Could Aritzia Stock Rebound in 2025?

Down 18% from all-time highs, Aritzia stock is quite cheap and trades at a sizeable discount to consensus price target estimates.

| More on:
Women's fashion boutique Aritzia is a top stock to buy in September 2022.

Source: Getty Images

Valued at a market cap of $5.5 billion, Aritzia (TSX:ATZ) stock went public in October 2016. In the last eight years, the TSX stock has returned 178% to shareholders, outpacing the broader market returns of 129%. Founded over 40 years ago, Aritzia designs and sells apparel and accessories in Canada, the U.S., and other international markets. It sells products under multiple brands like Wilfred, Super World, TNA, and Babaton.

Despite its outsized gains, ATZ stock trades 18% below all-time highs, allowing you to gain exposure to a quality growth company at a lower multiple. Let’s see if Aritzia can reclaim its all-time highs and continue to beat the broader markets in 2025 and beyond.

A strong performance in fiscal Q2 of 2025

In the fiscal second quarter (Q2) of 2025 (ended in September), Aritzia reported revenue of $616 million, an increase of 15% year over year. Its gross margins expanded by 520 basis points to 40.2%, enabling gross profits to grow by 33% to $247 million. Focusing on cost savings allowed Aritzia to expand EBITDA (earnings before interest, tax, depreciation, and amortization) by 500 basis points to 9%. Moreover, adjusted EBITDA grew by 161% to $55 million in the September quarter.

Aritzia emphasized that strong sales in the United States drove top-line growth for the company in Q2. Revenue grew by 24% year over year to $345 million in the U.S., powered by strong performance across retail and e-commerce segments. With 56 boutiques in the U.S., the region will remain a key driver of sales in the upcoming decade.

This was offset by weak performance in Canada, where sales growth was much lower at 6%, indicating soft consumer spending and a challenging macro environment.

Interestingly, retail sales grew by 18% to $426 million, while e-commerce sales rose 10% to $190 million year over year. Aritzia opened three new boutiques in Q2 and plans to open nine to ten new boutiques over the next six months.

The bull case for ATZ stock

Aritzia is banking on opening retail stores to grow its revenue going forward. Further, launching a new website and a mobile application over the next 12 months should boost higher-margin online sales.

The company projects fiscal Q3 sales to range between $675 million and $700 million. At the midpoint estimate, it expects to grow fiscal 2025 sales by 10% year over year to $2.56 billion. These estimates suggest that Aritzia’s sales will grow between 15% and 20% year over year in Q4.

According to analyst estimates, Aritzia is positioned to grow

  • Revenue from $2.3 billion in fiscal 2024 to $3.2 billion in fiscal 2027;
  • Earnings per share from $0.92 in fiscal 2024 to $3 in fiscal 2027; and
  • Free cash flow from $182 million in 2024 to $575 million in 2026.

Priced at 10 times forward free cash flow, Aritzia stock is really cheap. Between fiscal 2024 and fiscal 2027, it will invest close to $600 million in capital expenditures, which should drive future cash flow growth.

Analysts remain bullish on ATZ stock and expect it to surge close to 20% over the next 12 months.

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.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Aritzia. The Motley Fool has a disclosure policy.

More on Stock Market

Hourglass and stock price chart
Stock Market

This Stock Could Be the Best Investment of the Decade

Brookfield Business Partners: A private equity giant delivering 30% IRR and three times returns. See why this undervalued TSX stock…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, January 7

TSX benchmark could face another day of cautious trading as investors weigh mixed commodity prices against ongoing political and economic…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, January 6

TSX investors could react to the speculative report of Prime Minister Justin Trudeau’s expected resignation as political uncertainty may weigh…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, January 3

Firm commodity prices could continue to lift the TSX Composite benchmark at the open today.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, January 2

With a solid 18% gain in 2024, the TSX Composite posted its best performance since 2021.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, December 31

Despite a 4% decline so far in December, the TSX Composite Index still trades with strong 17.5% year-to-date gains.

Read more »

A plant grows from coins.
Stock Market

Key Sectors Set to Drive Growth in 2025

Sectors such as information technology and communication services are expected to drive earnings growth in 2025.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, December 30

Despite declining by 3.3% so far in December, the TSX Composite still trades with solid 18.3% year-to-date gains.

Read more »