Time to Try On TSX Index Standout Stock Aritzia (TSX:ATZ)

Here’s why high-end retailer Aritzia Inc (TSX:ATZ) should be on your holiday wish list.

| More on:

Aritzia (TSX:ATZ) has managed to do something that few retailers can: provide stylish clothing that appeals to teen girls AND their moms. This phenomenon allows Aritzia to stand out against its competitors in the crowded retail space. And the stock has been rewarded. It’s up 56.8% for the year, making it one of the shining stars of the TSX.

In its latest quarterly report, Aritzia beat expectations across the board. Net revenue increased by 18.0% to $205.4 million and gross profit margin increased to 37.4%. Adjusted EBITDA increased by 59.6% to $33.0 million.

With 90 stores in the US and Canada, as well as eCommerce, Aritzia’s trendy styles, high quality of goods, upscale boutiques and high price point for its merchandise target the most affluent shoppers. The retailer boasts 16 exclusive in-house brands, treating each as an independent label with its own unique aesthetic and showcasing each group within a specific area of the store.

An American tale

Comparable store sales increased 11.5%, marking the 16th consecutive quarter of comparable growth. One of the highlights of the quarter was Aritzia’s continued successful expansion into the US retail landscape. Sales in the US grew 40% year over year. In the next few years, the company plans to aggressively grow its locations in the US. According to Founder and CEO Brian Hill, “Our brand has a lot of momentum and we are seeing that momentum continue with our sales in the United States, but we have a long way to go. It’s a big market there in the United States.”

The US sites have been so successful in driving traffic that, according to Hill, landlords are pursuing Aritzia rather than the other way around. The company touts a strong pipeline of potential US locations through 2020.

In August, Aritzia opened a 225,000 square foot distribution center with an upgraded warehouse management system in Vancouver. This facility serves as the flagship distribution center and is a model for all distribution facilities going forward.

Web-based success

Aritzia has also seen stellar performance in its relatively new eCommerce business. The company is on track to meet or exceed its target eCommerce penetration of 25% by fiscal 2021. In the earnings call, Hill outlined five strategies for the eCommerce business. These strategies include improving the digital experience, growing the client program, developing multi-channel fulfillment capabilities, increasing digital marketing and expanding the international online business. With proper execution, Hill believes these strategies can drive brand awareness, increase eCommerce and store traffic and ultimately lead to higher conversion.

The company also plans to broaden its coverage by celebrities and digital influencers. Aritzia was recently selected by Facebook as a test brand to drive social commerce. So far, this has resulted in a 200% increase in revenues driven by social media to sales at aritzia.com.

In only two years since its IPO, Aritzia has become a darling of the TSX. And the stock shows no sign of slowing down, with the momentum of its stores in the US and Canada and the continued expansion of its eCommerce business. Now that the holiday season is upon us, Aritzia should be on everyone’s wish list.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Cindy Dye does not have a position in any stocks mentioned in this article. David Gardner owns shares of Facebook. Tom Gardner owns shares of Facebook. The Motley Fool owns shares of Facebook.

More on Investing

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

ways to boost income
Investing

Are Telus and BCE Stocks a Smart Buy for Canadian Investors?

Telus (TSX:T) and BCE (TSX:BCE) have massive dividend yields, but their shares have been quite sluggish!

Read more »

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

rising arrow with flames
Investing

2 Riskier Stocks With High Potential for Canadian Investors in November

Risky stocks such as Well Health Technologies have the potential to provide life-changing long-term returns.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »