Aritzia Inc. (ATZ.TO)

Ran into self-imposed issues surrounding communication involving capex spending. Plus "lost" a fashion season. Only retailer he's comfortable owning -- big US business, very successful online. Makes and sells its own products. Reduced his portfolio position on valuation, but a bright future.

He'd loaded up, but trimmed yesterday to bring the position back in line. Still loves the outlook for the stock, one of his major weightings. US expansion going extremely well, lots of runway. Price target in 2-3 years might be $75-85. If $75, don't buy now. If $85, could buy a bit today and average in.

Following its inventory issues of a couple of years ago, ATZ has staged an impressive turnaround, certainly. EPS of 71c beat estimates of 62c; sales of $728.7M beat estimates of $698M. EBITDA of $136M beat estimates by 15%. Aritzia could meet the high end of 4Q sales guidance of 31% growth (adjusting for the extra week) to C$850 million, driven by three upsized flagship reopenings -- two in New York and one in Chicago -- along with 11 new boutiques opened. It could also achieve a comparable sales increase in the high teens. The flagships are the equivalent of 10 regular stores. Ebitda margin, which expanded 450 bps year to date, is poised to grow another 500 bps in 4Q, on higher initial mark-ons, lower clearance and as the company leverages fixed costs. Bloomberg notes consumer-transaction data indicates 4Q-to-date adjusted observed US sales are tracking well above consensus, supporting guidance for a 25% rise, with one less week this year vs. last. We would be quite fine moving to a full position along with the strong results, guidance and positive momentum.
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He doesn't have a great feel for retailers but it screens like something he would own and is doing the right things. It is a great company with great financials. The problem is that they go in and out of favour since fashion is fickle. If owned, stay long.

One of the best retailers. Recent correction was a major buying opportunity. Payback on new store openings is phenomenal, very high ROIC. Just scratching the surface on digital offerings. Innovation must offset volatility of consumer demand, and they've done a good job on this.

Huge growth runway in US. Tough year, but turned things around. Earnings are improving; revenue and sales are starting to accelerate. Not a perfect proxy, but Google Black Friday trends on ATZ are at new highs. About 5% of his global growth fund.

Yes, fashion can be tricky. That's why he likes fashion companies that don't have a signature "look". GPS in the 90's and GOOS have faced this issue. Whereas ATZ has a broad product portfolio; goal is highest quality at best price point.

Very strong brand name with growing footprint in USA. Excellent price to value proposition on the stock markets. Recent meeting with CEO very positive. Share price below pre Covid-19 levels. Expecting 8-10 new stores in the US annually. Earnings projected to grow with expanded margins. EPS growth also projected to rise as more sales roll in. Would recommend to long term shareholders. 

Nice run, but still likes it. Quarterly results very strong. Company's seeing softness on the Canadian side. Very strong growth in the US. Opening new stores; upping marketing spend to facilitate that, and some investors didn't approve so stock pulled back. Long-term growth profile in place. Areas of growth further out include beyond NA and e-commerce.

Fundamental things precipitated recent downdraft. Yesterday's chart showed fair bit of institutional selling. When you see that, typically more downside. Wouldn't be surprised to see $37. 

Chart shows a longer-term uptrend, so he doesn't mind accumulating. However, context is 4-year cycle will peak in first half of 2025. There will be a better chance to invest once we're through that.

EPS of 21c beat estimates of 14.8c. Revenue of $615.6M beat estimates of $583.4M. Guidance was fractionally lower, probably due to the company simply being conservative. Still, Aritzia could surpass full-year guidance for sales to rise 9-11% and consensus' 11% growth, aided by three flagship openings in 2H -- SoHo and Fifth Avenue in New York City and one in Chicago -- which the company said was the equivalent of opening 10 regular stores. New US stores' sales exceeded hurdle rates in 2Q, comprising half the 15.3% total sales lift. Ebitda margin may also beat management's outlook for 400-450 bps and analysts' 478 bps for the full year, with further upside in 2025, mostly from additional mark-on opportunities and as growth from new and repositioned stores leverage fixed costs. Balanced inventories also support margins, minimizing markdown risk. The quarter itself was very solid, but without upped guidance investors were disappointed after its big run up (still up 71% YTD). But nothing really changes here. The problems the company had (largely inventory related) have been solved, and growth continues nicely overall. We would remain buyers. 
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Gotten mojo back. Admires management, especially as it's fashion (and women's fashion, to boot). Gets his nod over, say, a LULU.

It has turned around the excess inventory situation from last year. Its store square footage is expanding by 25%. Analysts have 32% per share growth pegged for next year

Excellent retailer in a notoriously difficult sector. Doing really well. A good name to consider adding for consumer discretionary exposure. Be mindful of headwinds such as Canadian consumer retrenching; some retailers navigate those macro headwinds easily.

Can be volatile, but they have long-term unit growth potential in the US. Are doing well with new stores there.

His models show that it has 10-15 years of growth to becoming a global, dominant brand. Penetrating the US, opening up in Europe. Feedback that it's not as cool as it was. His target price is close to $60, so you could still buy today.

The story is not same-store sales growth, it's number of stores in the future.