Canada Goose loses bull as El Niño, U.S. tariff problems heat up

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Photo by Scott Olson/Getty ImagesOne of Canada Goose Holdings Inc.’s last remaining bulls has turned bearish, fearing that unusually warm weather, weakness in Europe and fallout from trade negotiations between the United States and Canada will hit the company’s outerwear offerings during the key holiday season.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountWells Fargo & Co. analyst Ike Boruchow double-downgraded the outerwear firm to underweight from overweight and cut his price target to $10 from $16. With Boruchow’s downgrade, more than one-third of analysts covering the retailer recommend selling shares, according to data compiled by Bloomberg.“We simply feel the macro is against them and the near-term risk is material,” Boruchow wrote in an Aug. 24 note. “The negatives are becoming harder to ignore, with an increasingly difficult setup shaping up for 2H.”Breaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againCanada Goose shares are down 37 per cent so far this year following a string of disappointing earnings and skepticism around the company’s ability to create a year-round business. The stock has fallen almost 88 per cent from a 2018 record, losing about $9 billion in market value in the process.The formation of a Super El Niño — a climate event that disrupts global weather patterns — means that the upcoming winter could be among the hottest on record, putting demand for Canada Goose’s parkas at risk, Boruchow said. That would likely hit sales in the third quarter, which includes the crucial holiday period and generates roughly half of the company’s annual revenue, according to the note.A 2023 El Niño had a “sizable impact” on Canada Goose’s third quarter, when sales were considerably below what the company expected, Boruchow wrote. In addition, while there was a recovery in the fourth quarter, sales missed the company’s initial projection, signifying that some demand was lost instead of simply deferred. The reoccurrence of an El Niño in the coming winter season brings “meaningful risk” to Canada Goose’s current full-year plan, Boruchow said.In addition, Europe — which makes up 15 per cent to 20 per cent of sales — is seeing a weakening macro backdrop at an “increasingly difficult time” for Canada Goose, per the note. This comes as an exceptionally hot summer in the region has presented a headwind for the company.Risks for Canada Goose are not limited to weather. Last week, U.S. President Donald Trump imposed a 50 per cent tariff covering roughly US$20 billion in Canadian goods. The new duties apply to goods previously shielded by CUSMA, putting Canada Goose in the crosshairs.The company now faces a potential 200 basis-point, or roughly 25 cent, headwind to full-year 2027 margins assuming no mitigation, Boruchow said.“We see heightened risk to the company’s ability to fully mitigate the pressure, given recent challenges with margin flow-through, adding another hurdle to FY27 margin delivery, which does not include the additional impact from tariffs,” Boruchow wrote.Prime Minister Mark Carney has introduced retaliatory tariffs which will kick in on Sept. 8. In response, the Trump administration is discussing additional measures against Canada.“This in turn raises the risk of additional U.S. duties to follow and, with them, could further pressure Canada Goose margins,” Boruchow said.—With assistance from Janet Freund.We apologize, but this video has failed to load.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.