Canada Goose shares plunge most since IPO despite earnings

Shares of Canada Goose tumbled over 18 per cent on Wednesday morning — the most since it went public last year — after its earnings topped forecasts but failed to impress investors.

The retailer reported an over 60 per cent jump in its fiscal third quarter net profit from a year ago to $62.9 million, widely beating market expectations.

Its revenue for the three months to December also rose over 21 per cent to $265.8 million. 

"In our peak selling season, we delivered strong performance across geographies, channels and categories this quarter," said CEO Dani Reiss in a statement.

But the Toronto-based company that sells heavy winter jackets for as much as nearly $1,500 also refused to give a new annual forecast and announced a management change by appointing a new chief finance officer.

Changes ahead

Jonathan Sinclair, who is CFO at designer shoe label Jimmy Choo, will be replacing John Black, who is retiring, as CFO in the middle of the year.

"Given the run in the shares, no update to the annual outlook, and a new CFO announcement, the shares could take a breather here," said Brian Tunick, analyst at RBC Capital markets.

Wednesday's share price plunge may have erased most of the retailer's gains for this year, but shares are still up over 85 per cent since the firm went public less than a year ago. Shares closed down over 16 per cent on Thursday.

The company's rapid expansion plans, which includes opening up to 20 stores around the world by 2020, at a time when other brick and mortar retailers are seeing falling sales, could also have an impact on its growth, according to analysts.

Expansion plans

It currently has stores in Toronto, New York, Chicago and London and operates 11 online stores in Europe and North America.

But Goldman Sachs analyst Lindsay Drucker Mann said that downside risks for the company are "brand fatigue and over expansion".

She, however, maintained a "buy" rating on its stock, saying the company remains one of the "most compelling growth stories in our coverage as a brand adoption story as well as a product cycle story."

The over 60-year-old company, which had been only selling products through wholesalers, has been defying the headwinds in the retail sector since it started opening flagship stores in 2016.

Its direct-to- consumer revenue almost doubled to $131.6 million in the quarter. 

The popularity of retailer's products have made them difficult to purchase.

Canaccord Genuity analyst Camilo Lyon said in a note on Tuesday that more than 50 per cent of the winter jackets on its website had only one size left or were sold out.

In phone call with analysts after its earnings on Thursday morning, CEO Reiss said the company was not afraid to sell out of jackets as demand jumps.

But he added that he was confident the manufacturer had the capacity to meet the growing demand.