Shenyang's Opening Up Investment In China Has Damaged The Profitability Of Canadian Geese.

Over the past year, Canada Goose Holdings Inc. (NYSE:GOOS) (TSX:GOOS) Canada geese has fallen from the infinite to the darkest hour. After two and a half years of landing in the open market, the Canadian brand was in a number of difficulties.

Before Wednesday's launch, canadian goose reported a 7% drop in share prices after its first quarter results in losses.

As of the first quarter of 2020 fiscal year ended June 30th, Canada goose net loss increased by 57.2%, from $18 million 700 thousand to $29 million 400 thousand, and the loss per share expanded from $0.17 to $0.27. After adjustment, Canada Company lost a net loss of 16 million 700 thousand Canadian dollars or a loss of 0.15 Canadian dollars per share, increasing to 22 million 800 thousand Canadian dollars or a loss of 0.21 Canadian dollars per share, which is better than Refinitiv's expected loss of 0.24 US dollars per share.

During the reporting period, Canadian geese income was lower than market expectations. The current revenue grew by 59.1% to 71 million 100 thousand Canadian dollars, compared with 44 million 700 thousand yuan in the 2019 fiscal year, which is also higher than the Refinitiv expected $54 million 380 thousand, and the fixed exchange rate increased by 58.6%.

However, as revenue growth has benefited partly from early delivery of some customers in Europe and Asia, and gross margin has fallen sharply, the company's latest performance has been denied by investors.

In the first quarter, domestic market revenue increased by 40.4%, the US market increased by 15.8%, and Europe and other markets increased by 79.7%.

Canada Company said that the increase was mainly due to the increase in Asian market revenue from 6 million 600 thousand Canadian dollars to 18 million 100 thousand euros, as well as early shipment to Japanese and South Korean distributors.

The direct channel revenue in the period was 34 million 800 thousand Canadian dollars, an increase of 50% over the first quarter of 2019 and a growth rate of 23 million 200 thousand yuan. The fixed exchange rate increased by 49.1%, which mainly benefited from the promotion of 5 new stores and 1 electricity supplier markets. The wholesale business revenue increased by 68.8%, from 21 million 500 thousand yuan to 36 million 300 thousand yuan, which mainly benefited from the advance order and the acquisition of shoe brand Baffin.

Group CEO and chief executive officer Dani Reiss said that the first quarter was usually off season and the three month of the company's smallest revenue in the four seasons, but the first quarter started well, and all regional markets grew, while the products continued to expand. During the period, the income of non Parke coats nearly doubled, accounting for about 1/3 of the total DTC revenue of the quarter.

Because canadian goose has been accused of killing goose and coyote by PETA, an animal protection organization, and protesting in front of Canadian stores in New York, Montreal and Toronto, and has been known as "following" the Canadian brand's opening shop and carrying out global protests. Besides, the sustainable development of fashion brands and the increasing standards of ethics have allowed Canadian geese to carry out category transformation.

At the beginning of this month, Canada goose removed the moral statement on animal purchases from the official website, and no longer used the word "guarantee" to make sure that its suppliers did not abuse animals.

According to PETA, the organization's constant complaints led the Federal Trade Commissioner (FTC) to investigate Canadian brands and investigate suspected misleading and false advertisements of Canadian brands.

However, FTC did not punish the Canadian geese. After the withdrawal of the moral commitment of the supply chain, the US agency issued a statement in June 17th that it would not enforce any enforcement action against the Canadian geese because the Canada Company had taken prompt corrective actions against suspected misleading and false advertising.

Last week, Canadian brands announced cooperation with Inuit Tapiriit Kanatami (ITK), an Inuit people (Eskimo), called on Eskimo designers to join the Project Atigi project launched at the beginning of the year to improve the health and well-being of Inuit people in Canada. The next Project Atigi event will display and auction 100 coats designed by 20 designers and give feedback to the local Inuit community.

On Monday, canadian goose announced the appointment of Woody Blackford as the senior vice president of design and products, leading the company to continue to focus on category expansion and innovation, so as to take over as the chief product management Lee Turlington at the end of the year. Woody Blackford previously served as vice president of global design and innovation in Columbia sports and has 25 years of industry experience.

In the first quarter, Canada's gross margin dropped to 650 basis points, from 64% to 57.5%. The company blamed the increase in wholesale revenue and the advance of international orders. The data is far below 61.6% of market expectations.

Direct operating channel gross profit margin fell from 76.3% to 74.7%, down 160 basis points, mainly due to the increase in the proportion of non core Parker coats sales, which failed to offset the increase in gross margin resulting from rising prices. The operating profit margin of the channel dropped by nearly 1000 basis points, from 28% to 18.7%. Canada goose said that the operating profit rate was down sharply, mainly because the investment in new store opening, excluding the cost of opening the shop, increased the profit margin from 21.6% to 25.3% after adjustment.

During the reporting period, the unallocated cost of enterprise expenditures increased from 25 million 900 thousand US dollars to US $36 million 900 thousand. The increase was mainly due to the increase in marketing investment, including the increase in the operation of new stores and the increase in operating costs in the Greater China market. Dani Reiss said that last week, Canada geese opened a new store in Shenyang. Although the temperature was over 20 degrees, the store had an unusual start. Jonathan Sinclair, chief financial officer, said it was one of the three stores in the Greater China market.

Wholesale channel gross margin was 41%, which was 50.7% in the same period last year. Canada Company blamed the gross profit margin of wholesale channels on the proportion of revenue from international distributors during the quarter, while last year's low margin wholesale business occurred mainly in the two quarter. Wholesale channel operating profit margin improved by 30 basis points to 13.8% in the first quarter, and the proportion of international distributors increased. It was offset by positive operating leverage and channel sales rate.

By the end of June, Canada's goose adjusted profit margin of EBIT was -36.4%, a slight improvement over -38.7% in the same period last year.

In the first quarter performance statement, Canada Company again failed to update its annual performance expectations. When the results were released in the fourth quarter, Canada goose predicted that the annual growth rate of revenue in fiscal year 2020-2022 would be above 20%, less than 28% of the market expectation, and the average annual growth rate of EPS adjusted by 25%+ was also lower than that of market expectations.

However, Dani Reiss reiterated its expectations in the financial year at its performance meeting, saying it would not change its guidelines based on the minimum financial season because it was irresponsible. The chief financial officer, Jonathan Sinclair, reiterated the EBIT profit margin improvement by 40 basis points and at least 20% of the expected revenue growth.

Management expectations had raised Canadian geese stock prices up, but then the market was taken over by panic. Macy 's Inc. (NYSE:M) Messi department store's two quarter profits plummeted and lowered its outlook for the whole day. At the same time, it also said that it had no ability to transfer tariffs to price sensitive consumers, as well as 10 years and 2 years of decline in the US bond interest rate, triggering a sharp sell-off in the US stocks, and three major stocks, which had fallen by about 3% during the session.

On Wednesday, Canada goose fell 7.50% in the US stock market at $39.97, down 8.58% this year.