Canada Goose plunges after rally leaves investors restless

Canada Goose Holdings Inc. tumbled the most since it went public last year as better-than-expected results failed to meet investors’ lofty expectations for the parka maker

The Toronto-based company plunged 15 percent to CAD 40.87 , erasing most of its gains for the year. Canada Goose declined to give a new annual forecast and appointed a new finance chief, which may be weighing on shares, said RBC Capital Markets analyst Brian Tunick.

“Given the run in the shares, no update to the annual outlook, and a new CFO announcement, the shares could take a breather here,” he said in a note.

The stock plunged even as Canada Goose topped estimates, as customers snatched up the made-in-Canada luxury garments at new e-commerce sites and flagship stores including London and Chicago. Sales to wholesalers fell after the company moved some shipments forward, bringing the two sales channels almost to par.

The six-decade-old company is defying the retail malaise as consumers flock to parkas that were originally designed for arctic expeditions and cost as much as USD 1495. The share price had almost tripled before today since Canada Goose went public in March, as its direct-to-consumer strategy helps boost margins while it keeps adding new markets.

Profit Rises

Profit excluding some items rose to CAD 58 cents a share in the fiscal third-quarter ended Dec. 31, more than the highest analyst estimate. Direct-to-consumer revenue almost doubled to CAD 131.6 million (USD 105.6 million) as the company added seven e-commerce channels and five stores to its network. Overall revenue jumped 27 % to CAD 265.8 million, the company said in a statement on February 8, 2018.

“Canada Goose remains one of the most compelling growth stories in our coverage as a brand adoption story as well as a product cycle story,” said Goldman Sachs analysts Lindsay Drucker Mann.

The products are so popular it has become hard to buy them, according to research by Canaccord Genuity Corp. analyst Camilo Lyon, who raised his stock price target to CAD 50 from CAD 36 previously.

In a note published February 6, Lyon said more than 50 % of parka styles online were sold out, or had one size left.

Dani Reiss

In a phone interview, Chief Executive Officer Dani Reiss said the company plans business carefully at the beginning of each year and is comfortable having sold-out models.

“We’re not a commoditized brand,” he said. “The mentality that a lot of brands or retailers have to try to sell as much as possible, that often ends in being detrimental to the brand.”

Jonathan Sinclair

Asked about whether investors are setting unattainable expectations, Reiss said he believes markets understand what the company is trying to do.

“We put a lot of pressure of ourselves to do the right thing for the company,” he said. “I don’t think we’re feeling additional external pressure.”

Canada Goose, which added more than 700 employees last year, said it hired Jonathan Sinclair as its new chief financial officer. Sinclair, who is CFO at Jimmy Choo, will join mid-year, replacing John Black, who is retiring.