Canada Goose Flies South on Warning Coronavirus to Hit Sales

Shares of luxury winter parka maker Canada Goose fly south despite better-than-expected earnings as the company waves the coronavirus red flag on future sales.
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Shares of down-filled luxury winter parka maker Canada Goose Holdings  (GOOS) - Get Report flew south on Friday after the company reported fiscal third-quarter results that beat expectations on strong international sales but cautioned that the ongoing coronavirus health crisis will have an impact on future sales and earnings.

The Toronto-based company posted adjusted net income of $119.7 million, or $1.08 a share, in its fiscal third quarter ended Dec. 29, vs. $107.2 million, or 96 cents a share, in the comparable year-earlier quarter. Analysts polled by FactSet had been expecting earnings of 81 cents a share.

Sales were $452.1 million in the quarter, up from $399.9 million and above analysts’ forecasts of $339.3 million.

The company highlighted its “standout performance” in Asia, where revenue doubled to $94.7 million from $46.4 million. However, it also recognized the current “heightened uncertainty” due to the coronavirus health crisis, noting the outbreak is “having a material negative impact on performance in the current fiscal quarter ending March 29.”

The company noted that the health crisis "has resulted in a sharp decline in customer traffic and purchasing activity," with both retail stores and e-commerce across Greater China experiencing "significant reductions in revenue." 

Retail stores in international shopping destinations in North America and Europe are also being affected due to global travel disruptions, Canada Goose said.

As such, Canada Goose is now forecasting fiscal 2020 adjusted net income of $1.33 to $1.37 a share, lower than its own previous forecasts but also still above analysts’ consensus estimates of $1.25 a share.

The company also said it now expects adjusted earnings before interest and taxes (EBIT) margin to contract by between 330 basis points and 280 basis points, translating into adjusted EBIT margin of 21.6% to 22.1%, vs. its previous estimate of at least a 40-basis-point expansion.

On the sales front, the company revised its annual revenue growth outlook to between 13.8% and 15%, implying sales of between $945 million and $955 million - lower than earlier predictions though still above analysts’ forecasts of annual sales of $775 million.

Shares of Canada Goose were down 4.36% to $31.77 in morning trading in New York.