Aritzia Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mark Petrie - CIBC Capital Markets - Analyst : Thanks and good afternoon. I wanted to just ask about the performance of the new stores. And Jennifer, I think you called out at the bulk overtime location that 60% of the customers were new to the Aritzia brand. I just want to make sure I had that right. And then also if you could just comment like how does that compare to what you've seen from your other new stores in new markets over the last two or three years? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 11, 2024 / 8:30PM, ATZ.TO - Q1 2025 Aritzia Inc Earnings Call

Question: Mark Petrie - CIBC Capital Markets - Analyst : Okay, thanks for that. And if I could just follow up on the sales momentum. I think the Q2 guidance is 7% to 10% growth. You've got some additional new stores coming into the network. During the quarter, the Q1 growth was up 8% and you were calling out how the trends accelerated through Q1. So I'm just hoping you could square that up and is that just sort of pointing to the upper end of the range is the lower end just sort of conservatism. Maybe, Todd, you could just elaborate on the Q2 sales guidance.

Question: Mark Petrie - CIBC Capital Markets - Analyst : Understood. Appreciate all the comments and all the best.

Question: Luke Hannan - Canaccord Genuity - Analyst : Thanks. Good afternoon. I wanted to ask about digital marketing and specifically the campaigns that you've rolled out so far. Can you share with us any specifics on certain KPIs like return on ad spend. How is that unfolding relative to your expectations, maybe conversion as well? Just to give us a sense, the progress there?

Question: Luke Hannan - Canaccord Genuity - Analyst : Very helpful. Thanks. And then I wanted to follow up on the gross margin performance in the quarter. It was Todd, slightly ahead of expectations. Curious to know if that's entirely driven by better than expected leverage on fixed costs because of the sales performance or if there's anything else to call out there? Maybe I'll just squeeze in if you can share your thoughts on freight as well as if that's appropriately reflected in the margin guidance for the year?

Question: Luke Hannan - Canaccord Genuity - Analyst : Very helpful. Thank you very much.

Question: Irene Nattel - RBC Capital Markets - Analyst : We've been talking a lot about newness. It sounds as though you're really pleased with how that played out in the quarter. But wondering if you could provide just a little bit more color on the types of newness that you're seeing and what we should be expecting to move through the summer into fall?

Question: Irene Nattel - RBC Capital Markets - Analyst : That's great to hear. Thank you. So in light of the good momentum that we're seeing. I guess one of the questions is why no upward nudging of the guidance for F '25? And what will it take to get there?

Question: Irene Nattel - RBC Capital Markets - Analyst : Understood. Thank you.

Question: Brian Morrison - TD Securities - Analyst : Thanks very much. I want to go back to the question that ad market on new store productivity because it's a big driver here. So just over the past year, I wonder if the new norm is a payback less than one year are the US stores in local currency? Are they tracking well ahead of the $1,000 of without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 11, 2024 / 8:30PM, ATZ.TO - Q1 2025 Aritzia Inc Earnings Call sales per square foot in Canadian dollars? And if so, by how much and is your target this year that 60% of revenue growth, it's to come from new stores in [Reynosa].

Question: Brian Morrison - TD Securities - Analyst : Okay. And then I guess, Todd, if I can have a follow up here. If these encouraging trends continue throughout the second half, you're saying through the important holiday season, you're going to have some pretty significant net cash come year end and you're going to have declining CapEx next year. I'm wondering if an active NCIB is at the top of your capital priorities or how you're thinking about that?

Question: Brian Morrison - TD Securities - Analyst : Thanks very much.

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Thank you. Good afternoon, everyone. I just wanted to clarify with respect to the new stores, new boutiques for the balance of the year. Jennifer, did I catch correctly that you have accelerated those new store openings like like, like you've brought some forward. And if so, can you just give the breakdown of what you expect in terms of new boutiques by quarter through the balance of the year?

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Right. Okay. That's great color. Thank you. And then just coming back to the 2025 guidance, you obviously reiterated it here, which is great to see. I'm just wondering, I'm thinking about the SG&A as it for the balance of the year you're guiding to kind of flat to down 50 basis points is overperforming on SG&A relative to your guidance. Would that be largely just driven by the comps? Or is there something else in there that you could do on SG&A? I'm just thinking about driving increased leverage compared to what your current guidance implies.

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Okay. That's great. And then I just had just one more, if I could. You talked a lot about optimized inventory driving e-commerce sales, even retail sales. Do you have a inventory target? Like how should we think about that evolving through the balance of the year? Is it kind of in line, we'll start with revenue growth?

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Great. Okay. Thanks. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 11, 2024 / 8:30PM, ATZ.TO - Q1 2025 Aritzia Inc Earnings Call

Question: Michael Glen - Raymond James - Analyst : Just on gross margin, so you're talking about this improving, continually improving inventory composition and then lower markdowns as the positive influence on gross margin, but I'm just trying to assess like you do expect a relatively sizable step down in gross margin in Q2 relative to Q1. So I know there's some normal seasonality, but is there anything else and there the that we should be thinking about?

Question: Michael Glen - Raymond James - Analyst : But you're still seeing. So would you expect -- are you expecting for this Q2 relative to prior years to have a similar level of sale activity in Q2? Like I'm just trying to gauge it versus history.

Question: Michael Glen - Raymond James - Analyst : Okay. And then just on the store openings like as we think about the next year, fiscal '26, like what's the are you seeing a potential for a higher higher number of store openings next year versus what we might be modeling?

Question: Michael Glen - Raymond James - Analyst : Thank you.

Question: Mauricio Serna - UBS - Analyst : Great. Good afternoon and thanks for taking my questions. I just wanted to confirm the comment that you guys saw positive comp sales across both geographies and both channels. And then maybe you could talk a little bit more about the exit rate that you had at the end of the quarter. Maybe from a so like total sales and comp sales perspective, that will be super helpful. Thank you.

Question: Mauricio Serna - UBS - Analyst : On the gross margin puts intakes. One of the headwinds still is like the preopening, flagship amortization. Could you give us a sense like how much of that would have an impact you had in Q1 and the expectation for the rest of the year? If you have any idea?

Question: Mauricio Serna - UBS - Analyst : Got it. Very helpful and congrats on the results.