After an incredible 94% gain in 2024, Aritzia (TSX:ATZ) has kicked off 2025 on a solid note. So far in January, ATZ stock has surged an additional 28%, currently trading at $68.50 per share and pushing its market cap to $7.6 billion. The recent rally comes on the heels of strong financial results, with shares jumping nearly 19% on January 10 alone after the Vancouver-based design house and fashion retailer released its upbeat earnings for the third quarter (ended in November) of its fiscal year 2025.
These results strengthen Aritzia’s status as a Canadian retail icon with impressive growth potential. But does this make ATZ stock a must-buy for investors at its current levels? In this article, let’s dive into Aritzia’s latest numbers and key drivers behind its strong performance, which should help you decide whether this growth stock deserves a spot in your portfolio.
Aritzia’s upbeat third-quarter results
In the third quarter, Aritzia’s total revenue climbed by 11.5% YoY (year over year) to $728.7 million. This top-line growth was mainly supported by robust gains in its U.S. operations, which saw a 23.6% YoY revenue increase to $403.7 million. As a result, the U.S. geographical segment stood out as Aritzia’s largest growth driver, accounting for over 55% of total revenue. Meanwhile, its e-commerce segment also delivered impressive results, with a 14% YoY rise to $242.1 million. At the same time, the company’s retail revenue grew 10.3% from a year ago, fueled by new boutique openings and strong product launches.
On the profitability side, Aritzia’s gross profit margin saw a healthy expansion last quarter to 45.8%, up from 41.5% a year ago. Positive factors such as better inventory management, reduced markdowns, and savings from efficiency initiatives continued to help it expand profitability. Similarly, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) surged 48.7% YoY to $136.4 million, with a margin of 18.7%.
These are some of the key reasons why Aritzia’s third-quarter earnings event boosted investors’ confidence, triggering a rally in its share prices.
Key drivers behind Aritzia’s success
It’s important to note that currently, there are two main pillars of Aritzia’s growth strategy. The first one is its focus on U.S. market expansion, and the second one is its increasing attention to digital innovation.
In the latest quarter, the company opened flagship boutiques in high-traffic locations such as South of Houston Street in New York and Michigan Avenue in Chicago. These additions not only improved its retail footprint but also showcased its efforts to capture more market share in the United States.
On the digital front, investments in e-commerce and targeted marketing are continuing to pay off well, driving strong traffic growth, especially in the U.S. market. Also, the Canadian fashion icon’s ability to create a seamless online and in-store experience is gradually improving customer loyalty.
Is Aritzia stock a must-buy right now?
With a projected fiscal 2025 revenue of $2.67 to $2.69 billion and adjusted EBITDA expected to increase by 400 to 450 basis points on a YoY basis, Aritzia’s short-term outlook looks strong. In addition, its focus on expanding in high-potential markets, coupled with operational efficiencies, also makes it a top growth stock for long-term investors.
