GOOS | Setting Up to Miss 2H

On the print, the stock has been all over the place this morning, up 10% (during amateur hour pre-market) to down 11%in the real market. Top line beat, with revenue growth of 30% accelerating from down 2% last Q, mostly due to strength in Canada (with ~$20mm help from F&F sale) and strength in Asia, while core US market was down 8%.  Wholesale (up 30%)  is outperforming DTC (up 23%) is bearish particularly as the company continues to stuff the wholesale channel while it still can at the expense of margins. Yet the company guided to wholesale down about 6% for the year (fall orderbook getting cut – in-line with our thesis), while DTC grows low teens (we think that’s too ambitious). Remember, this brand is far past its prime.  Inventories still up 20%, or ~C$2.4bn in retail equivalent product.  Huge GM% miss by 300bps.  On the call, management said that 2H EBIT will see expansion as DTC grows especially as the 16 new stores are fully operational. Again, an ambitious guide when we’re likely to see heavy discounting in GOOS product as the distribution friction gets worse.  The guide straddles the street while tempering the upcoming (kinda irrelevant seasonally) Quarter, full year at C$1.20 to C1.48.  We think it will be lucky to earn a dollar this year, and then headed lower next year.  Crux of our call here in 2023 is that weakness in US wholesale in the key selling periods later this year will offset and China improvement while taking sales and margins down, and inventories up.  TAIL EPS closer to 50 cents, we think with a low teens multiple or single digit stock – in either currency. Best Idea Short. For Our Black Book CLICK HERE