Is Canada Goose Holdings Inc. (TSX:GOOS) Stock a Buy After 2nd-Quarter Results?

Canada Goose Holdings Inc. (TSX:GOOS)(NYSE:GOOS) provided second-quarter results this week that beat expectations. Should you buy the stock?

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The TSX has plunged by almost 7% since the beginning of the year; while many Canadian stocks are in negative territory, there are some exceptions, like Canada Goose Holdings (TSX:GOOS)(NYSE:GOOS).

The winter coat maker’s stock has risen by 115% since the beginning of the year. The rally continued on Wednesday, as the stock soared 20% after reporting an impressive second quarter.

Let’s look at what made this quarter so strong.

Much better-than-expected revenue and profit, forecast raised

In its fiscal 2019 second quarter, Canada Goose’s revenue and profit both beat analysts’ estimates by a wide margin, helped by higher demand for its luxury parkas.

Indeed, while analysts expected an adjusted profit of $0.26 per share, Canada Goose reported an adjusted profit of $0.46 per share, up 59% from a year ago. Profit increased 35% to $49.9 million, or $0.45 per share, as compared to the same quarter a year before.

Revenue increased by 34% to $230.3 million, while analysts expected revenue of $197.9 million.

Direct-to-consumer (DTC) revenue saw a big jump of 150% from $20.2 million to $50.4 million. The strong performance of existing retail stores and e-commerce sites, as well as incremental revenue from four new retail stores opened in the third quarter of fiscal 2018, contributed significantly to the increase in DTC revenue.

In light of these strong results, Canada Goose raised its outlook for fiscal 2019. The luxury parka maker now expects annual revenue growth of at least 30% for the full year instead of 20%.

The Toronto-based company also expects its full-year EPS to grow by at least 40% instead of 25%.

A first store in eastern Canada and foray into footwear

Since going public in 2017, Canada Goose continues to expand by opening new stores and by entering new product categories like spring jackets and knitwear.

Canada Goose is opening its first store in eastern Canada today. It is located in the former premises of the defunct HMV chain on Sainte-Catherine Street West in Montreal.

The branch is the first in the country to be equipped with a cold room to simulate the way the brand tests its products. Customers can try outdoor clothing in this space where the temperature can go down to -25 °C.

The new Montreal store is the 10th Canada Goose store in the world and the fourth in Canada. The brand also plans to inaugurate a new store in Beijing, China, by the end of the year.

Earlier this month, Canada Goose acquired winter boot company Baffin Inc. for $32.5 million to enter the footwear market.

The parka maker will use Baffin’s boot-making expertise to create its own footwear designed for cold weather, while letting the brand operate independently as a subsidiary.

Should you buy Canada Goose stock?

While Canada Goose stock has been rising fast in the last year, I strongly believe that the rally is not about to stop. Unlike other retailers who are struggling to achieve significant growth in revenue and earnings, Canada Goose keeps posting impressive double-digit growth in both revenue and earnings.

The opening of new stores in strategic areas will help fuel growth, and the diversification into other products like footwear will bring further growth. For these reasons, I think that Canada Goose stock is still a strong buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Stephanie Bedard-Chateauneuf has no position in any of the stocks mentioned.

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