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Bear of the Day: Canada Goose (GOOS)

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Canada Goose Holdings Inc. (GOOS - Free Report) is getting hit hard by the coronavirus business and travel shutdowns. This Zacks Rank #5 (Strong Sell) is expected to see its earnings decline by the double digits in Fiscal 2021.

Canada Goose is a luxury apparel retailer, best known for its rugged winter jackets. It has retail stores around the world and sells wholesale as well.

Business Being Impacted Globally By the Coronavirus

On June 3, Canada Goose reported fourth quarter and full year fiscal 2020 results.

It met on the Zacks Consensus of a loss of $0.09.

Total revenue for the year rose 15.4% to $958.1 million but was impacted as the coronavirus hit in China and Asia at the beginning of 2020 and then spread to Europe, North America and then the rest of the globe.

Prior to COVID, the political demonstrations in Hong Kong, and a decline in tourism there as well as store shutdowns, also impacted results.

Some of the actions the company has taken this year is voluntary salary reductions of 20% of all Executive Team members, with the CEO continuing to forego his entire salary indefinitely.

Canada Goose has also eliminated large seasonal inventory investments that are typical at this time of the year due to the mandated suspension of down-filled jacket manufacturing.

Warns on the Fiscal First Quarter

The fiscal first quarter ends on June 28, 2020 and Canada Goose warned that it expects a "negligible level" of revenue.

This quarter, historically, is the company's slowest of the year. It represents just 7.4% of all sales.

But through the first 7 weeks of this quarter, 75%, or 15 out of 20 retail stores in the direct-to-consumer channel were temporarily closed.

Even those that were re-opened have taken a hit. In Hong Kong, 2 stores that were open during the quarter have been "severely impacted" by tourism and travel restrictions that remain in effect.

It's Paris store re-opened on May 20, followed by Milan on May 29 and Montreal on June 2.

It will continue to slowly reopen more stores as allowed under the regulatory guidelines.

Full Year Estimates Cut

It's not a surprise, with stores closed and wholesale revenue down due to closures as well, that analysts have cut full year estimates.

2 were cut in the last 30 days pushing the fiscal 2021 Zacks Consensus Estimate down to $0.78. It was at $1.29 just 90 days ago.

That's an earnings decline of 21.2% compared to last year when it made $0.99.

Are Shares a Bargain?

Shares have been hit over the last three years and are still down 30% year-to-date.

But with those estimate cuts, they're not altogether cheap with a forward P/E of 31.7.

The luxury retailers are mostly in the same position. Burberry Group (BURBY - Free Report) is a Zacks Rank #4 (Sell), Tapestry (TPR - Free Report) and Capri Holdings (CPRI - Free Report) are both Zacks Rank #5 (Strong Sells) like Canada Goose.

But the shutdowns won't last forever.

Investors interested in the luxury retail companies have to be prepared to be patient.

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