Canada Goose Holdings Inc (GOOS) 2018 Q1 法說會逐字稿

Good morning. My name is Jessa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Canada Goose First Quarter Fiscal 2018 Earnings Conference Call. (Operator Instructions) Ms. Allison Malkin from ICR, you may begin your conference.

Thank you. Good morning, and thank you for joining us today. With me today are Dani Reiss, President and CEO; and John Black, CFO. For today's call, Dani will begin with highlights of our first quarter fiscal 2018 performance and then update you on the progress against our key priorities. Following this, John will provide details on our financial results and outlook. After our prepared remarks, we will take your questions.

Before we begin, I would like to inform you that this call, including the Q&A portion of the call, includes forward-looking statements, including plans for our business and our fiscal 2018 outlook. Each forward-looking statement made on this call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statement.

Certain material factors and assumptions were considered and applied in making forward-looking statements. Additional information regarding these forward-looking statements, factors and assumptions appears under the headings Cautionary Note Regarding Forward-Looking Statements and Risk Factors in our annual report on Form 20-F, which is filed with the Securities and Exchange Commission and the Canadian Securities Regulatory Authorities and available on our website at www.canadagoose.com, under Risk Factors in our final prospectus filed on June 28, 2017 and in the earnings press release that we've furnished today under the heading Cautionary Note Regarding Forward-looking Statements.

The forward-looking statements made on this call speak only as of today, and we undertake no obligation to update or revise any of these statements.

During this conference call, to provide greater transparency regarding Canada Goose's operating performance, we refer to certain non-IFRS financial measures that involve adjustments to IFRS results. Any non-IFRS financial measures presented should not be considered to be an alternative to financial measures required by IFRS and are unlikely to be comparable to non-IFRS financial measures provided by other company.

Any non-IFRS financial measures referenced on this call are reconciled to the most directly comparable IFRS financial measure in a table at the end of our earnings press release issued this morning and available in the Investor Relations section of our website at www.canadagoose.com.

With that, I will turn the call over to Dani.

Thank you, Allison, and thank you for joining this call, and good morning, everyone. I am very pleased with our solid start to fiscal 2018. Building on our strong finish to fiscal 2017, our team demonstrated a determined focus to deliver on our key growth strategies, which as a reminder, are execute our proven market development strategy across all markets, strengthen and expand our geographic footprint in newer markets, enhance and expand our product offering and continue to drive higher margins through operational excellence.

Notably, in the smaller quarter, we increased revenue across all geographies and sales channels. We made headway in our direct-to-consumer global expansion plans and we continued to expand our in-house manufacturing capabilities and achieve gross margin expansion.

Together, these factors allowed us to grow year-over-year sales. We were particularly pleased with the continued strength of our spring offering around the world. Our line performed very well this year, which validates that consumers are looking to Canada Goose for new function-first products to protect them in any climate or season. As a result, we are confident in our ability to continue to deliver this year and beyond.

You'll hear some additional highlights of the quarter. In our D2C channel, we continue to see solid performance at our first 2 locations, Yorkdale Shopping Centre in Toronto and Soho in New York City, all laying the groundwork to expand our retail footprint globally. We're on track to open Chicago and London ahead of holiday 2017, and we are excited to announce our plans to open 2 additional locations, Boston and Calgary, both of which are on track to open later this fall.

We shared on our last call that our plan was to open 3 stores this fiscal year. However, we are pleased to be opening our fourth location in Calgary. Having our own stores allowed us to showcase a full array of our products in a store that tells the story of Canada Goose unfiltered while also better capturing market share and adding to our bottom line.

I am also really encouraged as I read our daily in-store reports from both our stores to hear the positive consumer feedback about the high level of service they received in our stores. Our brand ambassadors are doing an exceptional job of helping customers find the right product for their needs, and I want to thank them for their dedication. I believe that this quality of experience is a significant part of what set Canada Goose apart at retail. We are also really excited to announce that Tokyo will be home to a Canada Goose retail store this fall, which will be operated through our distribution partner there.

Recently, I've come back from Tokyo, and I'm really encouraged by the continued demand for Canada Goose products in this long-standing strategic market.

On the e-commerce front, both our Canadian and U.S. sites continued to perform well, and we are happy with customer traffic and orders from the France and U.K. markets, which are in their first year of operation. We've also activated Ireland at the end of Q1 and Belgium, Luxembourg and the Netherlands early in Q2, and we remain on track to open 3 additional sites for a total of 7 sites in fiscal 2018.

In our wholesale channel, we experienced strong performance across all geographic regions. The growth was primarily driven by the earlier timing of shipments, reflecting not only our increased efficiency in manufacturing and sales planning, but also a high demand and sell-through of our products. In fact, many retailers are specifically asking us to accelerate shipments so they can get our product on the floor earlier. We see this as a testament to our belief that Canada Goose is a bright spot for our retail partners.

As noted earlier, we saw a continued sell-through of our spring products across the globe during the quarter, but this performance further builds confidence with retailers in the year-round consumer interest in Canada Goose products, and as a result, increased the desire for Canada Goose shop-in-shops. Work is underway to bring more of this to life in Q2 and Q3 in partnership with key retailers in North America and Europe.

Additionally, we are very pleased with our spring '19 order book, and we're encouraged by the strong response we receive from retailers about the collection. Given our top line performance, our product clearly continues to resonate with our customers, and we look forward to seeing compelling sell-through of our new and classic in the months ahead. We're especially excited about the launch of our first-ever knitwear collection, which will be available at retail next week in our owned channels as well as in select retail partners around the world. Knitwear is a natural next step for our brand and for our business, and by all accounts, we expect this to be successful.

In marketing, with the goal to find creative ways to build brand awareness globally, the team is focused this quarter on supporting the success of our spring collection at retail and developing creative assets for the upcoming fall/winter season.

Turning to our operational strategies. During the quarter, we expanded manufacturing capacity at our Québec facility to 95,000 square feet, which supports our strategy of in-sourcing manufacturing capacity while also driving margin expansion. As of July, we employed 125 people in the facility, and we plan to hire another 325 people by the end of 2018. With the view to have margin improvement and driving further operational efficiency, we also centralized raw materials processing and quality assurance with the addition of our sixth site located in Toronto in of July 2017. We remain committed to keeping production of our core products made in Canada, and we believe that we are well-positioned from a supply chain perspective to continue to meet the demands of our growing business.

Finally, I want to note that from a talent perspective, we reached a significant milestone in this quarter as we surpassed 2,000 employees. I'm very proud of everyone on our team and believe that we have the strongest team we have ever had in place to keep building on our momentum and on the growth opportunities that we see ahead. As John will discuss shortly, we continue to take a disciplined approach of managing this business, and as a result, we are on track for the upcoming peak selling season and beyond.

I am excited about our strong start, so I believe, it will be another great year for Canada Goose. And with that, I will now turn it over to John to review our financial results with you in more detail.

Thank you, Dani, and good morning, everyone. As Dani mentioned, we are pleased to begin fiscal 2018 with strong momentum. In a seasonally small quarter, we reported revenue growth in our direct-to-consumer channel, pulled forward sales in our Wholesale channel and increased gross margins.

Before I review our detailed financial results, I want to remind you again of some of the unique characteristics of our business. As I mentioned in our year-end call, our business is quite seasonal, which results in a greater percentage of our revenues and earnings occurring in the second and third fiscal quarters, while our first and fourth quarters represent a smaller percentage of our volume.

Given the lower revenue base of these quarters, we experienced negative pressure on our profitability as our fixed SG&A spending continues regardless of the period, particularly in our direct-to-consumer channel. We plan our business over the long term with annual cycles in mind and believe the visibility of our wholesale order book continues to give us high confidence in the annual cadence of revenue and related costs.

Now let me review highlights from our first quarter results, which as a reminder, are in Canadian dollars. For the quarter, revenue increased by $12.5 million to $28 million, up from $16 million in the prior year. Revenue was up in all geographic regions in both sales channels. Direct-to-consumer revenue grew by $1.3 million to $8.3 million, driven by continued strong momentum in our retail stores and e-commerce sites. Of course, it is very early, but we are encouraged with the performance of these stores and our first year of operation through the spring months and are excited about the opportunities ahead of us with our fiscal 2018 openings.

On the e-commerce front, both our Canadian and U.S. sites outperformed the prior year and in the first year of operation of the U.K. and France sites, we were happy with customer traffic and orders. Wholesale revenue increased by $5.5 million to $20 million in the first quarter. Most of the year-over-year growth was driven by timing as retailers took $5 million of product earlier than originally planned, which we view as another indication of the strength of our brand and the demand for our products.

Our first quarter also includes the disproportionally higher amount of distributor sales to Asia relative to the other quarters. The timing is consistent with fiscal 2017. Cost of sales on a per unit basis were consistent with our expectation. As Dani noted, we increased production capacity at our in-house facilities through expansion in Québec and centralizing raw materials cutting in Toronto. We believe there will be efficiencies as we increase the proportion of in-house production. Consolidated gross margin expanded significantly to 47% from 30%, driven by the increased percentage of revenues generated from our D2C channel.

Gross margins in D2C expanded approximately 15 percentage points to 75%, reflecting maturity of our e-commerce in-store networks. Gross profit was up substantially as our Q1 fiscal 2018, at revenue base that included 2 retail stores and 4 e-commerce sites compared to only 2 e-commerce sites in Q1 of fiscal 2017. Our wholesale channel delivered gross margins of 35%, an increase of 8 percentage points from 27% last year.

As noted in my comments on revenue, distributor sales to Asia comprised a higher proportion of wholesale revenue in Q1, consistent with the first quarter of fiscal 2017. These products carry a lower per unit margin, which impacts the first quarter much more than Q2 and Q3 when sales to retail customers represent the vast majority of our wholesale business.

The comparable quarter in the prior year also included an inventory write-off of approximately $1 million. Selling, general and administrative expenses were $26 million, up $8 million from the first quarter of fiscal 2017. This reflected increased operating expenses related to the Yorkdale and Soho retail stores and expanding the number of e-commerce sites. The year-over-year change in SG&A includes the cost related to the timing of revenue pull forward; the shift in timing of SG&A spending, which we now expect to incur later in the year; and a foreign exchange gain on the term loan included in fiscal 2018 and gains on our hedges excluded from fiscal 2017 SG&A.

Combined, these activities led to on an adjusted EBITDA loss of $13.6 million compared to $7.5 million loss in the first quarter of fiscal 2017. The increase in adjusted EBITDA loss was the result of higher SG&A cost base associated with the direct-to-consumer channel and a one-time hedging benefit included in fiscal 2017. The timing of revenue and SG&A spending put us ahead of our plans in Q1, but we're expecting many of these benefits to reverse over the year.

If you will recall, during Q3 of fiscal 2017, we had a recapitalization transaction that increased our debt. Average borrowings for the quarter were $203 million compared to $170 million in the same quarter fiscal of 2017. The increase in borrowings had a corresponding impact on interest expense. These combined effects resulted in decreased interest expense in the quarter of $600,000 compared to the same quarter in fiscal 2017.

On an IFRS basis for the quarter, we reported net loss of $12 million or $0.11 per diluted share based on 106.5 million weighted average shares compared to last year's reported loss for the quarter of $14 million or $0.14 per share on 100 million weighted average diluted shares.

On an adjusted basis, we reported net loss per share of $0.13 for the quarter compared to $0.10 per share in the same quarter of fiscal 2017.

Now turning to the balance sheet. As of June 30, 2017, our balance sheet remained strong as we head into the peak selling season. Execution in manufacturing has positioned us to deliver on our order book. And in fact, we are able to ship some of our fall/winter orders in the first quarter as retail customers took product ahead of schedule. Capital expenditures for the first quarter were $7 million, compared -- primarily driven by our investments in our 2 retail stores in London and Chicago as we prepare for Q3 openings, expansion of our recently acquired manufacturing facility in Québec and raw materials and cutting facility in Toronto and other corporate investments to support our global growth initiatives.

Total debt, net of cash, was $234 million at the end of the first quarter compared to $151 million at the end of the prior year period, reflecting the change in the capital structure from both the recapitalization in December 2016 and our IPO in March of 2017.

We remain comfortable with the flexibility our revolving credit facility provides as we ended the quarter with approximately $99 million outstanding under the facility and unused borrowing capacity of approximately $72 million.

On to some recent news. As many of you are aware, the Ontario government has proposed new legislation that is expected to result in an increase in the minimum wage over the next year. Given our commitment to Made-in-Canada, this will have an impact on our cost structure. However, we have many levers available in our business model that enable us to offset the wage increase and do not believe it will result in a material change to our long-term outlook. Now I will turn it back to Dani for some closing remarks.

Thanks, John. In summary, we are all very pleased with our first quarter results and are looking forward to the peak selling season for Canada Goose. We are on track to deliver against our goals, and I continue to be extremely proud of our teams for the hard work that they do and the strong performance that they all continue to deliver. We look forward to updating you on our progress on our next earnings call. And with that, I'll turn it over to the operator to begin our Q&A session.

(Operator Instructions) Your first question comes from the line of Ike Boruchow from Wells Fargo.

I guess, my question is just in terms of your fiscal year top line guide you gave a few months ago, it; sounds like you're pleased with the start to the year, you feel well positioned, plus, now you have 2 new retail stores planned to hit ahead of holiday that weren't -- that don't seem to be in your initial plan. Are you now -- can you just update us on your fiscal year top line guide? I think you gave us mid- to high-teens 3 months ago. And then any change to the EBITDA margin outlook, which I think you gave flat a couple of months ago.

Yes, thanks, Ike. As you know, it's not our intention to update our guidance quarterly. And at this time, there have been no material changes to our plans and so we're not upguiding.

Our next question comes from the line of Lindsay Drucker Mann from Goldman Sachs.

This is Bill Schultz on for Lindsay. Just a question on your wholesale business. Can you talk about what drove the shift in timing in wholesale? We've been hearing from other cold-weather branded wholesalers that shipments have actually been sliding further back into the season as retailers set their floors later. So do you think that's just a function of your brand strength? Is it something you're seeing from just a few customers? Or is that just more of a general comment?

Thanks for the questions. It's Dani. I think that there's a couple of things that can speak to that. First of all, let's talk about our manufacturing and supply chain operational efficiency. We're really operating at a very high level and able to -- and deliver not only on time, but earlier than the market had originally requested the goods. And on top of that, there is demand from our retailers to pull orders further to the left and because of our operating efficiency, we're able to react to that and that's why we've been able to shift orders from quarter-to-quarter.

And if I could just slide one more in. Can you just update us on sort of your selling for fall, specifically, how some of your lighter-weight styles are trending and what you're seeing with retailers on that product? And anything you can kind of talk about regarding how big a percentage of your product mix, the sort of lighter-weight styles, are becoming.

Yes, I mean, we don't break down style mix specifically, but certainly can share some color that our lighter-weight styles are for sure very much in demand at retail, either via our daily retail reports from both our stores, I see our online activity, and there's no question that there's a lot of demand for that product. And I believe it's going to be a product line that continues to grow for us.

Your next question comes from the line of Brian Tunick from the Royal Bank of Canada.

I guess, on the 3 additional store openings this year, I guess, how should we think about, number one, the franchise impact on the P&L with the Japanese location; two, the footage growth trajectory as we think about next year? And then in that 30 to 50 store target you've given, what should we think about should be the mix of your own stores, franchise, JV, longer term? And then the second question. Just any FX impact that we should be thinking about on the P&L, given the recent strengthening of the Canadian dollar versus your previous guidance? Or what's baked into your guidance, I should say?

Well, sure. Thanks, Brian. Those are a lot of questions, and I'll see if I can remember them all in order. But I guess, I'll start first by -- you mentioned 30 to 50 stores, I mean, we've talked about opening 15 to 20 stores through 2020, so I'll remind you of that number. Secondly, Japan, our Japanese model is distributor. As you look at the wholesale sale, we have very strong distribution partners and brand building partners in Japan, and we're very, very pleased with how that relationship is going. And so the stores are going to be opened -- they're -- it's a collaborative opening. We contribute in many ways, but they operate the store and we virtually sell to them on a wholesale basis. We have -- we do participate in some of the margin upside, but it's not the same as our own retail stores. And our plans, going forward, as it stands right now, most of the retail stores we plan to open in the future are planned to become owned-stores at this time. There may be other situations like this, but the vast majority will not be of this nature. And I'll hand it over to John to talk about -- to answer your FX question

Brian, regarding the FX point, just as a reminder, we have our order book in place by the beginning of the year, so it gives us a great line of sight into what's coming up. So we have hedged our foreign exchange impacts largely throughout the years, and the exchanges -- or not the changes, but the store openings and other things don't impact us that much. So although there is movement in the Canadian dollar currency relative to the U.S. and some of the other currencies we deal in, it doesn't result in much of a change.

Your next question comes from the line of Jay Sole from Morgan Stanley.

My question is about, with the new stores coming, not just the ones announced today, but also the ones announced last quarter, is the company incurring preopening rent expense right now and in the next quarter? And can you give us an idea of what that might be?

Yes, we do incur some preopening rent expense in some of the stores, depending on how that works and we don't give any of the details on that. But yes, that's a common thing. So as we're getting ready to open, they're included in our results.

Okay. And then maybe just on the wholesale business. If you can maybe just give us an idea of, just with the timing shift. I know you already touched on it, but would you expect that the growth in the wholesale business in 2Q might be in a different rate than like a 3% growth that we would see -- than we saw in 1Q ex the timing shift? I mean, would you anticipate that just because you're getting closer to season, that there might be more orders coming in that time than maybe what we saw in 1Q?

Yes, I'll -- thanks for the question. We are very encouraged as the order book slides to the left, for sure. Our order book remains the same and the shift of order is still not a reflection of more order, it is a reflection of timing. We are excited about the opportunity for goods to be in store early and, therefore, sell-throughs earlier and give us more potential for reorders later. But we -- our order book is the same.

Okay. And then maybe one last one for me. Dani, what was the signal that was -- the time was right to open than store in Japan, the brand, the awareness that risen to the point that you feel comfortable opening up a store, that, that could be the profit driver that has been in other cities?

In Tokyo -- Japan is a strong market. Tokyo, in particular, is a very strong city of us, and it has been strategic for a long time. We've been growing for a long time. And it's such an exciting opportunity to be able to open a retail store there. So it's something we've been working on for a little while and have been in my thoughts for a long time.

Your next question comes from the line of Meaghen Annett from TD Securities.

Can you just talk to your digital marketing strategy a little bit? And perhaps, any commentary with respect to data analytics, specifically around the direct-to-consumer business? What has the strategy been there since launching the websites? How has it changed over time? And lastly, what levers do you feel you have left to pull there to continue to drive growth, specifically on the e-com side?

Thanks for the question. Our marketing efforts are primarily digital these days, and we execute year-round campaigns, both performance marketing and brand marketing. And in terms of consumer insights, we're working very diligently at increasing our capabilities internally. We're building insights, capabilities internally, which gives us a view into all sorts of information about our consumers that helps us drive our business forward and make more educated decisions as we move forward.

And secondly, can you just give us any more insight into the knitwear offering, specifically, any expectations you have for the category going into the launch next week?

Yes. Knitwear is a very exciting launch for us. As a know, we're very careful about new products and the way that we develop them, that they're perfect reflections of the Canada Goose brand. And it's a new category for us outside of outerwear. The knitwear program incorporates, I mean -- it incorporates -- it speaks to the national -- what products consumers know us for, which is warmth and protection from the elements. And therefore, we include technologies like our thermal mapping technology, which is a proprietary technology that we've developed, which allows heat to escape differently from different parts of the garment that cover -- that protect people in places where they lose heat more or less. And we're a function first brand, and so it's very important to us that every new product that we create leaves with function and -- is highly functional as well as looks the part and I believe that if you go over to the stores next week, you will agree with me that these products are truly Canada Goose products, and I'm really excited about it.

Your next question comes from the line of Mark Petrie from CIBC.

I just wanted to ask about the manufacturing acquisition in Scarborough. Could you just describe a little bit more what the capabilities of that facility are? And then more broadly speaking, what does that mean for your overall cost base in manufacturing? And does it have implications for your total capacity, manufacturing capacity?

For sure, I mean, it's -- the facility in Scarborough is a raw materials hub. We'll do some cutting there and centralize our QA of raw materials. And for sure, it's to our ability to -- adds to our efficiency. And to the extent that it adds to our efficiency, it will also add to our capacity and will help us also be more -- the efficiency will -- it is part of our strategy to increase margins through operating efficiencies.

And also add to that, the more of these things we bring in-house instead of using outsourced manufacturers, there's generally some minor margin benefit to it, and those are factored in.

Okay. So I guess, just to clarify, was this a facility that was already in existence and now you're just going to own it? Or is this an incremental facility?

No, this is a new facility. So we now have 5 factories and this raw materials hub, in addition that, we're 6 facilities.

Your next question comes from the line of Omar Saad from Evercore ISI.

I wanted to ask about the e-commerce kind of geographic footprint, where you're seeing demand coming from globally, and maybe how that's informing your decisions on where to open stores. And a follow-up on the Japan and Korea distributor relationships. What is the kind of terms and duration of how those partnerships are set up? And the do you -- when we look at the giant Chinese market, how do you think about, potentially over time, going after that market? And if you're seeing things again in your e-com business in terms of global demand that point towards China as an opportunity?

Yes, thank you for the question. E-commerce, we had visitors from almost every country in the world last year to our e-commerce site. And certainly, you look at those metrics, as we determine now what markets to open, we have planned to open 7 markets this year and we've already opened 4 of those and well on track to meet our targets. And certainly -- yes, we look at -- we definitely look at where our traffic is coming from when we decide to -- and where the awareness is when we decide to open websites. I think you asked about China. We're very excited about China. China is a strategy that we're working on internally. We believe, there is a lot of demand from the Chinese market place for our products, and we're -- we have a -- we're working internally on tweaking our playbook, our go-to-market strategic playbook that we use as we open new markets to perfect our market interest strategy there. And we'll let you know more as we -- as that unfolds. But certainly, we consider it to be a large opportunity. And in Japan, you asked about Japan and Korea. We -- on Japan, as I mentioned earlier, Japan is really a very, very strong market for us, has been for years. We've been in there for a long time, growing for a long time and we have very strong distribution partners as we do in Korea, which is also a market, which continues to grow for us and we're very optimistic about.

Your next question comes from the line of Christian Buss from Crédit Suisse.

Could you provide some perspective into how your marketing strategy is evolving? We're seeing some Canada Goose advertising on Facebook, and I'd love to see how the strategy for marketing evolves over the next year.

Yes. We do a lot of targeted marketing, and it's probably why you're seeing us on Facebook, because you're on the Canada Goose site a lot. And so probably, it notices that and targets you for purchasing Canada Goose products. I think that the digital world is evolving so quickly, and I think what's important for us is to stay nimble and to be aware of all of -- be aware of the evolution of digital marketing and make sure that we continue to, in our execution of that, swim upstream and have a unique point of view in the way that we communicate about our brand.

(Operator Instructions) Your next question comes from the line of Simeon Siegel from Nomura Instinet.

Dani, can you remind us what percent of your business is currently manufactured in-house versus where you think that goes over the next 1 to 2 years? And then just any help at all you guys can give on the wholesale quarterly revenue cadence for the next several quarters, along with maybe if you can quantify what the Q1 SG&A shift was and the right way to think about dollar growth there.

Yes, in-house manufacturing -- thanks, Simeon. We are -- our in-house manufacturing, yes, the in-house component of our manufacturing is approximately 30% and we see that growing over time to come closer to 50% over a number of years. And in the future, it's hard to predict the exact rate of that because that will depend on our ability to scale internally and/or acquire contractors and/or those greenfield sites. So there are a number of variables that affect that, but we believe that we're going to be able to increase that number, over time. The second question...

Well, I can talk about the SG&A shift, if you want, Dani.

Sure.

I mean, your question was about the SG&A shift in the quarter. One of the things we always emphasize is that we look at the business on a full year basis rather than on a quarter-by-quarter basis. So it's normal, for example, for some things to shift from quarter-to-quarter. It could be a marketing project we're involved in that just goes from Q1 into Q2, or some back-office type cost. So this is a normal course thing and it's across a multitude of different categories of costs.

Yes, I'll -- come back to your wholesale question. Similar to what I've said before -- the comments I made before about it, I mean, it's a shift to the left. It's based on demand from the marketplace, and that's a very encouraging for us. Our order book -- our wholesale order book has not changed. Our wholesale order book was strong and remains strong, it's the same as always before. And we're optimistic that, with the shift to the left, that maybe that will give us some more opportunity for reorder later. But at this point, we have no such reorders.

Your next question comes from the line of Jonathan Komp from Robert W. Baird.

Dani, first, the risk of getting too granular, I just want to follow up and hoping to maybe clarify your guidance policy. I just want to ask, is your policy that you won't be providing any quarterly updates? Or is that, that you will only provide updates when they're needed? And I'm just asking because those could be interpreted pretty differently.

Our intention is to provide long-term guidance update on an annual basis. That's our guidance policy.

Okay, great. And then, I wanted to ask, just on the DTC business, obviously, now 2 quarters, where the performance looks very strong and pretty significant amount of upside versus the external estimates. So I'm just wondering if you could help maybe disaggregate how much of that is the first 2 stores really doing incredibly well out of the gate versus the e-commerce sites, and how we should think about that going into later in the year when you cycle that performance, but also have new stores opening.

Yes, thanks, Jon. We don't -- I mean, as you know, we don't break out our stores versus our e-commerce performances. They're both performing very well and growth is coming from both sides. And we're very happy with it and it's certainly very encouraging. We -- I'll continue to remind you, I think it's important to remember, this is a small quarter and we have a lot of our larger quarters.

Your next question comes from the line of John Morris from BMO Capital Markets.

Yes. And also, especially on that spring product performance, which has been pretty impressive. We saw a lot of differentiation there, and so I'm wondering, Dani, if you can comment a little bit about -- obviously, we're not going to get into details, but will we see differentiation on the core winter product? We've heard some good rumblings about interesting new kind of styles and pieces, and I'm wondering if you can share with us, will there be more differentiation or should we kind of continue to expect that you'll be positioned kind of similarly from a product perspective as you were last year? And also, implications on price points, your approach to price points this year versus last year and any kind of changes there.

Thank you. Good question. Yes, of course, we're going to continue to innovate in our core as well as in our newer categories. There's lots of newness. It's important to us and to remember, I mean, with -- these new products are -- they're exciting, they're new, they're vibrant and they're, we believe in exceptional executions of the Canada Goose aesthetics and look. So yes, we're excited about those. And next question was?

Yes, it was on price points. If you're raising price points, see the opportunity to on comparable product or as I might imagine, you might be introducing more items that could skew with the higher price point on core winter product.

You're talking about Fall '18, I'm assuming.

Yes, yes, exactly. Yes, yes, fall. Yes, exactly, for the pricing comparability.

Yes, I mean, in some cases, we've increased prices on life -- for lifestyles, in some cases, we've not. And we also have new product offerings to the market at different price points. In many cases, they're higher price points and offer additional features as well.

Good. And then just last one. Especially with how well you had performed on spring, thinking about how -- can you just share with us how you're developing the merchant team to be able to execute on the shoulder seasons? Are you bringing in new talent or are you promoting within? How do you handle that expansion? And similarly, the marketing and the marketing message around that, it seems like that's where a lot of the opportunity you see is on the shoulders seasons, so some thoughts on that.

Sure. We have had -- we've been undertaking an initiative for the last several years now, to build a world-class design and merchandising department, to bring it to have the best-in-class department of this nature. And we've been executing very strongly against those goals, both in bringing in new talent from outside where needed, and also improving from within we are able to develop our internal talent. So I'm really, really comfortable, excited about our capabilities from a design and merchandising point of view and happy with the progress that we've made in that -- against our strategy.

There are no further questions at this time. I'd turn the call back over to Mr. Reiss.

Great. Yes, thank you very much for being on this call. Thanks for your interest in Canada Goose. We look forward to speaking to you next quarter when we report our results again. So thanks for making the time, and speak to you all again soon.

Thank you.

This concludes today's conference call. You may now disconnect.