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Mar 16, 2017

Canada Goose growth plans won't include bathing suits as CEO Dani Reiss vows to stay 'authentic'

Canada Goose growth plans won't include bathing suits

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Canada Goose Holding (GOOS.TO) CEO Dani Reiss says he will not be diluting its winter brand to cash in on short-term profit temptations.

“No bathing suits and flip flops for Canada Goose, I can assure you that. We believe in making best-in-class products and staying authentic,” said Reiss in an interview with BNN on Thursday.

The maker of $900 parkas priced the offer above the marketing range on Wednesday, underscoring strong investor appetite for a brand that celebrities have made popular.

The Toronto-listed shares closed at $21.53, compared with an IPO price of $17, after opening at $23.86.

Founded in a small Toronto warehouse 60 years ago, Canada Goose was acquired by private equity firm Bain Capital in 2013. The company's fur-laced jackets and hoods are sold in 36 countries around the world.

The company sold 20 million shares at $17.00 each after pitching them to investors at $14 to $16. Part of the proceeds of the IPO, which valued the company at about $1.8 billion, will go to paying down debt.

The company has not been without controversy. It has been targeted by animal rights activists for its use of fur in its parkas. Reiss defends the practice and said the company has high ethical standards.

“We use fur for function first, and our customers care a lot about the ethical and sustainable sourcing of all our raw materials,“ he said. “We also offer all sorts of jackets that don’t have fur.”

Governance advocates have been critical of the company’s dual-class share structure, but Reiss said the company’s board and management are committed to creating value for all their shareholders.

“We have an independent board that has a fiduciary responsibility to all the shareholders,” he said.

While Canada Goose is a solid success, the spike in trading makes it expensive, according to one money manager.

“It’s a great Canadian story; but it’s trading at 36 times earnings, which is close to the valuation for Hermès. I think a Hermès scarf is much nicer than a Canada Goose jacket, but that’s just me,” said Paul Harris, partner and portfolio manager at Avenue Investment Management, in an interview with BNN. 

Avenue Investment Management portfolio manager Bryden Teich, who did not participate in the IPO, was cautious about the company's growth prospects.

"It is a very niche product at the high end of the retail market, and the retail market is under pressure overall," Teich said. "In light of an over-indebted Canadian consumer, a really tough retail environment, I have a hard time seeing how it becomes a big growth story."

CIBC Capital Markets (CM.TO), Credit Suisse (CSGN.S), Goldman, Sachs & Co (GS.N) and RBC Capital Markets (RY.TO) managed the share sale.

With files from BNN

 

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