Canada Goose Holdings (GOOS) shareholders are feeling festive on New Year's Eve as the gangbusters opening of a Beijing flagship store and apparent easing trade tensions between China and Canada are helping stem the stock's December drop.
The shares have risen nearly 10% in early Monday trading, reversing course from their nearly 40% drop in December. The jump has largely been motivated by the overwhelming success of the company's first mainland China retail location, amid concerns on Sino-Canadian relations.
Analyst estimates remain north of $70 per share as holiday sales and the alleviation of trade troubles suggest the stock's potential to trend higher into 2019.
Susquehanna analyst Sam Poser noted that the company still represents a best-in-class brand for luxury retailers and has "significant growth potential" ahead of it. With the Chinese growth still available now as consumers line up for the $1,300 coats, the potential he foresees remains largely intact.
Dropping the Ball
The stock's precipitous drop from its highs near $70 to around $40 has coincided not only with poor performance of the retail sector broadly, but followed directly after the arrest of Huawei CFO Meng Wanzhou in the company's Canada home base earlier in December.
The arrest sparked concern that "patriotic buying" that would include boycotts of Canadian goods in China could stunt shopping interest in the world's largest market and add Canada Goose to the list of trade-war casualties.
Canada Goose is an apparent target of a boycott from Chinese consumers, according to the Global Times, due to the arrest in Canada of Huawei CFO Sabrina Meng $GOOS— Mike Newton (@NewtonGroupSM) December 11, 2018
An initial delay in the opening of the company's Beijing flagship only added to the market's anxiety, especially after CEO Dani Reiss touted the company's execution in the nation during a November earnings call.
Reports from Chinese media on the crowds flocking to the storefront indicate that such concerns were largely unfounded.
"It's been popular for ages but Beijing didn't have one, only Hong Kong. So everyone's come to see it," one shopper told Reuters, noting that the brand's popularity among the citizenry was not diminished much by the arrest and subsequent trade spat.
Shoppers Aren't Buying the Trade Bluster
While it might not be New Years quite yet in China, tweets from President Trump suggest that both he and Chinese President Xi Jinping could agree on some resolutions early into 2019.
Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!— Donald J. Trump (@realDonaldTrump) December 29, 2018
Such agreements would likely carry over to the Great White North, releasing some pressure on Canadian companies like Canada Goose as well.
To be sure, it has become increasingly difficult to weigh how much water President Trump's tweets hold, but the confluence of factors on Monday could signal a migration to a more positive trading pattern for the Canadian luxury retailer and possibly the market overall.