Aritzia Inc Q3 2025 Earnings Call Transcript

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

Question: Martin Landry - Stifel Canada - Analyst : Hi. Good afternoon, guys, and congrats on your strong results. Todd, the first question is regarding your guidance for Q4. You're guiding for revenue growth of 28% to 31% when we normalize for an equal amount of weeks. So I was wondering if you could share with us a little bit what's the comparable sales growth assumption that's behind that revenue growth?

Question: Martin Landry - Stifel Canada - Analyst : Okay. And then I guess the follow-up to that question, Jennifer, you've touched on a lot of success factors that are playing out right now. It seems very broad-based, but I was wondering if you could just try to summarize for us. Why do you have so much success right now? What's different versus, let's say, six months ago because it does seem like a very impressive turnaround?

Question: Martin Landry - Stifel Canada - Analyst : Indeed. Well done, everyone.

Question: Mark Petrie - CIBC Capital Markets - Analyst : Yeah, good afternoon. I also wanted to ask about the Q4 guide, and I guess, specifically, given the stronger top line, what were the factors that held you back from adjusting the margin guidance? And what are you investing in Q4, maybe above what you might have otherwise baked into the previous guidance?

Question: Mark Petrie - CIBC Capital Markets - Analyst : Yeah. Understood. Okay. And I guess, that's sort of -- my follow-up question was just around that sort of pieces of spending for fiscal '26. I mean, you kind of answered it there. But is it the marketing piece that's really sort of still the area of investment and then it's the other areas where you would expect to be getting leverage?

Question: Mark Petrie - CIBC Capital Markets - Analyst : Yeah, understood. Okay. I'll pass the line. Congrats on a great quarter.

Question: Irene Nattel - RBC Capital Markets - Analyst : Thanks, and good afternoon, everyone. Happy New Year, and congratulations on the quarter. I was wondering if we could spend just a few minutes talking about the new store openings. And particularly the flagships, the response to the flagships, and I know it's early days, but what has been kind of the biggest surprises and how have they been performing, and how would you categorize the productivity in this larger square footage?

Question: Irene Nattel - RBC Capital Markets - Analyst : That's outstanding. Thank you. And a follow-up to that, as we go ahead to next year, how should we be thinking about the number of new store openings? And I guess, maybe taking a slightly longer-term horizon. You stepped up the number of openings, but also with the flagships and the success, has it refrained a little bit how you're the types of locations you're now going for? And again, how should we be thinking about all of that?

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

Question: Brian Morrison - TD Cowen - Analyst : Happy New Year, and lots of positives within these results, for sure. I want to drill down on the digital initiatives to start with because that was really impressive. What's driving that, Jen? Is it the products resonating? Is it halo impact? Is it your digital marketing? And then just to follow on to that, what is the percentage of digital marketing as a percentage of sales? And is 45% as a percent of revenue is still the target for you?

Question: Brian Morrison - TD Cowen - Analyst : And 45% still the target for fiscal 2027?

Question: Brian Morrison - TD Cowen - Analyst : All right. And then my follow-up question, thank you for that. My follow-up question is, I don't think it would be a call without discussing tariffs. Can you just talk about how you're preparing for the potential impact of tariffs, the undertakings to address? Where is the risk? Is it on imports to REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 09, 2025 / 9:30PM, ATZ.TO - Q3 2025 Aritzia Inc Earnings Call the US? Is it the minimum threshold? And what is your current percentage of manufacturing in China? I know you've been moving manufacturing to Vietnam.

Question: Brian Morrison - TD Cowen - Analyst : All right. Thank you very much. Congratulations to you and your team.

Question: Luke Hannan - Canaccord Genuity Limited - Analyst : Thanks. Good afternoon, everyone, and congratulations on the results. I wanted to ask about the trends in the Canadian business. If we were to go back a quarter ago, I think things were a little bit less sanguine maybe than they were right now. So was there anything specific that you did in order to bring in the Canadian consumer a little bit more often than your boutiques? Or is it something a broader element that maybe the Canadian consumer on all seems a little bit healthier than they were a couple of months ago?

Question: Luke Hannan - Canaccord Genuity Limited - Analyst : That's great. Thanks. And then for my follow-up here, Todd, I think I heard you correctly that freight was an 80-basis-point headwind during the quarter. When we think about moving forward, so there's a couple of moving parts. One, you're already facing easier comps, I believe, from that perspective, considering, I think, it was around this time last year that freights began to pick up. But also, I think freight rates in the markets continue to go a little bit higher as well. So can you just help us think about maybe the near and the next three to six months? How should we be thinking about freight?

Question: Luke Hannan - Canaccord Genuity Limited - Analyst : That's helpful. Thank you very much, and congratulations.

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Thank you. Good evening, everyone, and congrats on a very strong quarter and very strong outlook. Lots of color so far, so thanks for that. But I just wanted to follow up on two things. So I know you've kind of characterized the Q3 strength as fairly broad-based, which is great to see. But is there any way to quantify like how much of that strength and how much of the momentum continuing into Q4? Would have been driven by the flagships and the associated momentum and brand awareness around them? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 09, 2025 / 9:30PM, ATZ.TO - Q3 2025 Aritzia Inc Earnings Call

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Yeah, okay. That makes a lot of sense. Thanks, Jennifer. And then maybe just thinking about -- aligned with that, or my follow-up, I guess. Just in terms of the investments, I mean, I know you made a lot of investments in digital and a lot of investments around flagships that obviously have paid off in consumer response and customer response. Do you kind of expect this to be maybe like a new run rate in terms of marketing spend? Or is it, I know you've had a sort of a test and react strategy, so perhaps that's something that you'll implement around this as well? But I'm just trying to get a sense of like how these instruments will continue to roll out and maybe over the next, call it, like 12 to 18 months.

Question: Stephen MacLeod - BMO Capital Markets - Analyst : That's great. Thanks, Jennifer, and congratulations again.

Question: Mauricio Serna - UBS - Analyst : Great. Thanks for taking my question, and congratulations on the results. I was wondering if you could talk a little bit more about the sequential acceleration that we saw month after month, and it seems like that was also like broad-based. Maybe could you talk about what you think were like the factors in each market that drove that? And just a follow-up on the gross margin, Q3 performance. Could you provide like a breakdown of the drivers behind the [400 basis points-plus] expansion that you experienced in the quarter? Thank you.

Question: Mauricio Serna - UBS - Analyst : Great. And just one quick follow-up on the guidance for Q4, the sales guidance. I think you mentioned earlier in the call that that includes roughly hiking comp. I just want to make sure that's like a total comp for the company or is that US? Thank you.

Question: Mauricio Serna - UBS - Analyst : Awesome. Okay, great. Congratulations, and thanks again. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 09, 2025 / 9:30PM, ATZ.TO - Q3 2025 Aritzia Inc Earnings Call

Question: Dylan Carden - William Blair & Company - Analyst : Thank you. Just another point of clarification on the guidance, Todd. You mentioned earlier in the call, you thought it was more prudent to put guidance how you exited the quarter as opposed to current trends. I just want to just make sure, does that imply that things have decelerated? Or is that just simply that you're sort of no longer in holiday period? I just want to kind of touch on that.

Question: Dylan Carden - William Blair & Company - Analyst : Excellent, thank you. And then for modeling purposes, as we kind of look to next year, I know you're not going to give obviously guidance. But how are you at least thinking about productivity of these new larger-format stores? I know that you haven't had a long run with them, and it's been holiday and you promoted them. But at least sort of conservatively, how should we think about their productivity on a square foot basis? Thanks.

Question: Dylan Carden - William Blair & Company - Analyst : Awesome. Thank you very much.

Question: Michael Glen - Raymond James Ltd. (Canada) - Analyst : Thank you for getting me in. Just a question on the mobile app. Are you able to indicate what we might see as this mobile app comes up? Would you expect a meaningful uptick in e-commerce sales to result as you get the mobile app and working? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 09, 2025 / 9:30PM, ATZ.TO - Q3 2025 Aritzia Inc Earnings Call

Question: Michael Glen - Raymond James Ltd. (Canada) - Analyst : Okay. And the inventory system or inventory management system that you would have underlying and how the mobile app would interact with your current warehouse and omnichannel. Like, do you have everything in place for inventory tracking or inventory software that you need with this new app?

Question: Michael Glen - Raymond James Ltd. (Canada) - Analyst : Okay. Thank you for taking the questions.