8 | (1.8) | (3.5) | % | ||||||||||||||||||
| Effective tax rate | 28.6 | % | 27.0 | % | (160) | bps | |||||||||||||||||
| Net income | 131.4 | 137.5 | (6.1) | (4.4) | % | ||||||||||||||||||
Net income attributable to non-controlling interest | 0.8 | 2.6 | (1.8) | (69.2) | % | ||||||||||||||||||
Net income attributable to shareholders of the Company | 130.6 | 134.9 | (4.3) | (3.2) | % | ||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||
| Basic | 100,253,473 | 105,146,788 | |||||||||||||||||||||
| Diluted | 101,308,836 | 105,668,608 | |||||||||||||||||||||
| Earnings per share attributable to shareholders of the Company | |||||||||||||||||||||||
| Basic | $ | 1.30 | $ | 1.28 | 0.02 | 1.6 | % | ||||||||||||||||
| Diluted | $ | 1.29 | $ | 1.28 | 0.01 | 0.8 | % | ||||||||||||||||
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Revenue
Revenue for the third quarter ended December 31, 2023 was $609.9m, an increase of $33.2m or 5.8%, from $576.7m for the third quarter ended January 1, 2023. Revenue generated from our DTC channel represented 84.3% of total revenue for the third quarter ended December 31, 2023 compared to 78.1% for the third quarter ended January 1, 2023. Revenue for non-Heavyweight Down categories and Heavyweight Down categories grew, while non-Heavyweight Down grew faster to become a larger share of revenue. On a constant currency1 basis, revenue increased by 5.3% for the third quarter ended December 31, 2023 compared to the third quarter ended January 1, 2023, reflecting the strengthening of the euro and softening of the Chinese yuan and Japanese yen relative to the Canadian dollar in the current period.
| Third quarter ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | As reported | Foreign exchange impact | In constant currency1 | As reported | In constant currency1 | ||||||||||||||||||||||||||||||||||
| DTC | 514.0 | 450.2 | 63.8 | (1.1) | 62.7 | 14.2 | % | 13.9 | % | ||||||||||||||||||||||||||||||||
| Wholesale | 81.8 | 114.4 | (32.6) | (1.3) | (33.9) | (28.5) | % | (29.6) | % | ||||||||||||||||||||||||||||||||
| Other | 14.1 | 12.1 | 2.0 | — | 2.0 | 16.5 | % | 16.5 | % | ||||||||||||||||||||||||||||||||
| Total revenue | 609.9 | 576.7 | 33.2 | (2.4) | 30.8 | 5.8 | % | 5.3 | % | ||||||||||||||||||||||||||||||||
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.
| Third quarter ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | As reported | Foreign exchange impact | In constant currency2 | As reported | In constant currency2 | ||||||||||||||||||||||||||||||||||
| Canada | 94.9 | 109.2 | (14.3) | — | (14.3) | (13.1) | % | (13.1) | % | ||||||||||||||||||||||||||||||||
| United States | 157.5 | 182.8 | (25.3) | (3.3) | (28.6) | (13.8) | % | (15.6) | % | ||||||||||||||||||||||||||||||||
| North America | 252.4 | 292.0 | (39.6) | (3.3) | (42.9) | (13.6) | % | (14.7) | % | ||||||||||||||||||||||||||||||||
| Asia Pacific | 270.7 | 167.6 | 103.1 | 2.3 | 105.4 | 61.5 | % | 62.9 | % | ||||||||||||||||||||||||||||||||
EMEA1 | 86.8 | 117.1 | (30.3) | (1.4) | (31.7) | (25.9) | % | (27.1) | % | ||||||||||||||||||||||||||||||||
| Total revenue | 609.9 | 576.7 | 33.2 | (2.4) | 30.8 | 5.8 | % | 5.3 | % | ||||||||||||||||||||||||||||||||
1EMEA comprises Europe, the Middle East, Africa, and Latin America.
2Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
DTC
Revenue from our DTC segment was $514.0m for the third quarter ended December 31, 2023 compared to $450.2m for the third quarter ended January 1, 2023. The increase of $63.8m or 14.2% was driven by the following factors:
•Retail expansion mainly in United States and Asia Pacific with two new permanent stores and one temporary store converted to permanent in the quarter, in addition to six
| Canada Goose Holdings Inc. | Page 18 of 43 | |||||||
openings in fiscal 2023 running for the full duration of the current quarter compared to partial operations in the comparative quarter.
•Total revenue from non-Heavyweight Down grew across all geographies except EMEA and Heavyweight Down grew in Asia Pacific compared to the third quarter ended January 1, 2023.
•Strong performance in Asia Pacific with positive comparable sales growth due to:
◦Continued improvements in tourism in the region.
◦Return of domestic consumer and elevation of traffic across our retail network in the region; in contrast to the third quarter of fiscal 2023, where reduced working hours and store closures as result of COVID-19 related restrictions unfavourably impacted Asia Pacific.
◦Strong performance in the e-Commerce channel positively impacted by Singles’ Day in Greater China.
•DTC comparable sales growth1 of (1.6%) was driven by lower e-Commerce revenue, partially offset by positive comparable store growth.
◦Negative comparable sales growth in North America and EMEA, due to a continuously challenging macroeconomic backdrop, a decline in e-Commerce revenue in North America and EMEA, despite traffic increases in the majority of stores.
•The later onset of cold weather in Asia Pacific and warmer than seasonal weather in North America and EMEA throughout the current quarter may have affected purchase behaviour, including causing delayed purchases for our warmest Heavyweight Down products as consumers are buying closer to need.
1DTC comparable sales 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 $81.8m for the third quarter ended December 31, 2023 compared to $114.4m for the third quarter ended January 1, 2023. The decrease of $32.6m or (28.5)% was due to lower overall order book value as planned. We were further impacted by higher returns from our wholesale partners who were impacted by similar headwinds as our DTC segment, as well as lower re-order levels than in the comparative quarter as we exert greater control over managing our inventory.
Other
Revenue from our Other segment was $14.1m, for the third quarter ended December 31, 2023, and increased compared to $12.1m for the third quarter ended January 1, 2023. The increase of $2.0m was attributable to revenue contributed by Paola Confectii.
See “Business Developments” for detailed information on the business combination.
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Gross Profit
Gross profit and gross margin for the third quarter ended December 31, 2023 were $449.7m and 73.7%, respectively, compared to $416.4m and 72.2%, respectively, for the third quarter ended January 1, 2023. The increase in gross profit of $33.3m was attributable to higher revenue and gross margin expansion. Gross margin in the current quarter was favourably impacted by pricing, partially offset by higher product costs due to input cost inflation.
| Third quarter ended | |||||||||||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Gross profit | Gross margin | Gross profit | Gross margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
| DTC | 403.6 | 78.5 | % | 351.1 | 78.0 | % | 52.5 | 50 | bps | ||||||||||||||||||||||||||
| Wholesale | 43.7 | 53.4 | % | 60.6 | 53.0 | % | (16.9) | 40 | bps | ||||||||||||||||||||||||||
| Other | 2.4 | 17.0 | % | 4.7 | 38.8 | % | (2.3) | (2,180) | bps | ||||||||||||||||||||||||||
| Total gross profit | 449.7 | 73.7 | % | 416.4 | 72.2 | % | 33.3 | 150 | bps | ||||||||||||||||||||||||||
DTC
Gross profit in our DTC segment was $403.6m for the third quarter ended December 31, 2023 compared to $351.1m for the third quarter ended January 1, 2023. The increase of $52.5m in gross profit was attributable to higher revenues as noted above and higher gross margins. The gross margin was 78.5% for the third quarter ended December 31, 2023, an increase of 50 bps compared to 78.0% in the comparative quarter. During the third quarter ended December 31, 2023, gross margin was impacted by pricing (+160 bps), partially offset by higher inventory obsolescence provisioning (-50 bps), unfavourable product mix (-40 bps) and higher freight & duty (-40 bps). In addition to the factors above, the comparative quarter included a higher fair value inventory acquisition adjustment on sales related to the Japan Joint Venture (as defined below), relative to the current quarter (+20 bps).
Wholesale
Gross profit in our Wholesale segment was $43.7m for the third quarter ended December 31, 2023 compared to $60.6m for the third quarter ended January 1, 2023. The decrease of $16.9m in gross profit was attributable to lower revenue partially offset by gross margin expansion. The gross margin was 53.4% for the third quarter ended December 31, 2023, an increase of 40 bps compared to 53.0% in the comparative quarter. During the third quarter ended December 31, 2023, gross margin was impacted by pricing (+280 bps), which included positive foreign exchange results due to the strengthening of the euro relative to the Canadian dollar and favourable product mix (+120 bps) due to lower revenue from Baffin. Partially offsetting margin results were higher product costs (-210 bps) due to input cost inflation and higher inventory obsolescence provisioning (-160 bps).
Other
Gross profit in our Other segment was $2.4m for the third quarter ended December 31, 2023 compared to $4.7m for the third quarter ended January 1, 2023. Gross margin was 17.0% for the third quarter ended December 31, 2023 compared to 38.8% for the third quarter ended January 1, 2023.
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SG&A Expenses
SG&A expenses were $250.9m for the third quarter ended December 31, 2023 compared to $225.7m for the third quarter ended January 1, 2023. The increase of $25.2m or 11.2% was attributable to $21.5m in higher costs related to the expanded retail network, $5.6m of consultancy fees related to the Transformation Program, and $2.8m of incremental corporate personnel costs. The increase was partially offset by $3.2m of favourable foreign exchange fluctuations.
| Third quarter ended | |||||||||||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | % of segment revenue | Reported | % of segment revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| Reclassified | Reclassified | ||||||||||||||||||||||||||||||||||
| DTC | 116.5 | 22.7 | % | 92.3 | 20.5 | % | (24.2) | (26.2) | % | ||||||||||||||||||||||||||
| Wholesale | 17.8 | 21.8 | % | 21.8 | 19.1 | % | 4.0 | 18.3 | % | ||||||||||||||||||||||||||
| Other | 116.6 | 111.6 | (5.0) | (4.5) | % | ||||||||||||||||||||||||||||||
| Total SG&A expenses | 250.9 | 41.1 | % | 225.7 | 39.1 | % | (25.2) | (11.2) | % | ||||||||||||||||||||||||||
Depreciation and amortization, included above, was $29.3m for the third quarter ended December 31, 2023 compared to $24.7m for the third quarter ended January 1, 2023, an increase of $4.6m which is attributable to continued retail expansion.
DTC
SG&A expenses in our DTC segment for the third quarter ended December 31, 2023 were $116.5m, or 22.7% of segment revenue, compared to $92.3m, or 20.5% of segment revenue, for the third quarter ended January 1, 2023. The increase of 2.2% in SG&A expenses as a percentage of segment revenue was driven by higher costs incurred in the retail network and negative DTC comparable sales growth1, as a result of performance in North America and EMEA. The increase in costs of $24.2m or 26.2% was primarily due to $21.5m of costs associated with the retail network. This was driven by the expansion of the retail network in the United States and Asia Pacific, prior year store openings running for the full quarter in fiscal 2024, and higher costs from variable rent in Asia Pacific resulting from increased revenue compared to fiscal 2023. This region was impacted by COVID-19 restrictions in the comparative quarter. There were no COVID-19 related temporary store closure costs or restrictions in the third quarter ended December 31, 2023 compared to $0.8m in the comparative quarter.
1.DTC comparable sales growth is a supplementary financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Wholesale
SG&A expenses in our Wholesale segment for the third quarter ended December 31, 2023 were $17.8m, or 21.8% of segment revenue, compared to $21.8m, or 19.1% of segment revenue, for the third quarter ended January 1, 2023. The increase of 2.7% in SG&A as a percentage of segment revenue was primarily driven by lower revenue in the quarter and $4.0m or 18.3% of lower costs. The decrease in costs was attributable to $2.2m reduced freight and warehouse costs driven by lower volumes, and $0.7m of lower personnel costs and commissions, partially offset by costs incurred related to the build-out of travel retail locations.
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Other
SG&A expenses in our Other segment, which include unallocated corporate expenses, were $116.6m for the third quarter ended December 31, 2023 compared to $111.6m for the third quarter ended January 1, 2023. The increase of $5.0m or 4.5% was attributable to $5.6m of consultancy fees related to the Transformation Program, $2.8m of incremental corporate personnel costs, $1.3m of product donations for Gansu earthquake relief, and $1.0m of higher legal costs. The increase was partially offset by $3.2m of favourable foreign exchange fluctuations. In the comparative quarter, donations of $2.8m were made to the United Nations for Ukrainian refugees, which did not recur in the current quarter.
Operating Income and Margin
Operating income and operating margin were $198.8m and 32.6% for the third quarter ended December 31, 2023 compared to $190.7m and 33.1% for the third quarter ended January 1, 2023. The increase in operating income of $8.1m was attributable to higher gross profit, partially offset by higher SG&A costs noted above. The decrease in operating margin of (50) bps was attributable to higher SG&A costs, partially offset by the improved gross margin.
| Third quarter ended | |||||||||||||||||||||||||||||||||||
| December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Operating income (loss) | Operating margin | Operating income (loss) | Operating margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
| Reclassified | Reclassified | ||||||||||||||||||||||||||||||||||
| DTC | 287.1 | 55.9 | % | 258.8 | 57.5 | % | 28.3 | (160) | bps | ||||||||||||||||||||||||||
| Wholesale | 25.9 | 31.7 | % | 38.8 | 33.9 | % | (12.9) | (220) | bps | ||||||||||||||||||||||||||
| Other | (114.2) | (106.9) | (7.3) | ||||||||||||||||||||||||||||||||
| Total operating income | 198.8 | 32.6 | % | 190.7 | 33.1 | % | 8.1 | (50) | bps | ||||||||||||||||||||||||||
DTC
DTC segment operating income and operating margin were $287.1m and 55.9% for the third quarter ended December 31, 2023 compared to $258.8m and 57.5% for the third quarter ended January 1, 2023. The increase in operating income of $28.3m was attributable to improved revenue and gross profit, partially offset by higher costs associated with the expansion of the retail network. The decrease in operating margin of (160) bps was attributable to higher costs associated with the expanded retail network and a decline in DTC comparable sales growth, as described above. There were no COVID-19 related temporary store closure costs in the third quarter ended December 31, 2023 compared to $0.8m in the comparative quarter.
Wholesale
Wholesale segment operating income and operating margin were $25.9m and 31.7% for the third quarter ended December 31, 2023 compared to $38.8m and 33.9% for the third quarter ended January 1, 2023. The decrease in operating income of $12.9m was attributable to lower gross profit and SG&A expenses as discussed above. The decrease in operating margin of (220) bps was attributable to higher SG&A costs as discussed above, partially offset by the improved gross margin.
| Canada Goose Holdings Inc. | Page 22 of 43 | |||||||
Other
Other segment operating loss was $(114.2)m for the third quarter ended December 31, 2023 compared to $(106.9)m for the third quarter ended January 1, 2023. The increase in operating loss of $7.3m was attributable to higher SG&A expenses as discussed above and lower gross profit realized in this segment.
Net Interest, Finance and Other Costs
Net interest, finance and other costs were $14.8m for the third quarter ended December 31, 2023 compared to $2.4m for the third quarter ended January 1, 2023. The increase of $12.4m was driven by the increase in net loss of $5.7m on the fair value remeasurement of the put option (liability increase of $4.9m, excluding translation losses of $0.4m) and contingent consideration (liability decrease of $0.4m, excluding translation losses of $0.8m) related to the Japan Joint Venture. The increase was also driven by unfavourable foreign exchange fluctuations related to the term loan facility which is denominated in USD, net of hedging impacts, of $4.1m.
Income Taxes
Income tax expense was $52.6m for the third quarter ended December 31, 2023 compared to $50.8m for the third quarter ended January 1, 2023. For the third quarter ended December 31, 2023, the effective and statutory tax rates were 28.6% and 25.5%, respectively, compared to 27.0% and 25.3% for the third quarter ended January 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 rates.
Net Income
Net income for the third quarter ended December 31, 2023 was $131.4m compared to $137.5m for third quarter ended January 1, 2023, driven by the factors described above.
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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) (reclassified) | Adjusted EBIT1 | Adjusted net income (loss) per diluted share attributable to shareholders of the Company1 | ||||||||||||||||||||||||||||
| DTC | Wholesale | Other | Total | Basic | Diluted | ||||||||||||||||||||||||||||||
| Fiscal 2024 | |||||||||||||||||||||||||||||||||||
| Third Quarter | 514.0 | 81.8 | 14.1 | 609.9 | — | % | 130.6 | $ | 1.30 | $ | 1.29 | 198.8 | 207.2 | $ | 1.37 | ||||||||||||||||||||
| Second Quarter | 109.4 | 162.0 | 9.7 | 281.1 | — | % | 3.9 | $ | 0.04 | $ | 0.04 | 2.3 | 15.6 | $ | 0.16 | ||||||||||||||||||||
| First Quarter | 55.8 | 27.1 | 1.9 | 84.8 | — | % | (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 | 27.6 | $ | 0.14 | ||||||||||||||||||||
| Third Quarter | 450.2 | 114.4 | 12.1 | 576.7 | 47.4 | % | 134.9 | $ | 1.28 | $ | 1.28 | 190.7 | 197.1 | $ | 1.27 | ||||||||||||||||||||
| Second Quarter | 94.8 | 180.7 | 1.7 | 277.2 | 22.8 | % | 3.3 | $ | 0.03 | $ | 0.03 | 21.5 | 26.3 | $ | 0.19 | ||||||||||||||||||||
| First Quarter | 34.8 | 33.2 | 1.9 | 69.9 | 5.7 | % | (62.4) | $ | (0.59) | $ | (0.59) | (82.2) | (75.9) | $ | (0.56) | ||||||||||||||||||||
| Fiscal 2022 | |||||||||||||||||||||||||||||||||||
| Fourth Quarter | 185.6 | 34.9 | 2.6 | 223.1 | 20.3 | % | (9.1) | $ | (0.09) | $ | (0.09) | 2.1 | 12.4 | $ | 0.04 | ||||||||||||||||||||
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 measure.
Revenue is highest in our Wholesale segment in our second and third quarters as we fulfill wholesale customer orders in time for the 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 second quarter as we invest ahead of our peak season.
Revenue
Over the last eight quarters, revenue has been impacted by the following:
•COVID-19 beginning in the fourth quarter of fiscal 2020;
•the formation of the Japan Joint Venture on April 4, 2022;
•timing of store openings;
•launch and expansion of international e-Commerce sites;
•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;
•timing of end-consumer purchasing in the DTC segment and the availability of new products;
•successful execution of global pricing strategy;
| Canada Goose Holdings Inc. | Page 24 of 43 | |||||||
•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;
•the extra week in the third quarter of fiscal 2022; and
•the formation of the new subsidiary Paola Confectii 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;
•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 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;
•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; and
•the introduction of the Transformation Program in the fourth quarter of fiscal 2023.
| Canada Goose Holdings Inc. | Page 25 of 43 | |||||||
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, constant currency revenue, net debt, net working capital, and free operating cash flow, certain financial measures that are “non-IFRS ratios”, including adjusted EBIT margin, adjusted net income per basic and diluted share attributable to shareholders of the Company, net debt leverage, and net working capital as a percentage of revenue, as well as DTC comparable sales 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, as issued by the IASB, 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, as issued by the IASB, 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.
| Three quarters ended | Third quarter ended | ||||||||||||||||||||||||||||||||||
| CAD $ millions (except per share data) | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||||||||||||||||||||
| Reclassified | Reclassified | ||||||||||||||||||||||||||||||||||
| Adjusted EBIT | 131.7 | 147.5 | 207.2 | 197.1 | |||||||||||||||||||||||||||||||
| Adjusted EBIT margin | 13.5 | % | 16.0 | % | 34.0 | % | 34.2 | % | |||||||||||||||||||||||||||
| Adjusted EBITDA | 222.9 | 220.7 | 239.4 | 222.5 | |||||||||||||||||||||||||||||||
| Adjusted net income attributable to shareholders of the Company | 81.7 | 96.0 | 138.6 | 134.5 | |||||||||||||||||||||||||||||||
| Adjusted net income per basic share attributable to shareholders of the Company | $ | 0.80 | $ | 0.91 | $ | 1.38 | $ | 1.28 | |||||||||||||||||||||||||||
| Adjusted net income per diluted share attributable to shareholders of the Company | $ | 0.79 | $ | 0.91 | $ | 1.37 | $ | 1.27 | |||||||||||||||||||||||||||
| Free operating cash flow | (27.6) | 43.4 | 299.7 | 321.0 | |||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | April 2, 2023 | ||||||||||||||
| Net debt | (587.4) | (419.2) | (468.1) | ||||||||||||||
| Net working capital | 353.7 | 326.5 | 328.0 | ||||||||||||||
| Canada Goose Holdings Inc. | Page 26 of 43 | |||||||
Adjusted EBIT, adjusted EBIT margin, adjusted EBITDA, adjusted net income attributable to shareholders of the Company, and adjusted net income 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 “Financial Condition, Liquidity and Capital Resources - Indebtedness” below for a table providing the calculation of net debt and discussion of net debt leverage.
Net working capital
We define net working capital as current assets, net of cash, minus current liabilities, excluding the short-term borrowings and current portion of lease liabilities. We use, and believe that certain investors and analysts use, this information to assess the Company’s liquidity and management of net working capital resources. See “Financial Condition, Liquidity and Capital Resources - Financial Conditions” below for a table providing the calculation of net working capital.
Free operating cash flow
We define free operating cash flow as net cash flows from (used in) operating activities plus net cash flows from (used in) investing activities, minus principal payments on lease liabilities. We use, and believe that certain investors and analysts use, this information as an indicator of operational financial performance and to assess the Company’s financial leverage and cash available for repayment of borrowings and other financing activities. See “Financial Conditions, Liquidity and Capital Resources - Cash Flows” below for a table providing the calculation of free operating cash flow.
DTC comparable sales growth
DTC comparable sales growth is a supplementary financial measure defined as 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
| Canada Goose Holdings Inc. | Page 27 of 43 | |||||||
the specific trading days when the stores were closed, whether those closures occurred in the current period or the comparative period.
The tables below reconcile net income to adjusted EBIT, adjusted EBITDA, and adjusted net income 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.
Beginning with the first quarter of fiscal 2024, foreign exchange gains and losses related to the term loan facility, net of hedging, are now reflected in the presentation of net interest, finance and other costs; which was previously presented in SG&A expenses. Comparable periods have been reclassified to reflect this change.
See “Basis of Presentation” for additional details on the updates made to the comparable periods.
| Three quarters ended | Third quarter ended | ||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||||||||||||||||||||
| Net income | 50.5 | 78.9 | 131.4 | 137.5 | |||||||||||||||||||||||||||||||
| Add (deduct) the impact of: | |||||||||||||||||||||||||||||||||||
| Income tax expense | 8.0 | 19.2 | 52.6 | 50.8 | |||||||||||||||||||||||||||||||
| Net interest, finance and other costs | 42.9 | 31.9 | 14.8 | 2.4 | |||||||||||||||||||||||||||||||
| Operating income | 101.4 | 130.0 | 198.8 | 190.7 | |||||||||||||||||||||||||||||||
| Net temporary store closure costs (a) | — | 3.2 | — | 0.8 | |||||||||||||||||||||||||||||||
| Head office transition costs (c) | 0.8 | 4.7 | — | 1.5 | |||||||||||||||||||||||||||||||
| Japan Joint Venture costs (e) | 2.4 | 8.3 | 2.3 | 4.1 | |||||||||||||||||||||||||||||||
| Strategic initiatives (g) | 21.1 | — | 5.6 | — | |||||||||||||||||||||||||||||||
| Net corporate restructuring costs (h) | 5.5 | — | — | — | |||||||||||||||||||||||||||||||
| Legal proceeding costs (i) | — | 2.2 | — | — | |||||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (k) | 0.5 | — | 0.5 | — | |||||||||||||||||||||||||||||||
| Other (l) | — | (0.9) | — | — | |||||||||||||||||||||||||||||||
| Total adjustments | 30.3 | 17.5 | 8.4 | 6.4 | |||||||||||||||||||||||||||||||
| Adjusted EBIT | 131.7 | 147.5 | 207.2 | 197.1 | |||||||||||||||||||||||||||||||
| Adjusted EBIT margin | 13.5 | % | 16.0 | % | 34.0 | % | 34.2 | % | |||||||||||||||||||||||||||
| Canada Goose Holdings Inc. | Page 28 of 43 | |||||||
| Three quarters ended | Third quarter ended | ||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||||||||||||||||||||
| Net income | 50.5 | 78.9 | 131.4 | 137.5 | |||||||||||||||||||||||||||||||
| Add (deduct) the impact of: | |||||||||||||||||||||||||||||||||||
| Income tax expense | 8.0 | 19.2 | 52.6 | 50.8 | |||||||||||||||||||||||||||||||
| Net interest, finance and other costs | 42.9 | 31.9 | 14.8 | 2.4 | |||||||||||||||||||||||||||||||
| Operating income | 101.4 | 130.0 | 198.8 | 190.7 | |||||||||||||||||||||||||||||||
| Net temporary store closure costs (a) | — | 3.2 | — | 0.8 | |||||||||||||||||||||||||||||||
| Head office transition costs (c) | 0.8 | 4.7 | — | 1.5 | |||||||||||||||||||||||||||||||
| Japan Joint Venture costs (e) | 2.4 | 8.3 | 2.3 | 4.1 | |||||||||||||||||||||||||||||||
| Strategic initiatives (g) | 21.1 | — | 5.6 | — | |||||||||||||||||||||||||||||||
| Net corporate restructuring costs (h) | 5.5 | — | — | — | |||||||||||||||||||||||||||||||
| Legal proceeding costs (i) | — | 2.2 | — | — | |||||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (k) | 0.5 | — | 0.5 | — | |||||||||||||||||||||||||||||||
| Net depreciation and amortization (o) | 91.2 | 73.2 | 32.2 | 25.4 | |||||||||||||||||||||||||||||||
| Other (l) | — | (0.9) | — | — | |||||||||||||||||||||||||||||||
| Total adjustments | 121.5 | 90.7 | 40.6 | 31.8 | |||||||||||||||||||||||||||||||
| Adjusted EBITDA | 222.9 | 220.7 | 239.4 | 222.5 | |||||||||||||||||||||||||||||||
| Canada Goose Holdings Inc. | Page 29 of 43 | |||||||
| Three quarters ended | Third quarter ended | ||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||||||||||||||||||||
| Net income | 50.5 | 78.9 | 131.4 | 137.5 | |||||||||||||||||||||||||||||||
| Add (deduct) the impact of: | |||||||||||||||||||||||||||||||||||
| Net temporary store closure costs (a) (b) | — | 3.3 | — | 0.8 | |||||||||||||||||||||||||||||||
| Head office transition costs (c) (d) | 1.2 | 5.9 | — | 2.0 | |||||||||||||||||||||||||||||||
| Japan Joint Venture costs (e) | 2.4 | 8.3 | 2.3 | 4.1 | |||||||||||||||||||||||||||||||
| Japan Joint Venture remeasurement loss (gain) on contingent consideration and put option (f) | 10.8 | (4.7) | 3.0 | (2.7) | |||||||||||||||||||||||||||||||
| Strategic initiatives (g) | 21.1 | — | 5.6 | — | |||||||||||||||||||||||||||||||
| Net corporate restructuring costs (h) | 5.5 | — | — | — | |||||||||||||||||||||||||||||||
| Legal proceeding costs (i) | — | 2.2 | — | — | |||||||||||||||||||||||||||||||
| Unrealized foreign exchange loss (gain) on Term Loan Facility (j) | — | 11.7 | 0.5 | (3.6) | |||||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (k) | 0.5 | — | 0.5 | — | |||||||||||||||||||||||||||||||
| Other (l) | — | (0.9) | — | — | |||||||||||||||||||||||||||||||
| 41.5 | 25.8 | 11.9 | 0.6 | ||||||||||||||||||||||||||||||||
| Tax effect of adjustments | (6.2) | (4.3) | (1.3) | (0.3) | |||||||||||||||||||||||||||||||
| Deferred tax adjustment (m) | (0.5) | — | — | — | |||||||||||||||||||||||||||||||
| Adjusted net income | 85.3 | 100.4 | 142.0 | 137.8 | |||||||||||||||||||||||||||||||
| Adjusted net income attributable to non-controlling interest (n) | (3.6) | (4.4) | (3.4) | (3.3) | |||||||||||||||||||||||||||||||
| Adjusted net income attributable to shareholders of the Company | 81.7 | 96.0 | 138.6 | 134.5 | |||||||||||||||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||||||||||||||
| Basic | 102,144,232 | 105,238,509 | 100,253,473 | 105,146,788 | |||||||||||||||||||||||||||||||
| Diluted | 103,125,365 | 105,778,351 | 101,308,836 | 105,668,608 | |||||||||||||||||||||||||||||||
Adjusted net income per basic share attributable to shareholders of the Company | $ | 0.80 | $ | 0.91 | $ | 1.38 | $ | 1.28 | |||||||||||||||||||||||||||
Adjusted net income per diluted share attributable to shareholders of the Company | $ | 0.79 | $ | 0.91 | $ | 1.37 | $ | 1.27 | |||||||||||||||||||||||||||
(a)Net temporary store closure costs of $nil and $nil were incurred in the third and three quarters ended December 31, 2023, respectively (third and three quarters ended January 1, 2023 - $0.8m and $3.2m, respectively).
(b)Net temporary store closure costs incurred in (a) as well as $nil and $nil of interest expense on lease liabilities for temporary store closures for the third and three quarters ended December 31, 2023, respectively (third and three quarters ended January 1, 2023 - less than $0.1m and $0.1m, respectively).
(c)Costs incurred for the corporate head office transition, including depreciation on right-of-use assets.
| Canada Goose Holdings Inc. | Page 30 of 43 | |||||||
(d)Corporate head office transition costs incurred in (c) as well as $nil and $0.4m of interest expense on lease liabilities for the third and three quarters ended December 31, 2023, respectively (third and three quarters ended January 1, 2023 - $0.5m and $1.2m, respectively).
(e)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.
(f)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 a loss of $3.0m and $10.8m on fair value remeasurement of the contingent consideration and put option during the third and three quarters ended December 31, 2023, respectively (third and three quarters ended January 1, 2023 - gain of $(2.7)m and $(4.7)m, respectively). These gains and losses are included in net interest, finance and other costs within the interim statements of income.
(g)Consultancy fees incurred in connection with our Transformation Program.
(h)Corporate restructuring costs, net of share-based award forfeitures, associated with the reduction in workforce as part of our Transformation Program.
(i)Costs for legal proceeding fees including for the defence of class action lawsuits.
(j)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 were previously presented in SG&A expenses, are now reflected in the presentation of net interest, finance and other costs.
(k)Remuneration recognized for the Earn-Out related to the formation of the new subsidiary Paola Confectii. See “Business Developments” for detailed information on the Earn-Out in connection with the business combination.
(l)Costs related to the transition of logistics agencies, restructuring costs related to the company’s manufacturing facilities, rent abatements received as well as individually immaterial items.
(m)Deferred tax adjustment recorded as the result of Swiss tax reform in Canada Goose International AG.
(n)Calculated as net income (loss) attributable to non-controlling interest within the Interim Financial Statements of $0.8m and $(2.9)m plus $2.6m and $6.5m 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 third and three quarters ended December 31, 2023, respectively. Net income (loss) attributable to non-controlling interest within the Interim Financial Statements of $2.6m and $3.1m plus $0.7m and $1.3m 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 third and three quarters ended January 1, 2023, respectively.
(o)Calculated as depreciation and amortization as determined in accordance with IFRS, less the depreciation impact for temporary store closures (a), and corporate head office transition
| Canada Goose Holdings Inc. | Page 31 of 43 | |||||||
costs (c). Depreciation and amortization includes depreciation on right-of-use assets under IFRS 16, Leases.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Financial Condition
The following table represents our net working capital1 position as at December 31, 2023, January 1, 2023 and April 2, 2023.
| CAD $ millions | December 31, 2023 | January 1, 2023 | $ Change | April 2, 2023 | $ Change | ||||||||||||||||||||||||
| Current assets | 846.3 | 1,011.1 | (164.8) | 863.2 | (16.9) | ||||||||||||||||||||||||
| Deduct: Cash | (154.3) | (344.2) | 189.9 | (286.5) | 132.2 | ||||||||||||||||||||||||
| Current assets, net of cash | 692.0 | 666.9 | 25.1 | 576.7 | 115.3 | ||||||||||||||||||||||||
| Current liabilities | 453.4 | 459.4 | (6.0) | 352.4 | 101.0 | ||||||||||||||||||||||||
| Deduct the impact of: | |||||||||||||||||||||||||||||
| Short-term borrowings | (38.7) | (52.4) | 13.7 | (27.6) | (11.1) | ||||||||||||||||||||||||
| Current portion of lease liabilities | (76.4) | (66.6) | (9.8) | (76.1) | (0.3) | ||||||||||||||||||||||||
| Current liabilities, net of short-term borrowings and current portion of lease liabilities | 338.3 | 340.4 | (2.1) | 248.7 | 89.6 | ||||||||||||||||||||||||
Net working capital1 | 353.7 | 326.5 | 27.2 | 328.0 | 25.7 | ||||||||||||||||||||||||
1Net working capital is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
As at December 31, 2023, we had $353.7m of net working capital compared to $326.5m of net working capital as at January 1, 2023. Net working capital as a percentage of revenue was 32.7% as at December 31, 2023 and 32.2% in the comparative quarter. The $27.2m increase in net working capital, or 8.3%, was driven by an increase in trade receivables.
As at December 31, 2023, we had $353.7m of net working capital compared to $328.0m of net working capital as at April 2, 2023.
As at December 31, 2023, total inventory was relatively flat year-over-year. We have decelerated inventory growth in the three quarters ended December 31, 2023 since fiscal 2023 as compared to the three quarters ended January 1, 2023 to fiscal 2022. Planned deceleration of inventory growth and a shift to in-house production is expected to support alignment between production levels, anticipated revenue growth and utilize the evergreen product we have on-hand. However, higher finished goods inventory levels year-over-year are attributable to lower-than-expected sales compared to inventory planning. In response, during the three quarters ended December 31, 2023, we increased our obsolescence reserve for slow-moving finished goods and continue to focus on optimizing inventory productivity. 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.
Inventory of $1.6m was acquired through Paola Confectii, and its inventory level is $2.2m as at December 31, 2023.
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Cash Flows
The following table summarizes the Company’s consolidated statement of cash flows for the third and three quarters ended December 31, 2023 compared to the third and three quarters ended January 1, 2023.
| Three quarters ended | Third quarter ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | $ Change | December 31, 2023 | January 1, 2023 | $ Change | |||||||||||||||||||||||||||||||||||||||||||||||
Total cash from (used in): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating activities | 81.8 | 109.3 | (27.5) | 348.3 | 351.0 | (2.7) | |||||||||||||||||||||||||||||||||||||||||||||||
| Investing activities | (59.7) | (21.4) | (38.3) | (27.6) | (12.8) | (14.8) | |||||||||||||||||||||||||||||||||||||||||||||||
| Financing activities | (153.3) | (35.3) | (118.0) | (204.4) | (95.2) | (109.2) | |||||||||||||||||||||||||||||||||||||||||||||||
| Effects of foreign currency exchange rate changes on cash | (1.0) | 3.9 | (4.9) | 0.5 | 4.1 | (3.6) | |||||||||||||||||||||||||||||||||||||||||||||||
| (Decrease) increase cash | (132.2) | 56.5 | (188.7) | 116.8 | 247.1 | (130.3) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash, beginning of period | 286.5 | 287.7 | (1.2) | 37.5 | 97.1 | (59.6) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash, end of period | 154.3 | 344.2 | (189.9) | 154.3 | 344.2 | (189.9) | |||||||||||||||||||||||||||||||||||||||||||||||
Free operating cash flow1 | (27.6) | 43.4 | (71.0) | 299.7 | 321.0 | (21.3) | |||||||||||||||||||||||||||||||||||||||||||||||
1Free operating cash flow is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
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, the revolving credit facility, and the trade accounts receivable factoring program 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.
Cash flows from operating activities
Cash flows from operating activities were $81.8m for the three quarters ended December 31, 2023 compared to $109.3m for the three quarters ended January 1, 2023. The decrease in cash from operating activities of $27.5m was due to lower net income, higher taxes paid of $24.7m and higher interest paid of $8.9m, partially offset by lower inventory production.
Cash flows from operating activities were $348.3m for the third quarter ended December 31, 2023 compared to $351.0m for the third quarter ended January 1, 2023. The decrease in cash flows from operating activities of $2.7m was due to higher taxes paid of $2.0m and higher interest paid of $3.5m, partially offset by lower inventory production.
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Cash flows used in investing activities
Cash flows used in investing activities were $59.7m for the three quarters ended December 31, 2023 compared to $21.4m for the three quarters ended January 1, 2023. The increase in cash flows used in investing activities of $38.3m was primarily due to increased costs on capital expenditures by $23.4m, driven by the expansion of the retail network, the settlements associated with the completion of the new head office, as well as $12.3m for the acquisition of Paola Confectii.
Cash flows used in investing activities were $27.6m for the third quarter ended December 31, 2023 compared to $12.8m for the third quarter ended January 1, 2023. The increase in cash flows used in investing activities of $14.8m was primarily due to the acquisition of Paola Confectii for $12.3m and increased costs on capital expenditures driven by the expansion of the retail network.
Cash flows used in financing activities
Cash flows used in financing activities were $153.3m for the three quarters ended December 31, 2023 compared to cash flow used in financing activities of $35.3m for the three quarters ended January 1, 2023. The increase in cash flows used in financing activities of $118.0m was driven by $95.6m of higher payments for the purchase of subordinate voting shares that were cancelled related to the normal course issuer bid (“NCIB”) that begun during fiscal 2023 (the “Fiscal 2023 NCIB”) and the NCIB that begun during fiscal 2024 (the “Fiscal 2024 NCIB”) as described below, increased repayments of $16.2m on the Mainland China credit facilities and increased principal payments on lease liabilities of $5.2m. See “Financial Conditions, Liquidity and Capital Resources - Normal Course Issuer Bids”, for more information on the Fiscal 2023 and the Fiscal 2024 NCIB.
Cash flows used in financing activities were $204.4m for the third quarter ended December 31, 2023 compared to cash flow used in financing activities of $95.2m for the third quarter ended January 1, 2023. The increase in cash flows used in financing activities of $109.2m was driven by $38.2m of higher payments for the purchase of subordinate voting shares that were cancelled related to the Fiscal 2023 NCIB and Fiscal 2024 NCIB as described below, increased repayments of $30.4m on the revolving credit facility, $29.8m on the Mainland China credit facilities and $7.1m on the Japan credit facility.
| Canada Goose Holdings Inc. | Page 34 of 43 | |||||||
Free operating cash flow1
The table below reconciles the cash flows from (used in) operating and investing activities, and principal payments on lease liabilities to free operating cash flow.
| Three quarters ended | Third quarter ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | $ Change | December 31, 2023 | January 1, 2023 | $ Change | |||||||||||||||||||||||||||||||||||||||||||||||
| Total cash from (used in): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating activities | 81.8 | 109.3 | (27.5) | 348.3 | 351.0 | (2.7) | |||||||||||||||||||||||||||||||||||||||||||||||
| Investing activities | (59.7) | (21.4) | (38.3) | (27.6) | (12.8) | (14.8) | |||||||||||||||||||||||||||||||||||||||||||||||
| Principal payments on lease liabilities | (49.7) | (44.5) | (5.2) | (21.0) | (17.2) | (3.8) | |||||||||||||||||||||||||||||||||||||||||||||||
Free operating cash flow1 | (27.6) | 43.4 | (71.0) | 299.7 | 321.0 | (21.3) | |||||||||||||||||||||||||||||||||||||||||||||||
1Free operating cash flow is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Free operating cash flows in the three quarters ended December 31, 2023 decreased to $(27.6)m from $43.4m for the three quarters ended January 1, 2023 due to lower net income, lower cash flow from operating activities, higher cash flow used in investing activities, and higher principal paid on lease liabilities as described above.
Free operating cash flows in the third quarter ended December 31, 2023 decreased to $299.7m from $321.0m for the third quarter ended January 1, 2023 due to lower cash flow from operating activities, higher cash used in investing activities, and higher principal paid on lease liabilities as described above.
Indebtedness
The following table presents our net debt1 as at December 31, 2023, January 1, 2023, and April 2, 2023.
| CAD $ millions | December 31, 2023 | January 1, 2023 | $ Change | April 2, 2023 | $ Change | ||||||||||||||||||||||||
| Cash | 154.3 | 344.2 | (189.9) | 286.5 | (132.2) | ||||||||||||||||||||||||
| Mainland China Credit Facilities | (9.3) | (15.7) | 6.4 | (9.8) | 0.5 | ||||||||||||||||||||||||
| Japan Credit Facility | (25.4) | (32.6) | 7.2 | (13.7) | (11.7) | ||||||||||||||||||||||||
| Revolving Credit Facility | — | — | — | — | — | ||||||||||||||||||||||||
| Term Loan Facility | (385.7) | (398.2) | 12.5 | (396.3) | 10.6 | ||||||||||||||||||||||||
| Lease liabilities | (321.3) | (316.9) | (4.4) | (334.8) | 13.5 | ||||||||||||||||||||||||
Net debt1 | (587.4) | (419.2) | (168.2) | (468.1) | (119.3) | ||||||||||||||||||||||||
1Net debt is 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 35 of 43 | |||||||
As at December 31, 2023, net debt was $587.4m compared to $419.2m as at January 1, 2023. The increase of $168.2m was driven by a decrease in cash of $189.9m, partially offset by decreased borrowings on the Mainland China credit facilities, Japan credit facility and the term loan facility. Net debt leverage1 as at December 31, 2023 was 2.1 times adjusted EBITDA, compared to 1.6 times adjusted EBITDA as at January 1, 2023.
Net debt as at December 31, 2023 was $587.4m compared to $468.1m as at April 2, 2023. The increase in net debt of $119.3m was driven by a decrease in cash of $132.2m and increased borrowings on the Japan credit facility, partially offset by decreased borrowings on term loan facility and lower lease liabilities.
See “Note 11. Borrowings” in our Interim Financial Statements, “Note 17. Borrowings”, “Factors affecting performance” and “Indebtedness” in our fiscal 2023 Annual Report for detailed information on our debt facilities and seasonality of the business.
Amendments to borrowings
Effective June 30, 2023, LIBOR rates were no longer published for U.S Dollars. As a result, in the first quarter ended July 2, 2023, the Company transitioned facilities and contracts denominated in U.S dollars applying LIBOR to the Secured Overnight Financing Rate published by the Federal Reserve Bank of New York (“SOFR”). The Company entered into further amendments for the revolving credit facility, the term loan facility and the interest rate swaps to transition to SOFR. In connection with the amendments, during the first quarter ended July 2, 2023 the Company also extended the maturity of the revolving credit facility to May 15, 2028 and incurred transaction costs of $0.7m, on the extension of the revolving credit facility, which are being amortized using the effective interest rate method over the new term to maturity. The term loan facility now has an interest rate of SOFR plus a term SOFR adjustment of 0.11448%. There were no amendments to borrowings in the third quarter ended December 31, 2023.
Normal Course Issuer Bids
Share capital transactions for the three quarters ended December 31, 2023
Normal course issuer bid for Fiscal 2024
During the third quarter ended December 31, 2023, the Company has renewed its NCIB in relation to its subordinate voting shares. 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.
| Canada Goose Holdings Inc. | Page 36 of 43 | |||||||
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 ASPP or upon the date of expiry of the Fiscal 2024 NCIB.
During the three quarters ended December 31, 2023, under the Fiscal 2024 NCIB, since it was initiated on November 22, 2023, the Company purchased 1,862,550 subordinate voting shares for cancellation for total cash consideration of $29.5m, of which $2.3m was payable to the designated broker as at the period end. The amount to purchase the subordinate voting shares was charged to share capital, with the remaining $25.3m charged to retained earnings. Of the 1,862,550 subordinate voting shares purchased, 1,365,074 were purchased under the Fiscal 2024 ASPP for total cash consideration of $22.2m.
A liability representing the maximum amount that the Company could be required to pay the designated broker under the Fiscal 2024 ASPP was $43.1m as at December 31, 2023. The amount was charged to contributed surplus. Subsequent to the three quarters ended December 31, 2023, the Company purchased an additional 1,508,082 subordinate voting shares for cancellation for total cash consideration of $23.8m under the Fiscal 2024 ASPP. As at the filing date of this report, the remaining liability to the designated broker is $3.6m.
Normal course issuer bid for Fiscal 2023
Prior to the Fiscal 2024 NCIB, the Company maintained another NCIB in relation to its subordinate voting shares. 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. The Board of Directors of the Company authorized the Company to repurchase up to 5,421,685 subordinate voting shares, representing 10% of the Public Float for the subordinate voting shares as at November 10, 2022.
During the three quarters ended December 31, 2023, under the Fiscal 2023 NCIB until its expiration, the Company purchased 4,268,883 subordinate voting shares for cancellation for total cash consideration of $83.3m. The amount to purchase the subordinate voting shares was charged to share capital, with the remaining $73.6m charged to retained earnings. Of the 4,268,883 subordinate voting shares purchased, 1,184,152 were purchased under the automatic share purchase plan in connection with the Fiscal 2023 NCIB for total cash consideration of $25.3m.
During the validity of the Fiscal 2023 NCIB, the Company purchased 5,421,685, which represents the total authorized subordinate voting shares for cancellation for total cash consideration of $111.2m. Purchases were made during the validity of the Fiscal 2023 NCIB by means of open market transactions on the TSX, the NYSE and alternative trading systems in Canada and the United States.
See “Note 12. Shareholders’ equity” in our Interim Financial Statements and “Note 18. Shareholders’ equity” in our fiscal 2023 Annual Report for detailed information on the Fiscal 2024 NCIB and Fiscal 2023 NCIB.
| Canada Goose Holdings Inc. | Page 37 of 43 | |||||||
Contractual Obligations
Refer to “Contractual Obligations” in the MD&A section of our fiscal 2023 Annual Report and “Note 16. 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 April 2, 2023.
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 also entered into 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. 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 December 31, 2023.
See “Note 16. Financial risk and management objectives and policies” in the Interim Financial Statements and “Off-Balance Sheet Arrangements” in our fiscal 2023 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 January 25, 2024, there were 45,931,714 subordinate voting shares issued and outstanding, and 51,004,076 multiple voting shares issued and outstanding.
As at January 25, 2024, there were 4,473,959 options, 521,551 restricted share units, and 389,858 performance share units outstanding under the Company’s equity incentive plans, of which 2,191,788 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 will be paid at settlement through the issuance of one subordinate voting share per unit.
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.
| Canada Goose Holdings Inc. | Page 38 of 43 | |||||||
In addition, a subsidiary of the Company in Europe manages 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.
Our exposure to credit risk has not significantly changed from the fiscal year ended April 2, 2023. See “Quantitative and Qualitative Disclosures about Market Risk” in our fiscal 2023 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 dollar and Taiwanese dollar 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.
We are also exposed to fluctuations in the prices of 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.
| Canada Goose Holdings Inc. | Page 39 of 43 | |||||||
See “Note 16. Financial risk and management objectives and policies” in our Interim Financial Statements, and the “Foreign exchange risk” section of our fiscal 2023 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, Japan credit facility, and the term loan facility, which currently bear interest rates at 3.00%, 0.34%, and 8.97%, 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. Effective June 30, 2023, the floating interest benchmark reference rate contained within the swap agreements were amended from LIBOR to SOFR and the average fixed rates were reduced from 1.97% to 1.76%. These swap agreements fix the interest rate on the USD300.0m term loan facility. Following the amendment, the interest rate swaps continue to be designated and accounted for as cash flow hedges.
Based on the weighted average amount of outstanding borrowings, a 1.00% increase in the average interest rate during the three quarters ended December 31, 2023 would have increased interest expense on the Mainland China credit facilities, Japan credit facility, and the term loan facility by $0.3m, $0.2m, and $3.0m, respectively (three quarters ended January 1, 2023 - $0.1m, $0.2m, and $2.9m, respectively).
RELATED PARTY TRANSACTIONS
The Company enters into transactions from time to time with its principal shareholders and organizations affiliated with members of the Board of Directors by incurring expenses for business services. During the third and three quarters ended December 31, 2023, the Company incurred expenses with related parties of $0.4m and $0.8m, respectively (third and three quarters ended January 1, 2023 - $0.3m and $0.8m, respectively) from companies related to certain shareholders. Balances owing to related parties as at December 31, 2023 were $0.4m (January 1, 2023 - $0.4m, April 2, 2023 - $0.4m).
A lease liability due to the former controlling shareholder of the acquired Baffin Inc. business (the "Baffin Vendor") for leased premises was $2.8m as at December 31, 2023 (January 1, 2023 - $3.3m, April 2, 2023 - $3.1m). During the third and three quarters ended December 31, 2023, 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 $0.3m and $1.0m, respectively (third and three quarters ended January 1, 2023 - $0.4m and $1.1m, respectively). No amounts were owing to Baffin entities as at December 31, 2023, January 1, 2023, and April 2, 2023.
The Japan Joint Venture has lease liabilities due to the non-controlling shareholder, Sazaby League, for leased premises. Lease liabilities were $2.2m as at December 31, 2023 (January 1, 2023 - $2.8m, April 2, 2023 - $2.7m). During the third and three quarters ended December 31, 2023, the Company incurred principal and interest on lease liabilities, royalty fees, and other operating costs to Sazaby League totalling $1.3m and $3.2m, respectively (third and three quarters ended January 1, 2023 - $1.0m and $3.5m, respectively). Balances owing to Sazaby League as at December 31, 2023 were $0.1m (January 1, 2023 - $0.6m, April 2, 2023 - $0.2m).
| Canada Goose Holdings Inc. | Page 40 of 43 | |||||||
During the third and three quarters ended December 31, 2023, the Japan Joint Venture sold inventory of $1.1m and $1.2m, respectively to companies wholly owned by Sazaby League (third and three quarters ended January 1, 2023 - $1.1m and $1.2m, respectively). As at December 31, 2023, the Japan Joint Venture recognized a trade receivable of $0.9m from these companies (January 1, 2023 - $0.7m, April 2, 2023 - $0.1m).
Pursuant to the agreement entered between the Company and Sazaby League to form the Japan Joint Venture ("Joint Venture Agreement"), during the third and three quarters ended January 1, 2023, the Company sold inventory of $0.7m and $11.9m, respectively, to Sazaby League for repurchase by the Japan Joint Venture for inventory fulfillment. There was no outstanding receivable from Sazaby League as at January 1, 2023. During the third and three quarters ended January 1, 2023, the Japan Joint Venture repurchased $0.3m and $11.5m, respectively, of inventory from Sazaby League and the Japan Joint Venture recognized a payable to Sazaby League of less than $0.1m as at January 1, 2023 in accounts payable and accrued liabilities. These transactions were measured based on pricing established through the Joint Venture Agreement at market terms and were not recognized as sales transactions. The repurchase of inventory pursuant to this Joint Venture Agreement was completed during the fourth quarter ended April 2, 2023.
In connection with the Paola Confectii business combination, for the third and three quarters ended December 31, 2023, the Company recognized $0.5m of remuneration costs related to the Earn-Out based on the estimated value of $6.6m 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 December 31, 2023.
A lease liability due to one of the PCML Vendors for leased premises was $1.2m as at December 31, 2023. During the third and three quarters ended December 31, 2023, the Company paid principal and interest on the lease liability, to one of the PCML Vendors totalling less than $0.1m, respectively. No amounts were owing to one of the PCML Vendors as at December 31, 2023.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Interim Financial Statements have been prepared in accordance with IFRS 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 fiscal 2023 Annual Report for detailed information.
| Canada Goose Holdings Inc. | Page 41 of 43 | |||||||
CHANGES IN ACCOUNTING POLICIES
Standards issued and not yet adopted
Certain new standards, amendments, and interpretations to existing IFRS 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 policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments, and interpretations is provided below.
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. The amendment is effective for annual reporting periods beginning on or after January 1, 2024. Earlier application is permitted. The Company is assessing the potential impact of the amendment.
Standards issued and adopted
In February 2021, the IASB issued narrow-scope amendments to IAS 1, Presentation of Financial Statements, IFRS Practice Statement 2, Making Materiality Judgements and IAS 8, Accounting Polices, Changes in Accounting Estimates and Errors. The amendments require the disclosure of material accounting policy information rather than disclosing significant accounting policies and clarify how to distinguish changes in accounting policies from changes in accounting estimates. Beginning April 3, 2023, the Company adopted the amendments. The adoption of the amendments did not have a material impact on the Interim Financial Statements.
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. Upon issuance of the Amendments, the temporary exception has been adopted by the Company as at July 2, 2023. The disclosure requirements for current tax expense and the disclosures for enacted legislation but not yet effective are required for annual reporting periods beginning on or after January 1, 2023, but are not required for any interim period ending on or before December 31, 2023.
| Canada Goose Holdings Inc. | Page 42 of 43 | |||||||
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 December 31, 2023 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 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 three quarters ended December 31, 2023 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 December 31, 2023.
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.
| Canada Goose Holdings Inc. | Page 43 of 43 | |||||||
CERTIFICATION
I, Dani Reiss, certify that:
| 1. | I have reviewed the financial statements and MD&A for the third quarter ended December 31, 2023 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: February 1, 2024
By: | /s/ Dani Reiss | |||||||
| Dani Reiss | ||||||||
| Chairman and Chief Executive Officer | ||||||||
-2-
CERTIFICATION
I, Jonathan Sinclair, certify that:
| 1. | I have reviewed the financial statements and MD&A for the third quarter ended December 31, 2023 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: February 1, 2024
By: | /s/ Jonathan Sinclair | ||||||||||
| Jonathan Sinclair | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
-2-
Canada Goose Reports Third Quarter Fiscal 2024 Results
Revenue increased 6% year-over-year to $609.9 million
Reported net income of $131.4 million
Adjusted EBIT6 of $207.2 million
Toronto - Feb 1, 2024 – Canada Goose Holdings Inc. (NYSE, TSX: GOOS), a global performance luxury and lifestyle brand, announced today financial results for the third quarter of fiscal 2024, which ended December 31, 2023, and an updated outlook for fiscal 2024. All amounts are in Canadian dollars unless otherwise indicated.
“Our third quarter results were in line with our guidance, highlighted by progress across our strategic priorities, including robust growth in the Asia Pacific region, increased revenue across categories, with particular strength in apparel, the delivery of elevated experiences across all touch points, and increased efficiencies driven by our transformation initiatives,” said Dani Reiss, Chairman and CEO of Canada Goose. “While we continue to operate in a challenging consumer spending environment, we are encouraged by our holiday performance, which saw record traffic levels and strong revenue generated during key consumer moments. We remain confident in our strategy and our ability to capitalize on the unique heritage of our iconic, luxury brand to deliver long-term profitable growth.”
Third Quarter Fiscal 2024 Financial Highlights1:
▪Total revenue increased 6% to $609.9m compared to the prior year period, up 5% on a constant currency basis2.
•DTC revenue grew 14% to $514.0m, up 14% on a constant currency basis2, driven by growth of in-store retail sales. Sales from DTC channels increased as part of the total revenue mix to 84% from 78% in the same reporting period last year. DTC comparable sales3 decreased 1.6% year-over-year due to lower e-commerce sales, partially offset by higher comparable in-store sales compared to the same period in the prior year.
•Wholesale revenue decreased (28)% or (30)% on a constant currency basis2 primarily due to a planned lower order book value resulting from lower orders from existing customers, compared to the same period in the prior year, and the ongoing streamlining of wholesale relationships as we optimize for greater DTC sales. In addition, we estimated higher returns from our wholesale partners as we proactively manage our inventory.
•Revenue grew by 62% year-over-year in Asia Pacific with higher sales across all channels. Revenue was down (26)% in EMEA4 and (14)% in North America year-over-year primarily due to the decline in e-commerce and wholesale revenue, partially offset by contribution from new stores.
▪Gross profit grew 8% to $449.7m, compared to the prior year period. Gross margin for the quarter expanded to 73.7% compared to 72.2% in the third quarter of fiscal 2023, primarily due to pricing, partially offset by higher product costs due to input cost inflation.
1 Comparisons to third quarter ended January 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 growth is a supplementary financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
4 EMEA comprises Europe, the Middle East, Africa, and Latin America.
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▪Selling, general and administrative (SG&A)5 expenses were $250.9m, compared to $225.7m in the prior year period. The increase in SG&A was primarily due to our expanded retail network and set-up costs related to our Transformation Program.
▪Operating lncome5 was $198.8m, compared to $190.7m in the prior year period. The increase in operating income was attributable to higher gross profit, partially offset by higher SG&A costs.
▪Adjusted EBIT5,6 was $207.2m, compared to $197.1m in the prior year period.
▪Net Income attributable to shareholders was $130.6m, or $1.29 per diluted share, compared with a net income attributable to shareholders of $134.9m, or $1.28 per diluted share in the prior year period.
▪Adjusted net income to shareholders6,7was $138.6m, or $1.37 per diluted share, compared with an adjusted net income of $134.5m, or $1.27 per diluted share in the prior year period.
Revenue By Segment
| Third quarter ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | As reported | Foreign exchange impact | In constant currency7 | As reported | In constant currency7 | ||||||||||||||||||||||||||||||||||
| DTC | 514.0 | 450.2 | 63.8 | (1.1) | 62.7 | 14.2 | % | 13.9 | % | ||||||||||||||||||||||||||||||||
| Wholesale | 81.8 | 114.4 | (32.6) | (1.3) | (33.9) | (28.5) | % | (29.6) | % | ||||||||||||||||||||||||||||||||
| Other | 14.1 | 12.1 | 2.0 | — | 2.0 | 16.5 | % | 16.5 | % | ||||||||||||||||||||||||||||||||
| Total revenue | 609.9 | 576.7 | 33.2 | (2.4) | 30.8 | 5.8 | % | 5.3 | % | ||||||||||||||||||||||||||||||||
Revenue by Geography
Third quarter ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | As reported | Foreign exchange impact | In constant currency7 | As reported | In constant currency7 | ||||||||||||||||||||||||||||||||||
| Canada | 94.9 | 109.2 | (14.3) | — | (14.3) | (13.1) | % | (13.1) | % | ||||||||||||||||||||||||||||||||
| United States | 157.5 | 182.8 | (25.3) | (3.3) | (28.6) | (13.8) | % | (15.6) | % | ||||||||||||||||||||||||||||||||
| North America | 252.4 | 292.0 | (39.6) | (3.3) | (42.9) | (13.6) | % | (14.7) | % | ||||||||||||||||||||||||||||||||
| Asia Pacific | 270.7 | 167.6 | 103.1 | 2.3 | 105.4 | 61.5 | % | 62.9 | % | ||||||||||||||||||||||||||||||||
| EMEA | 86.8 | 117.1 | (30.3) | (1.4) | (31.7) | (25.9) | % | (27.1) | % | ||||||||||||||||||||||||||||||||
| Total revenue | 609.9 | 576.7 | 33.2 | (2.4) | 30.8 | 5.8 | % | 5.3 | % | ||||||||||||||||||||||||||||||||
Balance Sheet Highlights
Inventory of $478.4m for the third quarter ended December 31, 2023, was relatively flat compared to the third quarter ended January 1, 2023.
During the third quarter of fiscal 2024, the Company repurchased 3,609,932 subordinate voting shares under its normal course issuer bid (the “NCIB) for a total cash consideration of $56.6M, ending the quarter with a cash balance of $154.3m, compared with $344.2m at third quarter ended January 1, 2023.
The Company renewed its NCIB in the third quarter of fiscal 2024, providing for the purchase for cancellation of up to 4,980,505 subordinate voting shares over the 12-month period commencing on November 22, 2023 and ending
5 Certain comparative figures have been reclassified to conform with current year presentation. Foreign exchange gains and losses related to the term loan, net of hedging, which were presented in SG&A expenses in the third quarter ended January 1, 2023, are now reflected in the presentation of net interest, finance and other costs.
6 Adjusted EBIT and adjusted net income attributable to shareholders of the Company are non-IFRS financial measures, and adjusted net income per basic and diluted share attributable to the shareholders of the Company is a non-IFRS financial ratio. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for more information.
7 Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for more information.
2
on November 21, 2024, representing approximately 10% of subordinate voting shares comprising the public float determined in accordance with the requirements of the Toronto Stock Exchange as at November 10, 2023.
Third Quarter Fiscal 2024 Business Highlights
During the third quarter, Canada Goose continued to engage and drive brand desirability with consumers globally through the holiday shopping season through elevated shopping experiences, product collaborations, and a stylish and functional product assortment. Notable business highlights from our third quarter included the following:
▪Driving consumer-focused growth
•Launched our second collaboration with BAPE, which has been the fastest selling collaboration year-to-date in fiscal 2024. We also executed collaborations with Pyer Moss, Concepts, OVO, Giants of Africa and the Shoe Surgeon to drive brand heat.
•Delivered a strong Black Friday long holiday shopping weekend, with record store traffic and a more than 40% increase in revenue over the comparable holiday shopping period in 2022.
•Expanded our travel retail footprint, entering South Korea, following the opening of the travel retail store in Frankfurt in the second quarter of fiscal 2024.
▪Building the DTC network
•Opened two permanent stores, in New Jersey's American Dream mall, and in Kobe, Japan, and converted one temporary store to permanent in New York City, bringing the total permanent store count to 65 at the end of the third quarter of fiscal 2024. In January, we opened a permanent store in Nanjing, China.
▪Product expansion
•Non-Heavyweight Down category grew year-over-year in the third quarter of fiscal 2024, expanding its share of revenue within the overall mix. Within non-Heavyweight Down, apparel was our fastest growing category, increasing across all key markets.
•Acquired Paola Confectii, a manufacturing partner in luxury knitwear, marking our first European manufacturing facility. This acquisition supports the company’s strategic objective of expanding existing categories by deepening in-house product expertise.
Fiscal 2024 Full Year and Q4 Outlook8
The outlook that follows supersedes all prior financial outlook statements made by Canada Goose, constitutes 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 Canada Goose’s control. Please see "Forward-looking Statements" below for more information.
Based on quarter-to-date trends, Canada Goose expects the following for fourth quarter fiscal 2024:
•Total revenue between $310m and $330m.
•Non-IFRS adjusted EBIT between $14m and $27m.
•Non-IFRS adjusted net income per diluted share between $0.02 and $0.13.
8The 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, it is unable to provide a reconciliation of the non-IFRS measures included in its fiscal 2024 guidance.
3
For fiscal 2024, we expect:
•Total revenue between $1.285b and $1.305b, compared to previous guidance of $1.2b to $1.4b.
•Non-IFRS adjusted EBIT between $146m and $158m, representing a margin of between 11% and 12%, compared to previous guidance of non-IFRS adjusted EBIT of $135m to $225m, representing a margin of 11% to 16%.
•Non-IFRS adjusted net income per diluted share between $0.82 and $0.92, compared to previous guidance of $0.60 to $1.40.
Our outlook now includes the following assumptions:
•DTC revenue as a percentage of total revenue of approximately 70%, representing a low-single-digit decrease to a low-single-digit increase in year-over-year DTC comparable sales growth, and continued channel expansion.
•Wholesale revenue growth to decrease by a high-teens percentage rate year-over-year, reflective of the continued editing of our wholesale door count, returns from wholesale partners, revised re-order expectations, and expansion of our retail store network.
•Gross margin as a percentage of total revenue to be in the high 60s, with DTC and wholesale gross margins in the mid 70s and low 50s, respectively.
•Three permanent stores planned in the fourth quarter, bringing the total permanent store count to 68 at the end of the fiscal year.
•SG&A expense to grow at a mid-teens percentage rate on a year-over-year basis due to a larger DTC network and operating cost base, moderated by cost savings initiatives, including approximately $15m in savings from the Transformation Program in fiscal 2024.
•Effective tax rate in the high teens as a percentage of income before taxes for fiscal 2024.
•Weighted average diluted shares outstanding of 101.7m for fiscal 2024, reflecting share buy backs executed year-to-date and assumed dilution effective of outstanding share-based payments.
Conference Call Information
The Company will host the conference call at 8:30 a.m. Eastern Standard Time on February 1, 2024. The conference call can be accessed by using the following link: https://events.q4inc.com/attendee/127600489. 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 2024 full year and fourth quarter financial outlook, 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, including, without limitation, our fiscal 2024 full year and fourth quarter financial outlook and the related assumptions included herein is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Our business is subject to substantial risks and uncertainties. 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 April 2, 2023. 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 at www.sedarplus.ca for a
4
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. The forward-looking statements in this press release speak only as of the date of this release, and we undertake no obligation to update or revise any of these statements.
Investors: ir@canadagoose.com
Media: media@canadagoose.com
5
Condensed Consolidated Interim Statements of Income
(unaudited)
(in millions of Canadian dollars, except share and per share amounts)
| Third quarter ended | Three quarters ended | ||||||||||||||||
| December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||||||||||
| Reclassified | Reclassified | ||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Revenue | 609.9 | 576.7 | 975.8 | 923.8 | |||||||||||||
| Cost of sales | 160.2 | 160.3 | 291.4 | 298.9 | |||||||||||||
| Gross profit | 449.7 | 416.4 | 684.4 | 624.9 | |||||||||||||
| Selling, general & administrative expenses | 250.9 | 225.7 | 583.0 | 494.9 | |||||||||||||
| Operating income | 198.8 | 190.7 | 101.4 | 130.0 | |||||||||||||
| Net interest, finance and other costs | 14.8 | 2.4 | 42.9 | 31.9 | |||||||||||||
| Income before income taxes | 184.0 | 188.3 | 58.5 | 98.1 | |||||||||||||
| Income tax expense | 52.6 | 50.8 | 8.0 | 19.2 | |||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | |||||||||||||
| Attributable to: | |||||||||||||||||
| Shareholders of the Company | 130.6 | 134.9 | 53.4 | 75.8 | |||||||||||||
| Non-controlling interest | 0.8 | 2.6 | (2.9) | 3.1 | |||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | |||||||||||||
| Earnings per share attributable to shareholders of the Company | |||||||||||||||||
| Basic | $ | 1.30 | $ | 1.28 | $ | 0.52 | $ | 0.72 | |||||||||
| Diluted | $ | 1.29 | $ | 1.28 | $ | 0.52 | $ | 0.72 | |||||||||
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Condensed Consolidated Interim Statements of Comprehensive Income
(unaudited)
(in millions of Canadian dollars, except per share amounts)
| Third quarter ended | Three quarters ended | ||||||||||||||||
| December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | |||||||||||||
| Other comprehensive (loss) income | |||||||||||||||||
| Items that will not be reclassified to earnings, net of tax: | |||||||||||||||||
| Actuarial (loss) gain on post-employment obligation | (0.1) | — | (0.3) | 1.0 | |||||||||||||
| Items that may be reclassified to earnings, net of tax: | |||||||||||||||||
| Cumulative translation adjustment gain | 6.7 | 22.5 | 0.2 | 10.7 | |||||||||||||
| Net (loss) gain on derivatives designated as cash flow hedges | (7.5) | (4.6) | (1.5) | 4.5 | |||||||||||||
| Reclassification of net loss (gain) on cash flow hedges to income | 0.1 | 3.4 | (0.9) | 4.9 | |||||||||||||
| Other comprehensive (loss) income | (0.8) | 21.3 | (2.5) | 21.1 | |||||||||||||
| Comprehensive income | 130.6 | 158.8 | 48.0 | 100.0 | |||||||||||||
| Attributable to: | |||||||||||||||||
| Shareholders of the Company | 129.7 | 156.6 | 51.6 | 96.9 | |||||||||||||
| Non-controlling interest | 0.9 | 2.2 | (3.6) | 3.1 | |||||||||||||
| Comprehensive income | 130.6 | 158.8 | 48.0 | 100.0 | |||||||||||||
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Condensed Consolidated Interim Statements of Financial Position
(unaudited)
(in millions of Canadian dollars)
| December 31, 2023 | January 1, 2023 | April 2, 2023 | |||||||||
| Assets | $ | $ | $ | ||||||||
| Current assets | |||||||||||
| Cash | 154.3 | 344.2 | 286.5 | ||||||||
| Trade receivables | 144.5 | 120.9 | 50.9 | ||||||||
| Inventories | 478.4 | 482.0 | 472.6 | ||||||||
| Income taxes receivable | 8.1 | 5.7 | 0.9 | ||||||||
| Other current assets | 61.0 | 58.3 | 52.3 | ||||||||
| Total current assets | 846.3 | 1,011.1 | 863.2 | ||||||||
| Deferred income taxes | 90.3 | 67.7 | 67.5 | ||||||||
| Property, plant and equipment | 177.2 | 128.5 | 156.0 | ||||||||
| Intangible assets | 132.1 | 132.9 | 135.1 | ||||||||
| Right-of-use assets | 272.7 | 275.6 | 291.8 | ||||||||
| Goodwill | 76.5 | 65.0 | 63.9 | ||||||||
| Other long-term assets | 6.8 | 22.2 | 12.5 | ||||||||
| Total assets | 1,601.9 | 1,703.0 | 1,590.0 | ||||||||
| Liabilities | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable and accrued liabilities | 268.8 | 262.0 | 195.6 | ||||||||
| Provisions | 55.0 | 46.6 | 21.6 | ||||||||
| Income taxes payable | 14.5 | 31.8 | 31.5 | ||||||||
| Short-term borrowings | 38.7 | 52.4 | 27.6 | ||||||||
| Current portion of lease liabilities | 76.4 | 66.6 | 76.1 | ||||||||
| Total current liabilities | 453.4 | 459.4 | 352.4 | ||||||||
| Provisions | 37.2 | 36.7 | 36.5 | ||||||||
| Deferred income taxes | 13.6 | 22.2 | 16.4 | ||||||||
| Revolving Facility | — | — | — | ||||||||
| Term Loan | 381.0 | 393.4 | 391.6 | ||||||||
| Lease liabilities | 244.9 | 250.3 | 258.7 | ||||||||
| Other long-term liabilities | 70.9 | 42.9 | 56.9 | ||||||||
| Total liabilities | 1,201.0 | 1,204.9 | 1,112.5 | ||||||||
| Equity | |||||||||||
| Equity attributable to shareholders of the Company | 396.5 | 484.1 | 469.5 | ||||||||
| Non-controlling interests | 4.4 | 14.0 | 8.0 | ||||||||
| Total equity | 400.9 | 498.1 | 477.5 | ||||||||
| Total liabilities and equity | 1,601.9 | 1,703.0 | 1,590.0 | ||||||||
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Condensed Consolidated Interim Statements of Cash Flows
(unaudited)
(in millions of Canadian dollars)
| Third quarter ended | Three quarters ended | ||||||||||||||||
| December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Operating activities | |||||||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | |||||||||||||
| Items not affecting cash: | |||||||||||||||||
| Depreciation and amortization | 32.2 | 27.0 | 92.0 | 79.2 | |||||||||||||
| Income tax expense | 52.6 | 50.8 | 8.0 | 19.2 | |||||||||||||
| Interest expense | 11.8 | 8.7 | 32.1 | 24.9 | |||||||||||||
| Foreign exchange (gain) loss | (1.4) | (14.9) | (1.9) | 4.3 | |||||||||||||
| Loss (gain) on disposal of assets | 0.1 | — | 0.1 | (0.1) | |||||||||||||
| Share-based payment | 4.3 | 4.2 | 11.5 | 11.2 | |||||||||||||
| Remeasurement of put option | 4.9 | (0.5) | 15.7 | 1.2 | |||||||||||||
| Remeasurement of contingent consideration | (1.9) | (2.2) | (4.9) | (5.9) | |||||||||||||
| 234.0 | 210.6 | 203.1 | 212.9 | ||||||||||||||
| Changes in non-cash operating items | 134.0 | 154.6 | (32.2) | (48.1) | |||||||||||||
| Income taxes paid | (7.6) | (5.6) | (56.6) | (31.9) | |||||||||||||
| Interest paid | (12.1) | (8.6) | (32.5) | (23.6) | |||||||||||||
| Net cash from operating activities | 348.3 | 351.0 | 81.8 | 109.3 | |||||||||||||
| Investing activities | |||||||||||||||||
| Purchase of property, plant and equipment | (15.1) | (12.6) | (46.3) | (22.9) | |||||||||||||
| Investment in intangible assets | (0.2) | (0.2) | (0.7) | (0.9) | |||||||||||||
| Initial direct costs of right-of-use assets | — | — | (0.4) | (0.4) | |||||||||||||
| Net cash (outlfow) inflow from business combination | (12.3) | — | (12.3) | 2.8 | |||||||||||||
| Net cash used in investing activities | (27.6) | (12.8) | (59.7) | (21.4) | |||||||||||||
| Financing activities | |||||||||||||||||
| Mainland China Facilities (repayments) borrowings | (38.2) | (8.4) | (0.5) | 15.7 | |||||||||||||
| Japan Facility (repayments) borrowings | (3.7) | 3.4 | 11.7 | 13.1 | |||||||||||||
| Term Loan repayments | (1.0) | (1.0) | (3.0) | (3.0) | |||||||||||||
| Revolving Facility repayments | (86.3) | (55.9) | — | (0.5) | |||||||||||||
| Transaction costs on financing activities | 0.1 | — | (0.2) | — | |||||||||||||
| Normal course issuer bid purchase of subordinate voting shares | (54.3) | (16.1) | (111.7) | (16.1) | |||||||||||||
| Principal payments on lease liabilities | (21.0) | (17.2) | (49.7) | (44.5) | |||||||||||||
| Issuance of shares | — | — | 0.1 | — | |||||||||||||
| Net cash used in financing activities | (204.4) | (95.2) | (153.3) | (35.3) | |||||||||||||
| Effects of foreign currency exchange rate changes on cash | 0.5 | 4.1 | (1.0) | 3.9 | |||||||||||||
| Increase (decrease) in cash | 116.8 | 247.1 | (132.2) | 56.5 | |||||||||||||
| Cash, beginning of period | 37.5 | 97.1 | 286.5 | 287.7 | |||||||||||||
| Cash, end of period | 154.3 | 344.2 | 154.3 | 344.2 | |||||||||||||
9
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 and constant currency revenue and certain non-IFRS ratios such as, adjusted EBIT margin, adjusted net income attributable to shareholders of the Company and adjusted net income 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 measures to the nearest IFRS measure can be found in our MD&A for the third quarter of fiscal 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” and, in the case of constant currency revenue, under “Revenue”.
This press release also includes DTC comparable sales growth which is a supplementary financial measure defined as 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. Adjusted EBIT margin is equal to adjusted EBIT for the period presented as a percentage of revenue for the same period.
Beginning with the first quarter of fiscal 2024, foreign exchange gains and losses related to the term loan, net of hedging, are now reflected in the presentation of net interest, finance and other costs, which was previously presented in SG&A expenses. Comparable periods have been reclassified to reflect this change.
| Third quarter ended | Three quarters ended | |||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | ||||||||||||||||||||||||||||
| Add (deduct) the impact of: | ||||||||||||||||||||||||||||||||
| Income tax expense | 52.6 | 50.8 | 8.0 | 19.2 | ||||||||||||||||||||||||||||
| Net interest, finance and other costs | 14.8 | 2.4 | 42.9 | 31.9 | ||||||||||||||||||||||||||||
| Operating income | 198.8 | 190.7 | 101.4 | 130.0 | ||||||||||||||||||||||||||||
| Net temporary store closure costs (a) | — | 0.8 | — | 3.2 | ||||||||||||||||||||||||||||
| Head office transition costs (c) | — | 1.5 | 0.8 | 4.7 | ||||||||||||||||||||||||||||
| Japan Joint Venture costs (e) | 2.3 | 4.1 | 2.4 | 8.3 | ||||||||||||||||||||||||||||
| Strategic initiatives (g) | 5.6 | — | 21.1 | — | ||||||||||||||||||||||||||||
| Net corporate restructuring costs (h) | — | — | 5.5 | — | ||||||||||||||||||||||||||||
| Legal proceeding costs (i) | — | — | — | 2.2 | ||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (k) | 0.5 | — | 0.5 | — | ||||||||||||||||||||||||||||
| Other (l) | — | — | — | (0.9) | ||||||||||||||||||||||||||||
| Total adjustments | 8.4 | 6.4 | 30.3 | 17.5 | ||||||||||||||||||||||||||||
| Adjusted EBIT | 207.2 | 197.1 | 131.7 | 147.5 | ||||||||||||||||||||||||||||
| Adjusted EBIT margin | 34.0 | % | 34.2 | % | 13.5 | % | 16.0 | % | ||||||||||||||||||||||||
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| Third quarter ended | Three quarters ended | ||||||||||||||||||||||||||||||||||
| CAD $ millions | December 31, 2023 | January 1, 2023 | December 31, 2023 | January 1, 2023 | |||||||||||||||||||||||||||||||
| Net income | 131.4 | 137.5 | 50.5 | 78.9 | |||||||||||||||||||||||||||||||
| Add (deduct) the impact of: | |||||||||||||||||||||||||||||||||||
| Net temporary store closure costs (a) (b) | — | 0.8 | — | 3.3 | |||||||||||||||||||||||||||||||
| Head office transition costs (c) (d) | — | 2.0 | 1.2 | 5.9 | |||||||||||||||||||||||||||||||
| Japan Joint Venture costs (e) | 2.3 | 4.1 | 2.4 | 8.3 | |||||||||||||||||||||||||||||||
| Japan Joint Venture remeasurement loss (gain) on contingent consideration and put option (f) | 3.0 | (2.7) | 10.8 | (4.7) | |||||||||||||||||||||||||||||||
| Strategic initiatives (g) | 5.6 | — | 21.1 | — | |||||||||||||||||||||||||||||||
| Net corporate restructuring costs (h) | — | — | 5.5 | — | |||||||||||||||||||||||||||||||
| Legal proceeding costs (i) | — | — | — | 2.2 | |||||||||||||||||||||||||||||||
| Unrealized foreign exchange loss (gain) on Term Loan Facility (j) | 0.5 | (3.6) | — | 11.7 | |||||||||||||||||||||||||||||||
| Paola Confectii Earn-Out costs (k) | 0.5 | — | 0.5 | — | |||||||||||||||||||||||||||||||
| Other (l) | — | — | — | (0.9) | |||||||||||||||||||||||||||||||
| 11.9 | 0.6 | 41.5 | 25.8 | ||||||||||||||||||||||||||||||||
| Tax effect of adjustments | (1.3) | (0.3) | (6.2) | (4.3) | |||||||||||||||||||||||||||||||
| Deferred tax adjustment (m) | — | — | (0.5) | — | |||||||||||||||||||||||||||||||
| Adjusted net income | 142.0 | 137.8 | 85.3 | 100.4 | |||||||||||||||||||||||||||||||
| Adjusted net income attributable to non-controlling interest (n) | (3.4) | (3.3) | (3.6) | (4.4) | |||||||||||||||||||||||||||||||
| Adjusted net income attributable to shareholders of the Company | 138.6 | 134.5 | 81.7 | 96.0 | |||||||||||||||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||||||||||||||
| Basic | 100,253,473 | 105,146,788 | 102,144,232 | 105,238,509 | |||||||||||||||||||||||||||||||
| Diluted | 101,308,836 | 105,668,608 | 103,125,365 | 105,778,351 | |||||||||||||||||||||||||||||||
Adjusted net income per basic share attributable to shareholders of the Company | $ | 1.38 | $ | 1.28 | $ | 0.80 | $ | 0.91 | |||||||||||||||||||||||||||
Adjusted net income per diluted share attributable to shareholders of the Company | $ | 1.37 | $ | 1.27 | $ | 0.79 | $ | 0.91 | |||||||||||||||||||||||||||
(a)Net temporary store closure costs of $nil and $nil were incurred in the third and three quarters ended December 31, 2023, respectively (third and three quarters ended January 1, 2023 - $0.8m and $3.2m, respectively).
(b)Net temporary store closure costs incurred in (a) as well as $nil and $nil of interest expense on lease liabilities for temporary store closures for the third and three quarters ended December 31, 2023, respectively (third and three quarters ended January 1, 2023 - less than $0.1m and $0.1m, respectively).
(c)Costs incurred for the corporate head office transition, including depreciation on right-of-use assets.
(d)Corporate head office transition costs incurred in (c) as well as $nil and $0.4m of interest expense on lease liabilities for the third and three quarters ended December 31, 2023, respectively (third and three quarters ended January 1, 2023 - $0.5m and $1.2m, respectively).
(e)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.
(f)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 a loss of $3.0m and $10.8m on fair value remeasurement of the contingent consideration and put option during the third and three quarters ended December 31, 2023, respectively (third and three quarters ended January 1, 2023 - gain of $(2.7)m and $(4.7)m, respectively). These gains and losses are included in net interest, finance and other costs within the interim statements of income.
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(g)Consultancy fees incurred in connection with our Transformation Program.
(h)Corporate restructuring costs, net of share-based award forfeitures, associated with the reduction in workforce as part of our Transformation Program.
(i)Costs for legal proceeding fees including for the defence of class action lawsuits.
(j)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 were previously presented in SG&A expenses, are now reflected in the presentation of net interest, finance and other costs.
(k)Remuneration recognized for the Earn-Out related to the formation of the new subsidiary Paola Confectii.
(l)Costs related to the transition of logistics agencies, restructuring costs related to the company’s manufacturing facilities, rent abatements received as well as individually immaterial items.
(m)Deferred tax adjustment recorded as the result of Swiss tax reform in Canada Goose International AG.
(n)Calculated as net income (loss) attributable to non-controlling interest within the Interim Financial Statements of $0.8m and $(2.9)m plus $2.6m and $6.5m 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 third and three quarters ended December 31, 2023, respectively. Net income (loss) attributable to non-controlling interest within the Interim Financial Statements of $2.6m and $3.1m plus $0.7m and $1.3m 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 third and three quarters ended January 1, 2023, respectively.
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