Is Canada Goose Stock a Buy, Sell, or Hold in September?

Shares of luxury retailer Canada Goose (TSX: GOOS) have burnt massive wealth for shareholders since its initial public offering (IPO) in March 2017. Down 77% from all-time highs, the TSX stock currently trades at a market cap of $2.15 billion.

Let’s see if Canada Goose stock can stage a rebound and outpace the broader markets in 2023 and beyond.

Is Canada Goose stock a good buy?

Canada Goose designs, manufactures, and sells luxury apparel products in Canada and several other international markets. It has increased sales from $958 million in fiscal 2020 (ended in March) to $1.21 billion in fiscal 2023.

Despite an inflationary environment and lower consumer spending, Canada Goose increased revenue by 18% year over year to $84.8 million in the fiscal first quarter (Q1) of 2024. Its high-margin DTC (direct-to-consumer) business grew the top line by 60% due to in-store retail sales. Currently, DTC sales account for 66% of total revenue, up from 50% in the year-ago period.

Moreover, comparable sales were up 28%, which indicates Canada Goose has opened multiple additional retail stores in the last year. This growth was offset by an 18% decline in wholesale revenue due to streamlining of wholesale relationships, as the company continues to focus on DTC sales within its channel mix.

Asia Pacific was Canada Goose’s fasting-growing region as sales were up 52% in Q1, followed by 24% in North America and 7% in Europe, the Middle East, and Africa.

“We had a strong start to the year, with first-quarter results reflecting solid demand for our brand, especially as more customers shop directly with us,” said Dani Reiss, chairman and chief executive officer of Canada Goose.

Reiss further explained, “We remain focused on our growth pillars to drive results over the long term. In the first quarter, we welcomed more new customers across every market into our expanding global retail network, and we continued to see product categories like apparel and accessories resonate with our customers.”

Higher DTC sales allowed Canada Goose to increase its gross margin to 65.1% from 61.1% in the year-ago quarter. The company’s gross profits were up almost 30% at $55.2 million in the June quarter.

Canada Goose opened three new stores in Dublin, Las Vegas, and Bellevue, bringing its total store count to 54, showcasing its focus on international expansion. It ended Q1 with $522 million in inventory, an increase of just 3% year over year.

What is the target price for Canada Goose stock?

Analysts tracking Canada Goose expect sales to rise by 19% year over year to $1.45 billion in fiscal 2024 and by 12.6% to $1.63 billion in fiscal 2025. Comparatively, its adjusted earnings are forecast to rise from $1.05 per share in 2023 to $1.34 in 2024 and $1.76 per share in 2025.

So, GOOS stock is priced at 1.3 times forward sales and 15.5 times forward earnings, which is very cheap for a growth stock. In the next five years, its earnings are estimated to grow by 22% annually.

Bay Street has an average price target of $27.6 for GOOS stock, which is 35% above current prices.