The weather is getting colder, and the down jacket market is gradually heating up. From "selling domestic down jackets for 7000 yuan" to "replacing military coats" and then to "Northeast people's cold clothing support", down jackets have repeatedly become the center of discussion.
The Red Star Capital Bureau has noticed that the former capital darling, the Canadian Goose (GOOS), has cooled down this year. In the secondary market, its market value has plummeted from a peak of $7.683 billion at the end of 2018 to $1.2 billion today.
In October of this year, Swiss Bank downgraded the rating of Canadian Goose to neutral, with a target price of $18, and pointed out that global luxury consumption has slowed down, and the brand is losing consumer favor.
Canadian goose market value evaporates by 5 billion US dollars
Swiss Bank Downgrades
Five years ago, Canadian geese may not have anticipated that their stock price would fall below the issue price in five years.
On March 16, 2017, Canada Goose was listed in both New York and Toronto, with an issue price set at $12.76.
On its first day of listing, its stock price surged 27.2% to $16.25. After experiencing a slight decline, the stock price of Canadian geese skyrocketed and reached its peak in late November 2018. On November 16, 2018, the closing price of Canadian geese was $70.05 per share, with a market value of $7.683 billion.
Screenshot from Dongfang Wealth Network
Since then, the stock price of Canada Goose has continued to decline, falling to $11.73 per share on December 1st, which is lower than the issue price of that year. The market value of 1.189 billion yuan has decreased by $520 million compared to when it first went public, and has decreased by about 85% compared to its peak in 2018.
Red Star Capital Bureau has noticed that even compared to the same period last year, its market value has fallen by nearly 40%.
In addition to a decline in market value, Swiss Bank also downgraded the rating of Canadian Goose, pointing out that global luxury consumption has slowed down and the brand is losing consumer favor. In addition, the warm weather in North America is also unfavorable for the performance of Canadian geese in the second quarter. These factors may lead to Canada Goose lowering its earnings per share guidance for the 2024 fiscal year.
Footwear analyst Ma Gang told Red Star Capital Bureau, "The capital market is quite complex. Some capital values future expectations, and if they are not optimistic about future expectations, there will be an inverted relationship between performance and stock price."
Senior brand management expert and founder of Shanghai Liangqi Brand Management Co., Ltd., Cheng Weixiong, believes that there are many reasons for the decline in market value, which are related to the global macroeconomic situation and the downward adjustment of Canada Goose's 2024 fiscal year forecast.
It is understood that Canada Goose expects total revenue for the fiscal year 2024 (April 3, 2023 to April 2, 2024) to be between $1.2 billion and $1.4 billion, lower than the company's original expectation of $1.4 billion to $1.5 billion.
"The expected decrease indicates that the brand's future sales channels, orders, supply chain and other indicators are not optimistic," Ma Gang said.
Cheng Weixiong stated that adjusting plans is also the norm for enterprises to avoid excessive inventory and capital turnover pressure caused by high expectations.
Continuously increasing income without increasing profits
The growth rate of revenue has significantly slowed down
In 2018, along with the soaring stock price of Canadian geese, there was also its popularity in the Chinese market. This year, Canadian geese officially entered the Chinese market, and the phenomenon of Chinese consumers queuing up to buy Canadian geese is often reported.
The financial report for the third quarter of the 2019 fiscal year shows that as of December 31 of that year, sales in the third quarter increased by 50.2% year-on-year to CAD 399 million (approximately USD 301 million). Regarding performance growth, Dani Reiss, CEO of Canada Goose, stated that this is due to e-commerce platforms including those under Alibaba Group in China. Although Canada Goose did not have any promotions, it ranked among the top ten brands on the Tmall platform in 2018 on the Double Eleven.
But after the "double standard return" incident in 2021, Canadian geese suffered significant damage throughout the Asia Pacific region.
Canada Goose achieved a revenue of CAD 223 million in the fourth quarter of fiscal year 2022 (within the three months ended April 3, 2022), a year-on-year increase of 6.85%, which is much slower than its revenue growth rate of 21.5% for the entire fiscal year of 2022. Among them, revenue in the Asia Pacific region declined by 9% in the fourth quarter due to the suspension of some business in China, and Canada Goose attributed the decline in performance to the pandemic.
During the same period, Canadian geese suffered a net loss of CAD 9.1 million, a year-on-year decrease of 464.00%.
Entering the fiscal year 2023, both the first and second quarters saw a decline in revenue for Canada Goose in the Asia Pacific region.
Meanwhile, the overall net profit attributable to the mother of Canadian geese has been declining year-on-year since the fourth quarter of fiscal year 2022 and continued until the first quarter of fiscal year 2024. As of July 2 this year, the net loss of Canadian geese attributable to their mother increased from CAD 63.6 million in the same period last year to CAD 85 million in the three months ended.
In the second quarter of fiscal year 2024, the net profit attributable to Canadian geese increased to 3.9 million yuan, but its revenue growth rate slowed down significantly, with a year-on-year increase of 1.41%. In the same period last year, its revenue growth rate reached 19.02%.
Screenshot from Dongfang Wealth Network
Canadian Goose Intends to Continuously Boost the Chinese Market
Mengkelai and domestic brands are all eyeing closely
At present, Canada Goose has the world's largest store network in China, and its CEO has emphasized the potential and importance of the Chinese market in future development on multiple occasions.
But in the future, if you want to continue to gain a share of the Chinese down jacket market, the challenge is not small.
Red Star Capital has noticed that in recent years, Moncler, the direct competitor of Canadian Geese, has also been making efforts in the Chinese market. In June 2022, Mengkelai officially settled on Tmall to open a brand flagship store. At the end of May this year, Remo Ruffini, CEO of Mengkelai Group, stayed in China for over a week and visited cities such as Beijing, Chengdu, Hangzhou, Hong Kong, Macau, and Shanghai.
Moose Knuckles, a high-end down brand with the same price range and origin as Canadian geese, has also taken frequent actions. Last year, it launched a joint autumn collection with fashion brand LI-NING1990 under the Li Ning Group, and successively selected domestic celebrities Wu Lei and Chen Feiyu as brand spokespersons.
In addition to international high-end brands, domestic down brands also frequently explore high-end product lines.
At present, it is not difficult to see down jackets priced above 3000 yuan in Bosiden's official flagship store. In 2019, Bosideng also launched the high-end down jacket "Dengfeng Series", priced at tens of thousands of yuan, in sharp contrast to Canadian geese and Moncler.
Govan claimed to benchmark "Moncler" and launched products with a price of 1000-6000 yuan, becoming the top of Tiktok down jacket with a price of more than 2000 yuan.
However, currently, Ma Gang believes that the market, price range, and overlap of domestic down jackets with Canadian geese are low. Canadian geese orders are more influenced by high-end department store orders, competitor strategies, and designer factors.