Making Canada Goose the Outerwear Apple

Canada Goose could 10x their biz using a few creative strategies + tripling down on area of excellences. Plus I’ve gone deep down the yield optimizing path.

TL;DR

- Making your money work for you

- Turning Canada Goose into the Apple of Outerwear

?? The Takeaways

We’re buying Canada Goose to flip this 65 year old Canadian jacket biz into the Apple of Outwear.

1. Create Collections for every segment of customer.
2. Create Luxury versions of Fast fashion trends. Faster.
3. Go all in on Drops + Reselling.

+ How I make 5% on ALL my parked money.

LBAB Community - ?Why I’m obsessed with Checking accounts with Yield.

Recently, I’ve become obsessed with overhauling my personal and biz banking to be all about the yield.

One of the greatest grifts that grinds my gears is how banks charge you fees to “store” your money then make more money lending it out to other people. But there’s never a meaningful return to me, the depositor.

I’ve been a BOA and Chase customer for a long time, and candidly, both suck.?

2 years ago, I moved my business banking from Chase to Mercury because Chase charged me to send wires. Completely messed up sending 2 big wires, then had the audacity to charge me overdraft fees + additional wire fees to correct it.

I moved all my biz banking to Mercury, and haven’t looked back since.

But as interest rates skyrocketed over the last 2 years, the delta between my nothing % interest at Mercury (same at Chase) hurt more and more. The working capital in my biz is actually costing me money.

Same with my personal capital that my family uses for personal runway (3-6 months of expenses). So, I set off to find a better solution.?

What’s the max amount I could be paid for my liquid cash? I’ve accepted that banks will turn my cash over many times to make their bag, but just like anywhere else I park my money, I expect a return.

So I moved virtually all my money:

1. My Biz banking to (5% APY on checking w/ min deposits of $100k)?
2. As much personal cash as possible to M1 (5% APY on an earning account w/ min deposits of $1k)*.

*I am compensated through these links. This is not financial, legal, or tax advice. Always do your own research before making financial decisions.

Keep in mind: M1 is not FDIC insured. All the new Neo Biz banks are FDIC insured into the millions because they’re sweeping you’re money across accounts and banks that they partner with.

On the Biz side, I still have my Mercury accounts but am actively phasing them out, as I can run all invoices and bill pay. (Another 3% in saved fees on all money in and out.) On $100k in Rev, that’s $3k more to my bottom line.?

On the Personal side, we keep 3-6 mos of runway in the bank at any given time. Now, I’m keeping 1.5 mos runway in Chase and everything else in M1.

Now why is all of this work worth it??

I’d argue it saves me a lot of time because now I can build If/Then rules to manage my flows of money, and once it is set up, it will run on its own.

But more importantly, as I build more wealth and have larger piles of money, these numbers add up. 5% of:

• $10k is $500/yr (That’s a very fancy dinner out.)
• $100k is $5k/yr (That’s my “Household” budget for the year.)
• $1m is $50k/yr (That’s a car.)
• $5m is $250k/yr (That’s a down payment for a house.

All for parking my money. This is before we move it into investments and assets.

Some will say the Yield is just an intro offer and interest rates will decrease.? I agree. And maybe there will be a point where this isn’t worth it.?

But when you can make 5% on your money, and it’s 100% liquid, I think it’s a mistake not to take advantage of it. Especially when so many of these new financial players are essentially just UI skins on traditional banks, moving money has never been easier.

As I plan on making more money over the next decade, having my money work as hard as I do will be the difference between hitting financial freedom in the next 1-2 decades vs. the next 3-4.

Let’s Examine This Biz

Canada Goose is fighting a two-front image war: trying to be the Heritage Luxury Outerwear brand while trying to appear sustainable.

Trading at $11.67/share with a $1.52B (CAD) market cap, it’s -68% L5. This biz is deeply underperforming for a luxury brand, and we’re going to fix it.

Today we’re going to buy Canada Goose for $1.97B CAD and flip it into the must-have luxury Outerwear brand it should be.

Financial Summary

2023 Financial Statements (YoY Comparison)

Sales: $1.3B (+10%) ??

COGS: $416m (+4%) ??

Gross Margins: 69% (+3%) ?? Gross Profits: $917m (+13%) ?? SG&A: $792m (+19%) ?? OPEX: $792m (+19%) ??

Net Income: $58m (-16%) ??

EPS: -$0.58 (-16%) ??

Link to Canada Goose’s earnings

TLDR Analysis: Good Growth but coming at a cost

• Gross Margins are growing faster than Rev. ??
• SG&A is growing faster than Rev. ??
• Net Income is shrinking YoY (both total $$ & %) ??

This biz has the exact match I love to see. Good above-the-line metrics (Growing Rev + even-faster-growing Gross Margins) but bad below-the-line metrics (SG&A is outpacing Rev).

The problem is SG&A is growing so quickly that despite the fact that Canada Goose’s Revenue is $235m higher than it was in 2021 its profits are $36.5m lower.?

Let’s Scale This Biz!

Here are the 3 ways I’d flip this biz to leverage its strong Gross Margins and reduce its cost to sell more jackets.

1) Build Collections for every life stage.

Canada Goose is an interesting mix of a heritage brand (around since 1954) and the Gen-Z-cool-kids Luxury brand.

The Campus Lifestyle collection is a brilliant idea. Take a key customer life moment, position your products as the perfect solution for it. Plus, for that age group specifically there’s definitely a “cool kids” factor Canada Goose is playing into.

But let’s be honest, college kids isn’t where the money is. This is a great playbook they should expand into other categories.

To me, the easy extensions are:

• Whatever the “cool kids with money version” of “Young Working professionals with too much money” (e.g., 1st job Wall Street, Lawyers, etc) is.
• Bougie Outdoor Family. The real moneymaker: Parents + Kids outfit coordination for Skiing, Vacations in the mountains, etc.
• “Take Your Kids to Campus” collection, so the Parents can look cool dropping their kids off at college.

Each segment needs different messaging/reasons to buy, but pre-packaging the same products to customers to meet them at “why they buy your products” is the key.

Canada Goose’s site is not heavily merchandised or covered with collections. Which is a good thing. Too many, and you’ll confuse customers. Strategically picking 1 collection per main audience segment will be a strong extension of what they’re already doing.

If they really nail each segment, they’ll have an interesting crossover effect where customers within a given segment will look at the other segments to see what’s aspirational / what will be good gifts:

• Parents will look at the college campus style to see what their High School/college kids want as gifts. Or to learn what the hip style is these days.
• Cool college kids will look to Young Professionals or their parents’ collections to see what style looks like for “Grown Ups”
• Grandparents will look at the family collection to see what holiday gifts they should get for their kids/grandkids.

Do all of the work for customers to make a purchase. If the shopping experience is truly well done, they’ll enter because they have the desire to buy from the brand and leave after a pleasant whirlwind and a full cart.

The less work their brain has to do in the shopping process, the more work their wallet will do at checkout.

Takeaway: Remove all the thought process for your customers.

2)?Create the Luxury version of fast fashion trends

Take the best selling up and coming Fast fashion trend. Add it as Luxury extensions onto their core bestselling products.?

Canada Goose will always be known for their Parkas, but if Vests, slippers, or a new type of Sweater becomes popular, Canada Goose needs the luxury version of it.

The strategy is simple. Act like the Apple of Outwear:?

Wait for an outerwear trend to become popular in fast fashion / social. Once it hits a certain critical mass, create the $500-2k+ version of the same product.

Trendier cooler products mixed with the Canada Goose logo will keep the brand fresh, relevant, and give customers regular reasons to return, but it also introduces lower price point items for the customers that can’t afford a $1,200 parka, or $450 pants but want to represent the brand.

Fashion has always been a function of arbitraging trends. Social + more data has increased the speed at which those arbitrages happen.

They don’t need to create every single trend/fashionable product, but if they take 5-10 new products and roll them out in limited quantities.?

It’ll be a good shot in the arm to sell more to their best customers and provide options for the fence sitters who haven’t pulled the trigger on the bigger ticket items.

Takeaway: Trend data is sitting there. It just needs to be analyzed.

3) Go All in on the Drop + Resale Model.

Canada Goose needs to invest more heavily in limited-edition products. Base their entire biz model around new hot collection drops and own their own reseller market.

Now that Supreme will die under the Luxottica brand (again, why is an eyewear monopoly buying a cool kids streetwear brand?)

Trendier cooler products mixed with the Canada Goose logo will keep the brand fresh, relevant, and give customers regular reasons to return, but it also introduces lower price point items for the customers that can’t afford a $1,200 parka, or $450 pants but want to represent the brand.

Fashion has always been a function of arbitraging trends. Social + more data has increased the speed at which those arbitrages happen.

They don’t need to create every single trend/fashionable product, but if they take 5-10 new products and roll them out in limited quantities.?

It’ll be a good shot in the arm to sell more to their best customers and provide options for the fence sitters who haven’t pulled the trigger on the bigger ticket items.

Takeaway: Trend data is sitting there. It just needs to be analyzed.

3) Go All in on the Drop + Resale Model.

Canada Goose needs to invest more heavily in limited-edition products. Base their entire biz model around new hot collection drops and own their own reseller market.

Now that Supreme will die under the Luxottica brand (again, why is an eyewear monopoly buying a cool kids streetwear brand?)

Canada Goose can fill that space.

Canada Goose is a Luxury brand with increasing SG&A costs. Essentially, it’s getting more expensive for them to sell their clothes. They need to find a way to strike a cultural moment around their new product releases.?

Their seasonal drops need to become must-attend events where if you aren’t at the drop, you aren’t getting the new “It” item.

Pushing more heavily into this strategy will solve 3 problems:

1. It will increase their Gross Margins by selling more items at Full price.
2. They’ll get more Earned Media from Influencers/Press covering how they sell out so quickly.
3. It’ll make them cooler. Scarce items are always perceived to be more valuable.

2 & 3 are crucial to reduce SG&A. As they get more impressions for free and build a better brand they’ll be able to move $$$ from their SG&A into their Gross margins.

And the real winner: it shortens their cash conversion cycle . Allowing them to reinvest in the next line more profitably. If they can effectively execute this strategy, they will grow faster, more profitably, and be perceived as a cooler luxury brand.

Trendier cooler products mixed with the Canada Goose logo will keep the brand fresh, relevant, and give customers regular reasons to return, but it also introduces lower price point items for the customers that can’t afford a $1,200 parka, or $450 pants but want to represent the brand.

Fashion has always been a function of arbitraging trends. Social + more data has increased the speed at which those arbitrages happen.

They don’t need to create every single trend/fashionable product, but if they take 5-10 new products and roll them out in limited quantities.?

It’ll be a good shot in the arm to sell more to their best customers and provide options for the fence sitters who haven’t pulled the trigger on the bigger ticket items.

Takeaway: Trend data is sitting there. It just needs to be analyzed.

3) Go All in on the Drop + Resale Model.

Canada Goose needs to invest more heavily in limited-edition products. Base their entire biz model around new hot collection drops and own their own reseller market.

Now that Supreme will die under the Luxottica brand (again, why is an eyewear monopoly buying a cool kids streetwear brand?)

Canada Goose can fill that space.

Canada Goose is a Luxury brand with increasing SG&A costs. Essentially, it’s getting more expensive for them to sell their clothes. They need to find a way to strike a cultural moment around their new product releases.?

Their seasonal drops need to become must-attend events where if you aren’t at the drop, you aren’t getting the new “It” item.

Pushing more heavily into this strategy will solve 3 problems:

1. It will increase their Gross Margins by selling more items at Full price.
2. They’ll get more Earned Media from Influencers/Press covering how they sell out so quickly.
3. It’ll make them cooler. Scarce items are always perceived to be more valuable.

2 & 3 are crucial to reduce SG&A. As they get more impressions for free and build a better brand they’ll be able to move $$$ from their SG&A into their Gross margins.

And the real winner: it shortens their cash conversion cycle . Allowing them to reinvest in the next line more profitably. If they can effectively execute this strategy, they will grow faster, more profitably, and be perceived as a cooler luxury brand.

On the back of a more frequent drop model they should also push their Generations (Second hand marketplace) so customers can free up their closet and replenish their wallet before buying more of the new must haves.

For the customers who always want the latest & greatest, but don’t have the closet space or budget, push more incentive for them to resell their items on Generations so they can afford to buy the new drops.

For the customers who want to buy Canada Goose but can’t afford it, resale prices provide a more accessible entry price point into the brand that isn’t from discounting.?

Moving the promotional incentive from discount downing new products -> “increasing the amount we’ll give you for your used product” protects the brand, and more importantly, the price point of new products—while giving customers the same financial value they need to keep buying.

There’s a reason IKEA, BMW and Levi’s are all launching these programs.

Pushing more resale also keeps the dollars flowing through Canada Goose’s system. Customers are more likely to buy a Used car from the Pre-owned BMW dealership than the Used Car Salesman down the block.?

Instead of Farfetch or The RealReal collecting the resale $$$, Canada Goose should be collecting those dollars.?

The other reason to heavily invest here is Canada Goose can break out capsules to re-release hits from their 65+ years of operations. They can buy back the old original inventory + create new iterations of the classics.

More importantly than making money on the resale, they’ll be able to maintain control of the supply and demand of their products.

If too many products are in the resale market, they know not to make a high volume of new ones. If there's crazy demand in the resale market for certain items, it’s a good indication to produce more to keep prices from getting into the gouging territory.

Takeaway: ?Owning Drops + Resales turns a brand into an Auction house.

Final Thought

The 1 strategy I see brands consistently underutilize is bringing hit products/collections back out of capsules, the vault, or whatever you wanna call it.

Essentially, it’s selling new products, taking it off the market to introduce other new products, and then bringing the super popular old versions back that customers can’t get anymore.

You can play into nostalgia and double dip as once-cool things always come back in style.

This can apply to beauty, home and garden, food and bev, and—if you're creative—other verticals. A favorite flavor, design, style, size.

It's a classic Disney play: make things available, throw them in the “vault” for a specific amount of time, take them back out of the vault, and charge an incredibly high price for a limited time. Same idea with the McRib.

The brands repeating that cycle over and over again while introducing new products will master their biz over time. They're naturally controlling their own supply & demand.

That's how they can maintain their price points.

If you've ever run anything for a limited edition, or if you ever have anything that's super popular that you have new versions of, take that old thing off the market, store them in a “vault” somewhere, sell through the available stock and bring them back.

The best part is you don’t need to create net new demand, but it's keeping yourself fresh and, ultimately, giving you a lot more control over ways to boost your revenue and your profits.