Canada Goose Holdings Inc. (GOOS) Q1 2026 Earnings Report, Transcript and Summary

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Canada Goose Quarter 1 Fiscal Year '26 Earnings Call. [Operator Instructions] I would now like to turn the call over to Neil Bowden, Chief Financial Officer. Neil, please go ahead.

Good morning, everyone. With me today are Dani Reiss, our Chairman and CEO; Carrie Baker, President of Brand and Commercial; and Beth Clymer, President and Chief Operating Officer. For today's call, Dani and I will start with prepared remarks, and then the 4 of us will take questions as usual. Today's presentation will contain forward-looking statements that are based on assumptions and, therefore, subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements, except as required by law. You can read about these assumptions, risks and uncertainties in our filings with U.S. and Canadian regulators. These documents are also available on the Investor Relations section of our website. We report in Canadian dollars, so the amounts discussed today are in Canadian dollars unless otherwise indicated. Please note the financial results described on today's call will compare first quarter results ended June 29, 2025, with the same period ended June 30, 2024, unless otherwise noted. With that, I'll turn the call over to Dani.

Thanks, Neil, and good morning, everyone. Since we kicked off fiscal 2026, it is clear, spring is a growth opportunity, and we are capitalizing on it in a big way. This season, we showed up differently with fresh product, bold marketing and a clear point of view that sparks new energy around the brand. And as customers engage with us, we delivered executing with strength across every channel. The first quarter marked a strong start to the year with revenue up 22% year-over-year. Our direct-to-consumer business showed positive momentum continuing since December of last year, delivering 15% D2C comparable sales growth for the quarter. This now marks a seventh consecutive month of positive comps. Our performance in North America and Mainland China were particular highlights this quarter, which gives us confidence as we enter the peak season. Our seasonally-relevant assortment, commitment to maintaining a consistent and impactful marketing presence and our focused execution of our direct-to-consumer strategy is clearly working. On our fourth quarter call, we shared our operating imperatives with you which continue to provide the foundation for our execution. First, expanding our product offering to enhance year-round relevance. This quarter, we introduced more newness than ever before, making our stores more seasonally relevant and well positioned with the selection that resonated with consumers in the moment. The Emerson T-shirt, a new style launched this season, topped our bestsellers this quarter, followed by the Beckley Polo and Chilliwack Fleece. Apparel was our fastest-growing category in Q1, but newness and relevance across our assortment also drove higher growth in our core outerwear products as well. Second, building brand heat through focused marketing investments. In the first quarter, we continued to drive brand momentum through strategic marketing investments in our Spring-Summer and Snow Goose summer campaigns. The Spring-Summer campaign brought a fresh energy to the brand, playful and relevant with a clear message. We do summer, too. It challenged old perceptions and made people take notice, backed by more season-specific product and elevated [ storytelling ], it sparks real momentum. The Snow Goose campaign built on that heat resonating globally and driving a strong lift in earned media reach, engagement and follower growth, clear signals that, that campaign landed. What Haider is doing is bold, is reaching deep into the DNA of Canada Goose and pulling it forward, reinterpreting our heritage in a way that feels right now. Snow Goose puts us squarely in the pop-culture conversation, creating something that speaks to longtime fans, we're capturing the attention of a whole new generation. Through channel development, we are executing across direct-to-consumer and wholesale to deliver an elevated experience at every touch point. Our direct-to-consumer comparable sales growth has remained positive in recent months. We're seeing strong alignment across product, marketing and channel operations, driving store conversion higher year-over-year in every region. These are clear proof points of the progress that we are making. That said, we are not standing still. Our teams around the world continue to push for more, and we are seeing that translate into the second quarter, with July showing yet another strong month. Finally, I want to highlight the recent release of our fiscal 2025 Impact Report. We are continuously looking to improve and innovate ensuring that our efforts lead to a more sustainable future. In fiscal 2025, we achieved a 9% reduction in Scope 1 emissions and a 25% reduction in Scope 3 emissions, while additionally investing in 10 renewable energy projects to fully match our Scope 2. I'm very proud of both our progress and of our teams for their commitment every step of the way. In closing, I'm energized about the momentum we have built, especially in the uncertain economic environment. We're unlocking major growth opportunities that set Canada Goose up for continued success through the rest of the year and beyond. And with that, I'll turn it over to Neil.

Thanks, Dani. Our first quarter fiscal 2026 results are a continuation of the strong performance we delivered as we closed out fiscal '25 and the early progress we're making on our key operational priorities this year. Let me walk you through the financial results. Revenue for the first quarter was $108 million, up 22% on a reported and constant currency basis from last year's first quarter. D2C comparative sales growth of 15% on a consolidated basis was the primary contributor to our strong quarter with standout performance in both North America and APAC and across both e-commerce and stores. First, some color on channel performance before getting into the regional picture. All the figures I cite are on a constant currency basis. D2C revenue increased to $78 million, up 23%, reflecting success of our broader D2C strategy. We sharpened execution and delivered a more elevated experience alongside more newness and made a greater investment in marketing. The combination of these initiatives is translating directly into our financial results with comparable D2C sales up 15% after a growth of 7% in Q4 of fiscal '25. In wholesale, we achieved an 11% year-over-year increase in revenue both delivering on our order book, including travel retail and some wholesale replenishment activity. While timing shifts may cause quarterly fluctuations, our view for the wholesale business is stable performance this year following the channel reset over the past few fiscals. That said, we are monitoring retail health in every market. And while there are some spots of caution, we are working together to build the Canada Goose business in this critical channel. Other revenue was $12 million, up from $9 million in Q1 last year, mainly due to hosting 2 Friends & Family events this year compared to 1 in the prior year. Now commentary on the geographic revenue trends in Q1. In North America, revenue was up 27% as our D2C channel continued to deliver very strong performance. Stores led the way with double-digit D2C comp sales growth each month in the quarter, while we're very pleased with the performance in both countries, the exceptional growth in the U.S. is particularly encouraging as we head towards our peak season. In APAC, revenue increased by 27%, driven by higher revenue in both channels. Mainland China delivered strong D2C growth, driving the region's overall performance. While softer trends in Japan tempered growth, the region still achieved double-digit D2C comparable sales growth, underscoring the strength of our brand in the region. While macroeconomic challenges had an effect on traffic, our store conversion rates improved year-over-year, evidence of our operational improvements bearing fruit. We opened a new store at WF CENTRAL in Beijing late in the quarter, marking our third store in that city. In EMEA, revenue was down slightly year-over-year due to a planned decline in wholesale revenue, partially offset by higher D2C revenue. The decrease in wholesale revenue was primarily due to timing shifts to later in the year and some planned decline in the order book across the region. For the quarter, D2C comparable sales growth was low single digits negative, reflecting a U.K. consumer who remains under pressure, while the business in Continental Europe is performing at a higher rate. We're focused on ensuring our conversion and brand marketing are optimized to mitigate some of the macro factors that are weighing on performance in EMEA. Moving down the income statement, let's turn to gross profit, keeping in mind that in Q1, small dollar impacts can have an outsized effect on our gross margin figures. Gross margin expanded 170 basis points year-over-year to 61.4% favorably impacted by margin expansion from our European manufacturing facility. Pricing, product and channel mix did not have a significant impact during the quarter. Reported SG&A expense for the quarter was $225 million and an increase of $75 million or 50% year-over-year. This included a onetime charge of approximately $44 million related to an arbitration award to a vendor in a previously disclosed commercial dispute as well as a higher earn out of $9 million linked to the purchase of our knitwear manufacturing facility in 2023. Excluding these onetime charges, our underlying adjusted SG&A was up 16% year-over-year as we made investments in important revenue-driving areas like strategic marketing spend, product creation talent, including design, merchandising, product development, talent and store labor, which helped fuel our strong comp sales growth for the quarter. Adjusted SG&A grew at a slower pace than revenue and therefore, improved as a percentage of revenue by 850 basis points year- over-year. As a reminder, our fourth operating imperative in fiscal '26 is operating efficiently with pace and accountability and SG&A as a percentage of revenue is the key metric we are tracking to monitor our progress. We're pleased with our progress here and plan to continue to focus on this by driving revenue growth and spending SG&A efficiently and on more revenue-driving investments, leading to EBIT margin expansion over the long term. Our adjusted EBIT was a loss of $106 million for the quarter, which increased from a loss of $96 million in Q1 last year. Adjusted net loss attributable to shareholders was $88 million or $0.91 per share compared to a loss of $76 million or $0.79 per share in Q1 of fiscal '25. We ended the quarter with a balance sheet with a strong position. Inventory was $440 million, down 9% on top of a 7% reduction in Q1 of fiscal '25, driven largely by higher demand over the last 12 months and tighter inventory management. This marks our seventh consecutive quarter of year-over-year inventory declines. Our inventory turnover has improved as well, rising to 0.9x from 0.8x at this time last year. As we plan the year with the benefit of demand signals of the last few quarters, production and purchasing have returned to a more normalized level, although still down from highs a few years ago. Supply chain agility, a competitive strength of being vertically integrated and more coordination across the product creation value chain continues to be an area of focus and an exciting opportunity for us. We ended the quarter with $542 million of net debt compared with $766 million at the end of the first quarter of fiscal '25. This significant improvement reflects our strong operating cash performance including our efforts around the inventory management over the past 12 months and resulted in higher cash balances and lower borrowings on our credit facilities. Our net debt leverage was 1.8x adjusted EBITDA compared with 2.8x adjusted EBITDA at the same time last year. CapEx in Q1 was higher versus the prior year as we are strategically allocating capital primarily to store openings and renovations that directly support revenue generation and brand elevation. We've started fiscal '26 in a strong liquidity position that provides flexibility to make strategic investments and navigate uncertainty in the operating environment, while maintaining an efficient capital structure. Lastly, I want to address the evolving trade environment. Consistent with what you heard from us last quarter, approximately 75% of our units are manufactured in Canada and virtually all comply with the USMCA requirements, making them currently exempt from tariffs. For our European product, we are paying modestly higher tariffs, but they will continue to have a minimal financial impact. We continue to monitor the ongoing developments as it relates to potential new U.S. tariffs on Canadian goods as well as potential second-order impacts on the consumer. In this fluid environment, our strong operational foundation and manufacturing advantages position us well to navigate the evolving trade dynamics. To close out today's remarks, we are seeing meaningful progress across our 4 key operating priorities to start the fiscal year, which is leading to continued momentum in our financial results. As we look ahead, we remain focused on what we can control, elevating our brand, driving operational excellence and deepening connections with our customers around the world. On behalf of our senior leadership team, I want to thank our Canada Goose teams around the world for their continued efforts and great results. Carrie, Beth, Dani and I will now take your questions. And with that, I'll turn the call over to our operator. Operator, you can open the line.

[Operator Instructions] Your first question comes from the line of Brooke Roach with Goldman Sachs.

I was hoping you could talk to the drivers of the sequential acceleration in comp in a little bit more detail. How much of this is coming from some of the Snow Goose product that continued to expand this quarter versus your core? And looking ahead, how are you thinking about Snow Goose's opportunity to scale into the important winter season?

Thanks, Brooke. It's Carrie. So I'll talk -- really, there's 3 things. So there's -- we talked a lot about marketing in terms of investments that we are making earlier and a higher up in the funnel. And so that's the job that, that needs to do is bring new energy, engage the consumer in a different way and bring new customers. And so that's working, right? So if you remember this time last year, we were a tiny bit quieter in the summer. And so we launched with a very bold Spring-Summer campaign that really did the job. It increased reach, increased engagement, the press coverage that we got from that was so strong. And so we know it's landing with the consumer. Then when you move into product, and Dani mentioned this in his remarks, but the assortment is so much more representative of a seasonally relevant collection. So when you look at the apparel growth that we've seen, we're a brand that is known for warmth. And outside of winter, we're just really not known as that brand, but this campaigns, the collection really challenge that perception and people responded to it. And so then the third thing I would say is really just our execution. So our continued efforts on making sure that we've got the product in the right place, that our brand ambassadors in-store are focused on conversion, and you'll see that in the results as well. Conversion was up across every region this quarter. And so the combination of those 3 things together really is helping us drive our comps. When you think about Snow Goose, Snow Goose did the exact job that it needs to, right? Haider's collection is supposed to be the top of the spear, really avant-garde, very bold, different for Canada Goose and bringing freshness, bringing excitement. And so it's much more of a brand heat driver. We're looking at this for now versus a commercial driver. It does do obviously help us and you see that when we look at basket size, it's obviously driving much more of a halo impact than we had anticipated. But that will continue. So we're looking at Snow Goose as more like a capsule collection on top of our mainline, really driving brand heat. And so we've had drop 1 in the summer, we'll have drop 2 soon shortly, and then we'll be looking at a fall drop as well.

Great. And if I could just ask Neil, a quick question. I understood that there's a lot of changes happening with the timing and the magnitude of marketing investments as you look to reinvigorate the brand. Can you just help us understand how we should be thinking about year-on-year SG&A growth for the balance of the year? And if there's any puts and takes by quarter that we should be thinking about?

Yes, it's a good question, Brooke. I'll make some maybe more general comments given that we don't have guidance out for the year. We talked a lot about -- in the call a few months ago about making investments in things that we expect to deliver revenue growth, and some of that will happen over the long term. Clearly, the investment around marketing in the first quarter was higher than it had been prior -- in the prior year. We would expect that to continue, especially as you just heard from Carrie that were focus on a few more Snow Goose related drops as well as getting into our main season. The other areas of investment that we're looking at are that we're going to open some new stores this year, as we talked about before. And within those stores, we see that labor as an investment that delivers revenue. And so those are all the areas around investment that we're focused on. As it relates to maybe more discretionary SG&A spending. That's a spot where we're being more disciplined about what we expect out of those investments and making, I'd say, more clear choices about things that are not necessarily delivering revenue. So on balance, we're expecting to see some lift in SG&A, as you'd expect year-over-year to fuel some of this growth. And I think we're comfortable with what that look's like.

Your next question comes from the line of Oliver Chen with TD Cowen.

Across the luxury goods sector, you've been bucking the trends nicely in China. So I would love to hear about what you're seeing and all the success that you're having there, especially given that's a tough market. And then as we think about newness, which does impress us, what -- is there any quantitative aspect to the level or percentage of newness and/or what we should know about the flows upcoming that could help us understand the degree of newness. And as you think about Haider's success, he's done a really good job with shows at TOM FORD and other. What are you thinking about amplifying his messaging in terms of speed of that and what's achievable creatively with respect to fashion and messaging and unification?

Thanks, Oliver. So let me start with the first question. I think that was on APAC and China. So yes, we're thrilled with the performance in China and the greater APAC region overall, actually. So when you think about it, it's no different in terms of the playbook that we're executing, earlier marketing, tougher the funnel, reaching that consumer diligence in making sure that, that product is available and that is really responding when you think about APAC, of temperatures, the idea that spring is not necessarily the same everywhere as it would be in North America, but that customer is responding to the newness that we're bringing forward to the table, and then the execution. So the discipline of in-store execution with our brand ambassadors and our store teams. But the other difference, particularly in that region, is when you look at e-commerce. So we've talked about our live streaming success on Douyin before and WeChat, so expanding that is really resonating. It's driving a lot of traffic and engagement with our brands. And so that is a, obviously, a helpful factor as we deliver in that market. Japan is maybe the outside sort of market in the APAC region, where it's a little bit under pressure, a little softer comps, but very happy with what we're doing in China. The second question, I think you were talking about a degree of newness and the impact of newness. So very strong. So again, that's a part of our long-term product strategy to nearly double the amount of newness, and that's [ hosting ] carryover where we're animating some of our heritage or iconic style, so bringing a new reason to buy that second expedition or third expedition, but also introducing new -- complete new styles and apparel is a big driver of that. So we're thrilled with that. It's much more of a seasonally relevant product. It's making sure people are thinking of Canada Goose outside of winter, which we're obviously thrilled with.

One thing, Carrie, this is Beth. I'll add on the newness front, Oliver, this is really an effort across the organization to significantly evolve our practices to accelerate that pace of newness, creativity, elevation. So merchandising, sourcing, product development, manufacturing, you name it. There are investments in team members, new ways of working to really accelerate that newness. So we feel like we're just getting started. And we're also -- you're excited about the newness you're seeing in the store, we are too. We're thrilled with the commercial results we're seeing from that newness. But we think that the snowball is just beginning to build on the impact that we'll have this year and over the medium to long term.

Great. And one follow-up, on the -- that would be great, yes, on the fashion show potential.

I mean -- so we're a very different brand than TOM FORD. So we're not trying to replicate those things, but it's obviously a benefit to us in terms of just Haider and his style and what -- how creatively he thinks and he's pushing our boundaries as Dani said, he's bold and what he's doing is working for us. So putting us in the center of pop culture, whether that's through our expeditions. We took, for this summer drop, we took everybody to Utah and really showed up differently, but authentically, right? He's not trying to turn us into a fashion brand that just is not in our DNA. And so that's what we love about him, that's what he loves about us. And so I think the fact that he's so focused on taking what makes us great as a brand and just elevating that, amplifying it. And you'll see that come through the product, you'll see that come through the marketing, the expeditions that we do. And that impact is going to soon impact our mainline collection. Right now, it's just been on Snow Goose, but very soon, it will be on all of our collections.

Neil, lastly, just on puts and takes on gross margin that we should know about regarding any headwinds or nonrecurring? And was 2 versus 1 Friends & Family expected? Should we know anything about that as well?

Thanks, Oliver. On the last point, yes, that was expected, minimal level of activity, but 2 is obviously twice as much as one. So that created a little bit of elevation in what was pretty small overall dollars. As it relates to margin for the quarter, I probably said this last quarter, in the first quarter, and I'll preview next year first quarter, it's a small quarter, so you can get some noise. The one put and take, which I think we did talk about 12 months ago was sort of the flow-through of the European knitwear manufacturer. It was a positive this quarter. Last year, it was not. And so that was probably the main underlying driver of expansion. If you back that off, as we said, net-net, pricing, product mix and channel mix was basically not -- neither of those were a factor. Although I will say, clearly, I'd take it as good news that product mix is not necessarily a factor given that we're mixing pretty significantly out of some of that core product and into a whole bunch of newness. And so we love what that shows about the underlying power of this gross margin in this business, really in the first quarter and as we grow the top line in a pretty significant way.

Your next question comes from Adrienne Yih with Barclays.

Neil, understanding that Q1 is a very small quarter, but it seems like you have some really nice inflection in wholesale, some really strong trends, all geos, all categories, obviously positive. What would you need to see to kind of reinstate at least the current quarter guidance? And how should we think about the shaping of -- I know you talked about gross margin but kind of from an SG&A standpoint, should we expect sort of a double-digit increase to get behind the new product? And then Beth, I know back in fall, we had talked extensively about kind of the store productivity drivers and driving productivity within the boxes in nonseasonal quarters. Can you talk about some of the developments there? And how you've been able to kind of generate more 4-wall in productivity during the slower quarters?

I'll start on the guidance point, Adrienne. Thanks for your question. I think where we are in the year, I guess there's still at least from our perspective, quite a bit of uncertainty around what the trade environment looks like. And as we said a few months ago, those sort of second-order impacts on consumer health are still weighing on us, especially as we got 5% of the year done with a lot more to go. And so we need to see more, and we're clearly monitoring the Canadian-U.S. dynamic more than anything else. There seems to be some more clarity around Europe. But as we see anything can happen at any day. So we're maintaining a bit of prudence around what the outlook is for the year.

And Adrienne, I'll take the SG&A one. It also relates to your question on store productivity. So obviously, not giving any guidance on what to expect on SG&A, but our philosophy on SG&A growth this year is twofold. One, make investments in critical areas that are going to drive revenue growth in the short, medium and long term. So those areas, as Neil mentioned before, include marketing investments, product creation investments and store-level investments. So store-level investments are new stores, but also labor and other investments in the stores, I'll talk when I address here the next part of your question. So those investments, we are in real time looking at what are the investments, what are the KPIs coming out of them. Are they working? Do we do more? So we intend to be very fluid over the course of the year to make those investments, where we're seeing the returns, and two, where we're not. So therefore, it's hard to say exactly what that SG&A growth will be because we want to be nimble and responsive to the impact we're seeing it have on the consumer and our commercial results. The other part of SG&A, which is all the rest of the controllable expenses. Our job is to keep them as lean as possible and make sure that we're looking for as much productivity as possible to offset any inflation or investments we make there. So that's really the two- pronged focus that we've got as an organization that will guide our SG&A expense for this year and beyond. With regards to your question on store productivity, we feel great about the progress in the first quarter, obviously, with the comp growth. And as you said, the consistency. We saw a strong performance across regions, across stores, et cetera. I think the notable highlight on the year we did part of our SG&A growth in the quarter was a big investment in store labor in existing -- in comp stores. And you heard us talk a lot about that last year. But really, we beefed up our focus on store labor, kind of tail part of Q1 last year and really into the back half of the year in terms of peak readiness. This year, we're ahead of that game, and we're doing it earlier. And we are seeing that manifest in 2 things. One, comp growth and higher sales productivity and sales per labor hour per store. So more labor hours, but also more dollars of output out of each of those labor hours, which is great, and also manifesting in better peak readiness. Store teams are hired up sooner, trained, sooner completed all their product education and really ready to go. So as we enter peak, we expect that will really, really bear fruit as well. So I think that we feel great about the store productivity and we're making some intentional investments that we think are bearing fruit in that regard.

That's very helpful. Just a quick follow-up. How should we think about the wholesale shift impact into Q1? And how does that impact 2Q?

We're not necessarily focused on the quarter-to-quarter there, Adrienne. I think our view is, over the year, we expect to be more or less stable, so last year -- and so a little bit of growth in the year on some earlier orders and a little bit of replenishment and we're talking about pretty small dollars, obviously. We don't anticipate that translating to any significant change in the second quarter. And our -- as I say, our focus is really what does the full year look like? And are we delivering against that order book?

Okay. Any comments on the order book?

This is Carrie. Yes. So I mean, truly, it's -- we're doing the job exactly as we wanted to, right? So following the reset last year, it's stabilized. It's growing. You look at inventory, it's much cleaner. Assortments are much more representative of a Canada Goose full lifestyle brand, which we're happy to see. Their sell-through rates have improved, lower, so that, plus they're not returning product. So we're very happy with that. The response to the fall order book has been -- or to the fall order collection, that's what I'm trying to say, has been very strong and also beyond that. So spring, we're bringing them in early. Again, we've been very strategic with working with our top globally strategic accounts, not the volume of accounts that we used to work with because we're trying to bring them on this journey and what we're doing is working, they're responding very well, and we're happy with what we're seeing so far.

Your next question comes from Rick Patel with Raymond James.

Can you just frame the newness that you have in stores right now? I guess how much of the floor set today would you consider to be new products that are driving year-round relevance versus what you might consider to be part of the core? And do you feel that merchandising is where it needs to be today? Or do you expect to continue leaning into having more newness to have more year- around relevance?

Great question. Thanks. So hard to quantify the exact number, I'll share a little bit more of a philosophy on introducing newness that's how we're trying to flow that because it relates much more to your second question about where we are at as merchandising. So we -- there's been a very concentrated effort to flow it earlier, so to bring newness in, obviously matching up with our marketing campaigns and investments. But we're not in a place where we're jumping all of the newness all at once and then hoping it works for the whole season. We're doing a very strategic flow to make sure that like there are offerings for depending on regions that people will grab and it builds throughout the season as we head to peak. So the newness is working. We're seeing that response. But I would say from a -- when you look at our full year perspective than a fall/winter, like we've just started to drop some of the fall/winter collection newness. But again, as we look at ahead, we're less -- we're less focused on this is our spring collection and then we're done with it, and then we're going to introduce our fall/winter. That's just not the kind of brand we are. We're not a runway brand that is putting up something on the runway and then pulling it off when it's done that season. We're much more broad in terms of full year relevance, making -- responding to whether it's weather conditions, responding to the needs of different regions at any given time. So it's much more of a flow that I would say it had been in previous years. The second question is on merchandising. No, we're not done yet. And I don't know if I'll ever be able to say that we're done because there's constant improvements that could be made. So as we talked about earlier, we hired a new Head of Merchandising early and she joined early in January this year. And building a team, organizing that team around just how do we optimize not only the collection, but the way in which we work, how do we bring newness to the table. How do we make sure that we can introduce the right level of newness by right category. We have no interest in just building an assortment, building a SKU count and waiting to see what the consumer responds to. We are very deliberate, much more disciplined, I think, than I've ever seen us be. So happy with the progress that we've made, but believe that there's lots more to come in future seasons and future years.

And I know you're not giving guidance, but can you unpack the factors that drove the increase in SG&A in Q1 as we think about stores, marketing and the merchandising areas. I guess curious about the relative size of those buckets? And as we think about the go forward, so we expect the relative size of those buckets to be consistent with where you landed in Q1? Just some color on the shape of investment would be helpful.

Yes. I'm not really going to comment on the size of the bucket, but I think you can assume that the bulk of the SG&A growth was on those investment areas that we were able to say, really nice and lean and have productivity funding, any investments in inflation we're seeing in the other areas. So it is a very investment -- strategic, revenue-driving investment-focused SG&A growth, and that would be our expectation over the balance of the year. With regards to how much marketing, how much is store labor, on that specifically, but consistent with what I shared in response to Adrienne's question before, I think we are looking at that data in real time and learning and dialing up investments that are really working and dialing down investments that are not so that we make sure we are generating maximum short and long-term return out of those investment dollars.

Your next question comes from Ike Boruchow with Wells Fargo.

Questions on DTC, maybe for Neil or Carrie, not sure. Just to double click, I think you said you were double-digit comp every month of the quarter and you kind of made a comment about momentum is sustained. I think I'm just kind of curious, like I know there's no guidance, but have you seen any real slowdown in the DTC trend that you guys saw in the last quarter so far?

I think the first part of your question may have been cut off, but I think we got the gist of it as it relates to the D2C performance. So we'll take it from there, and then you can ask a follow-up. And so the sort of the general trend here is that channels, both stores and e- commerce across the world, performing very well. Positive as you saw positive double-digit comps in both North America and APAC and low single-digit negatives in Europe. And I think I'd focus that European answer really specifically on what's happening in the U.K., continuation of trend that we've seen there for now. I'm going to guess about 12 months where traffic is down. And so we're doing the things that we can control, which is drive conversion through all the things that you've heard Beth and Carrie talk about over the last couple of minutes. And so we're pleased with conversion in spite of pretty stiff traffic headwinds. The other probably spot of softness. And again, I'm just -- I'm sort of echoing what Carrie said earlier, is the consumer in Japan. Early in the quarter was maybe a little bit stronger, exiting Q4 was stronger, but it seems to have moderated a little bit here in the first couple of months. Another area where, clearly, there's been some trade tension. And so perhaps that's using some lower consumer confidence. But again, our focus in that market is over the long term on building the brand, on putting in great stores, on improving the operations. And so some transitory headwinds are okay with us. And so that's the sort of downside picture. You've heard all the upside stuff, channels, store ops, conversion, all in the strong positives here over what has now been many months.

I guess the crux of the question, Neil, is I know there's no guidance, I'm not looking for a specific number, but the things you're doing and the kind of momentum you're seeing, especially with some seasonal changes in the mix, is this -- is it -- is the trend sustainable if you guys execute as you move into the much more meaningful, to the profit quarters in the winter months? That's kind of just what I'm, at a high level, trying to understand.

Yes, absolutely, Ike, it's Carrie. There's no reason to believe that it would change, right? We have to keep controlling the things we can control which is what product we're putting in, how are we engaging and attracting customers through our marketing investments and then at the finish line of e-com and in-store conversion. So I think the fact that we are seeing this continued momentum. This is not just a 1-month type of story, gives us a lot of confidence that, that will continue barring the macro headwinds that of course, we don't know all of them, but we're watching the ones that we already know about, that Neil just mentioned. So we've seen that continue into Q2. We're happy with the trends that we're [ going ]. And no reason to believe it would change barring some outsized impact events that we don't know about.

I think it's also just important to put in the context of where have we come from and where are we going. And so -- there has been a lot of work on -- and you've heard us describe this, Ike, around how are we performing in stores. How are we measuring it? What does the traffic look like? And how does that compare to the -- to our labor? Is the labor trained? Are we measuring the things that are happening inside the stores in a way that is driving behavior. A whole bunch of retail sort of 101 that has obviously borne fruit here over the last 12 or 15 months. And so you couple that with a little bit more focus on marketing and product that we love and the consumers clearly love, things are working here. And so that's why we've got confidence around sustainability of it in spite of what is still a pretty choppy, tough consumer market. So the things that we can control, I know that it sounds a little cliche are where we're focusing our energy. And that is clearly resulting in the positive outcomes.

Sure. I'll just add to that very quickly is that, we are really happy to be in a position that we are in and like we'd way rather be here at the beginning of the year, having seen acceleration and momentum going into the rest of the year. I'd way rather be sitting with this situation. It gives me lots of conference as opposed to what could be a very different situation And we're all very excited about.

Totally makes sense, Dani. And then just one more follow-up. Carrie, I think you mentioned to Adrienne's question, which you followed up on the order book. I think you used the word healthy. I guess I'm just trying to ask a simplistic question. If the wholesale door calling is largely behind you and you've got an order book that's healthy. Is there a reason why the wholesale business couldn't be growing from here? I know you're not really planning it that way. That's not how you're talking about it. But I'm just trying to understand, is there a reason why that couldn't occur given the 2 variables that I just kind of threw out there?

No reason at all. So we would love that. We're just not -- we're not making a commitment to that at that point because there are still -- when you look at the wholesale market, depending on -- in North America is very different than what it is in EMEA. And so we don't want to get over our skis, but we would say the order book response was strong. And over the year, we feel like that will produce exactly what we're expecting. Are there pockets of upside? Absolutely. I would be crazy to say that there's -- we don't think that we can overachieve. But we're not pretty there. We think that's a very important channel. And the response that we're getting from the partners that we are investing with is exactly the response we want.

Yes. To echo what Carrie said, I believe that there will be a point in time where wholesale does continue to grow. We have not built that into this year's plans because we don't want to be responsible in how we do that. But wholesale over the long term is a very important channel, and I have lots of faith that it will be a strong one for us going forward.

Your next question comes from Alex Perry with Bank of America.

This is Lucas Hudson on for Alex Perry. Can you guys speak to the drivers of the sequential improvement that you expect throughout the year? And how much is expectation for better macro versus your own initiatives?

So we can't talk about sequentially because we're not operating in a situation where we've got a guidance out for the year. So just qualify any comments here with that. Our expectation is -- has been that focus on positive comp, D2C performance and the drivers that deliver that, whether that is in-store or digitally are the key levers that we need to pull on in what is a relatively tough macro environment. And so our plans for this year were not a massive amount of growth in the industry, an internal improvement that delivers continued performance. And as I just said, and as you heard the rest of us say today and over the last couple of quarters, we have a lot of work to do internally, and we like what we're seeing. We see that that's turning into positive comp results, but there's not -- the work is not over. And so month-to-month, we are -- week-to-week, we're focused on what's happening in stores and what's happening in the digital business to ensure that the top line continues to grow.

I'll add, Lucas, this is Beth, that we're still a relatively small brand with a tremendous amount of runway. And so I think as we see challenging and volatile macro environment, we're not as intimidated by that because we know there is a lot we can do in our control to succeed even in those challenging environments. And obviously, you're seeing that with results over the last 2 quarters. And so certainly, macro will be what it will be. But I think we feel that we're very well positioned and have a lot of white space opportunity in front of us to continue to execute no matter what's going on in that macro context.

Great. And then just a follow-up. In regards to APAC, do you guys see APAC outside of Mainland outperforming Mainland as the remainder of the year continues?

I think -- I mean that's a fairly specific question. I'd say that the business outside of APAC -- outside of Mainland China is essentially Japan. And a few stores in Greater China and Australia. And so it's a fairly small part of the business. As a general point, you've heard our commentary on Japan, the -- I think in Hong Kong, in particular, we had 2 stores there for now quite a while. There continues to be some pressure around the traffic and sort of whether that's transitory or more permanent. I think we're monitoring along with others. And so while it's not maybe a material impact on the overall business, I suspect that Mainland China has more upside over the next -- over the rest of the fiscal than the rest of -- or at least Greater China.

Your next question comes from Jonathan Komp with Baird.

Neil, if I could follow up just on SG&A. Typically, it looks like Q1 is less than 20% of the full year spend that ultimately happens. I'm just wondering if we should be thinking that, that will be the case again this year as it typically is. And then bigger picture, any thoughts on the revenue scale you think you need here to get back to historical levels of higher EBIT margin here?

Thanks, Jon. I'll start maybe on the second point on revenue trends and then work back towards the SG&A question. And so flow- through of profit on revenue growth is a critical area of focus for, I think, any retailer and we're no different than that. I think, as you've heard us as we talked about a number of times, in this year, in particular, we are making some investments that we believe are going to deliver that revenue scale over the longer term. And so that is all the things we talked about here, marketing investment, store-level investments and product creation talent. The precise scale of how big do we need to get in order to start to see more meaningful margin expansion. I think we're going to have to leave for another time because that looks a little too much like I think longer-term guidance. But suffice to say that we think there's a ton of opportunity to grow that and with that scale, there will be significant margin expansion. It's just a matter of when does that happen, which I'm sure is of interest to you as well. On the kind of what's the -- is 20% of the year's SG&A in the books in Q1, I think I'm going to have to go back to the same sort of general comment, which is we don't have the quarterly guidance out there. We don't have the annual guidance out there. And so the timing of investments this year are tied to when we think they are most likely to deliver the most upside. We had obviously a major change in respect of Snow Goose capsule in the first quarter here, which delivered parts in marketing investment at a higher level than we had a year ago. We think that, that delivered also some positive outcomes on the top line. The timing of when stores open and things like that and how long are we in sort of pre-lease periods. Those are factors as well. These are all things that we best view over the full year rather than in specific quarters and how much is it going to be this quarter versus next quarter. So I appreciate that's maybe not as precise as you're looking for, but that's kind of just where we are at the moment.

Okay. That's helpful color. And then just one separately on China. I might have missed it, but did you close 1 store in the market there during the quarter? And then I believe last fall, you started calling out Douyin as a positive driver for traffic. Just as you look forward to anniversarying the strength there. Any thoughts on the ability to continue to drive traffic growth through the channel there?

So Douyin and WeChat livestreaming continues to be great for us, expanding. So last year really was our first test and making sure that we understood the nuance of the channel, how to optimize for that. And so we've been learning constantly and tweaking and hopefully expanding. So the products that we offer, the way we engage people with our hosts on that will continue to be a great driver. So we're really excited about the future of that platform for sure.

On the store closure point, we did, in fact -- we had a lease expire in Douyin. We had another store opened there in the last 12 months. And so we felt like that was a better spot. And so yes, we did close.

That concludes our question-and-answer session. I will now turn the call back over to Neil Bowden for closing remarks.

Thank you, operator, and thank you, everyone, for your interest today. Have a great rest of the summer, and we look forward to updating you on our progress here in a few months.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.