Wednesday, June 3, 2020

Is Canada Goose Set to Fly After Q4 Results?

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News shaping
the markets today

     

What’s happening: Canada Goose Holdings is scheduled to report its fourth-quarter results before the opening bell on Wednesday, June 3.

What happened: The pandemic has raised a panic alarm for the retail industry, as companies were forced to shut their stores amid lockdowns imposed by the government to contain the outbreak.

The Toronto, Canada-based company is heavily dependent on China, North America and some regions of Europe for generating the major part of its sales. With massive job losses, the decline in global consumer spending raises serious concerns over Canada Goose’s near-term outlook. The company has also recently faced a lot of flak from animal rights groups for using virgin fur in their products.

On the other hand, CEO Dani Reiss has announced some recent decisions, which are likely to help the retailer generate additional sales going ahead.

Expectations for the quarter: The luxury retailer is expected to report a double-digit decline in revenue, sending the company to the red.

  • Canada Goose’s revenue is expected to decline 35.3% year-over-year to $76.06 million in the latest quarter.
  • Analysts are projecting the company to report a loss of $0.09 per share, representing a massive 228.6% drop versus the year-ago quarter.

Why it matters: The luxury parkas maker enjoyed strong momentum last year and reported 41% growth in its fiscal 2019 sales. Canada Goose reported healthy results for the previous quarter in February, despite revenue growth slowing sequentially. However, the company was forced to close its retail stores in North America and Europe in March due to the covid-19 outbreak.

Management announced various initiatives to tackle the crisis, laying off 2.5% of its workforce in late May. However, the company offered compensation packages and certain additional benefits for those employees. Also, the company reopened all its Canadian manufacturing factories to produce PPE (personal protective equipment) kits for donation.

Canada Goose’s CEO Dani Reiss announced plans to stop using virgin fur, while also taking steps to avoid using plastic. These initiatives might attract the more environmentally conscious customers to its outlets. The company is also looking to increase its customer base by expanding into additional clothing categories.

How the shares have performed so far: Shares of Canada Goose jumped 4.2% to close the regular session at $21.59 on Tuesday. The stock has tumbled more than 40% since the beginning of the year.

What to watch: Investors look forward to Canada Goose’s comments on the impact of coronavirus on its overall business. Markets are also keen to know whether the company issues an outlook for the near term, after suspending its long-term forecast in March.

The Markets Today

     

European stocks will be in focus today, ahead of major economic data scheduled for release later in the day.

Context: European stocks ended higher on Tuesday, brushing off concerns related to protests over police brutality in the US. Investor sentiment was lifted by the reopening of economies and businesses and hopes of a recovery from the impact of the covid-19 outbreak.

Details: The pan-European Stoxx 600 index closed higher by 1.5%, with auto stocks leading the rally on Tuesday. Healthcare stocks bucked the overall market trend, moving lower in the previous session.

The German DAX index was the strongest performer in Europe, recording its best day in around two months. The index surged 3.5% on Tuesday following a three-day weekend.

Shares of Hammerson spiked around 35% as the British firm announced plans to reopen its sites from June 15. Unibail-Rodamco-Westfield’s stock rose around 9% as the retailer continued to reopen its stores. Shares of pharma and biotech firms, including Tecan and BioMerieux, tumbled around 5% on Tuesday.

What to watch: Investors await a basket of economic reports from the Eurozone, including producer prices, unemployment rate, services and composite PMI. The IHS Markit services PMI is expected to rise to 28.7 in May, from a reading of 12 in April. The composite PMI is also projected to rebound strongly to 30.5 in May. The Eurozone’s unemployment rate is estimated to rise to 8.2% in April, from 7.4% in March. Industrial producer prices, which declined 1.5% in March, are likely to decline by 1.8% in April.

Investors will be keeping an eye on the coronavirus numbers, with total cases exceeding 6,378,230 globally. The UK confirmed over 278,000 cases and almost 40,000 deaths.

Other Markets: US indices closed higher on Tuesday, with the Dow, S&P 500 and Nasdaq 100 up by 1.05%, 0.82% and 0.59%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s unemployment rate, services PMI and composite PMI, Russia’s services PMI, Turkey’s inflation rate and producer prices, South Africa’s Standard Bank PMI, Spain’s services PMI, Italy’s services PMI and unemployment rate, France’s services PMI and composite PMI, UK’s services PMI and composite PMI, Brazil's industrial production, services PMI and composite PMI, Canada’s labor productivity and Bank of Canada’s interest rate decision as well as the US MBA mortgage applications, ADP employment change, services PMI, composite PMI, ISM non-manufacturing PMI, factory orders and EIA’s crude oil stocks change.