Winter is on the way out, but financial analysts see a big year ahead for Canada Goose.
The luxury down coat brand went public in March and analysts from Wells Fargo and Instinet launched their coverage of the company with positive, albeit differing, views and expectations.
Wells Fargo analyst Ike Boruchow sees Canada Goose as a likely success story in a struggling retail environment, and expects its stock to outperform over the year. The bank said shares of the brand should hit between 25 and 26 Canadian dollars, or $18.74 and $19.49. It’s is currently trading at around $16.80.
“In a world of retail consolidation, overdistributed brands and diminishing margin stories across the retail space, we view [Canada Goose] as a rare find — an upwardly trending brand, with meaningful opportunities for top-line growth and margin runway,” Boruchow said in a research note.
While Boruchow likes seeing continued growth in its core North American market, his positive outlook for Canada Goose lies in the company’s “meaningful international opportunity.” He said the firm’s online and wholesale European strategy is in very early stages and growth possibilities in Asia are “virtually untapped.”
“The ongoing steady growth in their core domestic market, combined with a ramp overseas should enable [Canada Goose] to nearly triple revenues over time — from just $380 million today to close to $1 billion,” Boruchow said.
The wider struggles in retail will likely keep investors wary of the brand in the beginning, the analyst noted, considering some “mismanaged attempts at expansion” by other brands. Boruchow admitted that the success of Canada Goose hinges on execution in the coming months.
“Management is undertaking a difficult challenge [with] the attempt to buck the retail trend and maintain their core competency despite growth forays into new channels, geographies and product categories,” he added.
Instinet’s Simeon Siegel agreed that Canada Goose has a lot of room for expansion and “multiple avenues for growth,” but tempered his hope for the brand with a neutral rating, saying its current $1.35 billion market valuation is already reflecting an upside of these factors.
Siegel also noted possible risk factors for the brand, including any shift in customer perception as Canada Goose grows, seasonal volatility and the likelihood that the company “may not [be] able to continue to grow at its historical rate, which could lead to margin pressure” and earnings misses.
Nevertheless, he said the brand should see double-digit sales growth “for the foreseeable future” with wholesale and direct-to-consumer growth, expanding into new markets and the creation of new product categories, including non-winter items.
Non-parka products currently make up between 10 percent and 30 percent of Canada Goose’s online sales, Siegel said, and the brand is set to launch a knitwear line for fall 2018.
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