Canada Goose shares plunge 30% after sales outlook rattles investors

Shares of Canada Goose tumbled more than 30 per cent on Wednesday after the luxury retailer's fiscal fourth quarter earnings, and sales outlook sparked concerns over whether its explosive growth could be winding down.

Revenue in the first three months of this year was $156.2 million — below Bloomberg's average analysts' forecast of $158.9 million. This marked the first revenue miss by the parka maker since it became a public company in 2017.

Even though the company's revenue grew 25 per cent from a year ago, it was the slowest growth in eight quarters.

Its earnings of nine cents per diluted share on an adjusted basis beat analyst expectations. But, the company also revised down its revenue growth forecast for the next three years to 20 per cent — down from the 25 per cent it hit in the last year. 

Shares listed in Toronto and New York plunged more than 30 per cent to $33.89 US and $45.94, respectively, after the results.

"A stronger-than-anticipated early season shift due to cold North America weather could explain Canada Goose's below-consensus fourth quarter sales growth of 23 per cent," said Maxime Boucher, retail analyst at Bloomberg Intelligence in a note.

"Revenue in the region increased just high-single digits, a stark slowdown from prior 40 per cent-plus rates that suggests more than the brand maturing." 

Betting on global expansion

But despite concerns sales are slowing as the brand matures, Boucher still thinks Canada Goose's growth potential on global expansion remains intact.

"The 2020 guidance is in-line with historically conservative management expectations," Boucher said.

"The brand's image and engaging experiences, including sub-zero changing rooms, resonate strongly with millennials and teenagers, the age groups whose spending on luxury goods is growing quickest."

The company, founded in 1957, started out by selling products to retailers, but began opening its own stores in 2016 before going public. It now expects to open up to 20 stores around the world by 2020.

Canada Goose entered the world's biggest luxury market  — China — in the past year as its annual revenue outside of North America jumped more than 60 per cent.

The rest of the world is also catching up to Canada when it comes to sales. Canada accounted for more than 35 per cent of its total revenue, while the rest of the world took up 34.5 per cent.

"We entered the year with a very ambitious agenda of global growth, and we have surpassed it with flying colours," said Dani Reiss, Canada Goose president and CEO, in the earnings release.

"I believe that we are still just scratching the surface of our long-term potential as we continue to define performance luxury globally."