The future is apparently bright for Canada Goose (NYSE: GOOS) in China, which is why Cowen analyst Oliver Chen raised his rating from Market Perform to Outperform and his price target from $31 to $36.
According to Barron’s, Chen writes that the parka maker is “well-positioned as an outdoor resource” and as a “global luxury beneficiary” as China emerges from the pandemic faster than other countries.
When its revenue dropped more than 60% in the second quarter due to the pandemic, the Toronto-based winter clothing manufacturer shifted its global focus to mainland China.
Canada Goose announced a few months ago that it was adding four of its seven new global stores to mainland China. Its first new store, which opened in Chengdu in June, is reportedly performing very well.
Shares of Canada Goose finished Wednesday with an 8% pop, reaching its highest stock price since January. During trading hours, the stock jumped at over 10%.
In addition to its growth in China, Chen listed several other reasons to be optimistic about the company, including its healthy EBIT-margins, its positive free cash flow, and strong brand equity.
Despite ongoing economic issues with the pandemic, Chen believes that Canada Goose’s lower price points could help it compete in the luxury clothing market against more expensive players.
With Chinese tourists unable to travel abroad to buy Canada Goose clothing, the company is targeting these same Chinese tourists who are now only traveling domestically. One area of concern for Canada Goose is the growth of parka knockoffs in China where consumers can buy a counterfeit jacket for a fraction of the original price.