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Bull of the Day: Canada Goose (GOOS)

Tracey Ryniec

Canada Goose Holdings Inc. (GOOS) does it again with a spectacular holiday quarter. This Zacks Rank #1 (Strong Buy) continues to be one of the top luxury specialty retailers.

Canada Goose makes performance luxury apparel, especially warm winter coats. Founded in Toronto, Canada in 1957, it employs 3,400 worldwide and sells through its retail stores, its web site and wholesale.

Another Big Beat in the Fiscal Third Quarter of 2019

On Feb 14, Canada Goose reported its fiscal third quarter 2019 results and beat the Zacks Consensus Estimate by 15 cents. Earnings were $0.73 versus the consensus of $0.58.

Total revenue rose 50.2% to $399.3 million (all figures in Canadian dollars) from $265.9 million.

Direct to Consumer (DTC) revenue rose to $235.3 million from $131.7 million in the year ago quarter due to 5 new retail stores and one new e-commerce site.

Wholesale also rose to $164 million from $134.2 million due to higher order values from existing partners along with earlier shipment timing compared to the prior year.

Gross profit margin rose to 64.4% from 63.6% a year ago thanks to higher proportion of revenue from DTC where the gross profit margin is 76.1%.

Raised Full Year Guidance

Given the strength of the first nine months of the fiscal year, Canada Goose raised its full year guidance.

It now expects revenue growth in the mid-to-high 30% on a percentage basis compared to prior guidance of at least 30%.

The analysts are equally as bullish as they moved to raise both fiscal 2019 and fiscal 2020 earnings estimates.

3 estimates were raised for fiscal 2019 since the report which pushed the Zacks Consensus up to $0.96 versus the prior consensus of $0.94. That is earnings growth of 45% as Canada Goose made just $0.66 in fiscal 2018.

The growth isn't expected to slow much in fiscal 2020.

4 estimates have been revised higher in the past month for next year pushing the Zacks Consensus up to $1.24 from $1.21. That's earnings growth of 28.5%.

A Buying Opportunity?

Canada Goose went IPO in 2017 and the shares had been red hot until the middle of 2018. Like a lot of stocks, these shares sold off to finish 2018 but have rebounded to start 2019.

Shares are still down 3.5% for the last 6 months even though they have spiked 28% in 2019.

They haven't yet retaken their all-time highs.

Shares are trading at 57x times forward earnings which makes them a little more expensive than luxury retail peers like Lululemon (LULU) which has a forward P/E of 33.

But for those investors who love growth stocks with strong brands, Canada Goose is one to keep on the short list.

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