Canada Goose Seeks to Raise $240 Million in Luxury Parka IPO
Canada Goose Holdings Inc., the maker of $900 parkas worn by celebrities from Toronto rapper Drake to Blue Jays slugger Jose Bautista, is seeking to raise as much as C$320 million ($240 million) in its initial public offering.
The Toronto-based retailer and its backers, which plan to list shares both in the company’s home city and in New York, are offering 20 million shares for C$14 to C$16 each, according to a filing Wednesday. At the top of that range, Canada Goose would be valued at about C$1.7 billion. The company will offer 7.15 million subordinate voting shares while shareholders will offer an additional 12.85 million shares.
Even if shares price at the bottom of the range while 12-month trailing earnings per share grow by a below-sector 10 percent, Canada Goose would still rank third among its luxury-goods selling peers on valuation, Bloomberg Intelligence analyst Maja Rakic wrote in a note Wednesday.
The company would have a price-to-earnings multiple of 36 times, behind Hermes International’s 39 times and Brunello Cucinelli SpA’s 37 times.
“Perhaps ambitious, the multiple implies the maker of winter outerwear has strong earnings potential,” Rakic wrote. “Canada Goose’s IPO appears well-timed given luxury-goods valuations point to a sector recovery.”
Canada Goose is backed by Bain Capital, which will continue to own a controlling interest in the company following the IPO, according to the filing. Under the planned share structure, Bain and DTR LLC, controlled by Canada Goose Chief Executive Officer Dani Reiss, will own all the multiple-voting shares in the company in a 70-30 split respectively.
That’ll give Bain and DTR a collective 98 percent of the voting rights with 81 percent of the equity, or 97 percent if banks leading the IPO exercise an overallotment, the filing shows.
Snap Inc., the disappearing-photo app maker that is expected to price its own IPO Wednesday, is giving even less control to its shareholders. Snap is listing non-voting shares in its debut, giving shareholders no say over things like nominating directors or executive compensation.
Canada Goose was founded in a small warehouse in Toronto in 1957 as Metro Sportswear Ltd., specializing in woolen vests, raincoats and snowmobile suits. In recent years it has shifted its focus to luxury consumers, targeting shoppers who drive Land Rovers rather than dogsleds.
The company uses what it calls Goose People to help market the jackets, including brand ambassadors like Bautista, Toronto Raptor Cory Joseph and extreme adventure athlete Ray Zahab, and through partnerships with designers including Marc Jacobs and Drake’s OVO fashion brand.
The retailer also intends to expand into other markets including knitwear, footwear, hats and gloves as well as travel gear and bedding in the coming years, according to the prospectus. It will seek to build its market share in the U.S. and Europe, in particular in the U.K., France, and Scandinavia. The company also views China as a largely untapped market.
The expansion into other segments would move Canada Goose’s model closer to Italian rival Moncler SpA, BI’s Rakic said. The Canadian company could also follow in Moncler’s footsteps by adopting the store-led model that brand uses to sell its own luxury outerwear.
“Moncler has successfully used own-store openings to expand sales and gross margin since 2011, even after the private-equity stake was reduced,” she said. “The key will be tight control over operating expenses as store network expands, while driving sales.”
Major risks to Canada Goose’s business include the expense of expanding into new markets and competition, the filing shows. Another major risk would be that the company’s brand gets tarnished. Canada Goose has been targeted by animal-rights group People for the Ethical Treatment of Animals, which has held demonstrations outside its stores as well as its headquarters, to protest the company’s use of coyote fur and down.
The brand was sold in 36 different countries through about 2,500 wholesalers at the end of December, the prospectus shows.
In 2013, when Bain acquired a 70 percent stake in Canada Goose, the company was valued at about $250 million, people familiar with the matter have said. Terms weren’t disclosed at the time.
Canada Goose’s revenue, which hit C$290.8 million for the fiscal year ended March 31, 2016, had a compound annual growth rate of 38 percent of the past three years. Its net income, which hit C$26.5 million last fiscal year, grew at a rate of 196 percent over the same period, according to the filing.
Canadian Imperial Bank of Commerce, Credit Suisse Group AG, Goldman Sachs Group Inc. and RBC Capital Markets will be leading Canada Goose’s IPO. The company plans to list its shares under the symbol GOOS.