Investors are closely monitoring Canada Goose Holdings (TSX:GOOS)(NYSE:GOOS) as its shares recently experienced a decline, sparked by an analyst downgrade due to concerns over the company's performance in the Chinese market. Known for its luxury outerwear, Canada Goose has been a notable player in the apparel industry, enticing consumers with high-quality winter gear. But the stock has been struggling for years, and concerns about its performance in China only heighten those fears.
China, being a substantial market for luxury goods, holds significant sway over the company's revenue streams. The downgrade comes at a time when economic conditions are weak in multiple parts of the world.
Canada Goose is still growing, however, and expects a good year overall. On Aug 3, it released its first-quarter earnings numbers and revenue of $84.8 million grew by 21% year over year. Unfortunately, the company’s operating loss of $99.7 million was steeper than the $82.2 million loss it incurred in the prior-year period. For fiscal 2024, Canada Goose still projects revenue between $1.4 billion and $1.5 billion. That would mean growth of at least 15% overall as the company posted sales of over $1.2 billion for the year ending April 2, 2023.
Investors, nonetheless, remain worried about the outlook for the luxury apparel maker. Shares of Canada Goose are down 30% this year and over the past five years they have plummeted 75%. But at only nine times estimated future earnings, this could be a good contrarian stock to buy. There’s still some risk here but if the company does continue to generate solid growth, it does have the potential to outperform in the near future and prove analysts wrong.
