Canada Goose Holdings Inc. (TSX:GOOS)(NYSE:GOOS), one of the world’s leading makers of performance luxury apparel, released its fiscal 2018 second-quarter earnings results this morning, and its stock has responded by soaring over 10% in early trading. Let’s break down the quarterly results to determine if the stock could continue higher from here and if we should be long-term buyers today.
The results that ignited the rally
Here’s a quick breakdown of 12 of the most notable financial statistics from Canada Goose’s three-month period ended September 30, 2017, compared with the same period in 2016:
|Metric||Q2 2018||Q2 2017||Change|
|Wholesale revenue||$152.07 million||$122.44 million||24.2%|
|Direct-to-Consumer (DTC) revenue||$20.26 million||$5.50 million||268.4%|
|Total revenue||$172.33 million||$127.94 million||34.7%|
|Gross profit||$87.09 million||$59.33 million||46.8%|
|Gross margin||50.5%||46.4%||410 basis points|
|Operating income||$48.23 million||$27.67 million||74.3%|
|Operating margin||28.0%||21.6%||640 basis points|
|Adjusted EBITDA||$46.40 million||$33.79 million||37.3%|
|Adjusted EBITDA margin||26.9%||26.4%||50 basis points|
|Income before income taxes||$44.64 million||$25.23 million||76.9%|
|Adjusted net income||$32.88 million||$23.74 million||38.5%|
|Adjusted net income per diluted share (EPS)||$0.29||$0.23||26.1%|
Updated outlook on 2018
As a result of the company’s “stronger than expected” growth, it raised its full-year outlook on fiscal 2018. Here’s a breakdown of its new outlook compared with its previous one:
|Metric||New Outlook||Previous Outlook|
|Annual revenue growth||At least 25%||Mid to high teens|
|Adjusted EBITDA margin expansion||At least 50 basis points||Flat to modestly expanding|
|Annual growth in adjusted EPS||At least 35%||Approximately 20%|
What should you do with Canada Goose now?
It was a phenomenal quarter overall for Canada Goose, and it posted very strong results for the first half of the fiscal year, with its revenue up 39.6% to $200.54 million, its gross profit up 56.8% to $100.34 million, and its adjusted EPS up 28.6% to $0.18 compared with the first half of fiscal 2017. The company’s second-quarter adjusted EPS also crushed the consensus estimate of analysts, which called for $0.21, so I think the market has responded correctly by sending its stock soaring. Furthermore, I think the stock could continue higher from here, because I think investors will continue to pile in to gain exposure to one of North America’s fastest-growing brands.
Canada Goose’s stock has rallied more than 30% since I first recommended it in August following its first-quarter earnings release and more than 16% since October 4, and I think it still represents a great long-term investment opportunity, so take a closer look and consider beginning to scale in to a position today.