Aritzia stock skyrockets as much as 21% amid strong U.S. sales growth

·3-min read

Shares of Aritzia Inc. (ATZ.TO) skyrocketed as much as 21 per cent in early trading Thursday after the clothing retailer posted strong sales results – particularly in the U.S. – that surpassed expectations.

While many retailers struggle with supply chain issues, labour shortages and the impact of the Omicron variant, Aritzia is thriving. The retailer, which reported its financial results after markets closed on Wednesday, saw its adjusted profit more than double in its most recent quarter, reaching $71.2 million, up from $32.2 million during the same time last year.

Overall sales increased 63 per cent to $453.3 million, up from $278.3 million last year. Analysts had expected sales to hit $368 million, according to data from Refinitiv.

The strong sales growth came as demand in the United States continues to grow at what Aritzia chief executive Brian Hill called "an unprecedented pace." Sales in the U.S. surged in the most recent quarter, with net revenue increasing 126 per cent from last year to US$159 million. U.S. sales now make up 44 per cent of Aritzia's total net revenue, up from 33 per cent in the previous quarter.

The company also announced it will repurchase and cancel up to five per cent of its shares through a Normal Course Issuer Bid (NCIB).

Aritzia's stock was trading at $58.50 as of 11:35 a.m. ET, an increase of more than 20 per cent compared to Wednesday's close.

Aritzia's stock surged on Thursday after the company posted its third quarter results.
Aritzia's stock surged on Thursday after the company posted its third quarter results.

"As we set our sights on the future, we have extraordinary opportunities ahead of us," Hill said on a conference call with analysts on Wednesday.

"We are working hard to deliver on significant demand increases while managing the global headwinds of the pandemic, supply chain disruptions, labour shortages and health and safety protocols."

The company also updated its full-year outlook on Wednesday. It now expects sales to reach between $1.425 billion and $1.45 billion, an increase of between 65 per cent and 70 per cent compared to 2021, and up from a previous outlook of between $1.25 billion and $1.3 billion.

While Aritzia is grappling with headwinds due to the pandemic's resurgence, including "meaningful supply chain disruptions taking shape in the form of factory closures, reduced production efficiency and ongoing shipping delays," Hill says the company is still well-positioned for the launch of its new spring collection next month.

"As we set our sights on fiscal 2023, our business has never been stronger or better positioned for growth," he said.

BMO Capital Markets analyst Stephen MacLeod says the U.S. market will be a key growth engine for Aritzia.

"While Aritzia has been in the U.S. since 2007, recent demand has been unprecedented," MacLeod wrote in a note to clients.

"New boutique openings are focused on new markets (i.e., Tampa Bay, Nashville, Las Vegas, Atlanta, Phoenix, etc.), providing a long runway for network expansion... as well as complementary e-commerce growth when Aritzia opens in new markets (e-commerce doubles in markets after stores are opened)."

Clarification: This story has been updated to clarify currency denominations for U.S. sales.

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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