Canada Goose Stock Drops on China Weakness and Disappointing Earnings Report

• As of 10 a.m. ET today, Canada Goose shares are down 6% after cutting its annual profit outlook, citing weak demand in China.
• The stock has lost 67% of its value over the past five years but now trades at a forward P/E of 9, suggesting potential value.
• Revenue declined slightly year-over-year, missing analyst expectations.

China’s luxury market weighs on performance

Canada Goose Holdings (TSX:GOOS)(NYSE:GOOS) missed revenue estimates and lowered its profit forecast, sending shares lower in Thursday trading. The high-end outerwear brand reported third-quarter revenue of $607.9 million, slightly below last year’s $609.9 million and well short of analyst expectations of $620.9 million. In terms of earnings per share (EPS), Canada Goose only barely came short of estimates, with EPS of $1.51 versus estimates of $1.54.

China, a key growth market, was a notable weak spot, with sales in Greater China dropping 4.7% after a 5.7% gain in the previous quarter. The country’s sluggish economy, ongoing property crisis, and high youth unemployment have weighed heavily on luxury spending, affecting brands like Canada Goose and Estee Lauder.

Valuation and long-term outlook

Despite the sell-off, Canada Goose now trades at a forward price-to-earnings (P/E) ratio of 9, making it look attractively valued compared to historical levels. However, the company faces near-term headwinds, including weak consumer sentiment and slower-than-expected demand recovery in key markets.

Another concern for investors is that management revised its fiscal 2025 adjusted profit growth forecast to flat or low-single-digit growth, down from its prior mid-single-digit expectation. The one-two punch of a disappointing quarter and a reduced guidance can often send a stock into a tailspin. In the case of Canada Goose, it gives bearish investors even more of a reason to remain pessimistic about the stock’s long-term prospects.

Is Canada Goose a buy?

Canada Goose remains a well-known luxury brand, but growth struggles in China and slowing momentum in key markets present risks. The stock’s significant decline over the past five years may make it appealing to value investors, particularly given its low forward P/E. However, without a clear catalyst for renewed growth, potential buyers should weigh the risk of continued earnings pressure.