Canada Goose Holdings Inc.: A Case Study in the Nearsightedness of the Market

Shares of Canada Goose Holdings Inc.  (TSX:GOOS)(NYSE:GOOS) have rebounded slightly in recent trading days following a slide that saw the outerwear producer’s share price drop more than 15% lower to start last week after an earnings report that was, by most accounts, stellar.

The earnings report was well covered by fellow Fool contributor Brian Paradza, and based on nearly every metric, Canada Goose outperformed expectations during this most recent quarter. In many cases, the company reported numbers that were not only double-digit increases year-over-year, but also higher than analyst estimates by a double-digit margin. These results blew me away, but what perhaps blew me away even more was that the shares of the retailer dropped more than 15% following this earnings release.

The logic behind the drop is related to the stance that management has taken in maintaining its forecast for 2018; the company intends to grow slowly and methodically over the long term.

To a long-term investor like myself, this type of strategy is music to my ears. A company wants to maintain conservative growth estimates? Awesome. This same company wants to grow slow and steady over time? And avoid growing too quickly and creating long-term issues for shareholders? Great. The company doesn’t want to over-produce and become a commodity? Excellent.

The constant demand of the market for short-term results that may come at the detriment of longer-term performance is a topic often ignored by market participants looking to make a quick buck. If an investor has a time frame of a decade or more from which to earn compounded returns over time, then focusing on where a company is headed in five, ten, or fifteen years down the road should carry more weight than how said company is expected to perform in the next two, three, or four quarters.

Bottom line

The Canada Goose management team’s decision to keep its forecast steady and actively go out of stock rather than overproduce is one which the market should be praising. After all, creating a brand with a wide moat, customer loyalty, and perception of quality is tough to achieve. The fact that Canada Goose is able to command upwards of $1,400 for a jacket is incredible. If the company continues to sell the entire product from its shelves and keeps experiencing line-ups outside key retail locations, then I just don’t see the downside here.

Stay Foolish, my friends.

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Fool contributor Chris MacDonald has no position in any stocks mentioned in this article.

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