after a quick read here are a few things that poped out
Gross profit decreased by 0.5% to $180.0 million , compared to $180.9 million in Q1 2023. Gross profit margin 1 was 38.9%, compared to 44.3% in Q1 2023. The 540 bps decrease in gross profit margin was driven by higher product related costs primarily due to inflationary pressure, normalized markdowns, temporary warehousing costs related to inventory management, pre-opening lease amortization costs for boutiques and our new distribution centre, and foreign currency headwinds. These impacts were partially offset by lower expedited freight costs.
SG&A expenses increased by 27.6% to $153.5 million , compared to $120.3 million in Q1 2023. SG&A expenses were 33.2% of net revenue, compared to 29.5% in Q1 2023. The increase in SG&A expenses was primarily due to investments in retail wages and support office labour made in the back half of Fiscal 2023, as well as distribution centre project costs.
Outlook
Aritzia saw a deceleration in traffic trends beginning the first week of June, which management believes reflects macroeconomic pressure on the consumer as well as opportunities in the level of newness in its product assortment. The Company expects net revenue in the second quarter of Fiscal 2024 to be flat to slightly down compared to the second quarter of Fiscal 2023 on top of strong growth of 50% in the second quarter last year and 75% in the second quarter of Fiscal 2022. The Company also expects gross profit margin to decrease by 750 bps and SG&A as a percent of net revenue to increase by 550 bps in the second quarter of Fiscal 2024 compared to the second quarter of Fiscal 2023.
Given trends in the second quarter to date and the macro uncertainty for the remainder of the year, Aritzia currently expects the following for Fiscal 2024:
- Net revenue in the range of $2.25 billion to $2.35 billion 4 , representing an increase of approximately 2% to 7% from Fiscal 2023 including the 53 rd week. This reflects macroeconomic pressure on the consumer, as well as opportunities in the level of newness in its product assortment, and includes the contribution from retail expansion with:
- Eight new boutiques, including one boutique already opened in Q1 2024, and four boutique expansions or repositions, all of which are located in the United States . Six of the eight new boutiques are expected to open in the second half of the fiscal year, including three in the last month of the fiscal year.
- Gross profit margin to decrease by approximately 300 bps 5 compared to Fiscal 2023, reflecting ongoing inflationary pressures, normalized markdowns, temporary warehousing costs, and pre-opening lease amortization, partially offset by lower expedited freight costs. The additional pressure compared to the prior outlook is a result of the deleverage on fixed costs due to the lower net revenue forecast.
- SG&A as a percent of net revenue to increase by approximately 300 bps 6 compared to Fiscal 2023, driven by the annualization of investments in support office labour and retail wage inflation, as well as distribution centre project costs. The additional pressure compared to the prior outlook is a result of the deleverage on fixed costs due to the lower net revenue forecast.
- Capital cash expenditures (net of proceeds from lease incentives) 1 of approximately $220 million . This includes approximately $120 million related to investments in new, repositioned and expanded boutiques expected to open in Fiscal 2024 and Fiscal 2025, as well as $100 million primarily related to our distribution centres and support office expansion.