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

• New product launch: Recently, 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.

• Growth from eCommerce segment: The company is witnessing strong traction from its online segment and reported a whopping 47% y-o-y growth in Q2 2022. Notably, DTC revenue grew to CAD 112.6 million during the period, compared to CAD 56 million in pcp. 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.

• Strong traction from the wholesale segment: The company derives its majority revenue from the wholesale segment, while the company witnessed stupendous growth from the above segment aided by higher sales volume coupled the timing of shipments to the wholesale partners. Notably, the company reported its revenue of CAD 173.7 million in H2FY22, compared to CAD 127.2 million in pcp.

• Impressive Outlook: For FY22, the company expects its revenue to touch one billion, higher than CAD 903.7 million in FY21. The increase is expected to be driven by improved performance from the company’s DTC segment. Moreover, the company expects its wholesale revenue to come at par with FY21.

Risks associated with investment

Extension of government’s restrictions for the closure of stores 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. 

   Financial overview of Q2 2022

Source: Company Filing 

• In Q2 FY22, the company posted its revenue at CAD 232.9 million, higher than CAD 194.8 million in pcp. The growth was driven by higher sales from the existing retail stores coupled with strong performance from e-Commerce segment, followed by positive impact from the retail expansion.
• Gross profit surged to CAD 135 million, much higher than CAD 94.2 million in pcp, thanks higher revenue coupled with slightly lower costs of sales.
• The quarter was marked by higher SG&A expense which resulted to a lower operating income of CAD 11.3 million, compared to CAD 15.1 million in pcp.
• Net income stood at CAD 9 million, slide from CAD 10.4 million in pcp.

Valuation Methodology (Illustrative): Price to CF based

Analysis by Kalkine Group 

Stock Recommendation

During the second quarter of FY22, the company reported increase in retail traffic, normalized store operating hours and increased occupancy limits as compared to the previous quarter. Continuation of the above trend is likely to support the upcoming sales volumes. The company is witnessing strong traction from its online segment and reported a whopping 47% y-o-y growth in Q2 2022.

Furthermore, For FY22, the company expects its revenue to touch one billion, higher than CAD 903.7 million in FY21, 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 GOOS stock at the current market price of CAD 38.78 at 10:18 AM Toronto time as on February 03, 2022.

One-Year Price Chart (as on February 03, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Technical Summary Analysis

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