Is Canada Goose luxury retail’s next highflier?

Canada Goose, the high-end performance outerwear brand, just announced plans to open 6 new stores. The new locations—one each in Milan, Paris and Minnesota’s Mall of America, along with three in Canada—will bring the fast growing luxury retailer’s store count to 17 spanning three continents.

While Rent the Runway, Stitch Fix, Glossier and other so-called digitally native fashion brands generate the most press, in many respects Canada Goose is outpacing them. In recent years the company has been growing revenues more than 30% annually as it increases wholesale distribution and dramatically grows its direct-to-consumer (DTC) business (online and through owned-stores). Most impressive—and standing in stark contrast to the vast majority of current and hoped for “unicorns”—is that Canada Goose makes money. A lot of money. In the most recent quarter the Toronto-based company reported operating margins in excess of 30%, results which are likely to only improve as the company generates more scale economics and DTC becomes a greater portion of total sales.

Canada Goose is a great illustration of a retailer delivering on being “memorable,” which is No. 7 in what I call my 8 Essentials of Remarkable Retail.  Memorable brands create magic at the intersection of powerful customer relevancy and a truly wow experience. Like many of the best luxury brands, Canada Goose has an interesting and authentic origin story. But the real magic happens through their unique, highly differentiated product design combined with how the product is delivered in person. Canada Goose stores are far from boring. Their stores tell a compelling story, brought to life through beautiful imagery, dramatic product presentation and outstanding customer service.

While many retailers talk about being “experiential,” much of what passes for interesting is often gimmicky.  Canada Goose’s “Cold Rooms” are anything but that. These innovative dressing rooms  are essentially walk-in freezers where customers can try on the company’s products in simulated weather conditions. So not only are they creating a remarkable experience in the most literal sense, they are delivering something intensely customer relevant and useful. Unsurprisingly, conversion rates have spiked in stores that have added Cold Rooms.

On a recent trip to Manhattan, I was a bit surprised to see a significant percentage of folks hustling to their midtown offices sporting all manner of outwear with the Canada Goose logo. While this highly unscientific market research should be taken with a grain of salt, it does underscore both the appeal and the risks inherent in Canada Goose’s future. Clearly there are vast numbers of additional potential store locations. Moncler, probably the brand most analogous to Canada Goose, has nearly 300 worldwide. And robust growth in e-commerce is a lay up as the brand gains more distribution. It’s also pretty easy to imagine significant upside from product extensions. At face value it would seem that robust sales and earnings growth are likely for many years to come.

While Canada Goose delivers well-designed products that work, it is also a highly logo driven and, some would say, an over-priced fashion brand. Right now, in certain cities, it’s become the outerwear “badge brand.” But we shouldn’t forget that over the years the retail industry has seen plenty of brands that ascend to great heights on their “it” status, only to crater when the cool kids and fashionistas move on the next new thing. Unfortunately, as far as I know, no one has built a reliable model to readily predict which high-flying brands will crash back to earth when trends change versus which will achieve and sustain true iconic status.

While I certainly lack the gift of prophecy, I like Canada Goose’s odds of becoming one of the great global luxury brands over the next decade. People buy the story before they buy the product and Canada Goose’s is compelling and memorable: an authentic history, products that deliver, great customer service and a wow experience. And, at least so far, they have executed in a nearly flawless manner.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Despite defying the ‘retail apocalypse,’ At Home reportedly puts itself up for sale

Amid all the doom and gloom about physical retail, there are quite a few unsung stories of robust growth and solid profitability. At Home Group, the Plano, Texas-based chain of home decor superstores, is one of them. Despite the brand’s relative success, reports emerged late last week that because of poor stock performance the company was exploring sale options. Once again, it seems no good deed goes unpunished.

While the company has started to experience some headwinds, it is hard to understate what has been accomplished . Under the leadership of CEO Lee Bird, At Home has carved out a well-differentiated and remarkable position in the massive, highly fragmented home furnishings business. In just over five years, the company re-branded from Garden Ridge, did a complete merchandising and store format overall and grew from 68 stores to 180—with another dozen or so to open by year’s end. At Home’s operating margins are higher than industry averages, and it is among a handful of retailers to deliver positive comparable store growth every quarter for the past five years. Apparently it did not get the retail apocalypse memo.

Like many leaders in the value-oriented end of the market—think TJ Maxx, Ross, Five Below—At Home differentiates itself through low prices, broad and deep assortments, a “treasure hunt” shopping experience and a low-cost operating model. By playing in a category that is still largely driven by physical stores while having a very high penetration of private-label goods (~70%), it is somewhat insulated from the “Amazon effect.” With comparatively low brand awareness, under-developed digital capabilities and many untapped markets for new stores, there are ample reasons to believe At Home can deliver solid growth for years to come.

Yet Wall Street is clearly worried. After hitting a post-IPO high of nearly $41 last July, the stock has been bouncing around the low 20s for nearly four months. To be sure, the company has seen a deceleration in growth and greater margin pressure and gave lower guidance in its most recent earnings release. The prospects of growing competition and a more significant economic turndown give rise to growing concerns.

It remains an open question whether moderating performance suggests that the At Home model is starting to run out of gas, is the canary in the coal mine for macro-economic jitters or is caught up in the Street’s lack of appreciation for brands that are more physical-store-centric. Regardless, from where I sit, the brand has delivered strong results for several years running, seems to have carved out a compelling value proposition and has plenty of runway left in both its store expansion plans and the opportunity to better digitally enable its business.

At a market capitalization of under $1.5 billion, At Home could be an enticing acquisition target for a number of players. Amazon, Wayfair and TJX all to come to mind, but it could conceivably be of interest to Home Depot, Lowes or Target. A deal to take the company private could also make sense, where it could grow aggressively without having to endure the quarterly earnings pressures of the public market.

Either way, it may take a transaction to put At Home more favorably on investors’ radar screens. But it’s clear from the company’s results that it has won the hearts and wallets of plenty of customers.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Go big or go home: Restoration Hardware’s radical approach is paying off

Restoration Hardware’s stock has been under pressure despite since last week’s earnings report. Whether this is because of Wall Street’s tendency to not let any good deed go unpunished or perhaps because the company tried to tamp down future growth assumptions is anyone’s guess. But I continue to be impressed by the home furnishing chain’s progress.

A few years ago, I happened to be speaking at the same conference as Gary Friedman, the CEO of Restoration Hardware. In his talk, Gary outlined his vision for building radically re-designed new and dramatically larger stores under the label RH Gallery. The new flagships would be beautifully decorated, with dramatic spaces and vignettes. They would feature signature restaurants, rooftop bars, extensive interior design services and more. As he shared visuals with the audience and gave a sense of the massive size of the new concept, I tried to do some math on the potential cost of this bold new strategy. Yikes, I thought.

For context, it is important to bear in mind that, only a few years earlier, Restoration Hardware was seen as a likely candidate for the retail graveyard. But after managing to dodge the grim reaper, the company accelerated the shift of its product strategy to be more expensive and fashionable. It also abandoned the increasingly incongruous “Restoration Hardware” name and moved away from a promotional model to one that is membership-based.

But most notably, when the majority of retailers were closing stores in droves—and trying to make the ones they were keeping smaller—here was a guy deciding to go bigger and badder. As I listened to Friedman’s vision unfold, I found myself going back and forth between thinking that he was brilliant and thinking that he might well be out of his mind.

Based on RH’s earnings report last Friday, in which Friedman writes one of the best investor letters I’ve read in some time, the strategy seems to be paying off. The company reported record sales, earnings and margins and 7% comparable store sales growth and achieved what it believes is an “industry-leading ROIC of 27.8%.” Not bad.

For retailers to fight and win in the age of Amazon and digital disruption, many things are becoming table-stakes, like harmonizing the customer experience across channels and using data and insights to personalize marketing. To avoid what I call the “collapse of the middle,” brands must eschew the sea of sameness that is pervasive in so many sectors. So one of the reasons I love the RH story—and now include the RH Gallery in most of my keynotes—is that it is a great case study of what I call the Eight Essentials of Remarkable Retail, most notably the last two: Memorable and Radical. 

To be meaningfully “memorable,” brands must be unique, intensely customer-relevant, authentic and amplify the wow, all in a way that is economically feasible and scalable. The RH galleries do all of this extremely well and give the target customers a compelling reason to make RH a “must-visit” store (or website). The experience is not only immersive, distinctive and fun; it delivers strong utility for the customer.

The Eighth Essential of Remarkable Retail is “radical.” Being radical is the willingness to adopt a culture of experimentation, to accept that a slightly better version of mediocre won’t command the customer’s attention and that it is actually riskier to maintain the status quo than to forge out into bold new directions. Of course, there is no guarantee that being radically innovative will work, but as Seth Godin reminds us, “if failure is not an option, then neither is success.”

It certainly is an open and valid question of how much future growth is possible through these big and bold new stores. Clearly, this is not a strategy that will support hundreds of locations. So time will tell how much more runway there might be. Apparently, the market remains dubious.

Regardless, from where I sit, leadership should be commended for taking a brand that was stuck in the boring middle and, in rather little time, turning it into one of the most interesting and remarkable stories in retail.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

 

NRF’s Big Show: Addressing the knowing-doing gap

Just about every year for the past 25 or so, I make the trek to New York to rub shoulders (quite literally) with nearly 40,000 of my closest friends (not literally) during the National Retail Federation’s “Big Show.” It’s always a great opportunity to connect with the industry’s movers and shakers, see the latest in retail technology, hear from established and up-and-coming brand leaders and put one’s claustrophobia to the test.

In past years I’ve written a synthesis of my key takeaways from the event. But this year I’d like to focus on just one theme, partially because there are many excellent summaries already published–like this one from the NRF, this post from fellow contributor Chris Walton or this one from Forrester’s Brendan Witcher. The more substantive reason, however, is to address what many of us may already know yet have a hard time admitting: armed with all this knowledge we will leave the Big Apple behind, go back to our jobs and precisely nothing of any import will change.

The sad and frustrating fact is that I have attended the Big Show (and many other retail events) long enough to hear many of the same things repeated over and over again only to return a year later aghast, realizing that so few brands have acted upon what is increasingly obvious, important and, all too often, dire.

Every year, for the better part of a decade, we have heard speakers talk about how the the channels are blurring, how we are moving to a mobile-first customer journey, how important it is to root out friction in the customer experience, how data must be leveraged to provide a more personalized experience and on and on. And every year my guess is many in the audience return to hear a re-packaged version of the same prognostications having taken little or no action in the intervening time.

As one small example, I sat in on presentation where the speaker shared the “insight” that customers who shop in more than one channel are “better” customers. Aside from confusing correlation with causality–and aside from having shared this type of analysis myself at two different retailers in 2003 and 2006 respectively–some version of this alleged wisdom nugget has been trotted out at many a conference for quite some time. So if this is new knowledge to anyone in the audience it merely proves that they haven’t been paying much attention. But in the absence of a time machine, the real questions we are left with are: so what? and now what?

Over 3 days, and now for multiple years running, we’re told “the customer is back” or that physical retail isn’t dead or that we shouldn’t worry because e-commerce is “only” 10% of all retail. While this may be true in the abstract, the one thing we know for sure is that no one brand experiences any of these trends in the aggregate or in the same way. For some retailers, the customers they’ve been chasing are never coming back, their stores are in fact dead or dying and they may be experiencing a much bigger migration to digital commerce with attendant devastating consequences. Your mileage WILL vary and these platitudes are neither very useful nor very comforting.

What we must do instead is to take this big picture knowledge and translate it into strategies that matter for our unique situation. And then we must take action: by launching innovative experiments, by refining what has potential and scaling it fast, by killing quickly what isn’t working. Rinse and repeat.

Showing up is a start, but merely sitting in the audience consuming information doesn’t count for much.

Taking amazing notes or writing pithy summaries can be helpful, but without doing anything with it it’s mostly a waste of energy.

And enthusiasm is great, but the cheerleaders never win the game.

If the knowledge doesn’t translate into useful and meaningful action a visit to NRF is merely a vacation. And a chilly and expensive one at that.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

I was honored and humbled to move up to #5 on Vend’s 2019 Top Retail Influencer List and to be recently named a Top Retail Tech Influencer to follow on Twitter.