Shares of women’s clothing retailer Aritzia (TSX:ATZ) have been hot of late, and they could continue to add to recent gains going into year’s end as the firm moves on with its impressive comeback.
Undoubtedly, you don’t need to be heavy in the generative artificial intelligence (gen AI) trade to profit this year. As a low-tech play with plenty of room for growth, I continue to view ATZ stock as a Canadian growth play that’s worthy of a considerable premium to the peer group.
Aritzia stock is getting hot again. But will it last?
After a strong finish to last week, with the stock soaring more than 3% on Friday’s upbeat session for the broader TSX Index, it seems like Aritzia has evolved to become one of Canada’s more intriguing momentum plays. The company is fresh off a fantastic quarter, and though same-store sales growth trends could fluctuate as Canada’s economy looks to wobble just a bit, I continue to think that the long-term trajectory remains intact.
The company made it through a pretty turbulent environment for the consumer. With hot inflation and consumers that are becoming more inclined to tighten their belts, it’s quite remarkable that Aritzia has been able to adapt effectively by making moves to improve its new product mix while keeping inventories in check.
Additionally, Aritzia hasn’t been leaning too heavily on the discount rack, at least compared to most other lower-end retail plays. Over the long haul, I believe that the Aritzia brand is a source of strength that can help the firm continue finding success in the virtually untapped U.S. market.
Could the U.S. market jolt growth over the next three years?
Over the next few years, I view the U.S. market expansion as a massive growth driver for the firm. Undoubtedly, macro headwinds have weighed of late, but once inflation dies down, rates fall, and consumers are ready to splurge again, Aritzia stands out as one of those discretionaries that could boom again. Perhaps new all-time highs are not so out of sight after all!
Despite the recent rally, shares are still down around 40% from their peak levels hit in the earlier innings of 2022. Only time will tell where the rally goes from here.
Regardless, I’m a fan of the brand and the glimmers of brilliance the firm has seen during these rough times. In any case, the U.S. expansion seems to be a long-term growth driver as Aritzia looks to take a page out of the playbook of another legendary Vancouver-based apparel play.
The Foolish bottom line on ATZ stock
Things are looking bright for Aritzia going into the spring season. Though I’m no chaser of hot stocks, I still think there’s great value to be had in shares of ATZ at current levels.
At 19.2 times forward price to earnings (P/E), I view ATZ as one of those stocks that ought to be thrown into the growth-at-a-reasonable price basket. In a market that’s becoming overheated, it’s such low-cost growth plays that could continue to prosper! All considered, Aritzia looks dressed for success as it looks to move toward $50 over the coming quarters.
