Luxury coat company Canada Goose is riding the tailwinds of the pandemic-driven push towards outdoor activities. The company’s shares surged to a peak of 12% as investors look to the brand’s building momentum in the outlook of cold weather season.
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Even though the company slumped during the initial outbreak of coronavirus, alongside the majority of retailers, Canada Goose is better positioned to take on the potential second wave timed to the start of dropping temperatures. Shares fell as far as 25% this year and even lost to more than half of its market value during the time as a result of restrictions on nonessential businesses and diminished wholesale revenues.
Cowen & Co. analyst Oliver Chen upgraded his rating on Canada Goose and consequently raised his target price from $31 to $36. In the consumer survey, he touts the brand’s positive free cash flow and trajectory of strong profitability. The lifestyle brand received an additional lift to its products, which "are meant to help people stay outdoors in cold weather" and "is necessary for social gatherings in the age of COVID-19," according to Chen's equity research.
Chen also reports that the Toronto-based company is “well positioned as an outdoor resource amid the pandemic, as a leading brand in stores, and as a global luxury beneficiary as China improves faster.”
Canada Goose’s footprint in China remains robust as the country’s economy stabilizes. In the earnings report, it pointed to four new stores that have recently opened in Chengdu and highlighted its consistent performance, surpassing expectations.
The report states that its new openings this year “will be concentrated in Mainland China, where the recovery of traffic remains ahead of other markets. With international tourism now heavily constrained, serving the world’s largest luxury consumer base at home is increasingly crucial.”
In addition to refocusing its retail strategy, Canada Goose is expanding its retail channels, including the launch of mobile omni-channel capabilities in U.S. stores after a successful test run in Canada. Scaling its global in-house e-commerce presence comes in time for the apex of the luxury coat maker’s annual sales and as more people seek outdoor activities.
“With digital adoption rising rapidly, the Company has increased and accelerated investments in these areas going into the Fall / Winter season,” the earnings report states.