VANCOUVER, BC, Jan. 10,
2024 /CNW/ - Aritzia Inc. (TSX: ATZ) ("Aritzia", the
"Company", "we" or "our"), a design house with an innovative global
platform offering Everyday Luxury online and in its boutiques,
today announced its financial results for the third quarter ended
November 26, 2023 ("Q3 2024").
![Aritzia (CNW Group/Aritzia Inc.(Communications)) Aritzia (CNW Group/Aritzia Inc.(Communications))](https://mma.prnewswire.com/media/2315905/Aritzia_Inc__Communications__Aritzia_Reports_Third_Quarter_Fisca.jpg)
"Aritzia delivered third quarter net revenue of $654 million, an increase of 5% on top of
outstanding growth of 38% in the third quarter of Fiscal 2023 and
63% in the third quarter of Fiscal 2022. Although the consumer
environment remains mixed, we generated sales growth across all of
our geographies and channels, as clients responded well to our new
styles and outerwear offering," said Jennifer Wong, Chief Executive Officer. "As
expected, we saw sequential margin improvement in the third
quarter, and we made ongoing progress in executing against our
Fiscal 2024 priorities. Our new Toronto area distribution centre successfully
ramped to accommodate record volume and we further improved our
inventory position."
"As we continue to anniversary two years of unprecedented
growth, resulting in a 33% three-year net revenue CAGR in Q3 of
Fiscal 2024, we remain focused on investing in the scalability of
our business and setting the stage for our next level of
anticipated growth. Looking ahead, we expect to launch Spring 2024
with an improved product assortment and inventory position. We are
also accelerating our real estate expansion strategy into
Fiscal 2025 and diligently working to increase our eCommerce
momentum through strategic investments in leadership, digital
marketing and technology," added Ms. Wong.
Third Quarter Highlights
- Net revenue increased 4.6% from Q3
20231 to $653.5
million, with comparable sales growth2 of
0.5%
- United States net
revenue increased 4.2% from Q3 2023 to $326.6 million, comprising 50.0% of net revenue
in Q3 2024
- Retail net revenue increased 4.2% from Q3 2023 to
$441.1 million
- eCommerce net revenue increased 5.5% from Q3 2023 to
$212.5 million, comprising 32.5% of
net revenue in Q3 2024
- Gross profit margin2 decreased 180 bps to
41.5% from 43.3% in Q3 2023
- Selling, general and administrative expenses increased
14.4% from Q3 2023 to $187.4
million
- Net income decreased 39.1% from Q3 2023 to $43.1 million
- Adjusted EBITDA2 decreased 23.3% from Q3 2023
to $91.8 million
- Net income per diluted share of $0.38 per share, compared to $0.61 per share in Q3 2023
- Adjusted Net Income per Diluted Share2
of $0.47 per share, compared to
$0.67 per share in Q3 2023
Third Quarter Results Compared to Q3 2023
(Unaudited, in
thousands of Canadian dollars, unless otherwise
noted)
|
Q3
2024
|
Q3
2023
|
Change
|
|
|
% of net
revenue
|
|
% of net
revenue
|
%
|
% pts
|
Retail net
revenue
|
$
441,056
|
67.5 %
|
$
423,224
|
67.8 %
|
4.2 %
|
|
eCommerce net
revenue
|
212,468
|
32.5 %
|
201,391
|
32.2 %
|
5.5 %
|
|
Net revenue
|
$
653,524
|
100.0 %
|
$
624,615
|
100.0 %
|
4.6 %
|
|
|
|
|
|
|
|
|
Gross profit
|
$
270,937
|
41.5 %
|
$
270,663
|
43.3 %
|
0.1 %
|
(1.8) %
|
|
|
|
|
|
|
|
Selling, general and
administrative ("SG&A")
|
$
187,373
|
28.7 %
|
$
163,737
|
26.2 %
|
14.4 %
|
2.5 %
|
|
|
|
|
|
|
|
Net income
|
$
43,093
|
6.6 %
|
$
70,728
|
11.3 %
|
(39.1) %
|
(4.7) %
|
|
|
|
|
|
|
|
Net income per diluted
share
|
$
0.38
|
|
$
0.61
|
|
(37.7) %
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA2
|
$
91,763
|
14.0 %
|
$
119,618
|
19.2 %
|
(23.3) %
|
(5.2) %
|
|
|
|
|
|
|
|
Adjusted Net Income per
Diluted Share2
|
$
0.47
|
|
$
0.67
|
|
(29.9) %
|
|
Net revenue increased by 4.6% to $653.5 million, compared to $624.6 million in Q3 2023. This is on top of
strong net revenue growth over the last two years of 37.8% in Q3
2023 and 62.9% in Q3 2022, resulting in a three year compound
annual growth rate ("CAGR") of 32.9%. Comparable sales
growth2 was 0.5%, compared to 22.8% in Q3 2023. In
the United States, net revenue
increased by 4.2% to $326.6 million,
compared to $313.5 million in Q3
2023. Net revenue in Canada
increased by 5.1% to $326.9 million,
compared to $311.1 million in Q3
2023.
- Retail net revenue increased by 4.2% to
$441.1 million, compared to
$423.2 million in Q3 2023. The
increase was driven by strong performance of the Company's new and
repositioned boutiques, which continue to generate
better-than-expected results. Boutique count3 at
the end of Q3 2024 totaled 117 compared to 113 boutiques at the end
of Q3 2023.
- eCommerce net revenue increased by 5.5% to $212.5 million, compared to $201.4 million in Q3 2023, driven by growth in
Canada as well as the Company's
digital warehouse sale in Q3 2024.
Gross profit increased by 0.1% to $270.9 million, compared to $270.7 million in Q3 2023. Gross profit
margin2 was 41.5%, compared to 43.3% in Q3 2023. The
decrease in gross profit margin of approximately 180 bps was
primarily driven by higher markdowns to help optimize the Company's
inventory levels and pre-opening lease amortization costs for
flagship boutiques. These impacts were partially offset by lower
warehousing and freight costs.
SG&A expenses increased by 14.4% to $187.4 million, compared to $163.7 million in Q3 2023. SG&A expenses were
28.7% of net revenue, compared to 26.2% in Q3 2023. The increase in
SG&A expenses was driven by investments in talent made through
the end of Fiscal 2023, marketing initiatives and support office
expansion to help support the Company's growth.
Net income was $43.1
million, a decrease of 39.1% compared to $70.7 million in Q3 2023, primarily attributable
to the factors described above.
Net income per diluted share was $0.38 per share, a decrease of 37.7% compared to
$0.61 per share in Q3 2023.
Adjusted EBITDA2 was $91.8 million or 14.0% of net
revenue2, a decrease of 23.3% compared to $119.6 million or 19.2% of net
revenue1 in Q3 2023.
Adjusted Net Income2 was $52.7 million, a decrease of 31.2% compared to
$76.6 million in Q3 2023.
Adjusted Net Income per Diluted
Share2 was $0.47
per share, a decrease of 29.9% compared to $0.67 per share in Q3 2023.
Cash and cash equivalents at the end of Q3 2024 totaled
$140.8 million compared to
$131.9 million at the end of Q3 2023,
with strong operating cash flows funding the repayment of the
$100 million drawn on the Company's
revolving credit facility from the end of Q2 2024 and the Company's
capital investments.
On October 27, 2023, the Company
refinanced its revolving credit facility, increasing the limit from
$175.0 million to $300.0 million and extending the term to
October 27, 2026.
Inventory at the end of Q3 2024 was $397.0 million, a decrease of 21.9% compared to
$508.4 million at the end of Q3
2023. The Company is pleased that the inventory balance
continues to normalize and expects inventory levels to be optimized
by the end of Fiscal 2024.
Capital cash expenditures (net of proceeds from lease
incentives)2 were $41.4
million in Q3 2024, compared to $26.4
million in Q3 2023. The increase is primarily due to capital
investments in new boutiques, expanded or repositioned boutiques,
distribution centers and support office expansion.
YTD 2024 Compared to YTD 2023
(unaudited, in
thousands of Canadian dollars, unless otherwise
noted)
|
YTD
2024
|
YTD
2023
|
Change
|
|
|
% of net
revenue
|
|
% of net
revenue
|
%
|
% pts
|
Retail net
revenue
|
$
1,130,640
|
68.5 %
|
$
1,062,678
|
68.2 %
|
6.4 %
|
|
eCommerce net
revenue
|
519,740
|
31.5 %
|
495,370
|
31.8 %
|
4.9 %
|
|
Net revenue
|
$
1,650,380
|
100.0 %
|
$
1,558,048
|
100.0 %
|
5.9 %
|
|
|
|
|
|
|
|
|
Gross profit
|
$
637,734
|
38.6 %
|
$
671,832
|
43.1 %
|
(5.1) %
|
(4.5) %
|
|
|
|
|
|
|
|
SG&A
|
$
511,948
|
31.0 %
|
$
431,170
|
27.7 %
|
18.7 %
|
3.3 %
|
|
|
|
|
|
|
|
Net income
|
$
54,573
|
3.3 %
|
$
150,250
|
9.6 %
|
(63.7) %
|
(6.3) %
|
|
|
|
|
|
|
|
Net income per diluted
share
|
$
0.48
|
|
$
1.30
|
|
(63.1) %
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA2
|
$
144,511
|
8.8 %
|
$
271,827
|
17.4 %
|
(46.8) %
|
(8.6) %
|
|
|
|
|
|
|
|
Adjusted Net Income per
Diluted Share2
|
$
0.59
|
|
$
1.46
|
|
(59.6) %
|
|
|
|
|
|
|
|
|
Net revenue increased by 5.9% to $1.7 billion, compared to $1.6 billion in YTD 2023 with comparable sales
growth (decline)2 of (0.2)%. Results continued to be
driven by performance in the United
States, where net revenue increased by 9.4% to $857.4 million, compared to $783.5 million in YTD 2023. In Canada, net revenue increased by 2.4% to
$793.0 million, compared to
$774.5 million in YTD 2023.
- Retail net revenue increased by 6.4% to $1.13 billion, compared to $1.06 billion in YTD 2023. The increase in
revenue was led by strong performance of our new boutiques in
the United States, partially
offset by softer comparable sales.
- eCommerce net revenue increased by 4.9% to $519.7 million, compared to $495.4 million in YTD 2023.
Gross profit decreased by 5.1% to $637.7 million, compared to $671.8 million in YTD 2023. Gross profit margin
was 38.6% compared to 43.1% in YTD 2023. The 450 bps decrease in
gross profit margin was primarily due to normalized markdowns,
inflation in product costs, temporary warehousing costs related to
inventory management, pre-opening lease amortization costs for
boutiques and our new distribution centre, and foreign currency
headwinds. These impacts were partially offset by lower expedited
freight costs.
SG&A expenses increased by 18.7% to $511.9 million, compared to $431.2 million in YTD 2023. SG&A expenses
were 31.0% of net revenue compared to 27.7% in YTD 2023. The
increase in SG&A expenses was primarily due to investments in
retail wages and support office labour made through the end of
Fiscal 2023, as well as support office expansion, distribution
centre project costs and other initiatives to help support the
Company's growth.
Net income was $54.6
million, a decrease of 63.7% compared to $150.3 million in YTD 2023, primarily
attributable to the factors described above.
Net income per diluted share was $0.48, a decrease of 63.1%, compared to
$1.30 in YTD 2023.
Adjusted EBITDA2 was $144.5 million, or 8.8% of net revenue, a
decrease of 46.8%, compared to $271.8
million, or 17.4% of net revenue in YTD 2023.
Adjusted Net Income2 was $67.3 million, a decrease of 59.9%, compared to
$168.1 million in YTD 2023.
Adjusted Net Income per Diluted
Share2 was $0.59, a
decrease of 59.6%, compared to $1.46
in YTD 2023.
Capital cash expenditures (net of proceeds from
lease incentives)2 were $113.6 million, compared to $73.5 million in YTD 2023. The increase is
primarily due to capital investments in new boutiques, expanded or
repositioned boutiques, distribution centers and support office
expansion.
Outlook
Based on quarter-to-date trends, Aritzia expects net revenue in
the range of $670 million to
$690 million in the fourth quarter of
Fiscal 2024, including the addition of approximately $30 million from the 53rd week. This represents
growth of approximately 5% to 8% on top of strong growth of
44% in the fourth quarter last year and 66% in the fourth quarter
of Fiscal 2022. The Company expects gross profit margin to be flat
to slightly up and SG&A as a percent of net revenue to increase
approximately 250 bps for the fourth quarter of Fiscal 2024
compared to the fourth quarter of Fiscal 2023.
Aritzia expects the following for Fiscal 2024:
- Net revenue in the range of $2.32
billion to $2.34 billion,
representing growth of approximately 6% to 7% from Fiscal 2023
including the 53rd week, compared to the Company's
previous outlook of $2.25 billion to
$2.35 billion. This includes the
contribution from retail expansion in the
United States with six new boutiques and three boutique
expansions. Five new boutiques as well as the three boutique
expansions have already opened. Compared to the Company's prior
outlook of eight new boutiques and four boutique expansions, two
new boutiques are now expected to open in Fiscal 2025.
- Gross profit margin to decrease by approximately 300 bps
compared to Fiscal 2023, reflecting inflationary pressures,
normalized markdowns, temporary warehousing costs, and pre-opening
lease amortization, partially offset by lower expedited freight
costs.
- SG&A as a percent of net revenue to increase by
approximately 300 bps compared to Fiscal 2023, driven by the
annualization of investments in support office labour and retail
wage inflation, as well as distribution centre project costs.
- Capital cash expenditures (net of proceeds from lease
incentives)2 of approximately $180 million. This includes approximately
$100 million related to investments
in new, repositioned and expanded boutiques expected to open in
Fiscal 2024 and Fiscal 2025, as well as $80
million primarily related to our distribution centres and
support office expansion. The reduction compared to the prior
outlook of approximately $220 million
primarily reflects the timing shift of improvements to the
Company's distribution centre in Columbus, Ohio and certain store openings into
Fiscal 2025 from Fiscal 2024.
The foregoing outlook is based on management's current
strategies and may be considered forward-looking information under
applicable securities laws. Such outlook is based on estimates and
assumptions made by management regarding, among other things,
general economic and geopolitical conditions and the competitive
environment. This outlook is intended to provide readers
management's projections for the Company as of the date of this
press release. Readers are cautioned that actual results may vary
materially from this outlook and that the information in the
outlook may not be appropriate for other purposes. See also the
"Forward-Looking Information" section of this press release and the
"Forward-Looking Information" and "Risk Factors" sections of our
Management's Discussion & Analysis for the third quarter of
Fiscal 2024 dated January 10, 2024
(the "Q3 2024 MD&A"), for Fiscal 2023 dated May 2, 2023 (the "Fiscal 2023 MD&A") and the
Company's annual information form for Fiscal 2023 dated
May 2, 2023 (the "Fiscal 2023
AIF").
In addition, a discussion of the Company's long-term financial
plan is contained in the Company's press release dated October 27, 2022, "Aritzia Presents its Fiscal
2027 Strategic and Financial Plan, Powering Stronger". This press
release is available on the System for Electronic Document Analysis
and Retrieval + ("SEDAR+") at www.sedarplus.ca and on our website
at investors.aritzia.com.
Normal Course Issuer Bid
The Company intends to file with the Toronto Stock Exchange
("TSX") a notice of intention to commence a normal course issuer
bid ("NCIB") for its subordinate voting shares ("Shares") for a
one-year period (the "2024 NCIB"). If accepted by the TSX, the
Company would be permitted under the 2024 NCIB to purchase for
cancellation, through the facilities of the TSX and/or alternative
Canadian trading systems, up to 5% of the public float (calculated
in accordance with TSX rules) of the Company's issued and
outstanding Shares during the 12 months following such TSX
acceptance. Subject to TSX acceptance, Aritzia currently
anticipates the 2024 NCIB commencing on or about January 22, 2024, and in any event, at least two
trading days after TSX acceptance of the 2024 NCIB. The exact
amount of Shares subject to the 2024 NCIB will be determined on the
date of acceptance of the notice of intention by the TSX.
All Shares purchased by the Company under the 2024 NCIB will be
purchased at prevailing market prices in accordance with the rules
and policies of the TSX and applicable securities laws. The actual
number of Shares that may be purchased, and the timing of any such
purchases, will be determined by the Company, subject to the
applicable terms and limitations of the 2024 NCIB (including any
automatic purchase plan adopted in connection therewith). All
Shares acquired by the Company under the 2024 NCIB will be
cancelled.
The 2024 NCIB will terminate one year after its commencement, or
earlier if the maximum number of Shares under the 2024 NCIB have
been purchased. Although the Company presently intends to purchase
Shares under its 2024 NCIB, there can be no assurances that any
such purchases will be completed. The Company may also enter into
an automatic purchase plan with a designated broker during the
NCIB. The automatic purchase plan would allow for purchases by the
Company of Shares during certain predetermined blackout periods,
subject to certain parameters and approval of the TSX.
Aritzia's Board of Directors believes that an NCIB represents an
appropriate and desirable use of its available cash, after
prioritizing investments in boutiques and strategic infrastructure,
to increase shareholder value and is in the best interest of
Aritzia, including its shareholders. As at November 26, 2023, the Company had approximately
$140.8 million of cash and cash
equivalents.
The Company's prior NCIB commenced on January 20, 2023 and expires on January 19, 2024 (the "2023 NCIB"). Between
January 20, 2023 and January 9, 2024, the Company repurchased a total
of 1,089,641 Shares for cancellation at an average price of
$27.52 per Share for total cash
consideration of $30.0 million under
the 2023 NCIB.
Conference Call Details
A conference call to discuss the Company's third quarter results
is scheduled for Wednesday, January 10,
2024, at 1:30 p.m. PT /
4:30 p.m. ET. To participate, please
dial 1-800-319-4610 (North America
toll-free) or 1-416-915-3239 (Toronto and overseas long-distance). The call
is also accessible via webcast at
https://investors.aritzia.com/events-and-presentations/. A
recording will be available shortly after the conclusion of the
call. To access the replay, please dial 1-855-669-9658 and the
access code 0600. An archive of the webcast will be available on
Aritzia's website.
About Aritzia
Aritzia is a design house with an innovative global platform. We
are creators and purveyors of Everyday Luxury, home to an extensive
portfolio of exclusive brands for every function and individual
aesthetic. We're about good design, quality materials and timeless
style — all with the wellbeing of our People and Planet in
mind.
Founded in 1984 in Vancouver,
Canada, we pride ourselves on creating immersive, highly
personalized shopping experiences at aritzia.com and in our 115+
boutiques throughout North America
— for everyone, everywhere.
Our Approach
Aritzia means style, not trend, and quality over everything. We
treat each in-house label as its own atelier, united by premium
fabrics, meticulous construction and an of-the-moment point of
view. We handpick fabrics from the world's best mills for their
feel, function and ability to last. We obsess over proportion, fit
and that just-right silhouette. From hand-painted prints to the art
of pocket placement, our innovative design studio considers and
reconsiders each detail to create essentials you'll reach for
again, and again, and again.
Everyday Luxury. To Elevate Your
World.â„¢
Comparable Sales and Comparable
Sales Growth (Decline)
Comparable sales and comparable sales growth (decline) are
retail industry metrics used to explain our total combined revenue
growth (decline) in eCommerce and established boutiques.
Non-IFRS Measures and Retail
Industry Metrics
This press release makes reference to certain non-IFRS measures
and certain retail industry metrics. These measures are not
recognized measures under IFRS, do not have a standardized meaning
prescribed by IFRS, and are therefore unlikely to be comparable to
similar measures presented by other companies. Rather, these
measures are provided as additional information to complement those
IFRS measures by providing further understanding of our results of
operations from management's perspective. Accordingly, these
measures should not be considered in isolation nor as a substitute
for analysis of our financial information reported under IFRS. We
use non-IFRS financial measures including "EBITDA", "Adjusted
EBITDA", and "Adjusted Net Income"; non-IFRS ratios including
"Adjusted Net Income per Diluted Share", "Adjusted EBITDA as a
percentage of net revenue", and "Adjusted Net Income as a
percentage of net revenue"; and capital management measures
including "capital cash expenditures (net of proceeds from lease
incentives)" and "free cash flow." This press release also
makes reference to "gross profit margin" as well as "comparable
sales" and "comparable sales growth (decline)", which are commonly
used operating metrics in the retail industry but may be calculated
differently by other retailers. Gross profit margin, comparable
sales and comparable sales growth (decline) are considered
supplementary financial measures under applicable securities laws.
These non-IFRS measures and retail industry metrics are used to
provide investors with supplemental measures of our operating
performance and thus highlight trends in our core business that may
not otherwise be apparent when relying solely on IFRS measures. We
believe that securities analysts, investors and other interested
parties frequently use non-IFRS measures and retail industry
metrics in the evaluation of issuers. Our management also uses
non-IFRS measures and retail industry metrics in order to
facilitate operating performance comparisons from period to period,
to prepare annual operating budgets and forecasts and to determine
components of management compensation. Certain information about
non-IFRS financial measures, non-IFRS ratios, capital management
measures and supplementary financial measures is found in the Q3
2024 MD&A and is incorporated by reference. This information is
found in the sections entitled "How We Assess the Performance of
our Business", "Non-IFRS Measures and Retail Industry Metrics" and
"Selected Financial Information" of the Q3 2024 MD&A which is
available under the Company's profile on SEDAR+ at
www.sedarplus.ca. Reconciliations for each non-IFRS financial
measure can be found in this press release under the heading
"Selected Financial Information".
Forward-Looking
Information
Certain statements made in this document may constitute
forward-looking information under applicable securities laws.
Statements containing forward-looking information are neither
historical facts nor assurances of future performance, but instead,
provide insights regarding management's current expectations and
plans and allows investors and others to better understand the
Company's anticipated business strategy, financial position,
results of operations and operating environment. Readers are
cautioned that such information may not be appropriate for other
purposes. Although the Company believes that the forward-looking
statements are based on information, assumptions and beliefs that
are current, reasonable, and complete, such information is
necessarily subject to a number of business, economic, competitive
and other risk factors that could cause actual results to differ
materially from management's expectations and plans as set forth in
such forward-looking information.
Specific forward-looking information in this document include,
but are not limited to, statements relating to:
- our Fiscal 2027 strategic and financial plan and anticipated
results therefrom,
- our fourth quarter Fiscal 2024 financial outlook, including our
expected outlook for net revenue, gross profit margin, and SG&A
as a percent of net revenue,
- our full Fiscal 2024 financial outlook, including our expected
outlook for net revenue, new boutiques and expansions or
repositions, gross profit margin, SG&A as a percentage of net
revenue, and capital cash expenditures (net of proceeds from lease
incentives) and composition thereof,
- our approach and expectations with respect to our real estate
expansion strategy, including boutique growth, payback period
expectations and timing of openings,
- our expected investment in the scalability of our business
including timing of projects,
- our advancement of our eCommerce 2.0 strategy including
increasing our eCommerce momentum through strategic investments in
leadership, digital marketing and technology, and the anticipated
results therefrom,
- our expectations with respect to an improved product assortment
and our inventory position, and normalized markdowns,
- our intention to apply to commence the NCIB, the timing
thereof, and the number of Shares which may be purchased
thereunder,
- our potential future purchases of Shares pursuant to the NCIB
and potential to enter into an automatic share purchase plan,
and
- our anticipated growth and ability to deliver on our goals and
priorities.
Particularly, information regarding our expectations of future
results, targets, performance achievements, intentions, prospects,
opportunities or other characterizations of future events or
developments or the markets in which we operate is forward-looking
information. Often but not always, forward-looking statements can
be identified by the use of forward-looking terminology such as
"plans", "targets", "expects", "is expected", "an opportunity
exists", "budget", "scheduled", "estimates", "outlook",
"forecasts", "projection", "prospects", "strategy", "intends",
"anticipates", "believes", or positive or negative variations of
such words and phrases or state that certain actions, events or
results "may", "could", "would", "might", "will", "will be taken",
"occur", "continue", or "be achieved".
Forward-looking statements are based on information currently
available to management and on estimates and assumptions, including
assumptions about future economic conditions and courses of action.
Examples of material estimates and assumptions and beliefs made by
management in preparing such forward looking statements include,
but are not limited to:
- anticipated growth across our retail and eCommerce
channels,
- anticipated growth in the United
States and Canada,
- general economic and geopolitical conditions, particularly in
light of inflationary pressures,
- changes in laws, rules, regulations, and global standards,
- ongoing cost inflationary pressures,
- our competitive position in our industry,
- our ability to keep pace with changing consumer
preferences,
- no COVID-19 related restrictions impacting client shopping
patterns or incremental direct costs related to health and safety
measures,
- our future financial outlook,
- our ability to drive ongoing development and innovation of our
exclusive brands and product categories,
- our ability to invest in physical and digital infrastructure to
support growth,
- our ability to realize our eCommerce 2.0 roadmap and
omni-channel capabilities,
- our expectations for normalized year over year inventory growth
and markdown rates, and optimized inventory levels,
- our ability to recruit and retain exceptional talent,
- our expectations regarding new boutique openings, expansion and
repositioning of existing boutiques, and the timing thereof, and
growth of our boutique network and annual square footage,
- our ability to mitigate business disruptions, including our
sourcing and production activities,
- our expectations for capital expenditures,
- our ability to generate positive cash flow,
- anticipated run rate savings from our smart spending
initiative,
- availability of sufficient liquidity,
- warehousing costs and expedited freight costs, and
- currency exchange and interest rates.
In addition to the assumptions noted above, specific assumptions
in support of our Fiscal 2024 outlook include:
- ongoing inflationary pressures,
- macroeconomic uncertainty,
- the level of new styles in our product assortment,
- normalized markdowns,
- lower expedited freight costs,
- that our planned boutique openings and expansions will proceed
as anticipated and on-time,
- anticipated total square footage growth of our boutiques,
- infrastructure investments including our new distribution
centre in the Greater Toronto
Area, new and repositioned flagship boutiques, expanded
support office space, and eCommerce technology to drive eCommerce
2.0,
- subsiding transitory warehousing costs,
- estimated annualized run rate savings of approximately
$60 million from our smart spending
initiative, with approximately 50% of the benefits expected to be
realized in Fiscal 2024, and
- foreign exchange rates for Fiscal 2024: USD:CAD = 1.35.
In addition to the assumptions noted above, specific assumptions
in support of our Fiscal 2025 outlook include:
- ongoing inflationary pressures,
- anticipated benefits from product margin improvements,
- our approach and expectations with respect to our real estate
expansion strategy, including boutique payback period expectations
and timing of openings,
- cost efficiencies, and
- subsiding transitory cost pressures, including pre-opening
lease amortization for our new distribution centre in Greater Toronto Area, flagship boutiques,
warehouse costs related to inventory management, and distribution
centre project costs.
Given the current challenging operating environment, there can
be no assurances regarding: (a) pandemic-related limitations or
restrictions that may be placed on servicing our clients or the
duration of any such limitations or restrictions; (b) the
macroeconomic impacts (including those from the recent COVID-19
pandemic) on Aritzia's business, operations, labour force, supply
chain performance and growth strategies; (c) Aritzia's ability to
mitigate such impacts, including ongoing measures to enhance
short-term liquidity, contain costs and safeguard the business; (d)
general economic conditions and impacts to consumer discretionary
spending and shopping habits (including impacts from changes to
interest rate environments); (e) credit, market, currency,
commodity market, inflation, interest rates, global supply chains,
operational, and liquidity risks generally; (f) geopolitical
events; and (g) other risks inherent to Aritzia's business and/or
factors beyond its control which could have a material adverse
effect on the Company.
Many factors could cause our actual results, performance,
achievements or future events or developments to differ materially
from those expressed or implied by the forward-looking statements,
including, without limitation, the factors discussed in the "Risk
Factors" section of our Q3 2024 MD&A and Fiscal 2023
MD&A, and the Company's Fiscal 2023 AIF which are incorporated
by reference into this document. A copy of the Q3 2024 MD&A,
the Fiscal 2023 MD&A and the Fiscal 2023 AIF and the Company's
other publicly filed documents can be accessed under the Company's
profile on SEDAR+ at www.sedarplus.ca.
The Company cautions that the foregoing list of risk factors and
uncertainties is not exhaustive and other factors could also
adversely affect its results. We operate in a highly competitive
and rapidly changing environment in which new risks often emerge.
It is not possible for management to predict all risks, nor assess
the impact of all risk factors on our business or the extent to
which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any
forward-looking statements. Readers are urged to consider the
risks, uncertainties and assumptions carefully in evaluating the
forward-looking information and are cautioned not to place undue
reliance on such information. The forward-looking information
contained in this document represents our expectations as of the
date of this document (or as of the date they are otherwise stated
to be made) and are subject to change after such date. We disclaim
any intention, obligation or undertaking to update or revise any
forward-looking information, whether written or oral, as a result
of new information, future events or otherwise, except as required
under applicable securities laws.
Selected Financial
Information
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in
thousands of Canadian
dollars, unless otherwise noted)
|
Q3
2024
|
Q3
2023
|
YTD 2024
|
YTD
2023
|
|
|
% of net
revenue
|
|
% of net
revenue
|
|
% of net
revenue
|
|
% of net
revenue
|
Net
revenue
|
$ 653,524
|
100.0 %
|
$
624,615
|
100.0 %
|
$
1,650,380
|
100.0 %
|
$
1,558,048
|
100.0 %
|
Cost of goods
sold
|
382,587
|
58.5 %
|
353,952
|
56.7 %
|
1,012,646
|
61.4 %
|
886,216
|
56.9 %
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
270,937
|
41.5 %
|
270,663
|
43.3 %
|
637,734
|
38.6 %
|
671,832
|
43.1 %
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
187,373
|
28.7 %
|
163,737
|
26.2 %
|
511,948
|
31.0 %
|
431,170
|
27.7 %
|
Stock-based
compensation expense
|
9,449
|
1.4 %
|
11,558
|
1.9 %
|
16,428
|
1.0 %
|
21,212
|
1.4 %
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
74,115
|
11.3 %
|
95,368
|
15.3 %
|
109,358
|
6.6 %
|
219,450
|
14.1 %
|
Finance
expense
|
13,637
|
2.1 %
|
9,056
|
1.4 %
|
36,662
|
2.2 %
|
21,762
|
1.4 %
|
Other expense
(income)
|
(1,726)
|
(0.3) %
|
(11,994)
|
(1.9) %
|
(4,809)
|
(0.3) %
|
(11,968)
|
(0.8) %
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
62,204
|
9.5 %
|
98,306
|
15.7 %
|
77,505
|
4.7 %
|
209,656
|
13.5 %
|
Income tax
expense
|
19,111
|
2.9 %
|
27,578
|
4.4 %
|
22,932
|
1.4 %
|
59,406
|
3.8 %
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
43,093
|
6.6 %
|
$
70,728
|
11.3 %
|
$
54,573
|
3.3 %
|
$
150,250
|
9.6 %
|
|
|
|
|
|
|
|
|
|
Other Performance
Measures:
|
|
|
|
|
|
|
|
|
Year-over-year net
revenue growth
|
4.6 %
|
|
37.8 %
|
|
5.9 %
|
|
48.3 %
|
|
Comparable sales growth
(decline)4,5
|
0.5 %
|
|
22.8 %
|
|
(0.2) %
|
|
26.3 %
|
|
Capital cash
expenditures (net of proceeds from lease
incentives)5
|
$
(41,368)
|
|
$
(26,362)
|
|
$ (113,575)
|
|
$
(73,547)
|
|
Free cash
flow5
|
$ 171,607
|
|
$
68,297
|
|
$
76,631
|
|
$
(70,463)
|
|
NET REVENUE BY GEOGRAPHIC LOCATION
(unaudited,
in thousands of Canadian dollars)
|
Q3
2024
|
Q3
2023
|
YTD
2024
|
YTD
2023
|
|
|
|
|
|
United States net
revenue
|
$
326,605
|
$
313,534
|
$
857,355
|
$
783,506
|
Canada net
revenue
|
326,919
|
311,081
|
793,025
|
774,542
|
|
|
|
|
|
Net revenue
|
$
653,524
|
$
624,615
|
$
1,650,380
|
$
1,558,048
|
CONSOLIDATED CASH FLOWS
(unaudited, in
thousands of Canadian dollars)
|
Q3
2024
|
Q3
2023
|
YTD
2024
|
YTD
2023
|
|
|
|
|
|
Net cash generated from
(used in) operating activities
|
$
241,079
|
$
114,732
|
$
259,135
|
$
64,729
|
Net cash generated from
(used in) financing activities
|
(130,971)
|
(14,830)
|
(68,901)
|
(107,242)
|
Cash used in investing
activities
|
(45,344)
|
(32,401)
|
(135,728)
|
(89,973)
|
Effect of exchange rate
changes on cash and cash equivalents
|
(476)
|
(1,027)
|
(212)
|
(861)
|
|
|
|
|
|
Change in cash and cash
equivalents
|
$
64,288
|
$
66,474
|
$
54,294
|
$
(133,347)
|
RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA AND
ADJUSTED NET INCOME
(unaudited, in
thousands of Canadian dollars, unless
otherwise noted)
|
Q3
2024
|
Q3
2023
|
YTD
2024
|
YTD
2023
|
Reconciliation of
Net Income to EBITDA and Adjusted EBITDA:
|
|
|
|
|
Net income
|
$
43,093
|
$
70,728
|
$
54,573
|
$
150,250
|
Depreciation and
amortization
|
16,847
|
13,434
|
46,352
|
38,238
|
Depreciation on
right-of-use assets
|
25,524
|
21,204
|
75,358
|
57,883
|
Finance
expense
|
13,637
|
9,056
|
36,662
|
21,762
|
Income tax
expense
|
19,111
|
27,578
|
22,932
|
59,406
|
|
|
|
|
|
EBITDA
|
118,212
|
142,000
|
235,877
|
327,539
|
|
|
|
|
|
Adjustments to
EBITDA:
|
|
|
|
|
Stock-based
compensation expense
|
9,449
|
11,558
|
16,428
|
21,212
|
Rent impact from IFRS
16, Leases6
|
(36,390)
|
(28,278)
|
(106,270)
|
(76,012)
|
Unrealized loss on
equity derivatives contracts
|
390
|
(4,793)
|
11,623
|
(43)
|
Realized loss (gain)
on equity derivatives contracts
|
—
|
(1,387)
|
—
|
(1,387)
|
Fair value adjustment
of non-controlling interest ("NCI") in exchangeable shares
liability
|
—
|
—
|
(15,000)
|
—
|
CYC Design Corporation
("CYC") integration and acquisition costs
|
102
|
—
|
1,853
|
—
|
Secondary offering
transaction costs
|
—
|
518
|
—
|
518
|
|
|
|
|
|
Adjusted
EBITDA
|
$
91,763
|
$
119,618
|
$
144,511
|
$
271,827
|
Adjusted EBITDA as a
percentage of net revenue
|
14.0 %
|
19.2 %
|
8.8 %
|
17.4 %
|
|
|
|
|
|
Reconciliation of
Net Income to Adjusted Net Income:
|
|
|
|
|
Net income
|
$
43,093
|
$
70,728
|
$
54,573
|
$
150,250
|
Adjustments to net
income:
|
|
|
|
|
Stock-based
compensation expense
|
9,449
|
11,558
|
16,428
|
21,212
|
Unrealized loss on
equity derivatives contracts
|
390
|
(4,793)
|
11,623
|
(43)
|
Realized loss (gain)
on equity derivatives contracts
|
—
|
(1,387)
|
—
|
(1,387)
|
Fair value adjustment
of NCI in exchangeable shares liability
|
—
|
—
|
(15,000)
|
—
|
CYC integration and
acquisition costs
|
102
|
—
|
1,853
|
—
|
Secondary offering
transaction costs
|
—
|
518
|
—
|
518
|
Related tax
effects
|
(333)
|
(14)
|
(2,143)
|
(2,450)
|
Adjusted Net
Income
|
$
52,701
|
$
76,610
|
$
67,334
|
$
168,100
|
Adjusted Net Income
as a percentage of net revenue
|
8.1 %
|
12.3 %
|
4.1 %
|
10.8 %
|
Weighted average
number of diluted shares outstanding (thousands)
|
113,332
|
115,154
|
114,232
|
115,252
|
Adjusted Net Income
per Diluted Share
|
$
0.47
|
$
0.67
|
$
0.59
|
$
1.46
|
RENT IMPACT FROM
IFRS 16, LEASES
|
|
|
|
|
(unaudited, in
thousands of Canadian dollars)
|
Q3
2024
|
Q3
2023
|
YTD
2024
|
YTD
2023
|
|
|
|
|
|
Depreciation of
right-of-use assets, excluding fair value adjustments
|
$
(25,391)
|
$
(21,071)
|
$
(74,959)
|
$
(57,484)
|
Interest expense on
lease liabilities
|
(10,999)
|
(7,207)
|
(31,311)
|
(18,528)
|
|
|
|
|
|
Rent impact from IFRS
16, leases
|
$
(36,390)
|
$
(28,278)
|
$
(106,270)
|
$
(76,012)
|
RECONCILIATION OF COMPARABLE SALES TO NET REVENUE
(unaudited, in
thousands of Canadian dollars)
|
Q3
2024
|
Q3
2023
|
YTD
2024
|
YTD
2023
|
Comparable
sales
|
$
573,537
|
$
566,606
|
$
1,455,304
|
$
1,431,825
|
Non-comparable
sales
|
79,987
|
58,009
|
195,076
|
126,223
|
|
|
|
|
|
Net revenue
|
$
653,524
|
$
624,615
|
$
1,650,380
|
$
1,558,048
|
RECONCILIATION OF CASH USED IN INVESTING ACTIVITIES TO
CAPITAL CASH EXPENDITURES (NET OF PROCEEDS FROM LEASE
INCENTIVES)
(unaudited, in
thousands of Canadian dollars)
|
Q3
2024
|
Q3
2023
|
YTD
2024
|
YTD
2023
|
Cash used in investing
activities
|
$
(45,344)
|
$
(32,401)
|
$
(135,728)
|
$
(89,973)
|
Contingent
consideration payout, net relating to the acquisition of
CYC
|
—
|
—
|
6,303
|
5,625
|
Proceeds from lease
incentives
|
3,976
|
6,039
|
15,850
|
10,801
|
|
|
|
|
|
Capital cash
expenditures (net of proceeds from lease incentives)
|
$
(41,368)
|
$
(26,362)
|
$
(113,575)
|
$
(73,547)
|
RECONCILIATION OF NET CASH GENERATED FROM OPERATING
ACTIVITIES TO FREE CASH FLOW
(unaudited, in
thousands of Canadian dollars)
|
Q3
2024
|
Q3
2023
|
YTD
2024
|
YTD
2023
|
Net cash generated from
(used in) operating activities
|
$
241,079
|
$
114,732
|
$
259,135
|
$
64,729
|
Interest paid on credit
facilities
|
2,328
|
1,849
|
5,148
|
3,233
|
Proceeds from lease
incentives
|
3,976
|
6,039
|
15,850
|
10,801
|
Repayments of principal
on lease liabilities
|
(30,432)
|
(21,922)
|
(74,077)
|
(64,878)
|
Purchase of property,
equipment and intangible assets
|
(45,344)
|
(32,401)
|
(129,425)
|
(84,348)
|
|
|
|
|
|
Free cash
flow
|
$
171,607
|
$
68,297
|
$
76,631
|
$
(70,463)
|
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(interim periods
unaudited, in thousands of Canadian
dollars)
|
As at
November 26, 2023
|
As at
February 26,
2023
|
As at
November 27,
2022
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
140,804
|
$
86,510
|
$
131,898
|
Accounts
receivable
|
19,759
|
18,184
|
17,710
|
Income taxes
recoverable
|
16,482
|
6,419
|
3,951
|
Inventory
|
397,002
|
467,634
|
508,392
|
Prepaid expenses and
other current assets
|
34,510
|
33,101
|
42,315
|
Total current
assets
|
608,557
|
611,848
|
704,266
|
Property and
equipment
|
406,887
|
308,608
|
281,260
|
Intangible
assets
|
85,082
|
86,382
|
86,375
|
Goodwill
|
198,846
|
198,846
|
198,846
|
Right-of-use
assets
|
630,370
|
614,061
|
452,499
|
Other assets
|
5,422
|
3,830
|
4,595
|
Deferred tax
assets
|
14,938
|
12,968
|
14,798
|
|
|
|
|
Total
assets
|
$
1,950,102
|
$
1,836,543
|
$
1,742,639
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
248,450
|
$
221,712
|
$
319,364
|
Current portion of
contingent consideration
|
—
|
6,619
|
6,619
|
Current portion of
lease liabilities
|
116,889
|
117,316
|
96,505
|
Deferred
revenue
|
95,235
|
71,653
|
92,556
|
Total current
liabilities
|
460,574
|
417,300
|
515,173
|
Lease
liabilities
|
682,761
|
654,690
|
507,454
|
Other non-current
liabilities
|
11,218
|
21,499
|
23,921
|
Non-controlling
interest in exchangeable shares liability
|
—
|
35,500
|
35,500
|
Deferred tax
liabilities
|
22,067
|
21,767
|
21,106
|
Total
liabilities
|
1,176,620
|
1,150,756
|
1,103,154
|
|
|
|
|
Shareholders'
equity
|
|
|
|
Share
capital
|
292,911
|
265,519
|
260,029
|
Contributed
surplus
|
92,857
|
68,682
|
64,936
|
Retained
earnings
|
391,950
|
355,270
|
317,932
|
Accumulated other
comprehensive loss
|
(4,236)
|
(3,684)
|
(3,412)
|
Total shareholders'
equity
|
773,482
|
685,787
|
639,485
|
|
|
|
|
Total liabilities
and shareholders' equity
|
$
1,950,102
|
$
1,836,543
|
$
1,742,639
|
BOUTIQUE COUNT SUMMARY3
|
Q3
2024
|
Q3
2023
|
YTD
2024
|
YTD
2023
|
|
|
|
|
|
Number of boutiques,
beginning of period
|
116
|
112
|
114
|
106
|
New
boutiques
|
1
|
—
|
3
|
6
|
|
|
|
|
|
Number of boutiques,
end of period
|
117
|
113
|
117
|
113
|
Boutiques expanded or
repositioned
|
1
|
4
|
2
|
4
|
____________________________________
|
|
1 All
references in this press release to "Q2 2024" are to our 13-week
period ended August 27, 2023, to "Q3 2023" are to our 13-week
period ended November 27, 2022, to "YTD 2023" are to our 39-week
period ended November 27, 2022, to "YTD 2024" are to our 39-week
period ended November 26, 2023, to "Fiscal 2022" are to our 52-week
period ended February 27, 2022, to "Fiscal 2023" are to our 52-week
period ended February 26, 2023, to "Fiscal 2024" are to our 53-week
period ending March 3, 2024, to "Fiscal 2025" are to our 52-week
period ending March 2, 2025, and to "Fiscal 2027" are to our
52-week period ending February 28, 2027.
|
|
2 Certain
metrics, including those expressed on an adjusted or comparable
basis, are non-IFRS measures or supplementary financial measures.
See "Comparable Sales and Comparable Sales Growth (Decline)",
"Non-IFRS Measures and Retail Industry Metrics" and "Selected
Financial Information".
|
|
3 There were
four Reigning Champ boutiques as at November 26, 2023 and November
27, 2022 which are excluded from the boutique count.
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4 Please see
the "Comparable Sales and Comparable Sales Growth (Decline)"
section above for more details.
|
|
5 Please see
the "Non-IFRS Measures and Retail Industry Metrics" section above
for more details.
|
|
6 Rent
impact from IFRS 16, leases
|
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SOURCE Aritzia Inc.(Communications)