Aritzia Inc. (TSX:ATZ) Makes a Great Stocking Stuffer This Holiday

Aritzia Inc. (TSX:ATZ) is down more than 11% since hitting a 52-week high on November 7. Here’s why you should buy on the dip.

| More on:

The last time I set foot in an Aritzia (TSX:ATZ) store was late October. My wife and I were doing some early holiday shopping at Yorkdale Mall in Toronto while in town visiting family.

The place was slammed.

Since then, the few times I’ve walked by the Aritzia in the Halifax Shopping Centre near where I live, it’s also been packed with people spending money.

I’ve seen the light

I was the biggest Doubting Thomas when it came to Aritzia’s business, but over the past year or so, I’ve become a convert.


Busy stores certainly help. Perhaps that’s why analysts are also getting more excited about its stock.

“Importantly, U.S. sales growth accelerated to 40% from 20.5% in Q1, a clear sign of growing brand awareness that is driving higher traffic and conversion,” said Canaccord Genuity analyst Camilo Lyon in October. “With a majority of new store openings in F20 expected to be in the U.S., we expect these positive sales trends and rising brand awareness to persist for the foreseeable future.”

Americans are starting to find out about Aritzia.

In the second quarter, the retailer’s U.S. stores accounted for 30% of revenue, up considerably from 25% a year earlier. Add to this the growth rate alluded to by Lyon in the previous paragraph and it’s not hard to imagine Aritzia’s U.S. stores accounting for more than 50% of its overall revenue sometime in fiscal 2019 or early in fiscal 2020.

If you’ve followed Lululemon’s growth over the years, you’ll know that it didn’t start generating more revenue from the U.S. until fiscal 2011, six years after launching sales south of the border.

Aritzia might not get to that point quite as fast, but it will be close. What’s important is that it blows through that number and never looks back.

Where to next?

The Canaccord analyst raised his price target for Aritzia by a buck in October to $21 — 19% higher than where it’s currently trading, providing investors who buy ATZ stock with some nice potential upside in 2019.

Lyon also sees the retailer earning $0.82 a share in fiscal 2019 and $0.93 a share in fiscal 2020. That’s a forward 2020 P/E ratio of 18.9, a reasonable multiple given same-store sales are growing in the double digits, and it hasn’t even scratched the surface in the U.S.

Like Lululemon, the U.S. can make or break you. It was kind to LULU. Aritzia’s recent sales growth in the U.S. suggests it too faces a prosperous future south of the border.

CEO and founder Brian Hill certainly thinks so.

“We think we’re just at the tip of the iceberg as far as our recognition in the United States [goes],” Hill stated in October.

The company continues to invest in its infrastructure, including making investments to grow its e-commerce business. Although it doesn’t break out its online results, the fact that it’s shipping to over 220 countries suggests it soon will.

As far as I can tell, the potential growth in the U.S. and its online sales suggest Aritzia stock is the perfect stocking stuffer this holiday season.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Will Ashworth has no position in any stocks mentioned.

More on Investing

stock analysis

Buy the Dip: 2 Stocks to Buy Today and Hold for the Next 5 Years

These Canadian stocks are trading at discounted valuations, providing an opportunity for buying the dip.

Read more »

bulb idea thinking

Safety in Size? 2 of the Bluest Blue-Chip Stocks I’d Buy Now

TC Energy (TSX:TRP) and another cash cow have huge dividend yields for safe investors.

Read more »

A cannabis plant grows.
Cannabis Stocks

Can Aurora Cannabis Stock Recover in 2024?

Aurora Cannabis stock is down 99% from all-time highs but remains a high-risk bet, despite its cheap valuation.

Read more »

Question marks in a pile
Dividend Stocks

Where Will Brookfield Infrastructure Partners Stock Be in 5 Years?

Brookfield Infrastructure Partners (TSX:BIP.UN) kicked off 2024 with a bang. Where will it be in five years?

Read more »

TFSA and coins

TFSA Investors: 3 Incredible Stocks for 2024

Are you looking for stocks to buy and hold for years for your TFSA? These three stocks could deliver exceptional…

Read more »

A person looks at data on a screen
Stocks for Beginners

3 Warren Buffett Stocks to Hold Forever

Warren Buffett sold some shares in Apple (NASDAQ:AAPL), and the market had questions.

Read more »

Dividend Stocks

Golden Years Gain: Your CPP Benefits at Age 70

CPP users delaying pension payments until 70 will receive substantial monthly income streams in the golden years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Dividend Stocks You Can Safely Hold for Decades

Top TSX dividend stocks are on sale.

Read more »