Canada Goose Flies High On Results
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Canada Goose Gets A Second Wind
Canada Goose (NYSE: GOOS) emerged as a second-half play for us in 2020 because of the strength of consumer trends produced by the pandemic. That story played out well with the stock rising 200% from its March 2020 low and it’s not over. The company’s shift to DTC and digital, its push to expand markets, and the company’s value to consumers have it set up to be a great reopening play for the second half of 2021 as well.
“Canada Goose has shifted from recovery to growth beyond pre-pandemic levels,” said Dani Reiss, President & CEO. “We achieved our largest ever fourth quarter by revenue. With triple-digit e-Commerce growth and a resilient retail performance despite disruptions, we served our global consumer base through agile and flexible DTC distribution. Our new Cypress and Crofton collection, as well as the NBA All-Star collaboration, also showcase our ability to relentlessly drive brand heat. Recognizing pandemic uncertainties remain, we are highly confident in our potential for meaningful growth as we move into fiscal 2022.”
Canada Goose Has Blow Out Quarter
Canada Goose proved without a doubt that its brand is in demand and higher-end consumers are ready to spend money. The company’s $208.8 million in revenue (Canadian) is up 48% from last year and beat the consensus by more than 50,000 basis points or 50%. That is on top of an easy comp, we know, but still… 50% growth YOY, 34% growth over the past two years and a 50% beat in the face of upwardly moving consensus figures is good, very good.
And the strength was due to robust gains in all existing operating markets with notable strength in eCommerce and China. eCommerce sales grew 123% across the network with high-double to low-triple digit gains in all markets. China’s DTC grew 101.4%. Canada was the only area of weakness with net sales down about -7% but much better than expected given the impact of nationwide lockdowns during the quarter.
Moving down the report the news only gets better because the strength in sales translated to positive operating margins and a surprise profit for the quarter. Gross margins were flat YOY as cost-leveraging of fixed costs was offset by rising input costs. DTC gross margin, the company’s largest growth avenue by far, came in at 75% and is down slightly from last year. This does include a $4 million provision for fall inventory. At the operating level, the margin came in at 3.7% versus the 12.2% posted in the prior year to drive GAAP EPS of $0.03 and adjusted EPS of $0.01.
Looking forward, the company is expecting to see the strength continue into the end of the year at least. The new guidance is calling for revenue in excess of $1 billion or about 35% better than the current consensus estimate. The takeaway for us is this company is outperforming even our robust expectation and guiding higher, a situation that should lead the analysts to make some significant upgrades in the coming few weeks.k
The Technical Outlook: Canada Goose Pulls Back To Support
At the risk of sounding like a broken record, Canada Goose pulled back to support following its blowout report and guidance update. The move is due more to profit-taking and valuation than with fundamentals and is one we think will lead to a great buying opportunity. The price action is already showing signs of support at the $39 level that we think could become a bottom. If so, we see this stock remaining within the $39 to $48 range until mid-summer if not longer. If not, this stock could pull all the way back to the $36 level and close the gap which formed in February. In either case, we think this stock is a winner for the second half of the year.
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