Analysts hot on Canada Goose
Brand combines strengths of outdoor industry with appeal of luxury industry
TORONTO — Guarding against wintry blasts could spell hot returns for the investors of outdoor apparel maker Canada Goose.
A number of industry analysts initiated coverage this week on the Toronto-based manufacturer and retailer of $900 parkas and $400 spring jackets, and the bulk of them are very bullish.
“Canada Goose has created a unique brand in our coverage universe: A functional brand that appeals to a luxury consumer,” analyst Christian Buss of Credit Suisse said in a Monday report initiating coverage on Canada Goose with an outperform rating and a price target of $26.
Canada Goose closed at $22.43 on the Toronto market, down 0.22 per cent, on Monday.
Buss believes the Canada Goose brand combines the strengths of the outdoor industry — namely, long product life cycles and loyal customers — with the broad demographic appeal and high price points of the luxury industry.
“This should drive high-teens growth into underpenetrated geographies and mitigate the volatility associated with fashion-oriented product,” the analyst said.
Analyst Mark Petrie at the Canadian Imperial Bank of Commerce, who initiated coverage with an outperform rating and a price target of $27, said while Canada Goose may be close to “commonplace” on the streets of Canada, it “is experiencing soaring demand across the rest of the world.”
Petrie estimates the company has several years of material growth ahead of it as it expands into new markets, grows its store network, broadens its product assortment and shifts a greater proportion of sales to its burgeoning website.
Buss also applauded Canada Goose’s “e-commerce-first” strategy at a time when industry nerves are on edge over Amazon’s potential to destroy store-based retail businesses. Canada Goose’s direct business grew to 20 per cent of its total sales in the past two years, compared with the retail vendor average of eight per cent, and Buss anticipates e-commerce will account for 30 per cent of Canada Goose’s sales in the next five years. Its retail store strategy is also conservative, limiting expansion to a total of 30 to 50 stores worldwide over the next few years.
Petrie also believes there is potential for Canada Goose to flourish as its consumer brand awareness improves; the brand sits at 16 per cent awareness among U.S. consumers, he said, compared with more than three-quarters of Canadians who are aware of the Canada Goose brand.
RBC Capital Markets analysts Brian Tunick and Sabahat Khan initiated coverage on Canada Goose with an outperform rating on the shares and a $25 price target, and they also believe the brand has plenty of runway to develop internationally.
“Despite its 60-year history, we see Canada Goose as in the early stages of its growth trajectory, particularly in the fragmented and growing premium outerwear market,” they wrote.
TD analyst Meaghen Annett was slightly more cautious, initiating coverage on Canada Goose with a hold rating and a price target of $23.
“We remain mindful that solid cost control will be necessary as the company pursues its global growth strategy,” Annett wrote in a report Monday.
“Given the seasonality of the business that is heavily weighted to the second and third-quarter fiscal periods, which have accounted for over 75 per cent of consolidated revenue historically, and the lack of annual guidance by management, we believe share price performance may be weighted toward the second half of fiscal 2018.
“We see this as the earliest opportunity for meaningful visibility with respect to the pershare earnings growth profile and the potential for material financial outperformance,” Annett added. “At current levels, the shares are fairly priced in this attractive growth profile.”