Canada Goose Holdings Inc. (GOOS) Q2 2018 Earnings Report, Transcript and Summary

Good morning. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Canada Goose Q2 Fiscal 2018 Earnings Conference Call. [Operator Instructions] Thank you. Allison Malkin of 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 second quarter 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 and long-term 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 statements. Certain material factors and assumptions were considered and applied in making forward-looking statements. Additional information regarding these forward-looking statements, factors and 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 authorities 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, in order 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. And 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 good morning, everyone. I am pleased to share that our second quarter concluded a strong first half for Canada Goose. Last week, we held our annual global conference, where we brought together employees from our offices around the world to celebrate our achievements and to get inspired about our plans for the year ahead. I am so proud of the team's passion, commitment and disciplined approach to executing our growth strategies. With strong results across channel, geographies and categories, we continue to drive awareness and market penetration while also inspiring those who already know and love our brand. Here are some highlights from the business. As a function-first brand, it all starts with products. Across categories, demand remained strong, and our three seasons relevant is resonating. With a clear connection to our heritage and an unwavering commitment to authenticity, we are giving our fans more ways than ever before to experience our brand across styles, uses and climates. Our award-winning lightweight collection, which is renowned for its unique combination of comfort, movement and versatility, continues to grow significantly. In August, we launched our highly anticipated knitwear collection, our first non-outerwear category. Feedback from consumers has been extremely positive, and the collection is undeniably authentic Canada Goose in both aesthetic and performance. As a brand, we will always build demand ahead of supply, and we are very pleased with the sell-through of the initial assortment in both our wholesale and direct-to-consumer channels. Building on this momentum, we look forward to thoughtfully expanding our offering and our distribution for future seasons. Our direct-to-consumer channel enables us to give our fans around the world the ultimate Canada Goose experience. And it continues to surpass our expectations, both online and in-store. In e-commerce, which we view as our global flagship, we are now in 11 countries, and we have opened all seven of the new e-commerce sites planned for this year, which, as a reminder, are Austria, Belgium, Germany, Ireland, Luxembourg, the Netherlands and Sweden. Performance in our Canadian and U.S. sites continues to be strong, and results from our more recently launched European sites are also very encouraging. Profit growth is compelling in all of our major markets, and we are continuously improving our online experience to drive conversion and better position future site launches. Moving on to our retail stores; we recently celebrated the first anniversary of our Toronto store in Yorkdale Shopping Mall, and we continue to be very pleased with the contributions of our Toronto and New York stores. We have great brand ambassadors, who are consistently delivering an exceptional and immersive customer experience. With great teams in place, we are well on track with our new store openings. I was really, really excited to be with the team in Chicago last month for opening day. We are very pleased with the store's performance to date and encouraged by the positive response from customers in the Windy City. Similarly, consumer demand for our brand continues to be high in Japan. And we have heard stories of 100-or-so person lineup, which started 5:00 A.M. on opening day of the new Tokyo store. In addition to that, we opened our London flagship store in Regent Street just today, this morning, and we're really excited about that. We're excited to build on this momentum with our next three store -- next two store openings, Boston and Calgary, in the coming weeks. And we remain highly disciplined in identifying and securing the best locations for future store rollouts. In our wholesale channel, we continue to be a bright spot for our retail partners. Across geographies, we're delivering high-quality growth by driving traffic and full price sell-through. This channel, which played a central role in brand awareness and reach, will always be an important part of our strategy. In the current retail landscape, we have a singular focus on going deeper and broader with the world's best retailers. From recommended assortment and merchandising to in-store events and digital marketing, I'm really encouraged by how well our team is working with our partners to best position our brand and continue strengthening existing relationships for the long term. In operations, we continue to support a rapid trajectory and build capacity for future growth. I recently came back from visiting our two facilities in Winnipeg, and I'm impressed by how quickly we are expanding there as well as also in our factories in Ontario and Québec. We are hiring and training a significant number of sewers each month, and we continue to innovate and implement process improvements to drive efficiencies at all six of our sites. And finally, I'd like to take a moment to thank our employees for delivering such a strong performance in the first half of the year across functions that are working together and delivering on our ambitious growth strategies on time and on budget. We are building an enduring brand for the long term, and none of this would be possible without their contributions. As John will discuss shortly, given our results in the first half of the year and our outlook for the remainder, we are pleased to update our guidance for fiscal 2018. With that, I'm now going to turn it over to John, who'll review our financial results with you in more detail.

Thank you, Dani, and good morning, everyone. As Dani mentioned, we are very pleased with our performance in the first half of the year and our outlook for fiscal 2018. Before I go through the numbers in detail, I'd like to remind you that our results are stated in Canadian dollars. For the quarter, revenue increased by 34.7% to $172.3 million, up from prior year by 36.5% on a constant currency basis. This was driven by growth across all channels, geographies and categories. Direct-to-consumer, or D2C revenue, grew from $5.5 million to $20.3 million with strong performance in our North American e-commerce business and incremental revenue from our retail stores and e-commerce sites that were not open in Q2 of last year. Wholesale revenue increased by $29.6 million to $152.1 million, driven by growth across all regions. Approximately $13 million of revenue from our order books, which was originally expected to take place in the third quarter of the year, was pulled forward. We accelerated shipment timing in response to requests from our retail partners to put them in a better position ahead of their peak selling season. Through the first half of fiscal 2018, pull-forward revenue in the wholesale channel was approximately $18 million. Consolidated gross margin expanded approximately 410 basis points to 50.4% from 46.4%. This was primarily driven by a higher proportion of D2C revenue. Within our D2C channel, gross margins expanded approximately 450 basis points from 69.2% to 73.7%, reflecting a significantly higher revenue base with our two retail stores and 11 e-commerce sites in operation. Our wholesale channel gross margin expanded by approximately 200 basis points from 45.4% to 47.4% due to a shift in sales to higher margin geographies, a lower cost of purchases in U.S. dollars and lower inventory reserves. SG&A was $36.5 million, which represents an increase of $6.4 million. This was driven by operating costs from our stores in Toronto and New York City, which were not open in the second quarter of last year, as well as investments across the business to support continued growth. In total, SG&A rose at a slower rate than sales due primarily to the benefit of an unrealized foreign exchange gain of $5.8 million on our term loan facility and the shift in timing of marketing expense to our peak selling season in the third quarter. Combined, these activities led to an adjusted EBITDA of $46.4 million compared to $33.8 million, which represents year-over-year growth of 37.3%. Before I get into net income, I'd like to discuss a couple of factors that impacted our effective tax rate, which was 16.8% compared to 20.7% in the second quarter of last year. This was primarily driven by the timing of taxable income and jurisdictions with different statutory tax rates and, to a lesser degree, the nontaxable portion of the $5.8 million unrealized foreign exchange gain. This timing dynamic was pronounced throughout the first half of the year, and we expect it to reverse over the remainder of the year. For fiscal 2018 as a whole, we expect our effective income tax rate to be approximately in line with our statutory rate of 25%. On an IFRS basis, we reported net income for the quarter of $37.1 million or $0.33 per diluted share based on 111.5 million weighted average diluted shares compared to last year's reported net income of $20 million or $0.20 per share on a 101.7 million weighted average diluted shares. On an adjusted basis, we reported net income per diluted share of $0.29 for the quarter compared to $0.23 per share in the same quarter of fiscal 2017. Capital expenditures were $9.2 million compared to $11 million in the second quarter of fiscal 2017. Spend was primarily driven by the expansion of our corporate head office, investments in manufacturing and preparations for new store openings. The year-over-year decrease in capital expenditures is related to the timing of payments for work completed on new stores and planned capital spends in shop-in-shop initiatives through the remainder of the year. Now turning to the balance sheet; working capital was $212.6 million, up $113.6 million from fiscal year-end, reflecting the seasonal buildup of accounts receivable and inventory. The growth of our direct-to-consumer channel as well as the pull forward of wholesale revenue, shortened our cash conversion cycle and enabled us to pay down our revolving credit facility. Total debt, net of cash, was $247.4 million compared to $150.6 million at fiscal year-end. We ended the quarter with $118.7 million outstanding on our revolving credit facility, and we remain quite comfortable with the flexibility to -- with its flexibility to support our operational needs. Now turning to our guidance for fiscal 2018; based on our stronger-than-expected performance in the first half of the year, we have increased our guidance. For fiscal 2018, our current expectations are as follows: revenue annual growth rate on a percentage basis of at least 25%; adjusted EBITDA margin expansion of at least 50 basis points; annual growth and adjusted net income per diluted share on a percentage basis of at least 35%. This growth rate assumes a year-over-year comparison to adjusted net income for pro forma diluted share of $0.41 in fiscal 2017 and a diluted share count of 110.9 million in fiscal 2018. Now I would like to turn it back to Dani for some closing remarks.

Thanks, John. In summary, we are all very pleased with our financial results for the first half of the year, which reflect the strength of our brand. Across our business, we're executing well, and I've never been more excited about the opportunities that lie ahead for Canada Goose. We're looking forward to updating you on our progress on our next earnings call. And with that, I'd like to turn it over to the operator to begin our Q&A session.

[Operator Instructions] Your first question comes from Ike Boruchow.

Just a quick one on the wholesale shift. So I think you guys had a $5 million wholesale shift that came -- that helped Q1, and now $13 million for Q2. Should we expect that the $18 million all comes out of the Q3 quarter? And then just to make sure, the $5 million that came -- that helped Q1, did you not recapture any of that in Q2? Just want to make sure what's going on with the timing shifts.

Yes. So Ike, I think your position on the $18 million is reasonable, that the $18 million will -- was an advanced shipment that was planned to take place in Q3. It took place earlier in the year, so that should shift into Q3.

Got it. And then just to stay with wholesale, just to follow up. So organically speaking, is there anything different in the back half versus the first half in terms of your order book? Or anything there just from an organic perspective, on the top line?

No, nothing different. Really, the shift was orders that were -- it was part of our existing order book that was originally planned to be shipped a bit later and was pulled forward. And so there's no change to that order book.

Your next question comes from Camilo Lyon.

Canaccord Genuity. So staying on the topic of that pull forward of demand shipments. Given the strength of that demand, how do you think about managing your supply chain? Are you flexing your manufacturing capacity to make more inventory? Or do you prefer to be sold out or keep that brand heat high? How do you -- effectively, how do you manage that delicate balance? And how do you view managing the wholesale inventory piece versus your own retail stores inventory?

We're fortunate that because of our Canadian base supply chain, we have the ability to be flexible. And these days, we have more inventory because we have more stores. We have to support them with more inventory, and we have the ability to be flexible. So what -- the most important thing is all the inventory we produce is good inventory. That's good for this year. It's good for next year as well. And so we can allocate that as needed to wholesale or retail.

Can you just remind us, Dani, what part of the assortment you can be more flexible on? And how quickly can you get back in stock on some of these [indiscernible]? Because you're out of stock, and you were out of stock in some key items in September. So it'd be great to know your pace of your ability to get back in stock and on what specific SKUs, if there is a limitation on those SKUs.

For sure, yes. We're always happy when things get sold out. We're never afraid to be sold out. And it's always a good indicator. We are -- all of our Canadian factories are able to manufacture pretty much all of our products. So we're able to be flexibility on all of them, except -- with the exception of knitwear, of course, which we source in the best place to make it, which is in Italy and Romania.

And your ability to get in stock, what's the timing on that? Is it a -- what's the lead time on that?

We have a strong logistics supply chain, and we're able to -- we need to balance between satisfying different -- like our different channels, be it wholesaler, direct-to-consumer, stores, e-commerce. So we move pretty quickly. And fortunately, our sales have been strong as well.

Your next question comes from Lindsay Drucker Mann.

Goldman Sachs. I had a couple of questions. Now that you have a full sort of fall season, another full fall season under your belt in your stores, I was curious, Dani, if the products that are selling well in your stores mirror the products that are selling well in wholesale. And if there's anything that you are able to glean from the more complete assortment you can showcase the consumer in your retail channels and also online about where the opportunities are to sell out the assortment in wholesale.

It's always interesting. We have our retail stores, and we have -- where we have the broadest assortments. We certainly learn things from that. All the things we're learning are great and positive and additive to our business, and we're able to help inform future seasons and wholesale-recommended assortments based on, perhaps, sometimes you do a product that sells better than we expected. And we could certainly learn things like that from our performance in our own channels. So having our own channels is great for that reason, and it helps support our business across all our channels.

So is it possible to give us a little detail on what products are selling especially well in stores that might suggest opportunities for wholesale?

Yes. We're really -- lightweight down is a category that is one that we've been producing what we believe is best-in-class product for a long time. It's been growing well for some time. And that's a category that's growing really quickly. And so there's a good example of something that we're ramping up quickly based on retail sales.

Okay, great. I just wanted to clarify, on the wholesale timing shift; do you guys consider that, in its purest form, truly just a shift in timing of orders? Or is it a function of sell-through for retailers is stronger on the floor, and so they're ordering for you because they don't want to be out of stock, and they'll potential look to chase in the December quarter? In other words, we shouldn't view this as just a pure kind of shifting of timing of sales, but more a reflection of very strong sell-through.

We're very happy with our sell-through numbers. I would view it as a shift. I mean, it is -- the existing order book is still the existing order book, and it has shifted to the left. And so I would view it that way. But we're very happy with our sell-through numbers, and I think that's the best way to look at it.

Okay. Just one last one; on your wholesale gross margin improvement, I don't know if there's a way to quantify the specific impact from currency, which you called out. And so how much was that of the benefit? And then also, when you talk about the favorable regional shift, what specifically was that?

Lindsay, we don't actually get into geographic commentary shifting on these calls. The -- with respect to the foreign currency, there were some movements in the currency and in the number of currencies. But the key point there is that we're hedged. So that you do see volatility in the top line revenue number, but it's captured in the SG&A line where we have a mark-to-market gain on the hedges.

Your next question comes from Mark Petrie.

Dani, I wonder if you could just give us an update on where you're at in terms of the strategy for China. Maybe just outline your considerations as you think about partner -- wholesale partner relationships versus stores versus an e-commerce led strategy. And when could we expect a formal announcement?

Well, we're certainly making good progress on it. It's something that we spend a lot of time here talking about and trying to get absolutely perfect. We have nothing to announce right now, but I think that there are opportunities, both direct-to-consumer and wholesale, in that marketplace. And I think that we're making sure that when we finalize our plans, that we have taken in the proper end state that we want, and we'll start the way we're planning to finish.

Okay. And then I wanted to ask also about the performance in knitwear. Could you just give a bit more color in terms of the adoption of that in the wholesale channel -- adoption and sell-through of that in the wholesale channel versus direct-to-consumer? And sort of what the takeaways are from that? And what the kind of learning's are in terms of your brand as you continue to push into more product?

For sure. We -- so we primarily sold knitwear through our direct-to-consumer channels. We -- there are few partners that, on a wholesale level, we partner with. And we experienced very strong adoption, and our products resonated really well with our consumers in all those channels. And I said that I couldn't be happier with that result, and it certainly is -- leads me to believe and it's very encouraging that knitwear is something that is the right place for us to be. And our fans and consumers believe that, and so it's going to -- we're going to continue to build those collections, and do it in a responsible way. And yes, it's always great when a new product launch as well as this one did.

Your next question comes from Simeon Siegel.

Just a quick one on the pull forward again. Are you seeing that pull-forward volume in specific regions or retailers? Or is it broad-based? And maybe any learning's there? As the brand awareness just continues to grow, do you think that pull forward might become more normalized seasonality? And then, just to clarify, with the FY18 increase, is there any change to your three-year average targets?

So regarding the pull forward, yes, it's fairly broad-based. It's across all categories, and we don't really see that changing. It's just going to be higher in the quarters that we're reporting on and lower probably in the third quarter. So the order book remains unchanged. I'm sorry, what was the second question?

Go ahead, Simeon.

Yes. Sorry, Dani. No, no, I was going to repeat the question I think you were about to answer. Just thinking about the '18 increase, any change to your three-year targets.

Yes. So thanks for the question. Obviously, I totally understand why you're asking it, and I'm certainly really happy with our performance for the first half of the year. We review our long-term strategic plan after the conclusion of each year. And if there's a need for it, we'll provide updates at that point in time. So to be clear, we don't comment on it or revise it in the interim. We think it's important and responsible to communicate with our shareholders in a way, which is aligned with how we do the strategic planning that we do for this business.

Got it, makes sense. And then, sorry if I missed it. Obviously, really nice sales growth; did you guys comment on units versus price at all or would you?

We haven't broken those out.

No, we haven't broken that out.

Your next question comes from Brian Tunick.

I guess, two questions; one, on the store openings, can you maybe give us, for modeling perspective, if we think about London and Chicago and Boston and Calgary, maybe can you give us the average size of the store? We're assuming -- or you're not assuming probably the same productivity as Toronto or Soho. But just curious about what size of the stores you're opening there. And any learning's that you've implied to those new stores? And second question, I guess, Dani, from a newness perspective, if we think about holiday this year versus holiday last year, where do you think the most newness comes from on the outer wear side? Is it style count or color or weighting? Just give us some idea of where you think the newness is.

Brian, I'll comment on the store dynamics, and then Dani can answer some of the other questions. So we do have a few learning's, of course, from the new stores. And there are some minor changes in the economics of the stores, the new ones versus the old ones. But they're not material. So just as a reminder, a few things to consider when you're looking at the stores. They're generally between 3,000 and 5,000 square feet. Our cost to enter into them from a CapEx perspective is between $3 million and $5 million. And they're profitable in the first year and paid back within two years. So they're -- those are the hurdle rates we put in place, and all the new stores should achieve those, we're thinking. Dani, were you going to follow through?

Yes. We -- our collections are always evolving. We always are diversifying our core. We have a strong, strong group of core classics in our collection, which continue to perform strongly for us across geographies and across channels. But specifically to our stores, they're performing very well in our stores. We're always adding new color waves to there. We're noticing people are -- I mean, I hear about the brushed camel style that we -- color that we have doing really well, and people really responding well to that. Our -- as I mentioned earlier, lightweight is something which is becoming -- is perceived today as part of the core even. It's growing nicely. And often, people will buy multiple styles. They'll come in, and they'll buy lightweight, and they'll also buy a warmer jacket. And then of course, knitwear is the big new thing for us. It was a controlled launch, and we're seeing it go very well, as I mentioned. So that's some color on the diversity of product offerings.

All right. And just my final question, on inventory, I think it's up 8% at the end of the quarter. How do you feel about that velocity or turn heading into your guidance for the back half of the year?

Brian, we feel good about inventory. Our working capital is in a good position. Our production processes have been going well up to the second quarter. So we're in a good position to supply our customers and our direct-to-consumer channel with products. So we feel good about exactly where inventory is sitting.

[Operator Instructions] Your next question comes from the line of Jay Sole.

Dani, so I'm really excited about the knitwear launch. Does it change your thinking at all about entering into new categories? Or do you feel like you want to spend a lot of time on knitwear before thinking about the next thing?

Yes, I am really excited about it. It's always great when a new product is as successful as knitwear has been for us. And it doesn't change our perspective on new categories at all. We're always thinking about them. I think that there are certainly opportunities for us in multiple other categories. And we're going to enter those categories at the right time and with the right product. That's the most important thing. And whatever amount of time it takes us to develop those plans and to create the perfect expression of that product for our brand or for our consumers is the amount of time it will take. So no plans to accelerate based on knitwear, but lots of runway, and we're really excited about that.

Okay, great. And maybe John, if I can ask you a question on the gross margin, the D2C channel. It was up to 73.7% in the quarter from 69.2% last year. Can you just talk about what the drivers were of that change?

Yes, a lot of it's just volume. We've got more infrastructure and growth through the channel, so it's primarily just volume and growth.

Okay. And then maybe on a last one. Just if you could put a finer point on the full year sales guidance. Talking about at least 25% now; have you given a breakdown or could you give a breakdown between how you see the wholesale sales for the year trending versus D2C sales?

No, we're not going to provide that type of a breakdown on a forward-looking basis. It's just -- we're just going to leave it at the level we have it.

Your next question comes from the line of John Morris.

Dani, you guys are doing so well in knitwear but also the lightweight collection. And I'm thinking about how you're developing the 3-season capability here. In terms of SKU count for those categories or classifications, are you continuing to plan to increase those or sort of stay with what you have currently? But also, thinking about how you're staffing merchant and design for those areas, in particular, are you expanding the team, the design team or have the need to do that? So I just kind of want to get a feel for how that's all developing directionally?

We have a really strong design and merchandising team. I'm really, really happy with their performance and with the way that they're staffed. And as the company grow, I'm sure that we'll continue to build our capabilities there accordingly. But I believe we have a world-class D&M team, and I think that, that contributes -- and absolutely what's been contributing to the success of new category launches. Sorry, what was the second part of that question?

Well, it was kind of really directionally, I'm wondering how much breadth and depth directionally you're thinking about expanding, particularly within knitwear and lightweight, the lightweight collection SKU count on -- as you think ahead and plan a year out for next year, continue broadening out. And to what degree?

For sure. So yes, we're going to address each category individually and appropriately. And we probably expect knitwear, because it was such a smaller launch, to have a greater SKU count. And we have three categories: our outerwear, our knitwear and our accessories. And within those categories, our collections, our Arctic program, our HyBridge, our Altitude and our latitude collection, our outerwear collections. And we are looking to, not necessarily -- in those categories where we're more developed, not necessarily to increase our SKU count but to optimize our SKU count so that we have the right assortment. So it's not necessarily an expansion.

And then finally, on price points for winter product on outerwear compared to last year. Is your -- are your initials or your average price points about the same? Are they up a little bit? Where do you fall out on an average basis year-over-year?

Price points were up marginally this year.

Okay. On outerwear in particular, sorry, really kind of what I was asking; but up slightly [ph].

Outerwear for next season, is that what you're talking about?

No, I'm really thinking about this, the season we're in, just for planning purposes, yes.

We did increase our prices this year from last year a modest amount, not dramatically.

Your next question comes from the line of Jonathan Komp.

Just wanted to follow-up on the 2018 guidance. John, I was just curious if you could clarify. Is the increase to the full year growth rate, the 25% or at least 25%, is that based solely on what you saw in the first half? Or then you also kind of changed the expectations for the second half?

That's on the full year, so it's the full year. So it takes into account -- and again, there were a few factors in the first half. We had some pull-forward in revenue, so that will result in that -- the revenue that was pulled forward not occurring in the third quarter. So it's a full year item.

Okay. And I'm just wondering, so if I adjust the first half growth rate for that pull forward, looks like total revenue was up maybe 27% or so; so the second half has kind of implied kind of mid-20% growth. Is that the right way to think about it on an underlying basis?

That's the same amount. That's the right way to think about it, but remember, there was this $18 million that was pulled forward in -- from the third quarter into the second and first quarter, so that will come out. So that's the right way to look about it, I think.

Okay, great. And then just my other question, you talked a little bit about the learning's from the D2C stores you've opened. I know it's only been a few weeks now, but I'm just curious when you look at the Yorkdale store, if you have any learning's at all about whether or not the initial volumes you saw really were more of a honeymoon impact last year, that you'd come down from this year? Or you think sales are kind of stabilizing and even growing on the initial performance from last year.

We're really happy with how Yorkdale is performing. These are the only new stores been open for a full year now. I mean, it's a -- we're talking about Q3 numbers and results, so we'll comment more on that in Q3. But happy to share with you that we're very happy with how we're doing.

Your next question comes from the line of Jim Durran.

Just wanted to focus on replenishment and in-house production. So on the replenishment side, if I'm a major customer of yours on the wholesale side and I'm out of stock on an item, like how quickly should I expect to be able to get a replenishment on a, say a parka, which is -- where a lot of your tonnage is?

I think that, honestly, that depends on the style that you're looking for, and what warehouse it's in, and how quickly we can give it to you. We're not chasing sales, but there is always opportunities for reorders, too.

And with the hiring you've been doing, plus the purchase of one of your third-party suppliers, like, is in-house production gaining in terms of penetration now? Like, you're sort of in the 30% range, I think, when you first came public. Can you give us an update on where you'd be now on a run rate basis?

Anecdotally, for sure, from a numbers perspective, we'll update those at -- when we -- at the appropriate time when we do our internal calculations, probably at year-end. But certainly, I would say that we are making some great progress towards our goal of increasing in-house capacity. And I'm really proud of the way we've been able to build in-house training schools and a strong funnel of really highly skilled sewers and craftsmen, who can produce our products. And I believe that our strategy is working, and I look forward to giving you numbers when we have them.

And do you have a sense of, so far, what impact in-house production gains might have impacted your margins?

Don't have any numbers to provide you on that right now, but I feel good about the whole thing.

Yes, there are a number of factors to consider in something like that. For example, how much we end up paying to acquire the manufacturing, those types of things. So there is a number of factors. It hasn't been significant.

Your next question comes from the line of Omar Saad.

Can you talk a little bit about weather? I know it's still really early in the season. You guys obviously are seasonal -- it's a seasonally driven brand, to some extent. The fall started a little bit cooler, then it warmed up, and now we're getting cold again. Are you guys seeing those trends in your business, that weather is having an impact in sell-through with your D2C channels? Or you're still so young enough where you kind of just plow through that, and the weather changes and drops aren't really what moves the needle?

No. Over the years, regardless of what the weather has been, cold -- cold in one part of the world, warmer in another part of the world, perceived cold winter, warm winter, it's never prevented us from hitting our targets or for our business continuing to perform well. And so I think the same holds true this year. And the climate around the world is more varied these days than it's ever been. And we're not -- we don't see that as a major factor to impact -- that will impact our ability to achieve our goals.

Your final question comes from the line of Oliver Chen.

It's Oliver Chen from Cowen and Company. I was curious about your longer-term views for segmentation across your wholesale partners and your direct-to-consumer, as you're thinking about how to drive specialness for each, and would it make sense for the future of the brand and tiers or breadth diversification. And the second question we had is, as you're thinking about Net Promoter Scores and awareness builds and customer satisfaction, what are some key attributes you're monitoring? And along those axis, just to embrace authenticity as well as think about a combination of growing new customers versus being -- keeping your existing customers very impressed and surprised and delighted.

Yes, thanks for the question. I mean, from a product segmentation point of view, all of our -- as I've mentioned before, I mean, all of our wholesale partners are very important to us, and we work with each of them to create especially -- to create a right Canada Goose environment in their stores that will be the appropriate environment for Canada Goose and will also become a destination. And as part of that, we work with each of them on special products from time to time that we're able to create, so that every retailer can have their own distinct point of view. And from an NPS point of view, we're really happy to -- I'm happy to say the NPS scores that I've we have seen have been really high, and they continue to be really strong; and that's super exciting for me.

And it really seems like you're hitting on all cylinders. Did you have any thoughts about what concerns you most? Or where are you spending most of your time in terms of prioritizing the biggest opportunities because there is a lot of different opportunities happening?

Yes, there really are. I mean, we have a really strong strategic planning process, which, I think, keeps us -- it allows us to -- works really well for us in terms of how we prioritize our business. And we're really focused -- I mean, growing fast is a lot of fun, and it's also a challenging thing. So we're focused on keeping our eye on the ball, and making sure that we deliver our plans on time and on budget; and so far, so good.

There are no further questions queued up at this time. I'll turn the call back over to Dani Reiss.

Thank you. Yes, so everybody, again, thank you so much again for joining us. We really, really appreciate your interest in our business and following us. I feel like it's too early to wish you all a safe and happy prosperous holiday season, but since I'm not going to speak to you formally again until after the holiday season, I do wish you a safe and happy and prosperous holiday season. So thanks for joining us today, and look forward to staying in touch.

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