DA Davidson Downgrades Canada Goose, Cites Wholesale Channel Concerns

One analyst now thinks the bullish case for Canada Goose Holdings Inc GOOS can longer be applied amid concerns from the wholesale channel, which accounts for around 40% of total sales.

The Analyst

DA Davidson analyst John Morris downgraded Canada Goose from Buy to Neutral with a price target lowered from $48 to $42.

The Thesis

Canada Goose's direct-to-consumer business has outperformed expectations over the past few quarters and remains a key catalyst of growth, Morris said. At the same time, the wholesale channel is still important to the bullish narrative with "little tolerance for error."

Morris said first-hand channel checks with vendors point to "concern and caution" related to inventory buy-planning across North American department stores and other wholesale channels. Vendors could be looking to minimize their exposure after an aggressive inventory plan in the spring season last year.

Vendors could also be paying close attention to weather trends which calls for average U.S. temperature from November to January to be "significantly above average."

Aside from the U.S., Canada Goose could see pressure from the ongoing slowdown in luxury buying activity in China along with continued "challenges" in Hong Kong.

Canada Goose's stock rebounded about 30% since the summer and the recent gains warrant a move to the sidelines until visibility on next year's trends are presented.

Price Action

Shares of Canada Goose traded lower by 3.6% at $38.91.

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