Conor's avatar
$20.6m 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
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2022 Canada Goose global luxury brand with product offering from parkas to footwear
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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.
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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
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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.
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  • 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.
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  • 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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Scoreboard Investor's avatar
Very interesting. Never knew they were publicly held. Very intrigued by the diversity in their geographical locations!
Conor's avatar
@scorebdinvestor thanks so much!
Conor Mac's avatar
Great write up Conor!

How far do you think they can leverage their brand across different product verticals? We have seen Lululemon create quite a deep portfolio of apparel across a number of lines tailored to seasons, sports, and use.

Do you see Canada Goose going as far, or sticking to the core offerings?
Conor's avatar
They are following the $LULU playbook thank the lord
Sagar Vensi's avatar
I find this company interesting but for someone reason, the execution has been subpar. Operating margins have suffered in the last 4 years and net income is also down significantly. At the same time, other companies like Lululemon and Aritzia have done significantly better.
Conor's avatar
@stockado Their gross profit margins are up but yeah they don't have the secret sauce of avoiding the supply chain crisis. I'm not too worried about it since their valuation is extremely low. They can learn a thing or two from Lululemon and right the ship.
Sagar Vensi's avatar
@conorvalue I think 2020 was the best way to judge many companies. Some companies used their to their advantage and made the business even stronger while other businesses took the hit. I used it to my advantage to judge how good the management is.
Conor's avatar
@stockado Very true! If a company did well in 2020 they can do well in most markets. I like your thinking.
Sagar Vensi's avatar
@conorvalue I'll give you one example:
  1. I had a commodity company in 2020 and they noticed the pricing went to hell, so instead of dumping their product for a lower price, they took some warehouses, stored their products for 2 months and when the price recovered, they started selling in the third month and recovered beautifully.

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