Canada Goose Holdings Inc. (TSX: GOOS) is a leading luxury apparel manufacturer company which designs, manufactures, distributes, and retails premium outerwear for men, women, and children. The products are sold through select outdoor, luxury and online retailers and distributors across America, Europe, Asia etc. 

Key Highlights

• Recognizing higher revenues from different geographies: The company's traction is increasing as revenue climbed across all regions during FY 2022, compared to the previous corresponding period, owing to an increase in DTC and wholesale revenue. Revenue in Canada grew by 28.6% excluding the CAD 47.2 million of PPE sales made in the comparative period. Including PPE, revenue in Canada increased by 0.7%. The consolidated revenue growth was driven by greater revenues from existing retail locations, e-commerce growth, and retail store expansion across all regions.

• New product launch: In second half of FY 2022, the company launched its first-ever Performance Luxury Footwear Collection, with two innovative styles for men and women: the Snow Mantra Boots and the Journey Boots. The above marks the company’s presence within the footwear segment and would cater to the segments like adventurers, athletes, researchers, cinematographers etc. Moreover, the company intend to continue investing in innovation and the development and introduction of new products across styles, uses, and climates.

• Growth from eCommerce segment: The company is witnessing strong pull from its online segment and reported a whopping 40.4% y-o-y growth in FY 2022. Notably, DTC revenue grew by CAD 213.2 million to CAD 740.4 million during the period, compared to CAD 527.2 million in pcp. The majority of the increase was driven by higher sales from existing retail stores, complemented by e-Commerce growth and retail expansion. Considering the recent purchase pattern of the consumer, we expect the above momentum to continue in the coming days, which would support the upcoming performance.

• Registering sequential growth in operating matrix: Despite the unrest environment, the Company maintained its pace and witnessed spirited performance across its margin profile. The Company is continuously working closely to carry this winning momentum and has witnessed higher scale on the sequential basis, which is appreciable.     

• Accelerates expansion in Japanese market: With plans to accelerate DTC expansion, including retail stores the company and Sazaby League Ltd. have entered into an agreement to create the joint venture Canada Goose Japan. This venture is also expected to generate CAD 60 – 65 million in total revenue in fiscal 2023, which is roughly double the contribution from this market in fiscal 2022.
  

• Impressive Guidance: For FY23, the company expects its revenue to be in a range of CAD 1.3 – 1.4 billion, higher than CAD 1.1 billion in FY22. The increase is expected to be driven by improved performance from the company’s DTC segment. Moreover, the company expects its wholesale revenue to grow by 6%. Additionally, the DTC % of total revenue will range between 70% to 73%, driven by low to high teens comparable sales growth and continued channel expansion.
  

Risks associated with investment

Any further government’s restrictions on the closure of stores, on the back of Covid spread would be likely to dampen the company’s sales volume and the overall performance of the company. Also, there is a possibility that consumers might cut down on discretionary spending. Fluctuations in raw material costs, interest rates and currency exchange rates are the other big threats, which could impact the company’s financial picture.

 Financial overview of FY 2022 (Expressed in mn of CAD)

    Source: Company Filing

• Uprise in revenue: In FY 2022, the company posted higher revenue, which increased by 21.5% to CAD 1,098.4 million, compared to CAD 903.7 million in pcp. An increase was attributable to higher revenue from existing stores complemented by e-Commerce growth of 15.9% and new retail expansion.

• Higher gross profit: The company’s gross profit surged to CAD 733.6 million, much higher than CAD 554.0 million in pcp, thanks to higher revenue coupled with slightly lower costs of sales as a % to revenue.

• Surge in SG&A expenses: The period of FY 2022 was marked by higher SG&A expense, which stood at CAD 576.9 million, compared to CAD 437.0 million in pcp. An increase was attributable to higher costs related to new stores and the reopening of existing retail stores; some strategic initiatives also increased the expenses.

• Elevated operating income: Despite rise in operating expenses in the reported period of FY 2022, the company posted higher operating income of CAD 156.7 million against CAD 117.0 million in pcp. An operating margin in the same period also boosted to 14.3% against 12.9% in pcp.

• Robust net income: The company reported strong net income of CAD 94.6 million in FY 2022, compared to CAD 70.3 million in pcp, partially offset by higher income tax.
  

Top-10 Shareholders 

The top 10 shareholders have been highlighted in the table, which forms around 46.78% of the total shareholding. Morgan Stanley Investment Management and Fidelity Management & Research Company LLC hold the company's maximum interests at 17.47% and 7.68%, respectively. The company's institutional ownership stood at 92.30%. Higher institutional holding boosts the confidence in the mind of retail investors. 

Stock Recommendation

The company ended fiscal 2022 with record sales and optimism about its ability to accelerate earnings growth in fiscal 2023 and beyond. With new collaborations and stores, as well as an intense focus on customer experience, the organization is growing into new areas. At the same time, it is expanding product categories and ensuring year-round product relevancy by applying its successful strategy.

Additionally, for FY 2023, the company expects its revenue to be in range of CAD 1.3 – 1.4 billion, higher than CAD 1.1 billion in FY22, which will be a key positive. Moreover, it is focusing on new products and recently it launched its first premium footwear collection. We believe this stream will open fresh avenues for cash flows. 

Hence, considering all above discussed rationales we recommend a ‘Buy’ rating on the stock at the last closing price of CAD 25.42 as on June 1, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on June 1, 2022). Source: REFINITIV, Analysis by Kalkine Group 

*Recommendation is valid on June 2, 2022, price as well.

Technical Analysis Summary

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.