Canada Goose Holdings Inc

TSX:GOOS

Earnings Call Transcript 2021-Q4

[Operator]

Good day, and thank you for standing by. Welcome to the Canada Goose Q4 2021 Earnings conference call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Patrick Bourke, Vice President, Investor Relations. Please go ahead.

[Patrick Bourke, Senior Director of Investor Relations]

Thank you, and good morning, everyone. With me are Dani Reiss, President and CEO; and Jonathan Sinclair, EVP and CFO. After prepared remarks from Dani and Jonathan, we will take your questions. This will be limited to 1 each to allow as many as possible to ask questions within the allotted time. This call, including the Q&A portion, includes forward-looking statements. Each forward-looking statement 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 implied in making these forward-looking statements. Additional information regarding these forward-looking statements, factors and assumptions is available in our earnings press release issued this morning as well as in the Risk Factors section of our most recent annual report. These documents are also available on the Investor Relations section of our website. 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. Our commentary today will include certain non-IFRS financial measures, which are reconciled in the table at the end of our earnings press release issued this morning and available, again, on the Investor Relations section of our website. With that, I will turn the call over to Dani.

[Dani Reiss, Chairman, President & CEO]

Thanks, Patrick, and good morning, everyone. We entered this year in uncharted territory with a simple plan in place, to do everything we could to support people during this time of uncertainty and to put our business in the best possible position for a strong recovery this year and beyond. In an unprecedented and difficult year, we moved key strategic initiatives forward, and I'm very excited to share those highlights and our results with you here today. To begin, Canada Goose has shifted from recovery to growth beyond the pre-pandemic levels. Not only did we finish the year with a record fourth quarter, we have positioned our business well going into next year. And now with 2 strong growth quarters behind us, we feel very confident about the runway ahead and our return to continued meaningful growth. Our fourth quarter showcased the true strength of our global digital business with triple-digit growth. Our Global e-Commerce revenue increased by 123%, driven by a high double-digit or low triple-digit growth in all major established markets, including Canada, the United States, Mainland China and the U.K., not to mention the strong performance in our earlier-stage markets like Germany, France and Ireland. This year, we accelerated our digital strategy. We accomplished in months what was planned over years. This approach was a response to a shift in consumer behavior, driven by COVID, but it is underpinned by our focus on shift -- on our focus on shifting forward our strategic plans in order to accelerate continued growth. This achievement has had incredible implications across our business, and I look forward to continuing to update our achievements across this very important channel in the future. Looking ahead, we will continue to execute against our long-term growth strategy with 10 new store openings expected for fiscal year '22. In North America, we plan to open in South Coast Plaza, a premier shopping destination in Southern California. In Europe, we expect to open 3 new locations, including 2 in Germany and another in the U.K. And in Asia Pacific, we plan to expand our retail network, adding 6 new permanent stores. We continue to be encouraged by the performance of our existing APAC network. In the past 3 years alone, we've built a more than $250 million business, a tremendous feat by any measure and a testament to the strength of our brand in that region. Lastly, in terms of consumer relevance, all of the research we are seeing shows a growing and positive shift in brand sentiment and trust. We believe this is a result of a number of factors, including the important progress we have made under our HUMANATURE platform and our commitment to keep the planet cold and the people on it warm. We continue to execute against our commitment to address environmental, social and economic challenges, and we are extremely proud of the progress that we have made so far. Building on brand relevance and consumer demand, Canada Goose exists at the nexus of culture and fashion. For decades, we've been a coveted brand across the influential arenas of film, entertainment and sport. In this year, we bolstered that tradition by announcing a multiyear partnership with the NBA that made Canada Goose the outerwear partner of NBA All-Star. We continue to focus on driving brand heat with consumers. This multiyear partnership is a significant milestone for us. In the coming years, we will develop exclusive design collaborations in partnership with the NBA for players and fans alike. This quarter, we continue to focus on driving meaningful change that is fundamentally important to today's consumer. Through our product innovation strategy and focus on sustainability, we are making an impact. 2020 was the year we gave consumers the first glimpse of our most sustainable parka to date, the Standard Expedition Parka. This quarter, we also launched the Cypress and Crofton, 2 bold new spring styles featuring recycled fabrics. Not only are these offerings resonating incredibly well with consumers, they are blueprints for our sustainably-driven collections moving forward and key drivers of our expanding multi-seasonal offering. We've also made progress towards building vibrant communities and maintaining healthy and respectful workplaces. As a leader in the Canadian manufacturing industry, we offer meaningful work in valuable job skills for thousands of people, both in Canada and abroad, as vaccinations ramp up and that the global supply continues to increase. For many, we have entered a new, more hopeful phase in our global fight against COVID-19. In an effort to remove barriers and ensure equitable access, we are offering all employees paid leave to receive COVID-19 vaccinations. I am proud to do our part to ensure that all Canada Goose employees have equitable access to vaccines. That said, for many, the [ dial ] continues. And our thoughts are with all of those who have been affected by COVID, into those communities and countries who are at earlier stages in their recovery. Looking ahead, I'm very excited for the upcoming commercial launch of Canada Goose footwear. As you know, we have taken a very deliberate approach to this category, which has been many years in the making. And now with the launch later this fall, we have an incredible opportunity in front of us this year and beyond. We plan to bring a brand-new perspective to the marketplace, and I look forward to sharing more details about our vision for that with you this fall. In summary, we have demonstrated strong current momentum, and we have confidence in our growth potential long term. I am incredibly proud of the way our team has executed under such difficult circumstances and the strides that we have made across all of our strategic initiatives, while remaining steadfast in our commitment to strengthening our communities, protecting our planet and working towards a better future for generations to come. Our business has moved well beyond recovery. And we look forward to continuing to deliver meaningful growth this coming year and for the long-term as we plan to cross the $1 billion threshold as a brand for the first time this year. And with that, I will turn it over to Jonathan.

[Jonathan Sinclair, CFO & Executive VP]

Good morning, everyone. Thanks for joining us. I really hope everyone is well. The fourth quarter represents a step change in our performance and an excellent finish to fiscal '21. From where we are today, just 12 months ago, we were facing a near-total shutdown of our business globally. We've navigated the year like no other, and we're coming out stronger on the other side. Reflecting on our results and on our path forward, there are 3 key themes that stand out. Firstly, we have transitioned from recovery to growth beyond pre-pandemic levels. Secondly, we are purposely investing for the long term. And thirdly, we are confident in our potential for meaningful growth in fiscal '22. So let's start with the top line. Total Q4 revenue was $208.8 million. Looking at the pre-pandemic comparative base, this is still 33.7% higher than 2 years ago. It is a strong reaffirmation of our strategy in a challenged environment. e-Commerce led the way, driving our outperformance. Global revenue increased by 123.2% relative to last year. We had outstanding growth rates in all of our major markets. Mainland China and Canada were both in the high double digits, and the U.S. more than doubled. In Europe, the U.K. and Germany both nearly tripled. As expected, demand timing was later this fall/winter. This is due to the shift to buy now, wear now shopping, which we've discussed throughout the year. Supported by a wide range of operational improvements and investments, this made Q4 the high watermark for our online growth in fiscal '21. This was complemented by a resilient retail revenue performance, despite outsized headwinds due to a number of factors. 9 stores in Canada and Europe, representing 32% of our footprint, were closed for an average of 8 weeks in Q4. These closures included a number of our most significant locations globally. Those closures were also weighted to our most productive time in the period, namely January and February. Our stores in Mainland China continue to be a bright spot. Our decision to concentrate openings there has paid off. In the seasonally smaller quarter, wholesale revenue was $33.3 million. This was ahead of an expected decline, though the absolute dollars are fairly small. We experienced an uptick in final reorders to finish fall/winter. And the performance of our spring collection, which was heavily disrupted last year, has been encouraging. Looking at our top line performance from a geographic lens, this is where you see a brand with truly global growth and truly global potential. In the earlier stages of recovery from the first wave, Mainland China was the only growth engine. Now we are at a point where other markets are following its path. Revenue in the United States increased by 59.3%, while Europe and the rest of world came in at 46.7%. Each of these regions has a long runway, and they are important components of our global potential. Given the elevated and prolonged retail closures in Canada, including Greater Toronto, a revenue decline of just 6.9% is also an encouraging result. Moving from Q4 to our plans going forward, we are purposefully accelerating growth investments in a number of areas. We believe that the time is right to play more offense and to drive our agenda even harder. Thanks to the financial resilience and strong cash flows of our business, the only constraint we have is our own discipline, discipline around execution, discipline around returns and discipline around strategic value. You see this when you look at fiscal '21. In a year with unprecedented challenges, we still had a consolidated gross margin of 61.3%, an adjusted EBIT margin of 14.7% and free operating cash flow of $222.9 million. This gives us an immense level of capacity and flexibility. So let's start with marketing. You'll recall that we sharply pulled back spend in the early stages of the pandemic. Our business was largely shut down, and consumer retention was understandably elsewhere. We then accelerated brand and demand building in the back half of fiscal '21 to great effect, and you've seen the results. For fiscal '22, we are planning to carry this through and increase marketing as a percentage of revenue. We're returning to a normalized level of investment, and we believe it's the right thing to do, given our commercial momentum. Our next area of investment is continually improving our digital consumer experience. From site enhancements to virtual appointments to omni-functionality, we have a packed agenda of initiatives we are excited to launch in the coming year. While the pandemic has accelerated our digital strategy, it has also reaffirmed our retail store model. In all markets during reopenings, we've been very encouraged by the return of local traffic and the strength of our conversion rates. This tells us our consumers still deeply value physical experiences and personal service. With a selective focus on only the best locations, we have continued to generate strong levels of operating profitability and capital return. Looking ahead, we currently plan to open 10 new stores in fiscal '22, all in premier locations. Of these stores, 6 are in Asia, 3 in Europe and 1 in the United States. I'm particularly excited for us to be coming to South Coast Plaza in Southern California. It is one of, if not the top luxury malls in the U.S., as well as being one of the most productive malls in the country. It is also the perfect market for our growing lightweight offering. Lastly, on investments. This fall/winter, we will launch Canada Goose footwear as we continue to develop as a lifestyle brand. Our focus in year 1 is to maximize awareness and demand, with a focused and tightly controlled pinnacle product. This requires a significant level of upfront investment. It will not be immediately profitable. We strongly believe that we must put the full weight of the business behind seeding this pivotal category. This is the right first step for commercial and financial success at scale in the longer run. Moving on from our investment plans, let me share some color on how we're thinking about fiscal '22 and Q1. We are confident about the year ahead. We know, that said, but we remain in a disrupted and dynamic environment. The return of tourism, historically an important factor for our sector, remains someway off. Given stable economic and operating conditions, we currently fully expect to exceed $1 billion of annual revenue in fiscal '22. We are continuing to lean into DTC globally to drive our growth. This assumes the channel approaches 70% of total revenue. While we don't know today how much of the pandemic's digital fit will be permanent, we do believe we have the right foundations in both e-commerce and stores to capture demand and serve the consumer however, whenever and wherever they choose to shop. In Wholesale, we are assuming annual revenue is in line with fiscal '21. The channel has rebased to a new normal. Significant brick-and-mortar pressures remain in many markets. We have continued to edit down undifferentiated doors during the pandemic as we have been doing over many years, and our approach to volumes remains very controlled. We're excited to concentrate more of our business with our best-in-class strategic partners going forward as we come out of the pandemic together. From an inventory perspective, our current position is well-matched to our expectation of significant revenue growth in fiscal '22. It also gives us the right level of commercial flexibility for upside in the season. Given the current uncertainties around offshore supply chains and shipping, we believe that being a domestic manufacturer at scale with a staged evergreen offering is highly advantageous. In terms of gross margin, the expected DTC mix shift will structurally drive our consolidated level higher. At a channel level, the mid-70s for DTC and the mid- to high 40s for Wholesale remain the right levels for our business over the longer run. From a cost perspective, we are currently planning annual SG&A to have a growth rate in the low 30s. This reflects the suite of investments I described earlier, as well as variable costs not incurred last year due to shutdowns, and lower levels of commercial activity. In terms of adjusted EBIT margin, we, of course, expect improvement relative to the 14.7% we're reporting for fiscal 2021. A full margin recovery is dependent on the return of international traffic, which represented roughly half of our retail store business prior to the pandemic, as you may recall. Our planning assumes that tourism in major global shopping destinations will not be meaningful this year. Until that changes, we believe that our adjusted EBIT margin is likely to remain in the mid- to high teens. Let me round this out with some commentary around Q1. This factors into our current expectation of exceeding $1 billion in annual revenue, we are assuming DTC revenue to be roughly 2.5x last year's level. We have more retail stores in operation, but we continue to face closure headwinds in Canada and in Europe. For the stores that are open, the absence of international traffic is also more impactful at this time of year. e-Commerce continues to generate robust growth. Whilst not at the level of Q4, it is currently around the 54% growth rate we achieved in fiscal '21 as a whole. As this is a buy now, wear now channel, it is, however, a much smaller needle mover at this time of year. In Wholesale, we expect revenue to be roughly double last year's level. And in the Other segment, which was driven by PPE manufacturing last year, we do not expect any meaningful revenue. In terms of gross margin, we currently expect a mid-70s level in DTC and a low 40s level in Wholesale. This is in line with what we had in the comparative quarter in fiscal '20 prior to the pandemic. Lastly, on the expense line, we expect SG&A and D&A, combined, to have a low 70s growth rate. This is well above our expected annual level due to the fact that our operations were largely shut down at this time last year. In closing, we have navigated through a challenging year. We came out stronger than ever. We have grown beyond pre-pandemic levels. We are investing with purpose for the long term. Our brand is strong. We continue to innovate with best-in-class product. We are optimistic for the year ahead, and we are confident that our momemtum -- our strong momentum will continue. And with that, I'll pass it back to the operator to begin the Q&A.

[Operator]

[Operator Instructions] Your first question comes from the line of Ike Boruchow.

[Irwin Bernard Boruchow]

Congrats, everyone. I guess, Dani, just a question. The e-Commerce acceleration through the year, especially Q4, is just pretty -- it was pretty impressive. Can you just talk to what exactly is driving that within your business? And then maybe bigger picture, where do you expect e-Commerce penetration as a percent of direct-to-consumer sales, potentially to settle out maybe this year or multiyear down the road?

[Dani Reiss, Chairman, President & CEO]

Yes, sure. Thanks, Ike, and great question. I mean there's a couple of factors at play here, for sure. And the first one is obviously the massive shift in shopping behavior that was brought on by the pandemic. In this particular quarter, mandatory retail closures were more elevated in a number of markets and that affected it as well. The second factor is later in fees and purchasing that we saw, and we've seen more immediate by now. We're now shopping in the pandemic. And winter is our season, and that evolved tough. We saw that acceleration in previous quarters and even towards the end of Q3. We saw it growing stronger, which we indicated when we last spoke. And Q4 just continued. And we had -- to that point, we've been investing heavily into that to make sure we capture all that demand and meet our consumers wherever they wanted to shop what's best of them. In many cases, it turned out to be online, and we were able to -- and we were absolutely able to deliver on that. And I think that our investments in digital that we made through -- we pivoted quickly and decided to put a lot of -- to repurpose and pull a lot of additional investment into our digital platform also really paid off. In terms of like the percentage, for us, it's not really about reaching a certain level of digital penetration. Our strategy was to drive overall -- our overall DTC mix forward, however the customer wants to shop. And we believe that -- it will be natural to believe that it's not going to change again over time. And what's important is to be available to the consumer wherever, whenever and however they want to shop. So -- and for that reason, both channels are really important, both bricks and online. And all the -- well, the pandemic has obviously pushed e-Commerce further forward. Retail remains a very important part of the equation. And through like electronic card and virtual appointments, the lines between those 2, many observed, are actually doing quite quickly. And we're working really hard and investing a lot of money, bringing together the best of both worlds for our consumer.

[Operator]

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

[Jonathan Robert Komp, Senior Research Analyst]

One maybe follow-up, just clarification, thinking about the DTC margin. As e-Commerce penetration is higher, I believe that, that's a more profitable channel even versus retail. So does that help in terms of thinking through the margin recovery relative to the retail traffic levels, just given the higher e-Com penetration? And then my broader question, Jonathan, just thinking through the margin impacts you highlighted. Any way to quantify some of the investment areas as well as some of the external pressures from factors like the labor or freight? Yes, what you're expecting there in the outlook?

[Jonathan Sinclair, CFO & Executive VP]

So thanks, Jon. So I'm going to answer those in 2 parts. Let's take a the question around DTC and the component margins. In normal times, we enjoy similar margins from the stores and from online. But at the moment, with headwinds in terms of traffic in the stores, clearly, the online margin is higher. But overall, that -- its strength of the DTC performance is still producing a mid-40s operating margin. And that's well above the level that we see in Wholesale. And therefore, you're right, to the extent that DTC grows faster, that will move our margin forward and give us more scope for investment. So to turn to your question on freight and labor, to some extent, when -- this is more of a sort of a gross margin question, and it plays into our algorithm or margin, where we always talk about the tailwinds and headwinds of gross margin and the need to keep the 2 in balance. So for sure, like everyone else in the sector, we have seen disruptions to shipping routes and higher freight costs. And that -- we look at that in a dynamic landscape. But through our pricing power and our high gross margins as well as the fact that we've got staged inventory in domestic production, we actually think we're pretty well positioned, currently. Obviously, we watch the situation closely, and we proactively plan around it. It helps the fact that our average unit prices are -- selling prices are quite high. But if there is adverse change and their own significant impacts, we would update you. But right now, we're pretty confident that it's in balance.

[Operator]

Your next question comes from the line of Michael Binetti with Crédit Suisse.

[Michael Charles Binetti, Research Analyst]

Congrats on a great quarter. So Dani, Jonathan, I guess, just wanted to jump ball, but you talked a bit about the tourists. That's obviously been a huge part of your business. You're opening a store in Southern California, so you're clearly not walking away from that focus. Can you help us think about, numerically, how the lack of tourism impacted fiscal '21? I know, Jonathan, you've told us a few times, it was half of your stores' business prior to the pandemic. I'm just trying to think about -- it sounds like you didn't account for much tourism in the guidance this year. But if I look at what I think you're telling us, you expect this year to be, with Wholesale flat and DTC getting to about 70%, it looks like you're maybe $750 million of direct-to-consumer. That's significantly above where you were in fiscal 2020 without even having a tourist baked into your numbers. So I'd be curious about how you're thinking about how much that impacted you last year and to help us think about what the upside could be if we do start seeing tourism come back this year? And then, Jonathan, just maybe a little bit more on the strategic rationale about the acceleration of the growth investments that you did talk about. Obviously, it's a significant opportunity as you spoke about it, but why now and why so significantly? I'm curious to hear your thoughts on why the time is now.

[Dani Reiss, Chairman, President & CEO]

Thanks, Michael, for that question. About tourism, yes, I mean, your observation is a good one, and that is that it's -- we've not assumed the return of tourism this year. And that is the return of tourism to pre-pandemic levels, whenever that will happen, which is -- nobody will be able to predict that. Whenever that will happen, it definitely offers a material upside to our business because it did represent such a large percentage of our sales, and they're completely incremental. They're worth the time, and we believe they will be again at some point in the future. But with regards to this year -- and of course, we're optimistic that will happen at some point in the future. This year, and the way we look at the -- whether they come or not, we're not planning on tourism returning in fiscal '22. And so that's that the way we look at it. And I find it -- I find it really encouraging that we can grow through these times in the absence of global tourism and still -- so grow at the rate that we're growing, and I'm very excited about the return of global tourism. So just add to that comment.

[Jonathan Sinclair, CFO & Executive VP]

Sure, and I'd echo that. I think that there's -- for me, tourism is cold spring waiting to go. As and when it returns, that really will help bring us back. But I think when it comes to the investment rationale, we're seeing great demand strength globally. And from the investments we've already made, and as we've reported back to you, we've seen the payback in the fall/winter period this year in the space. The digital chip, in particular, have pulled forward years of digital growth. And consumer expectations we've experienced are way buoyant. So we remain staying in front of that. And so investing into that, right now, we see as pivotal.

[Operator]

And your next question comes from the line of Oliver Chen with Cowen.

[Oliver Chen, MD & Senior Equity Research Analyst]

You've made nice strides in the multi-seasonal product. Where do you see that mix going over time? And how will it impact the seasonality you experienced? Also, we're looking forward to footwear. We'd just love your views on how that mix could evolve and what the strategy will be by channel?

[Dani Reiss, Chairman, President & CEO]

Thanks, Oliver. Yes. Footwear is performing really, really well right now. We're very, very happy with how it's doing. And it's a super part of our -- super important part of our collection going forward. And our plans going forward, the Crofton and Cypress, in particular, our Lightweight Down styles for spring that are made completely of recycled materials. And we're really happy to see how well those are doing. I think spring is a very important part of our future plans. I think the lifestyle brand it's going to be a an important component and one that continues to grow at a meaningful rate. And so we're very excited about that. In terms of footwear, I'm personally extremely excited about footwear. It's something that we put a lot of thought into over many years and is -- has had a lot of strategic thinking put behind it, and it's finally coming to fruition this fall. We're very excited about it. I think that the market will like what we -- will like our interpretation for footwear as well and the products that we bring to market. And we're going to start -- we'll start small. And we're going to start with the best of the best and grow our parka offer from there. I mean we do believe that, over a long period of time, long haul, longer term, it can be a very material piece of business for this company. For this year, I wouldn't consider it to be a material piece of business.

[Operator]

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

[Meaghen Annett, Analyst]

Can you talk a little bit more about your learnings with regards to brand awareness? What's your view on brand, if any, today relative to pre-pandemic? And just looking at North America, specifically, have you seen any shift in consumer sentiment toward the brand in Canada and also in the U.S.?

[Dani Reiss, Chairman, President & CEO]

Yes. Thanks for the question. We're definitely seeing growing a positive shift in brand sentiment and in trust for our brand. This quarter, we continue to focus on driving meaningful change that is fundamental to today's consumer, and that has been delivering results. And we believe this to be a result of a number of factors, including important progress we've made under our HUMANATURE platform, which has been very well received and is a very important part of the future. Our commitment to keeping the planet cold and the people on it warm, that's a sincere commitment. We've released our 2020 sustainability report this year, second in a row. It reaffirms our commitment to net-zero emissions by 2025 and adds to new commitments around preferred fibers and materials and sustainable packaging. So we've been continuing to execute against our commitments to address environmental, social and economic challenges. And we're extremely proud of the products we've made so far. And a lot of like, I think it's -- one last thing, and that's -- I think that -- I mean, if it's -- with or without the pandemic -- if the pandemics were anything to like is that -- is the delicate balance of human and nature. And I really don't think that if you look forward 20 years, there are going to be many companies around that are not good for the world. And so it is our intention to be a leader in helping to transform the apparel industry to be sustainable.

[Operator]

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

[Omar Regis Saad]

All the information and the update are appreciated. It's great to hear the success of the DTC and e-Commerce. I'd love to ask a follow-up in more detail around the Wholesale side of the business. I know it's planned to be flat. Maybe any more details around plans to rationalize or not going forward? And then also, on the kind of wholesale.com side, how do you look at that marketplace? And is there a role for the e-concession-type models that are -- in marketplaces that are out there?

[Dani Reiss, Chairman, President & CEO]

Yes. Thank you for your question. And to address Wholesale first, we've always taken a very controlled, reinforced approach to wholesale. And this included editing down on differentiated distribution or going deeper with the best. We do believe we have some strong wholesale partners. And wholesale is an important part of our business always has been and continues to be. Even though our DTC business is growing faster, it's not is on diminishment of the importance of wholesale. And -- but with that said, we do edit and make sure that all of our accounts are brand accretive and helpful to build in our brand. So for example, in fiscal '21, we went from 2,100 points of distribution down to 1,900, just over 1,800. And when we first went public, we were at 2,500. So we have been rationalizing over time, and that's to make sure that we are continuing to partner with like-minded partners. And it's a continuous process. And honestly, it's not just been the last 3 years, it's happened in the last 15 years. And we continue -- we expect it'll always be a part of how we strategically think about our business. And just to -- that said, to reiterate, Wholesale as a category remains an important strategic part of our business. And we're really excited to get going in this coming year with the best business partners that we do have. So that's Wholesale. In terms of in terms of new ways of doing business on e-Commerce and with third parties and e-concessions and whatnot, certainly, very much top of mind. And we're always exploring new models and new ways of innovating with our partners and are involved in conversations all the time. Our focus is on staying in front of how consumers' shopping is evolving and making sure we provide the best possible experience for our consumers. And we're certainly evaluating how this sort of model can do that. We don't have any concrete plan at this time. But we'll continue to think talk, and we watch how the space is evolving.

[Operator]

Your next question comes from the line of Sam Poser with Williams Trading.

[Samuel Marc Poser, Senior Research Analyst]

I wonder if you can dig in to your marketing -- you're going to increase your marketing spend. I assume a lot of that's going to be digital and direct. And generally, when companies have been -- but what kind of return on investment are you putting this year upon that increased digital-owned marketing right now? Because a lot companies had probably gotten a good return fairly quickly when they start to crank that up?

[Jonathan Sinclair, CFO & Executive VP]

Yes. I think -- thanks, Sam. I think that you're right to say that a lot of our investment is digital. I mean, I think in this world, it's inevitable. And we have seen, and continue to see, and hence, continue to fuel the outgrowth by that investment. The ROIs are exceptional and measurable. So from that point of view, it sort of -- it gives you increased conviction over time. And that's where we've put a lot of entities to drive the performance of the business.

[Operator]

Your next question comes from the line of Camilo Lyon with BTIG.

[Camilo Russi Lyon, MD and Lifestyle Brands & Wellness Analyst]

Just 2 quick questions. One, just on the Wholesale guide. I was wondering, Jonathan, and if you could help us by articulating the components of what is the contribution from fewer doors versus what the order book was within that flat guide? And then just longer-term, on footwear, I'm assuming that, that's going to be an introduction to your DTC channel first. How should we think about the price points of the offering? And who are your key competitors that you would point to as one thing you would go after from a market share perspective as you straddle both the technical as well as the fashion components of the market? So there's a lot of opportunity there, it seems?

[Jonathan Sinclair, CFO & Executive VP]

So I think when it comes to the Wholesale business, we have been successful over the years at culling the distribution where it ceases to be brand-accretive. We've always been very clear. The wholesale distribution serves the purpose in this business, which is to be brand-accretive, either because it gives a physical presence of the business in places where we're there going to go directly ourselves, or because it puts us with key opinion leaders or both. And inevitably, over time, some distribution falls away. Some distribution comes on-stream, that's interesting on where we need to be. But overall, we see a gradual decline. And we're sort of somewhere just over 1,900 doors these days. And at the time of IPO, we were around the 2,500-or-so mark. So you can see there's a gradual decline going on in the number of doors. We see that as something that will likely continue and, therefore, produce, as I said before, ever better quality of earnings in absolutely the right quality of distribution for the brand. I think it's early days on footwear to be talking about it. We'll be talking about it much closer to the launch. We're super excited about it. We see real scope for it in this business, but we're also very clear that it's going to be a launch on where the focus is on seeding and demand generation rather than it being a meaningful business this year. It's a meaningful launch of a business that will become meaningful over time.

[Dani Reiss, Chairman, President & CEO]

Yes. And Camilo, I'll just add to that. I mean, I'm very excited about -- I'm very interested about the products themselves. I think I know that Canada Goose is known for best-in-class products, and it's our intention to only ever release best-in-class products into the marketplace, and you can expect no less from our footwear offer when it hits the marketplace.

[Operator]

Your next question comes from the line of Jay Sole with UBS.

[Jay Daniel Sole]

Great. In the past couple of calls, not last year, but in the 4Q calls in 2018 to 2019, you gave a kind of a 3-year view and that included operating margin guidance. In 2018, you talked about a 26% EBITDA margin by 2021. And in the '19 call, you talked about a similar type of target. Just given -- in light of the growth of the EBIT margin guidance that you gave today, can you update us on your 3-year outlook? And when you can kind of turn and get back to that 26% EBITDA margin that you talked about -- or EBIT margin? Just give us a little clarity on like what you kind of -- how you see the margin trending in fiscal '23 and into fiscal '24?

[Jonathan Sinclair, CFO & Executive VP]

So thanks, Jay. As you are aware, we're not giving that medium-term guidance formally at the moment. But what I would say is that, we already see fiscal '22 as the beginning of the margin recovery. A big needle mover, as Dani said before and so I'd reiterate now, the big needle mover is tourism. Because that's the thing that changes the game when it comes to the retail stores. And that will fundamentally drive sales density in the stores and sales density when you're dealing with a fundamentally fixed cost base, ultimately drives profitability of the stores, and that will be the one thing here. And -- because what comes with tourism is a full recovery of retail traffic. And so there's a reason why we're not giving medium-term guidance at the moment, which is -- in case that we don't know when that will assume. But for sure, when it resumes, we're going to be there, and that will propel us back both to where we were and ultimately to where we want to be.

[Operator]

Your next question comes from the line of Robbie Ohmes with Bank of America.

[Robert Frederick Ohmes, Managing Director]

My question is just when you look at the exceeding $1 billion of revenue guidance this year, which excludes the return of tourism. What is -- how should we think about sort of the assumption for U.S. and Canada versus international and China? And maybe, I'd be curious, how do you think about the 2-year growth rates for the U.S. and Canada for this year? So versus fiscal '20 or calendar 2019, how should we be thinking about that?

[Jonathan Sinclair, CFO & Executive VP]

Yes. I mean it's -- I think the first thing to think about when you're looking at that growth rate is -- the exceeding $1 billion. So when you're looking at that growth rate is that exceeding $1 billion is not coming off $903 million as an outturn because that's included PPE. And that's not something we see as a component going forward. So the first thing you have to do is to back that out. And then the second thing, I would say, is that we need to look at what's been happening in Q4 because, I think, that gives you an idea of the underlying brand strength and the direction of travel in the business. So we are optimistic for how we see all of our territories developing. Canada is somewhat more established. But to be honest, we see ample scope there. And for sure, in North America -- in the U.S., sorry, and Europe, you've seen we're way outperforming already, and we believe that, that's something that's got a huge amount of momentum. And that builds up to the crescendo that's Asia, where, at the end of last year, we still only had 8 or 9 stores in Mainland China, which, relative to both the potential and the sort of penetration you see in other brands, is very early in the journey. So we see a lot of scope for growth in all of our markets, probably led by Asia, but with real opportunity in Europe and continuing growth potential here in North America.

[Operator]

Your next question comes from the line of Adrienne Yih.

[Adrienne Eugenia Yih-Tennant]

Congratulations on the progress. My question is actually on the supply chain. There's not as much of a focus for you because you do so much of it domestically. So I guess, are you seeing any raw material input costs? And then, I guess, moving forward, others -- kind of for the fall/winter season, other competitors, they very likely need to be raising prices. So how do you think about the pricing environment as you go into fall/winter if others do take inflationary pricing up to pass it through? How do you philosophically think about where you should be in that type of a scenario?

[Dani Reiss, Chairman, President & CEO]

That's right. So I think that when you think about our balance in terms of margin, ultimately, we have to deal with input cost inflation and other headwinds. And the pricing power of the brand is such that we're able to move price up in mid-single digits year-in, year-out. And that creates a tailwind in gross margin. And as I've said many times, we always seek to keep those 2 in balance. We're not trying to advantage cost inflation over selling price inflation, quite the opposite. And where -- we've been able to do that over many years, and that's including the pandemic year, and that includes our prospects going forward. Now one of the other things that we do is we have a very strong sourcing team, and that enables us to manage our input cost inflation very effectively. And such that actually, although there are always cost pressures in it, we are able to accommodate those very effectively without unnecessary pressure on margin. So we're not looking at egregious move -- upward moves in selling prices, and we're not looking at margin pressure in channel because we're managing this as is very much in balance.

[Operator]

Your last question comes from the line of Mark Petrie with CIBC.

[Mark Robert Petrie]

I just wanted to come back to the topic of diversification in the assortment and the ramp-up. I guess, a couple of things. One, just a comment on Lightweight Down and the performance of that category in fiscal '21 maybe across geographies? And what that tells you about how the brand is evolving or being adopted in some other markets, I guess, specifically China? And then also, is footwear -- the right way to think about footwear sort of ramping more like spring, like rainwear and also knitwear? Or maybe more like Lightweight Down, which I think was a bit of a faster ramp than those other categories?

[Dani Reiss, Chairman, President & CEO]

Yes. Thanks for your question. Lightweight Down is doing extremely well for us across all geographies, and it's becoming extra pillar of our assortment. And the Crofton and Cypress collections this year have been true home runs in that regard. And on -- now your second part of your question? Sorry.

[Jonathan Sinclair, CFO & Executive VP]

Footwear relative to other categories in the ramp?

[Dani Reiss, Chairman, President & CEO]

Yes, sorry. So footwear, I mean, I think this year we'll been launching for footwear. We're going to launch it with the type of product you'd expect from us and as a fall/winter brand. And I think that we definitely have potential to expand that into a much broader footwear assortment and over time and have that be a very material piece of business as it relates to the overall business. But we do, and I'm very excited about that. I think it's a significant category. It's not just a couple of styles.

[Operator]

This concludes the Q&A portion of today's call. I will now turn it back to Dani Reiss, Chairman and CEO, for closing remarks.

[Dani Reiss, Chairman, President & CEO]

So thank you. Thank you, everyone, for joining us here today. Before we leave, I would like to also take a moment to touch upon our commitment to diversity and inclusion. In Canada Goose, we embrace diversity in all its forms and definitions, striving to remove barriers to create an inclusive culture and equitable workplace where everyone can live authentically. To further this, we have created an Inclusion Advisory Council, a unified body that acts as thought leaders and advisers on matters of inclusion within the internal community. We are currently in the process of hiring a leader of diversity and inclusion who will set the direction and drive our D&I strategy across the business. This position will partner with our leadership and teams to educate, guide and champion diversity and inclusion strategies and initiatives. Thanks again for joining us today. I really look forward to updating you on our next call.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.