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.
