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Can Canada Goose Sustain Growth Momentum Post-IPO?
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With a history spanning almost 60 years, Canada Goose Holdings Inc. has come a long way. Rising from the humble beginnings of a small family-run business founded in a Toronto warehouse, to a high-end outdoor apparel maker – with the signature Parkas, is indeed a journey to behold. That said, the company is ready to add another chapter to its glorious tradition when it makes a debut on the Wall Street with its initial public offering (IPO).
The Background
Founded in 1957 as a family business in Toronto, Canada Goose is currently led by the founder’s grandson Dani Reiss. The company started off as Metro Sportswear Ltd., specializing in woolen vests, raincoats and snowmobile suits. Today, the company has grown to become a leading name among the luxury outerwear apparel retailers known for its heavy coats, including the flagship parkas, as well as jackets, shells, vests, and accessories for fall, winter, and spring seasons.
The company also has the backing of Bain Capital, which bought a majority stake in the company in 2013 in order to boost business growth. Since then, it has added four eCommerce stores and two flagship stores in Toronto and New York City. Further, the company sells products in stores of upper-tier retailers like Macy's Inc.’s (M - Free Report) Bloomingdales, Nordstrom Inc. (JWN - Free Report) , and Saks Fifth Avenue.
Over the years, the company has displayed tremendous growth creating a strong footing in the U.S., which accounts for about a third of total sales. Further, it has a strong international presence, selling products in about 36 countries having developed a following in the U.K. France, Japan and Korea. Moreover, the company is looking to further expand in Germany, Italy and Scandinavia.
Canada Goose’s popularity as a luxury outerwear has increased as it targets eminent personalities for its clientele like rapper Drake or actress Emma Stone. Further, the fact that its products are worn in the South Pole and Mount Everest has helped its “Arctic Program” logo to resonate well with customers.
The company’s uptick in popularity is also evident from the 33% increase in sales to C$290.8 million in fiscal 2016, meaning a 38.3% CAGR in the last three years. Further, its profits have witnessed a 196% CAGR in the same time period.
The Offering
The company yesterday priced an IPO selling about 20 million shares at C$17 a share, higher than the projected range of C$14 to C$16. This means Canada Goose is valued slightly above $1.7 billion, which was estimated at the top of the projected range. This first luxury-goods IPO in three years raised about C$340 million for the company. With this IPO, it seeks a dual listing – expecting to start trading effective Mar 16, on both the Toronto Stock Exchange and the New York Stock Exchange (NYSE) under the ticker symbol “GOOS”.
The company revealed that shares with subordinate voting rights will be issued in the offering. Following the offering, Bain Capital will retain majority stake in the company with nearly 70% voting rights and Dani Reiss will be the second largest stake holder. The company plans to use the proceeds from the offering to pay down debt. The IPO is expected to close on Mar 21.
Further, in its IPO prospectus the company has stated that it plans to innovate product lines, aiming to attract footfall all round the year. Apart from core winter related coats and jackets, the company expects to produce merchandise for the spring and fall seasons, including lightweight and ultra-lightweight down, rainwear, windwear and softshell jackets. It also plans to deviate from jackets and enter categories like knitwear, fleece, footwear, travel gear and bedding.
What Lies Ahead for the Company?
While the company looks well positioned and geared up for the IPO, we all know that retail is fiercely competitive space. So where does Canada Goose stand? Let’s delve a little deeper.
Well, the competition for the luxury-outerwear retailers is not as fierce, due to the lack of a dominant player in the segment. V.F. Corp.’s (VFC - Free Report) North Face is one competitor, but this brand forms a part of V.F. Corp’s vibrant portfolio of brands and product lines. The company’s long list of brands including Lee, Wrangler, Timberland and others, makes the contribution of North Face less relevant.
Another direct competitor for Canada Goose is Italy’s luxury outerwear specialist Moncler S.p.A. , which has sales three times that of Canada Goose. The company has picked up considerably from its IPO in 2013 with its shares gaining nearly 92% since then. While Moncler has an advantage of a significant sales base in China – an important market for luxury-retailers, Canada Goose lacks on this front as it is yet to establish a footprint in the region.
However, MonCler only generates 17% of its revenues from the U.S., while Canada Goose gets majority of its revenue from Americas. This is likely to provide an edge for Canada Goose, though the lag in China cannot be ignored.
Another reason for worry for the Canadian debutant could be its plans to innovate and expand product lines. This is utterly risky. There are examples in the luxury-retail space of companies that emerged winners from this strategy and others that failed. While Michael Kors Holdings Inc. is an example of a retailer that failed with its expansion plans, there are names like U.K.-based Burberry Group Plc (BURBY - Free Report) and yoga and athletic apparel retailer Lululemon Athletica Inc. (LULU - Free Report) that illustrate success in their endeavors.
Bottom Line
Canada Goose looks like a solid investment bet from its growth journey so far and the future plans. The company has been setting a fashion statement and gaining in popularity given its strategies and vivacious product lines.
However, we think there is a tinge of risk involved due to the chances of success in endeavors and the continuation of the same popularity but then the old adage goes “To win without risk is to triumph without glory”. Going by the current prospects, we would suggest taking a share of this growth but knowing to exit at the right time.
Want to learn more about Canada Goose? Check out our podcast below which takes a look at this company, and its IPO potential as well.
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Can Canada Goose Sustain Growth Momentum Post-IPO?
With a history spanning almost 60 years, Canada Goose Holdings Inc. has come a long way. Rising from the humble beginnings of a small family-run business founded in a Toronto warehouse, to a high-end outdoor apparel maker – with the signature Parkas, is indeed a journey to behold. That said, the company is ready to add another chapter to its glorious tradition when it makes a debut on the Wall Street with its initial public offering (IPO).
The Background
Founded in 1957 as a family business in Toronto, Canada Goose is currently led by the founder’s grandson Dani Reiss. The company started off as Metro Sportswear Ltd., specializing in woolen vests, raincoats and snowmobile suits. Today, the company has grown to become a leading name among the luxury outerwear apparel retailers known for its heavy coats, including the flagship parkas, as well as jackets, shells, vests, and accessories for fall, winter, and spring seasons.
The company also has the backing of Bain Capital, which bought a majority stake in the company in 2013 in order to boost business growth. Since then, it has added four eCommerce stores and two flagship stores in Toronto and New York City. Further, the company sells products in stores of upper-tier retailers like Macy's Inc.’s (M - Free Report) Bloomingdales, Nordstrom Inc. (JWN - Free Report) , and Saks Fifth Avenue.
Over the years, the company has displayed tremendous growth creating a strong footing in the U.S., which accounts for about a third of total sales. Further, it has a strong international presence, selling products in about 36 countries having developed a following in the U.K. France, Japan and Korea. Moreover, the company is looking to further expand in Germany, Italy and Scandinavia.
Canada Goose’s popularity as a luxury outerwear has increased as it targets eminent personalities for its clientele like rapper Drake or actress Emma Stone. Further, the fact that its products are worn in the South Pole and Mount Everest has helped its “Arctic Program” logo to resonate well with customers.
The company’s uptick in popularity is also evident from the 33% increase in sales to C$290.8 million in fiscal 2016, meaning a 38.3% CAGR in the last three years. Further, its profits have witnessed a 196% CAGR in the same time period.
The Offering
The company yesterday priced an IPO selling about 20 million shares at C$17 a share, higher than the projected range of C$14 to C$16. This means Canada Goose is valued slightly above $1.7 billion, which was estimated at the top of the projected range. This first luxury-goods IPO in three years raised about C$340 million for the company. With this IPO, it seeks a dual listing – expecting to start trading effective Mar 16, on both the Toronto Stock Exchange and the New York Stock Exchange (NYSE) under the ticker symbol “GOOS”.
The company revealed that shares with subordinate voting rights will be issued in the offering. Following the offering, Bain Capital will retain majority stake in the company with nearly 70% voting rights and Dani Reiss will be the second largest stake holder. The company plans to use the proceeds from the offering to pay down debt. The IPO is expected to close on Mar 21.
Further, in its IPO prospectus the company has stated that it plans to innovate product lines, aiming to attract footfall all round the year. Apart from core winter related coats and jackets, the company expects to produce merchandise for the spring and fall seasons, including lightweight and ultra-lightweight down, rainwear, windwear and softshell jackets. It also plans to deviate from jackets and enter categories like knitwear, fleece, footwear, travel gear and bedding.
What Lies Ahead for the Company?
While the company looks well positioned and geared up for the IPO, we all know that retail is fiercely competitive space. So where does Canada Goose stand? Let’s delve a little deeper.
Well, the competition for the luxury-outerwear retailers is not as fierce, due to the lack of a dominant player in the segment. V.F. Corp.’s (VFC - Free Report) North Face is one competitor, but this brand forms a part of V.F. Corp’s vibrant portfolio of brands and product lines. The company’s long list of brands including Lee, Wrangler, Timberland and others, makes the contribution of North Face less relevant.
Another direct competitor for Canada Goose is Italy’s luxury outerwear specialist Moncler S.p.A. , which has sales three times that of Canada Goose. The company has picked up considerably from its IPO in 2013 with its shares gaining nearly 92% since then. While Moncler has an advantage of a significant sales base in China – an important market for luxury-retailers, Canada Goose lacks on this front as it is yet to establish a footprint in the region.
However, MonCler only generates 17% of its revenues from the U.S., while Canada Goose gets majority of its revenue from Americas. This is likely to provide an edge for Canada Goose, though the lag in China cannot be ignored.
Another reason for worry for the Canadian debutant could be its plans to innovate and expand product lines. This is utterly risky. There are examples in the luxury-retail space of companies that emerged winners from this strategy and others that failed. While Michael Kors Holdings Inc. is an example of a retailer that failed with its expansion plans, there are names like U.K.-based Burberry Group Plc (BURBY - Free Report) and yoga and athletic apparel retailer Lululemon Athletica Inc. (LULU - Free Report) that illustrate success in their endeavors.
Bottom Line
Canada Goose looks like a solid investment bet from its growth journey so far and the future plans. The company has been setting a fashion statement and gaining in popularity given its strategies and vivacious product lines.
However, we think there is a tinge of risk involved due to the chances of success in endeavors and the continuation of the same popularity but then the old adage goes “To win without risk is to triumph without glory”. Going by the current prospects, we would suggest taking a share of this growth but knowing to exit at the right time.
Want to learn more about Canada Goose? Check out our podcast below which takes a look at this company, and its IPO potential as well.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>