Headquartered in Vancouver, Canada, Aritzia Inc. (ATZAF) designs and sells apparel and accessories for women in North America. The company generates, develops, and designs retail fashion brands. It services through its e-commerce site, aritzia.com.

While the stock has declined 33.1% year-to-date, ATZAF has beaten the consensus EPS estimates in each of the trailing four quarters. The company reported an increase in revenue, primarily driven by high consumer demand in the United States.

“Our outstanding performance continued through the first quarter of fiscal 2023, driven by the incredible reception to our spring and summer product,” said Jennifer Wong, Chief Executive Officer of ATZAF. Also, the company said that it is experiencing momentum despite the challenging macro backdrop, as client demand remains strong.

Here is what could shape ATZAF’s performance in the near term:

Latest Developments

In May, ATZAF announced that in connection with its earlier announced normal course issuer bid (NCIB) to purchase up to 3,732,725 of its subordinate voting shares (Shares), it entered into an automatic share purchase plan (ASPP) with a designated broker.

The ASPP aims to allow for the purchase of Shares under the NCIB at times when ATZAF would ordinarily not be allowed to purchase shares due to regulatory restrictions and customary self-imposed blackout periods.

Robust Financials

For the first quarter of 2023, ATZAF’s net revenue increased 65.2% year-over-year to C$407.91 million ($315.20 million). Its income from operations grew 68% from its year-ago value to C$59.94 million ($46.32 million), while its net income improved 85.8% from its prior-year quarter to C$33.26 million ($25.70 million). The company’s adjusted EPS grew 84% year-over-year to C$0.35.

Strong Profitability

ATZAF’s 43.82% trailing-12-month gross profit margin is 36.7% higher than the 19.50% industry average. In addition, its trailing-12-month net income margin of 10.41% is 58.6% higher than the 6.56% industry average.

Also, its trailing-12-month ROE, ROC, and ROA are 17%, 7.2%, and 5.6% are higher than their respective industry averages.

Solid Growth Prospects

The consensus EPS estimate of $1.58 for fiscal 2024 represents a 20.6% improvement year-over-year. Analysts expect ATZAF’s revenue to increase 24% year-over-year to $348.89 million for the second quarter ending August 2022.

Consensus Rating and Price Target Indicate Potential Upside

Of the six Wall Street analysts that rated ATZAF, five rated it Buy, and one rated it hold. The 12-month median price target of $44.92 indicates a 54.8% potential upside. The price targets range from a low of $37.06 to a high of $54.05.

POWR Ratings Reflect Solid Prospects

ATZAF’s POWR Ratings reflect its solid growth prospects. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.          

ATZAF has a B grade for Growth and Quality. Its impressive financials and growth prospects are in sync with its Growth grade. In addition, its strong profitability justifies the Quality grade.

Among the 68 stocks in the B-rated Fashion & Luxury, ATZAF is ranked #32.

Beyond what I stated above, we have graded ATZAF for Momentum, Sentiment, and Value. Get all ATZAF ratings here.

Bottom Line

Despite the macroeconomic headwinds, ATZAF reported strong first-quarter results. Optimistic analyst estimates, robust profitability, and solid growth prospects could aid the stock’s price performance. Therefore, we think it could be a great investment now.

How Does Aritzia Inc. (ATZAF) Stack Up Against its Peers?

Check out these other stocks within the Fashion & Luxury industry with an overall rating of A (Strong Buy): J. Jill, Inc. (JILL), Hugo Boss AG (BOSSY), and Caleres, Inc. (CAL).

ATZAF shares were trading at $27.06 per share on Tuesday afternoon, down $0.65 (-2.35%). Year-to-date, ATZAF has declined -34.68%, versus a -19.17% rise in the benchmark S&P 500 index during the same period.

About the Author: Spandan Khandelwal

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing. More...

More Resources for the Stocks in this Article