Transcript: Aritzia Q2 2027 Earnings Conference Call

Aritzia (TSX: ATZ ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Aritzia Inc reported a 44% increase in net revenue and a 35% rise in comparable sales for Q2 2027, with a record adjusted EBITDA margin of 21%. The company reported strong growth across digital channels, with net revenue surging 68%, supported by investments in mobile apps and marketing. S. boutique square footage by 20%.

S. growth. 325 billion, with comparable sales growth in the high teens. Management highlighted strong inventory positioning, exceptional client demand, and effective marketing driving performance.

Aritzia's balance sheet remains robust with $528 million in cash and no debt, supporting continued share repurchases. 88 billion, forecasting a gross profit margin increase of 225 to 275 basis points. Full Transcript OPERATOR Thank you for standing by. This is the conference operator.

Welcome to Aritzia's second quarter 2027 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad.

Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I will now turn the conference over to Beth Sweet, Vice President, Investor Relations. Please go ahead. Beth Sweet, Vice President, Investor Relations Thanks, operator, and thank you all for joining Aritzia's second quarter fiscal 2027 earnings call.

On the call today, I'm joined by Jennifer Wong, our Chief Executive Officer, and Todd Engledue, our Chief Financial Officer. As a reminder, please note that remarks made on this call may include our expectations, future plans and intentions that may constitute forward-looking information. Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions as well as the competitive environment. Actual results may differ materially from the conclusions, forecasts or projections expressed by the forward-looking information.

We would refer you to our most recently filed Management Discussion and Analysis and our Annual Information Form, which include a summary of the material assumptions as well as risks and factors that could affect our future performance and our ability to deliver on the forward-looking information. Our earnings release, the related financial statements and the MD&A are available on SEDAR+ as well as the Investor Relations section of our website. I'll now turn the call over to Jennifer. Jennifer Wong, Chief Executive Officer Thanks, Beth, and good afternoon, everyone.

Thank you for joining us today. We sustained exceptional momentum in the second quarter, delivering 44% net revenue growth and a 35% increase in comparable sales. This, combined with disciplined execution and our profitability initiatives, drove a 590 basis point increase in our adjusted EBITDA margin, reaching a second quarter record of 21%. In addition, adjusted EPS more than doubled compared to last year.

These results, which exclude the benefit of $97 million in tariff refunds, demonstrate the tremendous earnings power of our business model as we continue to scale. Strength was broad based across geographies, channels and product categories, underscoring the wide appeal of our brand. We generated high demand for our summer and fall collections and supported this with optimal inventory positioning. In addition, strategic investments in digital real estate and marketing continued to expand our reach in the United States.

Q2 net revenue growth accelerated to an outstanding 60%. This was fueled by widespread demand for our brand across our digital channel and existing boutiques and new boutiques. In digital, momentum continued to build, propelled by our mobile app and full-funnel marketing initiatives. S.

retail channel, we delivered robust double-digit comparable sales gains across our existing boutique network. S. square footage by approximately 20%. Our performance in Canada also remained strong, with net revenue up 20%.

Our growth was driven by momentum in digital, fueled by meaningful client acquisition and greater purchase frequency. In addition, we generated double-digit comparable sales growth in our Canadian retail business. Turning to our retail channel, we delivered another quarter of outstanding results. Net revenue rose 34%, marking an impressive six-quarter streak of top-line growth exceeding 30%.

Comparable store sales remained exceptional, primarily driven by strong traffic gains. Our strategic marketing initiatives are working. They're building deeper brand loyalty and generating sustained demand into our boutiques. Our growth was also driven by our real estate expansion strategy, which continues to yield phenomenal results.

We opened a total of 19 new and repositioned boutiques over the trailing 12 months, yielding square footage growth in the mid-teens. New store productivity and paybacks remain exceptional. In Q2, we expanded into three new markets: Birmingham, New Orleans and St. Louis.

Our bespoke boutique activations continued to yield great results, generating awareness and community engagement. This drove strong traffic and sales when we opened our doors. In addition to fueling a robust omnichannel halo effect, these boutiques are already generating highly attractive unit economics. In digital, our momentum continued to accelerate.

Net revenue surged 68% over last year, again led by strong traffic trends. As a percentage of net revenue, digital increased nearly 500 basis points year over year. Growth was fueled by exceptional demand for our product, our strong inventory position, and our mobile app and our full-funnel marketing initiatives. Balanced investments across owned and paid marketing channels continue to introduce new high-value clients to our brand and reengage existing ones.

We further enhanced our marketing tactics across existing channels while launching new channels to fuel ongoing brand awareness. Our mobile app also delivered outstanding results with sustained monthly downloads and deep client engagement. It continued to drive higher conversion, higher average monthly sessions and repeat purchase behavior. In addition, the improvements to our international digital experience continue to pay off, with sales up 165% over last year.

Turning to product, our commitment to offering high-quality styles across a diverse assortment of categories continues to drive outstanding results. Widespread demand across all regions reflected the growing love for everyday luxury and deep loyalty of our core client base. Our strong inventory position ensured we had the right product in the right place at the right time. This enabled us to fuel robust demand and achieve a meaningful year-over-year improvement in our markdown rate.

Growth was driven by the combined strong performance of our new styles as well as the iconic franchises for which we're well known and loved. We drove continued client engagement from our end-of-summer events through to the launch of fall. Our fall collections were extremely well received across many different categories, such as T-shirts, blouses, sweatshirts, shorts and pants, among many others. In marketing, we continued to promote our world of everyday luxury, which expanded brand awareness and drove traffic to Aritzia.

This fueled another strong wave of new client acquisition. At the same time, we continued increasing loyalty and share of closet with our existing client base. Client growth was in the double digits in all channels and geographies. During our FIFA World Cup campaign, we extended our styling authority into sport.

During this year's most watched global event, we reached new audiences through spectator styling, product placement and paid media in host cities and key sport markets. Looking ahead, our strong momentum has continued into the third quarter. This is driven by exceptional client response to our fall product and the growing love for our brand. This quarter we're introducing new and exciting styles and colors across cooler weather categories such as tailored outerwear, suiting, sweaters and the Super Puff.

Our inventory remains well positioned to support upcoming holiday demand in our retail and digital channels. We're executing on several key initiatives to support ongoing omnichannel momentum. This fiscal year we have a strong pipeline of 12 to 13 new boutiques in premier locations and four to five repositions. S.

boutiques, one each in Florida, Georgia, Massachusetts and Nevada, and two in Texas. We're also opening two repositions, one in California and one in Quebec. Our real estate expansion strategy is a proven multi-year lever to help scale the Aritzia brand across the United States. In digital, our focus is on channel expansion and digital marketing optimization.

Near-term priorities include continuing to embed AI into how we work and support clients, ongoing website enhancements, releasing new mobile app features and upgrades, honing our digital marketing tactics and optimizing our omnichannel infrastructure. As always, we continue to strategically invest in core infrastructure to help ensure our business is built for scalable, profitable long-term growth. S. S.

and beyond. This opportunity is underpinned by the proven, enduring strength of the Aritzia brand, our disciplined execution and our healthy financial foundation. In closing, I'm incredibly proud of our people and their impeccable execution. This continues to differentiate Aritzia.

Their commitment to delivering exceptional experiences for our clients and advancing our strategic priorities has positioned us well for the future. I look forward to sharing how we will build on this momentum and unlock our next chapter of growth at our Investor Day on October 27th. With that, I'll now hand it over to Todd to discuss the details of our financial performance. Todd Ingledew, Chief Financial Officer Thanks, Jennifer, and good afternoon, everyone.

Our second quarter results exceeded our expectations on both the top and bottom line. This underscores the continued strength of the Aritzia brand as well as the disciplined execution across all of our teams. 17 billion and delivered comparable sales growth of 35%. This was driven by broad-based strength across channels, geographies, and product categories, excluding tariff refunds.

We expanded our adjusted EBITDA margin 590 basis points while continuing to invest in the capabilities that will drive our long-term growth. Four key drivers continued to fuel our momentum in the second quarter. First, exceptional client demand for our product supported by healthy, well-positioned inventory levels. Second, strong execution across our digital initiatives led by our mobile app.

Third, square footage growth in the mid-teens with high productivity in our new and repositioned boutiques. And fourth, strategic brand and digital marketing investments that generated significant traffic growth and attracted new clients in the United States. Second quarter net revenue increased 60% to $779 million. Digital led our performance as strategic investments in full-funnel marketing and our mobile app generated exceptional traffic growth and stronger conversion.

S. retail business delivered outstanding double-digit comparable sales growth. We also benefited from the strong contribution of our highly productive new and repositioned boutiques. S.

square footage by approximately 20%. These results demonstrate that our omnichannel expansion is not only driving immediate top-line growth but also building brand awareness and affinity in our highest-priority growth market. In Canada, net revenue increased 20% to $390 million, led by the strength of our digital channel. In addition, retail delivered double-digit comparable sales growth.

These results reinforce the strength of our Canadian market and the enduring loyalty of our clients. Turning to our sales channels, the momentum in our digital business continued to accelerate. Net revenue increased 68% to $403 million. Strong product demand, our mobile app, and our strategic marketing investments drove traffic growth across the United States and Canada.

Our performance reinforces our confidence in the significant opportunity to expand digital, particularly in the United States. In retail, net revenue increased 34% to $767 million. We delivered double-digit comparable sales growth in both the United States and Canada. We also benefited from the strong contribution of our 14 new and five repositioned boutiques opened in the trailing 12 months.

Our most recent openings continue to perform exceptionally well. New boutiques opened in fiscal 2026 are generating higher sales per square foot than prior cohorts and are tracking toward faster payback periods. Excluding the benefit of $97 million from tariff refunds, we delivered second quarter adjusted gross profit of $570 million, an increase of 60%. 7%.

The improvement was driven by IMU expansion, leverage on store occupancy and other fixed costs, and lower markdowns. 5%. The improvement was primarily driven by expense leverage and savings from our smart spending initiative, again excluding the benefit from tariff refunds. Adjusted EBITDA was $246 million, an increase of 100% compared to the second quarter last year.

As a percentage of net revenue, adjusted EBITDA expanded 590 basis points to 21%. We have now delivered sustained margin expansion for 10 consecutive quarters. This underscores our commitment to optimizing profitability while continuing to invest in our future growth. Turning to the balance sheet, we ended the second quarter with $715 million of inventory, up 36% from last year.

We remain pleased with both the composition and quantity of our inventory, which is well positioned to fuel demand through the back half of the year. Our liquidity position at the end of the second quarter is strong with $528 million in cash, no debt, and zero drawn on our $300 million revolving credit facility. During the quarter, we repurchased approximately 900,000 shares for $125 million. 1 million shares at an average price of $127, returning $270 million to shareholders.

We intend to continue repurchasing shares opportunistically throughout fiscal 2027. Turning to our outlook, we have sustained our momentum into the third quarter of fiscal 2027 as clients continue to respond well to our fall product. Our performance remains robust in both the United States and Canada, showcasing the broad strength of our brand. 325 billion.

This represents growth of 23% to 27% from last year. We expect comparable sales growth in the high teens as well as strong contribution from our new and repositioned boutiques. We expect third quarter gross profit margin to increase 100 to 150 basis points, primarily driven by continued IMU improvements and occupancy cost leverage. We expect SG&A as a percentage of net revenue to increase 50 to 100 basis points in the third quarter compared to last year.

Q3 SG&A outlook reflects the timing this year of some of our key strategic infrastructure investments that will power our long-term expansion. This timing, however, does not change our SG&A guidance for the full year. 88 billion. This represents growth of 29% to 32% from fiscal 2026, driven by comparable sales growth in the low 20s and strong contributions from 12 to 13 new boutique openings and four to five repositions.

We are also raising our full-year adjusted gross profit margin outlook to an increase of 225 to 275 basis points. S. 5%. Our guidance excludes any benefit from tariff refunds.

We continue to expect SG&A as a percentage of net revenue to be flat to down 50 basis points compared to fiscal 2026. We now expect adjusted EBITDA as a percentage of net revenue to be approximately 20%. In closing, our business continues to perform exceptionally well and our core growth drivers are delivering. We have confidence in our momentum and we remain focused on what comes next.

We will continue to invest with discipline, execute our long-term priorities, and build the business for sustainable, profitable growth.