Brand Presence, New Experiential Innovations, Consumer Engagement, and  Operational Efficiency Will Improve the Business Performance:  Canada Goose Holdings Inc. (TSX: GOOS) is a leading luxury apparel manufacturer company, which sell its product in 49 countries with 11 retail stores, 12 national e-commerce markets, and 2,227 points of wholesale distribution.

Highlights and Business Strategies:

• The group is actively extending it support to fight against COVID-19. It recently announced that the group is going to start the production of scrubs and patient gowns (which are short in supply) for the healthcare personnel and patients by leveraging its manufacturing facilities starting 30 March 2020.

• The business is focusing on enhancing its wholesale network, which would result in higher market penetration across the world. Further, the management intends to drive higher demand through strengthening its brand affinity.

Outlook: The group believe that COVID 19 outbreak is going to hamper its performance in the near term. The company believes that this is a temporary change in consumer behavior due to health precautions in unusual conditions. Following the outbreak of coronavirus, the group has revised its FY20 guidance. The business expects, annual revenue growth in the range 13.8% to 15.0%, which is expected to translate within the range of CAD 945 million to CAD 955 million. The management expects its EBIT margin to fell by 280 basis points to 330 basis point. The growth in adjusted net income is expected to be in the range of ~0.7 to – 2.2%.

Q3FY20 Financial Highlight for the Period Ended 31^st December 2019

Q3FY20 Income Statement Highlights (Source: Company Reports)

GOOS reported its quarterly results, wherein the company reported its revenue of CAD 452.1 million, up 13.2% on a y-o-y basis, driven by higher DTC revenue and higher revenue from new retail stores. Gross profit stood at CAD 298.4 million, as compared to CAD 257.3 million in the previous corresponding period. Gross margin improved to 66.0% from 64.4% in Q3FY19, driven by channel mix, with a higher proportion of DTC revenue. The operating margin increase to 35.7%, as compared to 35% in Q3FY19. Net income stood at CAD 118 million, up from CAD 103.4 million in the same period last year.

Stock Recommendation: The stock of GOOS is quoting at CAD 29.03, with a market capitalization of CAD 3.15 Billion. The stock is trading near the lower band of its 52-weeks trading range of CAD 18.27 and CAD 74.75. The business operates in the luxury category and has a tremendous product portfolio and is widely accepted by the customers across the globe, which indicates a higher pricing power of the business. Further, the company has taken several measures to reduce its operational expenses. Moreover, the company works in a highly erratic industry, failure to keep abreast of which could lead to a decline in sales. However, the group operates in the attractive and growing e-commerce market, which offers immense opportunities beyond the local borders as well. The recent outbreak is expected to have a material impact on the group’s financial in the near term. The group also downgraded its FY20 guidance and now expects its net income to grow in the range of 0.7% to -2.2% as against the earlier guidance of 25% growth. Looking at the current situation and above-mentioned facts, we have a ‘Watch’ stance on the stock at the closing market price of CAD 29.03 as on 26 March 2020.

GOOS Daily Technical Chart (Source: Thomson Reuters)

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.