Why Did Aritzia Stock Soar 19% Yesterday?

Aritzia (TSX:ATZ) is blowing out expectations, which is why the stock has rallied. Can it meet high market expectations and sustain its high multiple going forward?

| More on:
question marks written reminders tickets

Image source: Getty Images

Founded in 1984, Aritzia (TSX:ATZ) is a luxury brand that designs and sells apparel and accessories for women in North America. It had its initial public offering in October 2016 at $16 per share.

What happened?

Aritzia just reported its third-quarter (Q3) fiscal 2022 financial results on Wednesday. And the high-growth retailer reacted by sustaining gains of 18.9% on Thursday. It continued to gain strength from the second-quarter results for which the stock reacted for a pop of about 17%.

Its performance achieved on a year-over-year comparison is nothing to sneeze at. For Q3, it highlighted the following:

  • Net revenue increased by 63% to $453.3 million
  • e-commerce revenue increased by 47% to $148.0 million, making up almost a third of the quarter’s revenue
  • Adjusted EBITDA doubled to $109.3 million
  • Net income increased by 113% to $64.9 million
  • Adjusted net income per share more than doubled to $0.61 from $0.29 in Q3 2021

So what?

Aritzia is easily among the best-performing retailers in North America. It has greatly exceeded the performance of the benchmark in the last year.

XRT Total Return Level Chart

ATZ and XRT Total Return Level data by YCharts

Here’s what Brian Hill, Founder, chief executive officer, and chairman had to say in the recent press release,

“Our strong performance has continued in the fourth quarter to date, despite the recent resurgence of COVID-19, associated supply chain and labour headwinds. As I reflect on our brand acceleration, new client acquisition and the performance of our business in the United States, I see extraordinary opportunities for Aritzia. Our business has never been stronger or better positioned for growth, as we continue to drive digital innovation of our eCommerce channel and Omni capabilities, accelerate boutique growth, expand our product assortment, and acquire new clients, all while continuing to strategically invest in our infrastructure and growing our team of world-class talent.”

Now what?

The company still sees lots of room for expansion in North America. Though, investors need to be careful as the retailer’s multiple has expanded substantially from its rally in the last year. Specifically, it’s north of 33 times earnings on a forward basis! That said, if Aritzia can sustain its growth, it would be able to grind higher.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Kay Ng has no position in any of the stocks mentioned.

More on Investing