The high-flying Canada Goose Holdings Inc. is coming a little closer to the ground.
But for many on Wall Street who have pushed the rapidly growing parka-maker to sky-high stock multiples, sign of anything but never-ending expansion looks like a dive bomb.
Shares of Canada Goose fell 30.9 percent to $33.89 Wednesday, leaving the company with a market capitalization of 5.06 billion Canadian dollars — a decline of 2.27 billion Canadian dollars in one trading session.
That’s a big nosedive following what would count as a banner year for most fashion companies.
Canada Goose’s net earnings jumped 53 percent to 144.3 million Canadian dollars last year as revenues rose 40.5 percent to 830.5 million Canadian dollars.
Dani Reiss, president and chief executive officer, told WWD that he’s staying the course and looking past Wall Street’s reaction.
“It’s a moment in time,” Reiss said. “It does not change the fact that we’re growing as fast and as profitably as we are. How other people choose to perceive things, I can’t navigate or negotiate that. We’re really excited about the year we had. We had our biggest growth year ever.
“Why would we change something that works as well as what we’re doing is working?” he said. “We just have to keep executing.”
For the next three years, the company is looking for average annual gains of at least 25 percent in adjusted earnings per diluted share with revenues increases of 20 percent.
“Long-term guidance has been the same as its been for the last three years. That guidance is off a larger base,” the ceo said, pointing out the same hurdle becomes higher as the company grows. “We don’t look at our business quarterly, we don’t think that’s the right way to look at our business.”
The market tends to obsess over quarters.
The company’s fourth-quarter net earnings slipped 10.4 percent to 6 million Canadian dollars, or 8 cents a diluted share. Adjusted net income was flat at 10 million Canadian dollars. Revenues for the three months ended March 31 increased 25.2 percent to 156.2 million Canadian dollars.
“While the Canada Goose story continues to be one of the most compelling in our space, their fourth-quarter release today was simply not good enough for a stock that had been trading at a substantial premium to the branded space,” said Ike Boruchow, an analyst at Wells Fargo.
Boruchow said investors were seeing some red flags in the quarter, including sales that came in 2 million Canadian dollars short of expectations for 158 million Canadian dollars — after the company’s top line has come in 10 percent better than projected since its IPO in March 2017.
Canada Goose has been growing its direct-to-consumer business very quickly and now that growth seems to be slowing, changing its margin equation during off-peak selling periods, the analyst said.
“On one hand you have the fastest-growing brand in our space — with a compelling multiyear outlook for growth and lots of white space on the horizon,” Boruchow said. “On the other hand, you have a model that appears to be adjusting to a larger fixed cost base, with investors attempting to understand how much potential risk that could bring to the story down the road.”