We’re pressing Best Idea Short Canada Goose on the 27% one month rally and positive (yet irrelevant) earnings report given the seasonally weak quarter (no one buys parkas in July -- 1Q is only 6% of FY sales). We have a lot of problems with Canada Goose. The brand is just fine – definitely above average. But we think management is well below average, and their commentary that ‘everything is just fine’ and ‘we haven’t seen a slowdown yet’ should be taken as rear-view. Invest in what you think companies are going to say and do in the future, not based on what an inexperienced management team that has not operated through a full economic cycle is telling you today. The major problem we have here is that the wholesale channel is breaking rank with the company’s pricing in its full price channel (see exhibits below). This has been brewing for the last few months, and is a MAJOR factor that needs to be considered for a company that is sitting on $2.5bn in retail inventories (note, that’s 2.5x last year’s revenue base), and doesn’t account for the inventory sitting out there at wholesale. The company maintained guidance for the full year, which we think was a mistake. The Street is coming out at $1.60, and we’re closer to $1.10. Next year the Street is at $2.00, and we struggle to get to $1.40. If/when this company either misses or guides down, we think that it will get a 12x-13x multiple – on $1.10 in earnings – a permanent re-rating. That’s a 13-$15 stock, or 40% downside from current levels. Best Idea Short. Sell the rally…
