Canada Goose
(GOOS-T, GOOS-N) C$45.90 | US$37.10
Q2/F22 Preview: Looking for Progress in Capturing Local Demand
Event
Canada Goose (GOOS) is scheduled to report Q2/F22 results on November 5.
Impact: NEUTRAL
Q2/F22 Summary: This quarter represents a shift to a new normal for GOOS. In a period that has historically been dominated by Wholesale, a step-up in DTC revenue from pre-pandemic levels is anticipated. eCommerce and new stores added over the LTM should offset subdued retail traffic in the absence of international tourism. In the context of continued COVID-19-related disruptions throughout the global retail landscape, our revenue forecast is in line with management's guidance. The DTC channel shift should drive gross margin expansion from pre-pandemic levels, offset by investments in growth within SG&A and higher D&A. This derives our forecast for an Adjusted EBIT/EPS loss.
Risks Limit Upside to F2022: An acceleration of the recovery in the global luxury segment could remain elusive near-term. Global brands, including GOOS, continue to navigate disruptions related to the pandemic. We see challenges to a significant acceleration in global luxury near-term, including in the key market of China. As GOOS transitions to being more DTC centric, this includes servicing local demand in Asia. We believe investor patience will be required prior to assessing the success of this strategy. As indicated by our financial forecasts, we remain conservative with regards to the potential for management's F2022 guidance (revenue of >$1-billion) to be materially exceeded. In our view, putting book ends on the success of eCommerce and/or additional clarity surrounding store productivity could provide early indications of GOOS' strategic progress.
Investment Thesis: Management's efforts to capture local demand and drive the brand forward face near-term challenges, in our view. As we progress through this transitionary period for GOOS, it is admittedly difficult to gauge progress on this front. The strength of GOOS' balance sheet should enable management to move its strategic initiatives forward and return capital to shareholders. However, at the current valuation, we prefer growth stories within our coverage universe with arguably lower execution risk.
TD Investment Conclusion
We are maintaining our HOLD recommendation and $54.00 target price