Luxury Coat Maker Canada Goose plans to increase manufacturing operations within the company to increase profitability and help it achieve higher investor expectations, becoming the most expensive stock of major luxury brands.
Chief Executive Officer Dani Reiss said in an interview with the headquarters in Toronto that the company plans to increase its manufacturing of jackets from its current one-third share to at least half within a few years.
Dani Reiss said: "We hope to develop internal capabilities." He believes this is one of the company's "support pillars." This is an opportunity for us to have more internal capabilities and higher profitability, which is very important for our investors and us. â€
By strengthening control over manufacturing, Canadian goose, Italian luxury apparel makers like Moncler, and Kering’s Italian fashion brand, Gucci, are able to increase their control of quality to receive coveted profits.
"If you have a multi-level supply chain, you will leave profit margins in every link of the entire supply chain," said Rod Sides, head of Deloitte's US retail and distribution business.
Companies must be able to accurately predict future demand in order to develop strategies for success, and other factors such as the location of new facilities can play an important role.
Brian Madden, portfolio manager of Canada Geese, said that for example, the Canada Goose Base Ontario is the province with the highest electricity bill in Canada, and this year will increase the minimum wage by 21%. Increasing manufacturing here will not help Canadian geese increase profits.
But this risk is worthwhile for Canadian geese. All the Canadian geese produced in Canada have sold between $725 and $1,695. The company announced that the operating profit margin for the quarter ended December was 60% of online and self-operated store sales, while the wholesale business had an operating profit margin of 43%, which led investors to be optimistic about the company's direct consumer-oriented business growth.
The stock has almost doubled since it was listed last year, significantly exceeding the benchmark of the Toronto stock market, and this year's forward price-to-earnings ratio is 55 times, more than double that of Moncler.
Canada Goose opened its first store in 2016 and currently has 6 stores. It plans to open 20 stores by the end of 2020, and Moncler has 201 stores.
Nomura Securities analyst Simeon Siegel said: "At present, their penetration rate in the final audience is relatively low, and their penetration rate will gradually increase."
Although Siegel holds a positive view, his rating remains neutral due to the company's overvaluation.
As it expands its market and begins to sell online in China and possibly Russia, Reiss said the company needs to ensure that it can keep up with demand.
For many luxury goods companies, strictly controlling the quality of large items is very important for consumers to pull out their wallets. Most luxury companies also prefer to sell at full price rather than having to produce too much and have to discount goods.
Moncler controlled its own jacket production base in Romania and slightly reduced the number of suppliers in 2016. Most of its manufacturing and supply chains are still outsourced.
This year Kering’s Gucci also hopes to introduce more handbag productions internally and build a new factory near Florence.
Hermes of France is famous for Birkin and Kelly handbags with more than 10,000 US dollars. All of its leather products are produced in its domestic studio.
But outsourcing also makes sense, especially for basic products such as T-shirts.
The company stated that Canada Goose has no plans to change the suppliers of knitwear production lines from Italy and Romania, nor has it planned to change the exclusive external suppliers of its outerwear components.
It has six factories that produce outerwear in Canada and has increased manufacturing capacity by building new factories, acquiring contractors and adding staff.
Luxury goods consultant Robert Burke said: "This provides more quality, time and product control. The risk is to ensure that the facilities you purchase are sufficient for your future development, but this is not inconvenient."
Source: Flushing U.S. stocks
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