Then also that wholesale channel is feeling a lot more pressure across the board, every category, they are just – they are well inventoried, and so there was discounting, which obviously had an impact. So, between that two, look, the traffic was good, conversion was, as I have said earlier, a little more challenging, and so that’s where our focus is on. We have a lot of new stores that we have opened in the – over the last few years. And so that’s really our focus when you think about FY ‘25 priorities, of making sure of those we increase the productivity of those stores. What I am happy about is to see what people are buying in those markets. So, demand is strong. Brand is healthy there. They are coming into us – into our stores, whether it’s online to buy different things.
So, they aren’t just thinking about us for that Heavyweight Down parka. They are buying fleece, they are buying HyBridge Knit, they are looking at footwear. So, that is really encouraging to me, that they understand where the brand is going and that consumers want the products that we are offering, so more opportunity ahead for sure.
Jonathan Sinclair: I think when it comes to SG&A, and it’s worth unpacking a little bit about what’s been going on rather than just talking to the future. I think our SG&A growth is a function of our larger retail network and ongoing investment in store expansion. On the margin part of that has been pressurized by the fact that we are getting softer year-on-year revenue growth. Now, we remain committed to improving our operating leverage in the near-term. And I have talked specifically about the transformation program just now because we have seen that. We are right in the middle of planning next year at the moment. And in that context, we are looking at how we stabilized the expenses. And within that, what are – what the pace of our retail expansion program should look like.
Rick Patel: Thank you very much.
Operator: Our next question comes from the line of Ike Boruchow with Wells Fargo. Your line is open.
Ike Boruchow: Hey guys. Thank you and Jonathan congrats, and Neil, welcome. I guess I wanted to ask about the gross margins and inventory. So, I think Jonathan, you mentioned inventory provisions taken in the quarter. Could you give us more color on what exactly drove that? It sounds like it was in both channels. Is there anything expected from a provision standpoint in the fourth quarter? And then how should this kind of inform our views of how the channel gross margins look both in the fourth quarter and maybe even into next year? Thank you.
Jonathan Sinclair: So, our view on gross margins at a channel level has really not changed. We have always said that the long-term view is mid-70s and mid to high-40s both DTC and wholesale, respectively. This year, wholesale looks a bit better than that, it’s got a bit of an FX tailwind, so that’s obviously helped it. I think when it comes – we feel our inventory is good. We obviously have been very focused on improving the productivity of the inventory, and that’s why you have seen it going from 20% up at this time last year, progressively down in its growth rate to a point where it’s now flat year-over-year, and we see more opportunity still. When it comes to the obsolescence provisions, to be honest, we believe it’s appropriate to be cautious as we are developing the adjacent categories, but we continue to enjoy, as you can see, notwithstanding that very robust gross margins at the channel level, despite the change in product mix in favor of those newer categories.
So, overall, we feel pretty good.
Operator: Thank you. Our next question comes from the line of Alexander Perry with Bank of America. Your line is open.
Alexander Perry: Hi. Thanks for taking my question here. I guess I just wanted to ask a little bit about wholesale. So, as we move into 2024, how should we be thinking about wholesale from here, would you say after this year, you are mostly done editing down your door count, would you expect this to be sort of the new baseline and then wholesale grows from here? That would be really helpful. Thank you.
Carrie Baker: Sure. Thanks for your question. Wholesale, it’s an ongoing effort. So, for us, no, I wouldn’t say that we are – I would ever say one particular year that’s the new baseline. This has been something that we do constantly, whether there is new entrants that are really important with influencer customers or target customers that we are not reaching, we will add those stores. For us, it’s more about total control, total influence to the market and protecting the brand. And so for us, wholesale, as we both said, Jonathan said earlier, and I have said before is that, wholesale is a really important channel to us. Again, accretive to our brand, helps us validate maybe certain categories. Geographic reach, obviously.
We don’t anticipate having hundreds of stores in our own network. And so they play a really critical role for us. But it has to be strategic. It has to be important to our customer. And so that’s the spirit in which we look at our editing process. So, in terms of this year, you saw that in Q3, a lower order book, they are a little bit under pressure. And so we are working really closely with the partners that we see in the future of strategic partners, whether we are helping them move returns or move the inventory, whether we are making swaps, whether we are helping them on the marketing front and investment to get that inventory moving. So, it really is truly a partnership. But that’s an ongoing work. So, I think that will continue in FY ‘25 and likely FY ‘26 as well.
Alexander Perry: Perfect. That’s really helpful. Best of luck going forward.
Operator: Thank you. Our next question comes from the line of Jonathan Komp with Baird. Your line is open.
Jonathan Komp: Yes. Hi. Thanks. Good morning. Jonathan, I just want to follow-up. You mentioned thinking strategically about the pace of retail expansion going forward. Just wanted to ask, are there any factors you could highlight as you make that decision? Would it make sense to slowdown the pace in the near-term as you focus on productivity and margin of the existing base? Just any more color there.
Carrie Baker: Hi Jonathan, it’s Carrie. I will actually take that question. So, yes, pace of retail expansion, we obviously believe that there are still tons of runway. We have – we are going to have 68 stores at the end of this year and that is still tons of white space for us to go after in any given region. So, there is no change in our appetite in terms of where we think this brand can go and the importance of opening our stores. That said, we have opened a lot of stores in the last few years that have been in challenging environments, and so we haven’t seen the productivity that we know that they are capable of. And so that really is our near-term focus, making sure that we are delivering that amazing Canadian warmth experience to consumers, making sure we are maximizing the traffic that is coming through those doors, getting close to the customer, being able to present that full expanded category assortments that we are doing such great work on.
So, there is no shortage in our appetite for where it can go, but the near-term focus really is on getting more out of what we have already invested in.
Jonathan Komp: Okay. That makes sense. And then just one follow-up. When you think about the conversion discussion, I just want to ask about sort of pricing and comfort at the levels you are at, it’s been quite a bit of cumulative pricing over the last few years and some of the parkas have moved well beyond the levels they were priced at 4 years or 5 years ago. Just want to ask about sort of current comfort. Are there any styles you think you might ever reduce pricing or how to think about pricing changes going forward?
Carrie Baker: I will take that one, too. So, this is a great conversation because I think it’s so interesting, when you think about luxury brands and pricing comes up a lot. Luxury brands, it’s not about – and not looking at need state necessarily. You are creating desire for products that people want. And so price point matches that, but it’s typically not the factor of whether they are buying or not. And that’s how the spirit of what we think of. So, when we think about our assortment, do we have enough breadth in the assortment to reach different consumers, that’s a big focus. Do we make sure that there is enough – the quality, the craftsmanship, I think that’s why people come to Canada Goose for an amazing product that they know we will deliver, whether it’s style, whether it’s comfort, whether it’s performance, and so we price that accordingly.
