TSX:ATZ - Post Discussion
Post by
retiredcf on Jan 10, 2023 9:20am
RBC
Their upside scenario target is a double from here ($99.00). GLTA
Sector Perform
TSX: ATZ; CAD 49.89
Price Target CAD 63.00
Lookbook: All eyes on outlook when ATZ reports FQ3
Our view: Forecasting EPS $0.68, +10% Y/Y, unchanged from last published and at the high end of forecasts (average $0.65, range $0.62-$0.68). Notwithstanding near-term transient noise and reduced visibility notably around consumer spending trends and gross margin, we maintain our thesis on Aritzia, underpinned by an exceptional growth runway as it continues to seed the US market, grow its omnichannel presence and expand assortment into new categories. Maintaining SP rating on a relative basis, with other similarly compelling SMID-cap names in our coverage benefiting from a more defensive posture. Release scheduled Jan. 11 AMC.
Key points:
Expecting noisy H2 with diminished visibility on consumer spending trends; normalizing markdowns offset by lower use of expedited freight.Our FQ3 Revenue estimate $601 MM is a hemline above consensus and ATZ guidance "$565-590 MM," but we incorporate conservative assumptions around supply chain headwinds, wage growth, and investment in talent and technology to support growth, resulting in FQ3E EBITDA margin -490 bps to 24.3%.
In our view, consumer focus on value likely underpinned strong Black FivedayTM Sale (up to 50% off everything) that ran November 24-28. With 4/5 sale days occurring in FQ3, the offset could be a pull-forward of FQ4 demand as consumers locked in savings ahead of the holidays. Our H2 GM % incorporates normalized seasonal markdowns relative to prior year when inventory levels were abnormally low, offset by lower use of expedited freight relative to peak prior year. Calendar and weather effects likely a wash early FQ4, with one extra Saturday leading up to Christmas this year offset by unseasonable weather/precipitation across Canada in December.
Stepping back on the NCIB. According to regulatory filings, ATZ moderated share repurchases in FQ3, buying back 122k shares for $5.3 MM (1.7 MM shares or 1.5% fiscal YTD), with the last purchases on record dated late September as the share price neared $45. With the stock staging a solid recovery since July underpinned by better than expected H1 results and against the backdrop of rising uncertainty over discretionary consumer spending, share repurchases likely to remain highly opportunistic, in our view.
Maintaining SP rating, $63 PT. Target multiples reflect heightened uncertainty as we head into probable recession and in our view, valuation likely constrained by near-term concerns over the cadence of progress to objectives given the widely anticipated recession in the early part of the period. SP rating reflects sector exposure/positioning relative to other SMID-cap names.
Be the first to comment on this post