3 Strategies That Could Result In High Growth For Canada Goose

As Canada Goose Holdings Inc. Subordinate Voting Shares (NYSE: GOOS) (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.

3-Factored Thesis

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 gear for 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.

Analyst Conclusion

Barclays expects these strategies to prompt a four-year compound annual growth rate of 28 percent and 27 percent spike in EPS.

“We believe a strong earnings growth outlook, combined with top quartile financial metrics and gradually easing risk profile will support a valuation in line with a select group of peers, providing potential share price upside of 11 percent,” the note read.

Canada Goose was trading up 0.84 percent earlier Monday at of $16.89, but by time of publication, the stock was trending down by 0.84 percent at $16.61.

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