Canada Goose Holdings Inc

TSX:GOOS

Earnings Call Transcript 2019-Q2

[Operator]

Good morning. My name is Lisa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Canada Goose Second Quarter 2019 Earnings Conference Call. [Operator Instructions]I would now like to turn the call over to Patrick Bourke, Senior Director of Investor Relations. Please go ahead.

[Patrick Bourke, Senior Director of Investor Relations]

Thank you. Good morning, and thank you for joining us today. With me are Dani Reiss, President and CEO; and Jonathan Sinclair, EVP and CFO. For today's call, Dani will begin with highlights of our second quarter performance. Following this, Jonathan will provide details on our financial results and our updated outlook for fiscal 2019. 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, includes forward-looking statements, including plans for our business and our updated outlook for fiscal 2019. 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 statements. Certain material factors and assumptions were considered and applied in making forward-looking statements. Additional information regarding these forward-looking statements, factors and assumptions appear under the headings Cautionary Note Regarding Forward-looking Statements and Risk Factors in our Annual Report on Form 20-F, which is also filed with the SEC and the Canadian securities regulatory authorities. It is also available on the Investor Relations section of our website at canadagoose.com and in the earnings press release that we 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 the conference call, in order 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 companies. Any non-IFRS financial measures referenced on this call are reconciled to the most directly comparable IFRS measures in the table at the end of our earnings press release issued this morning, which is also available on the Investor Relations section of our website, canadagoose.com.With that, I will turn the call over to Dani.

[Dani Reiss, Chairman, President & CEO]

Thank you, Patrick. Good morning, everybody, and thank you for joining us today.I have always believed that a great idea without great execution is just someone else's success story. At Canada Goose, execution is a core competency. This quarter was no exception. When I say that, I'm not only talking about executing in the here and now, truly great execution also means setting ourselves up for wins down the road, and we are. We're delivering incredible results today while also making real progress on initiatives that will carry us well into the future. This duality is at the heart of our success and how we manage our business.It's only been 3 months since we spoke last, but our team has accomplished a staggering amount in a short period of time, and here are some of the highlights. Our financial performance was outstanding. Continuing our momentum from the first quarter, we increased total revenue by 33.7% to $230.3 million. And we delivered strong earnings growth while also making significant growth investments. In terms of products, we continued to strike a great balance between heritage and newness. The reception to new styles has been very strong, with the Olympia Parka leading the pack. Long-standing icons, which is the foundation of our business, also grew significantly.We have made great progress on our retail store opening program for fiscal 2019, with 3 of our 5 new locations open, and we're excited to be bringing our world class retail experience to this market. The fourth location Montreal will be opening later this week. And we're up and running in Greater China, telling our story and building the foundation for a successful business for decades to come. Our products are now available in our flagship store in Tmall's Luxury Pavilion and our first retail location at the ifc mall in Hong Kong. Just last week, we also opened a pop-up store in Beijing at the luxury hotel Opposite House in Sanlitun to activate and seed the market ahead of the opening of our fifth store in that city.To meet growing consumer demand, our manufacturing team continued to aggressively invest in Canadian manufacturing and scale our in-house capacity. We officially opened our third factory in Winnipeg in September, and we're joined by Prime Minister Trudeau for the opening event. Through a staged expansion, this will become the largest of our 7 wholly owned production facilities. We've hit the ground running with over 300 employees now working, and we expect to add an additional 700 in the city over the next 3 years. We are proud of our role in creating manufacturing jobs in Canada and to be doing it in Winnipeg, a place we think of as our second home. Our team continues to work diligently to identify other opportunities to further increase our in-house manufacturing capacity.Lastly, we took our first step into the exciting global footwear category with the acquisition of Baffin. This is a dream acquisition for me, as I'm watching and admiring Baffin for many years, and I know them very well. I believe this is the right move for us to be able to start exploring the category and look to ultimately launch Canada Goose footwear.Looking more closely at our results, we continued to significantly grow our wholesale business alongside the great success of our direct-to-consumer channel. This is the big sales quarter of the year for the wholesale channel, and we increased our revenue to $179.9 million from $152.1 million. Beyond the surface of this achievement, I think how we are achieving it is the most important thing to take away. In assortment and merchandising, we have made a concentrated effort to add newness and drive -- and adapt to drive momentum going into our peak season. We've delivered and strategically placed new fall and winter styles and seasonally relevant colors earlier in the season, and our successful lightweight down line is now a core part of our wholesale offering year round.As an experiential brand, our team is also doing great work elevating our presentation and storytelling around the world. Exploring [indiscernible] for Canada Goose with a retail partner is naturally different to our own stores or e-commerce sites, but the quality of the experience must be the same. We are not just putting jackets on racks, and we are working closely with our true partners to raise our game.We're also going deeper through retail [ seeder ] and experiential events. To drive awareness and affinity and to support specific product initiatives, we executed a number of new consumer activations. These include high impact windows and visual installations, strategically placed pop-up environments and engaging events, often outdoors, with Goose people and friends of the brand, such as polar explorer Ben Saunders. As a brand built on real stories and products, the work we do with our partners in these areas is an effective way to differentiate ourselves and reinforce our unmatched authenticity.That focus in Q2 on delivering exceptional experiences also applies to our DTC channel. The response to our first 2 cold rooms in Short Hills and Boston stores has been phenomenal. Our fans are truly our best brand ambassadors, and these fun moments become personalized stories shared online, amplifying our reach and driving awareness. This is also a natural extension of what our brand is built on, an authentic product that works. People tell me all the time trying on a Canada Goose jacket was the first time that they ever truly felt warm in cold climates. With our cold rooms, we're creating that moment even before they purchase. It's a strategic and highly effective in reinforcing that we make the best and warmest jackets that work in the coldest places on earth.An authentic product that works is also at the heart of our decision to acquire Baffin. We are building an enduring brand for generations to come, and getting footwear right is an important part of that vision. We also recognize that it is a business -- a distinct business to apparel, and it is difficult to cross over. Many others have chosen the faster and easier path of licensing or other ways, but struggled to find relevance. We would not be where we are today if we had followed someone else's playbook, and it is so important that we continue to chart our own course with best-in-class products. Buying the company that makes the best and warmest boots is the first -- is the right first step for Canada Goose in this exciting journey. Baffin is the still mantra of footwear in the coldest places on earth, and our products have lived alongside each other for decades. We will leverage Baffin's innovative technology and infrastructure as well as a world-class expertise of Baffin President, Paul Hubner, to inform our strategy and, ultimately, launch Canada Goose footwear.When it comes to operating structure, what we are not doing with Baffin is also important to take away. This is not a merger. We are not turning Baffin into Canada Goose or vice versa. We are distinct brands with different distribution channels and different customers. That is not going to change. Paul and his team have built a thriving business and reputation in the marketplace, and they will continue to manage Baffin on a stand-alone basis. Of course, we'll make sure that Baffin has access to the right resources it needs to continue its success and to realize its full potential.Before I turn it over to Jonathan, I want to reiterate that our execution in the first half of fiscal 2019 was exceptional. We are in an amazing position going into our peak selling season. Operational and financial performance in both channels has been outstanding, and we have done this while also making major progress on key longer-term initiatives.And with that, Jonathan will now go over our financial results with you in a greater detail.

[Jonathan Sinclair, CFO & Executive VP]

Thanks, Dani. Good morning, everyone, and thank you for joining us. Before I go through the numbers in detail, I'd like to remind you that they are stated in Canadian dollars. I shall comment on the quarter and then update you on guidance.As Dani mentioned just now our execution in the second quarter was exceptional across the business. Revenue increased by 33.7% to $230.3 million, 31.5% ahead on a constant-currency basis. Relative to last year, the Canadian dollar depreciated in comparison to the U.S. dollar, euro and pound, and that benefited our reported top line.Our wholesale channel was a standout performer in a largest quarter for wholesale shipments in the fiscal year. Revenue grew to $179.9 million from $152.1 million due to higher order values from existing partners and earlier shipment timing. In response to customer requests, we fulfilled a higher proportion of our total seasonal full winter order book in this quarter relative to last year.DTC revenue increased to $50.4 million from $20.2 million or 21.9% of total revenue compared to 11.7% last year. The strong performance of well-established retail stores and e-commerce sites in Canada and United States and incremental revenue from the recently opened stores in Calgary, Chicago, Boston and London were all significant factors.In terms of retail experience, it's also been great to see the very positive guest feedback we've received on our 2 very cold rooms in Boston and in Short Hills.Our consolidated gross margin expanded to 55.8% from 50.6% last year. This was primarily due to a higher proportion of DTC revenue as well as underlying gross margin expansion in each respective channel.In our wholesale channel, we saw gross margin expansion to 50.4% from 47.5%. This was driven by production efficiencies from manufacturing and reduction of duties on goods sold due to CETA -- the CETA trade agreement between Canada and the EU. In DTC, our gross margin expanded to 75.2% from 73.8% last year primarily due to the same production efficiencies which benefited our wholesale margin.Wholesale operating income was $80.1 million, an operating margin of 44.5%. This compares with $60.1 million or an operating margin of 39.5% last year.SG&A has also decreased as a percentage of revenues on a significantly larger quarterly revenue base.DTC operating income was $22.7 million, an operating margin of 45%. This compares to $6.6 million last year or an operating margin of 32.4%.Building on the momentum from the first quarter, this still off-peak retail productivity in both well-established and new retail stores continue to accelerate, driving lower total SG&A channel costs as a percentage of revenue. We continue to be very pleased with the performance of each of our stores.Unallocated corporate expenses were $34.2 million, up from $16.2 million last year. This was driven by planned growth investments in marketing, corporate headcount and IT, including the expected build out of our Greater China business unit and the commercial launch of our DTC channel in that region. We also incurred higher professional fees and other costs relating to public company compliance.Unallocated depreciation and amortization was $3.6 million compared to $2.3 million last year, driven by the retail opening program and upgrades to our manufacturing capability and capacity.Combined, our channel operating incomes and corporate SG&A resulted in a total operating income of $65 million compared to $48.2 million last year.On a non-IFRS basis, adjusted EBITDA was $70.9 million compared to $46.3 million. Net income was $49.9 million, or $0.45 per diluted share, compared to $37.1 million, or $0.33 per share, last year. And adjusted net income was $51 million, or $0.46 per diluted share, compared to $32.8 million, or $0.29 a share, last year.So now turning to our revised guidance for fiscal '19. Based on the strength of performance across the business, with the particularly significant contribution from the DTC channel, we are raising our fiscal '19 financial guidance. We currently expect annual revenue growth of at least 30%, adjusted EBITDA margin expansion of at least 150 basis points and annual growth in adjusted net income per diluted share of at least 40%. This compares to our previous guidance of at least 20%, 50 basis points and 25%, respectively. Our revised guidance assumes annual wholesale growth in the high single digits as well as 5 -- the opening of 5 new retail stores as mentioned previously.In terms of adjusted EBITDA margin expansion, we continue to expect a positive but less pronounced increase relative to last year. This is due to the SG&A growth investments in IT and our Greater China's business unit as well as variable SG&A fees that we paid to our operating partners on incremental revenue from both Tmall and our retail stores in Hong Kong and Beijing. As a reminder, this guidance incorporates the impact of the Baffin acquisition, which is not expected to have a material impact on our adjusted earnings in FY '19.In summary, our financial performance and progress on our key strategic initiatives has been outstanding in the first half of fiscal '19. Strong growth in profitability in both channels has funded and more than offset a planned program of significant growth investments, which we have delivered on time, on budget and with results above management expectations. Financially and operationally, we are entering our peak selling season from a real position of strength, and we are excited, optimistic and confident about the remainder of the year.Now I will turn the call back to Dani for some closing remarks.

[Dani Reiss, Chairman, President & CEO]

Thank you, Jonathan. As I said before, we delivered exceptional results today, and we're building a very strong foundation for the future. I'm truly extremely proud of what our team has accomplished and could not be more excited about what's coming next. And with that, I will turn it back over to the operator to begin our Q&A session.

[Operator]

[Operator Instructions] Our first question comes from the line of Michael Binetti from Crédit Suisse.

[Michael Charles Binetti, Research Analyst]

Let me start with just a quick math question, Jonathan. On your numbers, it looks like you're guiding wholesale flat to even slightly lower year-over-year in the second half compared to up mid-teens in the first half. I know you mentioned the shift. Would you mind helping us size the wholesale shipment timing shift on 2Q and how that impacts the second half of the year?

[Jonathan Sinclair, CFO & Executive VP]

So as I was saying before, we've delivered a significantly higher proportion of the order book in Q2 relative to last year. And that -- obviously, that's the function of delivery timing. It's a shift to the left, and there is a lower level of unfulfilled orders going into the third quarter, whereas Q4 is primarily driven by late season replenishment and, indeed, the shipments of spring, summer and fall. We've satisfied a larger amounts of our wholesale obligations compared to last year, but it's a temporary timing factor. That's why we encourage you to look at the channel annually in line with our guidance, which we've increased on wholesale in this update.

[Michael Charles Binetti, Research Analyst]

Okay. Just, Dani, thinking a little more bigger picture, maybe you could help us with what you're learning so far in China as you get into that. And I guess, is that -- any sign -- I know the initial concern, as you guys announced that, was we're all able to witness the tourist business you have at the U.S. and Canada stores from the Chinese tourist customers. Is there any signs of cannibalization there? Or how are you thinking about planning for cannibalization and maybe just your level of involvement with Baffin and how you see that rolling forward?

[Dani Reiss, Chairman, President & CEO]

Yes, sure. Thanks, Michael. We don't -- China has been -- China is going according to plan. And at a high level, it's definitely reaffirmed our conviction that we have the right strategy and that we're getting local execution right and that doing so is so important and we are definitely over-indexing on that. Our team there is great. It's on the ground with offices open, and things are moving very much in the right direction. We're not running China from Canada, we're running China from China, and that's really important. First observations I can share, we are -- we knew going in that brand awareness and demand were very high. And now that we are in the market, we see significant potential to further move the needle and spread our authentic message and build our brand there. And our local marketing team is working hard to share our story and our heritage and build our brand. Since opening, both Tmall and our Hong Kong store have performed well, and we're very happy with how things are going in that marketplace. So I think that to speak to cannibalization, I don't, from all anecdotal evidence that I have and people have spoken to the building of the brand in China and greater brand awareness we've built there does not cannibalize tourist business in the rest of the world and, in many cases, has the opposite effect. So that addresses the China question. In terms of Baffin, can you restate your question on that exactly, so...

[Michael Charles Binetti, Research Analyst]

Yes, just curious what your -- it sounds like you've known the brand for a while. I'm just curious what your level of involvement is on Baffin and, I guess, how you see transitioning from learning with that brand into bringing your own capabilities to market with Canada Goose.

[Dani Reiss, Chairman, President & CEO]

Sure. Yes, I mean, I think that -- to be very clear about my role, my time will continue to be dedicated to Canada Goose. We have so much brand power here, with runway, and my focus is on building Canada Goose brand. As I said before, I mean, this is not a merger, and Canada Goose and Baffin have distinct channels. We sell to different customers. We have distinct products, and that's not going to change. They've built a great business and Paul Hubner is a great footwear visionary, and I'm very happy that he's joined our team, and he's going to help us inform our strategy for Canada Goose footwear. And I'm really excited that this is the first step in us being able to bring to market the best-in-class footwear products for Canada Goose, which, I think, is -- I think this is the right way of doing that. And of course, at the same time, we're also going to make sure Baffin has resources that it needs to continue to thrive and to become the best version of itself.

[Operator]

Our next question comes from the line of Ike Boruchow from Wells Fargo.

[Irwin Bernard Boruchow]

Two questions I wanted to ask on the DTC segment, and I'll throw it out there for the team. So I know you guys don't talk to specific store performance and totally get that. But given the upcoming openings in the third quarter, especially in Shanghai, Hong Kong, that market's very different relative to North America. In some cases, there are a lot of other brands much more productive. I guess, could you just give us an assumption at a high level? Are those doors assumed to come in at lower productivity versus what you already have for the average fleet, higher productivity in line? Just -- I'm just kind of curious how you're thinking about those openings and what you're kind of thinking about how it impacts the P&L.

[Jonathan Sinclair, CFO & Executive VP]

So the stores that we're opening, we've opened Hong Kong already. We've got Beijing coming online initially as a pop-up as Dani said. Remember, the 2 things about. One, they're going to be -- they're cold starts in those markets in the sense that we are going to be opening our first monogram presence in each of Hong Kong and PRC with those stores. So in the early days, it's probable and it's natural that there will be a slightly lower level of revenue productivity out of the gate. On the other hand, the thing to remember is we do have variable costs as -- of revenues payable to our partners in that market as well, which means that the early-stage EBITDA from those stores won't be at the same level that they might be in another market. But it's right -- we're right at the opening gate, very confident about our position in those markets, very confident in the stores.

[Irwin Bernard Boruchow]

Got it. Very helpful, Jonathan. And then the follow-up is just the DTC commentary in the release, I think, you talk about sales productivity further accelerating and strong performance at well-established retail stores. I assume this means that your comp sales performance is compelling and strong. Any chance you could elaborate on some of those comments you have in the press release?

[Jonathan Sinclair, CFO & Executive VP]

I think you understand that there's a limit to what we do talk about on this. However, what I would say is we're looking at the DTC channel holistically, and in the quarter, both top line and the profitability metrics were just outstanding. We've seen revenue grow by $30 million in the period and generating operating margin of 45% in what, frankly, is still not a peak quarter. So it's an -- really an outstanding performance in an off-peak period and a significant improvement from last year's 32.4%.

[Operator]

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

[Brian Jay Tunick, Managing Director and Analyst]

I guess, couple here. First, we were curious about the wholesale gross margins. I think originally you had said you think this is a below 50% gross margin business longer term. And we were just wondering, I guess, given the margin progress you talked about today, year-to-date, do you think that this new rate is potentially a new level for the business? Or is there more transitory issues around duties? So first question's what do you guys think about the wholesale gross margin potential. Second question is you guys talked about a 26% EBITDA margin, I think, targeted by, I think, FY '21, and it looks like you'll be above that this year. So just maybe some puts and takes on what you think, Jonathan, maybe the margins can look like beyond this year. And then our final question on inventory. I think last year at this time, entering the second half, inventories were only up 8%, and I think this year, they're up 46%. So just wondering if that changes your ability to chase demand at all, Dani, into the back half. Or is that more just timing shifts on store openings?

[Jonathan Sinclair, CFO & Executive VP]

Okay. So I'll deal with the first of those 2 and then run it [ the point ] with Dani. So the -- on the wholesale, gross margin has clearly increased, and we've been very, very pleased with how that's gone. Partly that's due to in-house -- increased in-house manufacturing efficiency. I've also called out the lower import duties of the goods sold into CETA. We also got a lot of the natural variability due to shifts in FX rates, geographic mix, input costs and so on. And so far this year, those have all lined up to our benefit. So I think, we're very happy with how that's tracked. But remember, there can be mix factors around sales to different customers, which have different margin profiles, and that's all factored into the guidance we've provided. Okay? So that's the first point. I think we've been very pleased with how our EBITDA margins have evolved this year, and I can see why you're asking for longer term sort of perspective on it. But it's not really a consideration or conversation for this point in time. We're only 2 fiscals in to a 3-year outlook. And I think, we've -- at this stage, it's probably a bit too -- it's a bit too soon to say. I think expect us to update that in due course. When it comes to inventory, we do have a very healthy level of inventory. We also have 11 stores by the end of this quarter compared to 5 last year, 12 websites compared to 11 last year, and so there is a natural level of growth in the inventory. But I think that just -- that's consistent with the sorts of levels of revenue growth and network growth that we're talking about.

[Operator]

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

[Omar Regis Saad]

And as you stand on the precipice here entering the Chinese market, it would be great if you could help give us a sense what percentage of your existing business -- you have a sense if the Chinese customers already, is it single digits, double digits? And I also was wondering if you could give us some insight on the performance in your product lines, logo versus non-logo. I know you have the Black and the no-disc options with the logos now. And then my third question is production capacity. What -- with the new plant coming online, when that ramps up fully, what percentage will you be on manufacturing at that point? And how much capacity does it increase in terms of your ability to produce products for consumers?

[Dani Reiss, Chairman, President & CEO]

Yes. Thanks for your questions. To answer the last one first, from a production capacity point of view, I mean, we've been consistently increasing our capacity, not only our overall capacity but also our percentage of in-house capacity. And we have plans to continue to do that. And as we do that, it's going to have the expected positive impacts on our business. And I believe that's one of our core competencies, and the opening of our factory in Winnipeg recently reaffirms that. And we continue to look for other opportunities there. So in -- with regards to China, I mean, we don't -- perhaps end of the year, we'll break out percentages in terms of what percentage of sales was or in what markets. Still only halfway through the year. I'd say that China's doing -- we're very happy with our progress in China. We're very happy with their execution against their strategic plan. We're very optimistic about how that's going to roll out and how -- and on how the excellent execution our team has provided will lead to results that we're looking for.

[Omar Regis Saad]

And on the logo and -- versus non-logo, Black, no disc?

[Dani Reiss, Chairman, President & CEO]

I think that it's great to have a variety of products. That's why we do and different [ components ]. It's a personal choice and that's -- we're happy that we're able to provide that sort of choice for all sorts of different people and customers. And all the product lines are doing well. Our Fusion Fit is doing biz very well in Asia, Black Label as well; the classic red, white and blue disc as well. There is no one dominant style, let's say, or logo choice in that marketplace.

[Operator]

[Operator Instructions] Our next question comes from the line of Mark Petrie from CIBC.

[Mark Robert Petrie]

I guess, we're just over a year in terms of the second wave of stores. Wondering if you can just sort of talk about the performance of that tranche versus the first tranche and maybe just your latest thinking in terms of how quickly you want to add stores and potentially alternate kind of store models to maybe accelerate the ability to interact with consumers in a bit of a different way. And then, I guess, related to that, how do you balance or think about sort of going deeper in established and successful markets as opposed to continuing to add stores in new markets?

[Jonathan Sinclair, CFO & Executive VP]

So I think if we start this by sort of the beginning of your question, which is around the store performance, we've been really pleased with the performance, as I said, with all of our stores. Each of them comes out with -- out of the gate with great economics, and we are seeing all of our stores meet and beat expectations. So we are very pleased with how that -- that's developing. I think that the other thing that I'd remind you is that we've talked about sort of moving towards 20 stores in FY '20. Those -- that's not something that we're changing in terms of our direction of travel, and the beauty of being where we are in the cycle is we can pick really excellent space in each locale where we choose to situate the store. So we remain very excited about the prospects of the development for retail, our physical retail, where we're really just at the beginning of the journey.

[Mark Robert Petrie]

And sorry, just in terms of the potentially alternate models, I mean, in Shanghai, you started with a pop-up. Presumably, that evolves quickly to a full-blown store. But is that something you want to consider or would be potentially a bigger part of the strategy going forward?

[Dani Reiss, Chairman, President & CEO]

We continue to look at all sorts of different strategies, and I'm really, really happy that the initial strategy has been as successful as it is and naturally any -- naturally would -- any company would want to pursue other things that might work for our brand. I think that the pop-up in Beijing was a great way to introduce that market to our bricks-and-mortar presence and the opening of the permanent stores is -- in the near future is going to be even more powerful. Any -- we're an innovative company, and we'd like to think ahead. So there's a lot -- we have lots of plans that we look forward to sharing with you in the future. But we're -- at the moment, we couldn't tell you enough how excited and happy we are with where we are at today.

[Operator]

Our next question comes from the line of James Allison from Barclays.

[James G. Allison, Research Analyst]

Dani, in your opening remarks, you talked a little bit about experiential ambience that you're trying to elevate with your retail partners. Can you talk a little bit about how you see this materializing? Are you thinking it's more shop within shops, a higher density of media fixtures or -- and pop-up activations? Any color there would be great.

[Dani Reiss, Chairman, President & CEO]

Yes. I mean, I think that it's important in any environment in which Canada Goose exists, whether it be a wholesale environment or our own -- in our retail environment, that we show up in a way, which is representative and reflective of our brand and where our consumers will have a great experience. I think that, that's really important, especially for our brand, especially for our fans, where they want to know and learn and interact with the real stories and the real -- the authenticity that our brand offers in a way, that, I believe, is unmatched. I think that things like cold rooms and the way we've innovated and put those experiential factors into our stores have really elevated the game. And I know anecdotally that consumers in our stores -- I mean, a very high percentage of consumers that go into the stores -- into our stores with cold rooms use -- use our cold rooms and that they've -- the experience, they've not only enjoyed it, but they've also shared it. And that helped build brand awareness for us at the same time. So I think that you could -- you should expect us to continue to look at ideas like that, and we're really, really happy with how that one has performed for us, for example.

[James G. Allison, Research Analyst]

Okay. And then just quickly on Baffin, are you able to provide any financial metrics on where Baffin is currently, just revenues, margins, et cetera?

[Jonathan Sinclair, CFO & Executive VP]

I think the -- so this is Jonathan. I think in relative terms, Baffin is a much smaller business than Canada Goose. As a result, it's not material to the financial outlook for the 3 metrics that we guide on. And that said, we fully accounted for it in the revised increased guidance that we've provided. Contextually, relative to Canada Goose, it does have a much higher proportion of wholesale revenue, which implies a low margin profile.

[Operator]

Our next question comes from the line of Alexandra Walvis from Goldman Sachs.

[Alexandra E. Walvis, Research Analyst]

We were wondering if you could give us a little color on the differential in growth rate between the different regions, so U.S.A. growing a little bit faster than Canada? And then as a follow-up on the international business, there's been some movement in the growth rate over the last few quarters. I wondered if you could give us a sense of the underlying growth rate in that region given, I know, there's been some timing shifts there as well.

[Jonathan Sinclair, CFO & Executive VP]

Remember that in each of our regions, we have a different blend of wholesale and DTC. So if we look at Canada, for example, the growth rate that you see this quarter is a function of the wholesale shipment timing because, in Q1, we'll -- we shipped a greater proportion of our orders to Canadian accounts relative to last year, and that naturally reverses in the following quarter. As a result, if you -- for example, if you look there, you look at the 6-month growth rate, it's 25.7% in Canada, which is much more representative of the underlying growth demand. So what you see quarter-to-quarter is typically distorted or there's noise level in it from some shipment typing as well as from the underlying level of growth in the business. So what we are seeing is strong underlying growth, both in comparable and total terms, in each of our regions because what we do enjoy in this business is very strong brand salience around the world.

[Alexandra E. Walvis, Research Analyst]

And then one more question from me. As you look at product availability at your retail partners and how that's expected to trend through the season, what are your expectations for that? I'm thinking here of how last year some of your retail partners had insufficient product as we got through to the end of the holiday season. Are you planning to ensure that, that isn't the case this year? Or is some degree of scarcity likely again?

[Dani Reiss, Chairman, President & CEO]

I think that the scarcity factor that exists with our brand is because of the demand that exists in the marketplace. And we're very happy with the growth rates that -- in the rate in which our business is growing. Top line and bottom line, we're happy with all of that. And surely, there's more inventory available this year. We -- as Jonathan mentioned earlier, we also have more of our own bricks-and-mortar stores this year and we have more inventory available for those stores. And we are not afraid to be sold out. I think that's a really important message that I'm happy to reinforce. I think that being sold out is a good thing for business, and I think that sometimes people are -- businesses have lost sight of that and have had too much inventory. And I think that it's getting cold out there. I'd go grab a parka pretty soon.

[Operator]

Our next question comes from the line of Camilo Lyon from Canaccord Genuity.

[Camilo R. Lyon, MD & Head of US Consumer Research]

Just following up on the last question. Maybe I'll ask it a little differently. Within the wholesale guidance of high single digits for the year, Jonathan or Dani, can you talk about what level of reorders you're baking into that assumption, whether it's any level of reorders given the earlier shipments or we're going to normalize levels of reorders? If there's some sort of quantification you could provide on that, that'd be great.

[Jonathan Sinclair, CFO & Executive VP]

There were 3 data points that are really relevant here. First is we've got a lot more inventory than we had a year ago. The second is that we've raised our total revenue guidance; and the third is we've raised our wholesale guidance. So we're clearly moving into this coming quarter and the fourth quarter in good shape.

[Dani Reiss, Chairman, President & CEO]

For sure. If I'd add anything to that -- one thing to that is just we have the -- we are in the great position of being able to pull the levers of where we place the inventory, right? And to the extent that our -- what we -- we can make that choice and we'll do that be it wholesale or retail. And of course, our retail stores are important to us as our wholesale partner.

[Camilo R. Lyon, MD & Head of US Consumer Research]

Got it. And my second question, Dani, as we sit here, look back over the last year or so, you've had the successful launch of knitwear. You're now adding Baffin to the portfolio, assuming it gets you an entry into a different category. Do you think that you are in the major categories that you want to be and will want to be in for the next 5 years? Or are there other categories that you'd consider entering? And if so, what are those?

[Dani Reiss, Chairman, President & CEO]

There are certainly other categories. I mean, even going back to the prospectus that we issued on pop-up we listed other categories there. I think that, for the time being, we're very happy with the categories that we have on our plates to develop. And as you know, we are only interested in producing best-in-class products in any category that we enter, and we're really focused on the ones on our plate. I think that those opportunities themselves are significant for something that is -- a category that we've been asked about and that we wanted to get into for such a long time and the opportunity to be relevant in that category in a meaningful way is really exciting. And I don't think that -- I think we want to focus on those for the moment. But beyond that, there's, for sure, still other opportunities, and we'll get to those when the time is right.

[Camilo R. Lyon, MD & Head of US Consumer Research]

Got it. And if I could just sneak one more in on wholesale door expansion, if you could just update us on your views on door expansion in the U.S. on the wholesale side versus growing within the existing doors that you're currently selling.

[Dani Reiss, Chairman, President & CEO]

We continue to be happier -- happy to go deeper with the doors that we have, and we -- although, there are plenty of opportunities to expand doors, that's not the way that we look to grow our business, and that's not the way we look to grow our brands at the moment.

[Operator]

And our final question today will come from the line of Jonathan Komp from Baird.

[Jonathan Robert Komp, Senior Research Analyst]

I wanted to ask about some of the newer categories and maybe first, if there's any updates or metrics you can share around knitwear and the performance there. And then also, Dani, just on footwear, any additional thoughts on kind of the early vision you have there for the brand and even whether or not that would be a product that you would see yourself manufacturing as a company or just any kind of any initial thoughts there?

[Dani Reiss, Chairman, President & CEO]

Sure. Our new categories, knitwear, our spring products, windwear, rainwear, continue to resonate with our consumers and continue to grow. And we're very happy with the rate at which they're growing, and they're growing off of small bases. And that's the way -- we're happy that, that's -- that's why we built it and they keep growing. So really happy with that. Footwear, as I said earlier, I could not be -- it's a super exciting category. It's a large global category. It's something that is a natural complement to our brand. And I think that we can produce some phenomenal industry leading goods, and that's our objective. That's our -- that's the plan. And we're going to put together a strategic plan to back that up and we're going to execute against that the way that we are also proud of being able to do.

[Jonathan Robert Komp, Senior Research Analyst]

Understood. And maybe just one product-related follow-up. I know globally some of the other luxury brands have shifted stances a little bit recently on their use of the animal products and fur. And I'm just wondering if there's been any change in your customer appetite or product mix or anything like that or any kind of change in your attitude or maybe not?

[Dani Reiss, Chairman, President & CEO]

No, we -- again, we use fur for function. We're the first brand and we use fur for function first. The most important thing to ask is that everything -- all of our raw materials are sourced ethically and responsibly, and they are. And that's what's important to our consumers as well, and it continues to resonate with them too. And so all of our policies are available on the website.

[Operator]

I'd now like to turn the call back over to Dani Reiss for closing remarks.

[Dani Reiss, Chairman, President & CEO]

Awesome. Well, thanks again guys for joining us for today's conference call. Appreciate the time. I'd like to say Happy Thanksgiving to all of our American friends listening today and very much looking forward to catching up again when we report our third quarter results in a few months. Have a great morning, great day. Thank you.

[Operator]

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