UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
OR
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended March 31 , 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
OR
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Date of event requiring this shell company report
Commission file number 001-38027
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
General Counsel
Tel: (416 ) 780-9850
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(Name, telephone, email and/or facsimile number and address of Company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Title of each class | Name of each exchange on which registered | |||||||
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report: At March 31, 2024, 45,528,438 subordinate voting shares and 51,004,076 multiple voting shares were issued and outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. ☒ Yes ☐ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No
Note—checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Securities Exchange Act of 1934. ☐
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† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☐ | Other ☐ | |||||||
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18
If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). ☐ Yes ☒ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
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Canada Goose Holdings Inc.
Table of Contents
| INTRODUCTION | ||||||||
| CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | ||||||||
| PART I | ||||||||
| ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | ||||||||
| ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE | ||||||||
| ITEM 3. KEY INFORMATION | ||||||||
| ITEM 4. INFORMATION ON THE COMPANY | ||||||||
| ITEM 4A. UNRESOLVED STAFF COMMENTS | ||||||||
| ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS | ||||||||
| ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | ||||||||
| ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | ||||||||
| ITEM 8. FINANCIAL INFORMATION | ||||||||
| ITEM 9. THE OFFER AND LISTING | ||||||||
| ITEM 10. ADDITIONAL INFORMATION | ||||||||
| ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||||||||
| ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | ||||||||
| PART II | ||||||||
| ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | ||||||||
| ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | ||||||||
| ITEM 15. CONTROLS AND PROCEDURES | ||||||||
| ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT | ||||||||
| ITEM 16B. CODE OF ETHICS | ||||||||
| ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES | ||||||||
| ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | ||||||||
| ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | ||||||||
| ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | ||||||||
| ITEM 16G. CORPORATE GOVERNANCE | ||||||||
| ITEM 16H. MINE SAFETY DISCLOSURE | ||||||||
| ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | ||||||||
| PART III | ||||||||
| ITEM 17. FINANCIAL STATEMENTS | ||||||||
| ITEM 18. FINANCIAL STATEMENTS | ||||||||
| ITEM 19. EXHIBITS | ||||||||
| EXHIBIT INDEX | ||||||||
| SIGNATURES | ||||||||
| FINANCIAL STATEMENTS | F-1 | |||||||
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INTRODUCTION
Unless otherwise indicated, all references in this Annual Report on Form 20-F to “Canada Goose,” “we,” “our,” “us,” “the company” or similar terms refer to Canada Goose Holdings Inc. and its consolidated subsidiaries. We publish our consolidated financial statements in Canadian dollars. In this Annual Report, unless otherwise specified, all monetary amounts are in Canadian dollars, all references to “$,” “C$,” “CDN$,” “CAD$,” and “dollars” mean Canadian dollars and all references to “US$” and “USD” mean U.S. dollars.
This Annual Report on Form 20-F contains our audited consolidated financial statements and related notes for the years ended March 31, 2024, April 2, 2023 and April 3, 2022 (“Annual Financial Statements”). Our Annual Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
Our 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 2022 was the first 53-week fiscal year, which ended on April 3, 2022. Fiscal 2024 is a 52-week fiscal year.
Unless otherwise indicated in this Annual Report, all references to: "fiscal 2022" are to the 53-week period ended April 3, 2022; "fiscal 2023" are to the 52-week period ended April 2, 2023; and "fiscal 2024" are to the 52-week period ended March 31, 2024.
Trademarks and Service Marks
This Annual Report contains references to a number of trademarks which are our registered trademarks or trademarks for which we have pending applications or common law rights. Our major trademarks include the CANADA GOOSE word mark and the ARCTIC PROGRAM & DESIGN trademark (our disc logo consisting of the colour-inverse design of the North Pole and Arctic Ocean) as well as the BAFFIN word mark and BAFFIN Half Maple Leaf design trademark.
Solely for convenience, the trademarks, service marks and trade names referred to in this Annual Report are listed without the ®, (sm) and (TM) symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.
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CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This Annual Report 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,” “target,” “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 Annual Report 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 Annual Report 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;
•the continued absence of material global supply chain disruptions to our business and our 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 this 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;
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•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. 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, which may further affect general economic and operating conditions;
•fluctuations in raw material costs, interest rates and currency exchange rates;
•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 Annual Report 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 Annual Report. Additional impacts may arise that we are not aware of currently. The potential of such additional impacts intensifies the business and operating risks that we face, and should be considered when reading the forward-looking statements contained in this Annual Report. In addition, even if results and developments are consistent with the forward-looking statements contained in this Annual Report, 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 Annual Report may prove to be inaccurate. We have included important factors in the cautionary statements included in this Annual Report on Form 20-F, particularly in Section 3.D of this Annual Report on Form 20-F titled “Risk Factors”, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. 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 Annual Report and the documents that we reference herein and have filed as exhibits hereto 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 Annual Report, and we do not assume any obligation to update any forward-looking statements except as required by applicable laws.
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Risks Related to our Business
A downturn in the global economy, including as a result of recent geopolitical events and general economic conditions such as inflation, will likely affect or has substantially affected and will likely continue to affect, consumer purchases of discretionary items, which could materially harm our sales, profitability, and financial condition.
Our sales are significantly affected by changes in discretionary spending by consumers. Many factors outside our control influence and affect the level of consumer spending for discretionary items. These factors include actual and perceived economic conditions, interest and tax rates, inflation, energy prices, the availability of consumer credit, disposable consumer income, consumer indebtedness level, unemployment and consumer confidence in future economic conditions. Consumer purchases of discretionary items, such as our outerwear, tend to decline during recessionary periods when disposable income is lower. During our history, we have experienced recessionary periods, but we cannot predict the effect of future recessionary periods on our sales and profitability. A downturn in the economy in markets in which we sell our products or unfavourable changes related to interest rates, rates of economic growth, fiscal and monetary policies of governments, inflation, deflation, tax rates and policy, unemployment trends, energy prices, and other matters that influence the availability and cost of merchandise, consumer confidence or spending may materially harm our sales, profitability and financial condition.
Recent geopolitical events and general economic conditions, such as rising inflation and interest rates, has led to a slow-down in certain segments of the global economy and affected the amount of discretionary income available for certain consumers to purchase our products. If global economic and financial market conditions persist, our sales could decrease, and our financial condition and results of operations could be adversely affected. Unstable political conditions, civil unrest, armed conflicts or events of extreme violence, including the ongoing conflicts in the Middle East and Ukraine, and any escalation thereof, and related economic and other retaliatory measures taken by Canada, the United States, the European Union and others,
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may disrupt commerce globally and could negatively affect our business and results of operations. The risk of recession in one or several of the countries where we operate is growing, notably in light of the significant increase of interest and inflation rates, and could further have an adverse impact on our business and results of operations.
Our growth strategy continues to involve expansion of our Direct-to-Consumer (“DTC”) channel, including retail stores and e-Commerce, which may present risks and challenges.
Our business has continued to evolve from one in which we only distributed products on a wholesale basis for resale by others to a multi-channel distribution model. As of March 31, 2024, our DTC channel includes 57 national e-Commerce markets and 68 directly operated permanent retail stores across North America, Europe, and Asia Pacific. Our global DTC expansion has been the largest driver of operational and financial growth historically. We expect this to continue in the future.
Growing our e-Commerce platforms and number of retail stores is essential to our future strategy. This strategy has and will continue to require significant investment in cross-functional operations and management focus, along with investment in supporting technologies and retail store spaces. If we are unable to provide a user-friendly, convenient and consistent experience for our customers, our ability to compete and our results of operations could be adversely affected. In addition, if our e-Commerce platforms or retail store formats do not appeal to our customers, reliably function as designed, or maintain the privacy of customer data, or if we are unable to consistently meet our brand promise to our customers, we may experience a loss of customer confidence or lost sales, or be exposed to fraudulent purchases, which could adversely affect our reputation and results of operations.
To the extent our e-Commerce business grows, we will need an increasing amount of IT infrastructure to continue to satisfy consumer demand and expectations. If we fail to effectively scale and adapt our e-Commerce platform to accommodate increased consumer demand, our business may be subject to interruptions, delays or failures and consumer demand for our products and digital experiences could decline. In the event we fail to successfully respond to these risks, it might adversely affect sales and order flow in our e-Commerce business, as well as adversely impact our reputation and brand.
Furthermore, with our increasing retail footprint, lower profitability levels at new or existing retail stores will adversely affect our margins.
We are also subject to different and evolving local laws and regulatory requirements in the various jurisdictions in which we operate. In particular, we are subject to different and evolving laws and orders governing the operation and marketing of e-Commerce websites, as well as the collection, storage and use of information on consumers interacting with those websites. We may incur additional costs and operational challenges in complying with these laws, and differences in these laws may cause us to operate our businesses differently in different territories. If so, we may incur additional costs and may not fully realize the investment in our global DTC expansion.
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Our business depends on our strong brand and reputation, as well as our ability to maintain and enhance our brand.
The Canada Goose name and brand image are integral to the growth of our business, and to the implementation of our strategies for expanding our business. We believe that the brand image we have developed has significantly contributed to the success of our business and is critical to maintaining and expanding our customer base. Maintaining and enhancing our brand may require us to make substantial investments in areas such as product design, store openings and operations, marketing, e-Commerce, community relations and employee training, and these investments may not be successful.
We anticipate that, as our business continues to expand into new markets and new product categories and as the market becomes increasingly competitive, maintaining and enhancing our brand may become difficult and expensive. Conversely, as we penetrate these new markets and our brand becomes more widely available, it could potentially detract from the appeal stemming from the scarcity of our brand. Our brand may also be adversely affected if our public image or reputation is tarnished by negative publicity. In addition, ineffective marketing, product diversion to unauthorized distribution channels, product defects, counterfeit products, unfair labour practices, and failure to protect the intellectual property rights in our brand are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish consumer confidence in us. Maintaining and enhancing our brand will depend largely on our ability to be a leader in our industry and to continue to offer a range of high-quality products to our customers, which we may not execute successfully. Any of these factors could harm our sales, profitability or financial condition.
A key element of our growth strategy is the expansion of our product offerings into new product categories. We may be unsuccessful in designing products that meet our customers’ expectations for our brand or that are attractive to new customers. If we are unable to anticipate customer preferences or industry changes, or if we are unable to modify our products on a timely basis or expand effectively into new product categories, we may lose customers or fail to gain new customers. Our ability to successfully implement our growth strategy may be affected by the global economic contraction, including as a result of ongoing geopolitical uncertainty and the rising inflationary pressures. As we expand into new geographic markets, consumers in these new markets may be less compelled by our brand image and may not be willing to pay a higher price to purchase our products as compared to traditional outerwear. Our operating results would also suffer if our investments and innovations do not anticipate the needs of our customers, are not appropriately timed with market opportunities or are not effectively brought to market.
Our plans to improve and expand our product offerings may not be successful, and implementation of these plans may divert our operational, managerial and administrative resources, which could harm our competitive position and reduce our revenue and profitability.
In addition to our global DTC expansion plans, we are growing our business by expanding our product offerings outside down-filled jackets, including windwear, rainwear, apparel, fleece, accessories and footwear. The principal risks to our ability to successfully carry out our plans to expand our product offering include:
•the success of new products and new product lines will depend on market demand and there is a risk that new products and new product lines will not deliver expected results, which could negatively impact our future sales and results of operations;
•if our expanded product offerings fail to maintain and enhance our distinctive brand identity, our brand image may be diminished and our sales may decrease;
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•implementation of these plans may divert management’s attention from other aspects of our business and place a strain on our management, operational and financial resources, as well as our information systems; and
•incorporation of novel materials or features into our products may not be accepted by our customers or may be considered inferior to similar products offered by our competitors.
In addition, our ability to successfully carry out our plans to expand our product offerings may be affected by economic and competitive conditions, changes in consumer spending patterns (including reductions in discretionary consumer spending as a result of geopolitical events or general economic downturns) and changes in consumer preferences and styles. These plans could be abandoned, could cost more than anticipated and could divert resources from other areas of our business, any of which could negatively impact our competitive position and reduce our revenue and profitability.
Our success depends on our ability to anticipate trends and to identify and respond to new and changing consumer preferences.
In fiscal 2024, our core outerwear offering represented the majority of our sales. Consumer preferences often change rapidly. Therefore, our business is substantially dependent on our ability to attract customers who are willing to pay a premium for our products. Any future shifts in consumer preferences away from spending for our products would also have a material adverse effect on our results of operations.
In addition, we believe that continued increases in sales of outerwear will largely depend on customers continuing to demand technical superiority from their products. If the number of customers demanding outerwear does not continue to increase, or if our customers are not convinced that our products are more functional or stylish than other outerwear alternatives, we may not achieve the level of sales necessary to support new growth platforms and our ability to grow our business will be severely impaired.
Our indebtedness could adversely affect our financial condition.
As of March 31, 2024, we had $203.7m of unused borrowing capacity under our Revolving Facility (as defined below), with no principal amount outstanding, $393.1m of term loans under our Term Loan (as defined below), no amounts owing under the Mainland China Facilities, and $5.4m owing on our Japan Facility (as defined below), for total indebtedness of $398.5m. As at March 31, 2024, cash on hand was $144.9m (April 2, 2023 - $286.5m). We also generally experience significant fluctuations in our aggregate indebtedness and working capital over our operating cycle due to the seasonality in our business. Our debt could have important consequences, including:
•limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing;
•requiring a portion of our cash flow to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flow available for working capital, capital expenditures, acquisitions and other general corporate purposes;
•requiring the net cash proceeds of certain equity offerings to be used to prepay our debt as opposed to being applied for other purposes;
•exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our senior secured credit facilities, are at variable rates of interest; and
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•limiting our flexibility in planning for and reacting to changes in the industry in which we compete.
The credit agreements governing our senior secured credit facilities contain a number of restrictive covenants that impose operating and financial restrictions on us, including restrictions on our ability to incur certain liens, make investments and acquisitions, incur or guarantee additional indebtedness, pay dividends or make other distributions in respect of, or repurchase or redeem our shares, or enter into certain other types of contractual arrangements affecting our subsidiaries or indebtedness. In addition, the restrictive covenants in the credit agreement governing our Revolving Facility (as defined below) require us to maintain a minimum fixed charge coverage ratio if excess availability under our Revolving Facility (as defined below) falls below a specified threshold.
If we are unable to comply with these restrictions and covenants at times and to the extent they are applicable, including as a result of events beyond our control, we may risk an event of default under the credit facilities, which could accelerate the payment of any amounts then due, and limit our ability to incur future borrowings under the credit facilities, either of which could have a material adverse effect on our business.
Although the credit agreements governing our senior secured credit facilities contain restrictions on the incurrence of additional indebtedness, those restrictions are subject to a number of qualifications and exceptions and the additional indebtedness incurred in compliance with those restrictions could be substantial. We may also seek to amend or refinance one or more of our debt instruments to permit us to finance our growth strategy or improve the terms of our indebtedness.
The markets in which we operate are highly competitive.
The market for outerwear is highly fragmented. We compete against a wide range of brands and retailers. Many of our competitors have significant competitive advantages, including larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition, larger product offering, greater financial resources, more established research and development processes, a longer history of store development, greater marketing resources, more established distribution processes, and other resources which we do not have.
Our competitors may be able to achieve and maintain brand affinity and market share more quickly and effectively than we can. Our competitors may also be able to increase sales in their new and existing markets faster than we can by emphasizing different distribution channels than we can. If we fail to compete with such competitors, our business, financial condition and performance could be materially adversely affected.
Our business could be harmed if we fail to manage our operations and future growth effectively, or if we fail to successfully execute our Transformation Program.
If our operations continue to grow, of which there can be no assurance, we will be required to continue to expand our sales and marketing, product development, manufacturing and distribution functions, to upgrade our management information systems and other processes, and to obtain more space for our expanding administrative support and other personnel. Continued or fluctuating growth could strain our resources, and we could experience operating difficulties, including difficulties in hiring, training and managing an increasing number of employees and manufacturing capacity to produce our products, and delays in production and shipments. These difficulties may result in the erosion of our brand image, divert the attention of management and key employees and impact financial and operational results. In order to continue to expand our DTC channel, we expect to add selling, general & administrative (“SG&A”) expenses and depreciation and amortization expenses to our cost base. These costs,
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which include lease commitments, headcount and capital assets, could result in decreased margins if we are unable to drive commensurate DTC revenue growth.
In the fourth quarter of fiscal 2023, we launched our Transformation Program with the aim to strengthen the foundation of our company to drive efficient and scalable operations and deliver strong revenue growth, which we believe will contribute to margin expansion over the long-term. This multiphase program includes the following workstreams: the organizational and operating model, stores, production and procurement, product, planning and supply chain, marketing and experience, and technology. If we are unable to successfully execute our Transformation Program, our business, financial condition and performance could be materially adversely affected.
Our financial performance is subject to significant seasonality and variability, which could cause the price of our subordinate voting shares to decline.
Our business is affected by a number of factors common to our industry and by other factors specific to our business model, which drive seasonality and variability. Historically, key metrics, including those related to our growth, profitability and financial condition, have fluctuated significantly across fiscal periods. We expect this to continue in the future.
Consumer purchases of outerwear are naturally heavily concentrated in the Fall / Winter season. As a result, the majority of our DTC revenue is recognized in the third and fourth fiscal quarter. Our wholesale revenue is weighted in the second and third fiscal quarters, when most orders are shipped to wholesale partners in time for the Fall/Winter season. Our net income is typically negative in the first quarter and reduced or negative in the fourth quarter.
Guided by expected demand in both channels, we manufacture on a linear basis throughout the fiscal year, while adding capacity where relevant to our manufacturing network, resulting in the buildup and staging of inventory for future periods. These dynamics cause significant fluctuations in our working capital, cash conversion, and leverage throughout the fiscal year. At certain points in time, our inventory has increased at a significantly higher rate than our historical revenue growth in the same period.
Historical results, especially comparisons across fiscal quarters, should not be considered indicative of the results to be expected for any future periods. In addition to the seasonality of demand for our products, our financial performance is influenced by a number of factors which are difficult to predict and variable in nature. These include input cost volatility, the timing of consumer purchases, and wholesale deliveries, which very often shift between fiscal quarters, demand forecast accuracy, inventory availability, and the evolution of our channel mix, as well as external trends in weather, traffic and discretionary consumer spending.
A number of other factors which are difficult to predict could also affect the seasonality or variability of our financial performance. Therefore, you should not rely on the results of a single fiscal quarter as an indication of our annual results or future performance.
Our success depends on our ability to attract new customers and retain existing customers.
Our success depends, in part, on our ability to attract new customers. In order to expand our customer base, we must appeal to and attract consumers who identify with our brand and products. We have made significant investments in enhancing our brand and attracting new customers. We expect to continue to make significant investments to promote our current products to new customers and new products to current and new customers, including through our e-Commerce platforms and retail store presence. Such marketing investments can be expensive and may not result in increased sales. Further, as our brand becomes more widely known, we may not attract new customers as we have in the past. If we are unable to attract
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enough new customers, or grow revenues from existing customers, we may not be able to increase our sales.
Our operations and business may be adversely affected by global climate trends.
There is increasing concern that a gradual rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe, an increase in the frequency, severity, and duration of extreme weather conditions and natural disasters, and water scarcity and poor water quality. Climate change may also exacerbate challenges relating to the availability and quality of water and raw materials, including those used in the production of our products, and may result in changes in regulations or consumer preferences, which could in turn affect our business, operating results and financial condition. For example, there has been increased focus by governmental and non-governmental organizations, consumers, customers, employees and other stakeholders on products that are sustainably made and other sustainability matters, including responsible sourcing and deforestation, the use of plastic, energy and water, the recyclability or recoverability of packaging and materials transparency, any of which may require us to incur increased costs for additional transparency, due diligence and reporting. These events could also compound adverse economic conditions and impact consumer confidence and discretionary spending. As a result, the effects of climate change are unpredictable and could have a long-term adverse impact on our financial condition, results of operations or cash flows.
Climate change related transition risks are also growing in many countries, as governmental bodies are enacting new legislation and regulations to reduce or mitigate the potential impacts of climate change. If we, our suppliers, or our manufacturers are required to comply with these laws and regulations, or if we choose to take voluntary steps to reduce or mitigate our impact on climate change, we may experience increases in energy, production, transportation, and raw material costs, capital expenditures, or insurance premiums and deductibles. Varied legislation and regulations across jurisdictions may also make it more challenging and affect the costs of compliance with such laws and regulations. Any assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change.
A significant portion of our business is highly dependent on cold-weather seasons and patterns to generate consumer demand for our products. Consumer demand for our products may be negatively affected to the extent global climate patterns trend warmer, reducing typical patterns of cold-weather events or increasing weather volatility, which could have an adverse effect on our financial condition, results of operations or cash flows.
Unexpected obstacles in new markets may limit our expansion opportunities, which could negatively impact our business and financial performance.
Our growth strategy has led to our expansion into markets outside of North America, including in developing markets. There are varying regulatory environments and market practices in these regions, and such regulations may be unfamiliar to us and we may experience unexpected barriers. It may take us time to penetrate or successfully operate in any new market. In connection with our expansion efforts we may encounter obstacles, including cultural and linguistic differences, differences in regulatory environments, economic or governmental instability, labour practices and market practices, difficulties in keeping abreast of market, business and technical developments, and foreign customers’ tastes and preferences. In developing markets, potential challenges include relatively higher risk of political instability, economic volatility, crime, corruption and social unrest. Such challenges may be exacerbated in many cases by uncertainties regarding how local law is applied and enforced, and with respect to judiciary and administrative mechanism. Health concerns related to COVID-19 still give rise to
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uncertainties, and resurgences in new COVID-19 cases and/or the emergence and progression of new variants could cause governments to reintroduce restrictive measures. Other pandemics, epidemics and health risks could also occur, any of which could reduce traffic, result in temporary or permanent closures of stores, offices, and factories, could negatively impact the flow of goods, as well as the ability of our suppliers to provide us with products and services we need to operate our business. Any such pandemics, epidemics and other health risks could have an adverse effect on the economy and financial markets resulting in a declining level of retail and commercial activity, which could have a negative impact on the demand for, and prices of, our products.
We may also encounter difficulty expanding into new international markets because of limited brand recognition leading to delayed acceptance of our products by customers in these new international markets. In the event we fail to develop our business in new international markets or experience disappointing growth or undertake inadequate management of risks outside of existing markets, this could harm our business and results of operations.
Fluctuations in the price or quality of, or disruptions in the availability of, raw materials used in our products from a limited number of third-party suppliers could cause us to incur increased costs or disrupt our manufacturing processes.
Our products require high quality raw materials, including polyester, nylon, blend fabrics and down. The price of raw materials depends on a wide variety of factors largely beyond the control of Canada Goose. A shortage, delay or interruption of supply for any reason, including by reason of health concerns and global supply chain issues, could negatively impact our sales and have an adverse impact on our financial results.
In addition, while our suppliers, in turn, source from a number of sub-suppliers, we rely on a very small number of direct suppliers for certain raw materials. As a result, any disruption to these relationships could have an adverse effect on our business. Events that adversely affect our suppliers could impair our ability to obtain inventory in the quantities and at the quality that we require. Such events include difficulties or problems with our suppliers’ businesses, finances, labour relations and availability, shipping, ability to import raw materials, increases in labour, fuel and raw material costs, production, weather trends, insurance and reputation, as well as natural disasters, public health emergencies, including epidemics, pandemics and other health concerns, and responsive actions thereto such as border closures, restrictions on product shipments and travel restrictions, or other catastrophic occurrences. A significant slowdown in the retail industry as a whole may also result in bankruptcies or permanent closures of some of our suppliers and other vendors. Furthermore, there can be no assurance that our suppliers will continue to provide fabrics and raw materials or provide products that are consistent with our standards. Finally, raw materials and shipping costs have and may continue to increase as a result of inflation, recent geopolitical uncertainty and supply chain issues. Any such increases could adversely impact our financial performance if we are unable to offset such increases with price increases on our products.
More generally, if we need to replace an existing supplier, additional supplies or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, and any new supplier may not meet our strict quality requirements. In the event we are required to find new sources of supply, we may encounter delays in production, inconsistencies in quality and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Any delays, interruption or increased costs in the supply of our raw materials could have an adverse effect on our ability to meet customer demand for our products and result in lower sales and profitability both in the short and long-term.
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Significant disruptions in supply from our current sources and disruptions of our supply chain could have a material adverse effect on our operating and financial results.
We generally do not enter into long-term formal written agreements with our suppliers, and typically transact business with our suppliers on an order-by-order basis. There can be no assurance that there will not be a disruption in the supply of raw materials and certain finished goods from current sources or, in the event of a disruption, that we would be able to locate alternative suppliers of materials or finished goods of comparable quality at an acceptable price, or at all. Identifying a suitable supplier is an involved process that requires us to become satisfied with their quality control, responsiveness and service, financial stability and labour and other ethical practices. Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet customer demand for our products and result in lower revenue and operating income both in the short and long-term.
Disruptions in our supply chain capabilities, including due to trade restrictions, political instability, severe weather and natural disasters, epidemics, pandemics and other health concerns, war, labour shortages, reduced freight availability and increased costs, port disruptions, rising inflationary pressures and other factors, could impair our ability to distribute or manufacture products. These factors are beyond our control and to the extent we are unable to mitigate the likelihood or potential impact of such events, there could be a material adverse effect on our operating and financial results.
Our business and results of operations could be harmed if we are unable to accurately forecast demand for our products.
To ensure adequate inventory supply, we forecast inventory needs, which are subject to seasonal and quarterly variations in consumer demand. If we fail to accurately forecast demand, we may experience excess inventory levels or a shortage of product. Our ability to forecast accurately has become increasingly important as we have expanded our DTC channel globally and could be affected by many factors outside of our control, including an increase or decrease in consumer demand for our products or for products of our competitors, in the event we fail to accurately forecast consumer acceptance of new products, product introductions by competitors, unanticipated changes in general market conditions and, therefore, consumer spending in the sector (for example, because of unexpected effects on inventory supply and consumer demand), and weakening of economic conditions or consumer confidence in future economic conditions. In our wholesale channel, the majority of orders delivered in a given fiscal year are received in the prior fiscal year, enabling us to manufacture inventory relative to a defined order book. In the DTC channel, we manufacture according to our forecasts of consumer demand. If we overestimate the demand for our products, we could face inventory levels in excess of demand, which could result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would harm our gross margins and our brand management efforts. The potential for overestimation is expected to increase as a larger portion of our sales comes through our DTC channel, and as we expand our product offerings. If we underestimate the demand for our products, we may not be able to produce products to meet demand, and this could result in delays in the shipment of our products and a potential failure to capitalize on demand, as well as damage to our reputation and wholesale partner relationships. In addition, failures to accurately predict the level of demand for our products could harm our profitability and financial condition.
If we are unable to protect or preserve our intellectual property rights, brand image and proprietary rights, our business may be harmed.
We expect that there is a high likelihood that counterfeit products or other products infringing on our intellectual property rights will continue to emerge, seeking to benefit from the consumer
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demand for Canada Goose products. These counterfeit products do not provide the functionality of our products and we believe they are of substantially lower quality, and if customers are not able to differentiate between our products and counterfeit products, this could damage our brand image. In order to protect our brand, we devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts worldwide. We actively pursue entities involved in the trafficking and sale of counterfeit merchandise through legal action or other appropriate measures. In spite of our efforts, counterfeiting still occurs and, if we are unsuccessful in challenging a third-party’s rights related to trademark, copyright or other intellectual property rights, this could adversely affect our future sales, financial condition and results of operations. We cannot guarantee that the actions we have taken to curb counterfeiting and protect our intellectual property will be adequate to protect the brand and prevent counterfeiting in the future or that we will be able to identify and pursue all counterfeiters who may seek to benefit from our brand.
As our business has expanded, our competitors have imitated, and will likely continue to imitate, our product designs and branding, which could harm our business and results of operations. Competitors who manufacture products seeking to imitate our products could divert sales and dilute the value of our brand. We believe our trademarks, copyrights and other intellectual property rights are extremely important to our success and our competitive position.
However, enforcing rights to our intellectual property may be difficult and costly, and we may not be successful in stopping infringement of our intellectual property rights, particularly in foreign countries, which could make it easier for competitors to capture market share. Intellectual property rights necessary to protect our products and brand may also be unavailable or limited in certain countries. Furthermore, our efforts to enforce our trademarks, copyrights and other intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our trademark and other intellectual property rights. Continued sales of competing products by our competitors could harm our brand and adversely impact our business, financial condition and results of operations.
Labour-related matters, including labour disputes, may adversely affect our operations.
As of March 31, 2024, approximately 37% of our employees are members of labour unions, comprised of active employees at 6 of our 10 operated manufacturing and warehouse facilities (comprised of 8 manufacturing facilities, 1 warehouse facility and 1 Baffin manufacturing facility). The exposure to unionized labour in our workforce presents an increased risk of strikes and other labour disputes, and our ability to alter labour costs will be subject to collective bargaining, which could adversely affect our results of operations. In addition, potential labour disputes at independent factories where our goods are produced, shipping ports, or transportation carriers create risks for our business, particularly if a dispute results in work slowdowns, lockouts, strikes or other disruptions during our peak manufacturing, shipping and selling seasons. Any potential labour dispute, either in our own operations or in those of third parties, on whom we rely, could materially affect our costs, decrease our sales, harm our reputation or otherwise negatively affect our sales, profitability or financial condition.
The majority of our workforce is composed of manufacturing employees based in the provinces of Ontario, Manitoba and Québec, a sizeable portion of whom are paid minimum wage rates based on the applicable provincial minimum wage, as well as a number of other benefits including variable pay components. Many jurisdictions, including certain Canadian provinces, either have increased or plan to increase their minimum wage and other benefits requirements, which may materially increase our manufacturing costs. Minimum wage increases such as the foregoing may not only increase the wages of our minimum wage employees, but also the wages paid to our other hourly or salaried employees who, in recognition of their tenure, performance, responsibilities and other similar considerations, historically received a rate of pay
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exceeding the applicable minimum wage. Further, if we fail to pay such higher wages, we could suffer increased employee turnover. It is difficult to predict when such increases may take place and any such increase could have a material adverse effect on our business, financial condition, results of operations and prospects.
Further, the risks to our business due to a pandemic or other public health emergency, such as the recent COVID-19 pandemic, include risks to employee health and safety, prolonged restrictive measures put in place in order to control the crisis and limitations on travel, which may result in temporary shortages of staff or unavailability of certain employees or consultants with key expertise or knowledge of our business and, impact on workforce productivity.
We rely significantly on information technology systems for our distribution systems and other critical business functions, and are increasing our reliance on these functions as our DTC channel expands. Any failure, inadequacy, or interruption of those systems could harm our ability to operate our business effectively.
We rely on information systems to effectively manage all aspects of our business, including merchandise planning, manufacturing, allocation, distribution, sales and financial reporting. Our reliance on these systems, and their importance to our business, will continue to increase as we expand our DTC channel and global operations. We rely on a number of third parties to help us effectively manage these systems. If information systems we rely on fail to perform as expected, our business could be disrupted. The failure by us or our vendors to manage and operate our information technology systems as expected could disrupt our business, result in not providing adequate product, losing sales or market share, and reputational harm, causing our business to suffer. Any such failure or disruption could have a material adverse effect on our business.
Our information technology systems and vendors also may be vulnerable to damage or interruption from circumstances beyond our or their control, including fire, flood, natural disasters, systems failures, network or communications failures, power outages, public health emergencies, security breaches, cyber-attacks and terrorism. For example, we have implemented a hybrid work-from-home policy for our corporate workforce in North America and Europe. This increase in working remotely could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations. We maintain disaster recovery procedures intended to mitigate the risks associated with such events, but there is no guarantee that these procedures will be adequate in any particular circumstance. As a result, such an event could materially disrupt, and have a material adverse effect on, our business.
A portion of our sales are to wholesale partners, directly and through distributors, and we depend on them to display and present our products to customers in our wholesale channel. Our failure or inadvertent failure to maintain our relationships with our existing wholesale partners could harm our business.
A portion of our sales are made to wholesale partners, either directly or indirectly, through distributors. Our wholesale partners service customers by stocking and displaying our products and explaining our product attributes. We have progressively shifted sales from our wholesale channel to our DTC channel to drive sustainable growth, better control our brand, and manage relationships with our customers. Nevertheless, our relationships with our existing wholesale partners are important to the authenticity of our brand and the marketing programs we continue to deploy.
If we fail to maintain relationships with our existing wholesale partners, they could decide to emphasize products from our competitors, to redeploy their retail floor space to other product categories, or to take other actions that reduce their purchases of our products. We do not receive long-term purchase commitments from our wholesale partners, and confirmed orders
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received from our wholesale partners may be difficult to enforce. Factors that could affect our ability to maintain our sales to these wholesale partners include: (a) failure to accurately identify the needs of our customers; (b) lack of customer acceptance of new products, product expansions or changes in products (including the ceasing of the use of fur in our products); (c) unwillingness of our wholesale partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; (d) failure to obtain shelf space from our wholesale partners; and (e) new, well-received product introductions by competitors. If we lose any of our existing wholesale partners, or if they reduce their purchases of our existing or new products, or their number of stores or operations are reduced, or they promote products of our competitors over ours, or they suffer financial difficulty or insolvency, our sales and profitability could be harmed. Financial difficulties experienced by our existing wholesale partners could further harm our business.
We cannot ensure that our wholesale partners will continue to purchase and carry our products in accordance with current practices or carry any new products that we develop. The recent decline in the overall retail sector, including disruptions related to the recent COVID-19 pandemic, has been challenging for our wholesale partners. Such conditions, among other things, have resulted, and in the future may result, in financial difficulties leading to restructurings, bankruptcies, liquidations and other unfavorable events for our wholesale partners and may cause such partners to reduce or discontinue orders of our products or be unable to pay us for products they have purchased from us. This has caused us to negotiate shortened payment terms and reduce credit limits in certain cases. If the overall retail environment continues to decline or if one or more of our existing wholesale partners is unable or unwilling to meet our payment terms, our business and results of operations could be harmed.
Our marketing programs, our e-Commerce initiatives and our collection, use and disclosure of transactional and personal information about our customers are governed by an evolving set of laws and enforcement trends and changes in those laws or trends. Our failure or inadvertent failure to comply with existing or future laws, could substantially harm our business and results of operations.
We collect, process, disclose, maintain and otherwise use data, including personal information about individuals, including data available to us through online activities and other customer interactions in our business. Our current and future marketing programs may depend on our ability to collect, maintain, disclose and otherwise use this information, and our ability to do so is subject to evolving and increasingly demanding international, U.S., Canadian, Chinese, European legislation, jurisprudence, and regulatory guidelines such as the European Union’s General Data Privacy Regulation, Canada’s Personal Information Protection and Electronic Documents Act and China’s Personal Information Protection Law. In Canada and the United States multiple provinces and states have implemented personal information protection legislation. These information and privacy laws require companies to satisfy new data governance requirements including implementing appropriate security measures to protect the confidentiality, integrity, and availability of the personal information and allowing data subjects, depending on the jurisdiction, the right to access, correct or delete such data about themselves. Failure to comply with the data protection regulatory landscape could result in significant penalties. Companies are also facing an increasing number of class actions from consumer groups that claim loss or misuse of their personal information.
Although we strive to comply with all applicable laws and other security requirements related to privacy and information security, it is possible that these requirements are inconsistent from one jurisdiction to another. They may conflict with other rules or inadvertently not be reflected by our practices, our employees’ behaviour or our agreements with business partners. If so, we may suffer damage to our reputation and be subject to proceedings or actions against us by
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governmental entities or private parties, including a class of plaintiffs in the event of a class action. Any such proceeding or action could hurt our reputation, force us to spend significant amounts to defend our practices, distract our management or otherwise have an adverse effect on our business.
We post our privacy policies and practices concerning the collection, use and disclosure of personal information on our websites. Any failure by us to comply with our posted privacy policies or other privacy-related laws and regulations could result in proceedings which could potentially harm our business. In addition, certain of our marketing practices rely upon the sending of commercial electronic messages, including e-mails, to communicate with consumers. We may face risk if our use of commercial electronic messages is found to violate applicable laws and regulations. As information and privacy laws and anti-spam laws change, we may incur additional costs to ensure we remain in compliance. If information and data privacy laws and anti-spam laws become more restrictive at the international, federal, provincial or state levels, our compliance costs may increase, our ability to effectively engage customers via personalized marketing may decrease, our investment in our e-Commerce platform may not be fully realized, our opportunities for growth may be curtailed by our compliance burden and our potential reputational harm or liability for breaches may increase.
Data security breaches and other cyber security events could result in disruption to our operations or financial losses and could negatively affect our reputation, credibility and business.
We and our service providers are subject to risks associated with data security breaches and other cyber security events. We collect, process, maintain and use personal information relating to our customers and employees. We also disclose personal information about consumers and employees to third party service providers, who help us with our business operations, including the operation of our e-Commerce site and the provision of various social media tools and websites we use as part of our marketing strategy. Any attempted or actual unauthorized disclosure of personal information could harm our reputation and credibility, reduce our e-Commerce sales, impair our ability to attract website visitors, reduce our ability to attract and retain customers and could result in litigation, including class action lawsuits, against us or the imposition of significant fines or penalties.
Our online activities, including our e-Commerce websites, may also be subject to denial of service or other forms of cyber-attacks. While we have taken measures we believe are reasonable to protect against those types of attacks, those measures may not adequately protect our online activities from such attacks. If a denial of service attack or other cyber event were to affect our e-Commerce sites or other information technology systems, our business could be disrupted, we may lose sales or valuable data, and our reputation, results of operations and financial condition may be adversely affected. Additionally, new and evolving data protection legislation could impose more onerous requirements that could increase the risks associated with data security breaches.
We have procedures and technology in place designed to safeguard our customers’ debit and credit cards and our customers’ and employees’ other personal information under our control, and we continue to devote significant resources to network security, backup and disaster recovery, and other security measures. Nevertheless, these security measures cannot provide absolute security or guarantee that we will be successful in preventing and responding to breaches, loss, theft, or unauthorized access, disclosure, copying, use, or modification of personal information under our control.
As consumers are gaining more data privacy awareness, in the future there may be new foreign, federal, provincial and state laws and legislative proposals addressing data privacy and security, as well as increased data protection obligations imposed on merchants by credit card issuers.
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As a result, we may become subject to more extensive requirements to protect the personal information that we collect, use and disclose, resulting in, for example, increased compliance costs.
A significant portion of our business functions operate out of our headquarters in Toronto. As a result, our business is vulnerable to disruptions due to local weather, economics and other factors.
Most of our significant business functions reside at our headquarters in Toronto, Canada. Events such as public health emergencies, including epidemics and pandemics, extreme local weather, natural disasters, transportation strikes, acts of terrorism, significant economic disruptions or unexpected damage to the facility have resulted and could result in an unexpected disruption to our business as a whole. If a disruption of this type should occur, our ability to conduct our business could be adversely affected or interrupted entirely and adversely affect our financial and operating results.
Our success is substantially dependent on the continued service of our senior management.
Our success is substantially dependent on the continued service of our senior management, including Dani Reiss, who is our Chairman and Chief Executive Officer. The loss of the services of our senior management could make it more difficult to successfully operate our business and achieve our business goals. We also may be unable to retain existing management, technical, sales and client support personnel that are critical to our success, which could result in harm to our customer and employee relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs.
We have not obtained key man life insurance policies on any members of our senior management team. As a result, we would not be protected against the associated financial loss if we were to lose the services of members of our senior management team.
Talent management, employee retention and experience are important factors in our success.
Our future success also depends on our ability to attract, develop, and retain talent with the necessary knowledge, skills and experience and establish a positive work culture to maintain operations and institutional knowledge, and ensure we are competitive in our industry. Competition for experienced and well-qualified personnel is intense amidst a tight labour market with labour shortages and increased wage expectations. We, or the suppliers and service providers we rely on, may not be successful in attracting, hiring and retaining such personnel, which could impact our ability to remain competitive or operate efficiently and effectively. If we are unable to retain, hire, attract and motivate talented employees with the appropriate skill sets, or if changes to our organizational structure, operating results, or business model adversely affect morale or retention, we may not achieve our objectives and our results of operations could be adversely impacted.
We rely on credit card processors to receive payments, and are subject to payment-related risks.
For our DTC sales, as well as for sales to certain wholesale partners, we accept a variety of payment methods, including credit cards, debit cards and electronic funds transfers. Accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements relating to payment card processing. This includes laws governing the collection, processing and storage of sensitive consumer information, as well as industry requirements such as the Payment Card Industry Data Security Standard (“PCI-DSS”). These laws and obligations may require us to implement enhanced authentication and payment
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processes that could result in increased costs and liability, and reduce the ease of use of certain payment methods. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time. We rely on independent service providers for payment processing, including credit and debit cards. If these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers increases, our business could be harmed. We are also subject to payment card association operating rules and agreements, including PCI-DSS, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or consumers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our consumers, or process electronic fund transfers or facilitate other types of payments. Any failure to comply could significantly harm our brand, reputation, business, and results of operations.
Increased scrutiny from investors and others regarding our environmental, social, governance, or sustainability responsibilities could result in additional costs or risks and adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us.
Investor advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, current and prospective employees, and customers have focused increasingly on the ESG or “sustainability” practices of companies, including those associated with climate change. These parties have placed increased importance on the implications of the social cost of their investments. If our ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and employee retention may be negatively impacted based on an assessment of our ESG practices. Any sustainability report which we publish or other sustainability disclosures we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management, and workforce inclusion and diversity. For instance, we have ceased the use of fur in our products and, in fiscal 2022, we achieved certification under Responsible Down Standard, which stipulates that all down is a by-product of the poultry industry. Nonetheless, it is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption. We could also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices, including the integration of ESG into our financial reporting in due course. Further, our failure, or perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our reputation, employee retention, and the willingness of our customers and suppliers to do business with us.
If our independent manufacturers or our suppliers fail to use ethical business practices and fail to comply with changing laws and regulations or our applicable guidelines, our brand image could be harmed due to negative publicity.
Our core values, which include developing the highest quality products while operating with integrity, are an important component of our brand image, which makes our reputation sensitive to allegations of unethical or improper business practices, whether real or perceived. We have no or limited control over our suppliers and manufacturers or their business practices. Accordingly, we cannot guarantee their compliance with our guidelines or the law. A lack of compliance could lead to reduced sales or recalls or damage to our brand or cause us to seek
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alternative suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations.
In addition, many of our products include materials that are heavily regulated in many jurisdictions. Certain jurisdictions in which we sell have various regulations related to manufacturing processes and the chemical content of our products, including their component parts. Monitoring compliance by our manufacturers and suppliers is complicated, and we are reliant on their compliance reporting in order to comply with regulations applicable to our products. This is further complicated by the fact that expectations of ethical business practices continually evolve and may be substantially more demanding than applicable legal requirements. Ethical business practices are also driven in part by legal developments and by diverse groups active in publicizing and organizing public responses to perceived ethical shortcomings. Accordingly, we cannot predict how such regulations or expectations might develop in the future and cannot be certain that our guidelines or current practices would satisfy all parties who are active in monitoring our products or other business practices worldwide.
Our current and future products may experience quality problems from time to time that can result in negative publicity, litigation, product recalls and warranty claims, which could result in decreased revenue and operating margin, and harm to our brand.
There can be no assurance we will be able to detect, prevent, or fix all defects that may affect our products. Failure to detect, prevent, or fix defects, or the occurrence of real or perceived quality, health or safety problems or material defects in our current and future products, could result in a variety of consequences, including a greater number of product returns than expected from customers and our wholesale partners, litigation, product recalls, and credit, warranty or other claims, among others, which could harm our brand, sales, profitability and financial condition. We stand behind every Canada Goose product with a warranty against defects with reasonable use, for the expected lifetime of the product. Because of this comprehensive warranty, quality problems could lead to increased warranty costs, and divert the attention of our manufacturing facilities. Such problems could hurt our premium brand image, which is critical to maintaining and expanding our business. Any negative publicity or lawsuits filed against us related to the perceived quality and safety of our products could harm our brand and decrease demand for our products.
Our business could be adversely affected by protestors or activists.
Our products may include certain animal products, including goose and duck down in our outerwear and we previously included coyote fur on the hoods of some of our parkas, which has drawn the attention of animal welfare activists. As a result, we have been the target of protestors and activists in the past, including litigation commenced by such activists related to our use of certain animal products. While we ended the purchase of all fur at the end of 2021 and ceased manufacturing with fur at the end of 2022, we may continue to be targeted by protestors and activists in the future. We have been, and may in the future, also be impacted by widespread protests in any country or region that we trade.
Protestors can disrupt sales at our stores, cause or prolong store closures, and lead to property damage. Protestors can also use social media or other campaigns to sway public opinion against our products. In addition, such activism could influence laws or regulations applicable to the jurisdictions in which we operate, including laws and regulations related to the use of animal by-products. If any such activists are successful, our sales and results of operations may be adversely affected.
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The cost of raw materials could increase our cost of goods sold and cause our results of operations and financial condition to suffer.
The raw materials used in our supply chain include synthetic fabrics and natural products, including blend fabrics, nylon, polyester and down. Significant price fluctuations, including as a result of inflation, or shortages in the cost of these raw materials may increase our cost of goods sold and cause our results of operations and financial condition to suffer.
Additionally, increasing costs of labour, freight and energy could increase our and our suppliers’ cost of goods. If our suppliers are affected by increases in their costs of labour, freight and energy, (for example, because of rising global energy prices, increased global worker shortages impacting shipping and ports, truck driver shortages, increased congestion or other disruptions affecting the global distribution chain) they may attempt to pass these cost increases on to us. If we pay such increases, we may not be able to offset them through increases in our pricing, which could adversely affect our results of operation and financial condition.
Fluctuations in foreign currency exchange rates could harm our results of operations as well as the price of our subordinate voting shares.
The presentation currency for our consolidated financial statements is the Canadian dollar. Because we recognize sales in U.S. dollars, Euros, British pounds sterling, Swiss francs, Swedish kronor, Hong Kong dollars, Chinese yuan, and Japanese yen, if any of these currencies weakens against the Canadian dollar it would have a negative impact on our local operating results upon translation of those results into Canadian dollars for the purposes of financial statement consolidation. Although we engage in short-term hedging transactions for a portion of our foreign currency denominated cash flows to mitigate foreign exchange risks, depending upon changes in future currency rates, including those fluctuations derived from the broader impact on the global economy caused by rising inflationary pressures, rising interest rates and geopolitical uncertainty, such gains or losses could have a significant, and potentially adverse, effect on our results of operations. Foreign exchange variations have been significant in the past and current foreign exchange rates may not be indicative of future exchange rates. Significant variations in foreign exchange rates may also make hedging contracts ineffective for hedge accounting purposes in future periods.
Our earnings per share are reported in Canadian dollars, and accordingly may be translated into U.S. dollars by analysts or our investors. As a result, the perceived value of an investment in our subordinate voting shares to a U.S. shareholder will fluctuate as the U.S. dollar rises and falls against the Canadian dollar. As a result, U.S. and other shareholders seeking U.S. dollar total returns, including increases in the share price, are subject to foreign exchange risk as the U.S. dollar fluctuates in value against the Canadian dollar.
Political uncertainty and an increase in trade protectionism could have a material adverse effect on our business, results of operation and financial condition.
As a prominent Canadian brand, geopolitical events that involve Canada may have an impact on our business and share price. In addition, our brand and Canadian heritage may be detrimental to the company in the context of geopolitical disputes aimed at Canada or actors or situations with significant actual or perceived connection to Canada. We sell a significant portion of our products to customers outside of Canada and changes, potential changes or uncertainties in regulatory and economic conditions or laws and policies governing foreign trade, manufacturing, and development and investment in the territories and countries where we operate, could adversely affect our business and consolidated financial statements. Consumer sentiment in countries outside Canada may be affected by unforeseen factors leading to harm to our brand or may impact our business. Any potential or ongoing governmental action related to tariffs or international trade agreements has the potential to adversely impact demand for our
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products, our costs, customers, suppliers and/or the Canadian, U.S. or world economy or certain sectors thereof and, thus, to adversely impact our business.
We could be adversely affected by violations of the Canadian Corruption of Foreign Public Officials Act, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws.
We conduct our business in Canada and increasingly outside Canada, including the sourcing of an increasingly significant portion of our products from outside Canada. The Canadian Corruption of Foreign Public Officials Act, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other similar anti-bribery and anti-kickback laws and regulations generally prohibit companies and their intermediaries from making improper payments government officials for the purpose of obtaining or retaining business. While we take steps to ensure that our distributors, consultant and personnel comply with applicable law, we cannot assure you that we will be successful in preventing our employees or other agents from taking actions in violation of these laws or regulations. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.
We have been and may become involved in legal or regulatory proceedings and audits.
Litigation and other claims may arise in the ordinary course of our business and may include employee and client claims, commercial disputes involving business partners and clients, landlord-tenant disputes, intellectual property disputes, product-oriented allegations and personal injury claims. These claims can raise complex factual and legal issues that are subject to risks and uncertainties and could require significant management time. Moreover, our business requires compliance with many laws and regulations, including labour and employment, sales and other taxes, customs, and consumer protection laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise, and the operation of stores and warehouse facilities. Failure to comply with these laws and regulations could subject us to lawsuits and other proceedings, and could also lead to damage awards, fines and penalties.
We have in the past and may become involved in legal proceedings or audits, including commercial, contractual, employment, tort and other litigation, and other government and agency investigations. The outcome of some of these legal proceedings, audits, and other contingencies could require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition. Additionally, defending against these lawsuits and proceedings may be necessary, which could result in substantial costs and diversion of management’s attention and resources, harming our financial condition. There can be no assurance that any pending or future legal or regulatory proceedings and audits will not harm our business, financial condition and results of operations.
We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.
Our operations are subject to many hazards and operational risks inherent to our business, including: general business risks, product liability, false or misleading advertising claims, product recall and damage to third parties, our infrastructure or properties caused by fires, floods and other natural disasters, power losses, telecommunications failures, terrorist attacks, public health emergencies (including epidemics and pandemics, such as the recent COVID-19 pandemic), cyber security events, human errors, political instability, social and labour unrest or war and similar events.
Our insurance coverage may exclude or may be inadequate to cover our liabilities related to such hazards or operational risks. In addition, we may not be able to maintain adequate
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insurance in the future at rates we consider reasonable and commercially justifiable, and insurance may not continue to be available on terms as favorable as our current arrangements. The occurrence of a significant uninsured claim, or a claim in excess of the insurance coverage limits maintained by us could harm our business, results of operations and financial condition.
Furthermore, our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm, or legal liability.
We may be subject to in-store and workplace health and safety liability, claims and penalties.
We are committed to protecting the health and well-being of our customers and employees in all of our stores and workplaces. We have workplace and in-store health and safety programs in place and have established policies and procedures aimed at ensuring compliance with applicable legislative requirements within our stores. Failure to comply with established policies and procedures or applicable legislative requirements could result in increased workplace or in-store injury-related liability and penalties. Any workplace or in-store injuries could lead to claims or litigation being brought against our company, which could adversely affect the reputation of our company and could have a material adverse effect on our business, operating results and financial condition. Although we maintain insurance policies we deem sufficient to address those situations, there is no guarantee a particular claim would be accepted by the insurer or that the insurance coverage would be sufficient.
Any failure to maintain effective internal control over financial reporting could have a material adverse effect on our ability to produce accurate and timely financial statements, which could harm our operating results, financial condition, and cash flows, our ability to operate our business and our reputation.
The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and to expend resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. The measures we take may not be sufficient to satisfy our obligations as a public company and if we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and harm our results of operations.
We cannot provide assurances that material weaknesses or significant deficiencies will not occur in the future and that we will be able to remediate such weaknesses or deficiencies in a timely manner, which could have a material adverse effect on our ability to produce accurate and timely financial statements, which could harm our operating results, financial condition, and cash flows, our ability to operate our business and our reputation.
If we identify any material weakness in the future, it could negatively impact the company’s ability to prepare its future financial statements in conformity with IFRS. If the company were unable to prepare its future financial statements in conformity with IFRS, we may be unable to report our financial results accurately, which could increase operating costs, trigger an event of default under our credit agreements and harm our business, including our investors’ perception of our business, our share price and our ability to finance our operations.
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Risks Related to Our Subordinate Voting Shares
The dual-class structure contained in our articles has the effect of concentrating voting control and the ability to influence corporate matters with Bain Capital and our Chairman and Chief Executive Officer, who held our shares prior to our initial public offering.
Our multiple voting shares have 10 votes per share and our subordinate voting shares have 1 vote per share. As of March 31, 2024, shareholders who hold multiple voting shares (Bain Capital and our Chairman and Chief Executive Officer (including their respective affiliates)), together hold approximately 91.8% of the voting power of our outstanding voting shares and therefore have significant influence over our management and affairs and over all matters requiring shareholder approval, including the election of directors and significant corporate transactions.
In addition, because of the 10-to-1 voting ratio between our multiple voting shares and subordinate voting shares, the holders of our multiple voting shares will control a majority of the combined voting power of our voting shares even where the multiple voting shares represent a substantially reduced percentage of our total outstanding shares. The concentrated voting control of holders of our multiple voting shares limits the ability of holders of our subordinate voting shares to influence corporate matters for the foreseeable future, including the election of directors as well as with respect to decisions regarding amending of our share capital, creating and issuing additional classes of shares, making significant acquisitions, selling significant assets or parts of our business, merging with other companies and undertaking other significant transactions. As a result, holders of multiple voting shares will have the ability to influence or control many matters affecting us and actions may be taken that holders of our subordinate voting shares may not view as beneficial. The market price of our subordinate voting shares could be adversely affected due to the significant influence and voting power of the holders of multiple voting shares. Additionally, the significant voting interest of holders of multiple voting shares may discourage transactions involving a change of control, including transactions in which an investor, as a holder of the subordinate voting shares, might otherwise receive a premium for the subordinate voting shares over the then-current market price, or discourage competing proposals if a going private transaction is proposed by one or more holders of multiple voting shares.
Future transfers by holders of multiple voting shares, other than permitted transfers to such holders’ respective affiliates or direct family members or to other permitted holders, will result in those shares automatically converting to subordinate voting shares, which will have the effect, over time, of increasing the relative voting power of those holders of multiple voting shares who retain their multiple voting shares.
Bain Capital is expected to continue to have significant influence over us in the future, including control over decisions that require the approval of shareholders, which could limit shareholders’ ability to influence the outcome of matters submitted to shareholders for a vote.
We are currently controlled by Bain Capital. As of March 31, 2024, Bain Capital beneficially owned approximately 60.5% of our outstanding multiple voting shares, or approximately 55.6% of the combined voting power of our multiple voting shares and subordinate voting shares outstanding. In addition, our Chairman and Chief Executive Officer beneficially owns approximately 39.5% of our outstanding multiple voting shares, or approximately 36.2% of the combined voting power of our multiple voting shares and outstanding voting shares. As long as Bain Capital owns or controls at least a majority of our outstanding voting power, it will have the ability to exercise substantial control over all corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including the election and removal of directors and the size of our board of directors, any amendment of our notice of articles and
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articles, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. Even if its ownership falls below 50% of the voting power of our outstanding multiple voting shares and subordinate voting shares, Bain Capital will continue to be able to strongly influence or effectively control our decisions. Bain Capital’s multiple voting shares convert automatically to subordinate voting shares at the time that Bain Capital and its affiliates no longer beneficially own at least 15% of the outstanding subordinate voting shares and multiple voting shares on a non-diluted basis. Even once Bain Capital’s multiple voting shares convert into subordinate voting shares, we may continue to be a controlled company so long as an entity controlled by our Chairman and Chief Executive Officer continues to hold multiple voting shares.
Additionally, Bain Capital’s interests may not align with the interests of our other shareholders. Bain Capital is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Bain Capital may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.
We are a controlled company within the meaning of the NYSE listing rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. Our shareholders will not have the same protections afforded to shareholders of companies that are subject to such requirements.
We are a controlled company within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that:
•we have a compensation committee that is composed entirely of independent directors; and
•we have a nominating and governance committee that is composed entirely of independent directors.
As a foreign private issuer, we are exempt from certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, which may limit the information publicly available to our shareholders.
As a foreign private issuer we are not required to comply with all of the periodic disclosure and current reporting requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. For example, we are not subject to the proxy rules in the United States and disclosure with respect to our annual meetings and any special meeting of shareholders will be governed by Canadian requirements. In addition, our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Furthermore, as a foreign private issuer, we may take advantage of certain provisions in the NYSE listing rules that allow us to follow Canadian law for certain governance matters.
Our articles, and certain Canadian legislation contain provisions that may have the effect of delaying or preventing a change in control.
Certain provisions of our articles, together or separately, could discourage potential acquisition proposals, delay or prevent a change in control and limit the price that certain investors may be willing to pay for our subordinate voting shares. For instance, our articles contain provisions that establish certain advance notice procedures for nomination of candidates for election as
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directors at shareholders’ meetings. A non-Canadian must file an application for review with the Minister responsible for the Investment Canada Act and obtain approval of the Minister prior to acquiring control of a “Canadian business” within the meaning of the Investment Canada Act, where prescribed financial thresholds are exceeded. Furthermore, acquisitions of our subordinate voting shares and multiple voting shares may be reviewed pursuant to the Competition Act (Canada). This legislation permits the Commissioner of Competition, or Commissioner, to review any acquisition or establishment, directly or indirectly, including through the acquisition of shares, of control over or of a significant interest in us. Otherwise, there are no limitations either under the laws of Canada or British Columbia, or in our articles on the rights of non-Canadians to hold or vote our subordinate voting shares and multiple voting shares. Any of these provisions may discourage a potential acquirer from proposing or completing a transaction that may have otherwise presented a premium to our shareholders.
Because we are a corporation incorporated in British Columbia and some of our directors and officers are resident in Canada, it may be difficult for investors in the United States to enforce civil liabilities against us based solely upon the federal securities laws of the United States. Similarly, it may be difficult for Canadian investors to enforce civil liabilities against our directors and officers residing outside of Canada.
We are a corporation incorporated under the laws of British Columbia with our principal place of business in Toronto, Canada. Some of our directors and officers and the auditors or other experts named herein are residents of Canada and all or a substantial portion of our assets and those of such persons are located outside the United States. Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon us or our directors or officers or such auditors who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States predicated upon civil liabilities under the Securities Act. Investors should not assume that Canadian courts: (1) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or blue sky laws of any state within the United States or (2) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue sky laws.
Similarly, some of our directors and officers are residents of countries other than Canada and all or a substantial portion of the assets of such persons are located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these non-Canadian residents. In addition, it may not be possible for Canadian investors to collect from these non-Canadian residents judgments obtained in courts in Canada predicated on the civil liability provisions of securities legislation of certain of the provinces and territories of Canada. It may also be difficult for Canadian investors to succeed in a lawsuit in the United States, based solely on violations of Canadian securities laws.
Changes in tax laws and regulations or trade rules may impact our effective tax rate and may adversely affect our business, financial condition and operating results.
We are subject to income taxes in the jurisdictions in which we operate and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events.
Legislation implementing the Organization for Economic Cooperation and Development’s (OECD) model rules outlining a structure for a new 15% global minimum tax regime (the “Pillar Two Rules”) has been enacted or substantively enacted locally in a number of jurisdictions in which the Company operates in, where they would be effective for the financial year beginning on April 1, 2024. Based on a preliminary assessment, the Pillar Two Rules effective tax rate in most of the jurisdictions in which the Company operates in, is already above 15%. As a result,
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any impact of these rules is not expected to be material. However, the Company will continue to monitor and reassess the impact of the Pillar Two Rules and any change may impact our financial condition and operating results.
Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could result in an unfavorable change in our effective tax rate, which could adversely affect our business, financial condition and operating results.
There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ordinary shares.
Under United States federal income tax laws, a non-U.S. corporation will be a passive foreign investment company (a “PFIC”) for any taxable year if either (1) at least 75% of its gross income for such year consists of certain types of “passive” income; or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. We do not believe that we were a PFIC in 2022, and we do not expect to be a PFIC in the foreseeable future. However, since the determination of whether we are a PFIC is a factual determination made annually based on all the facts and circumstances and thus is subject to change, and the principles and methodology used in determining whether a company is a PFIC are subject to interpretation, there can be no assurance given in this regard. Moreover, we cannot guarantee that the Internal Revenue Service, or IRS, will agree with our conclusion. Accordingly, we cannot assure you that we will not be treated as a PFIC for any taxable year or that the IRS will not take a position contrary to any position we take. United States holders of our subordinate voting shares are urged to consult their tax advisors concerning United States federal income tax consequences of holding our subordinate voting shares if we are considered to be a PFIC.
If we were to be or become a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation.”) holds our subordinate voting shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See “Item 10. Additional Information—E. Taxation—Passive Foreign Investment Company Considerations.”
Canada Goose Holdings Inc. is a holding company with no operations of its own and, as such, it depends on its subsidiary for cash to fund its operations and expenses, including future dividend payments, if any.
As a holding company, our principal source of cash flow is distributions from our main operating subsidiary, Canada Goose Inc. Therefore, our ability to fund and conduct our business, service our debt and pay dividends, if any, in the future will depend on the ability of our subsidiary to generate sufficient cash flow to make upstream cash distributions to us. Our subsidiary is a separate legal entity, and although it is wholly-owned and controlled by us, it has no obligation to make any funds available to us, whether in the form of loans, dividends or otherwise. The ability of our subsidiary to distribute cash to us will also be subject to, among other things, restrictions that may be contained in our subsidiary agreements (as entered into from time to time), availability of sufficient funds in such subsidiary and applicable laws and regulatory restrictions. Claims of any creditors of our subsidiary generally will have priority as to the assets of such subsidiary over our claims and claims of our creditors and shareholders. To the extent the ability of our subsidiary to distribute dividends or other payments to us is limited in any way, our ability to fund and conduct our business, service our debt and pay dividends, if any, could be harmed.
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If securities or industry analysts cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our subordinate voting shares adversely, the price and trading volume of our subordinate voting shares could decline.
The trading market for our subordinate voting shares is influenced by the research and reports that industry or securities analysts publish about us, our business, our market or our competitors. If any of the analysts who cover us or may cover us in the future change their recommendation regarding our subordinate voting shares adversely, or provide more favorable relative recommendations about our competitors, the price of our subordinate voting shares may decline. If any analyst who covers us or may cover us in the future were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our subordinate voting shares to decline.
Our constating documents permit us to issue an unlimited number of subordinate voting shares and multiple voting shares without additional shareholder approval.
We may, from time to time, issue additional subordinate voting shares in the future. Subject to the requirements of the NYSE and the TSX, we will not be required to obtain the approval of shareholders for the issuance of additional subordinate voting shares. Although the rules of the TSX generally prohibit us from issuing additional multiple voting shares, there may be certain circumstances where additional multiple voting shares may be issued, including upon receiving shareholder approval. Any further issuances of subordinate voting shares or multiple voting shares will result in immediate dilution to existing shareholders and may have an adverse effect on the value of their shareholdings. Additionally, any further issuances of multiple voting shares may significantly lessen the combined voting power of our subordinate voting shares due to the 10-to-1 voting ratio between our multiple voting shares and subordinate voting shares.
ITEM 4. INFORMATION ON THE COMPANY
A. History
In December 2013, we partnered with Bain Capital through a sale of a 70% equity interest in our business. In connection with such sale, Canada Goose Holdings Inc. was incorporated under the Business Corporations Act (British Columbia) (the “BCBCA”) on November 21, 2013. The initial public offering of our subordinate voting shares in the United States and Canada was completed on March 21, 2017.
In November 2018, we acquired the business of Baffin Inc. (“Baffin”), a Canadian designer and manufacturer of performance outdoor and industrial footwear. Field-tested and trusted in extreme cold weather conditions, Baffin products are predominantly sold through distributors and retailers in Canada and the United States. As a wholly-owned subsidiary, Baffin is managed and operated on a stand-alone basis, with distinct products, sales channels, and customers.
In 2020, Canada Goose announced HUMANATURE, its purpose platform that unites its sustainability and values-based initiatives.
In April 2022, we entered into an agreement to form a joint venture with Sazaby League, Ltd. pursuant to which we acquired 50% of the issued and outstanding voting shares of the legal entity comprising the joint venture, Canada Goose Japan, K.K. (“CG Japan”). CG Japan markets, distributes, and sells Canada Goose products in Japan. It also operates a number of directly operated stores across Japan, a national digital commerce site, as well as wholesale points of distribution across the country.
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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. This acquisition is expected to enhance product margins and supply control, while deepening in-house product expertise and capability.
Our principal office is located at Floor 22, 100 Queens Quay East, Toronto, Canada, M5E 1V3 and our telephone number is (416) 780-9850. Our registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8. Our website address is www.canadagoose.com. Information contained on, or accessible through, our website is not a part of this Annual Report and the inclusion of our website address in this Annual Report is an inactive textual reference. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. Corporation Service Company, located at 251 Little Falls Drive, Wilmington, Delaware, is the company’s agent for service of process in the United States.
B. Business Overview
Canada Goose is a performance luxury outerwear, apparel, footwear, and accessories brand. For more than 60 years, we have designed, manufactured, and sold products that inspire people to thrive in the world outside. Founded in 1957 in Toronto, Canada, our products are designed with purpose, inspired by a rich heritage of functionality, craftsmanship, and innovation.
We believe the following differentiators are primary drivers of Canada Goose’s historical success and are the foundation on which to build for the future.
Our deep heritage and brand authenticity. Leveraging decades of experience, field testing, and obsessive attention to detail, we develop high-quality luxury and lifestyle products designed to protect from weather elements, offer stylish comfort, and provide an overall sense of well-being.
Relentless innovation and product evolution. Our expertise in matching our technical fabrics with the optimal blends of down enables us to create warmer, lighter, more durable, and versatile products across seasons and applications. Our commitment to superior quality and lasting performance now also extends into our emerging product categories, including apparel, rain and wind outerwear, footwear, and accessories.
Strong Canadian manufacturing capabilities. We are committed to investing in producing most of our down-filled products in Canada, the country from which we draw our inspiration. Our Canadian production facilities and craftspeople allow us to deliver high-quality, functional products, which we believe has set us apart on the international stage and in the minds of our customers. As we expand our product categories, we intend to manufacture our products in the regions we believe are best equipped to meet our high standards of quality and craftsmanship. In fiscal 2024, the majority of our goods were manufactured in Canada, including nearly all of our down-filled outerwear.
Vertically integrated supply chain. We directly control the design, innovation, engineering, and testing of our products, which we believe allows us to achieve greater operating efficiencies and deliver high-quality products. We manage our production through a combination of in-house manufacturing facilities and long-standing relationships with third-party sub-contractors. Our flexible supply chain gives us distinct advantages, including the ability to scale our operations, adapt to customer demand, shorten product development cycles, and achieve higher margins.
Our strategic positioning is underpinned by:
Increasingly controlled distribution through a primarily Direct-to-Consumer sales channel. Our products are sold directly to consumers around the world through our brick-and-
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mortar and online stores, as well as to wholesale distributors. We have progressively shifted sales from our wholesale channel to our DTC channel to drive sustainable growth, better control our brand, and manage relationships with our customers.
Our sustainability practices. Canada Goose is committed to contributing to a more sustainable future – one that supports the long-term success of our business, our communities, and the environment. Our commitment is reflected in how we conduct responsible business, including the selection and sourcing of materials, our manufacturing, distribution, and store operations, and how we nurture our talent and impact our communities. See Sustainability section for more information.
Growth Strategies
Canada Goose is on a journey to become a leading global luxury and lifestyle brand that reflects our unique qualities and rich heritage. We intend to maintain our leading position in warm outerwear, preserving our brand’s strength in performance and function, and enhancing the exclusivity of the brand as we build our product architecture to attract and retain more customers throughout the year. In fiscal 2024, we focused on the following themes:
Build a global retail network
Our Direct-to-Consumer store network has grown from one retail store in Canada in 2016 to 68 stores at the end of fiscal 2024 spanning 13 markets. In addition, we have a direct e-Commerce presence in more than 50 markets. Together, through complementary digital and retail experiences, we aim to offer customers a seamless omnichannel experience.
We see opportunity in multiple new markets and expect to increase our DTC penetration within existing markets, with a focus on improving sales per square foot in our existing stores and selecting locations that offer the optimal mix of traffic, adjacencies, and economics. See DTC channel section for more detail.
Drive customer-focused growth
We are broadening our appeal and how we engage with our target customer segments through our brand and marketing campaigns, partnerships, and elevated shopping experiences. We are also improving brand clarity by strengthening the connection between our brand campaigns and our products. See Brand and Marketing section for more information.
Product expansion
As a product-led, function-first brand, we expect to continue to evolve and expand our offering across styles, uses, and seasons as we seek to drive higher penetration and expand our geographic appeal. In May 2024, we announced the appointment of our first ever Creative Director, Haider Ackermann, who, alongside Dani Reiss, is tasked with leading the evolution of our product portfolio and elevation of the Canada Goose brand.
We intend to deliver year-round relevance consistent with Canada Goose’s position as a luxury and lifestyle brand. While continuing to grow our heavyweight down product category, we also intend to focus on emerging product lines such as rainwear, apparel and footwear and the addition of further categories. See Our Products section for more detail.
Advance our Transformation Program
In the fourth quarter of fiscal 2023, we launched our Transformation Program to strengthen the foundation of our company to drive efficient and scalable operations and deliver strong revenue growth, contributing to margin expansion over the long-term. This multiphase program includes the following workstreams: the organization and operating model, stores, production and procurement, product, planning and supply chain, marketing and experience, and technology.
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In fiscal 2024, key initiatives executed against these workstreams were as follows:
•Organization and operational model. We undertook a significant review of the organizational structure and roles needed to achieve our objectives of simplifying decision-making, moving with agility, and increasing efficiencies across our operating platform. This resulted in a streamlining of the organization, including two phases of workforce reductions implemented in August 2023 and March 2024.
•Stores. We introduced new labour planning tools to optimize scheduling in our retail stores and implemented new tools and training to enhance our customer experience both in-store and online.
•Production and procurement. We completed the consolidation of one of our manufacturing facilities in Montreal to improve the efficiencies in our supply chain and continued to apply LEAN methodology driving further efficiencies in our plants. We also in-housed production, counter sourced our raw materials, and established new production partnerships in Europe.
•Product, planning, and supply chain. We implemented enhanced merchandising planning and practices to support optimal placement of product according to the demand relevant for each store location. In addition, we optimized our distribution network focusing on continuous improvement initiatives, merged smaller warehouses into larger facilities and strengthened our transportation services.
In fiscal 2025, we will operationalize the workstreams of our Transformation Program into three key operating imperatives to deliver progress and measurement. These include implementing best-in-class luxury retail operations, setting the foundation for the next phase of brand and product evolution, and simplifying and focusing the way we operate internally.
Our Products
Our products are designed with expertise with a focus on function and style. The products we manufacture and sell are marketed under the Company’s brands: Canada Goose and Baffin. Further, following the acquisition of Romanian-based Paola Confectii Manufacturing in fiscal 2024, we, through our Paola Confectii subsidiary, manufacture for and supply products to select leading luxury and lifestyle brands.
We offer customers main collections plus a number of capsule collections and collaborations. The collections include a high proportion of continuative products, which are generally sold across seasons with minimal style changes, are highly distinctive, and are recognized as iconic products. Our capsule collections are mainly inspired by regional artists and local traditions, while our product collaborations leverage partnerships that help to drive brand heat and cultural relevancy with new and diverse audiences.
Our products include heavyweight down, lightweight down, other outerwear such as for rain and wind, apparel, and footwear and accessories. Revenue from heavyweight down products represented 54% of our total revenue in fiscal 2024 (57% in fiscal 2023).
Canada Goose created the Thermal Experience Index (TEI), an easy-to-understand five point system that enables customers to make an informed choice in their search for the right parka, jacket, or knitwear for a specific environment and activity. It works using a scale, in which 1 indicates the lightest insulation (e.g. shells, lightweight down for active pursuits) and 5 indicates the warmest parkas we make.
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Heavyweight down – our Heavyweight down products include styles designed to protect individuals in temperatures below -10 degrees Celsius and range from traditional to contemporary pieces. These products are given a TEI rating between 3 and 5.
Lightweight down – our Lightweight down products include a variety of styles designed to be worn in temperatures above -15 degrees Celsius. These products are given a TEI rating between 1 to 3.
Other outerwear – our other outerwear products include rain and everyday collections, jackets for everyday occasions, fleece, and vests.
Apparel – our apparel products include men’s and women’s leisure wear, including knitwear, sweats, and t-shirts.
Footwear and Accessories – our footwear and accessories products encompass men’s, women’s, and children’s products, including sneakers, boots, hats, scarves, gloves, hood trims, socks, and bags. In fiscal 2024, we launched our sneaker line.
Our Sales Channels and Key Markets
The channels through which we interact and sell to our customers have evolved over time to align with the evolution of our brand position from a pure performance and functional brand to a luxury and lifestyle brand. We have moved along the continuum from wholesale toward a primarily direct-to-consumer retail channel to deepen relationships with our customers through direct experience with the brand, capture more of our sales data to improve our products and customer experiences, manage our inventory through controlled distribution, and elevate the overall brand. In addition, we leverage alternative channels, including friends and family and employee sales to aid with exiting slow-moving and discontinued inventory and make room to offer new products in our stores. Sales via these alternative channels are reported under the Other segment.
The proportion of sales through our DTC and Wholesale channels varies by region.
The table below represents approximate values for each region and segment.
Percentage of DTC, Wholesale, and Other Revenue by Region
| Region | Fiscal 2024 | Fiscal 2023 | Fiscal 20221 | ||||||||
| North America | 70% DTC, 20% Wholesale, 10% Other | 68% DTC, 27% Wholesale, 5% Other | 70% DTC, 29% Wholesale, 1% Other | ||||||||
EMEA2 | 45% DTC, 50% Wholesale, 5% Other | 46% DTC, 53% Wholesale, 1% Other | 48% DTC, 52% Wholesale | ||||||||
| Asia Pacific | 85% DTC, 14% Wholesale, 1% Other | 80% DTC, 19% Wholesale, 1% Other | 79% DTC, 21% Wholesale | ||||||||
1.Less than 1% of Other revenue in EMEA and Asia Pacific in Fiscal 2022.
2.EMEA comprises Europe, the Middle East, Africa, and Latin America.
DTC Channel
We operate our business using an omnichannel strategy that aims to deliver a seamless and consistent experience to our customers across our direct channels, regardless of whether customers are shopping for products in our physical stores or online. Our current omnichannel capabilities include buy-online-return-in-store and endless aisle.
We also continue to develop our retail capabilities to enhance the shopping experience and deepen our relationships with our customers.
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Retail Stores
We strive to provide an immersive experience in our stores where consumers can engage with our brand and products.
In fiscal 2024, we introduced our new customer experience program, Canadian Warmth, primarily delivered in our retail stores. Canadian Warmth provides a distinctive approach to the guest experience through the conversations that our brand ambassadors have with guests, their expert guidance as customers explore product, and the attention provided to our customers as they are guided to the right purchase to serve their needs. The objective of Canadian Warmth is to educate customers about our brand and products, nurture desire for the brand, and improve sales conversion through a distinctive elevated luxury retail experience.
We have expanded our retail network in a strategic and selective manner with a portfolio of stores in premier locations. We do not employ a one-size-fits-all approach, with the determination of store size, location, and product assortment based on local demand factors and our overarching global company strategy.
We operate the following types of retail stores:
Permanent stores represent the vast majority of our store network and are located either in premier shopping malls or as standalone stores. The end-to-end store experience including store design, merchandising, and customer service is owned and operated by us. We have three types of permanent stores.
•Flagship. Flagship stores are our lead stores and typically are our largest stores by size, conveying the fullest expression of the brand, showcasing the most unique products, design, and technology. They offer a comprehensive product assortment and typically include our award-winning snow or cold rooms. As of March 31, 2024, we operated four flagship stores (one in Canada, one in the United Kingdom, and two in Asia Pacific).
•Branded. Our branded stores are generally smaller in size than our flagship stores and carry an assortment of products based on the store’s size, location, and customer preferences. Some branded stores include our cold rooms. Most of the stores in our global retail network are branded stores. As of March 31, 2024, we operated 61 branded stores.
•Concessions. Our concession stores, which are located on department store premises, have the smallest footprint among our retail store types. As of March 31, 2024, we operated three concessions, located in Asia Pacific.
We also operate pop-up and temporary stores that are opened seasonally and typically for less than a year. These stores enable us to test and learn in new markets before opening a permanent store and/or serve our customers during peak shopping periods at new or existing locations. The product assortment in these stores is tailored to the store’s size, local relevance, and demand.
As at March 31, 2024, our DTC segment by geography included the following directly operated permanent retail stores:
| Geography | March 31, 2024 Number of stores | March 31, 20243 Square feet | April 2, 2023 Number of stores | April 2, 20233 Square feet | ||||||||||
| Canada | 9 | 9 | ||||||||||||
| United States | 16 | 8 | ||||||||||||
| North America | 25 | 69,270 | 17 | 46,740 | ||||||||||
Greater China1 | 26 | 23 | ||||||||||||
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Asia Pacific, ex Greater China | 8 | 3 | ||||||||||||
| Asia Pacific | 34 | 79,420 | 26 | 59,760 | ||||||||||
EMEA2 | 9 | 27,860 | 8 | 23,670 | ||||||||||
| Total | 68 | 176,550 | 51 | 130,170 | ||||||||||
1.Greater China comprises Mainland China, Hong Kong, Macau, and Taiwan.
2.EMEA comprises Europe, the Middle East, Africa, and Latin America.
3.Approximate net selling square footage at the end of the fiscal year.
We opened 17 net new permanent stores in fiscal 2024 and ended the fiscal year with 68 permanent retail stores in 13 markets globally and 83 total stores, including temporary and pop-up stores, totaling approximately 201,720 square feet at March 31, 2024 compared with approximately 150,550 square feet at April 2, 2023.
Our average sales per square foot1, was $3,963 and $3,964 for fiscal 2024 and fiscal 2023, respectively. Sales per square foot is calculated using total revenue from our DTC retail stores that have been open for the full 52 weeks of the fiscal year divided by average net selling space. Average net selling space is defined as the sum of a store’s selling square footage at the end of each month divided by 12 fiscal periods. Revenue from our directly operated retail stores represented approximately 74% and 67% of total DTC channel revenue in fiscal 2024 and fiscal, 2023, respectively.
E-Commerce
E-Commerce channels include both directly-owned brand websites as well as third-party digital platforms, primarily in Asia. Our digital commerce platforms provide customers the benefit of added accessibility and flexibility to shop our products wherever and whenever they choose with access to the entire collection. As of March 31, 2024, we had a direct digital presence in more than 50 markets. Revenue from our e-Commerce business represented approximately 26% and 33% of total DTC channel revenue in fiscal 2024 and fiscal 2023, respectively.
Wholesale
Our wholesale channel is complementary to our DTC channel. This business is a highly curated expression of Canada Goose as we partner with high end retailers to raise brand awareness and test emerging markets. We work closely with our wholesale partners to optimize inventory levels across wholesale doors and tailor the product assortment to align with the preferences of consumers in each local market. We have a long tail of wholesale partners, and in fiscal 2024, the majority of our wholesale revenue was generated by approximately 10% of our traditional wholesale partners.
Our wholesale business includes the following categories:
•Traditional wholesale partners. These partners include department stores, independent multi-brand stores, and online retailers. We have a presence through these types of wholesale partners in EMEA, North America, and Asia Pacific. As part of our strategy to shift to our more profitable DTC channel segment, we have been intentionally and proactively streamlining our wholesale partners, optimizing for partners that are aligned with our luxury brand positioning. At the end of fiscal 2024, our wholesale door count was approximately 1,400 (approximately 1,500 wholesale doors at the end of fiscal 2023).
1 Sales per square foot is a supplementary financial measure. Please refer to the Non-IFRS measures and other financial measures section of our Management’s Discussion & Analysis for a definition of and explanation around this supplementary financial measure.
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•International distributors. Our partners in this category have partial or full exclusive territory rights to sell our products to a particular market through their own DTC channels or local wholesalers. In fiscal 2024, we worked with international distributors based in Asia Pacific.
•Travel retail. Our travel retail partners operate in airports and duty-free locations that cater to customers traveling abroad. In fiscal 2024, we opened travel retail locations through a third-party partner in Germany and South Korea.
In fiscal 2024, EMEA was our largest wholesale market, followed by North America and then Asia Pacific.
Other
The Other segment primarily includes revenue from friends and family sales and employee sales. In fiscal 2024, we launched a new employee sales program that enables employees to purchase select products from our current collections at attractive price points. This is a deliberate strategy to improve employee access to our in-line product, encouraging employees to engage with the brand and act as brand ambassadors.
Our friends and family sales program is a considered part of our inventory management strategy to create space for new product categories and assortments by proactively reducing excess inventory. Our approach allows us to directly oversee and manage the customer experience and our inventory while mitigating environmental impact. We believe this approach enables us to attract new customers, create desire with aspirational buyers, engage with existing customers in new ways, and generate incremental cash flow. In fiscal 2024, we significantly increased the number of friends and family sales events to exit slow moving and discontinued product at lower than previously available market price points.
Other also includes revenue generated by our manufacturing facility in Romania via the manufacturing of third-party products.
Brand and Marketing
Our global brand strategy is focused on building awareness, generating brand heat, and stimulating cultural and consumer connections. Our strength lies in our storytelling and amplifying those stories through a variety of channels and relationships. We target both attracting new customers and nurturing existing ones to drive customer lifetime value.
In fiscal 2024, our key marketing initiatives included our Fall/Winter Live in the Open campaign focused on inspiring women and multiple campaigns to support our product collaborations and amplify our partnership with the NBA.
Our authentic approach to storytelling has helped fuel brand awareness, drive brand heat, and build strategic relationships with influencers and celebrities and within relevant industries, represented through our product collaborations, Goose People, and our work in the film and entertainment industry.
Product collaborations. From time-to-time, we leverage product collaborations to drive cultural relevancy and tap into new and diverse audiences. These collaborations allow both us and our partners to flex outside of our design ethos, reinterpreting our iconic products in fresh, new ways. We also appear in different places, including leading international fashion shows, such as the KidSuper Men’s Fall 2024 show during Paris Fashion Week. In fiscal 2024, we executed nine collaborations with artists and designers around the world.
Goose People. Goose People, who include adventurers, athletes, scientists, and artists, are a diverse group of global brand ambassadors that embody our brand’s values and continue to be
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an important way for us to authentically tell our stories. In fiscal 2024, we announced eco-explorer and athlete, Mario Rigby as a Goose Person.
Film and entertainment. For more than three decades, our jackets have been a staple on film sets around the world. Our jackets offer film crews and talent the warmth and functionality they need to survive long shoots in the most demanding environments. Our products have naturally transitioned from behind the scenes to on-camera to authenticate cold-weather scenes.
Once a consumer is engaged, we aim to drive further connectivity and increase lifetime value, inviting them to our insider community, further engaging them through email campaigns, and ultimately delivering elevated and innovative product and shopping experiences, such as our Canadian Warmth customer experience program (see DTC Channel section).
We primarily measure our brand position and momentum through proprietary research conducted across our key markets that assesses how consumers perceive our brand. We leverage the insights from these studies as well as metrics from other sources, including our loyalty community, social media and search engines, in addition to our stores, to measure progress against our strategic objectives and inform long-term decision-making.
Warranty
We aim to strengthen relationships post-purchase, through customer service excellence and our lifetime warranty program, which applies to much of our outerwear.
Canada Goose products purchased from an Authorized Retailer are fully warranted against defects in materials and workmanship for the lifetime of the product – which means the usual and customary wearable life of the product, by the original owner. If a product fails due to a manufacturing defect, we repair the product free of charge, or replace it at our discretion. If the exact style is not available for replacement, a product of equal value and similar style is provided. Knitwear, accessories and collaborations are excluded from the Canada Goose warranty program, unless otherwise stated.
Sourcing and Manufacturing
Canada Goose operates a vertically-integrated supply chain, affording us increased quality control and direct involvement from end-to-end. This includes raw material sourcing, our own manufacturing facilities, domestic contract manufacturing partners, offshore manufacturers, quality assurance, regulatory compliance, and supporting sustainability commitments throughout our global supply chain and logistics network.
Sourcing
We source the necessary raw materials, trimmings and finished goods through our network of selected suppliers, based on our forecasts and confirmed wholesale order book.
Our materials are sourced globally and suppliers must comply with our Supplier Code of Conduct, which sets out our standards for inclusive, safe, and healthy working conditions and environmental responsibility throughout our supply chain.
We prioritize preferred fibers and materials (PFMs) in domestic production, which represents the significant majority of our finished goods in our domestically-manufactured products.
In 2021, we achieved our commitment to end the purchase of all fur, and in 2022, we ended the production of fur in our products.
Manufacturing
In fiscal 2024, nearly all of our down-filled outerwear were manufactured in Canada. Over 80% of these products were manufactured directly in our facilities.
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As of March 31, 2024, we operated eight Canada Goose manufacturing facilities (seven in Canada; one in Romania). We also work with domestic and international manufacturing partners who offer specialized expertise, which provides us with flexibility to scale our production and effectively offer a broader range of product categories.
At our Canadian facilities, we conduct comprehensive training programs for our manufacturing employees that help them to develop and become experts at their craft. Our manufacturing talent combined with our approach with domestic partners provides us with a high level of flexibility, which continues to fulfill our commitment to producing our down-filled product outerwear exclusively in Canada.
Our international partners, primarily based in Europe, produce finished goods for our wind wear, rainwear, knitwear, accessories, and footwear lines.
Logistics
Our logistics network includes third-party warehouses located around the world in addition to our own manufacturing facilities. Given the greater unit volume produced in Canada, our primary warehouse is located in Ontario, Canada. This unique point of origin is a competitive advantage as it allows us to operate, directionally, against traditional shipping routes.
Inventory Management
We aim to actively manage our inventory in line with the growing size of our business. Our owned manufacturing allows us to achieve our goal to ensure product quality and our Made in Canada heritage for our down-filled products. We strive to have inventory levels that are consistent with demand. Our partnerships with contract manufacturers helps us flex production capacity higher and lower depending on business needs. Contract manufactured product comes back to our owned facilities for final inspection and the application of our logo.
In fiscal 2024, we decelerated inventory growth and shifted more to in-house production, supporting alignment between production levels, anticipated revenue, and utilization of on-hand evergreen product.
Sustainability
Sustainability practices and principles are at the core of our culture. It drives how we conduct our business and the decisions that we make across our products and our operations. Our climate, materials and packaging, and community initiatives are executed through our purpose platform, HUMANATURE, which embeds our sustainability commitments across our company’s operations. Please refer to our fiscal 2023 Sustainability Report for more information on the initiatives described below.
Climate
We have achieved carbon neutrality for company operations (Scope 1 and Scope 2 emissions) in every year since fiscal 2019, by investing in projects that reduce, avoid, or sequester the equivalent of 200% of each year’s greenhouse gas emissions. In addition, in fiscal 2023, we launched energy retrofit projects in our manufacturing plants, with energy savings expected in future years.
In addition to our building sustainable operations, Canada Goose has promoted Arctic preservation through our support of Polar Bears International’s research and conservation work since 2007.
Materials and Packaging
We design our products for longevity, which is reflected in the high quality of our materials and our craftsmanship. Over time, we have increased the sourcing of PFMs in the domestic supply
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of our products that have demonstrated improved environmental and social sustainability impacts compared to conventional production. This includes recycled, organic, and responsible standards.
We have also been Responsible Down Standard (RDS) certified since 2022 as both a brand and manufacturer. The RDS is an international, voluntary program that monitors the chain of custody for certified down and ensures that RDS down standards are maintained throughout the entire supply chain.
In fiscal 2023, we launched our recommerce platform Canada Goose Generations in the US, offering an authorized reselling platform that keeps Canada Goose products in circulation, giving them multiple lifetimes, and expanding our initiatives in the circular economy. In fiscal 2024, we introduced Generations in Canada. Canada Goose first entered the circular economy through our Resource Centres Program, which provides excess fabrics and materials to communities in Canada’s North, which we began in 2009.
We are also making progress toward more sustainable packaging solutions. In fiscal 2023, we eliminated redundant packaging, upgraded boxes to 100% recycled content, and developed plans to transition to 100% recycled plastic poly bags, after consuming and depleting inventory. In addition, in fiscal 2023, all Canada Goose retail stores ended the purchase of any single-use plastics.
Community
We believe in engaging communities and supporting the people who are making a difference in those communities. In addition to our work with Polar Bears International and our Resource Centres Programs, we have formed deep partnerships with Indigenous communities in the Canadian North to honour and celebrate their traditions in a way that is linked to the Canada Goose ethos, such as elevating Canadian and Arctic narratives through our art program on display at our global retail locations, which prioritize Inuit art. At the end of fiscal 2024, we had over 600 artworks on display in over 25 stores around the world.
Intellectual Property
We own the trademarks used in connection with the marketing, distribution and sale of all of our products in the United States, Canada and in the other countries in which our products are sold. Our major trademarks include the CANADA GOOSE word mark and the ARCTIC PROGRAM & DESIGN trademark (our disc logo consisting of the colour-inverse design of the North Pole and Arctic Ocean). In addition to the registrations in Canada and the United States, our word mark and design are registered in other jurisdictions which cover approximately 75 countries. Furthermore, in certain jurisdictions we register as trademarks certain elements of our products, such as fabric, warmth categorization and style names such as our Snow Mantra parka.
We enforce our trademarks and we have taken several measures to protect our customers from counterfeiting activities. Since 2011, we have sewn a unique hologram, designed exclusively for us, into every jacket and accessory as proof of authenticity. Additionally, our website has a tool for potential online customers to verify the integrity of third party retailers that purport to sell our products. We are also active in enforcing rights on a global basis to our trademarks and taking action against counterfeiters, online and in physical stores.
Seasonality
Our business is seasonal in nature. See Item 5.A - “Operating and Financial Review and Prospects” - “Management’s Discussion and Analysis of Financial Results” - “Factors Affecting our Performance” - “Seasonality” and Item 3.D - “Risk Factors” - “Risks Related to our Business” for a discussion.
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Government Regulation
In Canada and in the other jurisdictions in which we operate, we are subject to labour and employment laws, laws governing advertising, privacy and data security laws, safety regulations and other laws, including consumer protection regulations that apply to retailers and/or the promotion and sale of merchandise and the operation of stores and warehouse facilities. Our products sold outside of Canada are subject to tariffs, treaties and various trade agreements as well as laws affecting the importation of consumer goods. We monitor changes in these laws, regulations, treaties and agreements, and believe that we are in material compliance with applicable laws.
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C. Organizational Structure
The following chart reflects our organizational structure (including the jurisdiction of formation or incorporation of the various entities) as of May 18, 2024.
D. Property, Plants and Equipment
We maintain leased facilities for our corporate headquarters and to conduct our principal manufacturing and retail activities, which we believe are in good condition and working order.
As of March 31, 2024, we lease properties globally, which is comprised of (i) 68 permanent retail stores, (ii) eight offices (two in Switzerland, two in Greater China, one in the United Kingdom, one in Japan, one in the United States and one in Canada (iii) nine manufacturing facilities (eight in Canada including one manufacturing facility for Baffin and one in Romania), (iv) one warehouse facility in Canada and (v) one distribution centre in the United States. Our manufacturing and warehouse properties range in size from 50,000 to 190,000 square feet. We also occupy inventory space in the warehouses of several third party logistics providers in all of our primary regions.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
See below for Management’s Discussion & Analysis of Financial Conditions and Results of Operations.
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CANADA GOOSE HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the fourth quarter and year ended March 31, 2024
The following Management’s Discussion and Analysis (“MD&A”) for Canada Goose Holdings Inc. (“us,” “we,” “our,” “Canada Goose” or the “Company”) is dated May 15, 2024 and provides information concerning our results of operations and financial condition for the fourth quarter and fiscal year ended March 31, 2024 (“fiscal 2024”). You should read this MD&A together with our audited consolidated financial statements and the related notes for the year ended March 31, 2024 (“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 this Annual Report on Form 20-F.
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,” “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;
•the continued absence of material global supply chain disruptions to our business and our 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.
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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. 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, which may further affect general economic and operating conditions;
•fluctuations in raw material costs, interest rates and currency exchange rates;
•we may be unable to maintain effective internal controls over financial reporting; and
•our ability to successfully realize expected benefits from 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, liquidity and capital resources, 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
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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 Annual Financial Statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and this accompanying MD&A are presented in millions of Canadian dollars, except where otherwise indicated. 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 Annual Financial Statements and the accompanying notes have been prepared using the accounting policies described in “Note 2. Material accounting policy information” to the Annual 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.
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 ended 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. Both fiscal 2024 and fiscal 2023 were 52-week fiscal years.
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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 (as defined below), 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 within the same financial statement caption in the consolidated statements of income. For the fourth quarter and year ended April 2, 2023, we reclassified foreign exchange losses of $0.4m and $12.1m, respectively. For the year ended April 3, 2022, we reclassified foreign exchange losses of $2.8m. This reclassification did not impact net income, earnings per share, or the consolidated statement of financial position in the comparative periods.
For the year ended March 31, 2024, the Company amended the allocation basis for certain SG&A expenses between the operating segments to provide more relevant information on financial performance of each operating segment. The reclassification did not impact net income, earnings per share, or the consolidated statements of financial position in the comparative year. Comparative figures have been reclassified to conform with the current year presentation.
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. We continue to monitor these conditions and their potential impact on our ability to achieve positive comparable sales growth in our DTC channel.
•Wholesale. We plan to increasingly control our distribution through progressively shifting sales from our wholesale channel to our DTC channel.
•New Products. We intend to continue investing in design, 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.
•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.
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•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 78.1%, 78.9% and 82.5% of our annual wholesale revenue in the combined second and third fiscal quarters of fiscal 2024, fiscal 2023, and fiscal 2022, respectively. Additionally, we generated 82.6%, 83.9% and 85.0% of our annual DTC revenue in the combined third and fourth fiscal quarters of fiscal 2024, 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.
Working capital requirements typically increase as inventory builds. We finance these needs through a combination of cash on hand and borrowings on our Revolving Facility, the Mainland China Facilities, and the Japan Facility, as defined below. Historically, cash flows from operations 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 earlier in the year.
•Global Climate Trends. A portion of our business is dependent on cold-weather seasons and patterns to generate consumer demand for our products. Consumer demand for our products may be negatively affected to the extent global climate patterns trend warmer, reducing typical patterns of cold-weather events or increasing weather volatility.
•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 2024, 2023 and 2022, we generated 70.5%, 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” 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, logistics and foreign exchange in certain countries and travel corridors.
We remain concerned about the conflicts in Ukraine and the Middle East and continue to suspend all wholesale and e-Commerce sales to Russia. We also continue to monitor the ongoing conflicts and the impacts on human life.
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.
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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 $15.9m. 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 reporting date, the estimated value of the payout was $7.4m. 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. The results of Paola Confectii were not significant for the period beginning on the date of acquisition and ended on March 31, 2024, and would not have been either during fiscal 2024 if the acquisition had occurred as of the beginning of the fiscal year.
See “Note 5. Business combination” in our Annual Financial Statements for detailed information on the acquisition of Paola Confectii SRL.
Transformation Program
In fiscal 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.
•On March 26, 2024, the Company undertook a workforce reduction as part of the Transformation Program, to streamline our business, accelerate decision-making, and increase efficiencies across our operating platform impacting approximately 17% of headcount.
SEGMENTS
Our reporting segments align with our sales channels: 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.
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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 starting in the second quarter ended of fiscal 2024.
The Other segment comprises revenue and costs that are not related to the Company’s DTC or Wholesale segments, such as sales to employees, friends and family sales, and results from the newly acquired Paola Confectii business (see "Business Developments" above).
For the fiscal year ended March 31, 2024, the performance measure for our Other segment was revised to exclude corporate general and administrative expenses; these expenses are now presented as a reconciling item to the Company’s consolidated operating income. This change in segment reporting was made to improve the understanding of financial performance in the Other segment.
Corporate expenses comprises costs that do not occur through the DTC, Wholesale, or Other segments, including 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 segment operations.
As at March 31, 2024, our DTC segment by geography included the following directly operated permanent retail stores:
| Fiscal 2024 | ||||||||||||||||||||
| April 2, 2023 | Q1 Additions | Q2 Additions | Q3 Additions | Q4 Additions | March 31, 2024 | |||||||||||||||
| Canada | 9 | — | — | — | — | 9 | ||||||||||||||
| United States | 8 | 2 | 3 | 2 | 1 | 16 | ||||||||||||||
| North America | 17 | 2 | 3 | 2 | 1 | 25 | ||||||||||||||
Greater China1 | 23 | — | 2 | — | 1 | 26 | ||||||||||||||
Asia Pacific (excluding Greater China1) | 3 | — | 3 | 1 | 1 | 8 | ||||||||||||||
| Asia Pacific | 26 | — | 5 | 1 | 2 | 34 | ||||||||||||||
EMEA2 | 8 | 1 | — | — | — | 9 | ||||||||||||||
| Total permanent stores | 51 | 3 | 8 | 3 | 3 | 68 | ||||||||||||||
| 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 | ||||||||||||||
Greater China1 | 19 | 1 | 2 | 1 | — | 23 | ||||||||||||||
Asia Pacific (excluding Greater China1) | — | 1 | — | 2 | — | 3 | ||||||||||||||
| Asia Pacific | 19 | 2 | 2 | 3 | — | 26 | ||||||||||||||
EMEA2 | 7 | — | — | 1 | — | 8 | ||||||||||||||
| Total permanent stores | 41 | 2 | 2 | 6 | — | 51 | ||||||||||||||
1Greater China comprises Mainland China, Hong Kong, Macau, and Taiwan.
2EMEA comprises Europe, the Middle East, Africa, and Latin America.
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SUMMARY OF FINANCIAL PERFORMANCE
The following table summarizes results of operations for the years ended March 31, 2024, April 2, 2023 and April 3, 2022 and the fourth quarters ended March 31, 2024 and April 2, 2023, and expresses the percentage relationship to revenues of certain financial statement captions. Basis points (“bps”) expresses the changes between percentages. See “Results of Operations” for additional details and for the comparison discussions between the years ended March 31, 2024 and April 2, 2023.
For the comparison discussions between the years ended April 2, 2023 and April 3, 2022, please see Item 5. “Operating and Financial Review and Prospects” of our Annual Report on Form 20-F for the year ended April 2, 2023, filed with Canadian securities commissions on SEDAR+ and with the SEC on May 18, 2023. See “Basis of Presentation” for details on impacts of reclassifications on comparative information.
| CAD $ millions (except per share data) | Year ended | Fourth quarter ended | ||||||||||||||||||
| March 31, 2024 | April 2, 2023 | April 3, 2022 | March 31, 2024 | April 2, 2023 | ||||||||||||||||
| Statement of Operations data: | Reclassified | Reclassified | Reclassified | |||||||||||||||||
| Revenue | 1,333.8 | 1,217.0 | 1,098.4 | 358.0 | 293.2 | |||||||||||||||
| Gross profit | 917.4 | 815.2 | 733.6 | 233.0 | 190.3 | |||||||||||||||
| Gross margin | 68.8 | % | 67.0 | % | 66.8 | % | 65.1 | % | 64.9 | % | ||||||||||
| Operating income | 124.5 | 147.6 | 159.5 | 23.1 | 17.6 | |||||||||||||||
| Net income (loss) | 58.1 | 68.9 | 94.6 | 7.6 | (10.0) | |||||||||||||||
| Net income (loss) attributable to shareholders of the Company | 58.4 | 72.7 | 94.6 | 5.0 | (3.1) | |||||||||||||||
| Earnings (loss) per share attributable to shareholders of the Company | ||||||||||||||||||||
| Basic | $ | 0.58 | $ | 0.69 | $ | 0.87 | $ | 0.05 | $ | (0.03) | ||||||||||
Diluted1 | $ | 0.57 | $ | 0.69 | $ | 0.87 | $ | 0.05 | $ | (0.03) | ||||||||||
1.Subordinate voting shares issuable on exercise of stock options are not treated as dilutive if including them would decrease the loss per share, or if the weighted average daily closing share price for the period was greater than the exercise price. For the fourth quarter and year ended March 31, 2024, there were 3,904,366 and 3,904,366 shares, respectively (fourth quarter and year ended April 2, 2023 - 643,505 and 2,231,231 shares, respectively) that were not taken into account in the calculation of diluted earnings per share because their effect was anti-dilutive.
| CAD $ millions | March 31, 2024 | April 2, 2023 | |||||||||
| Financial Position: | |||||||||||
| Cash | 144.9 | 286.5 | |||||||||
| Total assets | 1,481.6 | 1,590.0 | |||||||||
| Total non-current liabilities | 748.2 | 760.1 | |||||||||
| Equity | 423.5 | 477.5 | |||||||||
COMPONENTS OF OUR RESULTS OF OPERATIONS
Revenue
DTC revenue consists of sales through our e-Commerce operations and retail stores. DTC revenue is recognized upon delivery of the goods to the customer and when consideration is received, net of an estimated provision for sales returns.
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Wholesale revenue comprises sales to third party resellers, which includes retailers and distributors of our products. Wholesale revenue from the sale of goods, net of an estimated provision for sales returns, discounts, and allowances, is recognized when control of the goods has been transferred to the reseller, which, depending on the terms of the agreement with the reseller, occurs when the products have been shipped to the reseller, are picked up from our third party warehouse, or arrive at the reseller’s facilities.
Other revenue comprises of sales that do not occur through DTC or Wholesale segments, including sales to employees, friends and family sales, and results from the newly acquired Paola Confectii business.
Gross Profit
Gross profit is our revenue less cost of sales. Cost of sales comprises the cost associated with manufacturing our products, goods purchased from other manufacturers and bringing products to their place of sale. These include:
Manufacturing costs including raw materials, direct labour, and overhead. Cost of sales also includes depreciation on our manufacturing right-of-use assets and plant assets as well as inventory provisions, and allowances related to obsolescence and shrinkage. The primary drivers of our cost of sales are the costs of raw materials (which are sourced in both Canadian dollars and U.S. dollars), manufacturing labour rates, and the allocation of overhead.
Costs of goods purchased include the cost to source the product at our third party manufacturers, the product cost, freight and duty costs of shipping to our warehouses around the world.
Costs related to bringing products to their place of sale include freight, duty, and non-refundable taxes incurred in delivering the goods to distribution centres managed by third parties or to our retail stores.
Gross margin measures our gross profit as a percentage of revenue.
SG&A Expenses
SG&A expenses are incurred in our operating segments and at the corporate level. SG&A expenses consist of selling costs to support our customer relationships and to deliver our products to our e-Commerce customers, retail stores, and wholesale partners. It also includes our marketing and brand investment activities and the corporate infrastructure required to support our ongoing operations, as well as depreciation and amortization other than on manufacturing right-of-use assets and plant assets.
SG&A expenses within our operating segments include:
•Selling costs which generally correlate to revenue timing and would typically experience similar seasonal trends. As a percentage of sales, we expect these selling costs to change as our business evolves. This change has been and is expected to be primarily driven by the expansion of our DTC segment, including the investment required to support e-Commerce sites and retail stores. Retail store costs are mostly fixed and are incurred throughout the year.
•General and administrative expenses which are directly related to our operating segments primarily include personnel costs (including salaries, variable incentive compensation, and benefits), technology support, other professional service costs, and marketing.
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•Depreciation and amortization which represent the economic benefit incurred in using the Company’s property, plant and equipment, intangible assets, and right-of-use assets. We expect depreciation and amortization to increase, primarily driven by the expansion of our DTC segment.
SG&A expenses at the corporate level include:
•General and administrative expenses which generally represent costs incurred in our corporate offices, primarily related to marketing, personnel costs (including salaries, variable incentive compensation, benefits, and share-based compensation), technology support, and other professional service costs. We have invested considerably in this area to support the growing volume and complexity of our business.
•Depreciation and amortization which represent the economic benefit incurred in using corporate property, plant and equipment, intangible assets, and right-of-use assets.
Operating Income and Operating Margin
Operating income is our gross profit less SG&A expenses. Operating margin measures our operating income as a percentage of revenue.
Net Interest, Finance and Other Costs
Net interest, finance and other costs represents interest expense on our borrowings including the Revolving Facility, the Term Loan, the Mainland China Facilities, the Japan Facility, each as defined below, and lease liabilities, as well as standby fees and other financing costs, net of interest income. Net interest, finance and other costs also includes the fair value remeasurements of the contingent consideration, put option liability related to the agreement entered between the Company and Sazaby League to form the Japan Joint Venture (“Joint Venture Agreement”), and foreign exchange gains and losses related to the outstanding principal balance on the Term Loan, net of the impact of hedging which previously was presented in SG&A expenses.
See “Note 5. Business Combination” of the Annual Financial Statements for a description of the put option and contingent consideration under Japan Joint Venture.
Income Taxes
We are subject to income taxes in the jurisdictions in which we operate and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events.
Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could result in an unfavorable change in our effective tax rate, which could adversely affect our business, financial condition and operating results.
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RESULTS OF OPERATIONS
For the year ended March 31, 2024 compared to the year ended April 2, 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) | Year ended | $ Change | % Change | ||||||||||||||||||||
| March 31, 2024 | April 2, 2023 | ||||||||||||||||||||||
| Statement of Income data: | |||||||||||||||||||||||
| Revenue | 1,333.8 | 1,217.0 | 116.8 | 9.6 | % | ||||||||||||||||||
| Cost of sales | 416.4 | 401.8 | (14.6) | (3.6) | % | ||||||||||||||||||
| Gross profit | 917.4 | 815.2 | 102.2 | 12.5 | % | ||||||||||||||||||
| Gross margin | 68.8 | % | 67.0 | % | 180 | bps | |||||||||||||||||
| SG&A expenses | 792.9 | 667.6 | (125.3) | (18.8) | % | ||||||||||||||||||
| SG&A expenses as % of revenue | 59.4 | % | 54.9 | % | (450) | bps | |||||||||||||||||
| Operating income | 124.5 | 147.6 | (23.1) | (15.7) | % | ||||||||||||||||||
| Operating margin | 9.3 | % | 12.1 | % | (280) | bps | |||||||||||||||||
| Net interest, finance and other costs | 48.8 | 54.1 | 5.3 | 9.8 | % | ||||||||||||||||||
| Income before income taxes | 75.7 | 93.5 | (17.8) | (19.0) | % | ||||||||||||||||||
| Income tax expense | 17.6 | 24.6 | 7.0 | 28.5 | % | ||||||||||||||||||
| Effective tax rate | 23.2 | % | 26.3 | % | 310 | bps | |||||||||||||||||
| Net income | 58.1 | 68.9 | (10.8) | (15.7) | % | ||||||||||||||||||
| Net loss attributable to non-controlling interest | (0.3) | (3.8) | 3.5 | 92.1 | % | ||||||||||||||||||
| Net income attributable to shareholders of the Company | 58.4 | 72.7 | (14.3) | (19.7) | % | ||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||
| Basic | 100,816,758 | 105,058,643 | |||||||||||||||||||||
Diluted1 | 101,823,073 | 105,622,312 | |||||||||||||||||||||
| Earnings per share attributable to shareholders of the Company | |||||||||||||||||||||||
| Basic | $ | 0.58 | $ | 0.69 | (0.11) | (15.9) | % | ||||||||||||||||
| Diluted | $ | 0.57 | $ | 0.69 | (0.12) | (17.4) | % | ||||||||||||||||
1.Subordinate voting shares issuable on exercise of stock options are not treated as dilutive if including them would decrease the loss per share, or if the weighted average daily closing share price for the period was greater than the exercise price. As at March 31, 2024, there were 3,904,366 shares (April 2, 2023 - 2,231,231 shares) that were not taken into account in the calculation of diluted earnings per share because their effect was anti-dilutive.
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Revenue
| Year ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | March 31, 2024 | April 2, 2023 | As reported | Foreign exchange impact | In constant currency1 | As reported | In constant currency1 | ||||||||||||||||||||||||||||||||||
| DTC | 950.7 | 807.3 | 143.4 | (3.5) | 139.9 | 17.8 | % | 17.3 | % | ||||||||||||||||||||||||||||||||
| Wholesale | 312.3 | 373.8 | (61.5) | (9.2) | (70.7) | (16.5) | % | (18.9) | % | ||||||||||||||||||||||||||||||||
| Other | 70.8 | 35.9 | 34.9 | 0.1 | 35.0 | 97.2 | % | 97.5 | % | ||||||||||||||||||||||||||||||||
| Total revenue | 1,333.8 | 1,217.0 | 116.8 | (12.6) | 104.2 | 9.6 | % | 8.6 | % | ||||||||||||||||||||||||||||||||
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
| Year ended | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||
| CAD $ millions | March 31, 2024 | April 2, 2023 | As reported | Foreign exchange impact | In constant currency3 | As reported | In constant currency3 | ||||||||||||||||||||||||||||||||||
| Canada | 246.3 | 241.0 | 5.3 | — | 5.3 | 2.2 | % | 2.2 | % | ||||||||||||||||||||||||||||||||
| United States | 324.6 | 340.2 | (15.6) | (6.8) | (22.4) | (4.6) | % | (6.6) | % | ||||||||||||||||||||||||||||||||
| North America | 570.9 | 581.2 | (10.3) | (6.8) | (17.1) | (1.8) | % | (2.9) | % | ||||||||||||||||||||||||||||||||
Greater China1 | 422.2 | 287.2 | 135.0 | (0.2) | 134.8 | 47.0 | % | 46.9 | % | ||||||||||||||||||||||||||||||||
Asia Pacific (excluding Greater China1) | 84.7 | 67.0 | 17.7 | 3.6 | 21.3 | 26.4 | % | 31.8 | % | ||||||||||||||||||||||||||||||||
| Asia Pacific | 506.9 | 354.2 | 152.7 | 3.4 | 156.1 | 43.1 | % | 44.1 | % | ||||||||||||||||||||||||||||||||
EMEA2 | 256.0 | 281.6 | (25.6) | (9.2) | (34.8) | (9.1) | % | (12.4) | % | ||||||||||||||||||||||||||||||||
| Total revenue | 1,333.8 | 1,217.0 | 116.8 | (12.6) | 104.2 | 9.6 | % | 8.6 | % | ||||||||||||||||||||||||||||||||
1Greater China comprises Mainland China, Hong Kong, Macau, and Taiwan.
2EMEA comprises Europe, the Middle East, Africa, and Latin America.
3Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
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Revenue for the year ended March 31, 2024 increased by $116.8m, or 9.6%, to $1,333.8m from $1,217.0m for the year ended April 2, 2023. On a constant currency1 basis, revenue increased by 8.6% the year ended March 31, 2024 compared to the year ended April 2, 2023. The strength of the US dollar and the euro compared to the Canadian dollar and its impacts on revenue in the period outweighed the depreciation of the Japanese yen relative to the Canadian dollar.
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.
Within our product categories, non-Heavyweight Down grew year-over-year across all geographies except EMEA, expanding its share of revenue and units sold within the overall mix. Heavyweight Down revenue remained flat year-over-year on a consolidated basis with strong growth in Asia Pacific compared to the year ended April 2, 2023, offsetting declines in other regions.
Revenue generated from our DTC and Wholesale segments represented 71.3% and 23.4%, respectively, of total revenue for the year ended March 31, 2024 compared to 66.3% and 30.7%, respectively, for the year ended April 2, 2023.
DTC
Revenue from our DTC segment for the year ended March 31, 2024 was $950.7m compared to $807.3m for the year ended April 2, 2023. The increase of $143.4m or 17.8% was attributable largely to:
•Our retail stores had increased revenue across all geographies due to:
•Retail expansion, mainly in the United States and Mainland China, with 14 new permanent stores and three temporary stores converted to permanent stores during the year ended March 31, 2024, in addition to 10 stores in fiscal 2023 running for the full duration of the year ended March 31, 2024 compared to partial operations in fiscal 2023;
•Comparable retail sales growth was mixed with:
◦Strong performance in Asia Pacific with positive comparable sales growth due to:
▪Strong domestic and tourist shopping in Greater China;
▪Positive response to our product assortment;
▪Sales were bolstered by Lunar New Year;
▪Elevation of traffic across our retail network in the region; and
▪Reduced working hours and store closures as result of COVID-19 related restrictions in fiscal 2023 that did not reoccur in fiscal 2024.
◦Weakness in North America and EMEA with negative comparable sales growth due to a pressured consumer and an intense promotional environment.
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•The e-Commerce channel experienced a decline in revenue and a decline in comparable sales growth in North America and EMEA, which was partially offset by a strong performance in Greater China.
DTC comparable sales growth1 of 0.3%. The slight increase was driven by Asia Pacific, which was partially offset by North America and EMEA.
Our average sales per square foot1, was $3,963 and $3,964 for fiscal 2024 and fiscal 2023, respectively, with higher sales per square foot in Asia Pacific offset by lower sales per square foot in North America and EMEA in fiscal 2024 compared to prior year.
1DTC comparable sales growth and average sales per square foot are supplementary financial measures. See “Non-IFRS Financial Measures and Other Specified Financial Measures” for a description of this measure.
Wholesale
Revenue from our Wholesale segment for the year ended March 31, 2024 was $312.3m compared to $373.8m for the year ended April 2, 2023. The decrease of $61.5m or (16.5)% was due to:
•Lower order book value due to higher levels of inventory on hand for existing customers as our partners experienced the same intense promotional environment as we did in our DTC channel; and
•Continued streamlining of the Wholesale segment by reducing partnerships as we optimize for greater DTC sales within our channel mix, consistent with our expectations, particularly in EMEA.
Other
Revenue from our Other segment for the year ended March 31, 2024 was $70.8m compared to $35.9m for the year ended April 2, 2023. The increase of $34.9m or 97.2% was attributable to:
•Increased product sales to employees with the expansion of our employee purchase program;
•Larger number of friends and family events related to our strategic management of slow moving inventory; and
•Revenue generated from Paola Confectii in fiscal 2024 as a result of the business combination.
Gross Profit
| Year ended | |||||||||||||||||||||||||||||||||||
| March 31, 2024 | April 2, 2023 | ||||||||||||||||||||||||||||||||||
| CAD $ millions | Reported | Gross margin | Reported | Gross margin | $ Change | Change in bps | |||||||||||||||||||||||||||||
| Gross profit | 917.4 | 68.8 | % | 815.2 | 67.0 | % | 102.2 | 180 | bps | ||||||||||||||||||||||||||
Gross profit and gross margin for the year ended March 31, 2024 were $917.4m and 68.8%, respectively, compared to $815.2m and 67.0%, respectively, for the year ended April 2, 2023. The increase in gross profit of $102.2m was attributable to higher DTC revenue as noted above and margin expansion. Gross margin in the current period has been favourably impacted by pricing (+180 bps) across all geographies within both DTC and Wholesale.
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SG&A Expenses
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