Canada Goose takes flight with IPO
Luxury retailer tops peers in debut with richest price-to-earnings valuation
TORONTO It turns out investors are just as eager to part with wads of cash for Canada Goose Holdings Inc.’s shares as its customers are for its ubiquitous parkas.
The Toronto-based retailer, known for its $900 parkas with coyote fur-lined hoods, saw its share price open at $23.86 on the Toronto Stock Exchange, almost 40 per cent higher than the initial offering price of $17. The stock slipped to $21.53 by the time markets closed Thursday — a gain of 27 per cent on the day — giving it a market capitalization of $2.3 billion and the richest price-toearnings valuation of its luxury retailing peers.
In an interview after ringing the opening bell on the New York Stock Exchange, Canada Goose chief executive Dani Reiss said that valuation was warranted. According to the company’s initial public offering prospectus, the company’s revenue has been growing at a compound annual growth rate of 38.3 per cent for the past three years.
“I spend every waking moment of my life trying to earn everything we’ve already accomplished,” Reiss said.
“We believe greatness is out there. We want to build an enduring legacy that will last for many, many decades, if not centuries and beyond.”
Canada Goose will face challenges as it works to live up to the expectations set by the IPO. The company plans to develop new products like footwear and bedding to give customers who have already purchased parkas something else to buy, a strategy that could “potentially detract from the appeal stemming from the scarcity of our brand,” according to the prospectus.
Reiss said the key to maintaining that sense of exclusivity is quality. It helps that Canada Goose parkas are trendy, but the main reason people buy them is because they’re the best way to beat the elements and stay warm, he said.
“If we make a best-in-class product, we know consumers will come back to us for more, because they trust us to deliver on its functional benefits,” Reiss said. “The right way forward for us is to make sure we don’t dilute our brand.”
With origins in a small Toronto warehouse 60 years ago, Canada Goose has grown into a globally recognized brand worn by celebrities including rapper Drake and Toronto Blue Jay Jose Bautista.
Retailers sell Canada Goose jackets in 36 countries, with the company operating two of its own retail stores and four e-commerce stores.
Canada Goose sold 20,000,000 subordinate voting shares in its IPO, with plans to use the proceeds to repay outstanding debt, according to a release. Bain Capital owns a controlling interest in the company and will continue to do so following the public offering.
We believe greatness is out there. We want to build an enduring legacy that will last for many, many decades, if not centuries and beyond. DANI REISS, Canada Goose chief executive
Ed Strapagiel, an independent retail analyst, said Reiss and Bain Capital make a good team. Reiss is also heavily invested in the company and Bain Capital balances his creative energy with fiscal restraint, he said. “It was a great IPO, in terms of how it was pulled off,” Strapagiel said. “It shows you the importance of Bain Capital in this operation.”
Maureen Atkinson, a senior partner with the international retail consultants J.C. Williams Group, said Canada Goose will have to be careful to limit the number of retail outlets and resist the urge to boost sales by offering discounts if it wants to maintain its reputation.
“There is an appetite for and a belief in luxury products,” Atkinson said. “The challenge is to maintain the prestige of the brand.”
The company has also faced controversy, having been targeted by People for the Ethical Treatment of Animals for its use of coyote fur in its jackets. The animal-rights group said it plans on buying around $4,000 worth of shares so it can speak at the company’s annual meetings and urge it to stop using coyote fur in its jackets. That is a tactic the group has used in the past with other brands such as Lululemon, Hermes, Louis Vuitton and Prada.