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Canada Goose earnings: Stock sinks despite online sales surging 123%

Canada Goose (GOOS.TO)(GOOS) reported better-than-expected fourth-quarter results on Thursday, as e-commerce sales surged 123 per cent and strong performance in China offset revenue declines in Canada.

The Toronto-based company saw overall sales in the fourth quarter ending March 28 reach $208.8 million, up from $140.9 million during the same time last year, representing an increase of 48 per cent. Analysts expected revenue of $164.8 million, according to IBES data from Refinitiv.

The strong performance in the quarter was bolstered by e-commerce sales growth of 123 per cent, as well as expansion in China, which has been a key part of Canada Goose's international growth strategy. Direct-to-consumer sales in China grew from $114.2 million last year to $172.2 million, offsetting weaker revenue in regions facing COVID-19 restrictions. Canada, which saw regions across the country under COVID-19 lockdown restrictions through the fourth quarter, was the lone region that reported a sales decline, of 6.9 per cent.

The results signal a transition for Canada Goose, chief executive officer Dani Reiss said Thursday, as the company exits a period marked by uncertainty and significant closures as a result of the COVID-19 pandemic.

"Canada Goose has shifted from recovery to growth beyond the pre-pandemic levels," Reiss said on a conference call with analysts.

"Not only did we finish the year with a record fourth quarter, we've positioned our business well going into next year... we feel very confident about the runway ahead and returned to continued meaningful growth."

Yet, despite the record fourth-quarter results, Canada Goose's stock sank as much as nearly 9 per cent on Thursday following the release of earnings.

Wells Fargo analyst Ike Burochow said in a note to clients that the "lacklustre outlook" was the issue likely weighing on the company's stock.

The company forecast on Thursday that it expects revenue in 2021 to exceed $1 billion, with direct-to-consumer sales making up 70 per cent of that figure. Earnings before interest and taxes (EBIT) margin is expected to be in the mid-to-high teens.

Chief financial officer Jonathan Sinclair told analysts on Thursday that the company's outlook assumes tourism will not meaningfully return this year, something that Canada Goose relies on at its retail stores around the world.

"The big needle mover is tourism," Sinclair said. "That's the thing that changes the game when it comes to retail stores. That will fundamentally drive sales density in the stores… and ultimately drives profitability in the stores."

Reiss says the return of global tourism to pre-pandemic levels will offer "material upside" to Canada Goose's business, as it represents "such a large percentage" of the company's sales.

"The issue today is their outlook," Boruchow noted.

"Management opted to take a very cautious view on the direct-to-consumer business over the next 12 months (assuming no meaningful rebound in global tourism) and stating that margins could remain below (around) 20 per cent until tourism normalizes."

With files from Reuters

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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