Why Canada Goose shares fell 21% at the open today

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What happened

Shares of Canada Goose (GOOS -2.11%), a producer and retailer of winter coats and other cold-weather clothing, fell sharply at the open on Thursday, losing about 21% of its value in the first few minutes of trading. The decline moderated somewhat as the session progressed: As of 10:55 a.m., stocks were down about 15.5%.

The big news here was its third-quarter fiscal 2022 earnings update, which it delivered before the market opened. Investors weren’t happy, but it’s not like the news was completely terrible either.

So what

For the period ending Jan. 2, Canada Goose reported revenue of just over C$586 million. An extra week in the quarter compared to the third quarter of 2021 pushed that figure up nearly C$41 million, but even so, sales were up significantly from the C$474 million in the quarter. period of the previous year. The problem is that Wall Street analysts were expecting an even higher number. The same story played out on net income, with adjusted earnings per share of CA$1.42 versus CA$1.01 in the third quarter of fiscal 2021. A nice improvement, but below analyst consensus. Investors don’t like companies missing analysts’ estimates, so it’s no surprise the stock fell.

Image source: Getty Images.

Still, it was a quarter of solid growth, which really isn’t too bad. In fact, one could argue that Wall Street had simply been too bullish – only the negative news didn’t stop there.

Canada Goose also lowered its full fiscal 2022 guidance, lowering its sales outlook from a range of C$1.125 billion to C$1.175 billion to a range of C$1.09 billion to C$1.105 billion. of dollars. It narrowed its adjusted earnings per share range from C$1.17 to C$1.33 to a range of C$1.02 to C$1.11. That hints at expectations of a not-so-good fiscal fourth quarter and speaks to the headwinds the winterwear company continues to face in key markets, including pandemic-related operational disruptions.

Now what

Although Canada Goose posted strong results, they fell short of investors’ high expectations, and lower forecasts made matters worse. The glass-half-empty view is obviously the prevailing one among traders on Thursday. However, the specialty retailer, which has a seasonal business, still posted strong growth in its most important quarter of the year and, notably, its non-jackets revenue increased by almost 75%. This latest figure suggests that the company is succeeding in expanding its brand beyond winter coats. If this trend continues, it could make the long-term story here a lot more enticing.

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