Canada Goose Falls Most Since May on Hong Kong, Outlook

(Bloomberg) -- Canada Goose Holdings Inc. fell on Wednesday after saying that unrest in Hong Kong hurt its business there and that wholesale revenue will decline this quarter. Earlier, the stock had risen, bolstered by sales in Asia.

• Chief Executive Officer Dani Reiss said performance in Hong Kong, where Canada Goose recently opened a second store, was significantly impacted by protests. The parka maker reported global revenue increased 28% to C$294 million ($221 million) in the fiscal second quarter, outpacing projections. The company didn’t raise its guidance for the full year and reported that inventory expanded. For more details, see here.

Key Insights

• The Toronto-based company cited “standout performances in Asia” during last quarter in its statement, but the follow-up comments about Hong Kong sparked a reversal in the shares. Despite the disruptions, demand in China remains strong, the company said.
• Investors also reacted to a forecast that third-quarter wholesale revenue would decline “in the mid teens,“ as some orders were fulfilled earlier in the season this year. That drop doesn’t mesh well with a 61% jump in inventory that Canada Goose says it’s building up as a buffer to maximize production efficiency. Reiss said there’s no risk of excess because most of the inventory is carried over year after year and sold at full price.
• Canada Goose posted strong sales growth in the U.S., where it has faced increased scrutiny since going public over the use of coyote fur in its parkas. California became the first U.S. state to ban fur sales in October, with legislation to take effect in 2023.
• Management has moved to broaden its offerings beyond winter products, adding items such as rain gear and lightweight jackets. The company acquired bootmaker Baffin Inc. for C$32.5 million late last year to begin building a footwear business under the Canada Goose name.

Market Reaction

• U.S. shares of Canada Goose fell as much as 11%, the most intraday in more than five months, to $34.68 in New York. They had lost 11% this year through Tuesday’s close, compared with the 22% gain in the S&P 500 Retailing Index.

• For company statement, click here.

--With assistance from Janet Freund and Cécile Daurat.

To contact the reporters on this story: Sandrine Rastello in Montreal at srastello@bloomberg.net;Kim Bhasin in New York at kbhasin4@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder, Lisa Wolfson

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