Canada Goose Holdings Inc. (GOOS) Q4 2024 Earnings Report, Transcript and Summary

Thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Canada Goose Fourth Quarter Fiscal Year 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Ana Raman, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. With me are Dani Reiss, our Chairman and CEO; Neil Bowden, Chief Financial Officer; Carrie Baker, President of Brand and Commercial; and Beth Clymer, President of Finance, Strategy, and Administration. We will make forward-looking statements on our call today that are based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. In addition, the outlook that we provide today supersedes all prior financial outlook statements made by Canada Goose. We undertake no obligation to update these statements except as required by law. You can read about these assumptions, risks, and uncertainties in our press release this morning, as well as in our filings with U.S. and Canadian regulators. These documents are also available on the Investor Relations section of our website, along with our Form 20-F for fiscal 2024, in which you'll find additional information and new disclosures that we believe will strengthen your understanding of our business strategy, business model, and performance. We report in Canadian dollars, so all amounts discussed today are in Canadian dollars unless otherwise indicated. Please note that financial results described on today's call will compare fourth quarter results ended March 31, 2024, with the same period ended April 2, 2023, unless otherwise noted. Lastly, our commentary today will also include certain non-IFRS financial measures which are reconciled at the end of our earnings press release. For today's call, Dani, Neil, Carrie, and Beth will deliver prepared remarks following which we will open the call to take questions. With that, I'll turn the call over to Dani.

Thanks, Ana, and good morning, everyone. Canada Goose reported a solid fourth quarter, growing revenue and adjusted EBIT by 22% and 51%, respectively year-over-year. Our performance in the quarter surpassed our expectations and capped off an important year of execution across our strategic pillars. For fiscal 2024, we delivered CAD1.33 billion in total revenue, up nearly 10% over last year, and adjusted EBIT of CAD171.8 million. I'm extremely proud of the business we are building, of our rich heritage and craftsmanship, and the progress we've made towards transforming our business to achieve sustained rates of growth in the future. The year included several noteworthy accomplishments. Let me share some of those highlights. We expanded our global retail footprint to 68 permanent stores in our key markets, more than triple the number that we had five years ago. We successfully expanded our product offering with our new sneaker line and importantly, we implemented our transformation program to improve our operational infrastructure and set the foundation for our future growth. As part of this work, we realized cost savings, lowered inventory, and simplified how we work while reorganizing our management team and placing the right leaders in the right roles to improve collaboration, speed to market, and the efficiency with which we operate. While we accomplished a lot in fiscal '24, we didn't make as much financial progress as we would have liked. Some of this was due to external factors outside of our control, such as the ongoing challenging consumer environment and the warm winter. But after a period of rapid growth in retail expansion, we also recognized that our resources were spread across too many priorities, impacting our ability to deliver on our ambitious near and long-term targets. To this end, our leadership team began our fiscal '25 planning process with the goal of operational excellence in mind. We exited this process with the three strategic growth pillars we communicated last year intact. As a reminder, these were building a DTC network, driving consumer-focused growth, and product expansion. We also emerged from that process with three critical operating imperatives for this fiscal year which focus on us doing fewer things really, really well. These things are, number one, setting the foundation for the next phase of our product and brand evolution. Two, implementing best-in-class luxury retail execution, and three, simplifying our business and the way we operate. Our first imperative, focus on product and brand is underway as we welcome our first-ever creative director, Haider Ackermann, to our company. Haider is influential in the luxury space and will lead the evolution of our product vision as we reach an inflection point in our brand's growth. When I met Haider, it was clear that he understood our heritage and our vision to be an enduring luxury brand that leads with function, craftsmanship, and style. With Haider on board, we intend to elevate the Canada Goose brand and take our offering to another level. From our new design studio in Paris, Haider will be working closely across our teams to integrate Canada Goose's values and vision in innovative ways over the coming seasons. While his first seasonal capsule collection will be available in the 2024 fall-winter season, his mark on our company is already visible with renewed excitement and energy across the entire organization. Yesterday, along with our announcement of Haider's appointment, we launched a new hoodie he designed benefiting Polar Bears International, a longstanding partner to raise awareness of the impact of global climate change. This launch features an integrated marketing campaign with Academy Award-winning actor, producer, author, and activist, Jane Fonda, with proceeds from the sale of a sweatshirt going to PBI to find vital conservation research and education that they do. We are super excited to have Haider on board and to see his vision unfold across our product portfolio. On our call today, we will discuss our fourth quarter results and accomplishments, and share more details on our key operating imperatives for fiscal 2025 as we prepare for the next phase of our growth. Before I pass it over to Neil to discuss our financial performance, I want to thank our exceptionally talented and hard-working team. You are the backbone of our company and we truly value your passion and your contributions. And to the investor community, we are still only a CAD1.3 billion revenue brand in the space with significant market potential and we are just getting started. You will hear from us today that we have work to do, but also that we have a strong team in place, an incredible brand, and a plan we are all confident in delivering this year. We are super energized to unleash our potential.

Thanks, Dani. Stepping into the CFO role at this moment is exciting and I look forward to sharing more about the financial performance of this iconic brand today and on future earnings calls. I'll first provide a review of our Q4 financial performance and later discuss our outlook for fiscal '25. Revenue in our fourth quarter increased 22% year-over-year, or 23% on a constant currency basis, to CAD358 million. D2C sales of CAD271.5 million grew 19%, or 21% on a constant currency basis over the same period last year. Our D2C performance was driven by strong retail sales in Asia Pacific, supported by healthy traffic in advance of Lunar New Year, and in North America, as online traffic increased in January with the later onset of more seasonal weather versus last year. Breaking this down further, first, from a sales channel perspective, store comps were relatively flat, while e-commerce experienced outsized positive performance, mainly on the strength of improved return levels this year compared to last year. Store sales represented over 70% of our overall D2C revenue, both in Q4 and for the full fiscal year. Second, at the regional level, both North America and Asia Pacific delivered comparable sales growth in the mid-single digits during the quarter. This performance was noteworthy, especially in Asia Pacific, as the region comped against a very good Q4 in fiscal 2023. EMEA experienced a more promotional environment among both competitors and wholesalers, which challenged our D2C execution. A note on our sales per square foot. For the year ending March 31st, average sales per square foot for stores open for the full 52 weeks in fiscal '24 was CAD3,963 per square foot, which was relatively flat to the average sales per square foot of stores open for the same period of time in the prior fiscal year. While this is a very strong sales per square foot baseline that we are proud of, it is below historical levels as higher sales per square foot in Asia Pacific during the fiscal year was offset by lower sales per square foot in both North America and EMEA. You've heard us talk about the CAD4,000 per square foot threshold with regards to our store economics, and we expect to work towards this as a key performance indicator in our D2C segment as we improve the efficiency and execution of our retail operations. Carrie will share some of the detailed tactics that we expect will deliver results shortly. In Q4, wholesale revenue of CAD41.4 million was down 9% year-over-year, or 8% on a constant currency basis. This reflected our strategy to tighten supply to wholesale partners in a softer wholesale business environment and the continued winnowing of partners that are not aligned with our brand positioning. Q4 revenue in our other segment was CAD45.1 million, compared with CAD20.2 million in the same period last year. As a reminder, this segment comprises revenue from sales to employees, friends and family sales, and third-party sales from our newly acquired knitwear facility. The year-over-year growth in this segment is primarily the result of additional friends and family sales conducted versus the fourth quarter last year, which is in line with our inventory management strategy as Beth will detail shortly. Less of a factor, but still meaningful was our employee sales program that was implemented this past fiscal year and allows our people to purchase product at a significant discount, empowering them to be brand ambassadors around the world. Moving to a brief regional overview. In Q4, Asia Pacific was our fastest growing region with revenue up 33% on a constant currency basis over the same period last year, supported by domestic shopping in mainland China and mainland Chinese tourists driving strong growth in Hong Kong and Macau, reflecting positive consumer response to our ongoing product planning and merchandising efforts. Online and in-store sales in the period were bolstered by our Lunar New Year marketing campaign, and complemented by a longer peak selling period given the later date of Lunar New Year compared to last year. We also saw a significant increase in tourists from mainland China shopping at our Japan stores in Q4, contributing to double-digit sales growth in that country. Overall, Chinese clients increased spending with us both domestically and outside of their home market, reflecting the strength of our brand with this important consumer cohort, and despite macro and economic pressures impacting that market. North America revenue increased 24.2% on a constant currency basis over the same period last year, with each of Canada and the United States delivering more than 20% year-over-year growth on the strength of new stores in the U.S., D2C comparable sales across the region, and successful execution of friends and family events. EMEA grew 2.7% year-over-year on a constant currency basis supported by sales from our new stores and friends and family sales during the quarter, but continued to contend with pressured consumer spending and an intense promotional environment. On product, Q4 provides a unique opportunity for our consumers to experience the full range of our product assortment. We started the quarter with strong performance from heavyweight down owing to more typical seasonal temperatures as well as Lunar New Year. As the quarter proceeded and much of the world embraced spring, we saw significant growth in Apparel, specifically fleece and sweats, and our everyday collection, which includes wind wear. These categories have increased materially over the past few years as we have broadened our offering. Turning to gross profit. Our fourth quarter gross profit grew 22% year-over-year to CAD233 million, driven by higher D2C and other revenue, leading to 20 basis points of gross margin expansion. Q4 D2C gross margin increased 60 basis points to 73.9% due to pricing, favorable freight and duty, and product mix, partially offset by an inventory adjustment related to our Generations business. Wholesale gross margin rose 400 basis points to 39.6%, mainly due to raw material provisions taken in Q4 of fiscal '23 that did not recur this year, partially offset by a lower proportion of heavyweight down sales in our product mix during the quarter. D2C operating income increased by CAD14.4 million year-over-year in Q4 to CAD104.8 million. Operating margin, however, declined to 110 basis points despite modest gross margin improvement due to the number of new store additions despite D2C comparable sales growth. Wholesale operating income was CAD3.9 million with an operating margin of 9.4%, up CAD0.2 million and 130 basis points, respectively, over last year due to the improvement in wholesale gross margin partially offset by operating deleverage on lower wholesale revenue during the quarter. Adjusted EBIT was CAD40.1 million, up from CAD26.6 million in Q4 last year due to higher gross profit partially offset by higher SG&A spend. The increase in SG&A spend was primarily due to costs associated with the expansion of our retail network. While SG&A costs related to our transformation program are excluded from adjusted EBIT, we wound down our consulting engagements and associated costs related to the program in Q4. We also took an CAD11.1 million severance charge as a result of the workforce reduction completed in March, which has been adjusted. Finally, Q4 adjusted net income attributable to shareholders was CAD19.3 million, or CAD0.19 per diluted share, with some EPS benefit realized through our active buyback program during fiscal 2024, when we repurchased approximately 7.8 million shares throughout the year, including 1.7 million in Q4 alone. Turning to our balance sheet. At year-end, inventory was CAD445.2 million, down 6% year-over-year, driven by a notable decrease in finished goods and raw materials, offset by an increase in work in process as we onboarded our new knitwear facility. We ended the year with CAD584.1 million of net debt on our balance sheet, compared with CAD468.1 million at the end of the fourth quarter of fiscal '23. Our net debt leverage at the end of Q4 of two times adjusted EBITDA was well within our acceptable range, down slightly compared to 2.1 times at the end of Q3, but up from 1.7 times at the end of Q4, fiscal '23 to the lower cash levels on hand at the end of this fiscal year. Now onto our transformation program. In February 2023, we shared a target of achieving CAD150 million of transformation program benefits. As a reminder, this target was a combination of hard cost takeout, store and marketing productivity, which means higher revenue and improved operating margin on that revenue, and future cost avoidance. In fiscal '24, we realized approximately CAD30 million of in-year benefits related to the transformation program that is captured in our annual results that we are reporting today, split evenly between cost savings, including headcount and productivity. It is not lost on us, however, that while delivering CAD30 million of benefits is a significant achievement, we have also reported flat adjusted EBIT compared to our last fiscal year. This is simply not good enough. To build on these efforts and improve operating leverage, which is the ultimate goal of this program, we are rolling the work streams of our transformation program into the operating imperatives Dani mentioned earlier. We believe this will lead to lower SG&A as a percentage of revenue through measurable and observable cost reduction and improvements in our D2C comp sales. The first concrete step, which simplified our organizational structure and will lead to immediate improvement in the cost base was the reduction of our workforce at the end of fiscal '24. That wraps up the financial summary for our fourth quarter. I'll now hand it to Carrie and Beth to discuss our three operating imperatives for the year, and I'll be back after that to share our fiscal '25 financial outlook.

Thanks, Neil. As Dani mentioned, our three key operating imperatives for fiscal '25 are number one, product, and brand evolution. Two, best-in-class luxury retail execution, and three, simplifying our business. I'm excited to share more context on the first two. So let's start with our product and brand evolution. Canada Goose is globally renowned for warmth and outerwear. Our opportunity and our aspirations, however, are much bigger. We are on a journey, one that delights our customers across all seasons, in all regions and enables them to thrive in any environment. We have already made great strides. Customers are increasingly choosing Canada Goose for different occasions in different climates. Of course, we remain top of mind for protection from the cold, but now also for our lightweight puffers, sweaters, apparel, windwear and rainwear, and of course, footwear. Some of our best-selling products last year include our HyBridge Knit jacket, the Huron Hoody, and the Stormont zip sweater, indicating just how far we've come in expanding our share in the closets of our loyal clients and becoming a brand of choice beyond the Parka. Our opportunity and task now is to drive this at scale. We also know we have an opportunity to make more significant strides on the style spectrum while retaining our heritage as a function-first brand. We have taken a major step forward in this with bringing Haider Ackermann on board, who we believe will help us bring fresh energy, style, and a new boldness into our offering. At the same time, we're reshaping our approach to brand building and marketing. Our brand strength remains and we are well recognized all over the world, but we have an opportunity to inject new energy and significantly grow our customer base as we attract new audiences and deepen our relationship with our existing customers. This year, we plan to invest in our brand with a focus on big brand moments and bolder brand expressions to accelerate brand momentum, meaning we plan to execute fewer brand stories with greater impacts. We've built this brand on a belief that it's more powerful to make impressions than buy them, and in that way, we're returning to our roots. What that involves is a multi-pronged approach, from more tightly curating our social media content, to beefing up our celebrity and influencer programs to creating disruptive experiences that can only be delivered by Canada Goose. This is different from how we've executed marketing over the past few years, but it's an old family recipe that we know delivers. The campaign we launched yesterday with Haider and cultural icon Jane Fonda is a great example of how we intend to show up this year. With a more tactical lens to drive new customer acquisition and repeat customer engagement, we're leveraging more targeted marketing activations through email, direct outreach, and curated in-store events that we started in earnest last year around things like NBA All-Star Weekend and Lunar New Year, which generated solid revenue and EBIT. And our email campaigns in Q4 generated 55% more revenue, compared to last year's campaigns as we scaled automated journeys, increased the frequency of communications, and implemented greater personalization. We believe that digital marketing initiatives like these, plus our work to improve the content and speed of our e-commerce sites, will be a tailwind to fiscal '25 revenue. But it's important to understand that we will be focusing most of our resources on our retail store networks. A big part of our brand evolution and showing up differently extends to our wholesale channel, which remains a vital part of our distribution network. We continue to reset and refresh our wholesale footprint to focus our efforts with partners that are aligned with our luxury brand positioning by: First tightening the supply of inventory, which helps increase the exclusivity of our product and allows us to better control how our brand shows up to customers. And second, by continuing to reduce the number of partners and number of doors within our larger partners, we will make significant headway on this front in fiscal '25. As Neil will describe more, we expect this activity to result in a decline in wholesale revenue next year. However, we strongly believe that this pullback will more effectively support our DTC growth in fiscal '25, better elevate our brand, and regrow this channel in the future. So let me now give some color and context to our second operating imperative, which is implementing best-in-class luxury retail execution. In Q4, we added new locations in Honolulu, Hawaii, Nanjing, China, and Melbourne, Australia, bringing our permanent store count to 68 at the end of March. With only seven years under our belt as retailers, we're proud of the speed and breadth of our retail expansion, particularly given the fact that we did it during a very disruptive global pandemic. But we also know we must get more out of the store network we have, which is why retail execution will continue to be a key area of focus. As part of our recent work streamlining, our global stores function was moved to Dan Binder, who has decades of luxury retail experience and now has end-to-end oversight over our global stores and sales planning and operations. With this updated structure, we are doing three things to increase the productivity of our global network. First, we are slowing the pace of new store openings. We plan to open three new standalone stores this year, compared with 14 out of the 17 permanent stores opened in fiscal '24 being standalone. In addition, in FY '25, we will open four concessions and convert three temporary stores to permanent. This change in pace is intentional and this year allows us to focus primarily on driving sales productivity and comp sales growth in our current footprint. Second, we are leveling up our retail operations and processes. You all know the saying retail is detail. We are still a young retailer and learning how to perfect our operations alongside rapid product and geographic expansion. In fiscal '24, we started to introduce initiatives focused on enhancing merchandising planning, localizing product assortment, as well as improving labor productivity and our returns process, all informed by our transformation program. We saw some benefits in our early phases of implementation and we still have work to do across these areas and others to address the foundation of our network as well as build resilience so we are well-equipped to compete even when external conditions are not favorable. As a result, we expect to more profitably grow our sales as we better align product assortments by store to best serve their customers, better balanced team schedules with traffic levels, and optimize the replenishment process to ensure we deliver the right products in the right place at the right time cost effectively. The third area of retail execution is to elevate the customer experience. In luxury, experience is everything. Our Canadian Warmth program is at the core of ensuring the in-store consumer journey feels distinctly luxury and Canada Goose to convert browsers into long-time repeat customers and brand advocates. Our focus in fiscal '25 is to embed this at scale across our network. Our goal is a more consistent execution of Canadian Warmth achieved by stepping up our trading programs and implementing relevant and compelling incentives to generate conversion, cross-sell, and up-sell benefits. All of this work will take time. However, we believe we will unlock significant value this fiscal and cement best practices for years to come. Now, I will pass it over to Beth, who will discuss our third operating imperative for fiscal 2025.

Thanks, Carrie, and good morning all. I'll now talk about our third operating imperative to simplify and focus the way we operate. We are doing this with two anchors, internal operating excellence and focused capital deployment. First, achieving internal operating excellence. Put simply, this means we need fewer people working more effectively on fewer priorities and ensuring the results show up in our KPIs and in our P&L. As part of the org changes we made in March, we reduced our headcount, but it was about much more than just saving money. It was also about greater speed and agility. As we streamline the organization, we also got our structure right. We increased our spans of control. We combined teams that were working on overlapping tasks or where silos had been making us less coordinated and less efficient. For example, in our operations organization, prior to the March changes, we had 12 people at the VP level and above. While this part of our organization is obviously large and complex, given our manufacturing footprint and our global supply chain, candidly, this was just too much management overhead and it led to additional complexity and siloed behaviors. Today, after the changes, we have only six VPs in our positions in this function, a reduction of 50%, and those leaders are working more cross-functionally, nimbly, and effectively together to drive results. There are examples like this across the business. Overall, we eliminated over 25% of senior management roles in our corporate organization, compared to the total 17% headcount reduction. We've also eliminated meetings that aren't necessary anymore, killed reports that took time but weren't being used to drive the business. All of this is about simplifying how we work. We are also narrowing our focus on initiatives we believe will drive more impact. Some examples we've already shared today, including opening fewer stores and dedicating the resources we've freed up to retail execution. Also making fewer and more focused marketing bets. We're using data more rigorously to ensure we're making progress against these initiatives and driving accountability through the organization. Fewer people working more effectively on fewer priorities and driving the results. That's operating excellence. Second, we plan to deploy less capital expenditures in fiscal '25. Specifically, we're investing in a very selective group of new stores and a priority set of technology investments that bolster our retail operations, such as intelligent order management, as well as in the data architecture that supports our efforts to be a more data-driven organization. We also plan to rightsize our inventory levels this year. Our inventory position is unique in a very positive way. We're vertically integrated for a large majority of our products. We carry high-quality evergreen inventory and our products are sold at full price in our mainline stores, and they're actually sold for more in the second or third year than they were in the first. That means we have lower obsolescence, markdown, and margin risk. These are great strengths. But it also led us over the past few years to probably build more inventory than we should have. We wanted to be prepared to meet the demand if it occurred and we knew the inventory would hold its value. In fiscal '25, we'll shift that, focus on increasing our inventory efficiency, bringing up working capital, and improving cash conversion. To do this, we are temporarily reducing production levels, first with our third-party contract manufacturers and also at our own manufacturing facilities. We're also continuing a responsible build-out of an exit inventory strategy. Over the last year, we have thoughtfully used friends and family sales to exit slow-moving and discontinued inventory. As a full-price brand across our mainline stores, this is an environmentally friendly and brand-led way to exit discontinued styles and broken-size runs. We'll continue to leverage these in fiscal '25. We expect these two efforts, plus achieving the sales goals Neil will outline to help us improve our inventory turns from approximately 0.9 times in fiscal '24 to above one times in fiscal '25. We've accomplished a lot in fiscal '24 and so far in fiscal '25, simplifying and focusing the way we operate, and we look forward to sharing more on this over the course of the year. I'll now pass it over to Neil to wrap it up with our outlook for fiscal '25.

Thanks, Beth. To start, for fiscal '25, we are resuming annual financial guidance, which was our practice prior to fiscal 2021. We believe that an annual view rather than quarterly, offers better insight into and understanding of our evolving D2C model in the context of the seasonal nature of our business. It is also another example of simplification. While our business planning requires detailed focus on every consumer who visits our retail stores and every jacket that we produce in our manufacturing facilities, our business is planned over the annual cycle as we maintain a relentless focus to deliver throughout our peak season even as demand for our products expands beyond this timeframe. It is a key objective for the entire Canada Goose team to prepare for and execute on this massive opportunity, both from a consumer and revenue perspective. Our outlook for fiscal '25 continues to expect pressure on consumer spending due to the higher interest rate environment and geopolitical uncertainty. Also, while the team is focused on executing our operating imperatives, we acknowledge that change is hard and as a result, expect the benefits of our work to be reflected gradually in our KPIs over fiscal '25, with more meaningful impact in the years ahead. With this in mind, in fiscal '25, we anticipate total revenue to grow in the low single-digits year-over-year, with an approximate 25%-75% split between the first-half and second-half of the fiscal year, respectively. We expect our D2C business to drive topline growth, primarily due to low single-digit D2C comparable sales growth, largely driven by our efforts to strengthen our retail operations as well as incremental revenue from our new stores you've heard about. The majority of which we plan to open ahead of our peak selling season. Specifically, we plan to add 10 stores to our permanent store count, which includes three new standalone locations, three conversions from temporary stores, and four concessions. Therefore, while we expect to incur less capital expenditure related to new stores this year, we also expect less of an incremental topline impact from this cohort on a per-store basis. While we expect overall unit sales to grow in fiscal '25, we anticipate a continued shift in our product mix towards our emerging categories. Also benefiting revenue growth is an average mid-single-digit price increase over last year across our DTC and wholesale channels in line with fiscal '24. We expect revenue growth driven by these factors to be largely offset by a year-over-year decrease in wholesale revenue of approximately 20% as we tighten the supply of inventory to our wholesale partners with a reduced order book, await inventory levels in this channel to improve, and continue rationalizing our wholesale accounts to elevate our distribution in that channel. Consolidated gross margin percentage is expected to be similar to fiscal '24 as benefits relating to the continued shift to DTC in pricing are offset by higher production costs on lower planned output. As a result, DTC operating margin is expected to be relatively flat with the prior year, and wholesale operating margin is expected to decline, driven by lower revenue, further deleveraging fixed costs. Corporate costs are also expected to be down year-over-year. Continuing with SG&A, the consulting fees and severance costs with respect to our transformation program of approximately CAD40 million in fiscal '24 will not recur from this year and while they are not adjusted in our metrics for either period, they are important to isolate. Annualized transformation program benefits of approximately CAD25 million are expected to flow through our P&L, which includes some headwinds for inflation and annual people cost increases. These are further offset by a planned bonus for senior management levels for fiscal '25, which we did not pay in fiscal '24 in light of performance against our expectations, as well as key investments in our operating imperatives, particularly in our new creative director in Paris design studio. Overall, we expect SG&A expenses after considering these factors to be flat in dollars compared to the prior year, with an improvement as a percentage of revenue. When we add it all up, we expect adjusted EBIT margin to expand by approximately 100 basis points compared to fiscal 2024. Finally, we expect adjusted net income per diluted share to grow by a mid-teen percentage over last year, with weighted average diluted shares outstanding of approximately 99 million for the balance of fiscal '25. Finally, we are providing an update on our long-term financial outlook. Over the past year, business conditions have changed significantly and we're operating in a more challenging consumer environment since our long-term outlook was shared in February 2023. As we've discussed today, we also recognize that there are foundational pieces of work we must continue, particularly around D2C execution and operational discipline, leading to improved topline performance and EBIT margin expansion. Therefore, we believe it is prudent to remove our long-term financial targets. We continue to believe that Canada Goose has the potential to grow to a significant scale given our rich heritage, iconic brand, and the considerable white space opportunity that lies ahead of us in terms of product, consumer, and D2C expansion. During fiscal '25, we expect to make significant progress on the operating imperatives you've heard about today, and at the appropriate time, when we have established a pattern of success with a clearer line of sight to build on that success, we plan to reintroduce long-term financial targets. As Dani said, and I'll reiterate here on behalf of the Canada Goose management team, thank you to our committed group of people around the world who are passionate about Canada Goose and are relentlessly focused on delivering for our consumers every day so that we can collectively reach our potential. We'll now turn it back over to the operator to begin the Q&A.

Thank you. We will now begin our question-and-answer session. [Operator Instructions] Thank you. The first question comes from the line of Brooke Roach from Goldman Sachs. Please go ahead.

Good morning, and thank you for taking our question. As you evaluate the key initiatives you've identified today, as well as the commentary that you provided about the benefits of the work to be expected gradually becoming more meaningful over time, can you provide some guardrails that you're currently thinking about the path and pace to stronger margin and profit improvement beyond FY '25, understanding that you're not providing an updated long-term guide?

Good morning, Brooke. Thanks for your interest and good to hear you. I think at this point in time you've heard the commentary in the script that our focus is entirely on fiscal '25 and building in the operating discipline that's necessary for us to feel more confident about what the long-term margin profile could look like and the pace at which we would get there. And so I think at this point in time we're going to just remain silent on fiscal '26 and beyond, although without a doubt, the level of conviction in this organization at the Management table, at the Board table is very high on what the potential is for this business, and we intend to pursue that.

Great. Thank you. And just one quick follow-up. As you think about the opportunity for fiscal '25 revenue growth, you identified an opportunity for some improvement in sales in the year. Can you provide a little bit more color on how you think that sales growth might break down by geography? What are you expecting for the macro versus the Canada Goose initiatives that you've identified today for both North America, China and EMEA?

Yes, sure. I'll start with the macro. And I think the data points that we would look at would be sort of what a bank consensus look like and look around at what our peers are saying. I think the view of being a middle single-digit growth for the luxury business is kind of the consensus. Our experience in China over the last, and really in APAC over the last three months has been more or less in line with that. And as we noted on the call, against a pretty strong comp period. And so we feel pretty good about the pace that we've experienced in terms of operating performance there in that part of the world. North America has been under a little bit more pressure, and as we noted, the market in Europe, at least as it relates to our business, continues to be pressured. And a little bit of that is the wholesale situation and what those businesses are feeling and how that's impacting the DTC business. If we zoom out, we're looking at sort of mid-single-digits growth on total on revenue. The major components of that are that the DTC business will grow and we think it will grow meaningfully. You see comps being somewhere in the low single digits, which pricing helps, mix is a little bit of a negative. The big issue we're facing is as we normalize the wholesale business, it's a major headwind. And it's a major headwind both in the top line as well as on EBIT. When we see our way through that, we'll be very -- we'll feel very good. That's the revenue story.

Great. Thank you so much. I'll pass it on.

The next question comes from the line of Adrienne Yih from Barclays. Please go ahead.

Good morning, this is Michael Vu on for Adrian Yih. And thank you for taking our questions. So, related to the cadence of releasing new products, what is the strategy on a typical release? And do you release the product at specific stores or in specific geographies? And finally, what are the steps and strategies to roll out the product everywhere across?

Thank you for your question. This year we have on top of our normal cadence of releasing products time and the newness that we bring. Our new creative director, Haider is going to infuse a whole level of new energy and excitement into our product line that started yesterday. In fact, when we launched our first product by him, which is a PBI hoodie for parody and beyond that, we're going to see drops of his capsule collections into our retail stores in fiscal '24 and beyond that in every relevant period following.

Great. Thank you. And then as a follow-up. When adding the additional SKUs into the product mix, do you have any internal targets, for example, like in FY 1Q '25 or FY '25, you sell a certain number of SKUs, or is it more dependent on market trends rather than a specific number?

Yes, I think that we look at the correct number of SKUs that we need to have for our business, and we always every time we introduce new product categories and product lines -- not always new categories, but new products in general, our margin is in line with the rest of the margin for the rest of the business in general.

Sounds good. Thank you very much.

The next question comes from the line of Oliver Chen from TD Cowen. Please go ahead.

Hi. A lot of exciting announcements. On Haider Ackermann, his DNA is from Paris and Belgium and Galliano. Quite sophisticated. Just what was your vision for why he's the best for this role? Also, and as you see the evolution of what he does, what might be earlier or later in terms of how you're thinking about the sequencing and also the non-parka opportunity? Also just to follow-up. North America e-commerce, that number was quite robust overall. What's happening there in terms of conversion rates and what you're seeing with traffic and if you're happy with it. Thank you very much.

Thanks, Oliver. I'm very happy to talk to you a little bit, but Haider, we are so excited to have him join us as creative director, and we're so excited to make the announcement yesterday. This was a search which was a long time in the making. It took me probably somewhere in the vicinity of two years to find the right person and met all kinds of people from all over the world throughout this time. And I met Haider, he really struck me as somebody who shared my vision, who understood that Canada Goose is a function first quality craftsmanship driven brand, and something that he really felt that he could help elevate to the next level, which is at this point in our journey, we feel is an inflection point moment. He felt that he could really add to, that he really wanted to. And this is something he found to be very exciting. And we certainly had a meeting of the minds on that. And so that's how we made the decision. And we're both super excited about the future and about all that's to come. And this PBI -- a little anecdote about this PBI hoodie that came out yesterday is one of the first things that we did when he joined us and was that we went up to Churchill, Manitoba, to visit the home of the Polar Bears and Polar Bears International that we've been supporting for almost 15 years, over 15 years at this point. And Haider and I went up there and he really got inspired by the landscape and by the Bears and by the people. And he said to me, you know what? I'd like to design this hoodie. And I'd like this to be the way we launch our partnership. And we rolled with that and we launched this product yesterday with tremendous commercial success on its first day and really, really excited for the future and what's to come.

Oliver, let me talk to you about North America e-comm. So yes, e-comm is doing well. e-comm's post-sales were up, traffic APT both up year-over-year. I would say for North America specifically, conversion remains an opportunity. So I think it's both in-store and online. But we're happy to see traffic up, happy to see APT up, AUR up, but obviously we see opportunity and that's a focus for us. And so gives me comfort our brand is strong. We're getting the traffic. I think for us, the idea is how do we convert those into actual sales? I will just say something on e-com. There are going to be a lot of things that we're doing, whether it's site speed improvements, whether it's how we show up online is going to look a little bit different now that we have Haider on board and showing up -- helping us show up in a different way. But the most of our focus in terms of conversion and where are the majority of our initiatives and our investments going to go is in stores. We see that as really being the biggest driver of impact and revenue growth this year.

Thank you. Sounds exciting. Best regards.

The next question comes from the line of Rick Patel from Raymond James. Please go ahead.

Thank you. Good morning and congrats on the strong end to the year. A question on gross margins being planned flat year-over-year in fiscal '25. I hope you can provide additional color on the increase in costs that you're seeing that are offsetting the positive impact from the mix shift towards DTC. And I know you're moving away from quarterly guidance, but curious if you can provide any color on the shape of gross margins as the year moves forward.

Sure. Rick, thanks for the question. As it relates to gross margin flat for the year, we've got obviously benefit on the pricing, but as we've taken a look at the inventory levels in supply, we've been a little more surgical about planning our inventory build this year. And as a vertically integrated manufacturer, the advantages around having flexibility are very significant. But at a time when we slow production, a little bit we've got to absorb some additional fixed cost, and so we're expecting that's going to be a little bit of a headwind for this year. And that will work itself out as we sort of realign those production levels with what the it looks like as the years progress. As it relates to quarterly shape of gross margin, I'll frustrate you a little bit in that we're pretty clear about sticking to the annual profile. You can make assumptions about, given the revenue guide, what that will look like. And I think more or less channels will be in line with where you'd expect over the year. And so I think that whatever your assumptions are for quarterly progression of revenue in channel split, the margins will follow.

Also a question on DTC expectations for fiscal '25. Can you provide any additional insights on how we should think about comparable sales by region?

Yes, I think at a high level comp sales by region sort of squares with our view of what the health of those markets are. And so Asia, Asia Pacific and one level down in China, we certainly are drafting off of a pretty decent Q4. And so we'd expect that to probably be the strongest region followed by North America, where there's clearly still some headwinds around consumer spending and specifically consumer luxury spending. I think in Europe our expectations are a bit more moderated, but in all cases we're anticipating to be slightly positive in comp.

Thank you.

And just if I can add to that, I think one of the things that gives us confidence is that we're already seeing and in North America in particular, our share of transactions from repeat customers is up year-over-year. And so we'd expect that to continue. And specifically when you look at the US in terms of number of stores. So last year we opened 16 versus eight the year previous. So we have lots of opportunity to be, driving those comps and that really is our focus for the store team.

Appreciate the insights.

Thanks, Rick.

The next question comes from the line of Michael Binetti from Evercore. Please go ahead.

Hi, this is Jesalyn Wong on behalf of Michael. I would just want to ask on the SG&A leverage there, the guidance implied roughly about 100 basis points of leverage, but the DTC given wholesale is guided down 20%. The mix shift is likely to be a headwind. So we just want to know what the puts and ticks are and what's driving the leverage there. And on the wholesale guide, down 20%. In terms of cadence, are we expecting this to be first half weighted and then improves as second half into the year? How should we be just thinking about this? And just to clarify, I guess you guys mentioned ASP is up across both DTC and wholesale, but revenue is only guiding up low single digits in the year. Does this imply that overall units is down? Thank you.

Sure. Thanks for your questions on the business. So I'll repeat what I said in the prepared remarks as it relates to how the EBIT margin is going to flow through. So we're expecting to be more or less flat in terms of operating margin inside the D2C channel, although the operating margin -- the operating segment, operating dollars will increase. Operating dollars. And so you're going to get a little bit of leverage out of an increase in the absolute dollars there. Wholesale, going to see some deleverage, 20% decline in the top line. Despite the fact that we will and have taken some measures around costs, we're not going to be able to fully offset that. And so we're expecting to see some deleverage in terms of the operating margin there. And then, as we noted, corporate costs will be lower than they were last year, which is really a flow-through from transformation program and some tailored very surgical investments around some of the operating imperatives in the business. As far as the wholesale guide goes, our pattern of wholesale business on a quarterly basis is more or less established. And so I would anticipate that to the extent that you're using that as a baseline, that 20% decline is a reasonable baseline. Although we're not going to guide specifically on a quarterly or first-half, second-half basis. And then last on the low-single-digits is volume impacted. I think in pricing dynamics is important to understand because we've suggested that we're going to be mid-single digits on pricing. That is positive, obviously, to the overall story, but the mix within those categories is really critical to understand. And specifically inside the D2C business, where some heavyweight down growth is expected, although very moderate. And we will continue to expect to see some of those other categories where we've seen really material growth, whether that's apparel and inside apparel, fleece, or whether that's accessories, footwear is starting to come on. And so on a unit volume basis, I'm not sure it's as relevant as how the mix is moving and how we're protecting that gross margin as the mix moves.

Got it. Thank you.

The next question comes from the line of Ike Boruchow from Wells Fargo. Please go ahead.

Hey, good morning, everybody. Neil, just wanted to ask about the DTC business. So I know we're not talking about anything beyond this year, but I guess at a higher level, you gave some of the metrics on how the business looked last year. Can you just maybe tell us what are the KPIs you're really looking for as you kind of moderate growth, whether it's sales per foot four wall margins, up margins. Just basically, what are you looking for to see that you're ready to maybe start accelerating the growth again? Or conversely, what are you looking at to maybe make a decision down the road that maybe we need to call the fleet a little bit because it's not meeting expectations?

Yes, I mean, I'll just stop right there at the last point that there's no consideration of calling the fleet. Although, as any good retailer will tell you, that once you establish strong performance track record you want to ensure that everything in the fleet is delivering above that track record. And that would be the pattern I'd expect us to follow. As it relates to -- I'll speak about stores specifically because I think that's the nature of the question. We certainly want to be driving top line because that in this business with such a healthy gross margin profile that allows us to leverage. And so we want to have stores that are well above our $4,000 a square foot productivity levels. We need comparable sales growth to be at least in the mid-single digits on a sort of a normalized basis, and Carrie talked about a lot of the options around that. But none of that is great unless that translates into really healthy four-wall EBIT. And so we know we have some work to do there around execution within our stores. We're certain that as the product expansion occurs and we start to spread into some of the other seasons, there's opportunity there. But that's more of a medium-term situation. In the next 12 to 24 months this has to be about what we do in the stores every single day and what we do in the support offices to ensure that they're best prepared to deliver.

Got it. And then maybe at a high level, just what are your expectations specifically in North America, but obviously by region, if you can just on the inventory backdrop for outerwear in general, maybe at the higher price point, maybe the mid-tier. Just trying to understand what are your expectations in terms of how competitive the category might look as you get closer to the winter season? Does inventory look aligned when you look at other brands? I'm talking more big picture, not so much your specific business. Just trying to see is that part of the reason for the wholesale pullback that you don't want to play in that channel if that's what's going to go on. So just kind of curious what exactly your expectations are there.

I'll take that one. This is Beth and Carrie may add on. Look, this is a competitive market for sure. And so we saw competitive intensity be strong in fiscal '25. We expect that will be the same next year. That said, we, particularly in outerwear, have a real ownership position, and so we plan to continue to capitalize and leverage that strong brand strength we have in our DTC channels and in wholesale. But to your question specifically about wholesale, yes, that pullback is in large part to control the inventory that's in the channel and make sure our brand is being represented correctly and secure the inventory to be in our own DTC channels where we can deliver really the customer experience we want. Carrie anything you'd add to that?

Yes, I would say it's less about -- it's not really -- I mean, of course inventory is a factor, but I mean we still see massive potential in whether it's from price points that we're currently not serving a customer on and particularly in outerwear. So again, Haider his capsules will come in. We expect those to probably be at the highest end of our price points. But we also believe that there is other room to introduce other products. Again, we have no interest in going down market. As Beth said, we own this. We have a very ownable position and it's exciting for us to be able to really fulfill into that. But I think for us the biggest focus is about the brand and how it shows up. So I talked about wholesale being a reset, but it's also a refresh. And so we want to make sure that our customer that walks into our store also has a similar experience in seeing the brand show up in the way that we want to, which that's our biggest focus to make sure. And we think that is going to drive the health of that channel.

Got it. Thank you.

Thanks, Ike.

The next question comes from the line of Jonathan Komp from Baird. Please go ahead.

Yes, hi, good morning. Thank you. I want to follow up. Neil, I know you're suspending talking about formal targets beyond fiscal 2025, but you did mention more benefits of the actions you're taking this year in the years to come. So just curious, as you think about the long-term margin profile of this business, is it still realistic to think you're back to the mid-20s at some point in any sort of reference or context around really a credible path to get back there?

Yes, I mean I don't have any doubt that where we've been historically is a place that we can get back to. And that just to be really clear, that's mid-20s and have started obviously to plot the path to get back to that level. But the first step in that path is about execution in our channels, particularly in our D2C channel in fiscal '25. I don't think there's a whole lot of complexity in terms of what the necessary things are. It's just a matter of us taking them on and executing against them in a really disciplined way, learning from things that perhaps don't go the way that we expected, course correcting and building on that. And so I appreciate that's not as clear of a bridge as you'd like, probably between today and where we're going to get to But I think, rest assured that when we feel confident about it, we'll share that and we'll take you through that.

Jon, I'll add to that there's three real places where we can get a lot more out of assets in our business growth in our stores by driving productivity in our manufacturing facilities and our operations infrastructure in general, supply chain, et cetera and our corporate cost base. There's a lot of opportunity to leverage off of all of those as we drive growth. So to Neil's point, the execution to drive the growth in the areas where we have these existing assets is the focus. And then there's a lot of leverage that can come thereafter.

And maybe just to follow-up as we think about building our models or rebuilding our models after this year, should we think your priority will be centered around repairing margin fully, first and foremost over, say, getting back to double-digit growth or some higher level of growth rate or how should we think about prioritizing those two competing forces after this year.

I think in order of priority, having a well-established track record on margin and conviction that we can continue to grow, that is number one. But we need scale in order to get to a sort of mid-20s level. And scale will come and we're confident that we can build on the platform that we're going to establish here.

That's helpful context. Thank you.

Thanks, Jon.

Ladies and gentlemen, this concludes our Q&A session. I would like to turn the call over back to Ana Raman for closing remarks.

Thank you everyone for joining us and listening to us this morning. As always, please reach out to me and investor relations if you do have any further questions. Thank you.

This now concludes today's conference call. Thank you for your participation. You may now disconnect.