The stock market in Canada saw a handsome recovery in 2023 after witnessing a tech sector-driven selloff in the previous year amid rapidly rising interest rates. Last year’s rally in most stocks came after easing inflationary pressures in the second half of 2023 raised investors’ hopes that central banks could soon start easing their monetary policy stance. However, some growth stocks, especially from the retail sector, still ended the year deep in red territory, making them look cheap to buy right now.
In this article, I’ll highlight two such Canadian growth stocks you can buy today to expect healthy returns on investments, as they have the potential to make a big comeback in 2024.
The shares of the Vancouver-headquartered company, Aritzia (TSX:ATZ), recovered by 16.4% in the December 2023 quarter. But the stock still ended the year with 42% losses. At the time of writing, ATZ stock trades at $26.27 per share with $2.9 billion in market capitalization.
If you don’t know it already, Aritzia is an integrated design house and fashion retailer. The company sells a diverse collection of clothing and accessories suitable for various styles and occasions through its e-commerce platform and 116 boutiques across Canada and the United States.
In the second quarter (ended in August 2023) of its fiscal year 2024, Aritzia’s sales rose 1.6% YoY (year over year) to $534.2 million. Despite challenging retail and consumer spending environments, the company posted an adjusted quarterly profit of $3.4 million against the Street analysts’ expectations of a $4.2 million loss.
Despite the ongoing challenges, Aritzia expects to post positive revenue growth in its full fiscal year 2024. Its continued expansion in the United States with strategic boutique openings and focus on sustainable growth, amidst a dynamic consumer environment, make this beaten-down stock look cheap to buy now to hold for the long term.
Canada Goose stock
Canada Goose Holdings (TSX:GOOS) is another struggling retail stock that I find undervalued to buy now. After ending 2023 with nearly 35% losses, the shares of this Toronto-headquartered apparel retailer haven’t seen much change this year so far and currently trades at $15.80 per share with a market cap of $1.6 billion. Besides its home market, Canada Goose also generates a significant portion of its revenue from international markets, including Asia, the United States, and Europe.
In the September 2023 quarter, Canada Goose reported a 1.4% YoY increase in its total revenue to $281.1 billion. Even as its wholesale revenue fell 10% from a year ago, a strong 15% gain in its direct-to-consumer (DTC) sales drove its total revenue higher. Despite higher costs, positive factors such as more contribution of its DTC channel sales in its total revenue and stronger pricing helped the Canadian retailer deliver an adjusted quarterly profit of $16.2 million, far better compared to analysts’ expectation of a $22.3 million net loss.
If interest rates are cut in 2024, this could lead to an increase in consumer spending. Such a scenario should provide a more favourable economic backdrop for this global luxury and lifestyle brand’s growth and help its share prices recover fast. These expectations make Canada Goose stock look cheap after it has lost more than 40% of its value in the last year.