Canada Goose Holdings Inc. Subordinate Voting Shares GOOS 0.15% “has created a unique brand in our coverage universe: a functional brand that appeals to a luxury consumer,” Credit Suisse’s Christian Buss said in a note, while initiating coverage of the company with an Outperform rating and price target of C$26.The analyst believes Canada Goose’s positioning could help the company sustain revenue growth in the high-teens to the low-20s percent with EPS growth in the low- to mid-20s percent over the next five years.“Canada Goose has been able to combine the strengths of the outdoor industry (long product lifecycles, loyal customers) with those of the luxury industry (broad demographic appeal, high price points),” Buss mentioned.
The analyst believes this should help drive high teens growth in the underpenetrated geographies, while offsetting the volatility associated with fashion-related products.Buss noted that the company was dealing with global growth with an “e-commerce-first” strategy, growing the e-commerce business to 20 percent of total sales over the last 24 months.On the other hand, Canada Goose intends to limit store expansion, targeting 30–50 stores worldwide. The analyst expects the company’s direct-to-customer figures to continue to grow to 53 percent of sales over the next five years, at which time e-commerce is likely to be close to 30 percent of sales.“We see significant opportunity for margin expansion, with our target for 400bp of EBITDA margin expansion to 23.5 percent of sales,” Buss went on to say.
The analyst believes that this would be driven by a mix shift to higher-margin e-commerce, as well as manufacturing in-sourcing.As Canada Goose Holdings Inc. Subordinate Voting Shares GOOS 0.15% (TSE: GOOS) continues expanding into a global, three-season brand, Barclays initiated coverage of the company with an Overweight rating and $19 price target.“Canada Goose provides investors with an opportunity to invest in sector-leading, multi-year, compelling growth,” analysts Jim Durran and James Allison wrote in a Monday note.Their thesis depends on three factors. First is a vast capacity to develop sales channels through eCommerce, retail stores and wholesale expansion. The company launched its U.S. flagship location in November, one month after opening its first ever retail store in Toronto, and continued stretching into Europe in March.Second is the brand’s diversification into categories both beyond signature outerwear and into warmer seasons. Although known for heavy-duty parkas, the company is rolling out inclement weather gearfor spring and summer.“We believe GOOS’ efforts to diversify its product offering and revenue channel mix should decrease earnings volatility over time, gradually reducing the risk profile,” Durran and Allison wrote.Third is an upside to operating margin generated by an increase in in-house manufacturing as well as the outpacing of wholesale growth by DTC sales and COGS inflation by product price increases.