Q3/F25 PREVIEW: MOMENTUM MAINTAINED IN ADVANCE OF FLAGSHIP OPENINGS
THE TD COWEN INSIGHT
We believe Aritzia's offering continues to resonate with consumers during the holiday season. Momentum should accelerate in Q4/F25 as flagship contributions take hold and eCommerce penetration improves from digital/B&M investments. Along with gross margin expansion initiatives achieved in H1/F25, Aritzia appears well positioned for attractive EPS/ FCF growth that should warrant a premium multiple.
Impact: SLIGHTLY POSITIVE
Q3/F25 Summary: Our channel checks and sourcing of traffic and credit card data support our view that Aritzia's merchandise is resonating with consumers especially in the U.S. market. We forecast double-digit revenue growth (excluding Q3/F24 archive sale/
timing of warehouse sale in Q3/F24) attributable to accelerating new store expansion, improving eCommerce penetration, and positive SSSG. This should be complimented by the continuation of gross margin drivers illustrated in H1/F25, partially offset by digital/ marketing initiatives within SG&A to enhance future growth. Our EPS forecast of $0.61 is in line with consensus, and represents >30% y/y growth.
Flagships Finally Opened: Aritzia has opened its highly anticipated three flagships, that represent the equivalent square footage of ten standard boutiques. The revenue impact in Q3/F25 should be minimal (2 opened late Q3/F25, 1 Q4/F25) but is a key component of its target to increase square footage 20%-25% in F2025, and should support accelerated revenue growth in Q4/F25.
eCommerce Penetration: We expect eCommerce penetration to improve (33% TTM Q2/ F25) as new products and digital initiatives resonate, and from the halo effect of U.S. store expansion. Investment should weigh upon near-term SG&A leverage but be a key mid-term revenue growth driver.
F2027 Around the Corner: We will be looking for an update upon its F2027 guidance that was reiterated in mid-October. Consensus is well below management's forecast, and should further confidence be conveyed, it could act as a share price catalyst.
FCF Outlook: We forecast positive H2/F25 FCF to be additive to its net cash position (~ $104mm Q2/F25). For F2026 we forecast strong net income growth (~50%) and lower y/y capex to generate >$200mm in FCF. We believe this should support an active NCIB.
Investment Summary: We maintain our positive stance on Aritzia in advance of the Q3/F25 release. Despite recent share appreciation we believe it is on track with near-term targets and remain early days of a long-term growth story. We are increasing our target to $68.00 in advance of its January 9th release as we shift our valuation to our F2027 EPS forecast.