Canada Goose Holdings Inc. chief executive Dani Reiss says he remains confident about doing business in China, even as store traffic there has softened and the brand has faced criticism in recent months over its return policies and a marketing snafu.
“We are very optimistic and bullish about our future prospects in China,” Mr. Reiss told analysts on a conference call Thursday to discuss the company’s third-quarter results. While store traffic has been affected by the reintroduction of pandemic restrictions since the emergence of the Omicron variant, he said he believes the declines are temporary. “I’ll point out that our online business in China was up over 60 per cent in the last quarter, which is really important to note and is a very good sign of consumer demand for our products in China,” he added.
Last summer, the Canadian parka maker was fined in China for misleading advertising involving claims about the quality of its down filling. The company said at the time that it was related to a “text error” on e-commerce site TMall and was corrected, but criticism of the brand has resurfaced on social media. And in December Canada Goose drew more heat over claims on social media that its return policies in China were too restrictive, after which the company committed to a 14-day exchange policy at its stores and returns for any issues with craftsmanship.
Mr. Reiss said market research indicates demand continues to be high in China and that any slowdowns are temporary.
“Our brand equity in China … we see as being quite high,” he said.
On Thursday the company cut its revenue and profit forecasts for this year, citing lower-than-expected sales in key global markets such as Asia and Europe amid pandemic-related restrictions.
The Toronto-based company saw traffic at its retail stores slow in January. Canada Goose now expects approximately $1.09-billion to $1.11-billion in total revenue for the year, compared with an earlier forecast of $1.1-billion to almost $1.2-billion. This would be the first time the company has surpassed $1-billion in annual revenue.
Its earnings outlook for the year is now $1.02 to $1.11 a share, down from $1.17 to $1.33.
Canada Goose has seen strength in its e-commerce business, which increased 28.1 per cent in the third quarter compared with what was already a period of unusual growth last year.
The company reported Thursday that third-quarter earnings rose to $151.9-million, or $1.42 a share, compared with $107-million, or 97 cents a share, in the same period last year.
For the quarter ended Jan. 2, revenue increased 23.6 per cent, to $586.1-million from $474-million. The quarter included an additional week, which accounted for $40.9-million of that revenue, according to the company.
The majority of sales in the quarter came from its own retail stores and e-commerce channels. Wholesale sales to other retailers were down, as those retailers had placed orders earlier than usual. Many retailers have been moving up product orders in an attempt to cope with global supply-chain disruptions.
Canada Goose’s share price, which has fallen roughly 29 per cent in the past year, declined more than 15 per cent to $36.67 Thursday morning after the earnings report. Asked whether the company might consider share buybacks in the current environment, chief financial officer Jonathan Sinclair told analysts on the call that while the team believes investment in the business is the best use of funds, they have the option to consider buybacks when the share price is “attractive.”
“I believe firmly that it is our job to build a long-term and strong and enduring business that will last for decades and generations to come – and I firmly believe that we’re doing that,” Mr. Reiss said on the call. “And that’s not measured in quarters, that’s measured in years and in generations.”
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