This Canadian winter clothing brand, Canada Goose, which is well-known for its luxurious $1000 parkas, saw a significant setback with a 26% drop in its shares after announcing its slowest revenue growth in eight quarters. The disappointing news continued as the company also projected even slower sales growth for the next three years, disappointing investors who had high hopes for the brand as a lucrative investment opportunity.
In an effort to boost sales and enhance its brand image, Canada Goose has been shifting towards a direct-to-consumer model by opening its own retail stores rather than relying on wholesalers. This strategy gained momentum with the launch of its first store in China in 2018, with plans to open three more stores in addition to the six already in the pipeline.
Despite a 25% revenue increase reaching C$156.2 million ($115.65 million) in the fourth quarter, the sales growth fell slightly short of analysts’ expectations, leading to the sharp decline in shares. The company’s forecast of 20% growth in 2020, lower than what analysts had anticipated, further fueled the disappointment among investors.
CEO Dani Reiss defended the conservative forecast and emphasized responsible guidance as the company plans to expand its global footprint with up to 20 brick-and-mortar stores by 2020. However, rising labor costs and overall expenses have been pressuring the company, leading to a notable increase in cost of sales and expenses.
While Canada Goose’s net income rose by 11.1% to C$9 million, surpassing analysts’ expectations, industry experts like Ryan Craver have expressed disappointment in the brand’s performance. With a significant slowdown in the annual growth rate from 40% to 20% for the upcoming fiscal year, investors are growing wary of the brand’s future prospects.
In summary, Canada Goose faces challenges in maintaining its growth momentum amidst escalating costs and subdued sales expansion. The shift towards direct-to-consumer retail operations, although strategic, is posing challenges for the brand’s profitability, triggering doubts among investors about its future success.
To explore more about Canada Goose and its recent challenges, you can visit their official website here. Additionally, for insights into the luxury retail industry and investment opportunities, you can check out this article here.
