Columbia Sportswear Company (COLM) markets and distributes outdoor, active, and everyday lifestyle apparel, footwear, accessories, and equipment. The company offers a wide range of products for activities on snow and ice. On the other hand, Canada Goose Holdings Inc. (GOOS) designs, manufactures and sells performance luxury apparel and accessories for the fall, winter, and spring seasons.
People are already gearing up for the winter. According to a survey, 31% of U.S. consumers said they’ll begin shopping for the holidays before the end of October, while a cumulative 55% of consumers are expected to start shopping before Thanksgiving. In addition, one in four consumers is expecting to spend more on Christmas compared to last year. With significant progress on the vaccination front, outdoor activities have increased as consumers gained their confidence back. This should bode well for both COLM and GOOS in the coming months.
In terms of the past year’s performance, GOOS has gained 10.9% versus COLM’s 10.2% gain. Also, GOOS’ 19.8% gain year-to-date compares with COLM’s 9.7% return. Over the past six months, GOOS has slumped 10.2%, while COLM has slipped 10.7%.
But which stock is a better buy now? Let’s find out.
Latest Development
On September 8, COLM unveiled Omni-Heat™ Infinity, a new gold metallic lining material in a pattern scientifically engineered to optimize warmth and breathability, to be available this fall in the company’s apparel offering. “Omni-Heat Infinity expands upon our best-selling platform of patented technologies, and we’re looking forward to showcasing this revolutionary innovation in what will be Columbia’s largest campaign in our 83-year history,” said Joe Boyle, President of the Columbia Brand.
On August 18, GOOS announced its plan to repurchase up to 5,943,239 subordinate voting shares over the twelve months commencing on August 20, 2021, and ending no later than August 19, 2022. This is expected to increase shareholders’ value substantially.
Recent Financial Results
COLM’s net sales increased 78.9% year-over-year to $566.37 million in the fiscal second quarter that ended June 30. Gross profit stood at $292.52 million, up 100% from the same period last year. Net income grew 180.2% from the year-ago value to $40.68 million. The company’s EPS increased 179.2% year-over-year to $0.61.
For the fiscal first quarter that ended June 27, GOOS’ revenues increased 115.7% year-over-year to Can $56.30 million ($44.25 million). Its gross profit grew 539.6% from its year-ago value to Can $30.70 million ($24.13 million), while its operating loss increased 2.4% year-over-year to Can $60.70 million ($47.71 million). Also, the company’s loss per share rose 10.9% year-over-year to Can $0.51.
Past and Expected Financial Performance
COLM’s net income and EPS grew at CAGRs of 23.5% and 25.9% over the past three years, respectively. Analysts expect COLM’s revenue to increase 26.5% in the current year and 10.1% in the following year. The company’s EPS is expected to grow 186.4% in the current year and 16.6% in the next year. Moreover, its EPS is expected to grow 31.7% per annum over the next five years.
On the other hand, GOOS’ net income and EPS declined at CAGRs of 10.8% and 10.6% over the past three years, respectively. Analysts expect the company’s revenue and EPS to increase 17.4% and 55.6% in the next year, respectively. Moreover, GOOS’ EPS is expected to grow 33.9% per annum over the next five years.
Profitability
GOOS is more profitable with a gross profit margin and levered FCF margin of 60.75% and 16.57%, compared to COLM’s 50.55% and 13.46%, respectively.
However, COLM’s ROE, ROA, and ROTC of 14.52%, 7.88%, and 9.94% compare with GOOS’ 12.48%, 4.82%, and 5.76%, respectively.
Valuation
In terms of forward P/E, GOOS is currently trading at 41.68x, 48.7% higher than COLM, which is currently trading at 21.40x. Also, GOOS’ forward EV/EBITDA ratio of 20.23 is 42.2% higher than COLM’s 11.69.
Thus, COLM is relatively affordable here.
POWR Ratings
COLM has an overall grade of B, which equates to a Buy rating in our proprietary POWR Ratings system. On the other hand, GOOS has an overall grade of D, which translates into a Sell rating. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
COLM has a grade of B for Quality, in sync with its net income margin of 9.08%, 44.5% higher than the industry average of 6.29%. On the other hand, GOOS has a grade of C for Quality. This is justified as GOOS’ net income margin of 6.81% is 8.3% higher than the industry average.
COLM has a grade C for Stability and GOOS has a D grade for Stability, consistent with its beta of 1.5.
Of the 36 stocks in the Athletics & Recreation industry, COLM is ranked #7. Alternatively, among the 63 stocks in the Fashion & Luxury industry, GOOS is ranked #62.
Beyond what we’ve stated above, we have also graded the stocks for Stability, Momentum, Value, and Growth. Click here to view all of COLM’s grades. Also, get all GOOS grades here.
The Winner
COLM and GOOS should witness a rise in their product sales before the winter. However, fundamentally strong and relatively lower valuation make COLM a better buy here.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Athletics & Recreation industry here. Also, click here to view the top-rated stocks in the Fashion & Luxury industry.
COLM shares were trading at $96.51 per share on Friday morning, up $0.67 (+0.70%). Year-to-date, COLM has gained 11.29%, versus a 16.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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