Aritzia (OTC:ATZAF) reported a 2% increase in its net revenue to C$534 million in the second quarter of fiscal year 2024, despite a 4.3% decrease in comparable sales growth. The company's US sales rose by 6%, while Canadian sales dipped by 3%, attributed to a mixed consumer environment and the level of new styles in their product assortment. The company also revealed plans for further store expansion, despite a decline in e-commerce net revenue and a decrease in gross profit margin.
Key takeaways from the call include:
- Aritzia opened one new boutique in Florida and expanded two boutiques in New Jersey and Boston, with plans to open two more boutiques in the following quarter.
- E-commerce net revenue decreased by 1% due to softer traffic trends, despite the launch of personalized product recommendations and omni-channel services showing positive results.
- Gross profit margin declined to 35% due to higher product costs, normalized markdowns, and temporary warehousing costs.
- Selling, general and administrative (SG&A) expenses increased by 16% compared to the previous year, while adjusted EBITDA decreased by 74% to C$21 million.
- The company expects net revenue in the third quarter to be flat to slightly down from the previous year, with sequential improvement in gross profit margin and SG&A expenses.
- For the full fiscal year, Aritzia expects net revenue growth of 2% to 7% compared to the previous year, with a decline in gross profit margin and an increase in SG&A expenses.
- The company plans to focus on smart spending to drive savings and expects capital expenditures of approximately C$220 million for the year.
In the earnings call, the company also discussed plans for digital marketing and digital performance marketing, with a focus on paid search and paid social. They expect to see some effects in the second half of the year but are primarily building towards a strategy for fiscal year 2025. The company also discussed the benefits of their pick up in-store and ship from store offerings, including optimization of inventory and potential savings on delivery costs.
The company's Tampa store, which is performing better than expected, has encouraged the company to continue opening new stores. The company also plans to improve gross profit margins through cost savings and selective price increases. They expect a 300 basis point increase in SG&A expenses in Q3, but this is a sequential decline from the 400 basis point increase in Q2. The company has been aggressive in share repurchases and plans to pay back a majority of their line of credit by the end of Q3. They will continue to focus on capital investments but will consider buying back shares as they strengthen their cash position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.