Canada Goose Holdings Inc. (TSX: GOOS)(NYSE: GOOS), one of the world’s leading makers of performance luxury apparel, released its fiscal 2018 third-quarter earnings results this morning, and its stock has responded by plunging over 10% at the open of trading. Let’s break down the quarterly results to determine if we should consider using this sell-off as a long-term buying opportunity.
A very strong quarter of +25% top- and bottom-line growth
Here’s a quick breakdown of 12 of the most notable statistics from Canada Goose’s three-month period ended December 31, 2017, compared with the same period in 2016:
| Metric | Q3 2018 | Q3 2017 | Change |
| Wholesale revenue | $134.22 million | $137.03 million | (2.1%) |
| Direct-to-Consumer (DTC) revenue | $131.61 million | $72.02 million | 82.7% |
| Total revenue | $265.83 million | $209.05 million | 27.2% |
| Gross profit | $169.02 million | $120.28 million | 40.5% |
| Gross margin | 63.9% | 57.5% | 640 basis points |
| Operating income | $89.83 million | $56.31 million | 59.5% |
| Operating margin | 33.8% | 26.9% | 690 basis points |
| Adjusted EBITDA | $94.68 million | $66.13 million | 43.2% |
| Adjusted EBITDA margin | 35.6% | 31.6% | 400 basis points |
| Adjusted net income | $64.58 million | $44.92 million | 43.8% |
| Adjusted net income per diluted share (EPS) | $0.58 | $0.44 | 31.8% |
| Net cash from operating activities | $88.23 million | $36.63 million | 140.8% |
Is now the time to buy?
It was an outstanding quarter overall for Canada Goose, driven by “strong performances” at its existing e-commerce sites and retail stores as well as the addition of e-commerce sites in seven new markets and five new stores across three continents. It has also been on a tear so far in fiscal 2018, with its total revenue up 32.2% to $466.36 million and its adjusted EPS up 31% to $0.76 in the first nine months of the year compared with the same period in fiscal 2017.
With its very strong financial performances in its three- and nine-month periods ended December 31, I do not think the steep sell-off in its stock is warranted, and I would definitely use it as a long-term buying opportunity. To build on this thought, Canada Goose is undoubtedly one of the hottest brands in North America, and its stock is one of the best growth plays the retail industry has seen in a very long time. I think the company’s very high growth rate and its rising level of profitability should send its stock significantly higher in the years ahead.
Canada Goose was the top-performing retail IPO of 2017, and it’s still up more than 72%, since I first recommended it on August 11, 2017. I think it represents the best long-term investment opportunity in the retail industry, so take a closer look and strongly consider using today’s sell-off as a buying opportunity.
