Canada Goose Holdings Inc. — FY2023 Form 20-F
Period: Fiscal year ended April 2, 2023 (52 weeks), including the fourth quarter. The filing is an annual report, not a standalone “2022 Q4” filing; the fourth-quarter comparison is with the quarter ended April 3, 2022. Financial figures are in Canadian dollars (CAD) unless noted.
Business context
Canada Goose designs and sells performance luxury outerwear, apparel, footwear and accessories through direct-to-consumer (DTC) and wholesale channels. FY2023 revenue came from 62 countries; at year-end the company operated 51 permanent retail stores and 57 national e-commerce markets. DTC generated 66.3% of annual revenue. The company reports under IFRS.
Key financial metrics
| CAD millions, except percentages and per-share data | FY2023 | FY2022 | Q4 FY2023 | Q4 FY2022 |
|---|---|---|---|---|
| Revenue | 1,217.0 | 1,098.4 | 293.2 | 223.1 |
| Gross profit / margin | 815.2 / 67.0% | 733.6 / 66.8% | 190.3 / 64.9% | 154.1 / 69.1% |
| Operating income / margin | 135.5 / 11.1% | 156.7 / 14.3% | 17.2 / 5.9% | 0.9 / 0.4% |
| Net income (loss), consolidated | 68.9 | 94.6 | (10.0) | (9.1) |
| Net income (loss) attributable to company shareholders | 72.7 | 94.6 | (3.1) | (9.1) |
| Basic EPS attributable to company shareholders | $0.69 | $0.87 | $(0.03) | $(0.09) |
- Annual growth and profitability: Revenue rose 10.8% reported (11.1% excluding the extra week in FY2022); constant-currency growth was 10.9% reported and 11.2% excluding that week. Gross margin edged up 20 basis points, but SG&A rose 17.8% to $679.7 million, pushing operating income down 13.5% and net income down 27.2%.
- Fourth quarter: Revenue increased 31.4% reported (30.1% constant currency). Operating income improved to $17.2 million, but gross margin fell 420 basis points to 64.9%. The quarter remained loss-making after interest and tax.
- Channels: FY2023 DTC revenue was $807.3 million, up 9.0%; wholesale revenue was $373.8 million, up 7.3%. DTC comparable sales declined 2.6% for the year, but grew 6.9% in Q4. Annual growth reflected store expansion, while Mainland China restrictions weighed on full-year DTC performance.
- Adjusted measures: Adjusted EBIT was $175.1 million for FY2023 versus $171.3 million; adjusted EBIT margin decreased to 14.4% from 15.6%. Q4 adjusted EBIT rose to $27.6 million from $12.4 million. These are non-IFRS measures.
- Cash flow: Operating cash flow was $116.3 million, down from $151.6 million. Investing used $45.3 million; principal lease payments were $62.2 million. Free operating cash flow, a non-IFRS measure, fell to $8.8 million from $67.5 million.
- Liquidity and debt: Cash was $286.5 million, compared with $287.7 million. The company reported $396.3 million of term-loan principal, $27.6 million of short-term borrowings and $334.8 million of lease liabilities. Unused revolving-facility capacity was $238.4 million; the company said it complied with covenants. Reported net debt, including lease liabilities, was $468.1 million, or 1.7 times adjusted EBITDA.
- Working capital: Net working capital was $328.0 million, up 28.4%; inventory increased to $472.6 million from $393.3 million. The inventory obsolescence provision rose to $43.2 million from $23.6 million.
Material changes and unusual items
- FY2023 included the consolidation of Canada Goose Japan, K.K., following formation of a 50/50 joint venture with Sazaby League. The Japan business contributed approximately $54.0 million of revenue and $1.0 million of operating income. Japan-related contingent consideration and a put-option liability were remeasured, contributing to interest and other costs; the put-option liability was $32.1 million at year-end.
- SG&A growth reflected new and fully operational stores, personnel, technology, strategic initiatives and marketing, as well as unfavorable foreign-exchange effects. Annual operating margin contracted by 320 basis points despite slightly higher gross margin.
- Inventory provisioning, higher product costs and Japan acquisition-related inventory fair-value adjustments were important Q4 gross-margin pressures. FY2023 gross margin also included higher obsolete raw-material provisions, partly offset by pricing.
- The company announced a multi-phase Transformation Program in Q4, focused on operational efficiency, production and procurement optimization, people and resources, and consumer focus. It reported $4.1 million of strategic-initiative costs in its adjusted EBIT reconciliation for the year.
- FY2022 had 53 weeks versus 52 weeks in FY2023; the company provides comparisons excluding the extra week. Quarterly and annual results are seasonal and should not be treated as directly comparable without considering timing and channel mix.
Outlook, risks and governance
- The filing gives no quantified FY2024 revenue, earnings or margin guidance. Management describes continued DTC expansion, consumer-focused growth and expansion into newer and additional product categories as strategic priorities.
- Management said inflation and other macroeconomic pressures had not materially affected operations to date, but warned they could pressure consumer discretionary spending, gross margin and operating expenses. Retail traffic remained below pre-pandemic levels at year-end; restrictions in Mainland China affected sales during FY2023.
- Principal risks include elevated inventory and the possibility of markdowns or write-downs; demand forecasting; dependence on outerwear and cold-weather demand; brand and product-category execution; supplier, labour and freight disruptions; foreign-exchange and variable-interest-rate exposure; debt and covenant constraints; and cyber, privacy, geopolitical and regulatory risks.
- The board did not intend to pay dividends in the foreseeable future. Multiple-voting shares carry 10 votes each; Bain Capital and the CEO together held approximately 90.6% of voting power at year-end, limiting the influence of subordinate-voting shareholders.
- Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. Inventory obsolescence and the Japan business combination were identified as critical audit matters.
Investor verification priorities
- Track inventory growth, aging and the adequacy of the $43.2 million obsolescence provision, alongside discounting and subsequent sales.
- Assess whether DTC comparable-sales performance, store expansion and new product categories can support revenue growth without further margin erosion.
- Review cash conversion and free operating cash flow after capital spending, lease payments and seasonal working-capital needs.
- Monitor debt costs, the May 2023 facility amendments and exposure to foreign exchange and interest rates; distinguish borrowings from lease liabilities when assessing leverage.
- Examine the Japan joint venture’s results, contingent consideration and put-option assumptions, and the impact of those remeasurements on reported earnings.
- Compare reported results with non-IFRS measures and confirm the effects of FY2022’s extra week, foreign exchange and seasonal timing.