Canada Goose, the Canadian manufacturer of winter wear announced their first earnings since going public earlier this year. The stock popped 15% on the earnings as investors appreciated the higher margins and improved guidance. So how is this Canadian brand successful as we witness historic bankruptcies and hear that retail is dead?
1. Transition away from wholesale to direct to consumer
Canada Goose is a high end brand that typically sells into higher end department and independent stores. As department stores struggle, Canada Goose has focused on their sales direct to the customer through their own website and new store openings. Canada Goose also recognizes the foreign website traffic and launches country specific offerings like those launched in Fall 2016 in UK and France. If Canada Goose was reliant on their wholesale business, revenues (in Canadian dollars) dropped 48% in the quarter. Instead, the direct to consumer business offset that drop helping overall revenues to increase 22%. Direct to consumer (stores and canadagoose.com) now exceeds wholesale and was up 174% in the quarter to $36.5 million.
2. Opening of brick & mortar
Wait, huh? Brands are actually opening stores right now? The first store was Toronto, the birth place of Canada Goose. Next up was NYC in Soho with London and Chicago coming in Fall 2017. Focus for new stores is on cornerstone global cities that provide brand awareness without boundaries. Most brands keep a domestic focus in early years but Canada Goose realizes the potential of the brand internationally.
3. Authentic branding
Brand screams Canada, speaks to relentless cold punishment products are tested with and is manufactured in the high cost region of Canada. Can you get anymore credible branding?
So why all the excitement for the brand? I personally believe Canada Goose embodies the structure and mindset of new age apparel brands. New apparel brands start either with a small wholesale business or etail operation, eventually dip their toes into their own brick & mortar and fall in love with direct to consumer margins as their wholesale business limps along. This is not new but brands like Bonobos who are facing similar situations aren't public. With Canada Goose being public, we have front row seats to how brands play successfully in the new age of retail.
Disclosure: At the time of the time of publishing, I did not own Canada Goose stock but am a minority investor in Bonobos.