Shares of Canada Goose Holdings (NYSE:GOOS) lost altitude today although the luxury-parka maker turned in a strong earnings report; investors seemed to signal that they thought the stock was overvalued. Shares finished the session down 13%.
In its seasonally strong third quarter, Canada Goose said revenue rose 50.2% to 399.3 million Canadian dollars, well ahead of estimates, as the company continued to see soaring growth in its direct-to-consumer (DTC) division, which includes its stores and e-commerce. In DTC, sales jumped 78.7% to CA$235.3 million, which helped lift gross margin from 63.6% to 64.4%.
Operating income climbed 55.6% to CA$139.9 million, and adjusted earnings per share jumped from CA$0.58 to CA$0.96, beating estimates of CA$0.81. In U.S dollars, earnings per share were $0.72.
CEO Dani Reiss touted the company's momentum: "Fiscal 2019 is shaping up to be another year of impressive results. In our peak selling season we continued to deliver when and where it matters most, while also strengthening our foundation for future success on the global stage."
Canada Goose also raised its full fiscal-year outlook, calling for revenue growth in the mid- to high 30s, above a previous forecast of 30% growth. It also sees adjusted EPS growth in the mid- to high 40s, up from prior guidance of 40%.
Despite the strong report, analysts found fault in compressing gross margin in each of the company's individual segments, a reflection of rising labor costs. And the market seems to be wary of the stock's valuation, as it's hard to justify a price-to-earnings ratio around 50 for even a fast-growing apparel stock: Fashion is fickle, and Canada Goose has no apparent competitive advantage.