Key Market Outlook(s) and Pick(s)

On Wednesday, I joined David Lin on “The David Lin Report” for an in-depth conversation on my market outlook and “what’s next”/how we are positioned to benefit:

On Monday, I joined Katie Silver on BBC World News to discuss markets and outlook. Thanks to Katie and João Da Silva for having me on:

On Tuesday, I joined Marianne Star Inacay on Channel NewsAsia to discuss the Big Beautiful Bill, deductions, growth, sentiment, outlook, and opportunities. Thanks to Marianne for having me on:

On Tuesday, I joined Andrea Heng and Hairianto Diman to discuss markets, the Fed, outlook, and the economy. Thanks to Andrea and Hairianto for having me on:

Canada Goose Update

Each week we try to cover 1-2 companies we have discussed in previous podcast|videocast(s) and/or own for clients (including personally).

A few weeks ago, we put out a quick update following Canada Goose’s Q4 earnings but have not yet put out a full deep dive. Despite the ~70% move off the April lows, we don’t even think the train has left the station yet with this name. That said, we thought now would be a good time to revisit it.

Canada Goose, like many other names, went from a flashy growth story to a left-for-dead value story post pandemic and during the cyclical consumer drawdown that followed. Luckily for us, this once-in-a-hundred-year event gave us the opportunity to purchase what we believe is one of the highest-quality, family-run luxury brands amid an 85% drawdown and near all-time lows. The good news is we believe that over time, GOOS has the potential and all the right pieces to return to that growth story as management executes its turnaround plan and gets a little help from the recovery of the Chinese consumer and the shift toward a consumption-based economy.

The name of the game with the GOOS turnaround is reducing exposure to wholesale and leaning into high margin DTC stores. Back in 2017, DTC made up just ~29% of total revenue. This past fiscal year, that number had grown to ~74%, with management targeting 80% by FY2028. The biggest upside from this shift is the margin profile, with DTC typically commanding margins in the mid 70% range compared to wholesale in the mid to high 40% range. Beyond the MATERIAL profitability upside, the model also enables better brand and quality control, higher conversion rates, improved inventory management, and greater operational efficiency.

But those are just words. The real question is whether management can EXECUTE, and they are doing just that. Inventories have declined for six straight quarters, down to just $384 million and 14% lower YoY. DTC revenues jumped 15.7% in Q4, with comp sales up 6.8%. Wholesale revenues fell 23.2% in the quarter to just $31.8 million, with FY2026 expected to be the trough as nearly all intentional cuts are now behind GOOS. Most importantly, and as expected, gross margins hit RECORD HIGHS, coming in just under 70% for the full year and showing no signs of slowing as management pushes toward its low 70% range target.

So with DTC taking care of business on the profitability front, the next question and other prong of the turnaround plan is centered around re-accelerating revenue growth. On that front, management is effectively turning GOOS from a purely winter, one-time purchase luxury parka brand into an all-season, 365-day relevant brand. This past year, GOOS nearly DOUBLED its mix of updated and brand new styles. Whether it’s rain jackets, eyewear, shoes, or even warm-weather clothing, Canada Goose now has it. Most importantly, people can’t get enough. Apparel emerged as the fastest growing category in Q4 and for the full fiscal year 2025, with down-filled outerwear also seeing very solid growth. This continues to drive more repeat customers and multi-unit purchases, something GOOS had never traditionally had. And once again, the success is showing up in the data, with this past year’s holiday season search interest hitting a three-year high.

(Click on image to enlarge)

Oh, and by the way, the turnaround is being led by a CEO/chairman from the founding family who owns 39.5% of the entire company. How’s that for skin in the game?

Just as you’d expect, when management has skin in the game like that, they tend to respect shareholder equity. Over the last five years, they have reduced the share count by nearly 12%, making your slice of the pie that much bigger without putting up any additional capital.

Remember: price is what you pay, value is what you get. In the case of GOOS, all signs point to strengthening fundamentals. You have record-high gross margins, revenues reaccelerating, and near-record free cash flow, yet the price remains subdued. I built my career on capturing divergences like this. Rather than overthinking it, we are happy to sit on our hands and wait for Mr. Market to be done serving up one of his manic bouts.

Here’s everything you need to know following Q4 results:

10 Key Points

1) Q4 revenues grew 7.4% YoY to $384.6 million, beating expectations by $28.2 million. This was driven by DTC revenue growth of 15.7% and comp sales growth of 6.8% YoY, with higher conversion rates across every region.

2) Gross margins continue to benefit from the push into DTC, coming in ahead of expectations at 71.3% for the quarter, up 620 basis points YoY, and 69.9% for the full year. Adjusted EBIT margins came in at 15.5%, up 430 basis points YoY.

3) Management continues to make solid progress right sizing inventories, which declined 14% YoY to $384 million and marked the sixth consecutive quarter of reductions. Inventory turnover also improved to 1.0x, up from 0.9x last fiscal year.

4) Management continues to clean up the balance sheet, reducing net debt leverage to 1.3x compared to 2.0x in the prior year. Cash and cash equivalents totaled $334.4 million at the end of the quarter, up from $144.9 million a year earlier.

5) Tariffs are not expected to have a direct material impact on FY2026 profitability. ~75% of units are made in Canada and virtually all comply with the United States-Mexico-Canada Agreement, making them currently exempt. The remaining ~25% of units are produced in Europe, which is expected to have minimal financial impact.

6) Wholesale revenues declined 23.2% in Q4 to $31.8 million and fell 16.5% for the full year. This decline is part of the intentional strategy to reduce the wholesale order book and shift toward higher-margin DTC. FY2026 is expected to be the trough for wholesale as streamlining efforts are mostly complete, with management expecting growth from this point forward supported by strong interest from wholesale partners in the spring/summer and fall/winter ’25 collections.

7) GOOS continues to successfully expand into the nonwinter category as it works to become an all-season relevant brand, nearly doubling the mix of updated and brand new styles during the year. Interest in new products and categories remains strong, with down-filled outerwear showing solid growth and apparel emerging as the fastest growing category in Q4 and for the full fiscal year. Data also shows a rising number of repeat customers and multi-unit purchases driven by the ongoing apparel expansion.

8) For the full year, GOOS converted two temporary stores and opened four net new permanent stores, bringing the total store count to 74. Management continues to expect total net store openings to exceed FY2025 levels in the upcoming year.

9) GOOS ended the year with a corporate headcount reduction of ~3% compared to the start of the year, following the ~17% reduction in March 2024. This brought full-year SG&A expenses down to $779 million, compared to $792.9 million in the prior year.

10) Management did not provide guidance for the FY2026 outlook but remains confident in the strength of the brand and its solid financial position. Importantly, the decision to withhold guidance was driven by macro and tariff uncertainty rather than any weakness seen in consumer spending. In fact, management has seen positive sales momentum continue into the early part of FY2026.

Earnings Call Highlights

General Market

The CNN “Fear and Greed Index” ticked up from 56 last week to 66 this week.You can learn how this indicator is calculated and how it works here: (Video Explanation)

The NAAIM (National Association of Active Investment Managers Index) (Video Explanation) ticked down to 81.41% this week from 94.09% equity exposure last week.

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