Aritzia (TSX:ATZ) has been one of those retail companies that have been through a wild ride since the pandemic. We’ve seen shares hit all-time highs of around $60 per share. Yet today, shares are near half that amount, trading at $37 per share.
And yet, shares of Aritzia stock have started to climb once more. So should investors consider getting in on the action before shares hit $40?
About Aritzia stock
To understand what’s been driving Aritzia stock, we should first understand the company a bit more. Aritzia is a Canadian women’s fashion brand known for its contemporary and stylish clothing and accessories. While starting off in Canada and expanding into the United States, the company’s high-quality, on-trend fashion hit its stride and surged in the U.S. during the pandemic.
The United States represents a significant market for fashion retailers due to its large population and strong consumer purchasing power. Expanding into the U.S. provided Aritzia with the opportunity to tap into a broader customer base and increase its brand presence in a key market.
The rise of e-commerce has enabled retailers like Aritzia to reach customers beyond their physical store locations. Expanding in the U.S. allowed Aritzia to leverage its online platform to reach a larger audience and drive sales through digital channels. Although, when interest rates and inflation rose, shares of the company dropped as high-end fashion was no longer affordable.
Earnings
To really understand this, and the recent turnaround in share price, we can take a deeper dive into earnings. Especially over the last few quarters, which should help us see whether the company is going through a bit of momentum.
During the second quarter, Aritzia stock reported net revenue of $534.2 million, with net income at a loss of $6 million, a drop of 113% year over year. By the third quarter, net revenue rose slightly to $653.5 million, with net income increasing to $43.1 million, though still down 39% year over year.
By the fourth quarter however, investors were seeing more improvement. Net revenue increased year over year, hitting $682 million. Net income decreased to $24.2 million, but was still in the positive.
Looking ahead
The key now is the future, of course. Net revenue should hit between $2.52 billion and $2.62 billion for 2025, according to Aritzia management. This would be an enormous improvement, given the company hit $2.3 billion in 2024. The fashion retailer expects consumers to have far more cash on hand for spending.
The third quarter saw shares shoot up, and stay up, rising higher as the company hits the halfway mark in the year. In fact, shares of Aritzia stock are now up 12% in the last couple of weeks alone. And as interest rates and inflation look to continue falling, there is more hope that the $40 share price is in range. This would mean now could be an excellent time to pick up this stock. As it looks like Aritzia stock should see a rise in share price as revenue rises with consumers looking to buy high-end items once more.
