uploads///human _

Canada Goose Stock Fell 12.9% despite Strong Q3 Results


Feb. 15 2019, Published 8:12 a.m. ET

Third-quarter results

On February 14, Canada Goose (GOOS) (GOOS.TO) stock fell 12.9% on the NYSE. The company reported impressive results for the third quarter of fiscal 2019[1. Fiscal Q3 2019 ended on December 31, 2018] and raised its outlook for fiscal 2019.

Canada Goose’s third-quarter revenues rose 50.2% to 399.3 million Canadian dollars and beat analysts’ expectation of 361.6 million Canadian dollars. The company’s top-line growth was driven by a 78.7% increase in its direct-to-consumer revenues, which include the revenues from retail stores and e-commerce. The company’s wholesale revenues rose 22.2%.

Article continues below advertisement

On February 14, the steep decline in Canada Goose stock reflected investors’ concerns about the company’s valuation levels, uncertain macro conditions, and the potential impact of rising costs. The S&P 500 Index (SPY) fell 0.3% on February 14 after the Department of Commerce reported a 1.2% fall in US retail sales in December—compared to November.

So far, Canada Goose stock has risen 17.9% this year despite the decline on February 14. The S&P 500 has risen 9.5% on a year-to-date basis as of February 14.

Canada Goose’s third-quarter adjusted EPS rose 65.5% on a year-over-year basis to 0.96 Canadian dollars, which beat analysts’ estimate of 0.82 Canadian dollars. The company’s overall gross margin expanded by ~80 basis points to 64.4% in the third quarter. However, the gross margin for the direct-to-consumer and wholesale channels fell due to higher labor costs.

Revised outlook

Canada Goose raised its outlook for fiscal 2019 following the strong third-quarter performance. The company expects its fiscal 2019 revenues to grow in the mid-to-high thirties range compared to the previous forecast of at least 30% growth. Canada Goose expects its fiscal 2019 adjusted EPS to rise in the mid-to-high forties range. Previously, Canada Goose expected an adjusted EPS growth of at least 40% in the current fiscal year.

As of February 14, Canada Goose was trading at a forward PE ratio of ~42.5x compared to Columbia Sportswear (COLM) and Lululemon’s (LULU) 12-month forward PE ratios of 23.4x and 35.2x, respectively.


More From Market Realist