Canada Goose: Cold-Weather Stock Heating Up?

The winter of discontent for Canada Goose (NYSE:GOOS) may finally be thawing. Despite a brutal 2023-2024 fiscal year marked by store closures and margin erosion, this iconic outerwear brand is now positioning itself for a comeback. With its Direct-to-Consumer (DTC) segment roaring back to life in Asia and inventory discipline finally paying off, GOOS could be the perfect contrarian play for investors willing to brave the cold. Let’s dig into the frosty details.

DTC Momentum: The Engine of Growth

The DTC segment’s 13% revenue surge to $63.1 million in Q1 2025 is no accident. By slashing underperforming stores—down to 70 from a peak of 84—and focusing on prime locations in markets like Greater China, Canada Goose is proving that location matters more than quantity. The two new stores in Wuhan and Macau aren’t just retail outposts; they’re strategic land grabs in a region where Asia Pacific revenue jumped 25.7%, driven by a 12.3% sales spike in Greater China alone.

But here’s the kicker: DTC gross margins are still a work in progress. The 59.7% Q1 margin was dragged down by Europe’s lower-margin factory and a shift toward lighter products. However, management’s plan to improve this by scaling European production and rebalancing the product mix is credible. If executed, this could unlock a margin expansion tailwind for 2025 and beyond.

The Iceberg Ahead: Regional Risks

Don’t let the Asia glow blind you to the frostbite in other regions. North America’s 2.9% revenue decline—worsening to 6.8% in Canada—signals overexposure to a saturated market. Meanwhile, EMEA’s 9.6% revenue collapse reflects weak demand in Europe and the Middle East. These regions aren’t just lagging; they’re leaking cash.

The fix? Double down on Asia, pivot EMEA, and shrink North America. The company is right to close underperforming stores and focus on e-commerce in EMEA. But until these regions stabilize, GOOS remains a two-speed story: booming in China, sputtering elsewhere.

Valuation: A Luxury Bargain at 10x Forward Earnings?

Here’s where the contrarian case crystallizes. With a forward P/E of 12.76, Canada Goose trades at a 50% discount to luxury peers like Moncler (21.66x) and Lululemon (26.15x). Even against European luxury giants LVMH (20.1x) and Kering (19.8x), GOOS looks undervalued.

This valuation gap isn’t just about margin headwinds—it’s about perception. Investors are pricing in permanent underperformance in North America and EMEA. But if Asia’s growth and inventory discipline (down 7% to $484M) can offset these drags, GOOS could surprise to the upside.

Inventory Icebreakers: A Silent Turnaround

The 7% inventory reduction isn’t just a number—it’s a strategic masterstroke. Overstocked warehouses were a cash-bleeding albatross for years. By aligning production with demand and accelerating sales of older stock, Canada Goose has freed up capital. This leaner inventory posture could help improve cash flow and support the 100-basis-point EBIT margin expansion guidance for 2025.

The Bottom Line: Buy the Dip, or Get Left in the Cold?

Canada Goose is a stock for investors who believe in selective growth over perfection. The Asia-Pacific juggernaut, margin recovery potential, and cheap valuation make this a compelling entry point—if you’re willing to overlook the EMEA/NA frostbite.

Action Plan:
- Buy now if Asia’s momentum continues and inventory stays disciplined.
- Avoid if EMEA/NA declines accelerate or margins don’t rebound by mid-2025.

In a market obsessed with growth at any cost, GOOS offers something rare: a value play in luxury. At 10x forward earnings, this is a stock that could warm up fast—if you’re brave enough to catch it on sale.

The question isn’t whether winter will come—it’s whether you’ll be wearing Canada Goose when it does.