Canada Goose Holdings Inc

Canada Goose Holdings Inc (TSX: GOOS) is a Canada-based company that designs, manufactures, and sells performance apparel for men, women, youth, children, and babies. The company's apparel collections include various styles of parkas, lightweight down jackets, rainwear, wind wear, knitwear, footwear and accessories for fall, winter, and spring seasons.

Key Highlights

Strong Segment Performance: The company's global e-commerce segment performance in Q2FY22 was strong, with a 33.8% surge in segment revenue on the back of the growth in all major existing markets. Further, Direct-to-Consumer (DTC) segment revenue from China also increased by 85.9%. In addition, the total revenue, including temporary Personal Protective Equipment (PPE) sales, surged by 19.6% on a YoY basis.

Increased Store Count and Merchandise Margins in Q2FY22: During the quarter under consideration, the company's store count increased to 38 from 30 stores reported in the previous quarter. Its merchandise margin also improved to 73.7% from 72.8% in Q1FY22.

Positive Outlook: GOOS' performance in the upcoming quarter is expected to be better on the back of the festive season. Demand is expected to be strong unless new lockdown measures are implemented due to resurgence in the COVID-19 cases. However, the overall apparel sector is moving up, driven by higher penetration of the e-commerce platforms and the gradually increasing footfalls in the retail stores due to higher vaccination rollout.

Financial Highlights: Q2FY22 (in CAD millions)

Source: Company report

• During the quarter under consideration, the company reported a topline growth of ~19.6% to CAD 232.9 million vs CAD 194.8 million reported in Q2FY21.
• The company reported solid gross profit growth and margin expansion, with a gross profit of CAD 135.0 million and a gross margin of 58.0%, vs gross profit of CAD 94.2 million and a gross margin of 48.4%.
• However, its operating income and margin were suppressed due to an increase in SG&A expenses. During the quarter, operating income declined to CAD 11.3 million from CAD 15.1 million reported in Q2FY21 and operating margin lowered to 4.9% from 7.8% in pcp.
• As of September 26, 2021, GOOS's cash position stood at CAD 98.9 million vs CAD 156.3 million reported at Q2FY21 end.

Valuation Methodology (Illustrative): Price to Cash Flow Per Share-based valuation

Stock Recommendation

The company's performance in the quarter just gone was decent, with a solid topline growth and gross margin expansion. Also, its e-commerce platform is moving well and is expected to perform in the upcoming festive season. In addition, from the valuation standpoint, GOOS looks decent at the current trading level. Hence, we recommend a "Hold" rating on the stock at the closing price of CAD 52.93 (as on December 01, 2021)

1-Year price chart (as on December 01, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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