Canada Goose and the Paradox of Going Public

 

On February 15th, popular Toronto-based winter coat company Canada Goose announced its intention to file for a public offering on the Toronto and New York Stock Exchanges. Although the company dates back 57 years, the move comes after a surge of popularity it has experienced since 2005.

Canada Goose became popular in the mid-aughts by becoming the standard bearer for the film and television industry in cold weather climates. Since then, the company has expanded to numerous retail outlets, made a large segway into higher-end department stores in the US, and had sold off 70% of its interest to Bain Capital in 2013 on the condition that the manufacturing of its products will always remain in its home and native land.

The IPO intentions will bring Canada Goose to a new crossroad and the company will raise roughly $300 million to help expand operations internationally. However, the demand of the shareholders for endless growth can often lead to an expansion | oversaturation paradox that we have seen with large clothiers many times before.

Since quarter after quarter growth is the driving factor for investors, fashion companies that go public usually attempt to maximize all retail opportunities, which inevitably leads to discounting and sometimes factory outlet stores. The problem with this model, however, is that the core customer base becomes disillusioned with the brand once it is widely available. It may be superficial, but the allure of a brand is often predicated by its aspirational qualities and “just-out-of-reach” characteristics. Once discounting and over-availability become prevalent, the brand’s image is devalued, and the customer moves on to something else. At first, it may just be the initial fanbase, but eventually it trickles down to the mainstream buying public as well.

Canada Goose is far from the first company to potentially face this type of dilemma. In the mid-1990s, American clothier Tommy Hilfiger experienced its own surge of popularity through celebrity ad campaigns and whirlwind promotion after going public in 1992. Yet by the early 2000s, the company’s red, white and blue logo had been licensed to countless products and had transitioned its designs towards the urban, hip-hop image popular at the time. It too was sold at countless department stores and factory outlets all across the United States. By 2001, sales began to fall dramatically as the brand’s North American appeal dissipated. By the mid 2000s, the company was looking to reorganize operations. This has happened to Lacoste, to Cole Haan, to Coach and is even arguably happening right now to the mightiest giant of all when it comes to fashion; Ralph Lauren.

Dani Reiss, the CEO of Canada Goose, has done a fantastic job rebranding and building the company since he took it over from his father in 2001. Still, becoming too big is a problem that many clothing companies experience when it comes to the long-term. The IPO might make Riess a much wealthier man today, but keeping the attention of the famous and pricing exclusivity up is a much better strategy if he wants the brand to stay as relevant as it has over the past decade for the next one to come. 

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