Canada Goose Holdings Inc. (GOOS) Q4 2019 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 Fourth Quarter 2019 Earnings Call. [Operator Instructions] Thank you. I would now like to turn the call over to Patrick Bourke, Senior Director, Investor Relations. You may begin your conference.

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 the highlights of our fiscal year performance and then review the priorities we are focused on in fiscal 2020 and longer term. Following this, Jonathan will provide details on our financial results and our 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, includes forward-looking statements, including plans for our business and our 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 appear 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 SEC and the Canadian Securities Regulatory Authorities. It is also available on the Investor Relations sections of our website at www.canadagoose and in the earnings press release we have 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 measures presented today, should not be considered 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 measures in the table at the end of our earnings press release issued this morning, which is also available on our Investor Relations website. With that, I will turn the call over to Dani.

Thanks, Patrick, and good morning, everyone. I've often said that execution is a core competency here at Canada Goose. We entered this year with a very ambitious growth agenda, our biggest ever and we have surpassed it with flying colors. We accomplished in a single year at Canada use often feels like it would be 5 or 10 years at many other companies. In fiscal 2019, was no different. We have made massive progress against all of our key initiatives and I am excited to share the highlights of those with you. Our global platform has never been stronger. In addition to continued growth in Canada, we have made great strides in developing larger international markets. We grew annual revenue by 36.3% in the United States, and by 60.5% in Rest of World. Notably, this includes our very successful expansion in Greater China, which is the world's largest luxury market. In just one year, we've built a really strong local team and the commercially launched our Direct to Consumer business there. We are thrilled with our year one performance, and we plan to continue our expansion with three new retail stores in Greater China in the upcoming year. In just five years, our DTC channel has reached $431.3 million in annual sales, and just over half of our total revenue at 51.9%. To achieve this, with only 11 stores open today, we're also delivering double-digit wholesale growth is unprecedented in our space. This is grounded in disciplined and balanced with which we have built our innovative multi-channel distribution model. We are adding newness, depth and diversity across our offering and building capabilities for the future, along with continued leadership and innovation in parkas and lightweight down jackets, we are seeing great results in newer categories. Across our fall/winter and spring collections, we are developing new generations of hero products to add to our very strong core, and we took our first step into the global footwear category with the acquisition of Baffin. This provides us with valuable expertise and infrastructure to develop a separate Canada Goose footwear collection in the next few years. Lastly, we continue to rapidly scale our in-house production to increase capacity, support growth and drive efficiencies. In the past year alone we on board just over 1,000 new manufacturing employees and we opened two new facilities, one in Winnipeg and one in Montreal. And all of this was off of a much larger - with off of much larger unit numbers, which resulted in increasing in-house production of total down-filled jacket output from 43% in fiscal 2018 to 47% this year. As you know, Made in Canada is not just a slogan for us. Our operations including exclusive subcontractors represent approximately 20% of the national cut and sew workforce today. I've always believed the Canada the best place in the world to make premium down-filled jackets. Despite the skeptics, we've proven that it does matter, and it can be done profitably and at scale. The depth of our Canadian production expertise and the scale of our infrastructure is a significant competitive advantage, which will be almost impossible to replicate. These strategic investments and achievements also drove outstanding financial results. Total revenue increased by 40.5% to $830.5 million. Adjusted EBITDA margin expanded by 240 basis points to 27.6%. Adjusted EPS per diluted share increased by 61.9% to $1.36. To put this on perspective in just two fiscal years since going public we have doubled our annual revenue and tripled adjusted EPS per diluted share. It says a lot about the strength of global demand for our brand and our ability to execute on that, while also generating exceptional financial results. I am extremely proud that we have delivered on everything we said we would do and then some for the past two years. This is the critical part of being a good public company and earning the goodwill that we have built with our long-term shareholders. Our updated long-term outlook, which Jonathan will cover later in detail has the same revenue and EPS growth metrics as last year half of much larger numbers. This reflects our deep conviction in the path ahead and our commitment to making that happen. Executing with discipline has been in the most important thing is getting us to where we are today, and it is foundational to why we have such a long runway ahead of us. We are almost a $1 billion company now. And to grow as fast as we have, while preserving the purity of our brand is truly an unbelievable accomplishment. We've done it with only 11 bricks-and-mortar stores and no half price distribution. And at the same time, we have state true to our function first DNA and our reputation for making best-in-class products. A great example of that discipline is how we are growing in spring. Every year our spring products have gotten better and better and without a doubt, this year's selection is the best expression of Canada Goose today. Across on entire offering including rainwear, windwear and knitwear, we really moves with the needle. Spring grew at a significantly faster rate than the rest of our business, which is exactly what we want to see at this stage of development. We're making great progress. We are learning a ton, and I'm very confident about our future in spring. We are one of the most powerful aspects of our fall/winter collection, is that we have a strong foundation of core styles they grow year-after-year, in over time they turn into enduring icons. This year, we will follow the same strategy for spring putting our efforts around a smaller number of Hero product in order to see new generations of icons and adapt to our core in the years to come. Stand-out performer this season, including women's Berkeley wind jacket and men's of Seawolf rain jacket. Knitwear was also a strong success, and even though is often thought of predominantly as a fall product, our knitwear sales fairly have exceeded knitwear sales in fall 2018. We see that as a great leading indicator of our momentum in this category. With regards to Oliver's from products at first glance there esthetic is undeniably Canada Goose, but there is much more to them then great looks. From highly technical lightweight fabrics with elevated luxury finishing to protection from the elements and visibility. They offer the same best-in-class functionality, which has made our products so sought after. In addition, actually having our own stores and global e-commerce site has been a game changer for commercializing new product categories, because it allows us to show the full breadth of our line, how we want and when we want. Spring weather these days is more unpredictable than ever and the window for the selling season is shorter and more variable in fall/winter. With that in mind, we strategically set spring floors in our retail stores early and the beginning of February, with more than doubled the selling space allocations than we had last year. We made the decision to put the full power of our global retail network behind showcasing our best ever spring collection. Together with compelling marketing and a focus on high impact product moments we drove spring awareness, traffic and conversion at a greater scale and velocity than we have ever done before. The same is true in e-commerce. We have elevated our product storytelling visuals and media. We are seeing consumers spend significantly more time on our site interacting with these elements and it is becoming a richer experience gathering place for our fans. The successful recent launch of our [indiscernible] collection was very digitally focused and it's a great example of this. This is not just a DTC story though. In wholesale, we expanded significantly and achieve our best ever conversion levels for windwear and rainwear. Our presentation was on a whole new level this year and on the back of great result interest in spring of accelerating our wholesale partners. We've achieved and learned with spring also gives us confidence about our expansion into other product categories going forward. All of those learnings will be great guiding principles as we develop our footwear collection in the coming few years. Lastly, circling back to the topic of execution, I would like to once again talk about our very talented team. And its core, great execution is about having the right people in the right places supported by a culture of collaboration and desire for excellence. The staggering amount that they've accomplished together year-after-year is a tremendous testament to this. We will never sit still or take our success for granted. We are a high growth, always evolving organization. One of my most important jobs is making sure that we build our team ahead of our growth. When it comes to building and managing our senior leadership, my focus is on where we are going to be five and 10 years from now, and what we are going to need to get there in the right way. This is both an art and a science, is about developing our best people and give you them the opportunity to step up and take on new roles, while also acquiring outside talent we're needed to making the two work harmoniously together. And most importantly it is about empowering exceptional leaders thrive in the Canadians culture which environment where change is constant. On that theme, we recently announced the promotion of Ana Mihaljevic to Chief Commercial Officer. Joining us in 2015, Ana has been a top performer, building our planning function from the ground up, during a Direct to Consumer revolution was passionate leadership and exceptional results. I'm very excited about Ana taking the next step in her career with us. I'm also very grateful for the contributions of Greg Wood whose pivotal and bringing together our commercial processes into a single dynamic function. With that mandate complete our forward to working with him as a trusted Senior Advisor on the backend business and other projects where the extensive industry expertise will be in great value add. As we continue to grow in size, it is also critical that we maintain that scrappy entrepreneurial spirit and brand values that have gotten us to where we are today. In the past year alone, we onboarded approximately 1,300 new employees. We've put a lot of effort into codify and reinforcing our guiding principles and that is going a long way towards cementing our unique culture. Despite our rapid growth, I can truly say that our culture is strong today as it has ever been. And it is a critical ingredient for our continued success. In summary, fiscal 2019 was another absolutely amazing here at Canada Goose. We've made great strides across all of our strategic initiatives this year and I believe that we're still just scratching the surface of our potential, our business, our brand and our people have never been stronger and we have incredible momentum. We are excited to continue to deliver exceptional results this coming year and for the long term. With that, I will turn it over to Jonathan to go over the financial results in more detail and provide an overview of our fiscal guidance.

Thanks Dani. Good morning, everyone, and thank you for joining us. As Dani just said we made massive progress on our strategic initiatives this year and we've delivered another set of really strong financial results. I'm excited to be here to give you an update. With that in mind, I'm going to walk you through our numbers for the year, followed by an overview of our fiscal guidance. Please remember all numbers quoted are in Canadian dollars. So for the year, revenue increased above our expectations by 40.5% to $830.5 million or 39% increase on a constant currency basis. In absolute dollars this represents an increase of $239.3 million to our top line, well ahead of the $187 million of growth we had in fiscal 2018. Starting with the geographical lines, Canada reported 28.2% revenue growth and represents 35.3% of total sales. This is an outstanding result for our most developed market both in terms of brand affinity and distribution. It also speaks to the scale of our opportunities in less developed regions like Europe, where we know that there is already significant demand and where the addressable luxury apparel markets of that much larger. To that point, we have also made great strides in activating key international markets this year. The U.S. went from strength to strength, with revenue growing by an impressive 36.3% despite having only one of our five new store openings. In Rest of World, which is comprised of key markets in Europe and Asia, revenue grew by 60.5%. For the first time, Rest of World represented roughly the same proportion of total sales as Canada at 35%. At one level this represents strong performances in Europe and in other Asian markets, of course, there was a substantial impact from our successful DTC launch in Greater China with the impact of two new retail stores and [indiscernible]. And that contrasts with a more wholesale weighted business in the rest of the region compared to Canada and the U.S. Moving on to channel. As Dani mentioned earlier, we have reached a major landmark on our DTC journey. Revenue increased to $431.3 million from $255 million last year, and now represents 51.9% of total revenue. Each of our new five stores had great inaugural years relative to previous openings, as did team well on the e-commerce site. This was also complemented by strong performances from our established e-commerce markets and retail stores. Building out a global DTC channel from scratch and achieving a 50-50 wholesale DTC split inside of five years is a testament to both our strategy and execution. We have approached DTC in a unique way, as I've said numerous times before. And we have done that with great financial discipline. But we did this with a fleet of only 12 national e-commerce markets and 11 directly operated stores that lies our exceptional underlying economics and the long remaining runway. We've also achieved alongside double digit wholesale growth. The channel was another stand-out performer this year, with revenue growing to $399.2 million from $336.2 million last year. This was driven by strong demand with existing partners, as well as incremental revenue from Baffin and the modest FX tailwind. Core to our approach are our commercial beliefs. These lead directly to our disciplined approach of building demand ahead of supply, and indeed to selectively focusing on only best-in-class partners. Kept in balance with our expanding DTC footprint, wholesale continues to play an important role in extending the reach, depth and quality of our distribution. It is a pure high-margin, low inventory channel with sell-out rather than sell-through. We are an incredible driver of sales productivity for our partners. Turning to gross margin. Consolidated gross margin expanded to 62.2% from 58.8% last year, driven by the higher proportion of DTC revenue and to a lesser degree incremental gross margin expansion in each of the respective channel levels. DTC gross margin was 75.3% compared to 74.4% last year. This was primarily driven by pricing, partially offset by labor, manufacturing labor cost increases. DTC operating income was $234.6 million, an operating margin of 54.4% compared to $134.7 million on operating margin of 52.8% in fiscal 2018. This improved margin was achieved with strong sales productivity and after absorbing the impact of incremental SG&A fees to operating partners in Greater China. Frankly, opening five stores and a website with the lower margin in Greater China due to those fees and achieving an annual DTC operating margin of 54.4% is an outstanding reflection of the exceptional economics that we enjoy both online and in our stores. Wholesale gross margin was 48.1% compared to 46.9% last year. The increase primarily reflects pricing, which more than offset cost increases in manufacturing labor that we discussed around last year. To a lesser degree, wholesale gross margin also benefited from production efficiencies in manufacturing overhead, partly offset by product mix. Wholesale operating income was $149.2 million and operating margin of 37.3% compared to $120.6 million or an operating margin of 35.9%. The increase in wholesale operating margin was primarily driven by the channels gross margin expansion. These improvements were also made despite a headwind from purchase price adjustments to the cost of goods related to the Baffin acquisition. Unallocated corporate expenses were $169.1 million, compared to $107.8 million in fiscal '18. This was driven by planned investments to support growth in marketing, corporate headcount and IT, and including our Greater China operations. Unallocated depreciation and amortization was $18 million compared to $9.4 million last year, driven by the store opening program. Combined this resulted in total operating income of $196.7 million, compared to $138.1 million last year. On a non-IFRS basis, adjusted EBITDA was $229.6 million compared to $149.2 million in fiscal '18, with adjusted EBITDA margin expanding 240 basis points to 27.6% ahead of our expectations. Net income was $143.6 million or $1.28 per diluted share compared to $96.1 million or $0.86 per diluted share last year. Adjusted net income was $151.6 million or $1.36 per diluted share compared to $94.1 million or $0.84 a share, with a growth of 61.9%. Again well above our expectations. Turning to the balance sheet. We ended the quarter with net debt of $63.8 million and net working capital of $188 million. As we discussed last quarter, net working capital has increased due to the planned seasonal build of inventory for future growth, especially during peak demand in fiscal 2020. We ended the year with very clean in market inventory in both channels. We're right where we want to be at this point to deliver on our targets for the coming year, consistent with the full year impact of our store opening program in fiscal '19 are announced opening program for fiscal '20. Our developments in China which has a longer supply chain and our expanded production capacity. Now turning to our guidance for fiscal 2020. As the business scales delivering higher percentages on larger numbers means of quantum, high percentages on larger numbers - means our quantum of growth is accelerating. This raises the bar on the standards of execution and performance we must deliver. Notwithstanding this, we currently expect annual revenue growth of at least 20%. This assumes the opening of eight new retail stores and one digital concept store. We have previously announced six stores to which we can now add further three in Greater China. I want to point out that the digital concept store will be an experiential and experimental showroom to support local e-commerce sales in the Greater Toronto Area. Our guidance also assumes annual wholesale revenue growth in the high single digits, including the full-year benefit of the Baffin acquisition. Adjusted EBIT margin expansion is guided at least 40 basis points, relative to our adjusted EBIT margin of 24.9% in fiscal 2019. As a result of the IFRS 16 lease accounting standard coming into effect, we are moving away from adjusted EBITDA as a supplementary measure of operating income and margin. With operating lease expense is being shifted to depreciation and interest charges, with the exception of contingent rent. Adjusted EBITDA is no longer a meaningful measure for this business in our view. Lastly, we are guiding to annual growth. All on adjusted EPS per diluted share of at least 25%. Given the outperformance of the business this year, we're also updating our long-term guidance for the period from fiscal 2020 to fiscal 2022 as follows. Annual average revenue growth of at least 20%. Adjusted EBIT margin expansion of at least 100 basis points in fiscal 2022, relative to fiscal 2019. And lastly, average annual growth in adjusted EPS per diluted share of at least 25%. So in summary, fiscal 2019 was our best ever by a wide margin. Building on the exceptional achievements of fiscal 2018. It is a great confirmation that we're on the right path. We have come a long way in the short time, both operationally and financially. Yet we will have the feeling that we are still just getting started. We are extremely excited about what lies ahead. And I look forward to speaking with you again on our next call to update you on progress. Now, I'll turn it back to Dani for some closing remarks.

Thank you, Jonathan. As I have said before, we are very pleased with the results for fiscal 2019, and we continue to believe that we have an amazing set of opportunities in front of us. Before finishing, I just want to quickly touch on our new concept store in Toronto, which Jonathan mentioned briefly when discussing the guidance. Both experiential and experimental was been a immersive fusion of digital and physical elements bringing our storytelling and best-in-class products to life in totally new ways. I'm so proud of what we've done with our innovative and award winning cold rooms this past year and I'm excited to continue pushing the boundaries on this front. So stay tuned there is more to come later and for adoption you in the coming months. And with that, I'll turn it over to the operator to begin our Q&A session.

[Operator Instructions] Your first question comes from Erwan Rombourg with HSBC. Your line is open.

I hope you can hear me - I am on airport right now. So, thanks a lot. Two questions please. So firstly on margin expansion. Margin expansion last year was better than expected, despite an increase in wages and other headwinds. So I understand Q1 wage because of seasonality based on the increase this year, just a slight one. So I'm just wondering, if you can tell us what is and how you would think about gross margin versus SG&A deleverage growth for the year that's just started. And then secondly, on cash allocation. CapEx and sales looks pretty low, I think you also announced the buyback, and how does this play out versus accelerating a retail rollouts and linked to that, I mean, you said you're adding eight stores this year. Where do you see yourselves at the end of the 2022 plan in terms of your retail footprint? Thank you.

I think it's really important to remember where you are in a different place today. We've come very long way in a very short space of time when it comes to margin. Over the past few years, the pace of the DTC mix shift, which is our single most important margin lever has been significantly faster than expected, alongside a material uplift in China productivity. As a result, when it comes to the EBITDA margin, I'll met our key metric historically, we expanded to 27.6% from 20.1% in just two fiscal years outperforming two sets of three year guidance in the process. From where we are today, DTC is now the primary driver of the business. I'm making the uplift of DTC sales much less dramatic. Productivity levels are also very elevated and we have most retail stores operating in off peak periods as well as in the peak periods. And hence, we will continue to make strategic corporate SG&A investments and at of our growth, particularly in those new markets. We continue to feel very good about our runway on margin. But for these reasons, the trajectory going forward is being guided on a more gradual basis albeit prefaced with at least.

Right. And then will be - how you think about gross margin relative to SG&A deleverage as you invest in the business?

So I think, as far as gross margin is concerned, we continue to see a number of forward factors in gross margin, led by pricing, led by scale. But we reinvest that sometimes in cost price inflation equally in product development as we developed the categories outside of the core part of the category. But net of that we can - in the net we expect to see overall gross margins continue to improve on a very gentle basis in channel and obviously influenced by the continuing channel mix shift.

Yes, okay.

And then, when it comes to the capital expenditures in the business and the buyback. The capital expenditure is increased from last year. And that fully addresses our capital requirements in terms of continuing to fuel the growth in the size of the retail fleet. On the one hand, develop all managed fracturing capability and capacity. On the second hand, and invest in systems and technology to enable us to stay ahead in that dimension as well. That is ample investments in the business. Last year we invested handsomely in capital expenditure, we continue to do it this year. And the reason that we are contemplating the buyback and announcing it is because, in the end this is a highly cash generative business and we can therefore address all of our expansion needs and still generate excess cash and we believe this is a good use of excess cash.

And just coming back to where you project maybe the number of the size of your retail footprint by the end of the three year plan. You're adding eight this year. Is this the run rate, or could you accelerate that?

So I am somewhat asking, we are not quantifying planned openings beyond fiscal '20. There are both commercial and competitive sensitivities beyond it, but as we've done in the past we will out - we will articulate our outlook for annual openings in the coming year when we announce our results. What I would say, as we've demonstrated, a historical pace to our retail openings. And you should assume that's a pace we can sustaining going forward.

Your next question comes from Omar Saad with Evercore ISI. Your line is open.

I wanted to ask a little bit more about the inventory build. It seems philosophically, if we look back historically, the company is building inventory more aggressively earlier in the season for the winter ahead. It seems like it's been a little bit of a philosophical in operational shift around approached inventory. Maybe you could help us understand why the company is making those moves? And, maybe also if you could help us understand if the bigger inventory build of product earlier in the year ahead of winter is designed to help you fill the demand in that those DTC channel you keep talking about whether it's your own stores that you're building, eight new ones are the e-commerce side of it. Is obviously that is in a lot of cases the highest kind of return on incremental inventory that's available to fulfill demand. But if you kind of give us a broader picture on all those issues, I'll be really appreciate it.

This is Dani. I had no question that we need more inventory to satisfy our DTC channels, and we're building inventory out of demand. Our inventory position is exactly where we want to be from a commercial perspective, both in the composition of inventory and the size of inventory. And as I just mentioned the increase was driven by planned growth throughout fiscal 2020. In the way does this reflect the change in our model of building demand had a supply, we are obviously not afraid of being sold out. In fact, we kind of like it, and we do not sell in off-price channels in anyway so, I think weren’t remember that. Jonathan?

Yes, I think there is a couple of other things I'd add. Unlike most brands, we are a manufacturer as well as a wholesaler and retailer, and therefore, the build-up inventory for future growth happens much earlier on our balance sheet. So we produce evenly throughout the year relative to seasonally concentrated demand. Our DTC business is increasingly global and that requires much more regional staging to supported. The lead times are getting product into Europe and it's Greater China and in particular PLC are much longer than they often also America. So as we've done in the past, you should expect it to continue to build up our inventory in the quarters to come ahead of the peak fall and winter demand.

And one follow-up, is it fair to say, looking back over the last quarter. As you said, you kind of build to what you think it present in the level you want to supply for the whole winter season. And if you're - and you're not afraid to be out of stock, is it fair to say winter 2018-2019 this past season that the - you let the inventory run out in the fiscal fourth quarter and maybe weren't able to service demand that was there as it remained colder later in the quarter. Is that a fair conclusion?

I think we are very careful how we manage our inventory. And oftentimes, we have inventory that we've built for next year already and we are very careful in making sure that we don't use too much of that too early. And we also do plan inventory for that period of the year, and the year play out the way we ended the year and the end of the year play out the way that we expected the play out and we’ll beat our expectations when we came to that. So we were happy with that work.

Your next question comes from Michael Binetti with Credit Suisse. Your line is open.

So I'm just trying to think ahead here since the growth opportunity, so big, but this is the third year in a row where you delivered revenue growth at around 40%, very, very healthy growth rate by any standard, but it's also the third year in a row where you've guided the forward year growth rate to be cut in half. So it's natural this time a year for people in our position to have a difficult time kind of looking forward and think alongside you and that, maybe you could help us gauge where you actually see what you spoke to earlier as some of the real headwinds coming online from areas of the business that are getting to larger numbers that have some scale headwinds to the growth rate or maybe even just think ahead on some of the components like what kind of square footage is baked in this year, what kind of pricing is baked in and maybe have - new e-commerce markets that you'll be turning on to help us just think a little bit through the components this year, of how you're getting to a growth rate for the year. That's again half of what you did - you have delivered historically?

Yes, I think that, I mean it's important to note that the guidance that that we've put out there - and then I’ll turn it over to Jonathan in a minute to talk a bit more about it, but we preface it with at least, I think, that we - I think that's important to note. I think that's - I know that we are very confident of our growth opportunities ahead of us and all the levers that we have to pull in a different ways we can grow. We have loss of white space and all of our markets still remains accessible to us. Growth of our wholesale partners, growth in Direct to Consumer and converting our - and then moving to a higher percentage of Direct to Consumer sales and demand is extremely healthy for our brand and we continue to sell. So I would have full price. And so, I think that our guidance is appropriate as we start to the year to preface it with at least I think that - I think that - I think it puts us, I think it's the right way to start the year and put is an appropriate place and we'll update as needed. Jonathan is there anything to add to that?

No, I think, we've got a number of key areas in which we are expanding the businesses as you've had in terms of store openings continue to develop product range. We've got this is a business which is guides responsibly on the one hand, and on the other hand is very much of a growth engine.

Yes, I just want [indiscernible] that we've like we have - I'm really proud, I know we all are that we've been able to overachieve on every measure, anyway you look at it for the last two years as a public company, and I believe that opportunities are as big today as they ever been. And the way that we've guided has not changed, and I think that - I think that the fact that we are not changing it is a great indication of how strong we think that the opportunities are.

If I could follow up the - do you know it's not like when you're speaking about the spring - you said spring in stores in February, a little early in here at least in the U.S. is extremely cold through February and into March. Do you feel like you ask any business on the table in the quarter as you try to get some of the new spring stuff you're excited out? And then I guess, just think rolling that forward as we think about first quarter how to think about revenue growth there. Do you same posture - you feel like you said the first core - sorry, first quarter, you said the floors early for fall similar what you did in spring?

Yes, [indiscernible] comment still on the table. I mean, it's difficult to speculate about that sort of stuff. I think that what I will point out is that we grew 40% on the year, right? And so, our business this year, we had a tremendous year and we grew 40%. And shape of the sales shifted a little bit and that's a normal to happen and have those had the fluctuations - from one year to the next. I think that our ability to make long-term strategic decisions to drive business categories that are new and have it work is awesome. And that we were able to do that with spring and really see that category grow at a really fast rate because of our ability to do that in our own stores and online, and I think that - that we're able to do that and also grow 40% and also grow EPS at the rate that we did think is phenomenal. And so - having left any kind of sell until.

And actually, you think about it, the average selling prices for spring product versus fall probably a little bit lighter. So actually it's a more remarkable achievement on the revenue line as a result.

Your next question comes from Simeon Siegel with Nomura Instinet. Your line is open.

This is Steve McManus on for Simeon. Thanks for taking our questions. Just had a question on the labor pressure. I wanted to see if you guys can give us some more color on the magnitude during the quarter, both with respect to DTC and wholesale segment margins. And maybe how should we think about that moving into FY '20?

I think, whether we're looking at Wholesale segment marginal or the DTC segment margin. They're in great places. They both improved very significantly in the year. And to be honest you'd always expect some forward pressure on cost. And part of our job is to balance that and make sure that we continue to move the overall margin ahead on an annual basis. Within the year and across quarters you're going to see noise, but ultimately the pricing architecture and production efficiencies that we achieve more than fund any price pressures that we have to face. So both in the current year and prospectively, with - this is not a source of concern to us at all.

Your next question comes from Mark Petrie with CIBC. Your line is open.

You talked a lot about the introduction of and success in rainwear and knitwear. But could you just give a little color about the adoption of those categories by geography. I know you're not going to go into specifics, but sort of more interested in any color around what's driving the adoption if you see it more in regions with more sort of favorable climate for that type of product. Or do you think it's more just driven by brand awareness?

I think it's both, actually, I think that - we are very careful and how we in our development process as you know and making sure that our products are all quite essentially Canada Goose products esthetically and functionally. I think that - yes, sure, no question that, how we wouldn't having a broader assortment of products that are functional in a different variety of climates is important thing and - it's the question that - we don't for that reasons spring products to them particularly well in our Asian marketplaces, Beijing and Hong Kong in particular.

And then I just wanted to come back to the guidance question. The growth targets for the three year outlook versus the one year at the same effectively except for the March slight difference on margins. As you stressed earlier, maintaining growth percentages implies greater dollar growth. So I guess just at the margin. Does this reflect sort of incremental drivers entering the business in the out years, or is it just sort of conservatism about the performance in any one single year?

I think - I'll come back to the fact we guide responsibly, and the fact that we've - we refresh this guidance because we have credit and that's happened last couple of years. So yes, we guided at these levels, but we got responsibly in any one particular yet. On an at least basis and that at least basis applies to both the current year and the prospective period.

We feel that these growth numbers in the guidance that we're providing are significant numbers and we don't want to get ahead firstly we are responsible. We think that this is our very healthy growth objectives.

And that's the sort of growth rates double the revenues of the business every four years and double the earnings every three. So those we believe are strong statements as well for the business.

Your next question comes from Robbie Ohmes with Bank of America Merrill Lynch. Your line is open.

I actually had a follow-up question, I think on Omar's question, I'm just, maybe you could help us, just sort of think through more clearly the DTC in the fourth quarter was up 29%, but you almost doubled your stores versus last year and you went into the quarter with a very strong inventory position, and so on just mathematically to get to only a 29%, I have to either assume that the stores you opened last year are comping negative or your dotcom business slowed pretty significantly from the growth that it was generating. Can you just help us think about how the DTC wasn't stronger given everything heading into the quarter?

As you recall from quarter three, we noted earlier consumer purchasing a full winter product, relative to the previous year. We sold this trend across our business and it wasn't driven by specific customer demographic. And that's why we gave very defined parameters for the revenue growth in our guidance update reflecting that and frankly we're very pleased we outperformed them. Regarding the regional take, the growth rates clearly on apples-to-apples because we've added two retail stores [indiscernible] and Greater China and that has an outsized mechanical impact. As you have lot of new revenue at full value flowing into a more wholesale weighted base but that said, the other Asian markets also performed strongly. In Canada and the U.S., you see the timing shifts in the numbers more, as you have a much more developed DTC contribution and less incremental new unit growth relative to that from new stores.

Your next question comes from Ike Boruchow with Wells Fargo. Your line is open.

Dani, Jonathan Congrats on a great year. I guess maybe, I understand that we need to think about your business on an 12-month basis and I definitely appreciate that but seasonally just for us to help us understand a couple of things, I guess, Jonathan could you elaborate on the comment in the press release about meaningfully higher losses in Q1, year-over-year and how exactly we should think about that. And then when we look at your largest contributing quarter Q3, I think the last two years, 65% or 70% of your EBIT has come from that quarter, should we expect actually continue or should that maybe grow in terms of importance for the year. Just try to understand the seasonality of the business as things - as the business evolves.

Yes, I think the DTC expansion is something that will affect the shape of our numbers in the context of the growth trajectory that we're on. You will see a significantly higher proportion of revenue and profit in the back half of the year and that means both in Q3 and ultimately in Q4, but particularly Q3, which is the key quarter. That will also manifest itself in materially larger losses in Q1, and when you think about that, we're also activating markets, and investing behind the middle marketing sense, both at the time of launch and the head of that launch. And so those investments are also happening ahead of the realization of the revenue. So you put those two together and that's what brings more weight to bear in the first quarter.

Your next question comes from James Allison with Barclays. Your line is open.

So it looks like your entrants into Italy from a DTC perspective, we'll start with the retail store prior to an e-commerce offering. Can you walk us through your thinking here and can we expect a similar approach to other markets as you - as you have yet to establish DTC presence.

So we are present in Europe, in e-commerce. And at the same time we are also, we've been made our store announcements for European openings both in France and in Italy, against that context it's the same strategy.

Okay. And I appreciate that. And so looking at your e-commerce rollouts in the years to come obviously, there is still some white space. For your three year outlook have you built any activations of new markets into that as well. So, just stripping out the new retail store, but looking at e-commerce specifically because we haven't had kind of a new market activated other than China in the last couple of years.

Yes. We're working really actively at being able to three other -- half growth for our e-comm platform for consumers sort of by candidates from anywhere in the world and we'll see both more when they're going to say about that. And with regards to this - more excited about it and it's important and with regard to the store in Milan that is super exciting for us and it's a market that was how - had a strong for us for a long time and we'll - I believe for strong brand awareness and that store is going to be really exceptional store for us since we opened - I think opening stores in the - opening two in Europe this year as well I think is really important. And as I think Jonathan alluded to earlier, our percentage of DTC in Europe in general and our opportunity there truly moves the needle. I think that the store openings in Europe this year are massive part of that.

Your last question comes from Jonathan Komp with Baird. Your line is open.

Just maybe one more question on the DTC business. I want to maybe just understand how you're forecasting the business a little better. And I guess really the question is when you look forward, I think you're implying maybe less dollar growth in 2020 understanding, it's open-ended. Then you had in 2019. And I know you're opening more stores. So just want to maybe understand any color you're willing to share on the productivity of the new stores you're opening or what's in place already?

Yes I think Jon all stores are more productive, all over new stores have been great. We expect stores over this year to follow along and those footsteps. I think that our implied growth is substantial for next year. I think the size - as substantial more so than a year and no we're super excited to get out and deliver more exceptional results.

Yes, I mean on the one hand, we had a great performance in fiscal '19 and we clearly going to get the full year impact of those new units. We've announced 8 new units, as well as the digital store for the coming year. [indiscernible] was obviously significant last year, that's not something that will repeat and by the definition we will have a concept store out there which is experiential and experimental rather than - more of our traditional stores. That said, we've got right productivity in the stores that we're opening great economics with sustaining the margins. So that we believe this is a very strong operating model going forward.

And just one separate question I don't know if you're willing to talk about the initial results of the new ERP system that looks like it's in place. Could you just comment on how that's gone? And any issues or if it's been pretty smooth than the initial implantation?

I've been doing these for 20 years. I've never come across one that's gone as well as this.

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

Great, thank you, and thank you all so much for taking the time to be here with us today. As always, we appreciate your interest and support in Canada Goose and for Canada Goose and we look forward to updating you again on our progress when we report our fiscal results for our first quarter of the year and the results for that. So thank you very much and go Raptors.

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