The apparel scene can be a pretty tricky place to invest, especially if you’re a new investor who’s not quite sure what’s in fashion and how long something will stay fashionable. Despite the complexities involved with select fashions, I do think that we’re seeing some of the incumbents lose some pretty meaningful market share to some smaller, disruptive up-and-comers. Indeed, it’s tough to gauge the full power of a brand.
Perhaps the economic moat of a swoosh or slogan isn’t worth nearly as much if the firm behind the logo isn’t innovating. In any case, I’d much rather be in a smaller, up-and-coming mid-cap industry disruptor with room to expand than a firm that may be guilty of complacency as competition in the realm of apparel grows a bit more fierce by the day. Indeed, fashion can be a tough place to make big money.
But one name that I think stands out from the pack is Canadian women’s clothing firm Aritzia (TSX:ATZ), which has been doing surprisingly well with its relatively early expedition into the U.S. markets. Thus far, the name has been more tariff-resilient than I ever would have thought. And while things could change with time, I do view Aritzia as a household staple that’s on the cusp of a massive boom.
Indeed, if you’re Canadian, you’re already probably well familiar with the brand. And while Americans are just warming up to the retailer, I do view their early success as a hint of what we can expect from the firm as it looks to add to its recent strength and apply some added pressure to its fashionable rivals south of the border.
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Artizia stock keeps getting hotter
With shares of ATZ gaining another 3.2% on Wednesday’s solid session, questions linger as to what the next big move from the fast-rising $8.8 billion star will be. Personally, I think ATZ stock, while somewhat rich at just shy of 39 times trailing price-to-earnings (P/E) or 29 times forward P/E, is one of those market expansion stories that’s worth paying a premium for.
Indeed, Aritzia’s still a relatively small fish in the massive apparel retail market. And if it can keep sprinting in the U.S. in spite of tariffs, inflation, and other economic setbacks, I do view it as one of the next big banners to disrupt American fashion as we know it.
While I’m not thrilled to pay premium prices, I must say that Aritzia has all the makings of a truly wonderful high-growth business that can grow into its multiple. Whether Aritzia is the new rival that the U.S. fashion scene needs remains the multi-billion-dollar question. Either way, multiple analysts are upbeat about the company’s expansion potential.
More growth ahead
The company is poised to open new shops here in Canada and the U.S. over the coming years. And with no plans to pass tariffs onto consumers (Artizia’s margins are already quite decent), I don’t expect demand to wane anytime soon. Indeed, perhaps eating the tariff and finding other ways to mitigate costs is the best move at a time when the consumer is experiencing multiple headwinds.
If Aritzia can keep taking share, I think it’ll do fine, even in a mixed economy. That’s why I’m staying bullish at more than $76 per share. It’s a great Canadian growth story that’s still in its infancy.
