Things can’t seem to get any worse for those hard-hit shares of Canada Goose Holdings (TSX: GOOS), which are now down close to 88% from their 2018 all-time highs. Undoubtedly, the Canada Goose brand has built an impressive amount of brand awareness in recent years, not just within Canadian borders. Indeed, Canada Goose outerwear might be renowned for its quality and ability to keep wearers warm in the chilliest of climates.
But, for the most part, you don’t need to spend a small fortune (more than a grand) to get a high-quality jacket, even if you’re looking for something down-filled. At the end of the day, the Canada Goose badge is a status symbol, and in a harsh economy weighed down by considerable inflation. Such luxuries, at least in my humble opinion, have taken a bit of a backseat. While Canada Goose, the brand, is on solid footing, you really can’t say the same about the company or even the broader apparel industry.
Some massive names in apparel with some of the strongest brands out there haven’t been able to keep their heads above water. From Nike, whose collapse of 80% from peak to trough really surprised me, to Vancouver-based yogawear retailer Lululemon, also down around 80% from its peak, it has been a brutal environment to be investing in clothing stocks.
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Canada Goose just keeps flying lower: CEO Dani Reiss is a buyer
Any way you look at it, the future remains as cloudy as ever, and while the Canada Goose brand might still be worth backing for its shoppers, I find the name tough to value, even at these unprecedented depths, with shares going for $10 and change (I never would have thought shares would fall to these depths) and boasting a market cap of a mere $1 billion. From the impact of tariffs to the potential inflation-driven impact on discretionary purchases (and especially for high-end goods), it feels like Canada Goose finds itself in another hostile climate.
Either way, sometimes it just makes sense to be a buyer when nothing seems to be going right. And while catching a falling knife isn’t for everyone, perhaps big buying by Dani Reiss, Canada Goose’s CEO, is enough to convince one to revisit the potential deep-value proposition (shares going for 14.6 times forward price-to-earnings) to be had in those battered shares of GOOS.
While Canada Goose might not have that catalyst in the cards (at least not anytime soon), the stock does certainly look quite cheap.
And with Mr. Reiss topping up with a fresh $1-million stake, I do think that it’s hard to argue against the risk/reward, especially when you consider the potential comeback power once middle-income consumers (especially in China) become more than willing to spend again, a trade deal is reached, or the Goose finds a way to fly higher again without needing to spend considerable sums on marketing.
Does significant CEO buying mean that Canada Goose is about to turn a corner and fly higher again?
Probably not. In my view, it’s a sign that the firm is trading at a great value for long-term holders willing to embrace continued pain. As Canada Goose does its best to improve its cost structure, perhaps there will be some small “wins” on the windy road ahead. For those with strong stomachs and the patience to keep holding, I do think that GOOS stock looks like a terrific deep-value buy.
