More Raised Targets Calling it a “stellar print,” Canaccord Genuity’s Derek Dley was one of several equity analysts to raise their target price for shares of Aritzia Inc. following better-than-expected second-quarter 2023 financial results.
After the bell on Wednesday, the Vancouver-based retailer reported revenue of $526 million, blowing past Mr. Dley’s estimate of $455-million and the consensus forecast on the Street of $454-million. Adjusted EBITDA of $83 million also topped expectations ($74-million and $69-million, respectively).
“ATZ’s Q2/F23 net revenue of $526 million represents year-over-year growth of 50.1 per cent, reflecting (1) strength in the U.S., where sales grew 79.8 per cent year-over-year (making up 50.1 per cent of the quarter’s revenue), (2) comparable sales growth year-over-year of 28.3 per cent, including double-digit growth in Canada, (3) 8 more boutiques in its store network relative to last year, and (4) its robust e-commerce offering, with e-commerce revenue growing 33.3 per cent year-over-year,” he said.
“Aritzia noted the momentum from Q2/F23 has extended into Q3/F23, with the company tracking toward delivering $565-$590 million in net revenue for the quarter, above the current consensus figure of $511 million. Further, sales guidance for F2023 was lifted to $2.0-$2.05 billion (vs. $1.875-$1.9 billion previously), representing a 34-37-per-cent increase in net revenues year-over-year and indicating top-line strength (driven by higher new customer traffic) that’s expected to persist through H2/F23. The company has yet to witness any deterioration in key metrics such as average order values (AOVs), basket sizes, or conversion rates.”
Keeping a “buy” rating for Aritzia shares, Mr. Dley hiked his target to $67 from $64. The average is $58.57.
“Given the robust acceleration of revenue growth expected from Aritzia as stores reopen, we are comfortable assigning a premium multiple, more in line with the group we view as best-in-class retailers,” he said.
“In our view, Aritzia has done a great job of navigating a changing retail landscape by offering an aspirational customer experience within its brick-and-mortar locations and an improved e-commerce platform. With a healthy track record of comparable sales growth and strong growth this quarter, a robust pipeline of new store openings, a healthy balance sheet to support growth and margin enhancement initiatives, and a well aligned management team, we believe Aritzia is deserving of a premium valuation.”
Others making changes include:
* BMO’s Stephen MacLeod to $61 from $59 with an “outperform” rating.
“Strong growth momentum continued in Q2/23 (adj. EBITDA up 65.2 per cent), leading to another impressive earnings beat. Topline momentum across all geographies and channels has continued into Q3, leading to increased 2023E revenue guidance. The U.S. was again a key growth driver (up 80 per cent) and presents significant opportunity. Aritzia remains well-positioned to execute on its U.S. growth strategy, with ample liquidity, strong omnichannel, and a loyal employee and client base,” said Mr. MacLeod.