Aritzia To Continue Opening US & Canada Boutique Stores In Fiscal 2022 Financial Report - RETAILBOSS | Retail News & Articles
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Aritzia To Continue Opening US & Canada Boutique Stores In Fiscal 2022 Financial Report

Aritzia To Continue Opening US & Canada Boutique Stores In Fiscal 2022 Financial Report

Aritzia Inc. (TSX: ATZ) Aritzia” or the “Company”), a vertically integrated, innovative design house offering Everyday Luxury online and in its boutiques, today announced its second quarter financial results for fiscal 2022 ended August 29, 2021.

Aritzia Reports Second Quarter Fiscal 2022 Financial Results (CNW Group/Aritzia Inc.)
Aritzia Reports Second Quarter Fiscal 2022 Financial Results (CNW Group/Aritzia Inc.)
Aritzia Reports Second Quarter Fiscal 2022 Financial Results (CNW Group/Aritzia Inc.)
Aritzia Reports Second Quarter Fiscal 2022 Financial Results (CNW Group/Aritzia Inc.)

“The outstanding performance of the Aritzia brand continued through the second quarter of fiscal 2022. Our net revenue growth of 75% reflects accelerated momentum across all geographies and all channels. I am particularly excited by the unprecedented pace of growth in our business in the United States, as existing and new clients enjoy our Everyday Luxury experience on Aritzia.com and in our boutiques. Our eCommerce revenue continues to surge with 49% growth on top of the 82% growth that we saw in the second quarter last year. Sales in our boutiques were exceptional with comparable sales growth of 60% from fiscal 2021, whilst exceeding pre-pandemic levels with retail comps growing 14% from fiscal 2020,” said Brian Hill, Founder, Chief Executive Officer and Chairman.

“The strength of our business across all geographies and all channels continues through the start of the third quarter. Looking ahead, expansion in the United States will be a leading driver of our growth. We are confident that eCommerce will continue to grow even on the back of 89% growth last year. Retail has surpassed our most optimistic expectations and is continuing to trend above pre-pandemic levels, now and for the foreseeable future. The performance of our new boutiques continues to outperform our expectations with significant investment focused on the United States, further fueling our brand awareness and multi-channel business. I remain incredibly grateful for the enduring loyalty of our clients and the effort of our team and their unwavering commitment to delivering Everyday Luxury,” concluded Mr. Hill.

Second Quarter Highlights

  • Net revenue increased by 74.9% to $350.1 million from Q2 2021 and 45.1% from Q2 2020 
  • eCommerce revenue increased by 48.7% to $130.4 million from Q2 2021 and 171.1% from Q2 2020, comprising 37.3% of net revenues in Q2 2022 
  • Retail revenue increased by 95.3% to $219.6 million from Q2 2021 and 13.8% from Q2 2020, achieving double digit comparable sales growth compared to pre-COVID Q2 2020 
  • Gross profit margin(1) increased to 44.6% from 35.2% in Q2 2021 and 39.6% in Q2 2020 
  • Adjusted EBITDA(1) increased to $72.9 million from $12.3 million in Q2 2021 and $36.4 million in Q2 2020 
  • Adjusted Net Income(1) of $0.39 per diluted share, compared to $0.01 per diluted share in Q2 2021 and $0.18 per diluted share in Q2 2020

(1)

Unless otherwise indicated, all amounts are expressed in Canadian dollars. The Company’s second quarter results include the consolidation of CYC Design Corporation (“CYC”) from the close of the transaction on June 25, 2021. Due to the material impact of COVID-19 on business operations in fiscal 2021 and 2022, certain references to Q2 2020 and YTD 2020 have been included where Management deems to be a more meaningful measurement of the Company’s performance. Certain metrics, including those expressed on an adjusted or comparable basis, are non-IFRS measures. See “Non-IFRS Measures including Retail Industry Metrics” and “Selected Consolidated Financial Information”.  

Net revenue increased by 74.9% to $350.1 million, compared to $200.2 million in Q2 2021. The Company has seen an unprecedented acceleration of sales in the United States, where net revenues increased by 152.0% to C$146.4 million, compared to C$58.1 million in Q2 2021. 

  • eCommerce revenue increased by 48.7% to $130.4 million, compared to $87.7 million in Q2 2021. The Company’s eCommerce business continued its momentum, building on the 82.3% increase in Q2 2021. 
  • Retail revenue increased by 95.3% to $219.6 million, compared to $112.5 millionin Q2 2021. The increase in revenue was primarily driven by the Company’s boutiques exceeding pre-pandemic revenue levels in both Canada and the United States. During the quarter, the Company opened two new boutiques in the United States. Store count at the end of Q2 totaled 104 compared to 97 boutiques at the end of Q2 2021. 

Gross profit increased by 121.8% to $156.2 million, compared to $70.4 million in Q2 2021. Gross profit margin was 44.6%, compared to 35.2% in Q2 2021. Compared to Q2 2021, the improvement in gross profit margin was primarily due to leverage on occupancy costs, lower markdowns and the strengthening of the Canadian dollar, partially offset by lower rent abatements and higher expedited freight. 

Selling, general and administrative (“SG&A”) expenses increased by 53.1% to $92.1 million, compared to $60.2 million in Q2 2021. SG&A expenses were 26.3% of net revenue, compared to 30.1% in Q2 2021. Excluding the benefit of government payroll subsidies in Q2 2021, the increase in SG&A was 33.3%. This increase was primarily due to variable selling costs associated with the increase in revenue and continued investment in talent. 

Adjusted EBITDA(1) was $72.9 million, or 20.8% of net revenue, compared to $12.3 million, or 6.1% of net revenue in Q2 2021. 

Net income (loss) was $39.8 million, compared to $(0.9) million in Q2 2021. 

Adjusted Net Income(1) was $44.4 million, compared to $1.0 million in Q2 2021. 

Adjusted Net Income(1) per diluted share was $0.39, compared to $0.01 in Q2 2021.

Cash and cash equivalentsat the end of Q2 totaled $131.8 million compared to $207.3 million at the end of Q2 2021. In the last twelve months the Company has repaid $100.0 milliondrawn from the Company’s revolving credit facility, its $75.0 million term loan and funded the acquisition of CYC for $32.9 million. The Company currently has zero drawn on its revolving credit facility.

Inventory at the end of Q2 was $181.9 million, compared to $140.9 million at the end of Q2 2021. The Company continues to maintain a healthy inventory position despite global supply chain constraints.

Capital cash expenditures (net of proceeds from leasehold inducements) were $9.3 million, compared to $10.6 million in Q2 2021. 

YTD 2022 Compared to YTD 2021

Net revenue increased by 91.6% to $597.0 million, compared to $311.5 million in YTD 2021. The Company has seen an unprecedented acceleration of sales in the United States, where net revenues increased by 172.9% to C$260.6 million, compared to C$95.5 million in YTD 2021.

Gross profit increased by 217.7% to $265.3 million, compared to $83.5 million in YTD 2021. Gross profit margin was 44.4% compared to 26.8% in YTD 2021. Compared to YTD 2021, the improvement in gross profit margin was primarily due to leverage on fixed costs, lower markdowns and the strengthening of the Canadian dollar. 

SG&A expenses increased by 56.8% to $162.5 million, compared to $103.7 million in YTD 2021. SG&A expenses were 27.2% of net revenue compared to 33.3% of net revenue in YTD 2021. Excluding the benefit of government payroll subsidies in YTD 2021, the increase in SG&A was 29.7%. This increase was primarily due to variable selling costs associated with the increase in revenue and continued investment in talent. 

Adjusted EBITDA(1) was $113.8 million, or 19.1% of net revenue, compared to $(13.0) million, or (4.2%) of net revenue in YTD 2021. 

See Also

Net income (loss) was $57.8 million, compared to $(27.3) million in YTD 2021. 

Adjusted Net Income (loss)(1) was $66.1 million, compared to $(24.0) million in YTD 2021. 

Adjusted Net Income (loss)(1) per diluted share was $0.57, compared to $(0.22) for the YTD 2021.

(1)

See “Non-IFRS Measures including Retail Industry Metrics” and “Selected Consolidated Financial Information” below, including for a reconciliation of the non-IFRS measures used in this release to the most comparable IFRS measures. See also sections entitled “How We Assess the Performance of our Business”, “Non-IFRS Measures including Retail Industry Metrics” and “Selected Consolidated Financial Information” in the Management’s Discussion and Analysis for further details concerning Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per diluted share and free cash flow including definitions and reconciliations to the relevant reported IFRS measure.

Outlook

Consistent with its communication throughout the pandemic, the Company is providing an update for the third quarter and its fiscal 2022 outlook. Third quarter net revenues are anticipated to be in the range of $350 million to $375 million, this is in spite of supply chain disruptions, labour shortages, and the ongoing indirect effects of COVID-19.  

While the supply chain disruptions are meaningful, the Company is doing its best to mitigate the impacts through its geographically diversified supply chain, strategic inventory management and the use of expedited freight. As a result of these mitigation strategies, the Company believes it has the inventory levels to deliver on or exceed its revenue targets for the remainder of the year. In addition, the Company is not immune to the current labour shortages, however, Aritzia remains competitive given its employment brand, leading compensation, and energizing workplace environments help ensure it attracts the needed talent.

Taking everything into consideration, Aritzia has increased its net revenue outlook for the remainder of fiscal 2022. The Company currently expects the following for fiscal 2022:

  • Net revenue in the range of $1.25 billion to $1.30 billion, implying an increase of 45% to 50% from fiscal 2021, up from the Company’s previous outlook of $1.15 billionto $1.20 billion. The anticipated increase is led by sustained momentum in the United States, continued growth in the Company’s eCommerce business, the strength in the Company’s retail performance, as well as contribution from its geographic expansion with:
    • seven to eight new boutiques in the United States. The Company has opened 3 new boutiques in the first half of the fiscal year including The Grove in Los Angeles and plans to open four to five new boutiques in the second half of the year including locations in Miami, Las Vegas and Nashville; and
    • six boutique expansions or repositions, including four locations in Canada and two in the United States. Three boutique expansions or repositions have already opened during the year, with three remaining in the remainder of fiscal 2022.
  • Gross profit margin to be consistent with pre-pandemic levels in fiscal 2020 in the third and fourth quarter, reflecting leverage on fixed costs and the strengthening Canadian dollar, offset by the impact of meaningfully higher expedited freight costs, increased warehousing and Distribution Centre costs and continued investment in talent to drive the Company’s expansion strategy;
  • SG&A as a percent of net revenue to increase in the third and fourth quarter, slightly above the increase in the second quarter relative to pre-pandemic levels in fiscal 2020 as accelerated investments in people, processes and technology more than offset the leverage on fixed costs.
  • Net capital expenditures in the range of $55 million to $60 million, comprised primarily of investments in boutique network growth and ongoing investments in technology and its Distribution Centre network.

In addition to Aritzia’s outlook above, Reigning Champ is expected to deliver approximately $14 million in net revenue and $3 million in Adjusted EBITDA(1) in the second half of fiscal 2022.

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