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Aug 14, 2019

Canada Goose falls as guidance is unchanged amid revenue surge

Freshii, Macy's, Canada Goose: Market movers for Aug. 14, 2019

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Canada Goose Holdings Inc. (GOOS.TO) plunged as much as 8 per cent in premarket trading after the luxury clothing maker stuck to an annual forecast even as revenue topped expectations in the latest quarter.

In a phone interview, Chief Executive Officer Dani Reiss said it would have been “irresponsible” for him to change guidance based on the smallest sales quarter of the fiscal year.

“My focus really is on building long-term shareholder value and building a great brand for our consumers,” Reiss said. “I know that our shareholders understand our business.”

Key Insights

- Sales growth suggests Canada Goose’s attempt to expand its offerings beyond winter gear with products such as US$750 raincoats is paying off. The company also shipped wholesale orders to Asia and Europe earlier after increasing manufacturing capacity.

- Expansion in Asia and in particular China is working, with revenue from the region tripling. Overall revenue rose 59 per cent to $71.1 million, more than the $53.8 million expected by analysts. Reiss said the Hong Kong store has been performing well despite occasional disturbances due to protests.

- Even with the sales surge in the fiscal first quarter, Canada Goose left its annual revenue and net income guidance unchanged. Some analysts find it too conservative as it would mark a steep slowdown from the past. The Toronto-based company is forecasting revenue growth of at least 20 per cent.

- The increased revenue helped make up somewhat for falling gross margins, which at 58 per cent missed analysts’ estimate of 62 per cent. Adjusted net loss per share -- reflecting the company’s slowest quarter of the year -- was less than expected, at 21 cents versus 24 cents.

Market Reaction

- Canada Goose shares fell, tracking global equities lower. Investors’ concerns about the department store sector also increased after Macy’s Inc. trimmed its full-year profit forecast.

- Shares are down 1 per cent this year through Tuesday’s close, having recouped only part of the value lost on May 29 when the company reported revenue that missed analysts’ estimates for the first time.

--With assistance from Karen Lin.