Canada Goose's China Potential Is Underappreciated, UBS Says

The market seems overly concerned about Canada Goose Holdings Inc’s (NYSE: GOOS) 54% year-on-year inventory growth in the previous quarter and the impact of COVID-19 on its North America sales, while overlooking its massive potential in China, according to UBS.

The Canada Goose Analyst: Jay Sole initiated coverage of Canada Goose with a Buy rating and a price target of $30.

The Canada Goose Thesis: The company could generate 25% compounded annual growth in China sales over the next five years, Sole said in the note.

UBS Evidence Lab's Global Luxury Goods Consumer Survey revealed that 50% of Chinese consumers are aware of Canada Goose, which is higher than its awareness result of 43% in the U.S.

Sole said that the awareness of Canada Goose with Chinese consumers is higher than that of its main competitor Moncler.

“Softline companies with premium, global brands and large, financially strong direct-to-consumer (DTC) businesses are best positioned to thrive in the rapidly changing retail landscape,” Sole wrote in the note.

He added that Canada Goose is a luxury brand that offers no promotions on its website and its direct-to-consumer mix is likely to rise from 52% of sales in fiscal 2019 to 67% of the estimated sales of fiscal 2021.

GOOS Price Action: Shares of Canada Goose traded higher by 1.9% to $23.07 at the time of publication Wednesday.

Photo by Gaelen Marsden/Wikimedia.