Canada Goose Holdings Inc. (GOOS) Earnings

Management highlights

### Core Strategic Priorities for Fiscal 2027 - Deepen brand desire through more effective marketing to drive increased consumer demand - First quarter results show strengthened brand desire in mainland China and continental Europe, with brand desirability outperforming competitive benchmarks in key markets - While overall in-store traffic remains softer than expected due to macro conditions, strong e-commerce profit growth and healthy new customer acquisitions indicate growing underlying consumer interest - Marketing investments will be increased in Q2 and Q3 to convert growing consumer interest into sales, aligned with peak demand periods - Scale a repeatable product playbook across all seasons to drive greater year-round brand relevance - The Q1 2027 spring summer collection was the largest in company history, and saw exceptional consumer demand across both DTC and wholesale channels - Lifestyle category growth is fully additive to core down outerwear, which also grew in the quarter, enabling a more balanced full-year business while retaining the brand's core identity - Improve channel productivity and capital efficiency - Both DTC and wholesale delivered revenue growth and expanded segment margins in the quarter, demonstrating improving sales productivity and profitability - In-store execution improvements including aligned labor investment, ongoing staff training, enhanced clienteling, and in-store experience upgrades lifted conversion and units per transaction year-over-year despite softer traffic - Four new permanent stores were opened in the quarter, bringing total global permanent store count to 92, including a new Vancouver location showcasing the brand's latest retail concept ### Operational and Financial Highlights - Adjusted EBIT margin expanded over 10 percentage points year-over-year, marking the strongest first quarter adjusted EBIT margin since fiscal 2020 - Gross margin expanded 100 basis points year-over-year to 62.4%, driven by favorable channel and regional mix and positive pricing that offset modest cost inflation - SG&A expense decreased 21% year-over-year; after normalizing for non-recurring items from the prior year, SG&A increased 6% year-over-year with SG&A leverage achieved via improved marketing efficiency, operating leverage from higher revenue, and disciplined corporate spending - Inventory was $490 million, up 11% year-over-year, to support expanded product assortment, a larger wholesale order book, and anticipated fall-winter 2027 demand; inventory turns increased 11% year-over-year and 25% over two years, with a high-quality composition well positioned to meet demand - The company repriced its term loan late in the quarter to take advantage of favorable market conditions, delivering a 50 basis point reduction to its credit spread - Upgrades to the EMEA logistics network and e-commerce capabilities are on track to be completed in the first half of fiscal 2027, and are expected to improve customer experience and long-term operational efficiency

Guidance

- Management reaffirmed its full fiscal 2027 guidance of 11% to 12% operating margin, and remains confident in delivering full-year operating margin expansion after a strong Q1 start - First half revenue growth is expected to moderate from the 9% pace achieved in Q1, with marketing investments and logistics/ e-commerce upgrade spend expected to modestly pressure first half margins, consistent with prior guidance provided in May - Management continues to expect expanded full-year gross margin and operating leverage across channels, with lower fixed cost absorption from softer Q1 traffic offset by disciplined cost management - New store expansion remains on track, with no pullback in long-term expansion plans despite near-term soft traffic; management sees significant remaining white space for brand penetration in existing and new markets

Segment performance

Total first quarter revenue was $119 million CAD, up 9% year-over-year; excluding the planned decline in other revenue, total revenue increased 16% year-over-year. - **Direct-to-Consumer (DTC)**: Revenue grew 7% year-over-year, with double-digit growth in the Asia Pacific and North America regions, and double-digit growth in the e-commerce sub-channel. DTC comparable sales declined 3% year-over-year due to softer in-store traffic. This segment contributed the majority of total first quarter revenue. - **Wholesale**: Revenue grew 65% year-over-year, driven by a larger overall order book, strong in-season demand, in-season reorders, and partial shipment timing shifts. This segment's growth was also fueled by strong partner adoption of Canada Goose's new lifestyle categories. Less than half of the segment's 65% growth is attributed to timing shifts that will balance out over the full fiscal year. - **Other**: Revenue declined 64% year-over-year due to planned minimal activity in the quarter. By product category: - Expanded lifestyle categories (apparel including fleece, knitwear, shirts and bottoms, rainwear, windwear) accounted for nearly 40% of total first quarter revenue, up from 15% of total revenue in fiscal 2026 and just 5% in fiscal 2022. - Core Down-filled Outerwear also grew revenue year-over-year in the quarter, showing category growth is additive to core offerings rather than cannibalizing.

Risks & headwinds

- Softer macroeconomic conditions are weighing on in-store traffic across key regions, particularly in EMEA (the UK and continental Europe) and the U.S., leading to lower DTC comparable sales, with EMEA also facing greater conversion pressure from cautious consumers - Proposed new U.S. tariffs on Canadian products announced July 20 would impact a portion of Canada Goose's product portfolio if implemented; the situation remains fluid, and the company estimates that if tariffs are implemented as proposed with no mitigating actions, fiscal 2027 operating margin would decline by less than 200 basis points. Management is actively evaluating mitigation options to reduce impact - The ongoing transition and upgrade of the EMEA logistics network creates potential operational complexity that could impact order fulfillment in Q2, though no material disruptions were experienced in Q1 - Uneven consumer demand across global regions creates pressure on near-term revenue and margin performance as the company ramps marketing investments to drive in-store traffic

Analyst Q&A

• Q: What initiatives are in place to improve comparable store sales, bridge the gap between soft in-store traffic and strong e-commerce/conversion results, and what are current quarter-to-date geographic trends?

  A: Strong e-commerce performance is driven by the expanded lifestyle product assortment that attracts seasonal shoppers, prior customer acquisition investments, and improved digital shopping experiences. These improvements are translating to in-store: enhanced staff training and expanded clienteling have lifted conversion even with softer traffic, as consumers respond well to the new seasonable product assortment. Management notes the underlying demand is healthy, and plans to increase marketing spend in Q2/Q3 (aligned with peak demand) to drive higher in-store traffic. Quarter-to-date, trends are consistent with Q1: flat in Asia, -1% in the U.S., and a steeper decline in Europe, with continued gains in basket size and conversion across all regions.

• Q: How much of Q1 wholesale growth is from order timing shifts, and what is the split of Q1 revenue growth between pricing and unit gains?

  A: Less than half of Q1's 65% wholesale growth comes from timing shifts, which will balance out over the full year; the majority of growth is from real underlying order book increases and strong in-season reorder demand for new lifestyle categories. Annual pricing implementation delivered a mid-single-digit average benefit to revenue, with healthy unit sales also contributing to growth; pricing is not the primary driver of Q1 revenue gains. Management noted no consumer price resistance, as customers recognize the value of new product offerings.

• Q: What trends are you seeing in China versus Europe/U.S. traffic, and how will increased marketing spend drive traffic? Will it be allocated regionally?

  A: Mainland China sees encouraging momentum with strong brand desirability, and Chinese consumer demand holds up both domestically and when traveling across APAC destinations like Hainan and Korea. In EMEA, softer macro conditions have created broader in-store traffic pressure that is in line with industry peers, though conversion is improving and brand desirability is up against competitors in continental Europe. The company deliberately held marketing spend lower in Q1 to improve efficiency, which delivered higher return on ad spend; increasing spend in Q2/Q3 will drive higher traffic, including in-store traffic, and marketing can be calibrated regionally to address softness.

• Q: What spending increases will pressure Q2 margins, and how does the full-year profit plan stand for the second half?

  A: Three main areas of increased spend will pressure Q2 margins: stepped-up marketing investment to drive peak season demand, ramped up spending for the EMEA logistics network upgrade, and additional investment in the e-commerce platform upgrade. Management remains fully committed to its full-year 11% to 12% operating margin guidance, with tight cost controls on overhead and corporate headcount to deliver leverage in the second half after the first half investment period. The logistics upgrade is expected to deliver meaningful long-term cost savings once fully operational.