Aritzia Inc Q2 2025 Earnings Call Transcript

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

Question: Luke Hannan - Canaccord Genuity - Analyst : Yeah, thanks. Good afternoon. Maybe we'll start with the difference that you're seeing right now between your Canadian clientele and then your US clientele. So I think that's something that most folks on this call were seeing that all across the consumer universe. So that's not really a surprise. But how exactly is that manifesting itself in your business? Is that just shying away from higher ticket items, for example? Is trip frequency a little bit different north of the border versus south of the border? Maybe just additional commentary on how exactly that's manifesting itself in your business.

Question: Luke Hannan - Canaccord Genuity - Analyst : Okay, thanks. That's helpful. And maybe just to follow-up. I apologize if I missed this in your prepared remarks. But when it comes to the store-level economics, for those boutiques that you had opened during the quarter, is it fair to say that they are still tracking around that 12-month payback period or better? Or has that changed in the US at all?

Question: Luke Hannan - Canaccord Genuity - Analyst : Okay, great. And then last question, and then I'll pass the line here. When it comes to the updated guidance, specifically the updated SG&A guidance, I know that there's different investments that you're making in the business right now. But can you give us a little bit more specificity on what exactly that is that's maybe changed from last quarter to this quarter? Is it more investments in some of the existing initiatives that you're going to have planned for? Is it an expansion in scope of those initiatives? Just any incremental detail there would be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 10, 2024 / 8:30PM, ATZ.TO - Q2 2025 Aritzia Inc Earnings Call

Question: Luke Hannan - Canaccord Genuity - Analyst : Okay. Helpful. Thank you very much.

Question: Mark Petrie - CIBC Capital Markets - Analyst : Yeah, thanks. Good afternoon. Could you just clarify, for the Q3 trends to date, are you saying that the US is stable and it's Canada that's decelerated?

Question: Mark Petrie - CIBC Capital Markets - Analyst : Yeah. Okay, okay. And I wanted to just clarify, Jen, one of your comments around the digital marketing, I think you said your plan from here is to optimize and build. Does that imply that you expect overall investment to sort of be stable from here? Or are you still in a ramp-up phase?

Question: Mark Petrie - CIBC Capital Markets - Analyst : Okay. And if I could just ask one other one, which is just regards to sort of the consumer trends and sort of shifts in taste, what categories or occasions or types of product they're sort of under or over indexing versus your expectations so far in fall, winter?

Question: Mark Petrie - CIBC Capital Markets - Analyst : Okay. Appreciate all the comments. All the best.

Question: Martin Landry - Stifel Canada - Analyst : Hi. Good afternoon, guys. I was wondering if you can help us out, just to clarify one thing, did you delay some store openings into fiscal '26 or it's just the delay between Q3 and Q4?

Question: Martin Landry - Stifel Canada - Analyst : Yeah, thank you. And that's a good segue into my next question. You opened up a little bit about saying that you're excited with your plans for fiscal '26 for your real estate. And I was wondering if you can give us a peek as to what that could look like in terms of store openings?

Question: Martin Landry - Stifel Canada - Analyst : Okay. That's helpful. And then maybe my last question for you, Todd. You actually reiterated your fiscal '27 goals. I think it's great to see. That includes, I think, an EBITDA margin that's near 19%, if I recall correctly. Wondering what's the path from here to there? Is it a straight line? Is this going to be back-end loaded in terms of gross margin -- EBITDA margin expansion? Just a little bit of color would be helpful for modeling purposes.

Question: Martin Landry - Stifel Canada - Analyst : Okay. Great to hear. Best of luck, and thank you for the answers.

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Thank you. Good evening, everyone. Just wanted to follow up on the SG&A guidance. I understand that there are investments that continue to be ongoing. But just was there anything incremental? Because the sales number, roughly guidance to the midpoint is unchanged, but SG&A as a percent of sales has changed a little bit. So I'm just curious what the incremental piece it is in the SG&A that wasn't there three months ago.

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Yeah. That's great. Okay. So those are -- that's incremental spend that you expect to generate a return on it, just good to hear. Okay. That's great. And then I just wanted to clarify, you mentioned the number a couple of times, but just in terms of the new stores being weighted to Q4, you said that those stores are expected to deliver 15%, 20% growth in Q4. Is that -- are you talking in the US alone? Or are you kind of giving guidance -- what do you think the top line consolidated number is?

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Right. Okay, okay. No, that's helpful. Thanks, Todd. And then maybe just finally, you talked about some of those non-comparable items in fiscal Q3. Is it fair to say that comps maybe have decelerated a little bit, excluding those non-comparable items, just given the incremental weakness you've seen in Canada?

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Okay. And then would the net of that be a somewhat similar type comp in Q3 you saw in Q2?

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Yeah. Okay, okay. That's great. Okay. Thanks, Jennifer. Thanks, Todd. Appreciate it.

Question: Mauricio Serna - UBS - Analyst : Hi, good afternoon. Thanks for taking my question. I just wanted to clarify the two factors that are impacting your third quarter sales guidance that you're lapping. Is that impact on both markets? Or is it more weighted to one? I just want to make sure from that regard that like one market is (inaudible) than the other.

Question: Mauricio Serna - UBS - Analyst : Got it. And then just thinking about Q4, the implied comp sales guide, it's fair to assume also like a mid-single-digit comp sell guide? Or is it like some sort of acceleration there? Just trying to understand like -- how do you think about (inaudible) sales?

Question: Mauricio Serna - UBS - Analyst : Got it. And then just last question on the gross margin. For the third quarter, the expansion of 400 basis points, could you give us like a sense of what are like the main drivers behind that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 10, 2024 / 8:30PM, ATZ.TO - Q2 2025 Aritzia Inc Earnings Call

Question: Mauricio Serna - UBS - Analyst : And is that -- sorry, is that freight cost pressure kind of like -- did it get worse versus when we were like three months ago? Or is that like consistent with what we're seeing before?

Question: Mauricio Serna - UBS - Analyst : Got it. Thank you so much. Congratulations on the results.

Question: Brian Morrison - TD Cowen - Analyst : Oh, thanks very much. Going back to the SG&A, you mentioned the higher infrastructure costs and the marketing of the flagships. I assume that the marketing of the flagship was already planned in that number. So is the infrastructure, the SG&A spend, is that a pull forward? Or is that just incremental?

Question: Brian Morrison - TD Cowen - Analyst : Is that because of the successes you're seeing to date from them?

Question: Brian Morrison - TD Cowen - Analyst : Okay. So on flagship --

Question: Brian Morrison - TD Cowen - Analyst : Understood. So on the flagships, will they be open for Black Friday? How much is the incremental spend on that? And Todd, what will be the falloff of the pre-lease amortization associated with that?

Question: Brian Morrison - TD Cowen - Analyst : Thank you, Jen. I actually poked my head in the Rockefeller new store last three weeks ago, and it looks brilliant. I agree with that. Can you quantify what that cost is on the flagship celebration and also the previous amortization?

Question: Brian Morrison - TD Cowen - Analyst : Thank you very much.

Question: Mauricio Serna - UBS - Analyst : Great. I just had a quick follow-up. Now that you're lapping the -- I mean, not be recurring on the digital archive sale. Like, do you expect some sort of like gross margin benefit because of that? Could you quantify it, if possible? Thank you.

Question: Mauricio Serna - UBS - Analyst : Got it. Thank you so much.