BofA Downgrades Canada Goose On Projected Revenue Decline

Canada Goose Holdings Inc. GOOS is scheduled to report its fiscal fourth-quarter results on May 29.

The company is likely to witness a significant decline in revenues from North America and Europe due to restrictions on international tourism, which may continue through at least the end of 2020, according to BofA Securities.

The Canada Goose Analyst

Robert Ohmes downgraded the rating for Canada Goose Holdings from Neutral to Underperform, while reducing the price target from $24 to $15.

The Canada Goose Thesis

BofA’s BioTech analysts believe that a vaccine for COVID-19 is unlikely before mid-2021, which does not bode well for Canada Goose, Ohmes said in a Friday downgrade note. (See his track record here.)

Around 50% demand for the company is driven by international tourism, which is likely to remain constrained at least through the end of 2020, given strict social distancing guidelines and fear of a potential second wave of infections, the analyst said.

Ohmes said he expects additional headwinds in the North American market from a challenging wholesale environment, given Canada Goose’s mall-based footprint.

The company is likely to witness limited occupancy due to its small store format, he said.

While Canada Goose’s China sales may have recovered in April after plummeting in the fiscal fourth quarter, the company is still in early stage growth in the country, according to BofA.