Shares of women’s clothing retailer Aritzia (TSX:ATZ) have really blasted off so far this year, now up more than 68% year to date. Indeed, the latest spike came courtesy of an incredible quarterly earnings report that blew past expectations. Undoubtedly, Aritzia has made it a habit of blasting off after wonderful quarters. If it can continue to do so, shares may just power their way to highs not seen since the boom of late-2021 and early-2022.
In any case, the mid-cap apparel play stands out as a potential buy on the way up as the company continues executing on its promising growth story.
If the firm can thrive in the U.S. over the next three years, I’d not be shocked if it continues powering high double-digit sales growth numbers for many years, even decades to come. And though recent quarters suggest the company’s early expansion efforts in the U.S. market are going to be a successful one, I’d argue that it could take a number of years before the management team has enough confidence to really take its U.S. growth to the next level with an acceleration in new store openings.
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Slow and steady could win the race
Indeed, it’s only prudent to take more of a slow-and-steady move into a new market. Any glimmers of success in the earlier days are no guarantee of success over an extended time horizon. Additionally, fashion demand can fluctuate quite violently based on where we are in the current market cycle.
At the end of the day, though incredibly fashionable in recent weeks and quarters, Aritzia’s wears can experience soft demand if discretionary spending is at a low point. Just look at the turbulence experienced between 2022 and 2023!
As you may know, fashions can be in one day and out the next. Given the unpredictable nature of various fashionable trends, I’d argue that it’s wise not to get a tad ahead of one’s skis, especially when it comes to new markets that have new tastes and less brand awareness.
A smart growth strategy as Artizia eyes more U.S. growth
Personally, I think Aritzia could easily level up its brand marketing south of the border. And once it does, Aritzia’s growth may be tough to stop.
In any case, I view Aritzia as a great company with excellent risk managers who can grow the firm in a rather prudent way.
Following a pretty solid quarterly showing for Aritzia, the company’s CEO Jennifer Wong sounded pretty confident in her firm’s voyage in the States: “After 40 years in business, we’re very well known and loved in Canada and we’re well on our way to replicating that love in the United States,”
These are upbeat comments to get behind as a new long-term growth investor. Wong also highlighted her firm’s “opportunity to grow” the brand through various means. With such a brilliant top boss leading the firm, I’d not dare bet against ATZ stock after its recent surge.
Bottom line
Though not every new boutique opened in a high-traffic U.S. city is bound to be a profound hit, I do think that Aritzia’s pace of expansion is a sustainable one. And if lower interest rates act as a shot in the arm of the consumer (in Canada and the U.S.), perhaps it’s not so far-fetched to think that shares of ATZ could breach new highs ($60 per share) over the next 18 months or so.
At over 67 times trailing price-to-earnings, the stock looks expensive, but relative to the growth and fading of macro headwinds that could be on the horizon, perhaps ATZ stock is worthy of the radar.
