Home Luxury brand Canada Goose shares fall after parka maker cut outlook on Omicron disruption

Canada Goose shares fall after parka maker cut outlook on Omicron disruption

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Revenue below expectations in Asia and Europe amid new COVID-19 outbreaks

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Canada Goose Holdings Inc. sales increased in its third fiscal quarter amid a busy holiday and winter season, but lower-than-expected revenue in Asia and Europe as well as new outbreaks of COVID- 19 caused the company to lower its forecast.

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The shares were down 9% in premarket trading after falling nearly 12%.

Revenue for the luxury parkas maker reached $586.1 million in the third quarter ending Jan. 2, 2022, a 26.5% increase from a year earlier. E-commerce and direct-to-consumer sales helped drive revenue growth, the Toronto-based company reported Thursday. Per share, earnings were US$1.42.

“The momentum of the Canada Goose brand and the resilience of the supply chain drove a strong performance in our biggest quarter ever,” CEO and President Dani Reiss said in a press release. “Our digital business continued to outperform last year’s outsized gains, alongside a strong improvement in retail productivity.”

The positive growth suggests the company has strengthened to weather headwinds from a shift to higher interest rates in many of Canada Goose’s most important markets. However, it cut its forecast to between $1.090 billion and $1.105 billion, down from the forecast provided in November of between $1.125 billion and $1.175 billion. Thursday’s earnings move it $214.7 million away from its last projection low.

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Canada Goose should be able to weather an overall decline in consumer spending as the population that can afford $1,000 parkas will be relatively unaffected by a downturn, wrote Goldman Sach analysts Brooke Roach and Julie Hoover, in a December report.

“We believe that wealth effects and higher-income consumer spending impulses will be greater in an environment of inflated costs of essential goods,” Roach and Hoover wrote. “All other things being equal, we prefer brands with higher opening prices in a rising cost environment, as the opportunity to generate modest price increases per mix shift is likely to be less noticeable for the consumer in a higher range than a fixed low cost item.”

Online sales and purchases at Canada Goose retail stores increased to $445.4 million from $299.4 million year-over-year. Growing these two channels has been a key focus for the luxury brand over wholesale purchases, as it can make more money selling directly to consumers.

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  1. A man walks into a Canada Goose store in Beijing, China on December 2, 2021.

    Chinese state media warn Canada Goose may have breached consumer law

  2. Canada Goose Holdings Inc. will stop buying fur by the end of this year and stop manufacturing fur no later than the end of 2022, the company announced Thursday.

    Canada Goose pledges to be fur-free by 2022

China is another area the company pays particular attention to. He was criticized in the fall and winter of last year for his return policy in Asia’s biggest country. Calls to boycott the brand were made late last year after consumers complained they were barred from returning clothes, even within the time limit. Consumers have complained of discrimination from Canada Goose, which first launched its flagship store in Beijing in 2018.

However, chasing Chinese customers is key for the brand as it seeks big spenders on the mainland, especially after the pandemic hit luxury shopping tourism. Direct-to-consumer growth in China increased 35.1% from a year earlier, Canada Goose reported.

The Toronto-based company also relies on tourists seeking shopping on the high streets of Europe. Government-imposed travel restrictions and business closures have impacted profitability.

The lack of supply chain issues helped the flow of winter jackets and other luxury items continue when bottlenecks became a big concern for businesses ahead of the holiday season. Canada Goose attributed its domestic production as the reason, with eight factories in the country, Bloomberg reported in November.

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