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Like many brands, Canada Goose is facing pressure from inflation and the grim economic backdrop of the U.S. It’s third-quarter revenue, reported Thursday, was down nearly 2% from the prior year period, which CEO Dani Reiss blamed on “a softening of demand” in the U.S.
The company’s retail sales are continuing to decline, and its factory production is dropping, as well. Canada Goose had been hoping China would be a saving grace for its bottom line as the U.S. economic situation worsened, but disruptions from Covid-19 starting in December have made China a difficult market, as well. Overall, North America represented $25 million in lost revenue, and China represented a loss of $60 million.
“We did expect a certain level of disruption,” Reiss said. “What we did not anticipate was the sudden reopening in early December. This led to a surge in infections, which had a significant impact on our business during what is typically our most productive trading month. Consumer traffic decreased dramatically and staffing levels were impacted due to illness.”
Jonathan Sinclair, evp and CFO of Canada Goose, said smarter inventory management will play a role in the brand’s recovery. He said it takes “a reasonable while” to get product to its 22 stores in China, so it sent more inventory there than was needed. Overall, the company has $482 million in inventory, compared to $368 million from last quarter.
“We’ve got somewhat more inventory than you would have expected at this point in the year, probably a little bit more than we’d like,” Sinclair said on the earnings call.
Canada Goose will reduce the amount of inventory it’s shipping out to international channels to focus on selling through the inventory that’s already made its way there. The inventory it does send to foreign markets will be mostly made up of seasonless core product. Additionally, the company will likely reduce production volumes an undisclosed amount. It owns its own manufacturing facilities in Canada and has more control over granular production volumes than most brands.
In addition, Canada Goose is hoping a new program launched on January 31 will help bring in new customers at a time when acquisition is more difficult and boost revenue, now that consumer spending is depressed. Canada Goose Generations, created with resale company Trove, is the brand’s first resale program.
Carrie Baker, president of Canada Goose, told Glossy that Generations is meant to both bring in new customers and increase the lifetime value of existing customers by giving them a more affordable option to shop the brand. Generations first launched in the U.S., which Baker said is one of the brand’s “key markets, and one with significant growth opportunities.”
In 2022, Canada Goose’s revenue in the U.S. was more than $300 million, just under the largest market, Asia, at $328 million.
“We know the secondhand market for our product is robust and growing,” Baker said. “Our research shows that online year-over-year searches in the U.S. for ‘secondhand Canada Goose’ has grown 50%. Consumers are looking for it and want it to be authentic.”
Launching resale was a main priority for Canada Goose this fiscal year, as it’s a large untapped market, she said. Prices on Generations are significantly lower than retail prices. A $,1500 new Shelburne coat from Canada Goose currently costs $795 on Generations, for example. Generations is prominently displayed on the brand’s U.S. online store for organic discovery. It’s also being promoted through social ads featuring Woody Blackford, chief product officer, as part of an ongoing sustainability marketing campaign Canada Goose has been running called Next Gen.
“Launching branded resale is a smart move for Canada Goose to bring new audiences into their ecosystem,” said Syama Meagher, CEO of the retail consultancy Scaling Retail. “Authentication has a been an issue in the resale market, and a branded solution adds trust. Additionally, through understanding these new audiences Canada Goose may take that data to inform new products and brand experiences.”