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Why Canada Goose Holdings Stock Was Down on Wednesday

By John Ballard – Aug 11, 2021 at 2:40PM

Key Points

  • Canada Goose reported strong revenue growth, but that was outweighed by higher spending on marketing and other items.
  • The company's new footwear line coming this fall could keep its business momentum going.

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The company's latest earnings results didn't show enough improvement in profitability to excite investors.

What happened

Canada Goose Holdings (GOOS -1.99%) reported earnings results that showed e-commerce sales up 80%, which lifted total revenue up 115% year over year, but it wasn't enough. The company posted a wider net loss than expected, which stole the narrative of the quarter. 

The stock was down 13.2% at 12:37 p.m. EDT on Wednesday, while year to date the stock is up 32% and has significantly outperformed the broader market as measured by the S&P 500 index.

GOOS Chart

GOOS data by YCharts

So what

The company seems to be enjoying healthy momentum right now, as noted by the strong top-line performance. Lower COVID-19 restrictions and new retail expansions drove direct-to-consumer revenue up to $29.4 million from $10.4 million in the year-ago quarter. Despite more people visiting brick-and-mortar stores this year, Canada Goose still posted stellar e-commerce growth. 

However, investors were more focused on the wider operating loss of $60.7 million compared with $59.3 million in the year-ago quarter. The company experienced higher marketing spending and investments in strategic initiatives, along with higher performance-based compensation expense and unfavorable foreign exchange fluctuation.

A person wearing a down coat in a snowy landscape.

Image source: Getty Images.

Now what

All in all, it's difficult to call the quarter disappointing. CEO Dani Reiss called it a "great start" to the year. 

Market participants might have been looking for a raise to management's full-year outlook, which contributed to the stock's post-earnings sell-off, but that shouldn't concern long-term investors. Management's guidance for fiscal 2022 calls for revenue to exceed $1 billion. This assumes that direct-to-consumer revenue approaches 70% of total revenue. 

The company has a catalyst on the horizon with its upcoming footwear launch, not to mention the prospects of accelerating momentum heading into the colder season and holidays. 

John Ballard has no position in any of the stocks mentioned. The Motley Fool recommends Canada Goose Holdings. The Motley Fool has a disclosure policy.

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