After the TSX staged a sharp recovery in the fourth quarter of 2023, finding growth stocks that appear significantly undervalued has become a challenging task. If you’re on the hunt for such a stock, Aritzia (TSX:ATZ) could be worth considering in 2024.
If you don’t know much about it, it’s a Vancouver-headquartered fashion retailer and design house that sells everyday luxury clothing through its online store and a network of 117 boutiques in the United States and Canada. It currently has a market cap of $2.9 billion as ATZ stock trades at $26.46 per share after declining by nearly 47% in the last year. In this article, I’ll highlight the three key factors that make Aritzia a really attractive Canadian growth stock to buy in 2024.
Strong financial growth trends
One of the primary reasons to consider ATZ as a top growth stock pick is its years-long solid financial growth track record. Despite facing pandemic-driven operational challenges in recent years, the company has consistently demonstrated strong sales growth, healthy profit margins, and effective cost management. This financial stability, even amid macroeconomic uncertainties, says a lot about the company’s operational efficiency and market appeal.
On January 10, Aritzia announced its upbeat financial results for the third quarter (ended in November 2023) of its fiscal year 2024. In the first three quarters of the fiscal year combined, the company’s sales have gone up by 5.9% YoY (year over year) to $1.7 billion. Even as its adjusted earnings of $0.60 per share for the same period have slid considerably on a YoY basis, they have exceeded Street analysts’ expectations by a huge margin, reflecting the underlying strength of its business model to perform well even in challenging economic times.
Strategic expansion and growth efforts
Its ongoing expansion efforts could be the second key reason that makes ATZ stock so appealing. Unlike many of its competitors, Aritzia has a long experience in navigating challenging retail scenarios, which failed to shift its focus from strategic business expansion.
In the last four quarters, the company has expanded its network of boutiques from 113 to 117. While these expanded or repositioned boutiques have increased the company’s expenses, its consistent focus on retail expansion strategy, especially in the United States, is likely to have a notable positive impact on its financial growth in the years to come.
Besides its efforts to expand its retail network, Aritzia is also focusing on increasing its e-commerce momentum, introducing diverse product lines, and expanding its distribution centres and support offices. These strategic initiatives not only reflect the company’s adaptability to consumer behaviour but also its potential to capture a larger market share in the coming years.
Focus on brand image
My final reason to consider investing in ATZ stock revolves around its powerful brand identity and loyal customer base. Known for its fashion-forward designs and quality merchandise, Aritzia has earned a strong brand image that resonates with a large demographic.
In its latest earnings report, Aritzia’s chief executive officer, Jennifer Wong, highlighted how the company is continuing to make investments in digital marketing and technology. These efforts should continue to enhance Aritzia’s brand image, which could help its financials grow at a faster pace, and its share prices soar in the long term.
