This article is a part of InvestorPlace’s Best Stocks for 2019 contest. Will Ashworth’s pick for the contest is Canada Goose (NYSE:GOOS).
My pick for the Best Stocks of 2019 is one of Canada’s best exports, an outdoor apparel brand second to none, and a stock ready to fly higher over the next 12 months. I’m speaking about Canada Goose (NYSE:GOOS), the company best known for those puffy, warm parkas that the movie stars and celebrities love to wear.
While I have mixed feelings about the company because of well-documented animal-related cruelty charges, there’s no denying the power of its business model
Canada Goose is building a three-legged stool comprised of wholesale, brick and mortar, and online revenues that will thrive not only in the winter, the best time to wear one of its parkas, but summer too.
In the three months ended Sept. 30, 2018, Canada Goose grew revenue and profits by 34% and 55%, respectively, year over year to $230 million (all figures Canadian dollars) and $51 million.
If you look at the results from the perspective of that three-legged stool, the company’s wholesale revenue represented 78% of its sales in the quarter with its direct-to-consumer business (DTC) — brick and mortar or online — accounting for the rest.
That’s how it shakes out today. In five years, the numbers will look a lot different.
While its wholesale business is expected to grow by high single digits in fiscal 2019, its overall sales are projected to increase by at least 30%. Canada Goose’s revenue in fiscal 2018 was $591 million. An increase of 30% would translate into fiscal 2019 revenue of $768 million.
The wholesale business’ revenue in fiscal 2018 was $336 million. An 8% increase translates to $363 million. Subtract $363 million from overall projected revenue of $768 million and you get fiscal 2019 DTC revenue of $405 million, a growth rate of 58%, and representing 53% of overall sales.
In five years, even at a much-lower rate of growth, say 25%, DTC sales will be a few million short of $1 billion.
I believe the odds are good its DTC business grows at more than 25% annually. GOOS is up 64% year to date. I see more gains in 2019.
How much more? We’ll find out this time next year.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
