For clothing retailers working to survive the industry disruption of a worldwide pandemic, the lost sales from mandatory store closings was just one part of the problem. The other was the warehouses full of inventory – much of it seasonal, its value tied to quicksilver fashion cycles – ordered months before anyone saw the storm coming.
For Canada Goose Holdings Inc., the crisis has helped validate the company’s approach to manufacturing on its home turf, rather than being dependent on offshore suppliers.
“We can react faster,” chairman and chief executive officer Dani Reiss said in an interview. “If there’s a shift in demand, we’re able to make smaller runs of styles, closer to the season. We’re self-reliant, that’s the biggest thing. We’re not reliant on a third party to bring us goods.”
The Toronto-based outerwear brand, known for its high-priced winter jackets, has taken a hit during the pandemic. Last month, it reported that its profits fell 72 per cent in the three months ended March 29, which included the impact of its own store closings as well as those of other retailers that sell its products. Mr. Reiss cautioned that revenues this quarter would be “negligible.” In May, the company permanently laid off 125 people.
But Mr. Reiss said in an interview last week that he is “optimistic” about the future, and that he expects the company’s share price – which has fallen 44 per cent in the past year – “will take care of itself over time.”
In a report published last month, CIBC analyst Mark Petrie pointed out that the impact of COVID-19 had highlighted the potential for disruption in globalized supply chains.
“More local and more diversified supply chains will be increasingly sought after ... the benefits in reliability and flexibility are clear,” Mr. Petrie wrote.
Among the positives for Canada Goose, according to Mr. Reiss, is that it is not in the position of some other retailers with “hundreds of stores” that are faced with closing bricks-and-mortar locations. The company has 22 stores worldwide, and is moving forward with stores it had already planned to open this year. Canada Goose will continue looking for locations that are right for the brand, he said.
Last week, Aritzia CEO Brian Hill said that “compelling financial terms” are available to retailers negotiating new leases.
“I think more locations over time will become available, and opportunities will present themselves, no question,” Mr. Reiss said.
Canada Goose is also helped by the fact that two-thirds to three-quarters of its products are “carry-over” styles that do not have to be cleared out of the company’s inventory after one season. With restrictions on certain activities likely to remain, Mr. Reiss expects people to be eager to get outside this winter. But he added that COVID-19 has made forecasting difficult.
“We are actively managing our business on a literally day-to-day, week-to-week, a much more active basis than ever before,” he said.
Canada Goose has brought back some of its retail staff, and approximately 900 employees at its eight factories across Canada. The company has government contracts to manufacture personal protective equipment. The contracts total about two million units that Canada Goose is producing at cost.
The company recently announced a number of plans to improve its sustainability, including using “reclaimed” fur. It will source the fur both through a buyback program coming to stores within the next few months for customers, as well as from other companies or entrepreneurs with existing products to sell.
Canada Goose has come under fire from animal-rights groups for its use of fur as well as the feathers used in its down fillings. Mr. Reiss said the move was unlikely to relieve pressure on the brand from what he called “radical extremist groups,” and was not a reason for the decision.
As retailers reopen, management told analysts on a conference call last month that Canada Goose would be “disciplined” about the volumes of shipments to wholesale partners. The company has begun shifting its focus to direct-to-consumer sales through its e-commerce site and its own stores – which generate profits three times higher than wholesale.
In its past fiscal year ended March 29, direct-to-consumer accounted for nearly 55 per cent of sales, up from 43 per cent just two years earlier. There is more room for that to grow “quite a bit,” Mr. Reiss said.
“We’ve really focused on trying to look at the future, and how we’re going to come out of this,” he said. “I feel that the future of retail is going to be dominated by strong brands.”
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