What happened
Shares of Canada Goose (GOOS 1.48%) took a dive today after the luxury coat maker delivered a second-quarter earnings report that wasn't quite up to snuff for the high-valued growth stock, as guidance for the key winter season was lighter than expected.
As a result, the stock finished the session down 11%.
Image source: Canada Goose.
So what
Canada Goose, which is best known for its expensive, fur-lined parkas, said revenue in the second quarter rose 27.7% to 294 million Canadian dollars, or $222.2 million, easily beating estimates at CA$267.3 million.
The direct-to-consumer segment, which includes its own stores and online sales, continued to show off strong growth, with revenue in the channel up 47% to CA$74.2 million, while wholesale revenue increased 22% to CA$219.8 million. Sales were particularly strong in Asia, where they doubled to CA$48.9 million, and the U.S, where they were up 38.5%.
Further down the income statement, operating margin compressed from 28.2% to 25.6% as store openings accelerated and it lost a benefit from a year ago from lower tariffs and production efficiencies. Adjusted earnings per share increased from CA$0.46 to CA$0.57, ahead of expectations at CA$0.43.
Canada Goose CEO Dani Reiss said, "Our performance in the first half reflects the strength of our brand and power of our unique business model."
Now what
Canada Goose shares were actually up in pre-market trading as the company beat estimates on the top and bottom lines in its earnings report. However, it left its guidance unchanged and warned on the current quarter and Hong Kong on the earnings call, spooking investors.
On the call, Reiss said, "We've shipped so much of our fall/winter order book earlier, which naturally means less shipments in the next quarter," and added that its Hong Kong stores were affected by the political protests in the city-state.
For fiscal 2020, Canada Goose continues to expect revenue growth of at least 20% and adjusted EPS growth of at least 25%. Given the stock's high valuation and price-to-earnings ratio around 35, investors seemed to have expected more.
