(Reuters) - Luxury apparel maker Canada Goose Holdings (GOOS.TO) expects its fledgling direct-to-consumer business to contribute about half its profits in the long term, from about 14 percent in the three months through September, chief executive officer Dani Reiss said on Thursday.
The company, which reported a bigger-than-expected profit in the quarter ended Sept. 30, also said operating income from its direct-to-consumer business, comprising own-store and online sales, was 18 times higher than a year ago.
“We see, over time, direct-to-consumer and wholesale coming more into balance,” Reiss told Reuters, declining to specify a time frame. “We don’t have plans to open 100s of stores. We have plans to systematically and strategically open the right stores in the right places.”
Shares in Canada Goose jumped 9.6 percent to C$30.38 in Toronto, 79 percent above its March initial public offering price, in stark contrast to rival Roots Inc., which is 22 percent below last month’s IPO price.
Canada Goose has said it expects to open up to 20 physical stores around the world by 2020.
Canada Goose, which has historically sold its products through wholesalers, began opening its own stores last year, at a time when several rivals and department stores were reporting falling sales and shrinking margins, with its luxury pedigree helping cushion it from the retail industry’s struggles.
The maker of $900 parkas has opened stores in Toronto, New York, Chicago, Tokyo and London since 2016 and will open in Calgary and Boston before the end of 2017. It also operates 11 online stores across North America and Europe.
It will continue to maintain its relationships with its wholesale partners, Reiss said.
“It speaks to the strength and differentiation of the (Canada Goose) brand,” said Brian Madden, portfolio manager at Goodreid Investment Counsel in Toronto, who said he is waiting for the first holiday selling season since Canada Goose listed to decide whether to buy the stock.
New stores are “a risky gambit,” he said. But “putting up physical stores in upscale districts does showcase the brand and builds awareness, which they can’t do when they’re inside a department store.”
Operating profit from direct-to-consumer operations jumped to C$6.6 million from C$369,000 a year ago, Canada Goose said.
Operating profit from wholesale rose 30 percent to C$60 million.
The company raised its fiscal 2018 revenue growth forecast to 25 percent from mid-to-high teens estimated earlier.
($1 = 1.2724 Canadian dollars)
Reporting by Nichola Saminather in Toronto, Ahmed Farhatha in Bengaluru; Editing by Anil D'Silva and Sriraj Kalluvila