Conor's avatar
$20.9m follower assets
Goose
Check out my posts about $GOOS to learn more!
September Idea Competition - Aritzia Inc. ($ATZAF)
Wait, Who?
Aritzia is a vertically integrated fashion retailer offering what they call Everyday Luxury primarily catering to the female demographic. They maintain the bespoke-ness of your local luxury fashion shop while operating over 100 stores across Canada and the US. Each boutique, as they call their locations, is independently designed factoring in the local culture. No cookie-cutter locations. Also, their curated playlists are pretty good and available on $SPOT. I’m listening to their Cozy Sundays playlist as I write this.

Cool. Do They Move Product?

Since FY2018, Aritzia has seen their revenues grow at a CAGR of 19% while gross profit has grown at a CAGR of 22%. FY22 was a record year for margins with gross at 43.8%, operating at 15.8%, and net at 10.5%, improvements over FY20 (pre-COVID due to their FY ending in February's) of 270 bps, 30bps, and 130bps, respectively. Beyond margins, Aritzia reported C$2.36 in FCF/share, up 50% over two years earlier.

They’re pretty good at managing inventory as well. Aritzia has consistently maintained a TTM inventory turnover ratio between 4.0 and 5.0, figures other luxury retailers envy.

Talk Growthy To Me

Management identifies four growth drivers. Everybody wants to expand their eCommerce presence. That’s integral but boring to talk about. The keys to me are expansion.

  • Product Expansion

Aritzia made its first significant foray into the men’s demographic last year with the $63MM acquisition of Reigning Champs. This is a massive untapped market for them and the excitement from then-CEO Brian Hill showed in their press release. “...this acquisition meaningfully accelerates our product expansion into men's while bringing incremental growth to our already surging women's eCommerce and U.S. businesses. Capitalizing on our world-class operational expertise and infrastructure, men's, merchandised independently, will become a meaningful part of Aritzia's platform through our Reigning Champ acquisition.”

While management has been mum on the progress, there’s little reason to doubt their ability to successfully build out their men’s offerings although I expect them to take a slow, methodical approach.

  • Geographical Expansion

They currently have 109 boutiques, 61% being located in Canada and 39% in the US. Management recognizes the US opportunity as 19 of the 23 boutiques opened since 2018 have been south of their border.

Amounts in C$

Even though ~1/3 of their revenue comes from eCommerce, I believe revenue per boutique is a key metric to watch. As management noted below, geographical expansion is key in further driving eCommerce sales. Accordingly, management is guiding for 8-10 new boutiques in FY23 with all but 1 being in the US.

Don't think the boutiques aren't pulling their weight though. Aritzia generated over $1,230 in boutique sales per SqFt in FY22, on par with lululemon, who we'll discuss shortly.

Management and Insider Ownership

Aritzia has grown from one boutique opened by Brian Hill in 1984 to a rapidly growing up-and-coming behemoth currently run by Jennifer Wong, a veteran of the industry and a key figure in Aritzia’s eCommerce launch in 2012. Wong has been with Aritzia for 35 years, beginning with the company as a part-time sales associate in 1987, one year after their first boutique opened.

In May 2022, Aritzia announced that Wong would become CEO while Hill would transition to Executive Chair. In the press release, Aritzia was keen to note that Hill would remain part of the business and he had “no immediate plans to make changes in share ownership position", important as he currently owns nearly 20% of outstanding common shares.

Why Not Buy Lululemon? (The Valuation Section)
You could, sure, but you’d be paying premiums across the board for a company that’s growing sales just a few percentage points quicker and is at a more mature stage in its growth cycle. Evidence of that latter point is while both management teams are guiding for 26% revenue growth in their current FYs, lululemon recently released their five-year growth plan to double revenue to $12.5B by 2026. Sounds great except that would be a CAGR of <15% over the next 5 years, a significant slowdown.

Competitors such as $GOOS, $SHOO, $COLM, and $URBN are smaller in EV and may seem cheaper in some metrics, but that comes with 3Y revenue CAGRs <10%. With $ATZAF, you're paying a small premium over them, and a big discount to $LULU, for accelerating sales, gross profit, and net profit growth.

Disclosure Stuff
I own Aritzia and lululemon. There's room for both in a market-beating portfolio.
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Unfortunately I've been buying $ATZAF in a brokerage that is linked to Commonstock but isn't mapping my trades over so I've had to manually post when I did a trade. I actually just bought again on 9/2 but forgot to post that one. Here's my post from July 8 for a purchase I made on July 6 https://commonstock.com/post/9b2d9024-cadb-43e1-8cc5-8429d416bf18

On Septeber 2, I added another 7.5% more shares at a P/S of 2.9, forward P/S of 2.2, P/FCF of 22, and P/GP of 7.

All my other buys were between July 2021 and April 2022, before I joined Commonstock.
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Conor's avatar
$20.9m follower assets
Duck, Duck, Goose! $GOOS
Background
Sam Tick immigrated to Canada and founded Metro Sportswear in 1957 specializing in snowmobile suits. Canada Goose's origins started at Antarctica's McMurdo Station where their Expedition Parka became the standard issue parka and gained the nickname "Big Red".
Dani Reiss, the current CEO, and grandson of Sam Tick joined Canada Goose in 1997 and becomes CEO in 2001. Dani Reiss has transformed Canada Goose from a small niche manufacturer into a global luxury brand with almost a billion dollars in annual sales.
1982 Laurie Skreslet summiting Mt. Everest, wearing a custom parka designed by Metro Sportswear

2022 Canada Goose global luxury brand with product offering from parkas to footwear


Made in Canada
Canada goose had 84% of its units made or purchased in Canada in 2021. With global supply chains in chaos, being able to control their supply chain in their own country is a huge competitive advantage. Canada Goose has eight operating facilities across the country and is one of the largest apparel manufacturing platforms in Canada.

Growth Strategy
Canada Goose has impressive revenue growth with revenue growing 21.5% from FY21 to FY22. Their 7-year average growth rate is a whopping 26.8%.
Let's explore the 4 pillars of their future growth strategy:
  • Increase DTC mix higher
Canada Goose didn't start their e-Commerce business until 2014 with their launch in Canada and eventually expanded to an additional 13 national markets in the next 5 years. They had 62% of their revenue come from DTC in 2021 and 67% in 2022. The higher their DTC mix, the more their margins expand.
  • Increase global market share

Canada Goose is already diversified globally with no region making up more than 30% of its sales. They have tremendous potential to increase sales in Europe, China, and the Americas based on total luxury spending. The global reach and DTC have a nice flywheel effect. The more global consumers who recognize Canada Goose's brand, the more users will order directly from Canada Goose's website.
Amazon's show The Grand Tour had a new episode recently released with Jeremy Clarkson wearing a Canada Goose parka. The Grand Tour show has a global audience and increasing its brand image is going to be very powerful in the years to come.

  • Expand product offering
The more powerful the Canada Goose brand is the easier it will be to expand into other product offerings. Canada Goose 2020 launched their fleece and in 2021 their footwear. This will bring in more revenue from a more diversified product offering.

  • Margin expansion
Canada Goose's gross profit margin increased with the more DTC revenue they bring in. Their gross profit margin has been on a steady uphill climb since they launched DTC in 2014. Starting at a gross profit margin of only 40.6% in 2015 to 66.8% in 2022. Keep an eye on their gross profit margin continuing up and to the right as their DTC mix expands. A great comparison would be a company like $FIGS which receives most of its revenue via DTC. Figs have a gross profit margin of 71%. The sector median is only 36.32%!
Valuation
Canada Goose has a current P/E Non-GAAP (FWD) of 14.12 which is 69% below their 5-year average o 46.19 and well below the market average.
Their PEG Non-GAAP (FWD) is only 0.37! This is over 81% below their 5-year average of 1.97. The market is severely discounting the expected growth of Goose.
The stock price is down 54.60% YTD and continues to fall due to future recession worries. I am a bottom-up investor, but I can understand why the market is worried about a future recession impacting a luxury goods business. However, as a bottom-up investor, I am not seeing this pan out in the company's future guidance. Goose is forecasting total revenue of $1.3 - $1.4 B in 2023. To put this in perspective the current market cap for Canada Goose is only $1.88B.
Conclusion
Help your portfolio stay insulated this winter with some Canada Goose stock and a parka to go with it. The types of businesses that shine in a high inflationary environment our companies that can increase their prices and their revenue growth at the same time. Thanks to Goose's e-Commerce growth they should also see their margins expand as well.
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Conor's avatar
$20.9m follower assets
Winter is Coming $GOOS
With all the talk of winter coming, there is one company whom could stand to benefit. I think it's a good time to look at Canada Goose which is currently trading down 50% YTD.

It's no secret that retail companies would prefer a higher margin DTC business than building stores and trying to staff them, especially in today's labor market. Similar to $LULU, Canada Goose has been increasing DTC mix each year. This does wonder on their operating margin which will continue to expand as DTC mix grows.

You should always look at the underlying business of a company before you look at the stock price. Canada Goose has a thriving business built around a very strong brand.

What if I started the article with their revenue and gross profit numbers before I showed you their stock was down 50% YTD?

I know this is only the top line, but I wouldn't think Canada Goose as a business is not performing. Quite the contrary.

As you can tell from the name Goose is located in Canada, but you won't find many companies with as much diversity in their revenue as Canada Goose. They are totally global with 30% coming from APAC.

The growth rates in EMEA, USA, and APAC are extremely solid all over 20%.

Valuation
My name wouldn't be Conor Value without talking about Value. Right now, Canada Goose is trading at a VERY juicy valuation.

Their Price-to-Earnings/Growth (PEG) ratio is 0.38! Anything under 1 is solid, but a 0.38 is insane.

P/E, EV/EBITDA, Price/Sales, and Price/ Cash Flow are all way below their 5-year average.

Conclusion

Goose was founded by, Sam Tick, an immigrant to Canada with a strong entrepreneurial spirit. The company is still run by the same family with Sam Tick's grandson, Dani Reiss, at the helm.

This company checks a lot of boxes for me with strong growth, family operations, large insider ownership (over 20%), and a great present value.

Disclaimer: As of this morning, I'm a shareholder of $GOOS. Due your own due diligence before making any investment.
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Great overview— especially appreciate the valuation section. May pick up some shares! In 2018 they were always surprising with their ER’s.
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Conor's avatar
$20.9m follower assets
13Fs Flowing In
You're missing out if you don't check what other super investors are investing in!

Using Dataroma you can see everything in one place.

Here are some comments on some of my favorite investors:

  • Bill Miller (which I believe he no longer will be managing soon) reduced a lot of positions such as $OVV, $DXC, $FANG, $DAL, $NCLH, $GOOS, and $SOFI
  • Bill added or started a position in $OMF, $EXPE, $ET , and $CLF to name a few I found interesting
  • Very hard to have any takeaways from Bill's VAST holdings, but he is very active. Expect major turnover in his portfolio. It seems like he is kind of expecting a recession by cutting cruise lines and Delta, but he did add United
  • Michael Burry SOLD EVERYTHING except bought 501,360 shares in $GEO
  • Burry is easier to read as long as you catch his tweets before he deletes them. Burry is expecting a recession due to a credit crisis with consumers. No idea if he is right, but I've heard others raise alarms on this same issue
  • Bryan Lawrence is a real Warren Buffett-type/Joel Greenblatt-style of investor. He keeps his portfolio to 8-10 positions max. Number one position is $TDG followed by $GOOG and $IBKR
  • You can bet Bryan has a pretty strong conviction in his holdings, BUT you still have to do your due diligence. He was invested in $GDRX and sold it all last quarter. He will still sell out an entire position if he loses conviction
  • Seth Klarman is famous for writing an intrinsic value book that only sold a limited number of copies. Because of the limited number of copies the book's price got up to the many thousands of dollars range. The Investor's Podcast reviews his book and from their takeaway, it seemed like the book is more of a collector item than containing any sort of secret sauce to beating the market
  • Seth started a position in $WBD which I love since I own Warner Brothers in my portfolio. He also started one in $AMZN which I believe everyone knew was way underpriced last quarter. Seth added 75% to a stock called Gray Television $GTN. I've never heard of this stock before but will do some research to see what it's all about. Seth is pretty well versed in communication companies such as Liberty Media.

Overall, 13Fs are helpful but I wouldn't start or sell any positions because of what I see in a 13F. I really like using it because it introduces me to new stock ideas such as $GTN or what different investors are investing or selling currently. Kind of like Commonstock but for Super Investors but delayed three months.

Let me know some recent 13F holdings you find interesting below!
Alberto Wallis's avatar
$22.8m follower assets
Upcoming Earnings Calendar (Feb 7th - 11th)
Hey guys!

A key week is ahead of us! Here's what I'm interested in:

  • $APPS - One of my largest holdings. I'd like an update on the progress of single-tap and the tests they were running with Meta $FB. I'm also interested in seeing how their device footprint is expanding after their latest deals.
  • $DIS - They've invested heavily on Marvel and Star Wars series for Disney+, so let's see if this translates to lower churn and higher growth.
  • $NET - Really interesting stock but the valuation seems too high. Let's see if there's a good opportunity to enter post-earnings.

Good luck!

If you'd like an easier way to track earnings dates, you can automatically sync your portfolio's earning dates to your personal calendar with just a couple of clicks here.

MON:

TUE:

WED:

THU:

FRI:
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