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Canada Goose shares plunge 26% as revenue growth slows

Published 2019-05-29, 11:52 a/m
© Reuters.  Canada Goose shares plunge 26% as revenue growth slows
GOOS
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* Q4 revenue misses marginally

* 2020 revenue growth forecast of 20% below estimate

* Shares fall 26% to more than 1-yr low

By Arundhati Sarkar

May 29 (Reuters) - Canada Goose Holdings Inc GOOS.TO posted its slowest revenue growth in eight quarters and forecast even slower sales growth for the next three years on Wednesday, sending shares in the high-end winter clothing brand down 26%.

The $1000 parka maker's stock has been under pressure with sales and higher spending failing to excite investors who have backed the company as a high growth play.

Canada Goose, which historically sold its products through wholesalers, has been opening its own shops since 2016, banking on its luxury tag to draw in shoppers at a time when other retailers have been fighting off falling sales and shrinking margins.

The company, whose parkas are sported by celebrities, has been expanding beyond North America, opening its first store in China in 2018. It plans to add three more stores in China in addition to the six it already announced.

Revenue still rose 25% to C$156.2 million ($115.65 million) in the fourth quarter ended March 31, marginally below analysts' estimates of C$156.8 million, according to IBES data from Refinitiv.

A forecast of 20% growth in 2020, however, put it on course to undershoot analysts' average estimate of C$1.05 billion by more than C$50 million, according to Reuters calculations.

"I come back to the fact that we guide responsibly," Chief Executive Officer Dani Reiss said when analysts asked if the forecast was conservative.

Founded in a small warehouse in Toronto in 1957, the company now expects to open up to 20 brick-and-mortar stores around the world by 2020. company has also been struggling with labor costs. Chief Financial Officer Jonathan Sinclair said that while they expect some forward pressure on cost, it was not a "source of concern" this year.

Cost of sales in the quarter rose 15.4%, while overall expenses surged nearly 40%.

Net income rose 11.1% to C$9 million, or 8 Canadian cents per share. Excluding items, it earned 9 Canadian cents per share, above analysts' estimates of 6 Canadian cents.

"I believe the results of this latest quarter were underwhelming," said Ryan Craver, founder of Commerce Canal, an agency that handles digital sales and marketing for a number of brands including ones that compete with Canada Goose.

"Couple that with just a 20% annual growth rate for the coming fiscal year which is down from 40% this past year and 50% the previous year and investors are bound to be disappointed."

($1 = 1.3506 Canadian dollars)

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