Canada Goose Holdings Inc. (GOOS) Q1 2018 Earnings Report, Transcript and Summary

Good morning. My name is Jessa [ph], and I will be your conference operator today. At this time, I would like to welcome everyone to the Canada Goose First Quarter Fiscal 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Ms. Allison Malkin from ICR, you may begin your conference.

Thank you. Good morning and thank you for joining us today. With me today are Dani Reiss, President and CEO; and John Black, CFO. For today's call, Dani will begin with highlights of our first quarter fiscal 2018 performance and then update you on the progress against our key priorities. Following this, John will provide details on our financial results and outlook. After our prepared remarks, we will take your questions. Before we begin, I would like to inform you that this call including the Q&A portion of the call includes forward-looking statements including plans for our business and our fiscal 2018 outlook. Each forward-looking statement made on this call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statement. Certain material factors and assumptions were considered an applied making forward-looking statement. Additional information regarding these forward-looking statements factors assumptions appears under the heading Cautionary Note Regarding Forward-Looking Statements and risk factors, in our Annual Report on Form 20-F, which is filed with the Securities and Exchange Commission and the Canadian Securities Regulatory Authority and available on our website at www.canadagoose.com, under Risk Factors in our final prospectus filed on June 28, 2017 and in the earnings press release that we furnished today under the heading Cautionary Note Regarding Forward-Looking Statements. The forward-looking statements made on this call speak only as of today and we undertake no obligation to update or revise any of these statements. During this conference call to provide greater transparency regarding Canada Goose's operating performance, we refer to certain non-IFRS financial measures that involve adjustments to IFRS results. Any non-IFRS financial measures presented should not be considered to be an alternative to financial measures required by IFRS, and are unlikely to be comparable to non-IFRS financial measures provided by other companies. Any non-IFRS financial measures referenced on this call are reconciled to the most directly comparable IFRS financial measure in a table at the end of our earnings press release issued this morning and available in the Investor Relations section of our website at www.canadagoose.com. With that, I will turn the call over to Dani.

Thank you, Allison. And thank you for joining this call and good morning everyone. I'm very pleased with our solid start to fiscal 2018 building on our strong financial fiscal 2017. Our team demonstrated a determined focus to deliver on our key growth strategies which as a reminder are execute our proven market development strategy across all markets, strengthen and expand our geographic footprint and newer markets, enhance and expand our product offerings and continue to drive higher margins through operational excellence. Notably in the smaller quarter, we increased revenue across all geographies and sales channels. We made headway in our direct-to-consumer global expansion plans and we continue to expand our in-house manufacturing capabilities and achieve gross margin expansion. Together these factors allowed us to grow year-over-year sales. We were particularly pleased with the continued strength of spring offering around the world, our line performed very well this year which validates, the consumers are looking to Canada Goose for new function first product to protect them of any climate or season. As a result, we're confident enough in our ability to continue to deliver this year and beyond. So here are some additional highlights of the quarter. In our DTC channel we continue to solid performance at our first two locations, Yorkdale Shopping Centre in Toronto and Soho in New York City while laying the groundwork to expand our retail footprint globally. We're on track to open Chicago and London ahead of holiday 2017 and we're excited to announce our plans to open two additional locations, Boston and Calgary both of which are on track to open later this fall. We've shared on our last call that our plan was to open three stores this fiscal year, however we're pleased to be opening our fourth location in Calgary. Having our own stores allowed us to showcase full array of our product in our store, it tells the story of Canada Goose unfiltered while also better capturing market share and adding to our bottom line. I'm also really encouraged as I read our daily in store reports from both of our stores to hear the positive consumer feedback about the high level of service they receive in our stores. Our brand ambassadors are doing an exceptional job of helping customers find the right product for their needs and I want to thank them for their dedication. I believe that this quality of experience is a significant part of what sets Canada Goose apart at retail. We're also really excited to announce that Tokyo will be home to Canada Goose retail store this fall, which will be operated through our distribution partner there. Recently I come back from Tokyo; I'm really encouraged by the continued demand for Canada Goose products in its longstanding strategic market. On the e-commerce front, both our Canadian and US sites continue to perform well and we're happy with customer traffic and orders from the France and UK market, which are in their first year of operation. We've also activated Ireland at the end of Q1 and Belgium, Luxemburg and the Netherlands early in Q2 and we remain on track to open three additional sites for a total of seven sites in fiscal 2018. In our wholesale channel, we experienced strong performance across all geographic regions. The growth was primarily driven by the earlier timing of shipments reflecting only our increased efficiency in manufacturing and sales planning, but also the high demand and sell through of our products. In fact, many retailers are specifically asking us to accelerate shipments so they can get our product on the floor earlier. We see this as a testament to our belief that Canada Goose is a bright spot for our retail partners. As noted earlier, we saw continued sell through of our spring products across the world during the quarter with this performance further builds confidence retailers in the year round consumer interest in Canada Goose products and as a result increase the desire for Canada shop [indiscernible]. Work is underway to bring more of these to life, in Q2 and Q3 and partnership with key retailers in North America and Europe. Additionally, we're very pleased with our spring 2019 order book and we're encouraged by the strong response we received from retailers about the collection. Given our top line performance our product clearly continues to resonate with our customers and we look forward to seeing compelling sell through of our new in classic products in the month ahead. We're especially excited about the launch of our first ever knitwear collection which will be available at retail next week in owned channel as well as in select retail partners around the world. Knitwear is a natural step for our brand and for our business and by all accounts we expect this to be successful. In marketing, with the goal to find creative ways to build brand awareness globally, our team's focus this quarter was on supporting the success of our spring collection at retail and developing creative assets for the upcoming fall winter season. Turning to our operational strategies, during the quarter we expanded manufacturing capacity at our Quebec facility to 95,000 square feet which supports our strategy of in sourcing manufacturing capacity while also driving margin expansion. As of July, we employed 125 people into facility and we plan to hire another 325 people by the end of 2018. With a view to margin improvement and driving further operational efficiency, we also centralize raw materials processing and quality assurance with the addition of our six sites located in Toronto in July, 2017. We remain committed to keeping production of our core products made in Canada and we believe that we are well positioned from a supply chain perspective to continue to meet the demands of our growing business. Finally, I want to note that from a talent perspective we've reached a significant milestone in this quarter as we surpass 2,000 employees. I'm very proud of everyone on our team and believe we have the strongest team we've ever had in place to keep building on our momentum and on the growth opportunities that we see ahead. As John will discuss shortly, we continue to take a disciplined approach to managing this business and as a result we're on track for the upcoming peak selling season and beyond. I'm excited about our strong start, so I believe it will be another great year for Canada Goose and with that I'll now turn it over to John to review our financial results with you in more detail.

Thank you, Dani and good morning everyone. And as Dani mentioned, we're pleased to begin fiscal 2018 with strong momentum. In a seasonally small quarter we reported revenue growth in our direct-to-consumer channel, pull forward sales in our wholesale channel and increased gross margins. Before I review our details financial results, I want to remind you again of some of the unique characteristics of our business. As I mentioned in our year end call, our business is quite seasonal which results in a greater percentage of revenues and earnings occurring in the second and third fiscal quarters. While our first and fourth quarters represented smaller percentage of our volume. Given the lower revenue base of these quarters, we experienced negative pressure on our profitability as our fixed SG&A spending continues regardless of the period particularly in our direct-to-consumer channel. We plan our business over the long-term with annual cycles in mind and believe the visibility of our wholesale order book continues to give us high confidence in the annual cadence of revenue and related costs. Now let me review highlights from our first quarter results, which as a reminder are in Canadian Dollars. For the quarter revenue increased by C$12.5 million to C$28 million up from C$16 million in the prior year. Revenue was up in all geographic regions in both sales channels. Direct-to-consumer revenue grew by C$1.3 million to C$8.3 million driven by continued strong momentum in our retail stores and e-commerce sites. Of course it is very early, but we are encouraged with the performance of these stores in our first year of operations through the spring months and are excited about the opportunities ahead of us, with our fiscal 2018 openings. On the e-commerce front, both our Canadian and US sites outperform the prior year and in the first year of operation of the UK and France sites, we're happy with customer traffic and orders. Wholesale revenue increased by C$5.5 million to C$20 million in the first quarter. Most of the year-over-year growth was driven by timing as retailers took C$5 million of product earlier than originally planned, which we view as another indication of the strength of our brand and the demand for our products. Our first quarter also includes the disproportionately higher amount of distributor sales to Asia relative to other quarters. The timing is consistent with fiscal 2017. Cost of sales on per unit basis were consistent with our expectation. As Dani noted, we increased production capacity at our in-house facilities through expansion in Quebec and centralizing raw materials cutting in Toronto. We believe there will be efficiencies as we increase the proportion of in-house production. Consolidated gross margin expanded significantly to 47% from 30% driven by the increased percentage of revenues generated from our DTC channel. Gross margins in DTC expanded approximately 15 percentage points to 75% reflecting maturity of our e-commerce and store networks. Gross profit was up substantially as our Q1 fiscal 2018 had a revenue based that included two retail stores and four e-commerce sites compared to only two e-commerce sites in Q1 of fiscal 2017. Our wholesale channel deliver gross margins of 35% an increase of 8 percentage points from 27% last year. As noted in my comments on revenue, distributor sale to Asia comprised a higher proportion of wholesale revenue in Q1 consistent with the first quarter of fiscal 2017. These products carry a lower per unit margin which impacts the first quarter much more than Q2 and Q3, when sales to reach out customers represent the vast majority of our wholesale business. The comparable quarter in the prior year also included an inventory write-off of approximately $1 million. Selling general and admin expenses were C$26 million up C$8 million from the first quarter of fiscal 2017. This reflected increased operating expenses related to the Yorkdale and Soho retail stores and expanding the numbers of e-commerce sites. The year-over-year change in SG&A includes the cost related to timing of revenue pull forward, the shift and timing of SG&A spending which we now expect to incur later in the year and a foreign exchange gain on the term loan included in fiscal 2018 and gains on our hedges excluded from fiscal 2017 SG&A. Combined these activities led to the adjusted EBITDA loss of C$13.6 million compared to C$7.5 million loss in the first quarter of fiscal 2017. The increase in adjusted EBITDA loss was the result of higher SG&A cost basis associated with the direct-to-consumer channel and a one-time hedging benefit included in fiscal 2017. The timing of revenue and SG&A spending put us ahead of our plans in Q1 while we're expecting many of these benefits reverse over the year. If you will recall during Q3 of fiscal 2017, we had a recapitalization transaction that increased our debt. Average borrowings for the quarter were C$203 million compared to C$170 million in the same quarter of fiscal 2017. The increase in borrowings had a corresponding impact on interest expense. These combined effects resulted in decreased interest expense in the quarter of C$600,000 compared to the same quarter in fiscal 2017. On an IFRS basis for the quarter, we reported net loss of C$12 million or C$0.11 per diluted share based on C$106.5 million weighted average shares compared to last year's reported loss for the quarter of C$14 million or C$0.14 per share on C$100 million weighted average diluted shares. On an adjusted basis, we reported net loss per share of C$0.13 for the quarter compared to C$0.10 per share in the same quarter fiscal 2017. Now turning to the balance sheet. As of June 30, 2017 our balance sheet remained strong as we head into the peak selling season. Execution in manufacturing has positioned us to deliver on our order book and in fact, we're able to ship some of our fall winter orders in the first quarter as retail customers took product ahead of schedule. Capital expenditures for the first quarter were C$7 million compared - primarily driven by investments in our two retail stores in London and Chicago, as we prepared for Q3 openings expansion of our recently acquired manufacturing facility in Quebec and raw materials and cutting facility in Toronto and other corporate investments to support our global growth initiatives. Total debt net of cash was C$234 million at the end of the first quarter compared to C$151 million dollars at the end of prior year period. Reflecting the change in the capital structure from both the recapitalization in December, 2016 and our IPO in March, 2017. We remain comfortable with the flexibility our revolving credit facility provides as we ended the quarter with approximately C$99 million outstanding under the facility and unused borrowing capacity of approximately C$72 million. Onto some recent news, as many of you are aware. The Ontario Government has proposed new legislation that is expected to resolve in an increase in minimum wage over the next year. Given our commitment to Made in Canada, this will have an impact on our cost structure. However, we have many levers available in our business model that enable us off the waging fees and do not believe that will result in a material change to our long-term outlook. Now I will turn it back to Dani for some closing remarks.

Thanks, John. In summary, we are all very pleased with our first quarter results and are looking forward to the peak selling season for Canada Goose. We're on track to deliver against our goals and I continue to be extremely proud of our team for the hard work that they do and the strong performance that they all continue to deliver. We look forward to updating you on our progress on our next earnings call. And with that, I turn it over to the operator to begin our Q&A session.

Thank you. [Operator Instructions] your first question comes from the line of Ike Boruchow from Wells Fargo. Please go ahead.

I guess my question is, just in terms of your fiscal year top line guide you gave us few months ago, sounds like you're pleased with start to the year and you feel well position and plus now you have two new retail stores planned, ahead of holiday that don't seem to be in your initial plan. Are you now - can you just update us on your fiscal year top line guide? I think you gave us mid-to-high teens three months ago and then any change to the EBITDA margin outlook, which I think you gave flat a couple months ago.

Thanks Ike. As you know it's not our intention to update our guidance quarterly. At this time, there have been no material changes to our plans and so on.

Okay, thanks.

Your next question comes from the line of Lindsay Drucker Mann from Goldman Sachs. Please go ahead.

This is Bill Schultz on for Lindsay. Just a question on your wholesale business, can you talk about what drove the shipment timing in wholesale. We've been hearing from other cold weather branded wholesalers that shipments have actually been sliding, further back into the season as retailers set their floors later. So do you think that - which is a function of your brand strength, is it something you're seeing from just a few customers or is it that just more of a general comment.

Thanks for the question, this is Dani. I think there are couple of things that can speak to that. First of all, I'll just about our manufacturing and supply chain operational efficiency. We're really operating at a very high level enable to and deliver not only on time but earlier than the market, had originally requested the goods. And on top of that, there is demand from our retailers to pull orders further to last [ph] and because of our operating efficiency we're able to react to that and that's why we've been able to shift orders from quarter-to-quarter.

And if I could just slide one more and can you just update us on sort of your selling for fall, specifically housing your lighter weight styles are trending, what you're seeing with retailers on that product. Anything you can kind of talk about regarding how big a percentage and your product mix? That's the sort of lighter weight styles are becoming. Thank you.

I mean, we don't break down style mix. Specifically, but certainly can share some color that our lighter weight styles are for sure very much in demand. At retail I do, our daily retail reports from both our stores, I see our online activity and there is no question that there is lot of demands for that product and I believe it's going to be a product line that continues to grow for us.

Thanks guys.

Your next question comes from the line of Brian Tunick from the Royal Bank of Canada. Please go ahead.

I guess on the three additional stores openings this year. I guess how should we think about number one, the franchise impact on the P&L with the Japanese location to the footage growth trajectory as we think about next year and then, in that 30 to 50 store target you've given. What should we think about should be the mix of your own stores, franchise, JV longer term? And then the second question, just any FX impact that we should be thinking about on the P&L given the recent strengthening of the Canadian Dollar versus your previous guidance or what's baked into your guidance I should say. Thanks very much.

For sure. Thanks Brian. That's a lot of questions, it seems like I remember them all, in order. But I guess I'll start first by, you mentioned 30 to 50 stores I mean we talked about opening 15 to 20 stores through 2020, so I'll remind you that number. Secondly, Japan. Japanese model distributor you should look it as a wholesale sale, we have very strong distribution partners and brand building partners in Japan. And we're very, very pleased with how that relationship is going. So the store is going to be opened, it's a collaborative opening, we contribute in many ways, but they operate the store and whether we [indiscernible] wholesale basis. We do participate in some of the margins upside, but it is not the same as our own retail stores. And plan going forward, as it stands right now most of the retail stores we plan to open in the future are planned to become owned stores at that time. There may be other situations like this, but the vast majority will not be of this nature. And I'll hand it over to John to talk about the - answer your FX question.

Hi Brian, so regarding the FX point. Just as a reminder, we have an order book in place by the beginning of the year. So it gives us a great line of sight into what's coming up. So we've hedged our foreign exchange impacts largely to years and the changes are - of the changes the store openings and other things don't impact us that much. So although there is movement in the Canadian Dollar currency relative to the US and some of the other currencies we deal in, it doesn't result in much of a change.

Super, thanks very much. Good luck for fall.

Your next question comes from the line of Jay Sole from Morgan Stanley. Please go ahead.

My question is about with the new stores coming, not just the ones announced today, but those that was announced last quarter. Is the company incurring preopening rent expense right now in the next quarter? And can you give us an idea of what that might be?

We do incur some preopening rent expense in some of the stores depending on how that works and we don't get into details of that, but yes that's a common thing, so as we're getting ready to open - they're included in our results.

Okay and then maybe just on the wholesale business, if you can maybe just give us an idea of just with the timing shift. I know you already touched on it, but would you expect that the growth in the wholesale business in 2Q, might be in a different rate than like few percent growth that we would see, that we saw in 1Q ex-the timing shift. I mean would you anticipate that just because you're getting closer to season there might be, more orders coming in that time than maybe what we saw in 1Q.

Thanks for the question. We're very encouraged as the orders slide till effort [ph] sure. Our order book remains the same. The shift of orders still reflects in our reflection of more orders, which is a reflection of timing or where we are, excited about the opportunity of goods to be in store early and therefore sell through earlier and give us more potential for re-orders later, but our order book at this is the same.

Okay and then maybe last one from me, Dani. What was the signal that was the time was right, to open that store in Japan, the brand is, the awareness had risen to the point you feel comfortable opening up the store that could be the profit driver that's been in another cities?

It depends on Tokyo. Japan's a strong market. Tokyo particularly is a very strong city for us, it's been strategic for a long time, we've been growing for a long time. Its exciting opportunity to be able to open retail store there, so it's something we've been working on for a little while and been in my thoughts for a long time.

Okay, thanks so much.

Your next question comes from the line of Megan Annette [ph] from TD Securities. Please go ahead.

Can you just talk to your digital marketing strategy a little bit? And perhaps any commentary with respect to data analytics and specifically around the direct-to-consumer business. What is the strategy been there since launching the websites? How is it changed over time? And lastly, what levers do you feel you have left to pull there to contain to drive growth specifically on the e-com side?

Thanks for the question. Our marketing efforts are primarily digital these days and we execute year around campaigns both performance marketing and brand marketing. And in terms of consumer insights, we're working very diligently at increasing our capabilities internally with building insights capabilities internally, which give us a view into all sorts of information about our consumers that helps for our business forward to make more educated decisions, as moving forward.

And secondly, can you just give us any more insights into the knitwear offering specifically any expectations you have for the category going into the launch next week?

Yes knitwear is a very exciting launch for us. As you know we're very careful about new products and the way that we develop them, that they're perfect reflection to the Canada Goose brand. It's a new category for us. It's outer wear. The knitwear program incorporates, I mean it incorporates it speaks to the - what our consumers know us for, which is warmth and protection from the elements and therefore we include technology like our thermal mapping technology which is a proprietary technology that we've developed which allows heat to escape differently from different parts of the garment that cover that protect people and places where they loose heat more or less. And we're function first brand, so it's very important to us that, that every new product that we create leads with function and is highly functional and as well as looks the part. And I believe if you go over the store next week, you'll agree with me, that these products are truly Canada Goose products and I'm really excited about it.

That's great. Thank you very much.

Your next question comes from the line of Mark Petrie from CIBC. Please go ahead.

I just wanted to ask about the manufacturing our position in Scarborough. Could you just describe a little bit more what the capabilities of that facility are? And then more broadly speaking what does that mean for your overall cost base in manufacturing and does it have implications for your total manufacturing capacity.

For sure. I mean the facility in Scarborough, is a raw materials hub we do some cuttings there and [indiscernible] two-way or raw materials and added to our efficiency and to the extent it adds to our efficiency, it'll also add to our capacity and will help us also the more, the efficiency will, it is part of our strategy to increase margins through operating efficiencies.

And on times that, the more of these things we bring in-house instead of using outsourced manufacturers, there is generally some minor margin benefit to it and those are factored in.

Okay, so I guess just to clarify. Was this a facility that was already in existence and now you're just going to own it or is this an incremental facility?

No, this is a new facility.

Okay, that's it. Thank you.

So we now have five for reason and this raw materials have been addition to that for six facility.

Right, yes. Got it. Thank you very much.

Your next question comes from the line of Omar Saad from Evercore ISI. Please go ahead.

I wanted to ask about the e-commerce kind of geographic footprint, where you're seeing demand coming from globally. Maybe how that's informing your decisions on where to open stores. And a follow-up on the Japan and Korea distributor relationships. What is kind of terms and duration of how those partnerships are set up? And then, when you look at the giant Chinese market, how do you think about potentially overtime going after that market? And if you're seeing things again in your e-com business in terms of global demand, that point towards China and opportunity. Thanks.

Yes, thank you for the question. E-commerce, we had visitors from almost every country in the world last year to our e-commerce site and certainly, you look at those metrics, [indiscernible] what markets to open, we've plan to open seven markets this year and we've already opened four of those and well on track to meet our targets. And certainly we look at - we definitely look at where our profit is coming from and we decide to - awareness, we decide to open websites. As for China, we're very excited about China. China is a strategy that we're working on internally, we believe there was a lot of demand from the Chinese marketplace for our products and we're working internally on tweaking our playbook, our go-to-market strategic playbook that we use, as we open new markets to perfect our market entry strategy there and will let you know more as that unfolds. But certainly we consider it to be a large opportunity. And Japan, you asked about Japan and Korea. Japan is really - very, very strong market for us, has been for years. We've been there for long time, growing for a long time and very strong distribution partners. Either we do in Korea, which is also market which [indiscernible] for us and we're optimistic about it.

Thank you.

Your next question comes from the line of Christian Buss from Credit Suisse. Please go ahead.

Could you provide some perspective how your marketing strategy is evolving? We're seeing some Canada Goose advertising on Facebook and I'd love to see how this strategy for marketing evolves over the next year.

Yes, we do a lot of targeted marketing and that's probably why you're seeing on Facebook, Probably been through Canada Goose site a lot, and so, probably knows that and targets you for, for purchasing Canada Goose products. I think the digital world is evolving so quickly and I think what's important for us, is to stay nimble and to be aware of the evolution of digital marketing and make sure that we continue to, in our execution of that swim upstream and have meaningful view in the way we communicate of our brand.

Thank you very much and best of luck.

[Operator Instructions] your next question comes from the line of Simeon Siegel from Nomura Instinet. Please go ahead.

Dani, can you remind us what percent of your business is currently manufactured in-house? Versus where you think that goes over the next one to two years. And just any help at all you guys can give on the wholesale quarterly revenue cadence, for the next several quarters. Along with maybe if you can quantify what the Q1 SG&A shift was and what do you think about dollar growth there.

Yes, in-house manufacturing –our in-house component of our manufacturing is approximately 30% and we see that growing overtime to come closer to 50% over a number of years. In the future it's hard to predict the exact rate of that because that will depend in our ability to scale internally and or acquire contractors and or build greenfield sites. So there are number of variables [indiscernible] but we believe that we're going to be able to increase that number overtime. Second question.

Yes, well I can talk about the SG&A, if you want Dani.

Sure.

I mean your question was about the SG&A shift in the quarter. one of the things we always emphasize is that we look at the business on a full year basis, rather than on a quarter-by-quarter basis. So it's normal for example for some things to shift from quarter-to-quarter. it could be a marketing project we're involved in, it just goes from Q1 into Q2 or some back office type cost, so this is a normal course thing. And it's across a multitude of different categories of cost.

Yes on the last. I'll come back to your wholesale question. And in similar way, except the comments I made before about it, I mean it's a shift to the left, it's based on demand from the marketplace and that's very encouraging for us. Our wholesale order book has not changed. Our wholesale order book is strong, remains strong it's same always before and we're optimistic that, with the shift little less, that maybe that will give us more opportunity for reorder later, but at this point we have no such [indiscernible].

Great. Thanks a lot guys. Best of luck for the rest of the year.

Your next question comes from the line of Jonathan Komp from Robert W. Baird. Please go ahead.

Dani, first at the risk of getting too granular. I just want to follow-up and hoping to maybe clarify your guidance policy. I just want to ask, is your policy that you won't be providing any quarterly updates or is it that you will only provide updates when they're needed. And I'm just asking because those could be interpreted pretty differently.

Our intention is to provide long-term guidance update on an annual basis, that's our guidance policy.

Okay, great. Thank you. And then wanted to ask on, just on the DTC business. Obviously now two quarters where the performance looks very strong and pretty significant amount of upside versus the external estimate. So I'm just wondering if you could help maybe to segregate how much of that is, the first two stores really doing incredibly well out of the gate versus the e-commerce sites and how we should think about that going into later in the year, when you cycle that performance but also have new stores opening?

We don't break out stores versus our e-commerce performances. They're both performing very well and growth is coming from both sides and we're very happy with it. And it's certainly very encouraging. I continue to remind you, I think it's important to remember this is a small quarter and we have our larger quarters coming [technical difficulty].

Got it, okay. Thanks Dani.

Your next question comes from the line of John Morris from BMO Capital Markets. Please go ahead

Congratulations and also especially on that spring product performance which has been pretty impressive, we saw a lot of differentiation there until I'm wondering Dani, if you can comment a little bit about. Obviously we're not going to get into details, but will we see differentiation on the core winter product. We've heard some good rumblings about interesting new kind of styles and pieces and I'm wondering if you can share with us. Will there be more differentiation or should we kind of continue to expect that you can be positioned kind of similarly from a product perspective as you were last year. and also implications on price points, your approach to price points this year versus last year and any kind of changes there.

Thank you for your question. Yes, of course we're going to continue to innovate in our core as well as in our newer categories. There is lot of newness, it's important to us and to remember with - these new products are, they're exciting and they're new, they're vibrant and they're - we believe exceptional executions of the Canada Goose aesthetics and look. So we're excited about those and next question was?

Yes, it was on price points. If you're raising price points to the opportunity to on comparable product or is I might imagine, you might be introducing more items that could skew with a higher price point on core winter product.

You're talking about fall 2018, I'm assuming.

Yes exactly. Pricing comparability.

Yes, I mean in some cases. In some cases, we've increased prices on like-for-like styles in some cases we've not. We've also have new product offerings in the market at different price points, in many cases they're higher price points offer additional features as well.

Good and then just last one. Especially with how well you have performed on spring. Thinking about, if you can share with us how you're developing the merchant team to be able to execute on the shoulder seasons. Are you bringing in new talent or you promoting within? How handle that expansion? And similarly the marketing and the marketing message around that, it seems like that's where a lot of opportunity is, here is on the shoulder season. Shed some thoughts on that.

We've been undertaking initiative for the last several years now to build a world class design and merchandising department to bring it, to have the best in class department of its nature and we've been executing very strongly against those goals, both in bringing in new talent from outside where needed and also from within as we're able to develop original [ph] talent. So I'm really, really comfortable, excited about our capabilities for design and merchandising point of view and happy with the progress that we've made in that - it's against our strategy.

Excellent. Thanks very much.

There are no further questions at this time. I turn the call back over to Mr. Reiss.

Great. Thank you very much for being on this call. thanks for your interest in Canada Goose. We look forward to speaking to you, next quarter when we report our results again. So thanks for making the time and speak to you all again soon.

Thank you.

This concludes today's conference call. you may now disconnect.