Good morning. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Canada Goose Q2 Fiscal 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. Allison Melton of ICR, you may begin your conference.
Thank you. Good morning and thank you for joining us today. With me today are Danny Reese, President and CEO and John Black, CFO. For today's call, Danny will begin with highlights of our Q2 performance and then update you on the progress against our key priorities. Following this, John will provide details on our financial results and outlook.
After our prepared remarks, we will take your questions. Before we begin, I would like to inform you that this call, including the Q and A portion of the call, includes forward looking statements, including plans for our business and our fiscal 2018 and long term outlook. Each forward looking statement made on this call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such 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 appears under the headings, cautionary note regarding forward looking statements and risk factors in our annual report on Form 20 F, which is filed with the Securities and Exchange Commission and the Canadian Securities Regulatory Authorities and available on our website at ww w.canadagoose.com under Risk Factors in our final perspective filed on June 28, 2017 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 this 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 non IFRS financial measures referenced on this call are reconciled to the most directly comparable IFRS financial measure in a table at the end of our earnings press release issued this morning and available in the Investor Relations section of our website at www dotcanadagoose.com. With that, I will turn the call over to Danny.
Thank you, Alison, and good morning, everyone. I am pleased to share that our 2nd quarter concluded a strong first half for Canada Goose. Last week, we held our annual global conference where we brought together employees from our offices around the world to celebrate our achievements and to get inspired about our plans for the year ahead. I am so proud of the team's passion, commitment and disciplined approach to executing our growth strategies. With strong results across channels, geographies and categories, we continue to drive awareness and market penetration, while also inspiring those who already know and love our brand.
Here are some highlights from the business. As a function for First Brand, it all starts with products. Across categories, demand remains strong and our 3 season relevance is resonating. With a clear connection to our heritage and an unwavering commitment to authenticity, we are giving our fans more ways than ever before to experience our brand across styles, uses and climates. Our award winning lightweight collection, which is renowned for its unique combination of comfort, movement and versatility continues to grow significantly.
In August, we launched our highly anticipated knitwear collection, our first non outerwear category. Feedback from consumers has been extremely positive and the collection is undeniably authentic Canada Goose in both aesthetic and performance. As a brand, we have always built demand ahead of supply and we are very pleased with the sell through of the initial knitwear assortment in both our wholesale and direct to consumer channels. Building on this momentum, we look forward to thoughtfully expanding our offering and our distribution for future seasons. Our direct to consumer channel enables us to give our fans around the world the ultimate Canada Goose experience, and it continues to surpass our expectations both online and in store.
In e commerce, which we view as our global flagship, we are now in 11 countries as we have opened all 7 of the new e commerce sites planned for this year, which as a reminder are Austria, Belgium, Germany, Ireland, Luxembourg, the Netherlands and Sweden. Performance in our Canadian and U. S. Sites continues to be strong and results from our more recently launched European sites are also very encouraging. Traffic growth is compelling in all of our major markets, and we are continuously improving our online experience to drive conversion and better position future site launches.
Moving on to our retail stores. We recently celebrated the 1st anniversary of our Toronto store in Yorkdale shopping mall, and we continue to be very pleased with the contributions of our Toronto and New York stores. We have great brand ambassadors who are consistently delivering an exceptional and immersive customer experience. With great teams in place, we are well on track with our new store openings. I was really excited to be with the team in Chicago last month for Opening Day.
We are very pleased with the store's performance to date and encouraged by the positive response from customers in the Windy City. Similarly, consumer demand for our brand continues to be high in Japan, and we have heard stories of a 100 or so person lineup, which started 5 a. M. On opening day of the new Tokyo store. In addition to that, we opened our London flagship store on Regent Street just today, this morning, and we're really excited about that.
We're excited to build on this momentum with our next 3 store next 2 store openings, Boston and Calgary, in the coming weeks and we remain highly disciplined in identifying and securing the best locations for future store rollouts. In our wholesale channel, we continue to be a bright spot for our retail partners. Across geographies, we are delivering high quality growth by driving traffic a full price sell through. This channel, which played a central role in brand awareness and reach, will always be an important part of our strategy. In the current retail landscape, we have a singular focus on going deeper and broader with the world's best retailers.
From recommended assortments and merchandising to in store events and digital marketing, I am really encouraged by how well our team is working with our partners to best position our brand and continue strengthening existing relationships for the long term. In operations, we continue to support our rapid trajectory and build capacity for future growth. I recently came back from visiting our 2 facilities in Winnipeg, and I'm impressed by how quickly we are expanding there as well as also in our factories in Ontario and Quebec. We are hiring and training a significant number of sewers each month, and we continue to innovate and implement process improvements to drive efficiencies at all 6 of our sites. And finally, I'd like to take a moment to thank our employees for delivering such a strong performance in the first half of the year across functions that are working together and delivering on our ambitious growth strategies on time and on budget.
We are building an enduring brand for the long term and none of this would be possible without their contributions. As John will discuss shortly, given our results in the first half of the year and our outlook for the remainder, we are pleased to update our guidance for fiscal 2018. With that, I'm now going to turn it over to John to review our financial results with you in more detail.
Thank you, Danny, and good morning, everyone. As Danny mentioned, we are very pleased with our performance in the first half of the year and our outlook for fiscal 2018. Before I go through the numbers in detail, I'd like to remind you that our results are stated in Canadian dollars. For the quarter, revenue increased by 34.7 percent to $172,300,000 up from prior year 0.5% on a constant currency basis. This was driven by growth across all channels, geographies and categories.
Direct to consumer or D2C revenue grew from $5,500,000 to $20,300,000 with strong performance in our North American e commerce business and incremental revenue from our retail stores and e commerce sites that were not opened in Q2 of last year. Wholesale revenue increased by $29,600,000 to $152,100,000 driven by growth across all regions. Approximately $13,000,000 of revenue from our order books, which was originally expected to take place in the Q3 of the year, was pulled forward. We accelerated shipment timing in response to requests from our retail partners to put them in a better position ahead of their peak selling season. Through the first half of fiscal twenty eighteen, pull forward revenue in the wholesale channel was approximately $18,000,000 Consolidated gross margin expanded approximately 410 basis points to 50.4% from 46.4%.
This was primarily driven by a higher proportion of D2C revenue. Within our D2C channel, gross margins expanded approximately 450 basis points from 69.2 percent to 73.7 percent, reflecting a significantly higher revenue base with our 2 retail stores and 11 e commerce sites in operation. Our wholesale channel gross margin expanded by approximately 200 points from 45.4 percent to 47.4 percent due to a shift in sales to higher margin geographies, a lower cost of purchases in U. S. Dollars and lower inventory reserves.
SG and A was 36 point $5,000,000 which represents an increase of $6,400,000 This was driven by operating costs from our stores in Toronto and New York City, which were not open in the Q2 of last year, as well as investments across the business to support continued growth. In total, SG and A rose at a slower rate than sales due primarily to the benefit of an unrealized foreign exchange gain of $5,800,000 on our term loan facility and the shift in timing of marketing expense to our peak selling season in the Q3. Combined, these activities led to an adjusted EBITDA of 46 point $4,000,000 compared to $33,800,000 which represents year over year growth of 37.3%. Before I get into net income, I'd like to discuss a couple of factors that impacted our effective tax rate, which was 16.8% compared to 20.7% in the Q2 of last year. This was primarily driven by the timing of taxable income in jurisdictions with different throughout the throughout the first half of the year and we expect it to reverse over the remainder of the year.
For fiscal 2018 as a whole, we expect effective income tax rate to be approximately in line with our statutory rate of 25%. On an IFRS basis, we reported net income for the quarter of $37,100,000 or $0.33 per diluted share based on 111,500,000 weighted average diluted shares compared to last year's reported net income of $20,000,000 or $0.20 per share on 101,700,000 weighted average diluted shares. On an adjusted basis, we reported net income per diluted share of $0.29 for the quarter compared to $0.23 per share in the same quarter of fiscal 2017. Capital expenditures were $9,200,000 compared to $11,000,000 in the Q2 of fiscal 2017. Spend was primarily driven by the expansion of our corporate head office, investments in manufacturing and preparations for new store openings.
The year over year decrease in capital expenditures is related to the timing of payments for work completed on new stores and planned capital spend in our shop in shop initiatives through the remainder of the year. Now turning to the balance sheet. Working capital was $212,600,000 up 113.6 $1,000,000 from fiscal year end, reflecting the seasonal build of accounts receivable and inventory. The growth of our direct to consumer channel as well as the pull forward of wholesale revenue shortened our cash conversion cycle and enabled us to pay down our revolving credit facility. Total debt, net of cash, was $247,400,000 compared to $150,600,000 at fiscal year end.
We ended the quarter with $118,700,000 outstanding on our revolving credit facility, and we remain quite comfortable with the flexibility just with its flexibility to support our operational needs. Now turning to our guidance for fiscal 2018. Based on our stronger than expected performance in the first half of the year, we have increased our guidance. For fiscal 2018, our current expectations are as follows: revenue annual growth rate on a percentage basis of at least 25% adjusted EBITDA margin expansion of at least 50 basis points annual growth in adjusted net income per diluted share on a percentage basis of at least 35%. This growth rate assumes a year over year comparison to adjusted net income for pro form a diluted share of $0.41 in fiscal 2017 and a diluted share count of $110,900,000 in fiscal 2018.
Now I would like to turn it back to Danny for some closing remarks.
Thanks, John. In summary, we are all very pleased with our financial results for the first half of the year, which reflect the strength of our brand. Across our business, we're executing well and I've never been more excited about the opportunities that lie ahead for Canada Goose. Goose. We're looking forward to updating you on our progress on our next earnings call.
And with that, I'd like to turn it over to the operator to begin our Q and
session. Your first question comes from Ike Boruchow. Please state your company name. Your line is open.
Hey, everyone. Congrats on the great quarter. Just a quick one on the wholesale shift. So I think you guys had a $5,000,000 wholesale shift that helped Q1 and now $13,000,000 for Q2. Should we expect that the $18,000,000 all comes out of the Q3 quarter?
And then just to make sure, the $5,000,000 that came that helped Q1, did you not recapture any of that in Q2? Just kind of make sure what's going on with the timing shows.
Yes. So Ike, good morning. I think your position on the $18,000,000 is reasonable, that the $18,000,000 will was an advanced shipment that was planned to take place in Q3. It took place earlier in the year. So that should shift into Q3.
Got it. And then just to stay with wholesale, just a follow-up. So organically speaking, is there anything different in the back half versus the first half in terms of your order book or anything there just from an organic perspective on the top line?
No, nothing different. Really, the ship was orders that were it was part of our existing order book that was originally planned to be shipped a bit later and was pulled forward. And so there's no change to that order book.
Got it. Congrats again.
Thanks.
Your next question comes from Camilo Lyon. Please state your company name.
Thanks. Good morning. Canaccord Genuity. So staying on the topic of that pull forward of demand to the shipments, given the strength of that demand, how do you think about managing your supply chain? Are flexing your manufacturing capacity to make more inventory?
Or do you prefer to be sold out or keep that brand heat high? How do you effectively, how do you manage that delicate balance? And how do you view managing the wholesale inventory piece versus your own retail stores inventory?
We're fortunate that because of our Canadian based supply chain, we have the ability to be flexible. And these days, we have more inventory because we have more stores. We have to support them with more inventory, and we have the ability to be flexible. So what the most important thing is all the inventory that we produce is good inventory. That's good for this year.
It's good for next year as well. And so we can allocate that as needed to wholesale or retail.
Can you just remind us, Danny, what parts of the assortment you can be more flexible on? And how quickly can you get back in stock on some of these key items? Because you're out of stock and you were out of stock in some key items in September. So it'd be great to know your pace of your ability to get back in stock and on what specific SKUs if there is a limitation on those SKUs.
For sure. Yes. Well, we're always happy when things get sold out. We're never afraid to be sold out. And that's always a good indicator.
We are all of our Canadian factories are able to manufacture pretty much all of our products. So we're able to be flexible on all of them, except with the exception of knitwear, of course, which we source in the best place to make it, which is in Italy and Romania.
And your ability to get in stock, what's the timing on that? Is it what's the lead time on that?
We have a strong logistics supply chain, and we're able to we need to balance between satisfying different like our different channels, be it wholesale or direct to consumer stores, e commerce. So we move pretty quickly. Unfortunately, our sales have been strong as well.
Sounds good. Good luck in the holiday season, guys.
Thank you.
Your next question comes from Lindsey Trunkerman. Please state your company name. Your line is open.
Hi, thanks. Good morning. Goldman Sachs. I had a couple of questions. Now that you have a full sort of fall season, another full fall season under your belt in your stores, I was curious, Danny, if the products that are selling well in your stores mirror the products that are selling well in wholesale?
And if there's anything that you are able to glean from the more complete assortment you can showcase the consumer in your retail channels and also online about where the opportunities are to fill out the assortment in wholesale?
It's always interesting when we have our wholesale our retail stores and we have where we have the broadest assortments, we certainly learn things from that. All the things we're learning are great and positive and added to our business, and we're able to help inform future seasons and wholesale recommended assortments based on perhaps sometimes you see a product that sells better than we expected, and we could certainly learn things like that from our performance in our own channels. So having our own channels is great for that reason, and it helps support our business across all of our channels.
So is it possible to give us a little detail on what products are selling especially well in stores that might suggest opportunities for wholesale?
Yes. We're really we're lightweight down as a category that is one that we've been producing what we believe is best in class for product for a long time. It's been growing well for some time. And that's a category that's growing really quickly. And so
there's a good example of something
where we're ramping up quickly based on retail sales.
Okay, great. I just wanted to clarify on the wholesale timing shift. Do you guys consider that in its purest form truly just a shift in timing of orders or is it a function of sell through for retailers is stronger on the floor and so they're ordering for you because they don't want to be out of stock and they're they'll potentially look to case in the December quarter. In other words, we shouldn't view this as just a pure kind of shifting of timing of sales, but more a reflection of very strong sell through?
We're very happy with our sell through numbers. I would view it as a shift. I mean, it is the existing order book is still the existing order book and has shifted to the left. And so I would view it that way. But we're very happy with her to sell through numbers,
and I think that's the best way to look at it.
Okay. Just one last one. On your wholesale gross margin improvement, I don't know if there's a way to quantify the specific impact from currency, which you called out. And also just so how much was that of the benefit? And then also when you talk about the favorable regional shift, what specifically was that?
Lindsay, we don't actually get into geographic commentary shifting on these calls. The with respect to the foreign currency, there were some movements in the currency and in a number of currencies, but the key point there is that we're hedged. So you do see volatility in the top line revenue number, but it's captured in the SG and A line where we have a mark to market gain on the hedges.
Okay. Thanks a lot guys. Your next question comes from Mark Petrie. Please state your company name. Your line is open.
Hey, good morning. CIBC. Danny, I wonder if you could just give us an update on where you're at in terms of the strategy for China. Maybe just outline your considerations as you think about partner wholesale partner relationships versus stores versus an e commerce led strategy? And when could we expect a formal announcement?
Well, we're certainly making good progress on it. It's something that we spend a lot of time here talking about and trying to get absolutely perfect. We have nothing to announce right now. But I think that there are opportunities, both direct to consumer and wholesale in that marketplace. And I think that we're making sure that when we finalize our plans that we have taken in the proper end state that we want and we'll start the way we're planning to finish.
Okay. And then I wanted to ask also about the performance in knitwear. Could you just give a bit more color in terms of the adoption of that in the wholesale channel adoption and sell through of that in the wholesale channel versus direct to consumer and sort of what the takeaways are from that and what the kind of learnings are in terms of your brand as you continue to push into more product?
For sure. So we primarily sold knitwear through our direct to consumer channels. There are a few partners that at a wholesale level we partner with and we experienced very strong adoption, but and our products resonated really well with our consumers in all of those channels. And I'd say that I couldn't be happier with that result. And it certainly leads me to believe and it's very encouraging that knitwear is something that is the right place for us to be, and our fans and consumers believe that.
And so it's going to we're going to continue to build those collections and do it in a responsible way. And it's always great when a new product launch goes as well as this one did. Okay.
Thanks a lot.
Your next question comes from Simon Siegel. Please state your company name. Your line is open.
Thanks, Nomura Instinet. Good morning, guys, and congrats on a really great quarter. Just a quick one on the pull forward again. Are you seeing that pull forward volume in specific regions or retailers or is it broad based and maybe any learnings there as the brand awareness just continues to grow? Do you think that pull forward might become more normalized seasonality?
And then just to clarify, with the FY 2018 increase, is there any change to your 3 year average targets? Thanks.
So regarding the pull forward, it's fairly broad based. It's across all categories, and we don't really see that change. It's just going to be higher in the quarters that you were reporting on and lower probably in the Q3. So the order book remains unchanged. I'm sorry, what was the second question?
Yes. Also just with the Go ahead, Zimmerman. Yes.
Sorry, Danny.
No, no,
I was just going
to repeat the question. I think you're about to answer. Just thinking about the 2018 increase, a new change to the 3 year targets?
Yes. So thanks for the question. Obviously, totally understand why you're asking it. And I'm certainly really happy with our performance in the first half of the year. We review our long term strategic plan after the conclusion of each year.
And if there's a need for it, we'll provide updates at that point in time. So to be clear, we don't comment on it or revise it in the interim. We think it's important and responsible to communicate with our shareholders in a way which is aligned with how we do the strategic plan that we do for this business.
Got it. Makes sense. And then sorry if I missed it, obviously really nice sales growth. Did you guys comment on units versus price at all or would you?
We haven't broken those. No, we haven't broken that out.
Okay, great.
All right. Thanks a lot. Best of luck for the holiday season.
Thank you. Thank you, Yujim.
Your next question comes from Brian Tunick. Please state your company name. Your line is open.
Thanks. RBC, good morning guys. Good morning. I guess two questions. 1, on the store openings, can you maybe give us for a modeling perspective, if we think about London and Chicago and Boston and Calgary, maybe can you give us the average size of the store?
We're assuming or you're not assuming probably the same productivity as Toronto or SoHo, but just curious about what size of the stores you're opening there and any learnings that you've implied to those new stores? And second question, I guess, Danny, from a newness perspective, if we think about holiday this year versus holiday last year, where do you think the most newness comes from on the outerwear side? Is it style count or color or weighting? Just give us some idea of where you think the newness is. Thanks very much.
Hi, Brian. I'll comment on the store dynamics and then Danny can answer some of the other questions. So we do have a few learnings, of course, from the new stores. And there are some minor changes in the economics of the stores, the new ones versus the old ones, but they're not material. So just as a reminder, a few things to consider when you're looking at the stores.
They're generally between 3,000 5000 Square Feet. Our cost to enter into them from a CapEx perspective is between $3,000,000 $5,000,000 and they're profitable in the 1st year and payback within 2 years. So those are the hurdle rates we put in place, and all the new stores should achieve those we're thinking. Danny, were you going to follow on the second?
Yes. I mean, we our collections are always evolving. We always are diversifying our core. We have a strong group of core classics in our collection, which continue to perform strongly for us across geographies and across channels. But specifically to our stores, they're performing very well in our stores.
We're always adding new colorways to there. We're noticing people are resonating. I mean, I hear about the brush camo style that we have color that we have doing really well. People really responding well to that. Our light as I mentioned earlier, lightweight is something which is becoming is perceived today as part of the core even.
It's growing nicely and often people will buy multiple styles. They'll come in and they'll buy lightweight and they'll also buy a warmer jacket. And then of course, knitwear is the big new thing for us. It was a controlled launch and what we're seeing it go very well as I mentioned. So that's some color on the diversity of product offerings.
All right. And just my final question on inventory. I think it's up 8% at the end of the quarter. How do you feel about that velocity or turn heading into your guidance for the back half of the year?
Brian, we feel good about inventory. Our working capital is in a good position. Our production processes have been going well up through the Q2. So we're in a good position to supply our customers and our direct to consumer channel with products. So we feel good about exactly where inventory is sitting.
Your next question comes from the line of Jay Sole. Please state your company name. Your line is open.
Hi, thank you. Morgan Stanley. Danny, I'm really excited about the knitwear launch. Does it change your thinking at all about entering into new categories? Or do you feel like you want to spend a lot of time on knitwear before thinking about the next thing?
Yes. I'm really excited about it. It's always great when a new product is as successful as it has been for us. And it doesn't change our perspective on new categories at all. We're always thinking about them.
I think that there are certainly opportunities for us in multiple other categories, and we're going to enter those categories at the right time and with the right product. That's the most important thing. And whatever amount of time it takes us to develop those plans and to create the perfect expression of that product for our brand and for our consumers is the amount of time it will take. So no plans to accelerate based on knitwear, but lots of runway, and we're really excited about that.
Okay, great. And then maybe, John, if I can ask a question on the gross margin in the DTC channel. It was up to 73.7% in the quarter from 69.2% last year.
Can you just talk about what
the drivers were of that change?
Yes. A lot of it's just volume. We've got more infrastructure and growth through the channel. So it's primarily just volume and growth.
Okay. And then maybe on the last one, just if you could put a finer point on the full year sales guidance, talking about at least 25% now, have you given a breakdown or could you give a breakdown between how you see the wholesale sales for the year trending versus DTC sales?
No, we're not going to provide that type of a breakdown on a forward looking basis. It's just we're just going to leave it at the level we have it.
Okay. Thank you.
Thanks.
Your next question comes from the line of John Morris. Please state your company name. Your line is open.
BMO Capital Markets. Nice job on the quarter guys. Danny,
you guys
are doing so well in knitwear, but also the lightweight collection. And I'm thinking about how you're developing the 3 season capability here. In terms of SKU count for those categories or classifications, are you continuing to plan to increase those or sort of stay with what you have currently? But also thinking about how you're staffing merchant and design for those areas, in particular, are you expanding the team, the design team, or have the need to do that? So just kind of want to get a feel for how that's all
directionally? We have a really strong design and merchandising team. I'm really, really happy with their performance and with the way that they're staffed. And as this company grows, I'm sure that we'll continue to build our capabilities there accordingly. But I believe we have a world class D and M team, and I think that, that contributes and absolutely is what's been contributing to the success of new category launches.
Sorry, remind me the second part of that question?
Well, it was really kind of directionally, I'm wondering how much breadth and depth directionally you're thinking about expanding, particularly within knitwear and lightweight, the lightweight collection SKU count on as you think ahead and plan a year out for next year, continue broadening out and to what degree?
For sure. So yes, we're going to address each category individually and appropriately. I mean, you probably expect knitwear because it was such a smaller launch to have a greater SKU count. And we have we have 3 categories, our outerwear, our knitwear and our accessories. And within those categories, our collections of our Arctic program, our Hybridge, our Altitude and
our Latitude collections, our
outerwear collections. And we're collections, our outerwear collections. And we are looking to, not necessarily in those categories where we're more developed, not necessarily to
expansion.
And then finally, on price points for winter product on outerwear compared to last year, Is your are your initials or your average price points about the same? Are they up a little bit? Where do you fall out on an average basis year over year?
Price points were up marginally this year.
Okay. On outerwear in particular, sort of really kind
of was asking, but up slightly
On outerwear for next season? Is that what you're talking about?
No. I'm really thinking about this the season we're in just for planning purposes, yes.
We did increase our prices this year from last year, a modest amount, not dramatically.
Your next question comes from the line of Jonathan Kompf.
Baird. Just wanted to follow-up on the 2018 guidance. John, I was just curious if you could clarify the increase to the full year growth rate to 25% or at least 25%, is that based solely on what you saw in the first half? Or did you also kind of change the expectations for the second half?
That's on the full year.
So it's on the
full year. So it takes into account. And again, there were a few factors in the first half. We had some pull forward in revenue. So that will result in that the revenue that was pull forward not occurring in the Q3.
So it's a full year item.
Okay. And I'm just wondering, so if I adjust the first half growth rate for that pull forward, looks like total revenue was up maybe 27% or so. So the second half is kind of implied kind of mid-twenty percent growth. Is that the right way to think about it on an underlying basis?
That's the
notwithstanding the math, that's the right way to think about it. But remember, whether it's $18,000,000 that was pulled forward from the Q3 into the 2nd Q1, so that will come out. So that's the right way to look at it, I think.
And then just my other question. You talked a little bit about the learnings from the DTC stores you've opened. I know it's only been a few weeks now, but I'm just curious when you look at the Yorkdale store, if you have any learnings at all about whether or not the initial volumes you saw really were more of a honeymoon impact to last year that you'd come down from this year or if you think the sales are kind of stabilizing and even growing on the initial performance from last year?
We're really happy with how Yorkdale is performing. It is the only store that's been open for a full year now. I mean, it's a we're talking about Q3 numbers and results. So we'll comment more on that in Q3, but happy to share with you that
we're very happy with how we're doing.
Okay. Makes sense. Thank you.
Your next question comes from the line of Jim Durran. Please state your company name. Your line is open.
From Barclays. Just want to focus on replenishment and in house production.
So on the replenishment
side, if I'm a major customer of replenishment on a, say, a parka, which is where a lot of your tonnage is?
I think that honestly, that depends on the style that you're looking for and what warehouse it's in and how quickly we can give it to you. We're not chasing sales, but there's always opportunities for reorders too.
And with the hiring you've been doing plus the purchase of one of your 3rd party suppliers, like is in house production gaining in terms of penetration now? Like you're sort of in the 30 percent range, I think, when you first came public. Can you give us an update on where you'd be now on a run rate basis?
Anecdotally, for sure, from a numbers perspective, we'll update those at the appropriate time when we do our internal calculations probably at year end. But certainly, I would say that we are making some great progress towards our goal of increasing in house capacity. And I'm really proud of the way we've been able to build in house training schools and a strong funnel of really highly skilled sewers and craftsmen who can produce our products. And I believe that our strategy is working, and I look forward to giving you numbers when we have them.
And do you have a sense of so far what impact in house production gains might have impacted your margins?
Don't have any numbers to provide you on that right now, but I feel good about the whole thing.
There are a number of factors to consider in something like that. For example, how much we end up paying to acquire the manufacturer and those types of things. So there's a number of factors. It hasn't been significant.
Your next question comes from the line of Omar Saad.
Can you talk a little bit about weather? I know it's still really early in the season. You guys obviously are seasonal seasonally driven brand to some extent. The fall started a little bit cooler, then it warmed up, and now we're getting cold again. Are you guys seeing those trends in your business that weather is having an impact in sell through through your DTC channels?
Or you're still so young enough where you kind of just kind of plow through that and the weather changes and drops aren't really what moves the needle?
Over the years, regardless of what the weather has been, cold in one part of the world, warm in another part of the world, perceived cold winter or warm winter, never prevented us from hitting our targets or or from our business continuing to perform well. And so I think the same will through this year. And the climate around the world is more varied these days than it's ever been. And we're not we don't see that as a major factor to impact that will impact our ability to achieve our goals.
Got it. Thank you. Best of luck.
Thanks. Thank you.
Your final question comes from the line of Oliver Chen. Please state your company name. Your line is open.
Sure. Hi. It's Oliver Chen from Cowen and Company. I was curious about your longer term views for segmentation across your wholesale partners and your direct to consumer as you're thinking about how to drive specialness for each and whether it makes sense for the future of the brand and tiers or breadth diversification? And the second question we had is just as you're thinking about net promoter scores and awareness builds and customer satisfaction, what are some key attributes you're monitoring along those axes just to embrace authenticity as well as think about a combination of growing new customers versus being keeping your existing customers very impressed and surprised and delighted?
Thank you.
Yes. Thanks for the question. I mean from a product segmentation point of view, all of our as I mentioned before, I mean all of our wholesale partners are very important to us, and we work with each of them to create the right Canada Goose environment in their stores that will be the appropriate environment for Canada Goose and will also becomes a destination. And as part of that, we work with each of them on special products from time to time that we're able to create, so that every retailer can have their own distinct point of view. And from an NPS point of view, we're really happy to happy to say the NPS scores that I've that we have seen have been really high.
And they continue to be really strong. And that's super exciting for me.
And it really seems like you're hitting on all cylinders. Did you have any thoughts about what concerns you most or where are you spending most of your time in terms of prioritizing the biggest opportunities because there's a lot of different opportunities happening?
Yes, there really are. I mean, we have a really strong strategic plan process, which I think keeps us allows us to it works really well for us in terms of how we prioritize our business. And we're really I mean, growing fast is a lot of fun, and it's also a challenging thing. So we're focused on keeping our eye on the ball and making sure that we deliver our plans on time and on budget. And so far so good.
Thank you very much. Best regards for holidays.
Thanks. Thank you, too.
There are no further questions queued up at this time. I'll turn the call back over to Danny Reese.
Thank you. Yes. So everybody, again, thank you so much again for joining us. We really, really appreciate your interest in our business and following us. I feel like it's too early to wish you all a safe and happy prosperous holiday season.
But since I'm not going to speak to you formally, again, until after the holiday season, I do wish you a safe and happy and prosperous holiday season. So thanks for joining us today, and look forward to staying in touch.
This concludes today's conference call. You may now disconnect.