Canada Goose shares fall after parka-maker cuts outlook over Omicron disruption

Revenue lower than expected in Asia and Europe amid new COVID-19 outbreaks Canada Goose Holdings Inc. reported third-quarter earnings Thursday. Photo by REUTERS/Andrew Kelly Canada Goose Holdings Inc. on Thursday cut its full-year guidance following lower-than-expected retail growth in Asia and Europe after being hit by the unanticipated severity of the Omicron wave. The luxury…
Canada Goose shares fall after parka-maker cuts outlook over Omicron disruption

Revenue lower than expected in Asia and Europe amid new COVID-19 outbreaks

Canada Goose Holdings Inc. reported third-quarter earnings Thursday. Photo by REUTERS/Andrew Kelly

Canada Goose Holdings Inc. on Thursday cut its full-year guidance following lower-than-expected retail growth in Asia and Europe after being hit by the unanticipated severity of the Omicron wave.

The luxury parka maker’s shares were down more than 15 per cent to $36.70 in Toronto as of 11 a.m. The stock had plunged more than 17 per cent after the opening of the TSX and fell almost 20 per cent in New York.

Revenue at the Toronto-based company grew to $586.1 million in the third quarter ending Jan. 2, 2022, a 26.5 per cent increase from the year before. Adjusted earnings before interest and taxes came in at just under $207 million, slightly less than analyst expectations of $209 million.

Global e-commerce and direct-to-consumer sales helped boost top-line growth and purchases in the United States, and offset lower growth in China and Europe. On a per-share basis, earnings were US$1.44.

But the slower sales in China, a key focus for Canada Goose, and a stall in luxury tourism prompted the company to reduce its forward guidance. The company had raised revenue expectations in November to between $1.12 billion and $1.17 billion, before the Omicron variant spread around the world.

It now expects revenue to come in between $1.0 billion and $1.1 billion. Thursday’s earnings put it $214.7 million away from meeting the bottom of its latest projection.

“We view these disruptions as temporary and in the case of (Asia), we’ve already seen sequential improvement in the past two weeks,” chief executive Dani Reiss told investors in an earnings call. He also said the apparel company, which manufactures its products in Canada, did not have any “material revenue or margin headwinds” related to supply or shipping constraints.

“We’re confident in our inventory position going into fiscal 2023 and we’re confident in our ability to navigate inflationary pressures,” Reiss said.

Canada Goose is facing a calendar year in which central banks in have already raised or are poised to raise interest rates, broadly impacting the spending patterns of consumers. Inflation has hit three- and four-decade highs in Canada and the U.S., respectively, and central banks in both countries are gearing up for rate hikes in March.

The company is well positioned to weather an overall drop in consumer spending, chief financial officer Jonathan Sinclair said. It has pricing power for its expensive coats and clothing, and the demographic that can afford $1,000 parkas is unlikely to be affected by any downturn, he said.

Some luxury retailers will continue to see growth even as interest rates go up, Goldman Sachs Group Inc. analysts Brooke Roach and Julie Hoover wrote in a December report.

“We believe the wealth effects and spending impulses of the consumer with higher income will be greater in an environment of inflating essential goods costs,” they said. “All else equal, we prefer brands with higher opening price points in an environment of rising costs, as the opportunity to drive modest mix shift price increases is likely to be less noticeable to the consumer at a higher range than a fixed low-cost item.”

Direct-to-consumer sales are another area Canada Goose is shifting its efforts toward, seeking to take advantage of higher margins compared to the less-lucrative wholesale side of the business.

Its e-commerce and retail sales grew 49 per cent to $445.4 million from $299.4 million year over year. In China, that growth was up 35 per cent. Wholesale declined to $160.6 million from $136.7 million globally.

Gross margin for direct-to-consumer sales was down from a year earlier, at 71 per cent from 78 per cent, while wholesale was down 50 per cent from 51 per cent.

Reiss cited the expansion of Canada Goose’s clothing line and new product launches, such as shoes, as the reason for lower margins in the direct-to-consumer segment, which cut into hot demand for its parkas.

The company is also trying to shift from a seasonal business, with sales peaking in the holidays and winter, to a year-round apparel maker, he said.

• Email: [email protected] | Twitter: biancabharti

Financial Post Top Stories

Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.

By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300

Read More

Total
0
Shares
Leave a Reply

Your email address will not be published.

Related Posts
Salona Global Medical Device Corporation Publishes Investor Call Recording
Read More

Salona Global Medical Device Corporation Publishes Investor Call Recording

Author of the article: SAN DIEGO, Dec. 15, 2021 (GLOBE NEWSWIRE) — Salona Global Medical Device Corporation (“ Salona ” or the “ Company ”) (TSXV:SGMD), an acquisition-oriented medical device company serving the global injury and surgery recovery (known as recovery science) market, has posted a recording of last week’s investor call on its website.…
Ford Government’s Health Care Staffing Plan Doesn’t Add Up; Will Leave System Tens of Thousands Workers Short
Read More

Ford Government’s Health Care Staffing Plan Doesn’t Add Up; Will Leave System Tens of Thousands Workers Short

Author of the article: TORONTO — On Tuesday, December 7, 2021, at 1 p.m., SEIU Healthcare and the Canadian Union of Public Employees (CUPE) will present data that shows a terrifying gap in the number of health care workers Ontario will need over the next few years and the number of workers current Ford government…
Japanese shares rise on strong Wall Street finish, tech stocks shine
Read More

Japanese shares rise on strong Wall Street finish, tech stocks shine

Author of the article: TOKYO — Japanese shares extended gains to a third session on Tuesday, as a strong Wall Street finish overnight and expectations of robust corporate earnings lifted sentiment, and as investors snapped up beaten-down technology stocks. By 0224 GMT, the Nikkei share average advanced 0.7% to 27,199.29, after marking its biggest monthly…
Kintavar Announces Results of Annual and Special Meeting; Provides update on Exploration
Read More

Kintavar Announces Results of Annual and Special Meeting; Provides update on Exploration

Author of the article: MONTREAL, June 10, 2022 (GLOBE NEWSWIRE) — Kintavar Exploration Inc. (the “Corporation” or “Kintavar”) (TSX-V: KTR) (FRANKFURT: 58V), is pleased to announce the results of its Annual and Special Meeting (the “AGM”) and also to provide an exploration update on the Wabash property. All the resolutions that were presented at the…