Canada Goose Holdings (TSX:GOOS)(NYSE:GOOS) reported underwhelming earnings on Feb. 6, missing revenue expectations and cutting its profit outlook. Shares dropped on the day as investors reacted to the weaker-than-expected results.

The luxury outerwear company reported third-quarter revenue of $607.9 million, down slightly from $609.9 million a year ago and below the $620.9 million analysts had anticipated. Earnings per share came in at $1.51, just shy of estimates of $1.54.

A key concern is China, historically a strong growth driver for the brand and a key market for the business. Sales in Greater China fell 4.7% this quarter after rising 5.7% in the previous period. A slowing economy and high youth unemployment have dampened luxury spending, affecting Canada Goose and other high-end brands.

With the earnings miss and a lot of bearishness in the stock over the years (it's down around 70% over a five-year stretch), Canada Goose now trades at a forward price-to-earnings ratio of 9, which is a fairly low valuation. However, the company faces multiple near-term challenges, including weak consumer sentiment and slower demand recovery in key markets. While it's cheap, there's good reason for the discount - the stock is a bit of a risky play.

Adding to investor concerns, management lowered its fiscal 2025 adjusted profit growth forecast to flat or low-single-digit growth, down from prior expectations of mid-single-digit gains. This downward revision, coupled with soft quarterly results, doesn't give investors a reason to be too bullish on the stock's future.

Canada Goose remains a strong brand, but its ongoing struggles in China and slowing global momentum pose risks. While the stock's sharp decline may attract value investors, uncertainty around earnings growth makes it a risky bet without a clear catalyst for a turnaround. Investors are better off avoiding it for now.

COMTEX_462686429/2559/2025-02-11T10:12:42