Shares of Canadian retail giant Aritzia (TSX:ATZ) have surged over 150% since its IPO (initial public offering) in October 2016, outpacing the broader indices in this period. Valued at $5.1 billion by market cap, ATZ stock has returned over 65% year to date and trades 24% below all-time highs. Let’s see if Aritzia stock remains a good buy right now and if it can continue to deliver outsized gains to shareholders in the next five years.
Aritzia delivers in fiscal Q1 of 2025
Founded in 1984, Aritzia is a design house with an extensive portfolio of luxury brands. Aritzia has grown its revenue at an enviable clip, increasing sales from $857.3 million in fiscal 2021 to $2.33 billion in fiscal 2024. Its operating income has more than tripled from $51 million to $158.4 million in this period.
Despite a challenging macro environment, it increased sales by 7.8% year over year to almost $500 million in the fiscal first quarter (Q1) of 2025 (which ended in May). Its comparable sales growth stood at 2%, while sales originating in the U.S. were up 13% to $284.7 million, accounting for 57% of the top line.
Aritzia attributed its sales growth in the U.S. to its real estate expansion strategy and growing brand awareness. In Q1, it continued to optimize inventory composition, delivering a meaningful improvement in adjusted EBITDA (earnings before interest, tax, depreciation, and amortization).
The key driver of Aritzia’s revenue growth is the expansion of its retail stores. Over the years, Aritzia has developed its boutique network in a measured way, ending Q1 with 119 boutiques. These boutiques are situated in premier real estate locations in high-performing retail malls and high streets in the U.S. and Canada.
Aritzia’s chief executive officer (CEO), Jennifer Wong, explained, “Our new boutiques continue to perform ahead of expectations, and we are particularly excited about the extraordinary pipeline of boutique openings this year, representing 50% square footage growth in the United States.”
Aritzia’s growth story is far from over
Aritzia is a multi-channel retailer focused on growing its brand awareness in the U.S. by increasing its geographical footprint and a focus on digital sales. In recent years, it has invested in infrastructure to support geographic expansion and online sales with an increase in brand awareness.
Aritzia’s online sales rose from $226 million in fiscal 2020 to $785 million in fiscal 2023, indicating an annual growth rate of 37%. Its e-commerce sales increased from 23.1% to 33.7% in this period.
Aritzia is looking to gain traction south of the border, which is also the world’s largest economy. It currently owns and operates 51 boutiques in the U.S. and has identified over 150 locations that meet its investment criteria. Aritzia plans to open at least eight new boutiques in the U.S. each year through fiscal 2027, growing its total boutique count to more than 150 in the next three years.
Aritzia’s improving margins
Analysts tracking Aritzia expect adjusted earnings to expand from $0.92 per share in fiscal 2024 to $1.82 per share in 2025 and $2.41 per share in 2026. Given its focus on earnings expansion, the company should end fiscal 2029 with an adjusted earnings of $4 per share.
If ATZ stock is priced at 35 times trailing earnings, its share price should trade around $140 in July 2029, indicating an upside potential of over 200% from current levels.
Analysts covering ATZ stock remain bullish and expect it to gain 10% in the next 12 months.
