Canada Goose Holdings Inc. — Form 20-F Summary
Reporting period: Fiscal year ended April 3, 2022 (53 weeks; the extra week fell in Q3), with fourth-quarter results compared with the quarter ended March 28, 2021. Amounts are in Canadian dollars unless noted. This is an annual report, not a filing for calendar 2021 Q4.
Business context and performance
Canada Goose designs, manufactures and sells premium outerwear, apparel, footwear and accessories. It operates through Direct-to-Consumer (DTC), Wholesale and Other segments. In fiscal 2022, it sold in 64 countries, with 41 permanent retail stores and 56 national e-Commerce markets. DTC generated 67.4% of annual revenue.
| Metric | Fiscal 2022 | Fiscal 2021 |
|---|---|---|
| Revenue | $1,098.4 million | $903.7 million |
| Gross profit / gross margin | $733.6 million / 66.8% | $554.0 million / 61.3% |
| Operating income / margin | $156.7 million / 14.3% | $117.0 million / 12.9% |
| Net income | $94.6 million | $70.3 million |
| Basic / diluted EPS | $0.87 / $0.87 | $0.64 / $0.63 |
| Adjusted EBIT / margin (non-IFRS) | $174.6 million / 15.9% | $132.6 million / 14.7% |
| Adjusted net income (non-IFRS) | $119.4 million | $86.2 million |
Revenue rose 21.5% reported and 23.2% at constant currency; excluding $47.2 million of prior-year temporary personal protective equipment (PPE) sales, reported growth was 28.2%. DTC revenue increased 40.4% to $740.4 million, while Wholesale revenue grew 8.2% to $348.5 million. Other revenue fell to $9.5 million from $54.3 million, chiefly because prior-year Other revenue included PPE sales.
Fourth-quarter results and period comparability
| Metric | Q4 fiscal 2022 | Q4 fiscal 2021 |
|---|---|---|
| Revenue | $223.1 million | $208.8 million |
| Gross profit / gross margin | $154.1 million / 69.1% | $138.6 million / 66.4% |
| Operating income | $0.9 million | $7.2 million |
| Net income (loss) | $(9.1) million | $2.5 million |
| Adjusted EBIT (non-IFRS) | $12.5 million | $4.8 million |
Reported Q4 revenue increased 6.8%, but the comparison is affected by the fiscal-calendar shift: the prior-year Q4 included an extra week, while fiscal 2022’s extra week was in Q3. On the company’s adjusted comparison—adding the final week of fiscal 2022 Q3 to Q4 and excluding the fiscal 2022 53rd week—Q4 revenue was $258.5 million, up 23.8%. Reported Q4 DTC e-Commerce revenue declined 12.3%; on that adjusted-week basis it grew 1.2%. The quarter’s $7.7 million retail-store impairment was a significant expense; excluding it, DTC operating income was $79.4 million and margin was 42.8%.
Cash flow, debt and liquidity
- Fiscal 2022 operating cash flow was $151.6 million, down from $288.6 million; management attributed most of the decline to increased inventory production as manufacturing had produced PPE in the prior year.
- Investing cash outflow was $37.2 million, including store construction and strategic investment. Free operating cash flow, a non-IFRS measure, fell to $67.5 million from $222.9 million.
- Cash at year-end was $287.7 million, compared with $477.9 million. Net working capital was $255.4 million, up $53.3 million, largely due to a $51.0 million increase in inventory; inventory stood at $393.3 million.
- Term-loan principal was $370.8 million (US$296.3 million); there were no principal borrowings outstanding under the revolving facility or Mainland China facilities. Unused revolving-facility borrowing capacity was $191.8 million. Lease liabilities were $250.7 million.
- Net debt, as defined by the company and including lease liabilities, was $333.8 million versus $154.2 million; net debt leverage was 1.2 times adjusted EBITDA. The company reported compliance with its debt covenants.
- Fiscal 2022 financing cash outflow was $298.2 million, including $253.2 million spent repurchasing and cancelling 5.64 million subordinate voting shares under the normal course issuer bid.
Material changes, outlook and risks
- Annual gross margin improved 550 basis points. The increase reflected a higher DTC mix and pricing benefits, partly offset by a greater mix of lower-margin non-parka products. Comparisons also reflect prior-year PPE sales, government payroll subsidies and manufacturing overhead costs during temporary shutdowns.
- SG&A increased 32.0% to $576.9 million, reflecting retail reopening and expansion, marketing, personnel, digital infrastructure and strategic initiatives, as well as the absence of prior-year subsidies. The company recorded $7.7 million of impairment losses for two stores due to weaker-than-expected international traffic and limited remaining lease terms.
- Management’s stated strategy is to grow DTC and international sales, expand product categories and improve margins through scale, pricing and channel mix. The filing provides no specific quantified fiscal 2023 revenue or earnings guidance.
- COVID-19 continued to weigh on traffic and operations: five of 41 permanent stores were temporarily closed at year-end, traffic remained below pre-pandemic levels, and manufacturing ran below historical output to maintain distancing. Supply-chain disruption had not materially affected fulfillment in fiscal 2022, but freight and other input-cost pressures were being monitored.
- The company suspended wholesale and e-Commerce sales to Russia; Russia represented less than 1% of fiscal 2022 revenue. It ended fur purchases at the end of 2021 and committed to stop manufacturing with fur no later than the end of 2022.
- Key risks include discretionary consumer demand, warmer weather and seasonality, inflation and supply-chain costs, inventory forecasting and obsolescence, foreign exchange and variable-rate debt, reliance on DTC growth, brand and product expansion, labor relations, and COVID-19 or geopolitical disruptions. The auditor identified inventory obsolescence estimates as a critical audit matter.
- A Japan joint venture with Sazaby League was formed on April 4, 2022, one day after fiscal year-end. Canada Goose contributed $2.5 million for 50% and stated it controls and will consolidate the venture; the purchase-price allocation was not finalized in this filing.
Important facts for investors to verify
- Assess the fiscal-calendar effect when comparing Q4: reported growth was 6.8%, while the company’s adjusted-week comparison showed 23.8%.
- Review inventory valuation and sell-through: inventory rose to $393.3 million and the auditor highlighted obsolescence estimates as a critical audit matter.
- Track DTC profitability and store productivity, including the $7.7 million impairment and elevated store-related costs.
- Monitor operating cash conversion, inventory requirements, cash balances, and the company’s use of revolving capacity alongside term-loan and lease obligations.
- Evaluate the sustainability of margin gains, including pricing, channel and product mix, and the effect of rising freight, labor and raw-material costs.
- Review the Japan joint venture’s final purchase accounting and subsequent performance, and the financial impact of the fur-free transition and Russia sales suspension.
The financial statements were prepared under IFRS. Deloitte issued unqualified audit opinions on the consolidated financial statements and internal control over financial reporting; management also concluded internal controls were effective as of April 3, 2022.