Canadian Consumer Stocks: Invest in Brands That People Love

Canadian retail stocks such as Gildan Activewear and Canada Goose offer compelling risk/reward profiles for investors in 2023.

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Financial experts often advise individuals to invest in businesses they know and understand. It’s quite easy to analyze the business model of companies and brands that are part of the retail consumer sector. You come across consumer-focused brands regularly, making these stocks a favourite among retail investors.

Here are three such Canadian consumer stocks that you can consider buying in May 2023.

Canadian Tire stock

Valued at a market cap of $10.5 billion, Canadian Tire (TSX:CTC.A) also offers you a dividend yield of almost 4%. In the last 10 years, shares of this TSX retail giant have surged by 167% after adjusting for dividends.

Despite rising costs, supply chain disruptions, and elevated inflation levels, Canadian Tire reported adjusted earnings of $18.75 per share in 2022 — a decline of 1% compared to the year-ago period. Trading at less than 10 times forward earnings, Canadian Tire stock is priced at a discount of almost 14% to consensus price target estimates.

For the last three years, comparable sales for the company are up 21%, driven by growth across business verticals.

Gildan Activewear stock

Among the leading manufacturers of apparel globally, Gildan Activewear (TSX:GIL) is valued at a market cap of $7.2 billion. Since May 2013, GIL stock has returned a stellar 336% to shareholders.

Despite these outsized gains, the TSX stock also offers shareholders a dividend of 2.5%. Due to its expanding cash flows and earnings, Gildan Activewear has increased dividends by 20% annually in the last decade.

The company has increased sales from $1.98 billion in 2020 to $3.24 billion in 2022. Its operating income surged to $603 million last year compared to a loss of $181 million in 2020.

GIL stock is priced at 10 times forward earnings. While its bottom line will remain under pressure in 2023, it should normalize once inflation is brought under control.

Analysts remain bullish on Gildan Activewear stock and expect shares to rise over 25% in the next 12 months.

Canada Goose stock

The final Canadian consumer stock on my list is Canada Goose (TSX:GOOS), a retail luxury brand. Down 70% from all-time highs, Canada Goose stock has underperformed broader markets significantly in the last five years.

In the last 12 months, Canada Goose has reported sales of $1.14 billion, indicating it trades at less than three times trailing sales. Analysts now expect revenue to touch $1.33 billion in fiscal 2024 (ending in March), indicating year-over-year growth of 12.6%.

Canada Goose is a premium luxury brand that is recognized globally. The company expects to end fiscal 2028 with revenue of $3 billion and earnings before interest and tax of 30%. This suggests its top-line growth is estimated at 20% annually in the next five years.

In this period, Canada Goose aims to more than double its retail footprint while continuing to widen its digital presence. Canada Goose states its store count should increase to between 130 and 150, driven by growth across Asia Pacific, Europe, Middle East, Africa, and North America. Moreover, it forecasts direct-to-consumer sales to account for 80% of total revenue by fiscal 2028, driving margins higher.

Priced at 18.8 times forward earnings, Canada Goose is a growth stock that is reasonably valued.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Gildan Activewear. The Motley Fool has a disclosure policy.

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