Canada Goose Holdings Inc. (GOOS) Q2 2019 Earnings Report, Transcript and Summary

Good morning. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Canada Goose Second Quarter 2019 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. I would now like to turn the call over to Patrick Burk, Senior Director, Investor Relations. Please go ahead.

Thank you. Good morning and thank you for joining us today. With me are Dani Reiss, President and CEO and Jonathan Sinclair, EVP and CFO. For today's call, Dani will begin with highlights of our second quarter performance. Following this, Jonathan will provide details on our financial results and our updated outlook for fiscal 2019. 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, includes forward-looking statements including plans for our business and our updated outlook for fiscal 2019. 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 appear under the headings Cautionary Note Regarding Forward-Looking Statements and Risk Factors in our annual report on Form 20-F, which is also filed with the SEC and the Canadian Securities Regulatory Authorities. It is also available on the Investor Relations section of our Web site at canadagoose.com 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 the 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. Any non-IFRS financial measures referenced on this call are reconciled to the most directly comparable IFRS, measures in the table at the end of our earnings press release issued this morning, which is also available on the Investor Relations section of our Web site canadagoose.com. With that, I will turn the call over to Dani.

Thank you, Patrick. Good morning everybody and thank you for joining us today. I have always believed that a great idea without great execution is just someone else's success story. At Canada Goose execution is a core competency. This quarter was no exception. When I say that, I'm not only talking about executing in here and now, truly great execution also means setting ourselves up for winds down the road and we are delivering incredible results today, we are also making real progress on initiatives that will carry us well into the future. This duality is at the heart of our success and how we manage our business. It’s only been three months since we spoke last, but our team has accomplished a staggering amount in the period of time. And here are some of the highlights. Our financial performance was outstanding continuing our momentum from the first quarter we increased total revenue by 33.7% to $230.3 million and we delivered strong earnings growth while also making significant growth investments. In terms of product, we continue to strike a great balance with inherited and newness. The reception to new styles has been very strong with the Olympic Park leading the pack. Long standing icons which are the foundation of our business also grew significantly. We have made great progress on our retail store opening program for fiscal 2019 with three of our five new locations open and we are excited to be bringing our world class retail experience to these markets, the fourth location which we will be opening later this week. And we are up and running in greater China, telling our story and building the foundation for a successful business for decades to come. Our products are now available on our flagship store in T-Mall's luxury pavilion and our first retail location at the IFC Mall, Hong Kong. Just last week we also opened a pop-up store in Beijing at the luxury hotel opposite house [indiscernible] to activate and see the market ahead of the opening of our fifth store in that city. To meet growing consumer demand, our manufacturing team continues to aggressively invest in Canadian manufacturing and scale our in-house capacity. We officially opened our third factory in Winnipeg in September and we're joined by Prime Minister Trudeau for the opening event. Through a staged expansion this will become the largest of our seven wholly-owned production facilities. We've hit the ground running with over 300 employees now working and we expect to add an additional 700 in the city over the next three years. We are proud of our role in creating manufacturing jobs in Canada and to be doing it in Winnipeg a place we think of as our second home. Our team continues to work diligently to identify other opportunities to further increase our in-house manufacturing capacity. Lastly, we took our first step into the exciting global footwear category with the acquisition of Baffin. This is a dream acquisition for me. As I've been watching and admiring Baffin for many years and I know them very well. I believe this is the right move for us to be able to start exploring the category look to ultimately launch Canada Goose footwear. Looking more closely at our results, we continue to significantly grow our wholesale business alongside the great success of our direct to consumer channel. This is the biggest sales quarter of the year for the wholesale channel and we increased our revenue to $179.9 million from $152.1 million. Beyond the surface of this achievement, I think how we are achieving it is the most important thing to take away. In assortment and merchandising, we have made a concentrated effort to add newness and depth to drive momentum going into our peak season. We delivered and strategically placed new fall and winter styles in seasonally relevant colors earlier in the season and a successful lightweight down line is now a core part of our wholesale offering year around. As an experiential brand, our team is also doing great work elevating our presentation and storytelling around the world, exploring and shopping for Canada Goose with the retail partners naturally different to our own store or e-commerce sites. But the quality of the experience must be the same. We are not just putting jackets on racks and we are working closely with our true partners to raise our game. We are also going deeper through retail theater and experiential events to drive awareness and affinity and to support specific product initiatives. We executed a number of new consumer activations. These include high impact windows and visual installations strategically placed pop up environments and engaging events often outdoors with fewer people and friends of the brand such as Polar explorer Ben Saunders. As a brand built on real stories and products, the work we do with our partners in these areas is an effective way to differentiate ourselves and reinforce our unmatched authenticity. That focus in Q2 on delivering exceptional experiences also applies to our DTC channel. The response to our first two cold rooms in Short Hills and Boston Stores has been phenomenal. Our fans are truly our best brand ambassadors and these fun moments become personalized stories, shared online, amplifying our reach and driving awareness. This is also a natural extension of what our brand is built on an authentic product that works. People tell me all the time trying on, Canada Goose jacket was the first time that I ever truly felt warm in cold climates, with our cold rooms we are creating that moment even before they purchase. It's as if it's a strategic and highly effective and we are reinforcing that we make the best the warmest jackets work in the coldest places on earth. Authentic product that works also at the heart of our decision to acquire Baffin. We are building an enduring brand for generations to come and getting footwear right is an important part of that vision. We also recognize that it is a business, a distinctive business to apparel and it is difficult to cross over. Many others have chosen the faster and easier path of licensing or other ways but struggled to find relevance. We would not be where we are today if we had followed someone else's playbook and it is so important that we continue to charter our own course with the best in class products. Buying the company that makes the best of warmest boots is a -- it's right first step for Canada Goose in this exciting journey. Baffin is the still mantra of footwear in the coldest places on earth and our products have lived alongside each other for decades. We will leverage back an innovative technology and infrastructure as well as a world class expertise of Baffin President, Paul Hubner to inform our strategy and ultimately launch Canada Goose footwear. When it comes to offering structure, what we are not doing with Baffin is also important to take away. This is not a merger. We are not turning back and into Canada use or vice versa. We are distinct brands with different distribution channels and different customers. That is not going to change. Paul and his team have built a thriving business and reputation in the marketplace and they will continue to manage Baffin on a standalone basis. Of course, we will make sure that Baffin access the right resources it needs to continue its success and to realize its full potential. Before I turn over to Jonathan, I want to reiterate that our execution in the first half of fiscal 2019 was exceptional. We are in an amazing position we are into our peak selling season operational and financial performance in both channels has been outstanding and we have done this while also making major progress on key longer term initiatives. With that, Jonathan will now go over our financial results with you in greater detail.

Thanks Dani. Good morning everyone and thank you for joining us. Before I go through the numbers in detail, I'd like to remind you that stated in Canadian dollars, I shall comment on the quarter and then update you on guidance. As Dani mentioned just now our execution in the second quarter was exceptional across the business revenue increased by 33.7% to $230.3 million, 31.5% ahead on a constant currency basis. Relative to last year, the Canadian dollar depreciated in comparison to the U.S. dollar, euro and pound and that benefited our reported top-line. Our wholesale channel was a standout performer. In our largest quarter for wholesale shipments in the fiscal year, revenue grew to $179.9 million dollars from $152.1 million; these are higher order values from existing partners and earlier shipment timing. In response to customer requests, we fulfilled a higher proportion of our total seasonal Fall Winter order book in this quarter relative to last year. DTC revenue increased from $50.4 million from $20.2 million or 21.9% of total revenue compared to 11.7% last year. The strong performance of well-established retail stores and e-commerce sites in Canada and the United States and incremental revenue from recently opened stores in Calgary, Cargo, Boston and London where all significant factors. In terms of retail experience, it's also been great to see the very positive guest feedback we've received on our two very cold rooms in Boston and in Short Hills. Our consolidated gross margin expanded to 55.8% from 50.6% last year. This was primarily due to a higher proportion of DTC revenue as well as underlying gross margin expansion in each respective channel. In our wholesale channel, we saw gross margin expansion to 50.4% from 47.5%. This was driven by production efficiencies from manufacturing and the reduction of duties on goods sold due to the CETA Trade Agreement between Canada and the EU. In DTC, our gross margin expanded to 75.2% from 73.8% last year primarily due to the same production efficiencies which benefited our wholesale margin. Also operating income was $80.1 million an operating margin of 44.5%. This compares with $60.1 million or an operating margin of 39.5% last year. SG&A has also decreased as a percentage of revenues on a significantly larger quarterly revenue base. DTC operating income was $22.7 million and operating margin of 45%. This compares to $6.6 million last year or an operating margin of 32.4%. Building on the momentum from the first quarter, this still off peak retail productivity in both well established and new retail stores continued to accelerate, driving lower total SG&A channel costs as a percentage of revenue. We continue to be very pleased with the performance of each of our stores. On an allocated corporate expenses with $34.2 million up from $16.2 million last year. This was driven by planned growth investments in marketing, corporate headcount and IT including the expected build out of our Greater China business unit and the commercial launch of our DTC channel in that region. We also incurred higher professional fees and other costs relating to public company compliance. Unallocated depreciation and amortization was $3.6 million compared to $2.3 million last year driven by the retail opening program and upgrades to our manufacturing capability and capacity. Combined our channel operating incomes and corporate SG&A resulted in a total operating income of $65 million compared to $48.2 million last year. On a non-IFRS basis adjusted EBITDA was $70.9 million compared to $46.3 million. Net income was $49.9 million or $0.45 per diluted share compared to $37.1 million or $0.33 a share last year. And adjusted net income was $51 million or $0.46 per diluted share compared to $32.8 million or $0.29 a share last year. So now turning to our revised guidance for fiscal '19. Based on the strength of performance across the business with a particularly significant contribution from the DTC channel, we are raising our fiscal '19 financial guidance. We currently expect annual revenue growth of at least 30%, adjusted EBITDA margin expansion of at least 150 basis points and annual growth in adjusted net income per diluted share of at least 40%, this compares to our previous guidance of at least 20%, 50 basis points and 25% respectively. Our revised guidance assumes annual wholesale growth in the high single digits as well as the opening of five new retail stores as mentioned previously. In terms of adjusted EBITDA margin expansion, we continue to expect a positive but less pronounced increase relative to last year. This is due to the SG&A growth investments in IT and our Greater China business unit as well as variable SG&A fees that we paid to our operating partners on incremental revenue from both T-Mall and our retail stores in Hong Kong and Beijing. As a reminder, this guidance incorporates the impact of the Baffin acquisition which is not expected to have a material impact on our adjusted earnings in FY '19. In summary, our financial performance and progress on our key strategic initiatives has been outstanding in the first half of fiscal '19. Strong growth and profitability in both channels has funded and more than offset a planned program of significant growth investments which we have delivered on time, on budget and with results above management expectations. Financially and operationally, we are entering our peak selling season from a real position of strength and we are excited, optimistic and confident about the remainder of the year. Now, I will turn the call back to Dani for some closing remarks.

Thank you, Jonathan. As I said before, we delivered exceptional results today and we're building a very strong foundation for the future. I am truly, extremely proud of what our team has accomplished and could not be more excited about what's coming next. And with that, I will turn it back over to the operator to begin our Q&A session.

Thank you. [Operator Instructions] Our first question comes from the line of Michael Binetti from Credit Suisse. Your line is open.

Hey, guys, congrats on a nice quarter. And let me start with just a quick math question Jonathan. On your numbers, it looks like you're guiding wholesale flat to even slightly lower year-over-year in the second half compared to up mid-teens in the first half, and then, you mentioned the shift. Would you mind helping us size the wholesale shipment timing shift on 2Q and how that impacts the second half of the year?

As I was saying before, we delivered a significantly higher proportion of the order book in Q2 relative to last year, obviously, that's a function of delivery timing. It's a shift to the left and there is a lower level of unfulfilled orders going into the third quarter whereas Q4 is primarily driven by late season replenishment and indeed the shipments of spring summer [indiscernible]. We've satisfied larger amounts of our wholesale obligations compared to last year. But it's a temporary time in fact that's why we encourage you to look at the channel annually in line with our guidance which we have increased on wholesale in this update.

Okay. Just Dani thinking a little more bigger picture, maybe you could help us with what you're learning so far in China as you get into that. And I guess, is that any sign, I know initial concerns you guys announced, we are all able to witness the tourist business you have at that U.S. and Canada stores from a Chinese tourists customers or any signs of cannibalization there or how are you thinking about planning for cannibalization and maybe just your level of involvement with Baffin and how you see that rolling forward?

Yes, sure. Thanks Michael. China has been going to quite a plan and high level is definitely from recognition that we have the right strategy and that we're getting a local execution right and that doing so is so important. And we are definitely over investing on that, our team there is great. It's on the ground with offices open and things are moving very much in the right direction. We're not running to China from Canada, we're in China from China and that's really important, observations I can share, we knew going into brand awareness and demand were very high. Now though we are in the market we see significant potential to further move the needle and spread our authentic message and build our brands there and our local marketing team was working hard to share a story on our heritage and build our brand. We've since opened in both T-Mall and our Hong Kong store have [Technical Difficulty'] and we're very happy with how things are going in that marketplace. I think that to speak to cannibalization, I don't know from all angle, evidence that I have and people I've spoken to the building of a brand in China and a greater brand awareness would build there does not cannibalize our tourist business in the rest of the world. And in many cases has the opposite effect. So that addresses the China question. In terms of Baffin, to restate your question on that…

I am just curious what you're -- it sounds like you've known -- something you've known the brand for a while. I'm just curious what your level of involvement is on Baffin and I guess how you see transitioning from learning with that brand into bringing your own capabilities to market it with Canada Goose?

Yes. I mean I think that to be very clear what my role; my role was and my time will continue to be dedicated to Canada Goose. I know we have so much brand power here and with runway and my focus is on both the Canada used brand. As I said before, I mean this is not a merger and Kennedy and Baffin have distinct channels with all different customers, we have [indiscernible] and that's not going to change. They've got a great grip of us, and then Paul Hubner is a great foot vision and I'm very happy that he has joined our team and he's going to help us inform our strategy for Canada Goose footwear. And I'm really excited that this is the first step in us to be able to bring to market the best in class footwear products for Canada Goose, which I think is -- I think this is the right way of doing that. And of course, at the same time we're also going to make sure Baffin has resources that it needs to continue to thrive and to become the best version of itself.

Thanks a lot guys.

Our next question comes from the line of Ike Boruchow from Wells Fargo. Your line is open.

Hi. Good morning everyone. Dani, Jonathan, congratulations great quarter. Two questions I want to ask on the DTC segment. I'll throw it out there for the team. So I know you guys don't talk to specific store performance until they get that. But given the upcoming openings in the third quarter especially in Shanghai and Hong Kong that market is very different relative to North America in some cases for a lot of other brands much more productive. I guess could you just give us an assumption at a high level, are those doors assumed to come in at lower productivity versus what you already have for the average fleet, higher productivity in line? I'm just kind of curious how you're thinking about those openings and what you're kind of thinking about how it impacts the P&L?

The stores that we're opening -- we've opened Hong Kong already. We've got Beijing coming on line initially as a pop-up as Dani said. Remember the two things about them, one they're going to be -- cold starts in those markets in the sense that we are going to be opening our first monogram presence in each of Hong Kong and PRC with those stores. So in the early days, it's probable and it's natural that there would be a slightly lower level of revenue productivity out of the gate. On the other hand, the thing to remember is, we do have variable costs as a percentage of revenues payable to our partners in that market as well which means that the early stage EBITDA from those stores won't be at the same level they might be in another market. We are right at the opening gate. I'm very confident about our position in those markets very confident in the stores.

Good. Very helpful Jonathan. Thank you. And the follow up is, just the DTC commentary in the release, I think you talk about sales productivity further accelerating into strong performance at a well established retail stores. I assume this means that your comp sales performance is compelling and strong. Any chance you could elaborate on some of those comments you have in the press release?

I think you understand there's a limit to what we do talk about on this. However, what I would say is, we're looking at the DTC channel holistically and in the quarter both top-line and the profitability metrics were just outstanding. We've seen revenue grow by $30 million in the period and generate an operating margin of 45%. And what frankly is still not a peak quarter. So it's really an outstanding performance in a soft peak period and a significant improvement from last year 32.4%.

Got it. Congrats.

Our next question comes from the line of Brian Tunick from the Royal Bank of Canada. Your line is open.

Great. Thanks. I'll add my congrats as well. I guess, couple here, first, we were curious about the wholesale gross margins. I think originally you had said, you think there's a below 50% gross margin business a longer term and we were just ,wondering I guess given the margin progress you talked about today year-to-date, do you think that this new rate is potentially a new level for the business? Or is there more transitory issues around duties, so first question is, what do you guys think about the wholesale gross margin potential? Second question is you guys talked about a 26% EBITDA margin, I think targeted by -- I think FY '21 and it looks like you'll be above that this year. So just maybe some puts and takes on what you think Jonathan maybe the margins can look like beyond this year? And then, our final question is inventory. I think last year at this time and during the second half inventories were only up 8%. And I think this year they're up 46%. So just wondering if that changes your ability to chase demand at all Dani into the back half or is that more just timing shifts on store openings? Thank you very much.

I'll deal with the first of those two, and then, [indiscernible] to Dani. So on the whole wholesale gross margin has clearly increased and we've been very, very pleased with how that's gone. Partly that's due to an in-house -- increased in-house manufacturing efficiency. I've also called out the lower import duties on goods sold into CETA. You also get a lot of natural variability due to shifts in FX rates, geographic mix input costs and so on and so far this year those have all lined up to our benefit. So I think we're very happy with how that's tracked, but we'll learn but there can be mix factors around sales to different customers, which have different margin profiles and that's all factors into the guidance we've provided. Okay. So that's the first point, I think we've been very pleased with how our EBITDA margins have evolved this year. And I can see why you're asking for longer term sort of perspective on it. But it's not really a consideration or conversation at this point in time. We're only two fiscals into a three year outlook and I think with -- at this stage it's probably a bit too -- it's a bit too soon to say. I think you expect us to update that in due course. When it comes to inventory, we do have a very healthy level of inventory. We also have 11 stores by the end of this quarter compared to five last year, 12 Web sites compared to eleven last year. So there is a natural level of growth in the inventory. But I think that just that's consistent with the sorts of levels of revenue growth and network growth that we're talking about.

Super. Thanks very much. It's very helpful and good luck for the holiday season.

Thank you.

Our next question comes from the line of Omar Saad from Evercore ISI. Your line is open.

Good morning. Thanks for taking my question. Great quarter. As you stand on the precipice here entering the Chinese market, would be great if you could help give us a sense of -- what percentage of your existing business, you a sense it's a Chinese customers already, is it single digits double digits? And I also was wondering if you could give us some insight on the performance in your product lines logo versus non-logo. I know you have the black and the no desk options with the logos now. And then, my third question is production capacity, with the new plant coming online, when that ramps up fully what percentage will you be on manufacturing at that point and how much capacity does it increase in terms of your ability to produce products for consumers? Thanks.

Thanks for the questions. In terms of the last one first from a pricing capacity point of view and we've been consistently increasing our capacity not only our overall capacity but also our percentage of in-house capacity. And we have plans to continue to do that. And as we do that, it's going to have the expected positive impacts on our business. And I believe that's one of our core competencies and the opening of our factory in Winnipeg recently reaffirms that. And we continue to look for other opportunities there. So in regards to China, I mean we don't -- end of the year, we will break our percentages in terms of what percentage of sales in what markets, so only half way through the year. I'd say the China is doing -- we're very happy with our progress in China. We're very happy with our execution against our strategic plan. We are very optimistic about how that's going to roll out and how and anyone how the excellent execution to our team has provided will lead to the results that we're looking for.

And on the logo and versus down logo black, no disk?

I think that -- it's great to have a variety of product that's why we do and different view points. It's a personal choice and that's -- we're happy that we're able to provide that sort of choice for all sorts of different people and customers and all the product lines are doing well. Our Fusion fit is doing business very well in Asia, Black Label as well, the classic woodwinds, the dust as well, there is no one dominant style, it's aired on Logo choice in that marketplace.

Thanks Dani.

Thank you.

[Operator Instructions] Our next question comes from the line of Mark Petrie from CIBC. Your line is open.

Hey good morning. I guess we're just over a year in terms of the second wave of stores. Wonder if you can just sort of talk about the performance of that tranche versus the first tranche? And maybe just your latest thinking in terms of how quickly you want to add stores and potentially alternate kind of store models to maybe accelerate the ability to interact with consumers in a bit of a different way? And then, I guess related to that how do you balance or think about sort of going deeper an established a successful market as opposed to continuing to add stores in new markets?

I think if we start this by sort of the beginning of the question, which is around the store front. We've been really pleased with the performance as I said of all of our stores. Each of them comes out of the gate with great economics and we are seeing all of our stores meet and beat expectations. So we are very pleased with how that's developing. I think -- but, the other thing that I'd remind you is, that we've talked about sort of moving towards 20 stores in FY '20. That's not something that we're changing in terms of our direction of travel and the beauty of being where we are in the cycle, if we can pick really excellent space in each locale where we choose to just situate the store. So we remain very excited about the prospects for the development of retail without physical retail. Well, we're really just at the beginning of the journey.

And sorry just in terms of the potentially alternate models, I mean in Shanghai you started with a pop-up presumably that evolves quickly to a full blown store, but is that something you want to consider or would be potentially a bigger part of the strategy going forward?

We were going to look all sorts of different strategies and I'm really, really happy that the initial strategy has been as successful as it is and naturally any company will want to pursue other things that might work for our brand. I think that the pop-up in Beijing was a great way to introduce the market to our bricks and mortar presence and the opening of the permanent stores, in the near future it's going to be even more powerful. We're an innovative company and we like to think ahead because we have a lot of plans that we look forward to sharing with you in the future, but we're at the moment we couldn't tell you enough about how excited and happy with where we're at today.

Okay. Thanks for that. I'll get back in the queue.

Our next question comes from the line of James Allison from Barclays. Your line is open.

Good morning. Dani in your opening remarks, you talked a little bit about experiential beyond that you're trying to elevate with your retail partners. Can you talk a little about how you see this materializing, are you thinking it's more shop within shops higher density of media fixtures or a pop-up activations. Any color there would be great?

Yes. I think it's important that in any environment in which Canada Goose exists whether it be a wholesale environment or our own direct retail environment that we show up in a way which is representative and reflective of our brand and our consumers will have a great experience. I think that's really important especially for our brand especially for our fans where they know -- where they want to know and learn and interact with the real stories and the real authenticity that our brand offers in a way that I believe is unmatched. I think that things like cold rooms and the way we've innovated and input those experiential factors into our stores have really elevated the game. And I know anecdotally that consumers in our stores. A very high percentage of consumers go into stores -- into our stores with cold rooms -- user cold rooms and in that -- they've -- the experience they enjoyed, but they've also shared it and that's help build brand awareness for us at the same time. So I think that you could -- you should expect us to continue to look at ideas like that and we're really we have -- how that one has performed for us for example.

Okay. And then just quickly on Baffin, are you able to provide any financial metrics on where Baffin is currently just revenues margins et cetera?

This is Jonathan. I think in relative terms Baffin is a much smaller business than Canada Goose. As a result, it's not material to the financial outlook for the three metrics that we guide on. And that said, we fully accounted for it in the revised increased guidance that we provided contextually relative to Canada Goose, it does have a much higher proportion of wholesale revenue which implies a lower margin threshold.

All right. Thank you.

Our next question comes from the line of Alexandra Walvis from Goldman Sachs. Your line is open.

Good morning. Thanks for taking the question. We were wondering if you could give us a little color on the differential in growth rate between the different regions. So USA growing a little bit faster than Canada? And then as a follow-up on the international business, there's been some movement in the growth rate over the last few quarters. I wonder if you could give us a sense of the underlying growth rate in that region. And given I know there's been some timing shift there as well. Thank you.

Remember that in each of our regions we have a different blend of wholesale and DTC. So if we look at Canada for example the growth rate that you see this quarter is a function of the wholesale shift in timing because in Q1 we will shift a greater proportion of orders to Canadian accounts relative to last year and that naturally reverses in the following quarter. As a result, for example if you look there, you look at the six month growth rate, it's 25.7% in Canada which is much more representative of the underlying growth demand. So what you see quarter-to-quarter is typically distorted or that noise level in it from some shipment type as well as from the underlying level of growth in the business. So what we are seeing is strong underlying growth both in comparable and total terms in each of our regions because what we do enjoy in this business is very strong brands salience around the world.

Great. Thank you. And then, one more question for me. As you look at product availability at your retail partners and how that's expected to trend through the season? What are your expectations for that? I'm thinking here of how last year some of your retail partners had insufficient product as we got through to the end of the holiday season. Are you planning to ensure that isn't the case this year or is some degree of scarcity likely again?

I think that the scarcity factor that exists to their brand is to recover the demand that exists in the marketplace. And we are very happy with the growth rates that -- and the rate at which our business is growing top-line and bottom-line. We're happy with all of that. And surely there's more inventory available this year. As Jonathan mentioned earlier we also have more of our own bricks and mortar stores this year. We have more inventory available for those stores and we are not afraid to be sold out. I think that's a really important message and I'm happy to reinforce. I think that's being sold out is a good thing for business and I think that sometimes people are being businesses lost sight -- businesses have lost sight of that and have had too much inventory and I think that it's getting cold out there. I'll go grab the parker pretty soon.

Thanks guys. Thanks so much.

Our next question comes from the line of Camilo Lyon from Canaccord Genuity. Your line is open.

Hi guys. Add my congrats as well on a fantastic quarter. Just following up on the last question, maybe asked a little differently, within the wholesale guidance of high single digits for the year, Jonathan or Dani, can you talk about what level of reorders you're baking into that assumption whether it's any level of reorders given the earlier shipments or going to normalized levels of reorders if there's some sort of quantification around that. That would be great.

There were three data points that are really relevant here. First is, we've got a lot more inventory than we had a year ago. The second is that we've raised our total revenue guidance and the third is, we've raised our wholesale guidance. So we're clearly moving into this coming quarter and the fourth quarter in good shape.

For sure. I will add one thing to that is that we have the -- we are in the great position of being out to pull the levers of where we place the inventory, right? And to the extent that where we are -- we can make that choice and whether that be wholesale or retail and, of course, our retail stores are very important to us as our wholesale.

Got it. And my second question Dani, as we sit here look back over the last year or so you've had the successful launch of knitwear, you're now adding Baffin to the portfolio, assuming gets you an entry into a different category. You think that you are in the major categories that you want to be and will want to be in for the next five years or are there other categories that you would consider entering in, so what are those?

There are certain other categories, I mean even going back to the prospectus that we issued publicly, listed our categories there. I think that for the time being we're very happy with the categories that we have on our plates to develop. And as you know, we are only interested in producing best in class products in any category that we enter. And we're really focused on the ones on our plate. I think that those opportunities themselves are significant for something that is -- the category that we've been asked about and that we've wanted to do for such a long time and the opportunity to be relevant in that category in a meaningful ways is really exciting. And I don't think that -- I think we want to focus on those for the moment. But beyond that there -- for sure still there are opportunities and we'll get to those when the time is right.

Got it. And then, if I could just sneak one more in on wholesale door expansion if you could just update us on your views on door expansion in the U.S. on the wholesale side versus growing within the existing doors that you're currently selling?

We continue to be -- happy to go deeper with the doors that we have and we -- although there are plenty of opportunities to expand doors that's not the way that we look to grow our business and that's not the way we look into our business.

Perfect. Good luck in the holiday season.

Thank you.

And our final question today will come from the line of Jonathan Komp from Baird. Your line is open.

Yes. Hi. Thank you. I wanted to ask about some of the newer categories and maybe first if there's any updates or metrics you can share around knitwear and the performance there? Then also Dani just on footwear, any additional thoughts on kind of the early vision you have there for the brand and even whether or not there would be a product that you would see yourself manufacturing as a company or just any kind of initial thoughts there?

Sure. Our new categories, knitwear, spring products, swimwear, rainwear continue to resonate with their consumers and continue to grow. And we're very happy with the rate which they are growing. And they are growing off a small basis and that's the way we are happy that -- that's the best way we built it and they keep growing, so really happy with that. Footwear, I said earlier, I should not be -- it is a super exciting category. It's a large global category. It's something that -- it's something that is a natural complement to our brand. And I think that we can produce some phenomenal industry leading boots and that's our objective. That's the plan. And we're going to put together a strategic plan to back that up and we're going to execute against that the way that we are also proud of being able to do.

Understood. And maybe just one product related follow up, I know globally some of the other luxury brands have shifted, chances are a little bit recently on their use of the animal products and fur and I'm just wondering if there's been any change in your customer appetite or product mix or anything like that or any kind of change in your attitude or maybe not?

It can be used for a function -- first random use for function first. The most important thing to ask is the -- all of our materials or sources ethically responsibly and they are and that's what's important to our consumers as well and it continues to resonate with them too. And so all of our policies are available on our Web site.

Understood. Thank you.

I would now like to turn the call back over to Dani Reiss for closing remarks.

Awesome. Well, thanks, again guys for joining us for today's conference call. Appreciate the time. I'd like to say Happy Thanksgiving to all of our American friends listening today and very much look forward to catching up again when we report our third quarter results in a few months. Have a great morning. Good day. Thank you.

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