Canada Goose (GOOS) IPO Indicated Sharply Higher in Toronto; Could More Than Double on Open toronto canada goose

Canada Goose (GOOS) IPO Indicated Sharply Higher in Toronto; Could More Than Double on Open

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March 16, 2017 9:10 AM EDT
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(Updated - March 16, 2017 9:25 AM EDT)

(Update: IPO hasn't opened yet... indicated to open at C$40 now)

Canada Goose Holdings Inc. (NYSE: GOOS) hasn't yet opened on Toronto but the bid is indicated at C$40 after pricing 20,000,000 at a price to the public of C$17.00 per share, above the expected C$14-C$16 range.

CIBC Capital Markets, Credit Suisse, Goldman, Sachs & Co. and RBC Capital Markets are serving as joint book-running managers and as representatives of the underwriters for the proposed offering. BofA Merrill Lynch, Morgan Stanley, Barclays, BMO Capital Markets, TD Securities and Wells Fargo Securities are also acting as joint book-running managers and Baird and Canaccord Genuity are acting as co-managers for the proposed offering.

Founded in a small warehouse in Toronto, Canada 60 years ago, Canada Goose has grown into a global outerwear brand. Canada Goose is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. The Company’s jackets are sold in 36 countries around the world, including in two owned retail stores and four e-commerce stores.

In fiscal 2016, the company had revenue of $290.8 million, gross profit of $145.6 million, which represented gross margin of 50.1%, net income of $26.5 million, Adjusted EBITDA of $54.3 million, Adjusted EBITDA Margin of 18.7% and Adjusted Net Income of $30.1 million. They grew revenue at a 38.3% compound annual growth rate (CAGR), net income at a 196.0% CAGR and Adjusted EBITDA at an 85.0% CAGR from fiscal 2014 to fiscal 2016, while expanding gross margin from 38.6% to 50.1% and our Adjusted EBITDA Margin from 10.4% to 18.7% over the same period

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Controlling Canada geese an annual struggle for wildlife workers

Two recent geese-related injuries raise concerns about the urban Canada goose population and interactions with humans.

Canada geese can get aggressive during mating season. It's a challenge keeping their numbers in ruban centres down.  (Margaret Bream / Toronto Star) | Order this photo  

A pair of serious goose-related injuries have thrust Canada’s most loathed iconic creature back into the crosshairs. Normally simply honking, pooping, flapping nuisances, the birds have recently proven to be hazardous to people on the roads and in parks.

On Thursday, an OPP officer participating in a motorcycle training exercise was hit by a goose and seriously injured. Earlier this month, a cyclist in Ottawa was reportedly attacked by a Canada goose.

With about 400,000 geese resident in southern Ontario, efforts to minimize goose-human interactions are part of an annual struggle by government, wildlife workers and community members.

“The Canada goose population has increased a lot, starting in the 1970s. Prior to the early 1970s there were very few Canada geese breeding in southern Ontario,” said Jack Hughes, Canada Wildlife Service’s manager of population conservation for Ontario. “The conditions in southern Ontario are ideal for them, and that’s largely because of changes in landscape that people have made.”


Article Continued Below

• Feathered fighters defend Pearson Airport’s skies

The population appears to have stabilized, thanks to generous hunting permits, relocation efforts and regular destruction of eggs, Hughes said. Geese feast on fresh-cut grass and revel in waterfront locations free of trees and bushes — meaning golf courses and park lawns are buffets for the birds.

Hunters in Ontario kill 200,000 geese each year, said Hughes. Municipalities and property owners also apply for permits to oil eggs, which prevents new chicks from hatching.

But while he is “optimistic” the population will remain stable, there’s little recourse left if it does not. The birds live up to 20 years and are capable of breeding each year.

“It’s hard to know where it would stop. Eventually they will be limited by the amount of habitat available,” said Hughes. “It’s really hard to say what might eventually control the population if it might continue to grow.”

Their affection for clipped grass and clear waterfront terrain keeps Danny Moro on his toes. As the project manager in charge of goose population management for the Toronto and Region Conservation Area, he oversees some of the city’s efforts to minimize conflicts between geese and people.

On Thursday, Moro and his staff were rounding up geese from Toronto Island as part of an annual effort to move the moulting population, which flies in each year, to a farm near Mallorytown in eastern Ontario.

“It’s just like rounding up cattle. They ship them off to a farmer’s property that’s been designated for moulting Canada geese,” he said.

Between 500 and 700 geese will be caught on Toronto Island this year — a major drop from years past when Moro’s team would catch thousands. Earlier this spring they oiled about 1,000 eggs on the island and the waterfront.

At the University of Waterloo, where nesting geese dot the campus in spring, one staffer took a slightly different approach to living with the fowl. James McCarthy, an instructional co-ordinator with the faculty of environment, developed an online map where users can flag locations of nesting geese and plot paths around the sometimes hostile parents.

“We know they’re going to be here, so if we can show people where they are and everyone gets their own space, we cut off any potential conflict,” said McCarthy.

The map has had thousands of hits and several dozen nest location submissions.

Hughes said the risks presented by geese don’t arise much from their numbers but their location. Places like airports, golf courses and the Toronto Zoo employ measures like falconers and lasers to discourage geese. The key to keeping the population stable is effective landscaping practices, he said.

“If we want a long-term, permanent solution, we’ve got to start thinking about building habitats that are still attractive to people and less attractive to geese, if we can.”

With files from Paul Clarke

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Photographer: Galit Rodan/Bloomberg

Canada Goose Bypasses Saks With Sales Pitch for Amazon World

  • Fashion company targets consumers directly for $1,500 parkas
  • CEO says strategy will help firm match rivals’ margins

Dani Reiss, who runs Canada Goose Holdings Inc., used to be so anti-logo that he would cut the little crocodiles off his Lacoste shirts. Today, a prominent North Pole crest is emblazoned on the shoulder of each parka his company makes, enhancing their cachet with consumers as Inc.’s shadow looms large over the traditional retail landscape.

“I didn’t like brands, which is very ironic I realize given our large logo,” Reiss said in an interview from Canada Goose’s Toronto head office. “What I learned when I started working here was that the stories behind these products were phenomenal, the reputation we had built was phenomenal, anybody who knew about it really liked it -- but nobody knew about it.”

Dani Reiss

Photographer: Cole Burston/Bloomberg

Canada Goose turns 60 this year, but as a hot consumer brand it’s a relative youngster. After selling through wholesalers for most of its history, it’s only just beginning to roll out its direct-to-consumer strategy. The company is doing this in the midst of a growing threat from Amazon and declining mall traffic, giving it the ability to tailor its approach to the changing retail reality. Its strategy: rapid growth of e-commerce bolstered by a few flagship stores that Reiss says will help close the 15-point profit margin gap with its luxury peers. 

The direct-to-consumer approach has the added advantage of reducing Canada Goose’s reliance on the struggling retailers that accounted for all of its sales just three years ago. Department store chains like Hudson’s Bay Co.’s Saks Fifth Avenue, Bloomingdale’s, Harry Rosen and Holt Renfrew are at the front lines of Amazon’s assault on the industry, which has been forced to shutter stores and lay off employees amid declining mall traffic. This summer, Amazon said it would launch a service called Prime Wardrobe that lets consumers try on items at home before they buy, causing department-store shares to slump.

Retail Slump

“There’s no doubt that the wholesale landscape today is languishing,” said Reiss, who has been chief executive officer of Canada Goose since 2001. He’s the third generation of his family to run the company, founded by his Polish immigrant grandfather in 1957.

He emphasized that Canada Goose still has a strong relationship with its wholesalers, while its popular outerwear and new line of knitwear are attracting shoppers in department stores. But Reiss believes the direct-to-consumer category, which accounted for 29 percent of Canada Goose’s revenue in the fiscal year ended March 31, will grow faster and could one day overtake wholesale as the biggest source of sales.

“It’s more clear to me today than ever how big that opportunity is,” he said.

Select Stores

The pillar of its consumer strategy is e-commerce. Canada Goose has four country-specific sites -- in Canada, the U.S., U.K. and France -- and plans to roll out seven more European sites this year with a plan to eventually be “online everywhere around the world,” Reiss said. 

Canada Goose is supplementing that online presence with a smattering of flagship stores. So far it’s opened two, in Toronto and New York. Four more stores -- in London, Chicago, Boston and Calgary -- are coming this year with a goal of 15 to 20 worldwide by 2020.

“We have been very disciplined over the last 20 years in every decision we’ve made,” Reiss said. “We’re going to apply the same discipline with our real estate decisions to make sure we don’t sign any leases that we’re going to regret in a few years.”

Potential Growth

Analysts are encouraged by the potential growth trajectory of Canada Goose, which has seen its shares gain 42 percent since its trading debut in March, boosting its market value to C$2.58 billion ($2.16 billion).

“Canada Goose is the first ever hyper-growth softlines brand to arrive fully in this new digital era, and it should be amazing to have front-row seats to watch what happens when you incubate one of these young rocketships in a totally digital landscape,” Evercore ISI analyst Omar Saad said in an April note initiating coverage of the retailer.

“Think about it: Instant access to 3 billion modern consumers without needing to spend untold sums building fancy stores and expensive marketing campaigns,” he said.

Saad estimated that Canada Goose’s e-commerce sales already account for more than 20 percent of its total revenue, up from zero in 2014. This is well ahead of Burberry Group Plc, which has the next highest digital penetration of the luxury brands at 10 percent.

That has big implications for Canada Goose’s gross margin, which was 53 percent in the fiscal year ended March 31. By contrast, Moncler SpA’s was 77 percent in its last fiscal year, while Burberry, Hermes International and LVMH Moet Hennessy Louis Vuitton SE ranged from 65 percent to 70 percent.

For every 5 percent mix shift to direct-to-consumer, Canada Goose gains 120 basis points of margin, estimated BMO analyst John Morris.

A direct-to-consumer jacket sale provides two to four times more operating income than a sale of the same product through a wholesaler, according to Canada Goose’s annual report. Revenue in the direct-to-consumer channel more than tripled in the 12 months ended March 31, compared with 12 percent in the wholesale channel.

Canada Goose factory in Toronto.

Photographer: Cole Burston/Bloomberg

“We believe that the shift of a greater percentage of our business to direct-to-consumer will be one of the things that helps improve our margins, for sure,” Reiss said.

Winter Gear

To pull this off, Canada Goose needs to maintain the cache that has consumers across the northern hemisphere willing to spend up to $1,495 on its made-in-Canada parkas. For most of its history Canada Goose was a utilitarian brand, selling practical winter gear for use in the Far North.

“We made a best-in-class product but nobody really knew about it outside of the people who lived and worked in those places,” Reiss said.

Reiss, 43, who joined the company in 1997, recognized its potential to be more than just a maker of utilitarian outerwear and became obsessed with the idea of brand authenticity.

He tried hard to raise Canada Goose’s profile in Toronto but everyone told him the products were too utilitarian, too expensive, or both.

Coldest Place

“But when I traveled to Europe I found that in Europe they really understood it,” he said. “They’re like, ‘Oh, this is a parka made in Canada that is used in the coldest places on Earth by anybody who knows. This is almost the platonic image of a winter jacket.”’

Canada Goose’s jackets took off in Stockholm first and quickly spread to Italy, Germany and even Japan but took longer to take root in their home market.

“In typical Canadian fashion, Canadians adopt their own things after everybody else does,” Reiss said.

Canada Goose’s next big frontier is China, where many upscale consumers are familiar with the brand through their travels.

“We’re working on a China strategy as we speak,” Reiss said. “China’s a huge potential market for us.”

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