Canada Goose cuts revenue, profit forecast as China business takes hit

Luxury parka maker Canada Goose Holdings Inc cut its full-year revenue and profit forecast on Wednesday, with persistent Covid-related lockdowns and store closures in China hurting its business.

Toronto-listed shares of the company fell about 2% in morning trade.

The Chinese government's efforts to contain the spread of Covid-19 cases with zero-COVID policy has impacted luxury fashion retailers, who have taken a hit on their revenues due to store closures, inflated inventories and fall in demand as consumers turn more cautious in the region.

European peer Kering and cosmetics companies L'Oreal and Estee Lauder have all signaled that lockdowns and curbs on travel in China due to Covid-19 have dragged down their performance in the quarter.
The company did not disclose how much revenue it specifically earns from China, but said 20.3% of the revenue in the second quarter came from the Asia-Pacific region.

Canada Goose cut its fiscal 2023 sales expectation to C$1.2 billion ($882.74 million)-C$1.3 billion, from C$1.3 billion-C$1.4 billion. It downgraded its 2023 adjusted profit per share forecast to C$1.31-C$1.62, from C$1.60-C$1.90.

Demand for luxury products outside China, however, was holding up strong ahead of the holiday season despite rampant inflation, Chief Executive Officer Dani Reiss told Reuters.

"We expect sales growth to re-accelerate in FY 23 and FY 24 as sales in Asia improve over the next 12 months and margins of luxury apparel brands hold up better than non-luxury," said CFRA analyst Zachary Warring.

The company earned second-quarter adjusted profit of 22 Canadian cents, on a revenue of C$277.2 million, beating analysts' estimates per Refinitiv data.