Shares of Aritzia skyrocketed 18 percent Friday after the rapidly expanding fashion brand reported strong second-quarter results on Thursday and raised its outlook for the year.
As of midday, Aritzia’s stock hit $144, up $22.11, on the Toronto stock exchange, where it trades in Canadian dollars and has a market capitalization of $16.5 billion.
“We remain exceptionally well positioned to capitalize on our long runway for growth in the U.S. and beyond,” said Aritzia’s chief executive officer Jennifer Wong during a conference call with industry analysts and investors.
Wong has plenty of momentum to work with as she pursues that growth.
The Vancouver-based fashion company, which reports results in its native currency, as shown here, said revenue for the quarter ended Aug. 30 increased 44.1 percent to $1.2 billion; comparable sales rose 34.5 percent, and net income increased 204.2 percent to $201.7 million.
“This fiscal year, we have a strong pipeline of 12 to 13 new boutiques in premier locations, and four to five repositions. In Q3, we’re on track to open six new U.S. boutiques, one each in Florida, Georgia, Massachusetts and Nevada, and two in Texas. We’re also opening two repositions, in California and in Quebec…New store productivity and paybacks remain exceptional.”
Currently, Aritzia has 82 stores in the U.S., and 146 in total. “I think there’s still a lot of opportunity for store growth, particularly in the U.S.,” said Wong. She’s previously stated that there’s potential to operate upward of 200 stores in the U.S. alone.
Jennifer Wong
Courtesy image
During the current quarter, Aritzia is introducing new styles and colors in cooler weather categories, including tailored outerwear, sweaters and its Super Puff.
In digital, Wong said the focus going forward is on channel expansion and digital marketing optimization. “Near-term priorities include continuing to embed AI into how we work and support clients, ongoing website enhancements, releasing new mobile app features and upgrades, honing our digital marketing tactics, and optimizing our omnichannel infrastructure,” the CEO indicated.
Todd Ingledew, chief financial officer, said: “We do feel there’s an opportunity, specifically in the U.S. to really expand and grow our digital business.” Digital accounts for 34 percent of Aritzia’s sales volume.
Regarding building up and improving Aritzia’s infrastructure, Ingledew added: “We have projects underway across all areas of the business, whether that’s the digital road map investments that we’re making, our distribution center network, tech and AI enablement, merchandise planning software, customer initiatives and RFID, and frankly, that’s really just the start of it.”
On the outlook on business, “Based on quarter-to-date trends and accounting for the exceptional strength of our business in the back half of the last two years, we expect third-quarter net revenue of $1.275 billion to $1.325 billion,” the CFO said. “This represents growth of 23 to 27 percent from last year. We expect comparable sales growth in the high teens as well as strong contributions from our new and repositioned boutiques. We expect third-quarter gross profit margin to increase 100 to 150 basis points, primarily driven by continued IMU [initial markup] improvements and occupancy cost leverage. We’re continuing to expect IMU improvement in the back half of the year.”
Aritzia raised its full-year net revenue outlook to $4.78 billion to $4.88 billion, representing growth of 29 to 32 percent over last year, driven by comparable sales growth in the low 20s and contributions from 12 to 13 store openings and four to five repositioned stores.
“We offer an ‘Everyday Luxury’ value proposition and our brand has never been stronger,” said Wong. “The beautiful thing about Aritzia and our Everyday Luxury is that it has a broad appeal to a broad customer base. I’ve said before in the past, how it spans three generations, it might even be spanning four now. We have a breadth of an assortment that can cater to almost any profile of a client.”
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