Why You Should Steer Clear of Canada Goose

The COVID-19 pandemic has already sent the economy into a recession and there’s no telling how long it may last. And that could be a big problem for clothing retailer Canada Goose Holdings Inc (TSX:GOOS)(NYSE:GOOS).

The market for $1,000 parkas was already going to be limited to begin with, let alone when people have less money to spend and have to choose between paying for food and paying rent.

The company’s been slashing expenses in order to keep its costs low but that may not be enough to offset falling sales. In the company’s fourth-quarter results, which went up until March 29, its sales were down 10% from the prior-year period. The company was able to squeak out a positive net income figure but it may not be so lucky in the first quarter.

With COVID-19 having more of an impact since April, Canada Goose could be in for a disastrous Q1 to start the new fiscal year. And if that happens, investors can expect to see another selloff of the stock. It’s down 30% so far in 2020 but at seven times its book value and around four times it revenue, the stock still isn’t a cheap buy.

It may take a while for demand to come back, especially with millions of people in North America out of work. Buying a high-priced winter jacket just isn’t going to be a priority for many people right now.

It could take several quarters for demand to get back to where it was before the pandemic, and in the meantime, the stock is likely to go on even more of a decline.