Aritzia (TSX:ATZ) has started 2024 with a bang, as it has already risen nearly 30% this year so far to currently trade at $35.65 per share, outperforming the broader market by a big margin. By comparison, the TSX Composite benchmark has advanced by only 1% year to date from its previous year’s closing level.
After experiencing a combined value erosion of 47% in 2022 and 2023, the recent rally in ATZ stock has brought significant relief to its loyal investors. Despite the recent recovery, however, the stock has still lost 17% of its value in the last year. Does this dip still make it one of the most attractive Canadian growth stocks to consider in 2024? Before we discuss that, let’s take a closer look at some important factors that drove its share prices down last year.
A little about Aritzia’s business model
If you don’t know it already, Aritzia is a fashion designer and apparel retailer based in Vancouver that mainly specializes in women’s clothing and accessories. At the current market price, ATZ has a market cap of $3.8 billion.
At the end of November 2023, the company had 117 boutiques across North America as well as an online platform that serves customers globally. It has a loyal customer base and a strong brand identity, which has helped it achieve impressive financial growth with healthy margins in recent years.
Here’s why Aritzia stock fell sharply in 2023
Despite its strong fundamentals, Aritzia stock faced a major setback in 2023, when it plunged by more than 50% in the first three quarters of the calendar year 2023. The main reason for this decline was a slowdown in its sales growth trends due to inflationary pressures and a weakness in consumer spending.
Notably, Aritzia’s sales in the first three quarters of its fiscal year 2023 (ended in November 2023) grew positively by 5.9% YoY (year over year) to $1.7 billion. In the same three quarters of the previous fiscal year, its sales growth rate was significantly stronger at 48.3% YoY.
What’s next for ATZ stock?
While Aritzia’s sales growth in the first three quarters of its fiscal year 2023 clearly slowed on a YoY basis, we shouldn’t forget the fact that it follows significant growth in previous years. Despite macroeconomic challenges and a tough consumer spending environment, the company has managed to post stable performance across all geographies and channels in recent quarters, with continued increases in both retail and e-commerce revenues.
Aritzia’s management is also utilizing the ongoing phase of weak sales growth to expand its retail network across Canada and the United States, as well as strengthen its e-commerce presence. It’s investing in the scalability of its business, including launching an improved product assortment, accelerating real estate expansion, and making strategic investments in the e-commerce segment. These investments and strategic efforts should help Aritzia accelerate its financial growth trends in the years to come. These positive factors could continue to drive ATZ share prices higher, making it look attractive to buy now and hold for the long term.
