Nothing redeeming about this GOOS quarter, which is a Best Idea Short. The company tanked the quarter, printing C$1.27 vs the Street at $1.60. Took down the upcoming quarter materially. Most notable stat for us is that wholesale was down 17% for the quarter, with aggregate inventory up over 30% (it has over $2.2bn in retail value inventory on its books right now). GOOS had been jamming wholesale distribution with too much product, and it simply did not sell through – which is in line with our expectations. We think that 2023 will be the year where we see 20-30% order cuts from retailers – if not ditch the brand entirely, which will lead to excess inventory and promotions as we head into Spring and then the off season. The company is hosting an analyst meeting on Feb 7th, and we’d be pressing the short into the event. This brand is stuck between a rock and a hard place…It’s past its prime, not investing enough in R&D and marketing, and most importantly, there are too many quality competitors flooding the market with product at a 75% discount to Canada Goose. We think the real underlying earnings power here is well below C$1.00, and think it will get a ‘broken retail’ multiple on that – low double digits at best. This is good for a single digit stock over a TAIL duration. Yes, it's down 20% today, but we’d be pressing into the analyst event, and thereafter. The nosebleed stock price in the ~$20 range today is ridiculous if our model is right and directional trends are confirming our thesis. Management will introduce its 5-year financial plan next week, and it's going to take a LOT of convincing for us to change our bearish modeling assumptions and our take on the stock. This management team has one of the worst forecast accuracy histories out there. And we'll be scrutinizing the inputs into the upcoming one -- big time. We'll be back with more thoughts after the event. Still a Best Idea Short -- even on today's 20% sell-off.
For a Replay of our recent Black Book on Best Idea Short GOOS Link CLICK HERE
