What happened

Stock in premium outerwear retailer Canada Goose Holdings Inc. (NYSE:GOOS) gained 25.1% last month, according to data from S&P Global Market Intelligence .

So what

Canada Goose stock surged 14% on Nov. 9, after the release of its fiscal second-quarter 2018 earnings. Revenue expanded nearly 35% to $172.3 million. While investors were happy with the brisk top-line growth, the composition of sales proved particularly exciting: Direct-to-consumer (DTC) sales almost quadrupled during the quarter to $20.3 million.

Canada Goose employs a diversified retail strategy to move its upscale inventory, which includes parkas approaching $1,000 price points. At present, most of its goods are sold wholesale through traditional department stores. Wholesale volume of $152.1 million in the third quarter represented roughly 88% of total revenue.

The DTC channel consists of sales through the company's 11 country-specific e-commerce stores and seven flagship stores. E-commerce stores cover Canada, the U.S., and Europe. Flagship stores have opened in New York, London, Toronto, Calgary, Chicago, Boston, and Tokyo, all in the past two fiscal years.

The fast-growing DTC business promises richer profits than the organization's wholesale trade. In the third quarter, Canada Goose's wholesale channel produced a gross profit margin of 47.4%. This attractive gross margin pales in comparison with the DTC gross profit of 73.7%. Both segments benefit from the company's in-house manufacturing, and of course, the premium pricing the Canada Goose brand currently commands.

Canada Goose Toronto flagship store exterior.

Image source: Canada Goose Holdings, Inc.

Now what

Shares have gained more than 70% since the company's March 2017 IPO. Investors have heartily endorsed its niche-based, diversified revenue strategy that straddles e-commerce and traditional brick-and-mortar retailing. And the DTC channel's combination of rapid expansion and high gross profit is helping to boost the bottom line considerably -- the organization's net income jumped 85% to $37.1 million in the most recent quarter.

Of course, shares look pricey after their initial dash out of the gate -- they now trade at almost 8 times sales. Yet investors can still get comfortable with the company's valuation -- and potential volatility -- by hanging on to Canadian Goose stock for the medium term or longer.

Asit Sharma has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.