Aritzia (TSX:ATZ) has been one of Canada’s best growth stocks over the past five years. It is up 357% for a 35% compounded annual growth rate (CAGR). Now, it hasn’t come without volatility.
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Aritzia stock is volatile, but it has delivered great long-term returns
It has had three drawdowns of 40% or more during that time. Smart investors would have seen those as great buying opportunities. However, you would have needed some guts and gumption to hold through those pullbacks.
Strong brand power gaining traction globally
Aritzia’s “Everyday Luxury” brands have been resounding with young and middle-aged women. It owns its own brands, and each resounds with its own market. Aritzia has largely penetrated the Canadian market. However, it has a long way to go in America. That has been a massive factor in its growth story.
It has 68 boutiques in Canada and 71 boutiques in the U.S. The great thing is that as it adds new boutiques in the U.S., it tends to enjoy a surge in e-commerce when it enters a new region. In fact, since 2020, e-commerce sales have surged by a 33% CAGR. E-commerce now makes up 35% of total sales.
Results have been exceptional
Since 2020, Aritzia has grown revenues by a 23% CAGR. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) has risen by a 19% CAGR.
In its recent fiscal third quarter of 2026, net revenues eclipsed $1 billion of sales, for 34% revenue growth. Profit margins improved 60 basis points and adjusted EBTDA margins hit 20%.
The company continues to target 33% revenue growth for the whole fiscal 2026 year. However, analysts believe there are chances Aritzia could beat these estimates given that channel checks are exceeding expectations for the fourth quarter of 2026. The company is expected to report earnings on April 30, 2026, so investors will want to watch closely.
The company is undoubtably on a roll. Its merchandise and brand are resounding with its customer base. New store openings are exceeding expectations. In fact, the company continues to see store paybacks in less than 18 months, which is a very strong result.
Aritzia has a long growth trajectory, but how much should you pay for that?
Aritzia still has ample opportunities to expand. It believes it could easily have 150 or more American boutiques in the coming years. That is not even contemplating international expansion where it could have several multiples of that across Europe and Asia.
With $620 million of cash on the balance sheet and strong cash generation, it certainly has the dry powder to fund these growth plans. Management has proved to be thoughtfully prudent about growth. They don’t expand faster than they can manage effectively.
Despite its great growth trajectory, investors do need to be cognizant of risks. At $139.50, it is trading just off all-time highs. Aritzia is trading with a forward price-to-earnings ratio of 38 and an enterprise value-to-EBITDA ratio of 18.5.
These are elevated valuation multiples, and the market is factoring in strong execution for the fourth quarter. Any change in the U.S. tariff stance or a rapid decline in the economy could send this stock downward.
As noted above, Aritzia’s stock can be volatile. An inevitable pullback could provide a better opportunity to start or add to a position in this great Canadian growth stock.
