Will Tariffs Clip Canada Goose's Wings?

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Canada Goose (GOOS) - Get Canada Goose Holdings, Inc. Report may come out relatively unscathed by tariffs. 

The luxury apparel maker reports earnings on at the close Thursday, and investors have dumped the stock ahead of the earnings (down 7.7% since Jul 31), as Trump had said he wants to impose an additional 10% or 25% tariff on Chinese apparel, toy and electronic exports to the U.S. 

But "We see buying opportunity in GOOS in the wake of the U.S.-China trade and, now, currency war," said D.A. Davidson & Co. analyst John Morris in a note. 

Why is Goose likely to be unaffected? There are two core reasons. 

Cost Side

"Note that, as a Canadian based company, GOOS has minimal exposure to U.S. tariffs on its sourcing from China," Morris said. Goose simply isn't nearly as exposed to the added cost burden of a tariff the way other retailers -- especially those based in the U.S. -- are. Goose's profit margins are expected to remain in place. 

Sales Side

Morris estimates Goose sees about 10% of its revenue from China. Roughly 15% of revenue comes from the Asia Pacific Region at large, according to FactSet data. Morris says that's not enough for a hit to China sales to impact the total business. Still, China is a growth region for Goose, and the company may see more than 10% of its revenues come from China in the future. 

One of the core worries for American goods sold in China is whether the Chinese consumer will sour on American companies, as the trade war may cause strong nationalism. That's a theory some stock analysts have posed, but it hasn't seem to have been proven valid. Apple (AAPL) - Get Apple Inc. (AAPL) Report and Starbucks (SBUX) - Get Starbucks Corporation Report both reported strong quarters with no shortages of sales in China. 

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