Dive Brief:

• Canada Goose more than doubled its revenue against 2020, with revenue of $56.3 million Canadian dollars ($45 million U.S.) for the period June 27. 

• That figure includes direct-to-consumer revenue of $29.4 million, nearly tripled from last year, thanks in part to an 80.8% increase in e-commerce revenue.

• Revenue and profits beat Wall Street analysts, according to Seeking Alpha, but the company's stock took a hit after it reported margins fell from 66.4% earlier in 2021 to 54.5% in the most recent period. On a conference call, CEO Dani Reiss said the company expects margins to return to historical levels for the fiscal year. 

Dive Insight:

Like a lot of apparel brands, Canada Goose is rebounding from the woeful challenges of 2020. Also like a lot of apparel sellers, the upscale outdoor specialist went through some fundamental changes last year as the pandemic shifted and accelerated consumer trends. 

Perhaps chief among them was rapid growth in online shopping. That, in turn, helped boost Canada Goose's shift to more DTC sales, which holds the promise of higher profits. Plenty of brands that grew up in wholesale markets are chasing the margins of DTC, including Nike, Adidas and Crocs, among others.

Understanding why is simple math. At Canada Goose, for example, wholesale gross margin of 35.3% in the most recent period was less half of its DTC margin of 72.8%.

Yet with the shift in channel come timing changes in when the brand makes its money. Wholesale sales happen earlier in the year as retailers stock their shelves to prepare for end-consumer sales. 

"It's clear that we are much more DTC-centric today," CFO Jonathan Sinclair explained on the call, according to a Seeking Alpha transcript. "We expect the channel to approach 70% of our revenue this year, and I think that naturally puts a lot more revenue into Q3 and Q4 when consumer buying is at its peak." Sinclair also said on the call that the company expects DTC revenue one and a half times higher than in the previous year.

Canada Goose's sales are still well short of 2019 levels, and its profits show there is still ground to make up. The company's operating and net losses each expanded year over year, in part because sales remain constrained and also because of increased investment in marketing and other strategic initiatives.

With the company's stock down, in part over fluctuating DTC margins, Credit Suisse analysts led by Michael Binetti said in a research note that investors were too focused on the short term. The analysts estimated that the company's EBIT margins could ultimately reach levels up to 800 basis points above what Wall Street is currently modeling. 

Wells Fargo analysts noted that Canada Goose's earnings report fell short of peers in an environment "where the group is putting up material beats and guidance lifts." Specifically, the analysts pointed to category mix issues that hit gross margins, weakened guidance for the next period and lack of raised guidance for the year. On the other hand, they pointed to "strong e-commerce gains, category diversification underway and clear momentum in the brand in China and Europe."

Along with other changes at Canada Goose, the company announced this summer it would stop using animal fur in all products, including from its brand-defining coats, and it plans to enter the footwear category later this year.