Canada Goose Says China Tensions Are Nothing to Worry About
(Bloomberg) -- Sign up for Next China, a new weekly dispatch on where China stands now and where it's going next.
Canada Goose Holdings Inc. plotted its China expansion at an unfortunate time, but the coatmaker’s chief said there’s nothing he can do about it.
Diplomatic tensions between Canada and China arose in December, due to the arrest of a Chinese telecom executive in Canada, which prompted some Chinese websites to call for a boycott of Canadian brands. Canada Goose opened its Beijing flagship store just a few weeks later -- right before Apple Inc. cut its sales forecast, sparking worries about consumer spending in the critical Chinese market.
“We leave politics to the politicians,” Canada Goose’s Chief Executive Officer Dani Reiss said in an interview Thursday morning. “We’re really happy with our Chinese business plan and the way we plan to approach it. It’s been executed really well.”
Investors are less optimistic, perhaps because of wider macroeconomic problems back in the U.S., one of Canada Goose’s largest markets. Retail stocks tanked Thursday after the U.S. Department of Commerce released data that showed sales fell unexpectedly in December -- so much, in fact, that some analysts are questioning if the report’s right.
Canada Goose shares were dragged down, falling as much as 11 percent, even though it boosted its forecast for the year and global sales beat analyst estimates, rising 50 percent last quarter.
Canada Goose began its move into China last summer, planning to open a regional headquarters in Shanghai in addition to flagship stores in Beijing and Hong Kong. The maker of down jackets and parkas fit for arctic temperatures has been looking for new paths for growth since going public in 2017.
Luxury brands have been flocking to China, choosing to serve those valuable shoppers directly in their domestic market to mitigate exposure to ever-fluctuating tourist flows. U.S. luxury labels such as Coach and Ralph Lauren are opening more stores in China, too, and local demand for handbags and high-end spirits have fueled growth at French conglomerate LVMH in recent months.
But just as Canada Goose entered the Chinese market, Meng Wanzhou, the chief financial officer at Chinese telecom giant Huawei Technologies Co., was detained in Vancouver at the request of the U.S. The Canadian government said in January that 13 citizens have been detained in China since Wanzhou’s arrest.
Despite calls for a boycott of Canada Goose and other Canadian goods on Chinese websites and social media, Chinese shoppers lined up in the cold outside Canada Goose’s downtown Beijing store when it opened in late December. Reiss said the country name still resonates well in China and elsewhere.
Canada Goose’s partnership with Alibaba’s online Tmall has proven the “right way” to sell his coats to Chinese shoppers, Reiss said. Canada Goose is already a top selling brand in its category on the platform, despite only being available for just over a month, he said.
“There’s a lot of noise out there in the headlines, but as you see in our results, we continue to grow our business significantly, and you see that in China and all of our geographies,” Reiss said. “We’re just getting started in China.”
On a recent evening at the Beijing store, the madness from opening day had died down. Window shoppers filed past the mannequins as a cashier inside rung up $600 jackets. One shopper, who identified herself as Mrs. Hu, said she was surprised to see so many people decked out in Canada Goose, especially because it’s often not cold enough to warrant wearing the kind of coat they wear in Antarctica. She said any anti-Canada sentiment that may be out there won’t last.
“Canada diplomatic tensions are not an issue,” she said. “I mostly care about the product itself. The company is not to blame for the actions of the nation.”
©2019 Bloomberg L.P.