Canada Goose shares clock worst day on record as heady growth set to slow

Canada Goose shares notched their worst day on record on Wednesday after the purveyor of $1,000 parka coats posted its slowest sales growth in eight quarters and signalled it will not be able to sustain the explosive pace of growth seen in recent years.

After delivering full-year revenue increases of more than 40 per cent in each of the past two fiscal years, the company said on Wednesday that it expects sales growth to moderate to about 20 per cent a year over the next three years.

The guidance comes as the Canadian luxury apparel maker reported a 25 per cent rise in sales to C$156.2m for the fourth quarter that ended on March 31. That is slightly below analysts’ expectations of C$156.8m and marks the weakest pace of quarterly sales growth for the company in two years.

Canada Goose has in past years said it expected annual sales growth to moderate to around 20 per cent — only to hurdle over those expectations. But the latest guidance, coming against a backdrop of escalating US-Chinese trade tensions and concerns about the knock-on effect that this would have on the world’s two largest economies appeared to spook investors.

Adding to the downbeat mood, Canada Goose also warned that it would post “materially larger losses” for the current fiscal quarter as it looks to ramp up investment in China and new store openings.

Shares fell 30 per cent to $33.89 for its worst day since the stock listed in March 2017 and sliced the company’s market value down to about $3.7bn.

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The prospect of a sharp deceleration in sales growth overshadowed an otherwise solid fourth quarter for Canada Goose.

The company has been moving away from wholesalers to focus on more lucrative direct-to-consumer sales. It has also sought to drive growth by establishing a larger presence in China.

By selling its signature parkas — with their distinctive circle patch logo — directly to customers rather than through a third party, Canada Goose has been able to boost its profitability. This can be seen in the gross margin, which rose by nearly 3 percentage points to 65.6 per cent in the three months to March.

Net income was C$9m, or 8 cents per diluted share, topping expectations for $4m or 3 cents a share.

Canada Goose priced its shares at C$17 (or $12.78 based on exchange rates at the time) in March 2017. The stock hit a high of $70.26 in December 2018 but has since come under pressure on global growth concerns.

Via Financial Times