Strong Performance Expected for Canada Goose as Luxury Demand in China Recovers

Canada Goose Holdings has projected revenues for the fourth quarter that surpass analysts' predictions, attributing this to an anticipated recovery in luxury demand in the critical Chinese market, despite a sluggish U.S. economy. 

The shares of the company, known for its luxury parkas costing over $1,000, surged on the stock exchanges in New York and Toronto, lifting by 10% and 8% respectively. 

Luxury giants such as LVMH and Richemont, parent company of Cartier, have indicated resurgence in China, which has appeared to dispel concerns regarding demand in this key growth region. Revenues in the Asia-Pacific rose by 62% during the third quarter, a jump led by a boost in tourism and strong Singles' Day sales in Greater China. 

This lift contrasts with a mere increase of 13% in the previous quarter, when expected post-pandemic splurging failed to occur. Nevertheless, company executives have warned of challenging comparables ahead. CFO Jonathan Sinclair indicated during the earnings call that China has not been spared from the global economic slowdown. Tougher comparables in January for Asia-Pacific means business was somewhat slower. 

The ongoing recovery in Asia is marked by significant fluctuations, according to luxury portfolio manager at Tema ETFs, Javier Gonzalez Lastra. North American revenues dipped by 14% to C$252.4 million due to declining demand for luxury goods as pandemic-era savings dried up and living costs remained high. Wholesale revenue also fell by 29%, as U.S. retailers reduced orders. 

The forecast for fourth-quarter revenue by the Ontario-based company is estimated to be between C$310 million and C$330 million, surpassing expectations of C$301 million, based on LSEG data. 

Adjusted profits for the current quarter are predicted to be between 2 and 13 Canadian cents per share, in comparison to analyst predictions of 8 Canadian cents per share.