20-F 1 cg-20fxfy17.htm 20-F Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F
 
(Mark One)
¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2017

OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

OR

¨
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number 001-38027
 
CANADA GOOSE HOLDINGS INC.
(Exact name of Registrant as specified in its charter)
 

N/A
 
(Translation of Registrant’s name into English)
British Columbia
 
(Jurisdiction of incorporation or organization)
250 Bowie Ave
Toronto, Ontario, Canada M6E 4Y2
 
(Address of principal executive offices)

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David M. Forrest
Senior Vice President, General Counsel
250 Bowie Ave
Toronto, Ontario, Canada M6E 4Y2
Tel: (416) 780-9850
 
(Name, telephone, email and/or facsimile number and address of Company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Subordinate voting shares
 
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
 
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
 
(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report: At March 31, 2017, 23,088,883 subordinate voting shares and 83,308,154 multiple voting shares were issued and outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨ Yes x No

Note—checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer x Emerging growth company x


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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.    ¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨
International Financial Reporting Standards as issued
by the International Accounting Standards Board x
Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ¨ Item 17 ¨ Item 18

If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
 

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Canada Goose Holdings Inc.
Table of Contents
INTRODUCTION
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
 
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
 
ITEM 3. KEY INFORMATION
 
ITEM 4. INFORMATION ON THE COMPANY
 
ITEM 4A. UNRESOLVED STAFF COMMENTS
 
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
ITEM 8. FINANCIAL INFORMATION
 
ITEM 9. THE OFFER AND LISTING
 
ITEM 10. ADDITIONAL INFORMATION
 
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II
 
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
ITEM 15. CONTROLS AND PROCEDURES
 
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
 
ITEM 16B. CODE OF ETHICS
 
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
 
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
 
ITEM 16G. CORPORATE GOVERNANCE
 
ITEM 16H. MINE SAFETY DISCLOSURE
PART III
 
ITEM 17. FINANCIAL STATEMENTS
 
ITEM 18. FINANCIAL STATEMENTS
 
ITEM 19. EXHIBITS
 
EXHIBIT INDEX
SIGNATURES
FINANCIAL STATEMENTS
F-1

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INTRODUCTION
Unless otherwise indicated, all references in this Annual Report on Form 20-F to “Canada Goose,” “we,” “our,” “us,” “the company” or similar terms refer to Canada Goose Holdings Inc. and its consolidated subsidiaries. We publish our consolidated financial statements in Canadian dollars. In this Annual Report, unless otherwise specified, all monetary amounts are in Canadian dollars, all references to “$,” “C$,” “CDN$,” “CAD$,” and “dollars” mean Canadian dollars and all references to “US$” and “USD” mean U.S. dollars. References to the “Acquisition” refer to the sale of a 70% equity interest in our business in December 2013 to Bain Capital.
In connection with our initial public offering (“IPO”), we redesignated our Class A common shares into multiple voting shares. In addition, we eliminated all of our previously outstanding series of common and preferred shares and created our subordinate voting shares.
This Annual Report on Form 20-F contains our audited consolidated financial statements and related notes for the years ended March 31, 2017, 2016 and 2015 (“Audited Annual Consolidated Financial Statements”). Our Audited Annual Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
Trademarks and Service Marks
This Annual Report contains references to a number of trademarks which are our registered trademarks or trademarks for which we have pending applications or common law rights. Our major trademarks include the CANADA GOOSE word mark and the ARCTIC PROGRAM & DESIGN trademark (our disc logo consisting of the colour-inverse design of the North Pole and Arctic Ocean).
Solely for convenience, the trademarks, service marks and trade names referred to in this Annual Report are listed without the ®, (sm) and (TM) symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This Annual Report contains forward-looking statements. These statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Annual Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our

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results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. Forward-looking statements contained in this Annual Report include, among other things, statements relating to:

expectations regarding industry trends and the size and growth rates of addressable markets;
our business plan and our growth strategies, including plans for expansion to new markets and new products; and
expectations for seasonal trends.
Although we base the forward-looking statements contained in this Annual Report on assumptions that we believe are reasonable, we caution you that actual results and developments (including our results of operations, financial condition and liquidity, and the development of the industry in which we operate) may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report. In addition, even if results and developments are consistent with the forward-looking statements contained in this Annual Report, those results and developments may not be indicative of results or developments in subsequent periods. Certain assumptions made in preparing the forward-looking statements contained in this Annual Report include:

our ability to implement our growth strategies;
our ability to maintain good business relationships with our suppliers, wholesalers and distributors;
our ability to keep pace with changing consumer preferences;
our ability to protect our intellectual property; and
the absence of material adverse changes in our industry or the global economy.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” section of this Annual Report, which include, but are not limited to, the following risks:

we may be unable to maintain the strength of our brand or to expand our brand to new products and geographies;
we may be unable to protect or preserve our brand image and proprietary rights;
we may not be able to satisfy changing consumer preferences;
an economic downturn may affect discretionary consumer spending;
we may not be able to compete in our markets effectively;
we may not be able to manage our growth effectively;
poor performance during our peak season may affect our operating results for the full year;

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our indebtedness may adversely affect our financial condition;
our ability to maintain relationships with our select number of suppliers;
our ability to manage our product distribution through our retail partners and international distributors;
the success of our marketing programs;
the risk our business is interrupted because of a disruption at our headquarters; and
fluctuations in raw materials costs or currency exchange rates.
 
Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. As a result, any or all of our forward-looking statements in this Annual Report may turn out to be inaccurate. We have included important factors in the cautionary statements included in this Annual Report on Form 20-F, particularly in Section 3.D of this Annual Report on Form 20-F titled “Risk Factors”, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not rely on our forward-looking statements. Moreover, we operate in a highly competitive and rapidly changing environment in which new risks often emerge. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
You should read this Annual Report and the documents that we reference herein and have filed as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained herein are made as of the date of this Annual Report, and we do not assume any obligation to update any forward-looking statements except as required by applicable law.


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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A.
Selected Financial Data
See the selected financial data disclosure included under Item 5. — “Operating and Financial Review and Prospects”.

Exchange Rate Information
We have published our financial statements in Canadian dollars. The following table sets forth, for each period indicated, the high and low exchange rate for U.S. dollars expressed in Canadian dollars, and the average exchange rate for the periods indicated. Averages for year-end periods are calculated by using the exchange rates on the last day of each full month during the relevant period and the last available exchange rate in March during the relevant fiscal year. These rates are based on the noon buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York set forth in the H.10 statistical release of the Federal Reserve Board. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in preparation of our Audited Annual Consolidated Financial Statements or elsewhere in this Annual Report.
On June 2, 2017, the noon buying rate was US$1.00 = $1.3500
Year Ended
Period End
 
Period Average Rate
 
High Rate
 
Low Rate
March 31, 2014
$
1.1053

 
$
1.0580

 
$
1.1251

 
$
1.0023

March 31, 2015
$
1.2681

 
$
1.1471

 
$
1.2803

 
$
1.0633

March 31, 2016
$
1.2969

 
$
1.3128

 
$
1.4592

 
$
1.1950

March 31, 2017
$
1.3321

 
$
1.3149

 
$
1.3581

 
$
1.2544


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Last Six Months
 
 
 
 
 
 
 
December 2016
$
1.3426

 
$
1.3339

 
$
1.3555

 
$
1.3119

January 2017
$
1.3030

 
$
1.3183

 
$
1.3437

 
$
1.3030

February 2017
$
1.3247

 
$
1.3109

 
$
1.3247

 
$
1.3003

March 2017
$
1.3321

 
$
1.3387

 
$
1.3468

 
$
1.3278

April 2017
$
1.3669

 
$
1.3437

 
$
1.3669

 
$
1.3266

May 2017
$
1.3498

 
$
1.3606

 
$
1.3745

 
$
1.3454

B.
Capitalization and Indebtedness
Not applicable.
C.
Reasons for the Offer and Use of Proceeds
Not applicable.
D.
Risk Factors
Risks Related to our Business
Our business depends on a strong brand, and if we are not able to maintain and enhance our brand we may be unable to sell our products, which would adversely affect our business.
The Canada Goose name and premium brand image are integral to the growth of our business, and to the implementation of our strategies for expanding our business. We believe that the brand image we have developed has significantly contributed to the success of our business and is critical to maintaining and expanding our customer base. Maintaining and enhancing our brand may require us to make substantial investments in areas such as product design, store openings and operations, marketing, e-commerce, community relations and employee training, and these investments may not be successful.
We anticipate that, as our business continues to expand into new markets and new product categories and as the market becomes increasingly competitive, maintaining and enhancing our brand may become difficult and expensive. Conversely, as we penetrate these new markets and our brand becomes more widely available, it could potentially detract from the appeal stemming from the scarcity of our brand. Our brand may also be adversely affected if our public image or reputation is tarnished by negative publicity. In addition, ineffective marketing, product diversion to unauthorized distribution channels, product defects, counterfeit products, unfair labour practices, and failure to protect the intellectual property rights in our brand are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish consumer confidence in us. Maintaining and enhancing our brand will depend largely on our ability to be a leader in the premium outerwear industry and to continue to offer a range of high quality products to our customers, which we may not execute successfully. Any of these factors could harm our sales, profitability or financial condition.
A key element of our growth strategy is expansion of our product offerings into new product categories. We may be unsuccessful in designing products that meet our customers’ expectations for our brand or that are attractive to new customers. If we are unable to anticipate customer preferences or industry changes, or if we are unable to modify our products on a timely basis or

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expand effectively into new product categories, we may lose customers. As of March 31, 2017, our brand is sold in 37 countries through over 2,500 points of distribution. As we expand into new geographic markets, consumers in these new markets may be less compelled by our brand image and may not be willing to pay a higher price to purchase our premium functional products as compared to traditional outerwear. Our operating results would also suffer if our investments and innovations do not anticipate the needs of our customers, are not appropriately timed with market opportunities or are not effectively brought to market.
Because our business is highly concentrated on a single, discretionary product category, premium outerwear, we are vulnerable to changes in consumer preferences that could harm our sales, profitability and financial condition.
Our business is not currently diversified and consists primarily of designing, manufacturing and distributing premium outerwear and accessories. In fiscal 2017, our main product category across all seasons, our jackets, was made up of over 100 styles and comprised the majority of our sales. Consumer preferences often change rapidly. Therefore, our business is substantially dependent on our ability to attract customers who are willing to pay a premium for our products. Any future shifts in consumer preferences away from retail spending for premium outerwear and accessories would also have a material adverse effect on our results of operations.
In addition, we believe that continued increases in sales of premium outerwear will largely depend on customers continuing to demand technical superiority from their luxury products. If the number of customers demanding premium outerwear does not continue to increase, or if our customers are not convinced that our premium outerwear is more functional or stylish than other outerwear alternatives, we may not achieve the level of sales necessary to support new growth platforms and our ability to grow our business will be severely impaired.
A downturn in the economy may affect customer purchases of discretionary items, which could materially harm our sales, profitability and financial condition.
Many factors affect the level of consumer spending for discretionary items such as our premium outerwear and related products. These factors include general economic conditions, interest and tax rates, the availability of consumer credit, disposable consumer income, unemployment and consumer confidence in future economic conditions. Consumer purchases of discretionary items, such as our premium outerwear, tend to decline during recessionary periods when disposable income is lower. During our 60-year history, we have experienced recessionary periods, but we cannot predict the effect on our sales and profitability. A downturn in the economy in markets in which we sell our products may materially harm our sales, profitability and financial condition.
We operate in a highly competitive market and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our revenue and profitability.
The market for outerwear is highly fragmented. We compete directly against other wholesalers and direct retailers of premium functional outerwear and luxury apparel. Because of the fragmented nature of the marketplace, we also compete with other apparel sellers, including those who do not specialize in outerwear. Many of our competitors have significant competitive advantages, including longer operating histories, larger and broader customer bases, more

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established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, store development, marketing, distribution, and other resources than we do.
Our competitors may be able to achieve and maintain brand awareness and market share more quickly and effectively than we can. Many of our competitors have more established and diversified marketing programs, including with respect to promotion of their brands through traditional forms of advertising, such as print media and television commercials, and through celebrity endorsements, and have substantial resources to devote to such efforts. Our competitors may also create and maintain brand awareness using traditional forms of advertising more quickly than we can. Our competitors may also be able to increase sales in their new and existing markets faster than we can by emphasizing different distribution channels than we can, such as catalog sales or an extensive retail network, and many of our competitors have substantial resources to devote toward increasing sales in such ways.
Our operating results are subject to seasonal and quarterly variations in our revenue and operating income, which could cause the price of our subordinate voting shares to decline.
Our business is seasonal and, historically, we have realized approximately three quarters of our revenue and earnings for the fiscal year in the second and third fiscal quarters, due to the impact of wholesale orders in anticipation of the Winter and holiday selling season. Many of these orders are not subject to contracts and, if cancelled for any reason, could result in harm to our sales and financial results. Any factors that harm our second and third fiscal quarter operating results, including disruptions in our supply chain, unseasonably warm weather or unfavourable economic conditions, could have a disproportionate effect on our results of operations for the entire fiscal year. In addition, we typically experience net losses in our first and fourth fiscal quarters as we invest ahead of our most active season. Disrupted sales in our second and third fiscal quarters could upset our seasonal balance leading to an adverse effect on our financial and operating results.
In order to prepare for our peak shopping season, we must maintain higher quantities of finished goods. As a result, our working capital requirements also fluctuate during the year, increasing in the first and second fiscal quarters and declining significantly in the fourth fiscal quarter.
Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the sales contributed by our Direct to Consumer (“DTC”) channel. As a result, historical period-to-period comparisons of our sales and operating results are not necessarily indicative of future period-to-period results.
If we fail to attract new customers, we may not be able to increase sales.
Our success depends, in part, on our ability to attract new customers. In order to expand our customer base, we must appeal to and attract consumers who identify with our products. We have made significant investments in enhancing our brand and attracting new customers. We expect to continue to make significant investments to promote our current products to new customers and new products to current and new customers, including through our e-commerce platforms and retail store presence. Such campaigns can be expensive and may not result in increased sales. Further, as our brand becomes more widely known, we may not attract new customers as we

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have in the past. If we are unable to attract new customers, we may not be able to increase our sales.

We have grown rapidly in recent years. If we are unable to manage our operations at our current size or to manage any future growth effectively, the pace of our growth may slow.
We have expanded our operations rapidly since 2013 and have been developing a DTC channel with the launch of our four e-commerce stores in Canada and the United States as well as the United Kingdom and France in August 2014, September 2015 and September 2016, respectively, and the opening of our first two retail stores in October and November 2016 in Toronto and New York City, respectively. Our revenue increased from $218.4 million for fiscal 2015 to $403.8 million for fiscal 2017, a CAGR of 36.0%, including $115.2 million of revenue generated from our DTC channel in fiscal 2017.
If our operations continue to grow, of which there can be no assurance, we will be required to continue to expand our sales and marketing, product development, manufacturing and distribution functions, to upgrade our management information systems and other processes, and to obtain more space for our expanding administrative support and other personnel. Our continued growth could increase the strain on our resources, and we could experience operating difficulties, including difficulties in hiring, training and managing an increasing number of employees and manufacturing capacity to produce our products, and delays in production and shipments. These difficulties may result in the erosion of our brand image, divert the attention of management and key employees and impact financial and operational results. In addition, in order to continue to expand our DTC channel, we expect to continue to add selling, general & administrative expenses to our operating profile. These costs, which include lease commitments, headcount and capital assets, could result in decreased margins if we are unable to drive commensurate growth.
Our growth strategy involves expansion of our DTC channel, including retail stores and on-line, which may present risks and challenges that we have not yet experienced.
Our business has only recently evolved from one in which we only distributed products on a wholesale basis for resale by others to one that also includes a multi-channel experience, which includes retail physical and online stores operated by us. Growing our e-commerce platforms and number of physical stores is essential to our growth strategy, as is expanding our product offerings available through these channels. However, we have limited operating experience executing this strategy, which we launched with our first e-commerce store in August 2014 and our first retail store in October 2016. This strategy has and will continue to require significant investment in cross-functional operations and management focus, along with investment in supporting technologies and retail store spaces. If we are unable to provide a convenient and consistent experience for our customers, our ability to compete and our results of operations could be adversely affected. In addition, if our e-commerce store design does not appeal to our customers, reliably function as designed, or maintain the privacy of customer data, or if we are unable to consistently meet our brand promise to our customers, we may experience a loss of customer confidence or lost sales, or be exposed to fraudulent purchases, which could adversely affect our reputation and results of operations.
We currently operate our online stores in Canada, the United States, the United Kingdom and France, and are planning to expand our e-commerce platform to other geographies. These

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countries may impose different and evolving laws governing the operation and marketing of e-commerce websites, as well as the collection, storage and use of information on consumers interacting with those websites. We may incur additional costs and operational challenges in complying with these laws, and differences in these laws may cause us to operate our businesses differently in different territories. If so, we may incur additional costs and may not fully realize the investment in our international expansion.
Our indebtedness could adversely affect our financial condition.
We had $8.7 million of borrowings outstanding under our Revolving Facility (as defined below), and $141.3 million of unused commitments under our Revolving Facility, $151.6 million of term loans under our Term Loan Facility (as defined below), and total indebtedness of $160.3 million as at March 31, 2017. Our debt could have important consequences, including:

limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing;
requiring a portion of our cash flow to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flow available for working capital, capital expenditures, acquisitions and other general corporate purposes;
requiring the net cash proceeds of certain equity offerings to be used to prepay our debt as opposed to other purposes;
exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our senior secured credit facilities, are at variable rates of interest; and
limiting our flexibility in planning for and reacting to changes in the industry in which we compete.
The credit agreements governing our senior secured credit facilities contain a number of restrictive covenants that impose operating and financial restrictions on us, including restrictions on our ability to incur certain liens, make investments and acquisitions, incur or guarantee additional indebtedness, pay dividends or make other distributions in respect of, or repurchase or redeem our common or preferred shares, or enter into certain other types of contractual arrangements affecting our subsidiaries or indebtedness. In addition, the restrictive covenants in the credit agreement governing our Revolving Facility require us to maintain a minimum fixed charge coverage ratio if excess availability under our Revolving Facility falls below a specified threshold.
Although the credit agreements governing our senior secured credit facilities contain restrictions on the incurrence of additional indebtedness, those restrictions are subject to a number of qualifications and exceptions and the additional indebtedness incurred in compliance with those restrictions could be substantial. We may also seek to amend or refinance one or more of our debt instruments to permit us to finance our growth strategy or improve the terms of our indebtedness.
 

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Our plans to improve and expand our product offerings may not be successful, and implementation of these plans may divert our operational, managerial and administrative resources, which could harm our competitive position and reduce our revenue and profitability.
In addition to our DTC strategy and the expansion of our geographic footprint, we plan to grow our business by expanding our product offerings. The principal risks to our ability to successfully carry out our plans to expand our product offering include:

if our expanded product offerings fail to maintain and enhance our distinctive brand identity, our brand image may be diminished and our sales may decrease;
implementation of these plans may divert management’s attention from other aspects of our business and place a strain on our management, operational and financial resources, as well as our information systems; and
incorporation of novel materials or features into our products may not be accepted by our customers or may be considered inferior to similar products offered by our competitors.
In addition, our ability to successfully carry out our plans to expand our product offerings may be affected by economic and competitive conditions, changes in consumer spending patterns and changes in consumer preferences and styles. These plans could be abandoned, could cost more than anticipated and could divert resources from other areas of our business, any of which could negatively impact our competitive position and reduce our revenue and profitability.
We rely on a limited number of third-party suppliers to provide high quality raw materials.
Our products require high quality raw materials, including cotton, polyester, down and coyote fur. The price of raw materials depends on a wide variety of factors largely beyond the control of Canada Goose. A shortage, delay or interruption of supply for any reason could negatively impact our ability to fulfill orders and have an adverse impact on our financial results.
In addition, we rely on a very small number of direct suppliers for our raw materials. As a result, any disruption to these relationships could have a material adverse effect on our business. Events that adversely affect our suppliers could impair our ability to obtain inventory in the quantities and at the quality that we desire. Such events include difficulties or problems with our suppliers’ businesses, finances, labour relations, ability to import raw materials, costs, production, insurance and reputation, as well as natural disasters or other catastrophic occurrences. Furthermore, there can be no assurance that our suppliers will continue to provide fabrics and raw materials or provide products that are consistent with our standards.
More generally, if we need to replace an existing supplier, additional supplies or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, and any new supplier may not meet our strict quality requirements. In the event we are required to find new sources of supply, we may encounter delays in production, inconsistencies in quality and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Any delays, interruption or increased costs in the supply of our raw materials could have an adverse effect on our ability to meet

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customer demand for our products and result in lower sales and profitability both in the short and long-term.
We could experience significant disruptions in supply from our current sources.
We generally do not enter into long-term formal written agreements with our suppliers, and typically transact business with our suppliers on an order-by-order basis. There can be no assurance that there will not be a disruption in the supply of fabrics or raw materials from current sources or, in the event of a disruption, that we would be able to locate alternative suppliers of materials of comparable quality at an acceptable price, or at all. Identifying a suitable supplier is an involved process that requires us to become satisfied with their quality control, responsiveness and service, financial stability and labour and other ethical practices. Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet customer demand for our products and result in lower revenue and operating income both in the short and long-term.
Our business or our results of operations could be harmed if we are unable to accurately forecast demand for our products.
To ensure adequate inventory supply, we and our retail partners forecast inventory needs, which are subject to seasonal and quarterly variations. If we fail to accurately forecast retailer demand, we may experience excess inventory levels or a shortage of product to deliver to our retail partners and through our DTC channel.
If we underestimate the demand for our products, we may not be able to produce products to meet our retail partner requirements, and this could result in delays in the shipment of our products and our failure to satisfy demand, as well as damage to our reputation and retail partner relationships. If we overestimate the demand for our products, we could face inventory levels in excess of demand, which could result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would harm our gross margins and our brand management efforts. In addition, failures to accurately predict the level of demand for our products could cause a decline in revenue and harm our profitability and financial condition.
If we are unable to establish and protect our trademarks and other intellectual property rights, counterfeiters may produce copies of our products and such counterfeit products could damage our brand image.
Given the increased popularity of our brand, we believe there is a high likelihood that counterfeit products or other products infringing on our intellectual property rights will continue to emerge, seeking to benefit from the consumer demand for Canada Goose outerwear. These counterfeit products do not provide the functionality of our products and we believe they are of substantially lower quality, and if customers are not able to differentiate between our products and counterfeit products, this could damage our brand image. In order to protect our brand, we devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts worldwide. We actively pursue entities involved in the trafficking and sale of counterfeit merchandise through legal action or other appropriate measures. In spite of our efforts, counterfeiting still occurs and, if we are unsuccessful in challenging a third-party’s rights related to trademark, copyright or other intellectual property rights, this could adversely affect our future

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sales, financial condition and results of operations. We cannot guarantee that the actions we have taken to curb counterfeiting and protect our intellectual property will be adequate to protect the brand and prevent counterfeiting in the future or that we will be able to identify and pursue all counterfeiters who may seek to benefit from our brand.
Competitors have and will likely continue to attempt to imitate our products and technology and divert sales. If we are unable to protect or preserve our intellectual property rights, brand image and proprietary rights, our business may be harmed.
As our business has expanded, our competitors have imitated, and will likely continue to imitate, our product designs and branding, which could harm our business and results of operations. Competitors who flood the market with products seeking to imitate our products could divert sales and dilute the value of our brand. We believe our trademarks, copyrights and other intellectual property rights are extremely important to our success and our competitive position.
However, enforcing rights to our intellectual property may be difficult and costly, and we may not be successful in stopping infringement of our intellectual property rights, particularly in some foreign countries, which could make it easier for competitors to capture market share. Intellectual property rights necessary to protect our products and brand may also be unavailable or limited in certain countries. Furthermore, our efforts to enforce our trademarks, copyrights and other intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our trademark and other intellectual property rights. Continued sales of competing products by our competitors could harm our brand and adversely impact our business, financial condition and results of operations.
Labour-related matters, including labour disputes, may adversely affect our operations.
As of March 31, 2017, less than 25% of our employees are members of labour unions, and additional members of our workforce may become represented by unions in the future. The exposure to unionized labour in our workforce nonetheless presents an increased risk of strikes and other labour disputes, and our ability to alter labour costs will be subject to collective bargaining, which could adversely affect our results of operations. In addition, potential labour disputes at independent factories where our goods are produced, shipping ports, or transportation carriers create risks for our business, particularly if a dispute results in work slowdowns, lockouts, strikes or other disruptions during our peak manufacturing, shipping and selling seasons. Any potential labour dispute, either in our own operations or in those of third parties, on whom we rely, could materially affect our costs, decrease our sales, harm our reputation or otherwise negatively affect our sales, profitability or financial condition.
We rely significantly on information technology systems for our distribution systems and other critical business functions, and are increasing our reliance on these functions as our DTC channel expands. Any failure, inadequacy, or interruption of those systems could harm our ability to operate our business effectively.
We rely on information systems to effectively manage all aspects of our business, including merchandise planning, manufacturing, allocation, distribution and sales. Our reliance on these systems, and their importance to our business, will increase as we expand our DTC channel and global operations. We rely on a number of third parties to help us effectively manage these systems. If information systems we rely on fail to perform as expected, our business could be

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disrupted. The failure of us or our vendors to manage and operate our information technology systems as expected could disrupt our business, result in our not providing adequate product, losing sales or market share, and reputational harm, causing our business to suffer. Any such failure or disruption could have a material adverse effect on our business.
Our information technology systems and vendors also may be vulnerable to damage or interruption from circumstances beyond our or their control, including fire, flood, natural disasters, systems failures, network or communications failures, power outages, viruses, security breaches, cyber-attacks and terrorism. We maintain disaster recovery procedures intended to mitigate the risks associated with such events, but there is no guarantee that these procedures will be adequate in any particular circumstance. As a result, such an event could materially disrupt, and have a material adverse effect on, our business.
We depend on our retail partners to display and present our products to customers, and our failure to maintain and further develop our relationships with our retail partners could harm our business.
We sell our products in our wholesale segment through knowledgeable local, regional, and national retail partners. Our retail partners service customers by stocking and displaying our products, and explaining our product attributes. Our relationships with these retail partners are important to the authenticity of our brand and the marketing programs we continue to deploy. Our failure to maintain these relationships with our retail partners or financial difficulties experienced by these retail partners could harm our business.

We also have key relationships with national retail partners. For fiscal 2017, our largest Canadian wholesale customer accounted for 20.4% of our wholesale revenue in Canada, and our largest U.S. wholesale customer accounted for 21.0% of our wholesale revenue in the United States. If we lose any of our key retail partners, or if any key retail partner reduces their purchases of our existing or new products, or their number of stores or operations or promotes products of our competitors over ours, or suffers financial difficulty or insolvency, our sales would be harmed. Our sales depend, in part, on retailer partners effectively displaying our products, including providing attractive space in their stores, including shop-in-shops, and training their sales personnel to sell our products. If our retail partners reduce or terminate those activities, we may experience reduced sales of our products, resulting in lower revenue and gross margins, which would harm our profitability and financial condition.
The majority of our sales are to retail partners.
The majority of our sales are made to retail partners who may decide to emphasize products from our competitors, to redeploy their retail floor space to other product categories, or to take other actions that reduce their purchases of our products. We do not receive long-term purchase commitments from our retail partners, and confirmed orders received from our retail partners may be difficult to enforce. Factors that could affect our ability to maintain or expand our sales to these retail partners include: (a) failure to accurately identify the needs of our customers; (b) lack of customer acceptance of new products or product expansions; (c) unwillingness of our retail partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; (d) failure to obtain shelf space from our retail partners; and (e) new, well-received product introductions by competitors.

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We cannot assure you that our retail partners will continue to carry our products in accordance with current practices or carry any new products that we develop. If these risks occur, they could harm our brand as well as our results of operations and financial condition.
Our marketing programs, e-commerce initiatives and use of customer information are governed by an evolving set of laws and enforcement trends and unfavorable changes in those laws or trends, or our failure to comply with existing or future laws, could substantially harm our business and results of operations.
We collect, process, maintain and use data, including sensitive information on individuals, available to us through online activities and other customer interactions in our business. Our current and future marketing programs may depend on our ability to collect, maintain and use this information, and our ability to do so is subject to evolving international, U.S., Canadian, European and other laws and enforcement trends. We strive to comply with all applicable laws and other legal obligations relating to privacy, data protection and customer protection, including those relating to the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, may conflict with other rules, may conflict with our practices or fail to be observed by our employees or business partners. If so, we may suffer damage to our reputation and be subject to proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts to defend our practices, distract our management or otherwise have an adverse effect on our business.
Certain of our marketing practices rely upon e-mail to communicate with consumers on our behalf. We may face risk if our use of e-mail is found to violate the applicable law. We post our privacy policy and practices concerning the use and disclosure of user data on our websites. Any failure by us to comply with our posted privacy policy or other privacy-related laws and regulations could result in proceedings which could potentially harm our business. In addition, as data privacy and marketing laws change, we may incur additional costs to ensure we remain in compliance. If applicable data privacy and marketing laws become more restrictive at the international, federal, provincial or state levels, our compliance costs may increase, our ability to effectively engage customers via personalized marketing may decrease, our investment in our e-commerce platform may not be fully realized, our opportunities for growth may be curtailed by our compliance burden and our potential reputational harm or liability for security breaches may increase.
Data security breaches and other cyber security events could negatively affect our reputation, credibility and business.
We collect, process, maintain and use sensitive personal information relating to our customers and employees, including their personally identifiable information, and rely on third parties for the operation of our e-commerce site and for the various social media tools and websites we use as part of our marketing strategy. Any perceived, attempted or actual unauthorized disclosure of personally identifiable information regarding our employees, customers or website visitors could harm our reputation and credibility, reduce our e-commerce sales, impair our ability to attract website visitors, reduce our ability to attract and retain customers and could result in litigation against us or the imposition of significant fines or penalties.

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Recently, data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting new foreign, federal, provincial and state laws and legislative proposals addressing data privacy and security, as well as increased data protection obligations imposed on merchants by credit card issuers. As a result, we may become subject to more extensive requirements to protect the customer information that we process in connection with the purchase of our products, resulting in increased compliance costs.
Our on-line activities, including our e-commerce websites, also may be subject to denial of service or other forms of cyber attacks. While we have taken measures we believe reasonable to protect against those types of attacks, those measures may not adequately protect our on-line activities from such attacks. If a denial of service attack or other cyber event were to affect our e-commerce sites or other information technology systems, our business could be disrupted, we may lose sales or valuable data, and our reputation may be adversely affected.
A significant portion of our business functions operate out of our headquarters in Toronto. As a result, our business is vulnerable to disruptions due to local weather, economics and other factors.
All of our significant business functions reside at our headquarters in Toronto, Canada. Events such as extreme local weather, natural disasters, transportation strikes, acts of terrorism, significant economic disruptions or unexpected damage to the facility could result in an unexpected disruption to our business as a whole. Although we carry business interruption insurance, if a disruption of this type should occur, our ability to conduct our business could be adversely affected or interrupted entirely and adversely affect our financial and operating results.
Our success is substantially dependent on the continued service of our senior management.
Our success is substantially dependent on the continued service of our senior management, including Dani Reiss, who is our third-generation President and Chief Executive Officer. The loss of the services of our senior management could make it more difficult to successfully operate our business and achieve our business goals. We also may be unable to retain existing management, technical, sales and client support personnel that are critical to our success, which could result in harm to our customer and employee relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs.
We have not obtained key man life insurance policies on any members of our senior management team. As a result, we would not be protected against the associated financial loss if we were to lose the services of members of our senior management team.
We rely on payment cards to receive payments, and are subject to payment-related risks.
For our DTC sales, as well as for sales to certain retail partners, we accept a variety of payment methods, including credit cards, debit cards and electronic funds transfers. Accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements relating to payment card processing. This includes laws governing the collection, processing and storage of sensitive consumer information, as well as industry requirements such as the Payment Card Industry Data Security Standard, (“PCI-DSS”). These laws and obligations may require us to implement enhanced authentication and payment processes that could result in

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increased costs and liability, and reduce the ease of use of certain payment methods. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time. We rely on independent service providers for payment processing, including credit and debit cards. If these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers increases, our business could be harmed. We are also subject to payment card association operating rules and agreements, including PCI-DSS, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or consumers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our consumers, or process electronic fund transfers or facilitate other types of payments. Any failure to comply could significantly harm our brand, reputation, business, and results of operations.
If our independent manufacturers or our suppliers fail to use ethical business practices and fail to comply with changing laws and regulations or our applicable guidelines, our brand image could be harmed due to negative publicity.
Our core values, which include developing the highest quality products while operating with integrity, are an important component of our brand image, which makes our reputation sensitive to allegations of unethical or improper business practices, whether real or perceived. We do not control our suppliers and manufacturers or their business practices. Accordingly, we cannot guarantee their compliance with our guidelines or the law. A lack of compliance could lead to reduced sales or recalls or damage to our brand or cause us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations.
In addition, many of our products include materials that are heavily regulated in many jurisdictions. Certain jurisdictions in which we sell have various regulations related to manufacturing processes and the chemical content of our products, including their component parts. Monitoring compliance by our manufacturers and suppliers is complicated, and we are reliant on their compliance reporting in order to comply with regulations applicable to our products. This is further complicated by the fact that expectations of ethical business practices continually evolve and may be substantially more demanding than applicable legal requirements. Ethical business practices are also driven in part by legal developments and by diverse groups active in publicizing and organizing public responses to perceived ethical shortcomings. Accordingly, we cannot predict how such regulations or expectations might develop in the future and cannot be certain that our guidelines or current practices would satisfy all parties who are active in monitoring our products or other business practices worldwide.
Our current and future products may experience quality problems from time to time that can result in negative publicity, litigation, product recalls and warranty claims, which could result in decreased revenue and operating margin, and harm to our brand.
There can be no assurance we will be able to detect, prevent, or fix all defects that may affect our products. Failure to detect, prevent, or fix defects, or the occurrence of real or perceived quality, health or safety problems or material defects in our current and future products, could result in a

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variety of consequences, including a greater number of product returns than expected from customers and our retail partners, litigation, product recalls, and credit, warranty or other claims, among others, which could harm our brand, sales, profitability and financial condition. We stand behind every Canada Goose product with a full lifetime warranty against defects. Because of this comprehensive warranty, quality problems could lead to increased warranty costs, and divert the attention of our manufacturing facilities. Such problems could hurt our premium brand image, which is critical to maintaining and expanding our business. Any negative publicity or lawsuits filed against us related to the perceived quality and safety of our products could harm our brand and decrease demand for our products.
 
Our business could be adversely affected by protestors or activists.
We have been the target of activists in the past, and may continue to be in the future. Our products include certain animal products, including goose and duck feathers in all of our down-filled parkas and coyote fur on the hoods of some of our parkas, which has drawn the attention of animal welfare activists. In addition, protestors can disrupt sales at our stores, or use social media or other campaigns to sway public opinion against our products. If any such activists are successful at either of these our sales and results of operations may be adversely affected.
The cost of raw materials could increase our cost of goods sold and cause our results of operations and financial condition to suffer.
The fabrics used by our suppliers and manufacturers include synthetic fabrics and natural products, including cotton, polyester, down and coyote fur. Significant price fluctuations or shortages in the cost of these raw materials may increase our cost of goods sold and cause our results of operations and financial condition to suffer. In particular, in our experience, pricing for fur products tends to be unpredictable. If we are unable to secure coyote fur for our jackets at a reasonable price, we may have to alter or discontinue selling some of our designs, or attempt to pass along the cost to our customers, any of which could adversely affect our results of operations and financial condition.
Additionally, increasing costs of labour, freight and energy could increase our and our suppliers’ cost of goods. If our suppliers are affected by increases in their costs of labour, freight and energy, they may attempt to pass these cost increases on to us. If we pay such increases, we may not be able to offset them through increases in our pricing, which could adversely affect our results of operation and financial condition.
Fluctuations in foreign currency exchange rates could harm our results of operations as well as the price of our subordinate voting shares.
The presentation currency for our Audited Annual Consolidated Financial Statements is the Canadian dollar. Because we recognize sales in the United States in U.S. dollars, if the U.S. dollar weakens against the Canadian dollar it would have a negative impact on our U.S. operating results upon translation of those results into Canadian dollars for the purposes of financial statement consolidation. We may face similar risks in other foreign jurisdictions where sales are recognized in foreign currencies. Although we engage in short-term hedging transactions for a large portion of our foreign currency denominated cash flows to mitigate foreign exchange risks, depending upon changes in future currency rates, such gains or losses could have a significant, and potentially adverse, effect on our results of operations. Foreign

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exchange variations (including the value of the Canadian dollar relative to the U.S. dollar) have been significant in the past and current foreign exchange rates may not be indicative of future exchange rates.
Our earnings per share are reported in Canadian dollars, and accordingly may be translated into U.S. dollars by analysts or our investors. As a result, the value of an investment in our subordinate voting shares to a U.S. shareholder will fluctuate as the U.S. dollar rises and falls against the Canadian dollar. Our decision to declare a dividend depends on results of operations reported in Canadian dollars. As a result, U.S. and other shareholders seeking U.S. dollar total returns, including increases in the share price and dividends paid, are subject to foreign exchange risk as the U.S. dollar rises and falls against the Canadian dollar.
Unexpected obstacles in new markets may limit our expansion opportunities and cause our business and growth to suffer.
Our future growth depends in part on our expansion efforts outside of North America. We have limited experience with regulatory environments and market practices outside of this region, and we may not be able to penetrate or successfully operate in any new market, as a result of unfamiliar regulation or other unexpected barriers to entry. In connection with our expansion efforts we may encounter obstacles, including cultural and linguistic differences, differences in regulatory environments, economic or governmental instability, labour practices and market practices, difficulties in keeping abreast of market, business and technical developments, and foreign customers’ tastes and preferences. We may also encounter difficulty expanding into new international markets because of limited brand recognition leading to delayed acceptance of our outerwear by customers in these new international markets. Our failure to develop our business in new international markets or experiencing disappointing growth outside of existing markets could harm our business and results of operations.
We may become involved in legal or regulatory proceedings and audits.
Our business requires compliance with many laws and regulations, including labour and employment, sales and other taxes, customs, and consumer protection laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise, and the operation of stores and warehouse facilities. Failure to comply with these laws and regulations could subject us to lawsuits and other proceedings, and could also lead to damage awards, fines and penalties. We may become involved in a number of legal proceedings and audits, including government and agency investigations, and consumer, employment, tort and other litigation. The outcome of some of these legal proceedings, audits, and other contingencies could require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition. Additionally, defending against these lawsuits and proceedings may be necessary, which could result in substantial costs and diversion of management’s attention and resources, harming our financial condition. There can be no assurance that any pending or future legal or regulatory proceedings and audits will not harm our business, financial condition and results of operations.

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We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.
Our operations are subject to many hazards and operational risks inherent to our business, including: general business risks, product liability, product recall and damage to third parties, our infrastructure or properties caused by fires, floods and other natural disasters, power losses, telecommunications failures, terrorist attacks, human errors and similar events.
Our insurance coverage may be inadequate to cover our liabilities related to such hazards or operational risks. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable, and insurance may not continue to be available on terms as favorable as our current arrangements. The occurrence of a significant uninsured claim, or a claim in excess of the insurance coverage limits maintained by us could harm our business, results of operations and financial condition.
We have identified material weaknesses in our internal control over financial reporting and if we fail to remediate these weaknesses and maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be evaluated frequently. In connection with the audit of our consolidated financial statements for fiscal 2016, we have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
We did not have in place an effective control environment with formal processes and procedures or an adequate number of accounting personnel with the appropriate technical training in, and experience with, IFRS to allow for a detailed review of complex accounting transactions that would identify errors in a timely manner, including inventory costing and business combinations. We did not design or maintain effective controls over the financial statement close and reporting process in order to ensure the accurate and timely preparation of financial statements in accordance with IFRS. In addition, information technology controls, including end user and privileged access rights and appropriate segregation of duties, including for certain users the ability to create and post journal entries, were not designed or operating effectively.
We have taken steps to address these material weaknesses and continue to implement our remediation plan, which we believe will address their underlying causes. We have hired personnel with requisite skills in both technical accounting and internal control over financial reporting. In addition, we have engaged external advisors to provide financial accounting assistance in the short term and to evaluate and document the design and operating effectiveness of our internal controls and assist with the remediation and implementation of our internal controls as required. We are evaluating the longer term resource needs of our various financial functions.

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Implementing any appropriate changes to our internal controls and continuing to update and maintain our internal controls may distract our officers and employees, entail substantial costs to implement new processes and modify our existing processes and take significant time to complete. If we fail to enhance our internal control over financial reporting to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), we may be unable to report our financial results accurately, which could increase operating costs and harm our business, including our investors’ perception of our business and our share price. The actions we plan to take are subject to continued management review supported by confirmation and testing, as well as audit committee oversight. While we expect to fully remediate these material weaknesses, we cannot assure you that we will be able to do so in a timely manner, which could impair our ability to report our financial position.

Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting, which could harm our business and cause a decline in our share price.
Reporting obligations as a public company and our anticipated growth have placed and are likely to continue to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel. In addition, as of March 31, 2018 we will be required to document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify the effectiveness of our internal controls. As a result, we will be required to continue to improve our financial and managerial controls, reporting systems and procedures, to incur substantial expenses to test our systems and to make such improvements and to hire additional personnel. If our management is unable to certify the effectiveness of our internal controls or if additional material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could harm our business and cause a decline in our share price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in our share price and harm our ability to raise capital. Failure to accurately report our financial performance on a timely basis could also jeopardize our continued listing on the Toronto Stock Exchange (“TSX”), the New York Stock Exchange (“NYSE”) or any other exchange on which our subordinate voting shares may be listed. Delisting of our subordinate voting shares from any exchange would reduce the liquidity of the market for our subordinate voting shares, which would reduce the price of our subordinate voting shares and increase the volatility of our share price.
We do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. If we cannot provide reliable financial reports

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or prevent fraud, our reputation and operating results could be materially adversely affected, which could also cause investors to lose confidence in our reported financial information, which in turn could result in a reduction in the trading price of the subordinate voting shares.
Risks Related to Our Subordinate Voting Shares
The dual-class structure contained in our articles has the effect of concentrating voting control and the ability to influence corporate matters with Bain Capital and our President and Chief Executive Officer, who held our shares prior to our initial public offering.
Our multiple voting shares have 10 votes per share and our subordinate voting shares have 1 vote per share. As of March 31, 2017, shareholders who hold multiple voting shares (Bain Capital and our President and Chief Executive Officer (including their respective affiliates)), together hold approximately 97% of the voting power of our outstanding voting shares and therefore have significant influence over our management and affairs and over all matters requiring shareholder approval, including the election of directors and significant corporate transactions.
In addition, because of the 10-to-1 voting ratio between our multiple voting shares and subordinate voting shares, the holders of our multiple voting shares will control a majority of the combined voting power of our voting shares even where the multiple voting shares represent a substantially reduced percentage of our total outstanding shares. The concentrated voting control of holders of our multiple voting shares limits the ability of our subordinate voting shareholders to influence corporate matters for the foreseeable future, including the election of directors as well as with respect to decisions regarding amending of our share capital, creating and issuing additional classes of shares, making significant acquisitions, selling significant assets or parts of our business, merging with other companies and undertaking other significant transactions. As a result, holders of multiple voting shares will have the ability to influence or control many matters affecting us and actions may be taken that our subordinate voting shareholders may not view as beneficial. The market price of our subordinate voting shares could be adversely affected due to the significant influence and voting power of the holders of multiple voting shares. Additionally, the significant voting interest of holders of multiple voting shares may discourage transactions involving a change of control, including transactions in which an investor, as a holder of the subordinate voting shares, might otherwise receive a premium for the subordinate voting shares over the then-current market price, or discourage competing proposals if a going private transaction is proposed by one or more holders of multiple voting shares.
Future transfers by holders of multiple voting shares, other than permitted transfers to such holders’ respective affiliates or direct family members or to other permitted holders, will result in those shares automatically converting to subordinate voting shares, which will have the effect, over time, of increasing the relative voting power of those holders of multiple voting shares who retain their multiple voting shares.
Bain Capital continues to have significant influence over us in the future, including control over decisions that require the approval of shareholders, which could limit shareholders’ ability to influence the outcome of matters submitted to shareholders for a vote.
We are currently controlled by Bain Capital. As of March 31, 2017 Bain Capital beneficially owns approximately 70% of our outstanding multiple voting shares, or approximately 68% of the combined voting power of our multiple voting and subordinate voting shares outstanding. In

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addition, our President and Chief Executive Officer beneficially owns approximately 30% of our outstanding multiple voting shares or approximately 29% of the combined voting power of our outstanding voting shares. As long as Bain Capital owns or controls at least a majority of our outstanding voting power, it will have the ability to exercise substantial control over all corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including the election and removal of directors and the size of our board of directors, any amendment of our certificate of incorporation, notice of articles and articles, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. Even if its ownership falls below 50% of the voting power of our outstanding voting shares, Bain Capital will continue to be able to strongly influence or effectively control our decisions. Bain Capital’s multiple voting shares convert automatically to subordinate voting shares at the time that Bain Capital and its affiliates no longer beneficially own at least 15% of the outstanding subordinate shares and multiple voting shares on a non-diluted basis. Even once Bain Capital’s multiple voting shares convert into subordinate voting shares we may continue to be a controlled company so long as an entity controlled by our President and Chief Executive Officer continues to hold multiple voting shares.
Additionally, Bain Capital’s interests may not align with the interests of our other shareholders. Bain Capital is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Bain Capital may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.
We are a controlled company within the meaning of the New York Stock Exchange listing rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. Our shareholders will not have the same protections afforded to shareholders of companies that are subject to such requirements.
Because Bain Capital continues to control a majority of the combined voting power of our outstanding multiple voting shares and subordinate voting shares we are a controlled company within the meaning of the corporate governance standards of the New York Stock Exchange. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that, within one year of the date of the listing of our subordinate voting shares:

we have a board of directors that is composed of a majority of independent directors, as defined under the New York Stock Exchange listing rules;
we have a compensation committee that is composed entirely of independent directors; and
we have a nominating and governance committee that is composed entirely of independent directors.

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We are eligible to be treated as an emerging growth company, as defined in the Securities Act of 1933, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our subordinate voting shares less attractive to investors.
We are eligible to be treated as an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a non-binding shareholder advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total annual gross revenues exceed US$1.0 billion, if we issue more than US$1.0 billion in non-convertible debt securities during any three-year period, or if we are a large accelerated filer and the market value of our shares held by non-affiliates exceeds US$700 million as of the end of any second quarter before that time. We cannot predict if investors will find our subordinate voting shares less attractive because we may rely on these exemptions. If some investors find our subordinate voting shares less attractive as a result, there may be a less active trading market for our subordinate voting shares and our share price may be more volatile.
As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, which may limit the information publicly available to our shareholders.
As a foreign private issuer we are not required to comply with all of the periodic disclosure and current reporting requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. For example, we are not subject to the proxy rules in the United States and disclosure with respect to our annual meetings will be governed by Canadian requirements. In addition, our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our subordinate voting shares. Furthermore, as a foreign private issuer, we may take advantage of certain provisions in the New York Stock Exchange listing rules that allow us to follow Canadian law for certain governance matters.
Our articles, and certain Canadian legislation contain provisions that may have the effect of delaying or preventing a change in control.
Certain provisions of our articles, together or separately, could discourage potential acquisition proposals, delay or prevent a change in control and limit the price that certain investors may be willing to pay for our subordinate voting shares. For instance, our articles contain provisions that establish certain advance notice procedures for nomination of candidates for election as directors at shareholders’ meetings. A non-Canadian must file an application for review with the Minister

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responsible for the Investment Canada Act and obtain approval of the Minister prior to acquiring control of a “Canadian business” within the meaning of the Investment Canada Act, where prescribed financial thresholds are exceeded. Furthermore, limitations on the ability to acquire and hold our subordinate voting shares and multiple voting shares may be imposed by the Competition Act (Canada). This legislation permits the Commissioner of Competition, or Commissioner, to review any acquisition or establishment, directly or indirectly, including through the acquisition of shares, of control over or of a significant interest in us. Otherwise, there are no limitations either under the laws of Canada or British Columbia, or in our articles on the rights of non-Canadians to hold or vote our subordinate voting shares and multiple voting shares. Any of these provisions may discourage a potential acquirer from proposing or completing a transaction that may have otherwise presented a premium to our shareholders.
Because we are a corporation incorporated in British Columbia and some of our directors and officers are resident in Canada, it may be difficult for investors in the United States to enforce civil liabilities against us based solely upon the federal securities laws of the United States. Similarly, it may be difficult for Canadian investors to enforce civil liabilities against our directors and officers residing outside of Canada.
We are a corporation incorporated under the laws of British Columbia with our principal place of business in Toronto, Canada. Some of our directors and officers and the auditors or other experts named herein are residents of Canada and all or a substantial portion of our assets and those of such persons are located outside the United States. Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon us or our directors or officers or such auditors who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States predicated upon civil liabilities under the Securities Act. Investors should not assume that Canadian courts: (1) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or blue sky laws of any state within the United States or (2) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue sky laws.
Similarly, some of our directors and officers are residents of countries other than Canada and all or a substantial portion of the assets of such persons are located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these non-Canadian residents. In addition, it may not be possible for Canadian investors to collect from these non-Canadian residents judgments obtained in courts in Canada predicated on the civil liability provisions of securities legislation of certain of the provinces and territories of Canada. It may also be difficult for Canadian investors to succeed in a lawsuit in the United States, based solely on violations of Canadian securities laws.
Changes in U.S. tax laws and regulations or trade rules may impact our effective tax rate and may adversely affect our business, financial condition and operating results.
Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could result in an unfavorable change in our effective tax rate, which could adversely affect our business, financial condition and operating results. Additionally, results of the November 2016 U.S. elections have introduced greater uncertainty with respect to tax and trade

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policies, tariffs and government regulations affecting trade between the United States and other countries. Major developments in tax policy or trade relations, such as the renegotiation of the North American Free Trade Agreement or the imposition of unilateral tariffs on imported products, could have a material adverse effect on our growth opportunities, business and results of operations.
There could be adverse tax consequence for our shareholders in the United States if we are a passive foreign investment company.
Under United States federal income tax laws, if a company is, or for any past period was, a passive foreign investment company (“PFIC”), it could have adverse United States federal income tax consequences to U.S. shareholders even if the company is no longer a PFIC. The determination of whether we are a PFIC is a factual determination made annually based on all the facts and circumstances and thus is subject to change, and the principles and methodology used in determining whether a company is a PFIC are subject to interpretation. We do not believe that we currently are or have been a PFIC, and we do not expect to be a PFIC in the future, but we cannot assure you that we will not be a PFIC in the future. United States purchasers of our subordinate voting shares are urged to consult their tax advisors concerning United States federal income tax consequences of holding our subordinate voting shares if we are considered to be a PFIC.
If we are a PFIC, U.S. holders would be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws or regulations. Whether or not U.S. holders make a timely qualified electing fund (“QEF”), election or mark-to-market election may affect the U.S. federal income tax consequences to U.S. holders with respect to the acquisition, ownership and disposition of our subordinate voting shares and any distributions such U.S. holders may receive. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to our subordinate voting shares.
Canada Goose Holdings Inc. is a holding company with no operations of its own and, as such, it depends on its subsidiary for cash to fund its operations and expenses, including future dividend payments, if any.
As a holding company, our principal source of cash flow will be distributions from our operating subsidiary, Canada Goose, Inc. Therefore, our ability to fund and conduct our business, service our debt and pay dividends, if any, in the future will depend on the ability of our subsidiary to generate sufficient cash flow to make upstream cash distributions to us. Our subsidiary is a separate legal entity, and although it is wholly-owned and controlled by us, it has no obligation to make any funds available to us, whether in the form of loans, dividends or otherwise. The ability of our subsidiary to distribute cash to us will also be subject to, among other things, restrictions that may be contained in our subsidiary agreements (as entered into from time to time), availability of sufficient funds in such subsidiary and applicable laws and regulatory restrictions. Claims of any creditors of our subsidiary generally will have priority as to the assets of such subsidiary over our claims and claims of our creditors and shareholders. To the extent the ability of our subsidiary to distribute dividends or other payments to us is limited in any way, our ability to fund and conduct our business, service our debt and pay dividends, if any, could be harmed.

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If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our subordinate voting shares adversely, the price and trading volume of our subordinate voting shares could decline.
The trading market for our subordinate voting shares is influenced by the research and reports that industry or securities analysts publish about us, our business, our market or our competitors. If any of the analysts who cover us or may cover us in the future change their recommendation regarding our subordinate voting shares adversely, or provide more favorable relative recommendations about our competitors, the price of our subordinate voting shares would likely decline. If any analyst who covers us or may cover us in the future were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our subordinate voting shares to decline.
Our constating documents permit us to issue an unlimited number of subordinate voting shares and multiple voting shares without additional shareholder approval.
Our articles permit us to issue an unlimited number of subordinate voting shares and multiple voting shares. We anticipate that we will, from time to time, issue additional subordinate voting shares in the future. Subject to the requirements of the NYSE and the TSX, we will not be required to obtain the approval of shareholders for the issuance of additional subordinate voting shares. Although the rules of the TSX generally prohibit us from issuing additional multiple voting shares, there may be certain circumstances where additional multiple voting shares may be issued, including upon receiving shareholder approval. Any further issuances of subordinate voting shares or multiple voting shares will result in immediate dilution to existing shareholders and may have an adverse effect on the value of their shareholdings. Additionally, any further issuances of multiple voting shares may significantly lessen the combined voting power of our subordinate voting shares due to the 10-to-1 voting ratio between our multiple voting shares and subordinate voting shares.

ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Founded 60 years ago in a small Toronto warehouse, Canada Goose has grown into a highly coveted global outerwear brand. We are recognized for authentic heritage, uncompromised craftsmanship and quality, exceptional warmth and superior functionality. This reputation is decades in the making and is rooted in our commitment to creating premium products that deliver unrivaled functionality where and when it is needed most. Be it Canadian Arctic Rangers serving their country or an explorer trekking to the South Pole, people who live, work and play in the harshest environments on Earth have turned to Canada Goose. Throughout our history, we have found inspiration in these technical challenges and parlayed that expertise into creating exceptional products for any occasion. From research facilities in Antarctica and the Canadian High Arctic to the streets of Toronto, New York City, London, Paris, Tokyo and beyond, people have fallen in love with our brand and made it a part of their everyday lives.
We are deeply involved in every stage of our business as a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. This vertically integrated

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business model allows us to directly control the design and development of our products while capturing higher margins. As of March 31, 2017, our products are sold through select outdoor, luxury and online retailers and distributors in 37 countries, our e-commerce sites in Canada, the United States, the United Kingdom and France, and two recently opened retail stores in Toronto and New York City.
Our company was founded in Toronto, Canada in 1957. In December 2013, we partnered with Bain Capital through a sale of a 70% equity interest in our business to accelerate our growth. In connection with such sale, Canada Goose Holdings Inc. was incorporated under the Business Corporations Act (British Columbia) (the “BCBCA”) on November 21, 2013. The initial public offering of our subordinate voting shares in the United States and Canada was completed on March 21, 2017.
Our principal office is located at 250 Bowie Avenue, Toronto, Ontario, Canada, M6E 4Y2 and our telephone number is (416) 780-9850. Our registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8. Our website address is www.canadagoose.com. Information contained on, or accessible through, our website is not a part of this Annual Report and the inclusion of our website address in this Annual Report is an inactive textual reference.
Our Competitive Strengths
We believe that the following strengths are central to the power of our brand and business model:
Authentic brand. For decades, we have helped explorers, scientists, athletes and film crews embrace the elements in some of the harshest environments in the world. Our stories are real and are best told through the unfiltered lens of Goose People, our brand ambassadors. The journeys, achievements and attitudes of these incredible adventurers embody our core belief that greatness is out there and inspire our customers to chart their own course.
Uncompromised craftsmanship. Leveraging decades of experience, field testing and obsessive attention to detail, we develop superior functional products. Our expertise in matching our technical fabrics with the optimal blends of down enables us to create warmer, lighter and more durable products across seasons and applications. The commitment to superior quality and lasting performance that initially made us renowned for warmth now extends into breathability and protection from wind and rain.
Beloved and coveted globally. We offer outerwear with timeless style for anyone who wants to embrace the elements. From the most remote regions of the world to major metropolitan centres, we have successfully broadened our reach beyond our arctic heritage to outdoor enthusiasts, urban explorers and discerning consumers globally. Our deep connection with our customers is evidenced by their brand loyalty. Consumer surveys conducted on our behalf in 2016 show that 82% of customers say they love their Canada Goose jackets and 84% of customers indicate that, when making their next premium outerwear purchase, they would likely repurchase Canada Goose. These results are among the highest in our industry based on this survey.
Proudly made in Canada. Our Canadian heritage and commitment to local manufacturing are at the heart of our business and brand. While many companies in our industry outsource to offshore

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manufacturers, we are committed to aggressively investing in producing premium, high quality products in Canada, the country from which we draw our inspiration. We believe our Canadian production facilities and craftspeople have set us apart on the international stage and in the minds of our customers.
Flexible supply chain. We directly control the design, innovation, development, engineering and testing of our products, which we believe allows us to achieve greater operating efficiencies and deliver superior quality products. We manage our production through a combination of in-house manufacturing facilities and long-standing relationships with Canadian third party sub-contractors. Our flexible supply chain gives us distinct advantages including the ability to scale our operations, adapt to customer demand, shorten product development cycles and achieve higher margins.
Multi-channel distribution. Our global distribution strategy allows us to reach customers through two distinct, brand-enhancing channels. In our wholesale channel, which as of March 31, 2017 extends into 37 countries, we carefully select the best retail partners and distributors to represent our brand in a manner consistent with our heritage and growth strategy. As a result, our retail partnerships include best-in-class outdoor, luxury and online retailers. Through our fast growing DTC channel, which includes our e-commerce sites in four countries and two recently opened retail stores, we are able to more directly control the customer experience, driving deeper brand engagement and loyalty, while also realizing more favorable margins. We employ product supply discipline across both of our channels to manage scarcity, preserve brand strength and optimize profitable growth for us and our retail partners.
Passionate and committed management team. Through steady brand discipline and a focus on sustainable growth, our management team has transformed a small family business into a global brand. Dani Reiss, our President and Chief Executive Officer, has worked in almost every area of our company and successfully developed our international sales channels prior to assuming the role of CEO in 2001. Mr. Reiss has assembled a team of seasoned executives from diverse and relevant backgrounds who draw on an average of over 15 years’ experience working with a wide range of leading global companies including Marc Jacobs, New Balance, Nike, Patagonia, Ralph Lauren, McKinsey, UFC and Red Bull. Their leadership and passion have accelerated our evolution into a three season lifestyle brand and the rollout of our DTC channel.



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B.
Business Overview
Our Growth Strategies
We have built a strong foundation as Canada Goose has evolved into a highly coveted global outerwear brand. Over the past three fiscal years, we have grown our revenue at a 36.0% Compound Annual Growth Rate (“CAGR”), net income at a 9.2% CAGR and Adjusted EBITDA at a 47.6% CAGR. We have also expanded our gross margin from 40.6% to 52.5% and our Adjusted EBITDA Margin from 17.0% to 20.1% over the same period while concurrently making significant long-term investments in our human capital, production capacity, brand building and distribution channels. Leveraging these investments and our proven growth strategies, we will continue to aggressively pursue our substantial global market opportunity.
Execute our proven market development strategy. As we have grown our business, we have developed a successful framework for entering and developing our markets by increasing awareness and broadening customer access. We intend to continue executing on the following tactics as we further penetrate our markets globally:
Introduce and strengthen our brand. Building brand awareness among potential new customers and strengthening our connections with those who already know us will be a key driver of our growth. While our brand has achieved substantial traction globally and those who have experienced our products demonstrate strong loyalty, our presence is relatively nascent in many of our markets. According to an August 2016 consumer survey conducted on our behalf, the vast majority of consumers outside of Canada are not aware of Canada Goose. Through a combination of the organic, word-of-mouth brand building that has driven much of our success to date and a more proactive approach to reaching new audiences through traditional channels, we will continue to introduce the Canada Goose brand to the world.
Enhance our wholesale network. We intend to continue broadening customer access and strengthening our global foothold in new and existing markets by strategically expanding our wholesale network and deepening current relationships. In all of our markets, we have an opportunity to increase sales by adding new wholesale doors and increasing volume in existing retailers. Additionally, we are focused on strengthening relationships with our retail partners through broader offerings, exclusive products and shop-in-shop formats. We believe our retail partners have a strong incentive to showcase our brand as our products drive customer traffic and consistent full-price sell-through in their stores.
Accelerate our e-commerce-led Direct to Consumer rollout. Our DTC channel serves as an unfiltered window into our brand which creates meaningful relationships and direct engagement with our customers. This drives opportunities to generate incremental revenue growth and capture full retail margin. We have rapidly grown our online sales to $115.2 million in fiscal 2017, which represented 28.5% of our consolidated revenue. We recently launched new online storefronts in the United Kingdom and France and plan to continue introducing online stores in new markets. In May 2017, we announced our intention to open seven additional e-commerce sites in Germany, Sweden, Netherlands, Ireland, Belgium, Luxembourg and Austria.
Our e-commerce platform is complemented by our two recently opened retail stores in Toronto and New York City. We intend to open a select number of additional retail locations in major

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metropolitan centres and premium outdoor destinations where we believe they can operate profitably, including London and Chicago in fiscal 2018.
Strengthen and expand our geographic footprint. We believe there is an opportunity to increase penetration across our existing markets and selectively enter new regions. Although the Canada Goose brand is recognized globally, our recent investments have been focused on North America and have driven exceptional growth in Canada and the United States. Outside of Canada and the United States (“Rest of World”), we have identified an opportunity to accelerate our momentum utilizing our proven growth framework. The following table presents our revenue in each of our geographic segments over the past three fiscal years:
(in CAD $millions)
Fiscal year ended March 31,
 
'15 - '17
 
2015
 
2016
 
2017
 
CAGR
Canada
75.7

 
95.2

 
155.1

 
43.1
%
United States
57.0

 
103.4

 
131.9

 
52.1
%
Rest of World
85.7

 
92.2

 
116.8

 
16.7
%
 
 
 
 
 
 
 
 
Total
218.4
 
290.8
 
403.8
 
36.0
%

Canada. While we have achieved high brand awareness in Canada, we continue to experience strong penetration and revenue growth driven primarily by expanding access and product offerings. After developing a strong wholesale footprint, we successfully launched our Canadian e-commerce platform in August 2014 and opened our first retail store in Toronto in October 2016. We expect to further develop our presence through increased strategic marketing activities, deeper relationships with our retail partners and continued focus on our DTC channel. Additionally, we intend to continue broadening our product offering, to make Canada Goose a bigger part of our customers’ lives.
United States. As we continue to capture the significant market opportunity in the United States, our focus is on increasing brand awareness to a level that approaches what we have achieved in Canada. According to an August 2016 consumer survey conducted on our behalf, aided brand awareness in the United States is 16% as compared to 76% in Canada. Our market entry has been staged on a regional basis, with the bulk of our investments and wholesale penetration concentrated in the Northeast, where our aided brand awareness is 25% and as high as 46% in Boston and New York City. This has been the primary driver of our historical growth and momentum in the U.S. and we continue to generate strong growth in the region. Building on this success, we launched our national e-commerce platform in September 2015 and opened our first retail store in New York City in November 2016. We believe there is a large white space opportunity in other regions such as the Mid-Atlantic as well as the Midwest, where our aided brand awareness is currently 18%, and West, where our aided brand awareness is 14% and as high as 26% in metropolitan markets such as Denver and San Francisco. As we sequentially introduce our brand to the rest of the country, we are focused on expanding our wholesale footprint, including executing our shop-in-shop strategy and continuing to deliver a broader three season product assortment to our partners.

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Rest of World. We currently generate sales in every major Western European market and, while this is where the brand first achieved commercial success, we believe there are significant opportunities to accelerate these markets to their full potential. In the United Kingdom and France in particular, we have achieved strong traction through our retail partnerships, but have yet to fully extend our wholesale network and are only in the initial phase of executing on our shop-in-shop strategy. In both markets, we launched our e-commerce platforms in September 2016 and intend to establish our owned retail presence in the near future. While the United Kingdom and France are our most developed European markets, we have identified a number of markets with significant near-term development potential, such as Germany, Italy and Scandinavia.
Outside of Europe, our most established markets are Japan and Korea. Over the past decade, we have grown successfully in Japan and, in both Japan and Korea, recently partnered with world-class distributors. These partners will help us continue to build awareness and access to the brand while ensuring its long term sustainability. Additionally, we currently have a minimal presence in China and other large markets which represent significant future opportunities.
From fiscal 2014 to fiscal 2016, we nearly doubled our market penetration in Canada to reach approximately 35 unit sales per 1,000 addressable customers (people living above the 37th Parallel and with annual household income of greater than $100,000). We have been similarly successful in the United States, Western Europe, Scandinavia and Asia with units sales per 1,000 addressable customers reaching between 3.5 and 10 units, but we still have room to grow in our current markets. Even without expanding our geographic footprint or our product lines, we believe we have significant opportunity to further increase penetration in the United States, Western Europe (Sweden, Denmark, Norway, Finland, France, United Kingdom, the Netherlands, Spain, Germany, Austria, Belgium and Italy), Scandinavia and Asia (Japan and South Korea); if we were to achieve 50% of current penetration in Canada in these other geographies, this would result in tripled unit demand within our Fall and Winter product categories.
Enhance and expand our product offering. Continuing to enhance and expand our product offering represents a meaningful growth driver for Canada Goose. Broadening our product line will allow us to strengthen brand loyalty with those customers who already love Canada Goose, drive higher penetration in our existing markets and expand our appeal across new geographies and climates. Drawing on our decades of experience and customer demand for inspiring new functional products, we intend to continue developing our offering through the following:
Elevate Winter. Recognizing that people want to bring the functionality of our jackets into their everyday lives, we have developed a wide range of exceptional winter products for any occasion. While staying true to our tactical industrial heritage, we intend to continue refreshing and broadening our offering with new stylistic variations, refined fits and exclusive limited edition collaborations.
Expand Spring and Fall. We intend to continue building out our successful Spring and Fall collections in categories such as lightweight and ultra-lightweight down, rainwear, windwear and softshell jackets. While keeping our customers warm, comfortable and protected across three seasons, these extensions also increase our appeal in markets with more temperate climates.

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Extend beyond outerwear. Our strategy is to selectively respond to customer demand for functional products in adjacent categories. Consumer surveys conducted on our behalf indicate that our customers are looking for additional Canada Goose products, particularly in key categories such as knitwear, fleece, footwear, travel gear and bedding. We believe offering inspiring new products that are consistent with our heritage, functionality and quality represents an opportunity to develop a closer relationship with our customers and expand our addressable market.

Continue to drive operational excellence. As we scale our business, we plan to continue leveraging our brand and powerful business model to drive operational efficiencies and higher margins in the following ways:
Channel mix. We intend to expand our DTC channel in markets that can support the profitable rollout of e-commerce and select retail stores. As our distribution channel mix shifts toward our e-commerce-led DTC channel, we expect to capture incremental gross margin. A jacket sale in our DTC channel provides two-to-four times greater contribution to segment operating income per jacket as compared to a sale of the same product in our wholesale channel.
Price optimization. We intend to continue optimizing our pricing to capture the full value of our products and the superior functionality they provide to our customers. Additionally, we actively balance customer demand with scarcity of supply to avoid the promotional activity that is common in the apparel industry. This allows us and our retail partners to sell our products at full price, avoid markdowns and realize full margin potential.
Manufacturing capabilities. Approximately one-third of Canada Goose products are currently manufactured in our own facilities in Canada. We intend to optimize our domestic manufacturing mix by opportunistically bringing additional manufacturing capacity in-house to capture incremental gross margin.
Operating leverage. We have invested ahead of our growth in all areas of the business including design and manufacturing, multi-channel distribution and corporate infrastructure. For example, our current manufacturing footprint is sufficient to allow us to double our current headcount. As we continue our growth trajectory, we have the opportunity to leverage these investments and realize economies of scale.
Our Products
Our arctic heritage. Authenticity is everything to Canada Goose. We began as an outerwear manufacturer focused primarily on providing parkas to people working in the harshest environment on Earth—the Arctic. From the crew of a northern Canadian airline, First Air, to Canadian Arctic Rangers, we have been trusted to help keep people warm. For decades, this utilitarian, functional history has been core to our heritage. To ensure we deliver a product that performs when and where it is needed most, we strive to make the best products of their kind by using the highest quality raw materials and craftsmanship.
The precision of every cut, fold and stitch in our products is guided by decades of experience. From zipper to button and stitch to stitch, every element is carefully chosen and meticulously put into place by hand. Every Canada Goose jacket passes through the hands of multiple

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craftspeople, all united by our commitment to uncompromising quality. Our quality assurance team inspects every jacket to ensure no detail is overlooked. We believe our best-in-class Canadian manufacturing capabilities and partnerships afford us increased quality control and direct involvement in all stages of the process, enabling us to stand behind our outerwear with a lifetime warranty against defects in materials and workmanship.
Our evolution. As a global three-season outerwear brand, our product offering has evolved significantly since the days of solely making specialty jackets such as the Snow Mantra and Expedition parkas for the severe Arctic environment. We leveraged our tactical industrial heritage, including our long relationship with the Canadian military and law enforcement, to inspire, develop and refine functionally superior in-line collections for extreme conditions and beyond.
Recognizing our customers want to bring the functionality of our jackets into their everyday lives, we expanded our offering to include products for outdoor enthusiasts, urban explorers and discerning consumers everywhere. True to our heritage, we partnered with extraordinary Goose People as a source of inspiration and real-world testing. Whether developing novel HyBridge products for Ray Zahab to run the Sahara or custom-designing Laurie Skreslet’s coat to summit Everest, which inspired our Altitude line, Canada Goose has found inspiration in every technical challenge and parlayed that expertise into creating exceptional products for any occasion.
The uncompromised craftsmanship and quality of the Canada Goose brand is preserved in new products and high performance materials to keep our customers warm and comfortable no matter how low the temperature drops. According to our customers who responded to our consumer survey our jackets are the warmest as compared to other outerwear brands. As we evolved and expanded our winter assortment to suit new uses, climates and geographies, we also refreshed our core offerings with the introduction of our Black Label collection, enhancing our classic products with a focus on elevated style, luxurious fabrics and refined fits.
Our broad set of manufacturing capabilities and access to innovative materials ranging from ArcticTech and Tri-Durance fabrics to luxury Loro Piana wool enable us to meet customers’ needs in the Arctic, on designer runways and nearly everywhere in between. At the same time as our coats keep Canadian law enforcement warm and equip Goose People on epic adventures, our collaborations with Marc Jacobs, Levi’s, musician Drake’s October’s Very Own (OVO) fashion brand, professional baseball player José Bautista and others have been met with strong acclaim. These collaborations help extend our brand to new audiences and introduce inspiring new styles to those who already love Canada Goose.
Expansion into three seasons. As our heritage line has expanded significantly, Canada Goose has also developed a reputation for superior quality and exceptional functionality across Spring and Fall. No matter the season, people trust Canada Goose to keep them warm, comfortable and protected. Our Spring and Fall products enable consumers to embrace the elements in every season, with a wide selection of lightweight and ultra-lightweight down, rainwear, windwear and other down hybrid and softshell jackets.

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Our Spring and Fall collections have demonstrated meaningful traction with consumers, achieving a 60% increase in sales between fiscal 2015 and fiscal 2016. They have also been met with great critical acclaim: HyBridge Lite won the Gear of The Year Award from Outside Magazine in 2011 and our Spring 2017 collection was named Editor’s Pick by World’s Global Style Network (WGSN), a leading trend forecaster.

Beyond outerwear. Canada Goose has launched a refined line of accessories in response to customer demand for products to complement their outerwear. Our accessories focus on handwear, headwear and neckwear, and offer unparalleled warmth, function and timeless style to our customers, consistent with the heritage of our core products. Beyond accessories, we continue to selectively respond to customer demand for new product categories. Our customers have shown meaningful interest in key new product categories including knitwear and fleece, which we are developing, as well as footwear, travel gear and bedding, which we may pursue in the future. As we expand the Canada Goose brand to serve new uses, wearing occasions, geographies and consumers, we will always stay true to who we are and what the Canada Goose brand stands for: authentic heritage, uncompromised craftsmanship and quality, exceptional warmth and superior functionality.
Sourcing and Manufacturing
Uncompromised craftsmanship begins with sourcing the right raw materials. We use premium fabrics and finishings that are built to last. Our blends of down and fabrics enable us to create warmer, lighter and more durable products across seasons and applications. Our products are made with down because it is recognized as the world’s best natural insulator, providing approximately three times the warmth per ounce as synthetic alternatives and, when necessary, trimmed with real fur to protect the skin from frostbite in harsh conditions.
We are committed to the sustainable and ethical sourcing of our raw materials. We have introduced comprehensive traceability programs for fur and down throughout our supply chain which came into effect during the spring of 2017. We only use down that is a byproduct of the poultry industry and we only purchase down and fur from suppliers who adhere to our stringent standards regarding fair practices and humane treatment of animals.
As of March 31, 2017, we operate five production facilities in Toronto, Winnipeg and Montreal, manufacturing approximately one-third of our products in-house. We also work with 30 Canadian and 7 international highly qualified subcontractors who offer specialized expertise, which provides us with flexibility to scale our production of parkas and non-core products, respectively. We employ 1,340 manufacturing employees as of March 31, 2017, and have been recognized by the Government of Canada for supporting the apparel manufacturing industry in Canada. We have invested ahead of our growth and more than doubled our in-house and contract manufacturing unit production capacity, respectively, in the past five years.
Multi-Channel Distribution Network
We sell our products through our wholesale and DTC channels. In fiscal 2017, our wholesale channel accounted for 71.5% of our revenue and our DTC channel contributed 28.5% of our

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revenue. Across both channels we are very selective with the distribution and supply of our products.
Wholesale. The wholesale channel allows us to enter and develop new markets, maintain a leading position within our geographies and make informed investments in our DTC infrastructure. As we have grown, we have evolved what was originally a generalist approach to account management through specialist capabilities that are better aligned with the needs of specific markets and retail formats. These capabilities allow us to develop strategic relationships directly with retailers and distributors. We work with a select set of partners who respect our heritage, share our values and strengthen our market presence. As of March 31, 2017, through our global network of over 2,500 points of distribution with retailers such as Sporting Life, Harry Rosen, Gorsuch, Saks Fifth Avenue, Nordstrom, Selfridges and Lane Crawford we reach customers across 37 countries. Our wholesale distribution includes a mix of outdoor, luxury and online retailers. We drive traffic for our retail partners and leverage our mutually beneficial relationships to receive prime placement within their stores, showcase a broader product offering and establish Canada Goose shops-in-shops. Careful planning with our wholesale network allows us to manage scarcity and maintain high levels of full-price sell-through. Over the past three years, we have been in the process of enhancing our wholesale network to bring all of our accounts in-house with enhanced management. This allows us to deepen the relationships with our retailers by strategizing on product assortment, shop-in-shop presentation and rollout, and creates opportunities to increase our three season penetration and to offer new products through our retail partners.
Direct to Consumer. We operate an e-commerce-led DTC channel, which has grown rapidly since its launch in fiscal 2015. Our online store features our full product offering and grants us the ability to build valuable intelligence through a direct conversation with our customers. We rolled out our e-commerce platforms in Canada and the United States as well as the United Kingdom and France in August 2014, September 2015 and September 2016, respectively. We intend to continue building out our e-commerce infrastructure in new markets where we have an established wholesale presence.
Our e-commerce rollout is complemented by our retail stores in premium high traffic locations. We opened our first two retail stores in Toronto and New York City in the fall of 2016. Going forward, we plan to open a limited number of additional retail stores in other major metropolitan centres as well as premium outdoor destinations where we believe they can operate profitably. We have announced planned new locations in London and Chicago in fiscal 2018. This unfiltered window into our brand will allow us to develop a closer relationship with our customers through unique experiences, feature our full product offering and drive revenue growth across both channels.
Marketing
We have never taken a traditional marketing approach to driving consumer awareness. We have told real stories in authentic ways, fueling brand awareness and affinity through creative marketing initiatives and developing strategic relationships in relevant industries. Our success has been driven organically by word-of-mouth marketing. We have found that the experience

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people have with Canada Goose products is something they eagerly and passionately share with others, which we believe generates exceptional demand for our products.
Powerful and creative storytelling. To us, marketing is about telling stories—interesting stories with genuine impact. As a result of the love for our products and the deep relationships we have developed, our brand has been featured extensively in a wide range of media around the world including documentaries, feature films, commercials and magazines.
We also create original content to drive awareness and understanding of Canada Goose. In celebration of our 50th anniversary, we published Goose People, a coffee table book highlighting 50 people from around the world who embody our values. This cemented one of our key marketing initiatives as Goose People continue to be an important way for us to authentically tell our stories. In 2015, we brought some of these stories to life on the big screen through our collaboration with Oscar-winning director, Paul Haggis, and our production of the film, Out There, which was awarded two Cannes Gold Lions.
Goose People. Goose People are a diverse group of global brand ambassadors—adventurers, athletes, scientists and artists—who embody our values and lifestyle, stand for something bigger than themselves and inspire others through epic adventures and accomplishments. We consider them the epitome of our core belief that greatness is out there. They have become a platform to showcase our brand’s heritage, authentic story and uncompromised craftsmanship.
active622326805cghify_image1.jpg
 
active622326805cghify_image2.jpg
 
active622326805cghify_image3.jpg
 
active622326805cghify_image4.jpg
Film and entertainment. For more than three decades, our jackets have been a staple on film sets around the world and are known as the unofficial jacket of film crews anywhere it is cold. Our jackets offer crew and talent the warmth and functionality they need to survive long shoots in the most demanding environments. Due to this long-standing and organic seeding relationship, we have not paid for product placement, but our products have naturally transitioned from behind the scenes to on-camera as a way to authenticate cold weather scenes. We also support the industry as an official sponsor of a number of international film festivals, including the Sundance Film Festival and Toronto International Film Festival.
Investing for the future. Moving forward, our marketing focus is on continuing to tell our stories in unique, creative and authentic ways that engage and inspire customers. As our distribution model has shifted from pure wholesale to multi-channel, our business needs have evolved. We have supported this shift through digital first marketing that scales quickly and globally while maintaining a consistent and authentic brand experience for our customers. We have also taken a

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more proactive and sophisticated approach to understanding our customers and utilizing insights to inform how we deliver new products. This allows us to be present in their preferred digital platforms and to engage our fans and maintain their loyalty for years to come. We will continue to strategically invest in reaching new audiences in developing markets and boosting affinity around the world. Our marketing efforts, like our products, will always be subject to the brand discipline and stewardship that have guided us throughout our history.
Our Market
Strongly positioned in large and growing apparel market segment. Our focus on functionality and quality broadens our reach beyond people working in the coldest places on earth to outdoor enthusiasts, urban explorers and discerning consumers globally. Our uncompromised craftsmanship positions our products as premium technical garments and coveted luxury items in the eyes of our customer. We believe the staying power of our brand strongly positions us to compete in the growing outerwear and luxury apparel markets.

Proven growth framework to further penetrate geographic markets. While we have a global distribution network in place, we recognize the potential for significant penetration upside across all of our markets. Our tailored approach to market development is informed by prevailing awareness and distribution. We cost-effectively develop initial awareness in new markets by building strong relationships with carefully selected partners within our wholesale channel. Wholesale momentum informs our incremental brand building investments in each region. As our market presence grows, we evaluate the opportunity to roll out our DTC channel. The first step in this process is the introduction of our e-commerce platform which is followed by the evaluation of select retail store opportunities. With increased customer awareness and access, we begin to introduce a broader product offering.
For example, as we continue to capture the significant market opportunity in the United States, we are pursuing a staged regional expansion. Our initial entry into the U.S. market was concentrated in the Northeast where we grew our wholesale network to 125 doors as of March 31, 2017 and, according to a survey conducted on our behalf in August 2016 of consumers that have purchased premium outerwear, achieved aided brand awareness of 46% in Boston and New York City. Building on this, we have begun to focus on expanding customer access via our e-commerce site and retail store in New York City. Our successful execution in this region has been the primary driver of our 52.1% revenue CAGR in the United States from fiscal 2015 to fiscal 2017.
Moving beyond our success in the Northeast, we recognize a significant whitespace opportunity across the United States. We continue to focus on introducing and strengthening the Canada Goose brand given relatively low aided brand awareness levels of 26% in key metropolitan markets such as Denver and San Francisco. In these rapidly developing markets, we remain focused on expanding our wholesale footprint, including executing our shop-in-shop strategy and continuing to drive a broader product assortment to our partners. Our national e-commerce presence offers us a direct connection to our customers and informs our efforts in high potential regions such as the Mid-Atlantic, Midwest and Pacific Northwest. As we continue to expand to

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regions with diverse and temperate climates, our product offering will include a stronger emphasis on our expanding Spring and Fall collections.
The success we have achieved in North America has allowed us to refine and strengthen our framework for market development. We will continue to aggressively pursue our substantial global market opportunity using our proven growth strategies.
Competition
The market for outerwear is highly fragmented. We principally operate in the market for premium outerwear, which is part of the broader apparel industry. We compete directly against other manufacturers, wholesalers and direct retailers of outerwear, premium functional outerwear and luxury outerwear. We compete both with global brands and with regional brands operating only in select markets. Because of the fragmented nature of our marketplace, we also compete with other apparel sellers, including those who do not specialize in outerwear. While we operate in a highly competitive market, we believe there are many factors that differentiate us from other manufacturers, wholesalers and retailers of outerwear, including our brand, our heritage and history, our focus on functionality and craftsmanship and the fact that our core products are made in Canada.
Intellectual Property
We own the trademarks used in connection with the marketing, distribution and sale of all of our products in the United States, Canada and in the other countries in which our products are sold. Our major trademarks include the CANADA GOOSE word mark and the ARCTIC PROGRAM & DESIGN trademark (our disc logo consisting of the colour-inverse design of the North Pole and Arctic Ocean). In addition to the registrations in Canada and the United States, our word mark and design are registered in other jurisdictions which cover approximately 37 jurisdictions. Furthermore, in certain jurisdictions we register as trademarks certain elements of our products, such as fabric, warmth categorization and style names such as our Snow Mantra parka.
We enforce our trademarks and we have taken several measures to protect our customers from counterfeiting activities. Since 2011, we have sewn a unique hologram, designed exclusively for us, into every jacket and accessory as proof of authenticity. Additionally, our website has a tool for potential online customers to verify the integrity of third party retailers that purport to sell our products. We are also active in enforcing rights on a global basis to our trademarks and taking action against counterfeiters, online and in physical stores.
Seasonality
Our business is seasonal in nature. See Item 5.A — “Operating and Financial Review and Prospects” — “Management’s Discussion and Analysis of Financial Results” — “Factors Affecting our Performance” — “Seasonality” for a discussion.

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Government Regulation
In Canada and in the other jurisdictions in which we operate, we are subject to labour and employment laws, laws governing advertising, privacy and data security laws, safety regulations and other laws, including consumer protection regulations that apply to retailers and/or the promotion and sale of merchandise and the operation of stores and warehouse facilities. Our products sold outside of Canada are subject to tariffs, treaties and various trade agreements as well as laws affecting the importation of consumer goods. We monitor changes in these laws, regulations, treaties and agreements, and believe that we are in material compliance with applicable laws.

C.    Organizational Structure
The following chart reflects our organizational structure (including the jurisdiction of formation or incorporation of the various entities).
orgchartforq4filingupdated.jpg

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D.    Property, Plants and Equipment
We maintain the following leased facilities for our corporate headquarters and to conduct our principal manufacturing and retail activities, which we believe are in good condition and working order:
Location
Principal Activity
 
Square Feet
 
Lease Expiration Date
Canada
 
 
 
 
 
Toronto, Ontario
Corporate Headquarters, Showroom and Manufacturing
 
190,978 square feet
 
June 30, 2023
Scarborough, Ontario
Manufacturing
 
84,800 square feet
 
May 31, 2020
Scarborough, Ontario
Logistics
 
117,179 square feet
 
August 31, 2027
Yorkdale Shopping Centre,
Toronto, Ontario
Retail Store
 
4,503 square feet
 
October 31, 2026
Winnipeg, Manitoba
Manufacturing
 
82,920 square feet
 
November 12, 2022
Winnipeg, Manitoba
Manufacturing
 
94,541 square feet
 
September 30, 2025
Boisbriand, Québec
Manufacturing
 
94,547 square feet
 
July 31, 2023
United States
 
 
 
 
 
New York, NY
Office and Showroom
 
4,040 square feet
 
December 31, 2024
New York, NY
Retail Store
 
6,970 square feet
 
March 31, 2027
Chicago, IL
Retail Store
 
10,188 square feet
 
July 31, 2027
Rest of World
 
 
 
 
 
Paris, France
Office and Showroom
 
4,090 square feet
 
March 15, 2018
London, U.K.
Retail Store
 
6,000 square feet
 
September 28, 2027
Zug, Switzerland
Office and Showroom
 
7,545 square feet
 
January 31, 2021

ITEM 4A. UNRESOLVED STAFF COMMENTS
None
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following tables set forth our selected consolidated financial data. The selected historical consolidated financial data below should be read in conjunction with our Audited Annual Consolidated Financial Statements (Item 18), as well as Item 4. — “Information on the Company” and Item 5. — “Operating and Financial Condition and Results of Operations” of this Annual Report.
We have derived the statements of operations data for the years ended March 31, 2017, March 31, 2016 and March 31, 2015 and the consolidated financial position information as at March 31, 2016 and March 31, 2017 from our Audited Annual Consolidated Financial Statements included elsewhere in this Annual Report. The statements of operations data for the periods from

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December 9, 2013 to March 31, 2014 and April 1, 2013 to December 8, 2013 have been derived from our audited consolidated financial statements, which are not included in this Annual Report. Our Audited Annual Consolidated Financial Statements have been prepared in accordance with IFRS and are presented in thousands of Canadian dollars except where otherwise indicated. Our historical results are not necessarily indicative of the results that should be expected in any future period.
On December 9, 2013, Bain Capital acquired a majority equity interest in our business as part of the Acquisition. Accordingly, the financial statements presented for fiscal 2014 reflect the periods both prior and subsequent to the Acquisition. The consolidated financial statements for March 31, 2014 are presented separately for the predecessor period from April 1, 2013 through December 8, 2013 (the “Predecessor 2014 Period”), and the successor period from December 9, 2013 through March 31, 2014 (the “Successor 2014 Period”), with the periods prior to the Acquisition being labeled as predecessor and the periods subsequent to the Acquisition labeled as successor.
 
Successor
 
 
Predecessor
CAD $000s (except per share data)
Fiscal Year ended March 31, 2017
 
Fiscal Year ended March 31, 2016
 
Fiscal Year ended March 31, 2015
 
Period from December 9, 2013 to March 31, 2014
 
 
Period from April 1, 2013 to December 8, 2013
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
Revenue
403,777

 
290,830

 
218,414

 
17,263

 
 
134,822

Cost of sales
191,709

 
145,206

 
129,805

 
14,708

 
 
81,613

Gross profit
212,068

 
145,624

 
88,609

 
2,555

 
 
53,209

Selling, general and administrative expenses
164,965

 
100,103

 
59,317

 
20,494

 
 
30,119

Depreciation and amortization
6,601

 
4,567

 
2,623

 
804

 
 
447

Operating income (loss)
40,502

 
40,954

 
26,669

 
(18,743
)
 
 
22,643

Net interest and other finance costs
9,962

 
7,996

 
7,537

 
1,788

 
 
1,815

Income (loss) before income tax expense (recovery)
30,540

 
32,958

 
19,132

 
(20,531
)
 
 
20,828

Income tax expense (recovery)
8,900

 
6,473

 
4,707

 
(5,054
)
 
 
5,550

Net income (loss)
21,640

 
26,485

 
14,425

 
(15,477
)
 
 
15,278

Other comprehensive loss
(610
)
 
(692
)
 

 

 
 

Total comprehensive income (loss)
21,030

 
25,793

 
14,425

 
(15,477
)
 
 
15,278

Earnings (loss) per share
 
 
 
 
 
 
 
 
 
 
Basic
$
0.22

 
$
0.26

 
$
0.14

 
$
(0.15
)
 
 
$
157,505.15

Diluted
$
0.21

 
$
0.26

 
$
0.14

 
$
(0.15
)
 
 
$
157,505.15

Weighted average number of shares outstanding
 
 
 
 
 
 
 
 
 
 
Basic
100,262,026
 
100,000,000
 
100,000,000

 
100,000,000
 
 
97
Diluted
102,023,196
 
101,692,301
 
101,211,134

 
100,000,000
 
 
97

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CANADA GOOSE HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three months and twelve months ended March 31, 2017

The following Management’s Discussion and Analysis (“MD&A”) for Canada Goose Holdings Inc. (“Canada Goose” or the “Company”) is dated June 5, 2017 and provides information concerning our financial condition and results of operations for three months ended March 31, 2017 and the fiscal year ended March 31, 2017 (“fiscal 2017”). You should read this MD&A together with our audited consolidated financial statements and the related notes for the fiscal year ended March 31, 2017 (“Audited Annual Consolidated Financial Statements”), and other financial information. Additional information about Canada Goose is available on our website at www.canadagoose.com, on the SEDAR website at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission (the “SEC”) website which includes the Annual Report on Form 20-F at www.sec.gov. Our actual results, performance and achievements contained in this MD&A could differ materially from those implied by the forward-looking statements as a result of various factors, including those discussed below and elsewhere in our Annual Report on Form 20-F.

This MD&A contains forward-looking statements. These statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this MD&A and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. Forward-looking statements contained in this MD&A include, among other things, statements relating to:

expectations regarding industry trends and the size and growth rates of addressable markets;
our business plan and our growth strategies, including plans for expansion to new markets and new products; and
expectations for seasonal trends.
Although we base the forward-looking statements contained in this MD&A on assumptions that we believe are reasonable, we caution you that actual results and developments (including our results of operations, financial condition and liquidity, and the development of the industry in which we operate) may differ materially from those made in or suggested by the forward-looking statements contained in this MD&A. In addition, even if results and developments are consistent with the forward-looking statements contained in this MD&A, those results and developments

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may not be indicative of results or developments in subsequent periods. Certain assumptions made in preparing the forward-looking statements contained in this MD&A include:

our ability to implement our growth strategies;
our ability to maintain good business relationships with our suppliers, wholesalers and distributors;
our ability to keep pace with changing consumer preferences;
our ability to protect our intellectual property; and
the absence of material adverse changes in our industry or the global economy.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” section of our Annual Report on Form 20-F for the year ended March 31, 2017, which include, but are not limited to, the following risks:

we may be unable to maintain the strength of our brand or to expand our brand to new products and geographies;
we may be unable to protect or preserve our brand image and proprietary rights;
we may not be able to satisfy changing consumer preferences;
an economic downturn may affect discretionary consumer spending;
we may not be able to compete in our markets effectively;
we may not be able to manage our growth effectively;
poor performance during our peak season may affect our operating results for the full year;
our indebtedness may adversely affect our financial condition;
our ability to maintain relationships with our select number of suppliers;
our ability to manage our product distribution through our retail partners and international distributors;
the success of our marketing programs;
the risk our business is interrupted because of a disruption at our headquarters; and
fluctuations in raw materials costs or currency exchange rates.
 
Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. As a result, any or all of our forward-looking statements in this MD&A may turn out to be inaccurate. We have included important factors in the cautionary statements included in this MD&A, particularly in Section 3.D of our Annual Report on Form 20-F titled “Risk Factors,” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking

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statements, and you should not rely on our forward-looking statements. Moreover, we operate in a highly competitive and rapidly changing environment in which new risks often emerge. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward‑looking statements we may make.
You should read this MD&A and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained herein are made as of the date of this MD&A, and we do not assume any obligation to update any forward-looking statements except as required by applicable law.

BASIS OF PRESENTATION

The Audited Annual Consolidated Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and are presented in thousands of Canadian dollars, except where otherwise indicated. However, certain financial measures contained in this MD&A are non-IFRS measures and are discussed further under “Non-IFRS Measures” below. All references to “$” and “dollars” refer to Canadian dollars, unless otherwise indicated. Certain totals, subtotals and percentages throughout this MD&A may not reconcile due to rounding.

INTRODUCTION

This MD&A is provided as a supplement to the accompanying Audited Annual Consolidated Financial Statements to help provide an understanding of our results of operations, financial condition and liquidity. This MD&A is organized as follows.

Overview. This section provides a summary of financial performance, current trends and outlook. In addition this section includes a discussion of recent developments and transactions affecting comparability that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.
 
Results of operations. This section provides an analysis of operations for fiscal 2017 as compared to fiscal 2016; fiscal 2016 as compared to fiscal 2015; and the three months ended March 31, 2017 compared to the three months ended March 31, 2016.

Non-IFRS Measures. This section outlines non-IFRS measures which we believe provide useful information to both management and shareholders for purposes of measuring the financial performance of the business.

Financial condition and liquidity. This section provides a discussion of our financial condition and liquidity as at March 31, 2017, which includes (i) an analysis of financial conditions compared to the prior fiscal year end; (ii) an analysis of changes in our cash flows for fiscal 2017 and fiscal 2016 compared to the respective

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prior fiscal year; (iii) an analysis of our liquidity; and (iv) a summary of contractual obligations as at March 31, 2017.

Quantitative and qualitative disclosures about market risk. This section discusses how we manage our risk exposures related to foreign currency exchange rates and interest rates.

Critical accounting policies. This section discusses accounting policies considered to be important to our results of operations and financial conditions which typically require significant judgment and estimation on the part of management in their application. In addition, all of our significant accounting policies including our critical accounting policies are summarized in Note 2 to the accompanying audited financial statements.

Changes in accounting policies. This section discusses the actual and potential impact on our reported results of operations and financial condition of certain accounting standards that have been recently adopted by the Company, issued or proposed.

Internal controls over financial reporting. This section provides an update on our internal controls over financial reporting, including our remediation efforts with respect to the material weakness we have identified.


OVERVIEW

Factors Affecting our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us and may pose risks and challenges, including those discussed below.
Market Expansion. Our market expansion strategy has been a key driver of our recent revenue growth and we have identified a number of additional high potential markets where we plan to continue to execute our expansion strategy. Across all of our markets, we plan to focus on increasing brand awareness, deepening our wholesale presence and rolling out our Direct to Consumer (“DTC”) channel as market conditions permit. We expect that marketing and selling expenses to support these initiatives will continue to grow in proportion to anticipated revenue growth.
Growth in our DTC Channel. We introduced our DTC channel in fiscal 2015 with the launch of our Canadian e-commerce store and have since established e-commerce stores in the United States, the U.K. and France. In the fall of 2016, we opened our first two retail stores in Toronto and in New York City and anticipate opening a select number of additional retail locations where we believe they can operate profitably, such as London and Chicago. In fiscal 2018, we are targeting opening a further seven e-commerce sites, with a long-term target of 15 to 20 e-commerce sites. In addition, in fiscal 2018 we are targeting opening three retail stores in new geographies with a

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long term target of 15 to 20 retail stores. A jacket sale in our DTC channel provides two-to-four times greater contribution to segment operating income per jacket as compared to a sale of the same product in our wholesale channel. As we continue to increase the percentage of sales from our DTC channel, we expect to continue to maintain a balanced multi-channel distribution model. Growth in our DTC channel is also expected to reduce the current seasonal concentration of our revenue by allowing us to recognize revenue when customers make purchases instead of when products are shipped to our retail partners. As a result, we expect a relatively higher percentage of our DTC sales to be recognized in our fourth fiscal quarter. Finally, as we expand our DTC channel, including opening additional retail stores, we expect our capital expenditures to continue to represent approximately 6.0 to 8.0% of revenue.
New Products. The evolution of our heritage line of winter products and expansion of our product assortment across Spring, Fall and new product categories has contributed meaningfully to our performance and we intend to continue investing in the development and introduction of new products. We introduced a new Spring collection in stores in the fourth quarter of 2017 and we expect our new knitwear collection to be rolled out gradually over fiscal 2018 and 2019. As we introduce additional products, we expect that they will help mitigate the seasonal nature of our business and expand our addressable geographic market. We expect these products to be accretive to revenue, but carry a lower margin per unit than our Winter collection.
Seasonality. We experience seasonal fluctuations in our revenue and operating results and we historically have realized a significant portion of our revenue and earnings for the fiscal year during our second and third fiscal quarters. We generated 83.5%, 77.4%, and 78.1% of our revenues in the second and third fiscal quarters of fiscal 2017, fiscal 2016 and fiscal 2015, respectively. Our business model also provides visibility into expected future revenues, with a significant majority of wholesale orders booked during the third and fourth fiscal quarters of the prior fiscal year. In addition, we typically experience net losses in the first and fourth quarters as we invest ahead of our most active season. Working capital requirements typically increase throughout our first and second fiscal quarters as inventory builds to support our peak shipping and selling period from August to November. Cash provided by operating activities is typically highest in our third quarter due to the significant inflows associated with our peak selling season. On an annual basis, changes that impact the gross margin are not significant.  However, when these amounts are recorded in the first or fourth quarter, they can have a disproportionate impact on the quarterly results due to the low proportion of revenue recorded in the period.
Foreign Exchange. We sell a significant portion of our products to customers outside of Canada, which exposes us to fluctuations in foreign currency exchange rates. In fiscal years 2017, 2016 and 2015, we generated 52.2%, 54.6% and 49.3%, respectively, of our revenue in currencies other than Canadian dollars. Our sales outside of Canada also present an opportunity to strategically price our products to improve our profitability. As the vast majority of our wholesale revenue is derived from retailer orders made prior to the beginning of the fiscal year, we have a high degree of visibility into our anticipated future cash flows from operations. In addition, most of our raw materials are sourced outside of Canada, primarily in U.S. dollars.

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Selling, General and Administrative (“SG&A”) costs are typically denominated in the currency of the country in which they are incurred. This extended visibility allows us to enter into foreign exchange forward contracts with respect to managing foreign currency exposure.

Segments
We report our results in two segments which are aligned with our sales channels: Wholesale and DTC. We measure each reportable operating segment’s performance based on revenue and segment operating income. Through our wholesale segment we sell to retail partners and distributors in 37 countries, as of March 31, 2017. Our DTC segment is comprised of online sales through our e-commerce sites to customers in Canada, the United States, the U.K. and France and, as of the third quarter of fiscal 2017, in retail stores to customers in Toronto and New York City.

Product variances including raw material inventory provisions are shared pro-rata within segments on the basis of units sold.

Our wholesale segment and DTC segment represented 71.5% and 28.5% of our total revenue, respectively, in fiscal 2017. For fiscal 2016, the wholesale segment and DTC segment contributed 88.6% and 11.4%, of the total revenue respectively and for fiscal 2015, the wholesale segment and DTC segment contributed 96.3% and 3.7% respectively. We expect this trend from wholesale towards DTC to continue as we roll out more retail stores and e-commerce sites.

RECENT DEVELOPMENTS
Recapitalization
On December 2, 2016, we completed a series of share capital and debt transactions (collectively, the “Recapitalization”) to simplify our share capital structure and return capital to our shareholders. The effect of these transactions is summarized as follows.

We entered into the Term Loan Facility (as defined below).
With the proceeds of the Term Loan Facility, we repaid our subordinated debt and accrued interest.
We amended our articles of incorporation to permit a share capital reorganization and effected a 1-for-10,000,000 split of our Class A common shares and a 1-for-10,000,000 split of our Class B common shares.
The proceeds of the Term Loan Facility were also used in connection with the Recapitalization to redeem certain outstanding shares, to make certain return of capital distributions on outstanding common shares, and to fund a secured, non-interest bearing loan to DTR LLC which was subsequently extinguished on January 31, 2017 by a settlement against the redemption of preferred shares issued in the Recapitalization.

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We amended the terms of the Company’s stock option plan and changed the terms of outstanding stock options to conform to the revised share capital terms.
At the conclusion of the Recapitalization, and after the redemption of all the Class D preferred shares on January 31, 2017, we had 100,000,000 Class A common shares and no preferred shares outstanding. As at March 31, 2017 there were stock options outstanding to purchase 5,810,777 Class A common shares at exercise prices ranging from $0.02 to $8.94 per share.
Initial public offering of shares of Canada Goose (“IPO”)
Transactions to effect the IPO are summarized as follows:
On March 13, 2017 we further amended our articles of incorporation to redesignate its Class A common shares as multiple voting shares and to create a class of subordinate voting shares. All previously authorized classes of preferred shares were eliminated.
In connection with the IPO, 16,691,846 multiple voting shares were converted into subordinate voting shares. On March 21, 2017, we sold 6,308,154 subordinate voting shares at $17.00 per share, for net proceeds of $100.0 million and the principal shareholders sold 16,691,846 subordinate voting shares.
On March 21, 2017, we repaid $65.0 million of the outstanding balance owing on the Term Loan Facility and $35.0 million of the outstanding balance owing on the Revolving Facility.
As of March 31, 2017, we had 106,397,037 multiple voting shares and subordinate voting shares, and no preferred shares outstanding.
Other developments

In the fall of 2016, we opened our first two retail stores in Toronto and New York City and anticipate opening a select number of additional retail locations where we can operate profitability. We expect to open an additional three flagship locations in fiscal 2018, including London and Chicago, both of which are expected to open their doors to customers in the third quarter.
We launched two new e-commerce sites in the U.K. and France in September 2016, and expect to significantly expand our European e-commerce channel by opening a further seven on-line storefronts in the fall of 2017; including Germany, Sweden, Netherlands, Ireland, Belgium, Luxembourg and Austria.

SUMMARY OF FINANCIAL PERFORMANCE

For the three month period ended March 31, 2017:

Total revenue increased by 21.9% to $51.1 million from $41.9 million in the fourth quarter of fiscal 2016.
Wholesale revenue was $14.6 million as compared to $28.6 million in the fourth quarter of fiscal 2016.

-52-




DTC, which includes e-commerce revenue as well as company-owned retail store sales, increased to $36.5 million from $13.3 million in the fourth quarter of fiscal 2016.    
Constant currency(1) revenue increased by 27.0% relative to the fourth quarter of fiscal 2016.
Gross profit increased to $27.8 million from $18.8 million in the fourth quarter of fiscal 2016. As a percentage of total revenue, gross profit was 54.4% compared to 44.9% in the fourth quarter of fiscal 2016.
SG&A was $54.7 million compared to $27.3 million in the fourth quarter of fiscal 2016, and as a percentage of total revenue was 107.0% compared to 65.0% in the fourth quarter of fiscal 2016. Fourth quarter 2017 SG&A included $15.2 million of net non-recurring expenses.
Net loss for the fourth quarter of fiscal 2017 was $23.4 million compared to a net loss of $9.2 million in the fourth quarter of fiscal 2016.
Adjusted EBITDA(1) was $(11.4) million compared to $(7.6) million in the comparable period of fiscal 2016.
Net loss per diluted share for the fourth quarter of fiscal 2017 was $0.23, based on 103.2 million shares outstanding and compared to the net loss per share of $0.09, based on 101.8 million shares outstanding in the fourth quarter of fiscal 2016.
Adjusted net loss per share(1) for fourth quarter of fiscal 2017 was $0.15, based on 103.2 million shares outstanding and adjusted net loss per share of $0.08, based on 101.8 million shares outstanding in the comparable period of fiscal 2016.

For the 2017 fiscal year ended March 31, 2017:

Total revenue increased by 38.8% to $403.8 million from $290.8 million in fiscal 2016.
Wholesale revenues increased to $288.5 million from $257.8 million in fiscal 2016.
DTC, which includes e-commerce sales as well as company-owned retail store revenue, increased to $115.2 million from $33.0 million in fiscal 2016.
Constant currency(1) revenue increased by 41.6% relative to fiscal 2016.
Gross profit increased to $212.1 million from $145.6 million in fiscal 2016, representing gross margin of 52.5% compared to 50.1%.
SG&A was $165.0 million compared to $100.1 million in fiscal 2016, and as a percentage of total revenue was 40.9% compared to 34.4% in fiscal 2016. Fiscal 2017 SG&A included $32.1 million of net non-recurring expenses.
Net income for fiscal 2017 was $21.6 million compared to net income of $26.5 million in fiscal 2016.
Adjusted EBITDA(1) for fiscal 2017 increased by 49.2% to $81.0 million from $54.3 million in fiscal 2016.
Net income per diluted share for fiscal 2017 was $0.21 based on 102.0 million shares outstanding compared to the diluted earnings per share of $0.26, based on 101.7 million shares outstanding in fiscal 2016.
Adjusted net income per diluted share(1) for fiscal 2017, which excludes net non-recurring expenses, were $0.43, based on 100.3 million shares outstanding and compared to adjusted earnings per share of $0.30, based on 101.7 million shares outstanding in fiscal 2016.

-53-




The Company ended fiscal 2017 with $9.7 million in cash and cash equivalents, compared to $7.2 million at the end of fiscal 2016. Inventory at the end of fiscal 2017 increased by 5.0% to $125.5 million compared to $119.5 million at the end of fiscal 2016.

(1) EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), Adjusted Net Income per diluted share and Working Capital are non-IFRS measures. See “Non-IFRS Financial Measures” for a description of these measures and a reconciliation to the nearest IFRS measure. .

Results of Operations

The following tables set forth our Results of Operations for the quarter ended March 31, 2017 and the three years ended March 31, 2017. You should read the following selected historical consolidated financial data in conjunction with our Audited Annual Consolidated Financial Statements.

CAD $000s
(except per share data)
Three months ended
March 31, 2017
Three months ended
March 31, 2016
Fiscal year ended
March 31, 2017
Fiscal year ended
March 31, 2016
Fiscal year ended
March 31, 2015
Statement of Operations Data:










Revenue
51,096

41,921

403,777

290,830

218,414

Cost of sales
23,306

23,099

191,709

145,206

129,805

Gross profit
27,790

18,822

212,068

145,624

88,609

Gross margin
54.4
 %
44.9
 %
52.5
%
50.1
%
40.6
%
Selling, general and administrative expenses
54,695

27,252

164,965

100,103

59,317

SG&A expenses as % of revenue
107.0
 %
65.0
 %
40.9
%
34.4
%
27.2
%
Depreciation and amortization
1,700

982

6,601

4,567

2,623

Operating income (loss)
(28,605
)
(9,412
)
40,502

40,954

26,669

Operating income (loss) as % revenue
(56.0
)%
(22.5
)%
10.0
%
14.1
%
12.2
%
Net interest and other finance costs
1,342

1,979

9,962

7,996

7,537

Income (loss) before income tax
(29,947
)
(11,391
)
30,540

32,958

19,132

Income tax expense (recovery)
(6,516
)
(2,189
)
8,900

6,473

4,707

Effective tax rate
21.8
 %
19.2
 %
29.1
%
19.6
%
24.6
%
Net income (loss)
(23,431
)
(9,202
)
21,640

26,485

14,425

Other comprehensive gain (loss)
119

(692
)
(610
)
(692
)

Total comprehensive income (loss)
(23,312
)
(9,894
)
21,030

25,793

14,425

Earnings (loss) per share










Basic
$
(0.23
)
$
(0.09
)
$
0.22

$
0.26

$
0.14

Diluted
$
(0.23
)
$
(0.09
)
$
0.21

$
0.26

$
0.14


-54-




Weighted average number of shares outstanding










Basic
101,062,660

100,000,000

100,262,026

100,000,000

100,000,000

Diluted
103,155,814

101,808,379

102,023,196

101,692,301

101,211,134












Other data: (1)










EBITDA
(26,664
)
(8,139
)
48,914

46,870

30,063

Adjusted EBITDA
(11,433
)
(7,606
)
81,010

54,307

37,191

Adjusted EBITDA margin
(22.4
)%
(18.1
)%
20.1
%
18.7
%
17.0
%
Adjusted net income (loss)
(14,704
)
(8,398
)
44,147

30,122

21,374

Adjusted net income (loss) per diluted share
$
(0.15
)
$
(0.08
)
$
0.43

$
0.30

$
0.21


CAD $000s
As of
March 31,
2017
 
As of
March 31,
2016
 
As of
March 31,
2015
Financial Position Information:
 
 
 
 
 
Cash
9,678

 
7,226

 
5,918

Working capital (1)
98,954

 
104,751

 
64,793

Total assets
380,869

 
353,018

 
274,825

Total non-current liabilities
170,432

 
160,335

 
131,295

Shareholders’ equity
146,168

 
142,702

 
114,433


(1) EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per diluted share and Working Capital are non-IFRS measures. See “Non-IFRS Financial Measures” for a description of these measures and a reconciliation to the nearest IFRS measure.

The following table presents our revenue in each of our geographic segments over the past three fiscal years and compound annual growth (“CAGR”) over the three year period:

CAD $000s
Fiscal year ended March 31
 
Year-on-year growth
 
2015-2017
Geographic revenue:
2017
2016
2015
 
2017 vs. 2016
2016 vs. 2015
 
CAGR
Canada
155,103

95,238

75,725

 
59,865

19,513

 
43.1
%
United States
131,891

103,413

56,990

 
28,478

46,423

 
52.1
%
Rest of World
116,783

92,179

85,699

 
24,604

6,480

 
16.7
%
 
403,777

290,830

218,414

 
112,947

72,416

 
36.0
%


-55-




The following table presents our retail store and e-commerce site presence at the end of each of the previous three fiscal years:
 
Fiscal year ended March 31
 
2017
2016
2015
Retail stores
2



E-commerce sites
4

2

1

 
6

2

1


Components of Our Results of Operations and Trends Affecting Our Business
Revenue
Revenue in our wholesale channel is comprised of sales to retail partners and distributors of our products. Wholesale revenue from the sale of goods, net of an estimate for sales returns, discounts and allowances, is recognized when the significant risks and rewards of ownership of the goods have passed to the retail partner or distributor which, depending on the terms of the agreement with the reseller, is either at the time of shipment from our third-party warehouse or upon arrival at the reseller’s facilities.

Revenue in our DTC channel consists of sales through our e-commerce operations and, beginning in the third quarter of fiscal 2017, in our retail stores. Revenue through e-commerce operations and retail stores are recognized upon delivery of the goods to the customer and when collection is reasonably assured, net of an estimated allowance for sales returns.

Gross Profit
Gross profit is our revenue less cost of sales. Cost of sales comprises the cost of manufacturing our products, including raw materials, direct labour and overhead, plus in-bound freight, duty and non-refundable taxes incurred in delivering the goods to distribution centres managed by third parties. It also includes all costs incurred in the production, design, distribution and merchandise departments, and inventory write-downs to net realizable value. The primary drivers of our cost of sales are the costs of raw materials, which are sourced both in Canadian dollars and U.S. dollars, labour in Canada and the allocation of overhead. Gross margin measures our gross profit as a percentage of revenue.

Over the past two fiscal years, our gross margin has improved as a result of an increase in sales in our DTC channel, execution on our geographic expansion strategy, and an increase in the average effective price of our products. We expect to continue to improve gross margin in future periods as a result of expanding DTC sales and strategically increasing the pricing of our products at a rate that exceeds the expected increases in production costs.



-56-




Selling, General and Administrative Expenses (“SG&A”)
SG&A expenses consist of selling costs to support our customer relationships and to deliver our product to our retail partners, e-commerce customers and retail stores. It also includes our marketing and brand investment activities and the corporate infrastructure required to support our ongoing operations.

Selling costs generally correlate to revenue timing and therefore experience similar seasonal trends. As a percentage of sales, we expect these selling costs to increase as our business evolves. This increase is expected to be driven primarily by the growth of our DTC channel, including the investment required to support additional e-commerce sites and retail stores. The growth of our DTC channel is expected to be accretive to net income given the higher gross profit margin of our DTC channel which results from the opportunity to capture the full retail value of our products.

General and administrative expenses represent costs incurred in our corporate offices, primarily related to personnel costs, including salaries, variable incentive compensation, benefits, share-based compensation and other professional service costs. We have invested considerably in this area to support the growing volume and complexity of our business and anticipate continuing to do so in the future. In addition, in connection with the IPO, we have incurred transaction costs and stock compensation expenses and, we anticipate a significant increase in accounting, legal and professional fees associated with being a public company. Foreign exchange gains and losses are recorded in SG&A and comprise translation of assets and liabilities denominated in currencies other than the functional currency of the entity, including the Term Loan Facility, mark-to-market adjustments on derivative contracts, foreign exchange forward contracts, and realized gains on settlement of assets and liabilities.

Income Taxes
We are subject to income taxes in the jurisdictions in which we operate and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. The primary regions that determine the effective tax rate are Canada, the United States, Switzerland and the United Kingdom. Over the long-term, we target our annual effective income tax rate at approximately 25%.


-57-




RESULTS OF OPERATIONS
Fiscal Year Ended March 31, 2017 Compared to Fiscal Year Ended March 31, 2016

The following table summarizes results of operations and expresses the percentage relationship to revenues of certain financial statement captions. All percentages shown in the table below and the discussion that follows have been calculated using rounded numbers.

CAD $000s
(except per share data)
Fiscal year ended
March 31, 2017
 
Fiscal year ended
March 31, 2016
 
$
Change
Statement of Operations Data:
 
 
 
 
 
Revenue
403,777

 
290,830

 
112,947

Cost of sales
191,709

 
145,206

 
46,503

Gross profit
212,068

 
145,624

 
66,444

Gross margin
52.5
%
 
50.1
%
 
 
Selling, general and administrative expenses
164,965

 
100,103

 
64,862

SG&A expenses as % of revenue
40.9
%
 
34.4
%
 
 
Depreciation and amortization
6,601

 
4,567

 
2,034

Operating income
40,502

 
40,954

 
(452
)
Operating income as % revenue
10.0
%
 
14.1
%
 
 
Net interest and other finance costs
9,962

 
7,996

 
1,966

Income before income tax
30,540

 
32,958

 
(2,418
)
Income tax expense
8,900

 
6,473

 
2,427

Effective tax rate
29.1
%
 
19.6
%
 
 
Net income
21,640

 
26,485

 
(4,845
)
Other comprehensive loss
(610
)
 
(692
)
 
82

Total comprehensive income
21,030

 
25,793

 
(4,763
)
Earnings per share
 
 
 
 
 
Basic
$
0.22

 
$
0.26

 
$
(0.04
)
Diluted
$
0.21

 
$
0.26

 
$
(0.05
)
 
 
 
 
 
 
Other data (1)
 
 
 
 
 
EBITDA
48,914

 
46,870

 
2,044

Adjusted EBITDA
81,010

 
54,307

 
26,703

Adjusted EBITDA margin
20.1
%
 
18.7
%
 
1.4
%
Adjusted net income
44,147

 
30,122

 
14,025

Adjusted net income per share
$
0.44

 
$
0.30

 
$
0.14

Adjusted net income per diluted share
$
0.43

 
$
0.30

 
$
0.13

(1) EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income per share, Adjusted Net Income per diluted share are non-IFRS measures. See “Non-IFRS Financial Measures” for a description of these measures and a reconciliation to the nearest IFRS measure.


-58-




Revenue
Revenue for fiscal 2017 increased by $112.9 million, or 38.8%, including the impact of unfavourable currency exchange rates of $8.1 million, compared to fiscal 2016. The strong growth was driven by an increase in revenue in all geographies, and by an increase in revenue in both our wholesale and in particular our DTC channels. On a constant currency basis, revenue increased by 41.6% for fiscal 2017 compared to fiscal 2016.
Revenue for the two business segments as well as discussion of the changes in each segment’s revenue from the prior fiscal year are provided below:
 
For the fiscal year ended
 
$ Change
 
Foreign Exchange Impact
 
$ Change
 
% Change
CAD $000s
March 31, 2017
 
March 31, 2016
 
As reported
 
 
Constant Currency
 
As reported
 
Constant Currency
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale
288,540

 
257,807

 
30,733

 
(4,642
)
 
35,375

 
11.9
%
 
13.7
%
Direct to consumer
115,237

 
33,023

 
82,214

 
(3,408
)
 
85,622

 
249.0
%
 
259.3
%
Total revenue
403,777

 
290,830

 
112,947

 
(8,050
)
 
120,997

 
38.8
%
 
41.6
%

Revenue in our wholesale channel was $288.5 million, an increase of $30.7 million or 11.9%, compared to fiscal 2016. The increase in revenue in our wholesale channel was driven primarily by sales of new products from our Spring and Fall collections to our retail partners, strong growth outside of North America and, to a lesser extent, by price increases of our products in certain geographies.
  
Revenue in our DTC channel was $115.2 million, an increase of $82.2 million or 249.0%, compared to fiscal 2016. The growth in revenue reflects strong performance from our e-commerce sites, including U.K. and France sites launched in the second quarter of fiscal 2017 and the full year of activity generated from our U.S. e-commerce site. DTC segment revenue was further buoyed by incremental sales generated from our first two retail stores opened in Toronto and New York in the third quarter of fiscal 2017.


-59-




Cost of Sales and Gross Profit
  
Gross profit and percentage of segment revenue, of gross margin for each of our two reportable segments are provided below:

 
For the fiscal year ended
 
 
 
March 31, 2017
 
March 31, 2016
 
 
CAD $000s
Reported
% of segment
revenue
 
Reported
% of segment
revenue
 
$
Change
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
  Wholesale
288,540

71.5
%
 
257,807

88.6
%
 
30,733

  Direct to consumer
115,237

28.5
%
 
33,023

11.4
%
 
82,214

 
403,777

100.0
%
 
290,830

100.0
%
 
112,947

Cost of sales
 
 
 
 
 
 
 
  Wholesale
163,459

56.7
%
 
136,396

52.9
%
 
27,063

  Direct to consumer
28,250

24.5
%
 
8,810

26.7
%
 
19,440

 
191,709

47.5
%
 
145,206

49.9
%
 
46,503

Gross profit
 
 
 
 
 
 
 
  Wholesale
125,081

43.3
%
 
121,411

47.1
%
 
3,670

  Direct to consumer
86,987

75.5
%
 
24,213

73.3
%
 
62,774

 
212,068

52.5
%
 
145,624

50.1
%
 
66,444


Cost of sales for fiscal 2017 increased by $46.5 million, or 32.0%, compared to fiscal 2016. Gross profit was $212.1 million, representing a gross margin of 52.5%, compared with $145.6 million for fiscal 2016, representing a gross margin of 50.1%. The increase in gross margin was primarily attributable to a significant increase in DTC channel revenues and pricing increases across the globe, partially offset by a higher proportion of revenue in CAD, primarily in the DTC channel, a year-over-year decline in the GBP versus the CAD, and inventory adjustments throughout the year related to book-to-physical counts, cost adjustments, and a limited number of products that did not meet our quality standards that were removed from sellable inventory.

Cost of sales in our wholesale channel for fiscal 2017 was $163.5 million, an increase of $27.1 million, compared to fiscal 2016. Segment gross profit was $125.1 million, representing a segment gross margin of 43.3%, compared with $121.4 million for fiscal 2016, representing a segment gross margin of 47.1%. The decline in segment gross margin of 380 basis points was attributable primarily to the items described above related to foreign currencies and inventory adjustments, offset by pricing increases and lower product costs.

Cost of sales in our DTC channel for fiscal 2017 was $28.3 million, an increase of $19.4 million, compared to fiscal 2016. Segment gross profit was $87.0 million, representing a segment gross margin of 75.5%, compared with $24.2 million for fiscal 2016, representing a segment gross margin of 73.3%.The increase in segment gross profit and gross margin was

-60-




attributable to higher segment revenue driven by incremental retail store revenue, a full fiscal year of an e-commerce site in the United States, the launch of e-commerce websites in France and the U.K. in September 2016, lower product costs in Canadian dollars, partially offset by higher raw materials costs sourced in U.S. dollars, and by the proportionate share of inventory provision items described above that related to DTC.
Selling, General and Administrative Expenses
SG&A expenses for fiscal 2017 increased by $64.9 million over the same period in fiscal 2016, or 64.8%, representing 40.9% of revenue compared to 34.4% of revenue for fiscal 2016. The overall increase in expenses was attributable to costs associated with operating retail stores, an increase in headcount and brand investment to support operational growth, new marketing initiatives and entry into new markets, establishing our new e-commerce sites, $10.0 million of transaction costs related to the IPO, $5.9 million of share-based compensation costs, and fees of $9.6 million incurred as a result of the termination of the Management Agreement (as defined below) with Bain Capital.

SG&A expenses in our wholesale channel for fiscal 2017 was $30.7 million, an increase of $3.7 million, compared to fiscal 2016, which represents 10.6% of segment revenue for fiscal 2017 compared to 10.5% of segment revenue for the fiscal 2016. The increase in segment costs was attributable to an increase in headcount as well as higher selling and operational expenditures to support wholesale growth initiatives and entry into new markets. The increase was partially offset by $3.1 million of expenses incurred in the comparable prior year period related to termination of third party sales agents.

SG&A expenses in our DTC channel for fiscal 2017 was $27.5 million, an increase of $13.3 million compared to fiscal 2016, which represents 23.8% of segment revenue for fiscal 2017 compared to 42.8% of segment revenue for fiscal 2016. The increase in segment costs was attributable to increased revenue, establishing our new e-commerce sites in France and the U.K, maintaining our existing e-commerce sites and opening our two retail stores in the United States and Canada.



-61-




Operating Income and Margin

Operating income and margin for each of our two reportable segments are provided below.

 
Fiscal Years ended
 
 
 
March 31, 2017
 
March 31, 2016
 
 
CAD $000s
Operating Income
Operating Margin
 
Operating Income
Operating Margin
 
$
Change
 
 
 
 
 
 
 
 
Segment:
 
 
 
 
 
 
 
  Wholesale
94,363

32.7
%
 
94,366

36.6
%
 
(3
)
  Direct to consumer
59,534

51.7
%
 
10,081

30.5
%
 
49,453

 
153,897

 
 
104,447

 
 
49,450

  Unallocated corporate expenses
113,395

 
 
63,493

 
 
49,902

   Total operating income
40,502

10.0
%
 
40,954

14.1
%
 
(452
)


Wholesale operating income remained flat, but operating margins decreased by 390 basis points in fiscal 2017, primarily due to weaker segment gross margins described above.

DTC operating income increased by $49.5 million resulting from strong performances of new retail stores and new and established e-commerce sites while operating margin increased by 2120 basis points.

Unallocated corporate expenses in fiscal 2017 increased by $49.9 million, and includes $10.0 million of IPO related transaction costs, $10.3 million of management fees including the termination fee paid in connection with our IPO and $5.9 million of share based compensation.
Net Interest and Other Finance Costs
Finance costs for fiscal 2017 increased by $2.0 million, or 24.6%, compared to fiscal 2016, primarily as a result of higher average borrowings of $221.5 million, compared to $147.5 million in fiscal 2016 year, a $3.9 million write off of deferred financing costs resulting from refinancing our previous credit facility and a $65.0 million repayment of the Term Loan Facility from proceeds of the IPO, partially offset by a lower interest rate. The repayment resulted in a permanent reduction in the interest rate margin of the loan and prospectively changed the estimated cash outflows. This required a revaluation of the carrying value of the Term Loan Facility using the original effective interest rate and revised cash flows and resulted in a gain of $5.9 million recorded in the fourth quarter of fiscal 2017.

Income Taxes
Income tax expense for fiscal 2017 was $8.9 million compared to $6.5 million for fiscal 2016. For fiscal 2017, the effective tax rate was 29.1% and varied from the statutory tax rate of 25.3%. For fiscal 2016, the effective tax rate was 19.6% versus the statutory tax rate of 25.3%.


-62-




The difference between the effective tax rate and the statutory tax rate for fiscal 2017 relates primarily to non-deductible stock compensation expenses of $5.7 million in fiscal 2017.

The difference between the effective tax rate and the statutory tax rate for fiscal 2016 relates primarily to the benefit of a one-time reversal of a deferred tax liability of $3.5 million pertaining to intercompany transactions in the second quarter of fiscal 2016.
Net Income
Net income for fiscal 2017 was $21.6 million compared with $26.5 million in fiscal 2016. The decrease of $4.8 million, or 18.3%, was primarily the result of the factors described above.



-63-




Fiscal Year Ended March 31, 2016 Compared to Fiscal Year Ended March 31, 2015

The following table summarizes results of operations and expresses the percentage relationship to revenues of certain financial statement captions. All percentages shown in the below table and the discussion that follows have been calculated using rounded numbers.
CAD $000s
(except per share data)
Fiscal year ended
March 31, 2016
 
Fiscal year ended
March 31, 2015
 
$
Change
Statement of Operations Data:
 
 
 
 
 
Revenue
290,830

 
218,414

 
72,416

Cost of sales
145,206

 
129,805

 
15,401

Gross profit
145,624

 
88,609

 
57,015

Gross margin
50.1
%
 
40.6
%
 
 
Selling, general and administrative expenses
100,103

 
59,317

 
40,786

SG&A expenses as % of revenue
34.4
%
 
27.2
%
 
 
Depreciation and amortization
4,567

 
2,623

 
1,944

Operating income
40,954

 
26,669

 
14,285

Operating income as % revenue
14.1
%
 
12.2
%
 
 
Net interest and other finance costs
7,996

 
7,537

 
459

Income before income tax
32,958

 
19,132

 
13,826

Income tax expense
6,473

 
4,707

 
1,766

Effective tax rate
19.6
%
 
24.6
%
 
 
Net income
26,485

 
14,425

 
12,060

Other comprehensive loss
(692
)
 

 
(692
)
Total comprehensive income
25,793

 
14,425

 
11,368

Earnings per share
 
 
 
 
 
Basic
$
0.26

 
$
0.14

 
$
0.12

Diluted
$
0.26

 
$
0.14

 
$
0.12

Other data:(1)
 
 
 
 
 
EBITDA
46,870

 
30,063

 
16,807

Adjusted EBITDA
54,307

 
37,191

 
17,116

Adjusted EBITDA margin
18.7
%
 
17.0
%
 
1.7
%
Adjusted net income
30,122

 
21,374

 
8,748

Adjusted net income per share
$
0.30

 
$
0.21

 
$
0.09

Adjusted net income per diluted share
$
0.30

 
$
0.21

 
$
0.09

(1) EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income per share, Adjusted Net Income per diluted share are non-IFRS measures. See “Non-IFRS Financial Measures” for a description of these measures and a reconciliation to the nearest IFRS measure.

Revenue
Revenue for fiscal 2016 increased by $72.4 million, or 33.2%, compared to fiscal 2015, driven by an increase in revenue in our wholesale channel and by growth in our DTC channel. The year on year increase includes a favourable impact from changes in currency exchange rates of

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$17.4 million. On a constant currency basis, revenue increased 25.2% for fiscal 2016 compared to fiscal 2015.

Revenues for the two business segments as well as discussion of the changes in each segment's revenues from the prior fiscal year are provided below:     

 
For fiscal year ended
 
$ Change
 
Foreign Exchange Impact
 
$ Change
 
% Change
CAD $000s
March 31, 2016
 
March 31, 2015
 
As reported
 
 
Constant Currency
 
As reported
 
Constant Currency
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale
257,807

 
210,418

 
47,389

 
14,786

 
32,603

 
22.5
%
 
15.5
%
Direct to consumer
33,023

 
7,996

 
25,027

 
2,634

 
22,393

 
313.0
%
 
280.1
%
Total revenue
290,830

 
218,414

 
72,416

 
17,420

 
54,996

 
33.2
%
 
25.2
%

Revenue in our wholesale channel increased $47.4 million, or 22.5%, compared to fiscal 2015. The increase in revenue in our wholesale channel was primarily driven by additional product sales, sales of new products from our Spring and Fall collections to our retail partners and, to a lesser extent, by price increases on our products in certain geographies.

This increase in revenue was also due in part to the inclusion of a full year of performance from our Canadian e-commerce site and the launch of our U.S. e-commerce site in our DTC segment, representing a $25.0 million increase over fiscal 2015.


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Cost of Sales and Gross Profit

Gross profit and margin for each of our two reportable segments are provided below:

 
For the fiscal year ended
 
 
 
March 31, 2016
 
March 31, 2015
 
 
CAD $000s
Reported
% of segment
revenue
 
Reported
% of segment
revenue
 
$
Change
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
  Wholesale
257,807

88.6
%
 
210,418

96.3
%
 
47,389

  Direct to consumer
33,023

11.4
%
 
7,996

3.7
%
 
25,027

 
290,830

100
%
 
218,414

100
%
 
72,416

Cost of sales
 
 
 
 
 
 
 
  Wholesale
136,396

52.9
%
 
127,675

60.7
%
 
8,721

  Direct to consumer
8,810

26.7
%
 
2,130

26.6
%
 
6,680

 
145,206

49.9
%
 
129,805

59.4
%
 
15,401

Gross profit
 
 
 
 
 
 
 
  Wholesale
121,411

47.1
%
 
82,743

39.3
%
 
38,668

  Direct to consumer
24,213

73.3
%
 
5,866

73.4
%
 
18,347

 
145,624

50.1
%
 
88,609

40.6
%
 
57,015

Cost of sales for fiscal 2016 increased by $15.4 million, or 11.9%, compared to fiscal 2015, while gross profit was $145.6 million, representing a gross margin of 50.1%, compared with $88.6 million in fiscal 2015, representing a gross margin of 40.6%. The increase in gross profit was attributable to the growth in e-commerce revenue in our DTC channel as well as overall higher revenue in fiscal 2016. Additionally, gross profit was positively impacted by lower production costs, partially offset by an increase in raw materials costs sourced in U.S. dollars.

Cost of sales in our wholesale channel for fiscal 2016 increased by $8.7 million, or 6.8%, compared to fiscal 2015, while segment gross profit was $121.4 million, representing a segment gross margin of 47.1%, compared with $82.7 million in fiscal 2015, representing a segment gross margin of 39.3%. The increase in segment gross profit was attributable to the overall higher revenue in fiscal 2016. Additionally, segment gross profit was positively impacted by lower production costs, partially offset by an increase in raw materials costs sourced in U.S. dollars.

Cost of sales in our DTC channel for fiscal 2016 increased by $6.7 million, or 313.6%, compared to fiscal 2015, while segment gross profit was $24.2 million, representing a segment gross margin of 73.3%, compared with $5.9 million in fiscal 2015, representing a segment gross margin of 73.4%. The increase in segment gross profit was attributable to the growth in e-commerce revenue in our DTC channel, including the impact of having the U.S. e-commerce store open beginning in September of 2015, as well as overall higher revenue in fiscal 2016.


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Selling, General and Administrative Expenses
SG&A expenses for fiscal 2016 increased by $40.8 million over fiscal 2015, or 68.8%, representing 34.4% of revenue in fiscal 2016, compared to 27.2% of revenue in fiscal 2015. The increase in expenses was attributable to an increase in headcount in both segments and our corporate office, and an increase in marketing expenses that were not allocated to a segment and were designed to support an overall investment in our brand and entry into new markets. The increase was also partially attributable to investments in our DTC channel associated with establishing our e-commerce sites and opening our retail stores. In addition, we incurred costs of $3.1 million in our wholesale segment associated with terminating third party sales agents which resulted in indemnities and other termination payments. Also included was $6.9 million of expenses relating to restructuring our international operations to Zug, Switzerland, including closing several offices across Europe, relocating personnel and incurring temporary office costs.

SG&A expenses in our wholesale channel for fiscal 2016 decreased by $10.1 million over fiscal 2015, or 27.2%, representing 10.5% of segment revenue in fiscal 2016 compared to 17.7% of segment revenue in fiscal 2015. The decrease was attributable to the increase in centralized marketing initiatives described above, offset by indemnities and termination payments for third party sales agents.

SG&A expenses in our DTC channel for fiscal 2016 increased by $12.7 million over fiscal 2015, or 920.4%, representing 42.8% of segment revenue in fiscal 2016 compared to 17.3% of segment revenue in fiscal 2015. The increase in expenses was attributable to an increase in headcount and brand investment in our DTC channel associated with establishing our
e-commerce sites and opening our retail stores.

Operating Income and Margin

Operating income and margin for each of our two reportable segments are provided below.
 
Fiscal Years ended
 
 
 
March 31, 2016
 
March 31, 2015
 
 
CAD $000s
Operating Income
Operating Margin
 
Operating Income
Operating Margin
 
$
Change
 
 
 
 
 
 
 
 
Segment:
 
 
 
 
 
 
 
  Wholesale
94,366

36.6
%
 
45,577

21.7
%
 
48,789

  Direct to consumer
10,081

30.5
%
 
4,481

56.0
%
 
5,600

 
104,447

 
 
50,058

 
 
54,389

Unallocated corporate expenses
63,493

 
 
23,389

 
 
40,104

   Total operating income
40,954

14.1
%
 
26,669

12.2
%
 
14,285


Wholesale operating income increased in fiscal 2016 by $48.8 million and DTC operating income increased by $5.6 million primarily as a result of the increase in the respective segment’s gross margin for reasons described above.


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Unallocated corporate expenses increased by $40.1 million primarily to support the increase in revenues and for reasons described above.

Net Interest and Other Finance Costs
Finance costs increased by $0.5 million, or 6.1%, during fiscal 2016 primarily as a result of higher borrowings of $25.9 million used to finance working capital, partially offset by a lower interest rate.

Income Taxes
Income tax expense increased by $1.8 million during fiscal 2016 while the net income before taxes increased as compared to fiscal 2015. This is primarily as a result of a decrease in the effective tax rate from 24.6% for fiscal 2015 to 19.6% for fiscal 2016, together with the benefit of a one-time reversal of a deferred tax liability of $3.5 million relating to intercompany transactions during the three months ended September 30, 2015.

Net Income
Net income for fiscal 2016 was $26.5 million compared with $14.4 million in fiscal 2015. The increase of $12.1 million, or 83.6%, was primarily the result of the factors described above.


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Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016
 
The following table summarizes results of operations and expresses the percentage relationship to revenues of certain financial statement captions. All percentages shown in the table below and the discussion that follows have been calculated using rounded numbers.
CAD $000s
(except per share data)
Three months ended
March 31, 2017