CIBC PreviewCurrently have a $60 target. GLTA
EQUITY RESEARCH
October 31, 2021 Flash Research
CANADA GOOSE HOLDINGS INC.
Q2 Preview: All Eyes On Peak Selling Season
Canada Goose will report its Q2/F22 results (ended September 26) on
Friday, November 5. A conference call will be held at 9:00am ET; dial-in numbers are (833) 952-1517 or (778) 560-2836, conference ID # 9893128.
European luxury companies reported better-than-expected Q3 sales with peers noting strength in the Americas, an improving recovery in Europe (albeit limited tourism) and mixed trends across Asia. Reports of consumer demand in China are strong, but COVID lockdowns remain an issue in certain regions of the country, as well as Japan. Overall, strong sales highlight consumers’ willingness to spend, and we believe these trends line up favourably for Canada Goose heading into peak selling season. That said, GOOS shares have lagged luxury peers, and we believe this is in part due to the H2-weighted annual guidance as direct-to-consumer (DTC) has become a more meaningful part of the business. We also note that October web traffic has remained flat from last year month-to-date, though these data exclude China, and we are still entering peak sales periods; November and
December represent peak months for site visits (38% of annual traffic).
Overall for Q2, we forecast revenue of $205MM with DTC revenue of $70MM (up 1.5x Y/Y) and wholesale revenue of $135MM (up 14% Y/Y), both in line with management guidance. Below the top line, we expect DTC gross margins of 76% and wholesale gross margins of 45.6%, while we forecast SG&A dollars to be up significantly Y/Y due to increased investment spending (previously delayed from Q1). This leads to an EBIT loss of $11.7MM and an EPS loss of $0.13.
On the call we will look for updates on: 1) initial feedback from the footwear pre-sale (select sizes already sold out), 2) DTC sales trends quarter to date, and 3) brick-and-mortar foot traffic and store productivity relative to pre-pandemic levels, with readthrough to run-rate margins.