Shares of Canada Goose (GOOS 5.68%), a producer and retailer of winter coats and other cold-weather apparel, fell sharply at the open on Thursday, losing roughly 21% of their value in the first few minutes of trading. The decline moderated somewhat as the session progressed: As of 10:55 a.m., the shares were down by about 15.5%.
The big news here was its fiscal 2022 third-quarter earnings update, which it delivered before the market opened. Investors weren't pleased, but it's not like the news was completely terrible, either.
For the period, which ended Jan. 2, Canada Goose reported revenues of just over 586 million Canadian dollars. An extra week in the quarter compared to 2021's Q3 boosted that figure by nearly CA$41 million, but even so, sales were up notably from the CA$474 million achieved in the prior-year period. The problem is that Wall Street analysts had been expecting an even higher number. The same story took shape on the bottom line, with adjusted earnings per share of CA$1.42 compared to CA$1.01 in fiscal 2021's third quarter. A nice improvement, but below the analysts' consensus call. Investors don't like it when companies miss analysts' estimates, so it's not surprising that the stock fell.
Still, it was a quarter of solid growth, which really isn't all that bad. In fact, one could argue that Wall Street had just been overly optimistic -- only the negative news didn't stop there.
Canada Goose also lowered its full fiscal 2022 guidance, dropping its sales outlook from a range of CA$1.125 billion to CA$1.175 billion to a range of CA$1.09 billion to $1.105 billion. It cut its range for adjusted earnings per share from CA$1.17 to CA$1.33 all the way down to a range of CA$1.02 to CA$1.11. That hints at expectations for a not-so-great fiscal fourth quarter, and speaks to the headwinds the winter apparel company is still facing in key markets, notably including pandemic-related operational disruptions.
Although Canada Goose posted solid results, they didn't live up to investors' high expectations, and the lowered guidance made things even worse. The glass-half-empty view is obviously the prevalent one among traders Thursday. However, the specialty retailer, which has a seasonal business, still posted strong growth in its most important quarter of the year, and, notably, its non-jacket revenue increased by nearly 75%. That last figure suggests that the company is having some success in extending its brand beyond winter coats. If that trend continues, it could make the long-term story here much more enticing.