This Top Canadian Retail Stock Eyes E-Commerce Growth

Here’s why I think investors interested in owning retail stocks should consider Canadian retailer Aritzia (TSX:ATZ) today.

| More on:
analyze data

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Retail stocks are among the most sought-after in this current market environment. There are a number of reasons for this.

From a fundamentals standpoint, retailers stand to benefit greatly from a post-pandemic mass reopening. From a speculative standpoint, meme stock investors are out there en-masse, driving up the value of these retailers given this economic backdrop.

However, not all retailers are the same. Canadian fashion retailer Aritzia (TSX:ATZ) has proven to be a much steadier growth gem for investors interested in retail exposure today. Accordingly, this stock is on my radar now for those seeking a retail play.

Let’s dive into why Aritzia looks well-positioned as a growth play right now.

U.S. expansion highlights growth potential with Aritzia

The pace of the economic reopening in the U.S. blows away most countries out there, including Canada. Accordingly, retailers like Aritzia that are rapidly expanding in the U.S. ought to be viewed as higher-growth options than Canada-focused retailers. Indeed, Aritzia plans to actually open stores south of the border this year. I view this move as highly bullish for long-term investors looking at retail stocks right now.

One of the reasons Aritzia has been able to show resilient results of late is related to its U.S. store reopening. The company’s Q4 revenue came in relatively flat on a year-over-year basis. Store reopening combined with a surge in e-commerce sales drove this better-than-expected performance.

On the e-commerce front, Aritzia posted a massive year-over-year jump of more than 80% this past quarter. The company produced a profit, despite the headwinds caused by the pandemic. And the company pointed to continued supply chain improvements and operational efficiencies as drivers of future margin expansion.

Needless to say, the ability of Aritzia to shift quickly to an omnichannel business model is something I think investors need to take solace in. This is a company with a best-in-class management team and strong strategic focus.

U.S. growth potential remains strong for Aritzia, which is what I’d encourage long-term investors to focus on right now.

Bottom line

Aritzia’s long-term growth prospects look appealing today. The fashion retail space is a difficult one to navigate. However, Aritzia’s core brands provide investors with a strong moat in a sector that is likely to be ultra-competitive in the years to come.

Analysts remain bullish on this stock for similar reasons. Indeed, Aritzia stock currently trades around 10% below its all-time highs. Accordingly, I think this dip provides investors with a nice entry point today in a high-quality retail stock. That’s hard to find today.

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 Chris MacDonald has no position in any of the stocks mentioned.

More on Investing

growing plant shoots on stacked coins
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy Now and Own for 25 Years

These top TSX dividend stocks look oversold and now offer attractive yields for TFSA and RRSP investors.

Read more »

money cash dividends

Passive-Income Power: How to Make $105/Week TAX FREE in a Bear Market

Investors may want to pursue a passive-income strategy in this bear market by snagging dividend stocks like Freehold Royalties Ltd.…

Read more »

Money growing in soil , Business success concept.
Energy Stocks

3 Growth Stocks up +30% in 2022

These three growth stocks are up over 30% in 2022 alone but have come down in the last few weeks…

Read more »

Oil pumps against sunset
Energy Stocks

2 Energy Stocks That Jumped Over 60% This Year

Consider investing in these two energy stocks amid the recent pullback after putting up stellar gains earlier this year.

Read more »

Profit dial turned up to maximum
Dividend Stocks

RRSP Investors: 2 Undervalued TSX Stocks to Buy Now for Total Returns

Top TSX dividend stocks are now on sale for RRSP investors seeking attractive total returns.

Read more »

TFSA and coins
Dividend Stocks

2 Beaten-Down Stocks to Buy for Your TFSA

Two beaten-down, but high-yield TSX stocks are profitable options for TFSA investors.

Read more »

Volatile market, stock volatility
Stocks for Beginners

3 Top TSX Stocks to Buy in Volatile Markets

Sitting on cash? Consider these three TSX stocks for the long term.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

Inflation Soars to 7.7%: 1 Dividend Stock to Buy Now

Enbridge (TSX:ENB)(NYSE:ENB) stock looks like a magnificent dividend stock to help Canadians deal with inflation at 7.7%.

Read more »