Valued at a market cap of $5.5 billion, Aritzia (TSX:ATZ) stock went public in October 2016. In the last eight years, the TSX stock has returned 178% to shareholders, outpacing the broader market returns of 129%. Founded over 40 years ago, Aritzia designs and sells apparel and accessories in Canada, the U.S., and other international markets. It sells products under multiple brands like Wilfred, Super World, TNA, and Babaton.
Despite its outsized gains, ATZ stock trades 18% below all-time highs, allowing you to gain exposure to a quality growth company at a lower multiple. Let’s see if Aritzia can reclaim its all-time highs and continue to beat the broader markets in 2025 and beyond.
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A strong performance in fiscal Q2 of 2025
In the fiscal second quarter (Q2) of 2025 (ended in September), Aritzia reported revenue of $616 million, an increase of 15% year over year. Its gross margins expanded by 520 basis points to 40.2%, enabling gross profits to grow by 33% to $247 million. Focusing on cost savings allowed Aritzia to expand EBITDA (earnings before interest, tax, depreciation, and amortization) by 500 basis points to 9%. Moreover, adjusted EBITDA grew by 161% to $55 million in the September quarter.
Aritzia emphasized that strong sales in the United States drove top-line growth for the company in Q2. Revenue grew by 24% year over year to $345 million in the U.S., powered by strong performance across retail and e-commerce segments. With 56 boutiques in the U.S., the region will remain a key driver of sales in the upcoming decade.
This was offset by weak performance in Canada, where sales growth was much lower at 6%, indicating soft consumer spending and a challenging macro environment.
Interestingly, retail sales grew by 18% to $426 million, while e-commerce sales rose 10% to $190 million year over year. Aritzia opened three new boutiques in Q2 and plans to open nine to ten new boutiques over the next six months.
The bull case for ATZ stock
Aritzia is banking on opening retail stores to grow its revenue going forward. Further, launching a new website and a mobile application over the next 12 months should boost higher-margin online sales.
The company projects fiscal Q3 sales to range between $675 million and $700 million. At the midpoint estimate, it expects to grow fiscal 2025 sales by 10% year over year to $2.56 billion. These estimates suggest that Aritzia’s sales will grow between 15% and 20% year over year in Q4.
According to analyst estimates, Aritzia is positioned to grow
- Revenue from $2.3 billion in fiscal 2024 to $3.2 billion in fiscal 2027;
- Earnings per share from $0.92 in fiscal 2024 to $3 in fiscal 2027; and
- Free cash flow from $182 million in 2024 to $575 million in 2026.
Priced at 10 times forward free cash flow, Aritzia stock is really cheap. Between fiscal 2024 and fiscal 2027, it will invest close to $600 million in capital expenditures, which should drive future cash flow growth.
Analysts remain bullish on ATZ stock and expect it to surge close to 20% over the next 12 months.
