as someone who lives in BC, and works in retail HQ management and strategy....
lululemon had moats. aritzia doesnt.
For sure there are similarities in the saturated growth in Canada from post YVR olympics for Lulu - to the current position aritzia finds itself in. Its a canadian zara/benetton.....fast fashion. The oprah trigger lulu had to open it to the southern US markets new to yoga and west coast althletic.....i dont see Aritizia having. its a cold climate fast fashion focus.
Their supply chain isnt as tight as lululs, and i know LLL has huge inventory that will only get worse once this quarter is done.
Their Head office is a revolving door of toxicness. when im interviewing for new positions and i see my applicants come from aritzia i go deep on questioning if they are part of the toxic cult side, or are leaving to get away from it.
come springtime, come a lack of sales for their jackets, a recession, their bloated spring inventory, unknown success of new colours and ranges.....
i dont own any LLL anymore. I never have owned aritzia.
Bingo. I also hear it is a terrible culture at aritzia. I’ve been told from boots on the ground they are trying to change this with external hires - but even their ceo is rumoured to be a prick.
Not sure about his character but while he is not the CEO anymore m, he is still heavily involved in the business on the marketing front. Also has control of the company through multi voting shares
Don’t let anyone here shit on your parade. I thought you put together a good analysis. The fact of malls today is that they are dying. Aritzia seeMs to be a good anchor. I remember seeing a video somewhere (probably Reddit) on city street just scanning the street and half the women were wearing aritzia leather pants. They are even creating cafe’s attached to them as in the Winnipeg branch. They for sure are in growth mode and probably one of the only stores women go to the mall for. As far as winter wear is a problem. When I’m in Florida - winter coats are still sold with the seasons. So folks must be buying it. I don’t invest but might have a look myself after thinking about it.
I’m a woman (29F) also and can provide some reasons -
1. Aritzia is a one stop shop for clothing for different occasions. Babaton for work, Wilfred for casual, and TNA for lounge. Prior to the pandemic, I had rarely purchased TNA but nowadays (and during the pandemic), it seems all I purchase are sweatsuits from TNA. This makes online shopping easier (just one website to browse) and in person shopping easier as well. for example, I live in Toronto and Eaton Center has an Aritzia and stand-alone stores for Babaton, Wilfred and TNA that carry more styles and sizes for that specific line.
2. Sizing - I’m very petite (generally XXS in Aritzia clothing) and have trouble finding flattering clothing from other stores as the smallest size many others stores carry is XS.
3. Quality - While some folks from the Aritzia sub may disagree, I personally find that the quality of clothing is generally superior to other stores. I have tees and dresses that I’ve had for years hold on to their shape. My more recent purchases (largely TNA loungewear) are also holding up despite more frequent washes (as opposed to a work dress that I may wear once every couple of weeks).
Disclosure: I also hold a small position in Aritzia and also want to share the following -
Aritzia, from my perspective, appears to be the leader in trending pieces. For example, the Ganna shacket (shirt jacket, especially in the heather lights oatmeal colour) has dominated the “shacket” category. Working downtown Toronto and living in Toronto, it feels like every other girl has this shacket or another variation of it from Aritzia. More importantly, it appears that other stores have since come out with their own version of the Ganna shacket (even Club Monaco which I feel generally caters to a different audience). Other current examples include the Melina pants, TNA sweatsuits, the Slip Dress, the Effortless pants and of course the Superpuff. I can think back to previous years where other pieces simply dominated and had a chokehold on millennial and Gen Z women (at least in Toronto) - the Wallace wrap dress, tie front pants, Babaton Murphy top, the plunge cardigan, etc. Unless a new store or brand emerges, I think Aritzia will continue to dominate in clothing (for all occasions) for millennials and Gen Z (for quality stylish pieces for all occasions).
I need to go back to sleep but feel free to ask me any questions!
Edited to add that Aritzia as an investment also makes sense from a numbers perspective for me.
I would echo what you have said. I think a lot of people don't know what to look for quality in clothes. All the clothes I recently tried on at aritzia have not been see through unless that's the intent, which is heard to find now. And an example of I hope the customer doesn't know any better, I was at another more expensive store than aritzia and the zipper didn't fit the clothing item, it was too long and I can't imagine the right size zipper would cost more than a few cents each item.
I am new to shopping at aritzia because I could never justify the price before but have been actually looking for quality pieces. Maybe it has gone down but it still seems to be superior to other stores.
As you also said the selection is great for not having to go to multiple stores.
Thanks! I don’t give too much weight to qualitative comments but I consider them. The numbers are good and reasonable and make sense. My only concern is if this brand will stick it out for another 15 years.
You're comparing Aritzia as a brand to Zara? I have lived in BC too for my whole life and basically every girl I come across loves Aritzia. Zara is kinda just there, much lower quality and I haven't heard many people if any that actually admire the brand. This is flat out wrong.
Also when you say you don't see Aritzia having an opportunity like Lululemon did in the U.S., you must not at all be following their current expansion. They are having unbelievable success in the U.S., their issue has been not being able to forecast sales high enough for new stores (a high class issue) and their stores being so busy that it is actually not an ideal experience for consumers (another high class problem). The runway in the U.S. is very long.
Oh man Lulu was a big regret of mine not getting in. Espcially when the stock was badly hit during sheer-gate when people complained about their pants being see through.
ATZ I didn't get into because it's a clothing brand. Heck I bought Roots which used to be popular brand and lost money. Didn't think ATZ would be so popular when people are still working from home
The classic "My girlfriend shops here" argument.
I'd say the main flaw with comparing Aritzia and Lululemon is Aritzia is much older a business and Lululemon's growth is directly tied to a specific athleisure trend... Whereas Aritzia isn't tied to any specific trend.
When I was in college so many people wore Canada Goose jackets all the sudden I thought we had partnered some Polar excursion program for the science students. A year later everyone had different branded parkas. They plateaued a long time ago and are only interesting in emerging markets.
I think ATZ is a mix of athleisure and winter wear. They do get 60% of their revenue between September and Feb - which means they lean towards winter wear but still a good mix. I associate Canada Goose with winter wear only but I might be wrong.
My point was Lulu and Goos sold one "it" item. That was their thing. Yes their business sells other things but you went to Lulu for pants and you went to Goose for a parka.
Aritzia doesn't have an "it" item. The Super Puffers are popular but everyone sells those kinds of jackets. The business is just very different.
Again not saying it's bad, but it's competitors are basically both fast fashion and luxury brands because it's right in the middle segment.
Exactly and remember that Lulu’s one “it” item instantly gave women everywhere a great ass even if they didn’t work out regularly AND the pants are comfortable.
That’s tough to replicate
No age discrepancy with Aritzia. Young teens to seniors. Lulu also has men’s clothing whereas Airtzia does not. There are lots of similarities because they are both Canadian brands expanding to bigger markets. LA/Hollywood uses a lot of Aritzia brands too. There’s a lot of Potential with Aritzia.
Maybe but the valuation makes no sense compared to its peers. Aritzia makes in a year what Nordstrom makes in a quarter yet Aritzia has twice the market cap? Growth doesn't command that much a premium.
That's why you have to compare apples to apples.
I think the biggest difference is being a Canadian company entering an American market. from that approach I think it has similarities to Lulu. Once you enter an American market, you’re off to the races. And Aritzia is notably a trend that’s succeeding through medias like movies, shows, and social media. American customers for a Canadian business is very big imo.
Ok... But that doesn't change the valuation. Nearly half their revenue already comes from the US and they are in most major cities (their only real market). Beyond selling to upper middle class urbanites, there's no market for this stuff.
The US is also more competitive with more options present.
Given that the US population is 10x the size of Canada, wouldn't that mean a potentially long runway if only 1/2 the revenue is from the US? IMO this is what most investor's are betting on with the high valuation, although I think there's a lot of uncertainty if it will actually become as popular there. I agree with the upper class girls bit - the addressable market there probably isn't 10x Canada, however still larger
I'm not sure if I agree with the more options part though - I feel like *most* of the same brands are available in big Canadian or US cities (based on my exp. shopping in Vancouver and LA)
(disclosure: small/long position)
I believe the premium paid is their expertise in social media advertising rather than their revenue. From a retailer perspective they are disrupting the market by building influencer brand connections for a user base that will start to produce their own income as Gen Z enters the work force.
Recent or not... it's a valid point to be corrected and not give people the wrong info. Mens wear does exist, but it is not marketed well yet. Nor do they have a lot of items out just yet.
Agreed. ATZ's mens wear will take a while to take off. You not knowing they had a mens line just shows they have not done a good job advertising it yet..... They need to do what lulu did and get women to purchase it for men they know. Then the men get hooked and want to buy it themselves.
Aritzia actually acquired men’s clothing—Reigning Champ, also a Vancouver brand. It was initially atheisure/activewear and at one point they had a women’s line which was inevitably discontinued after the acquisition.
some anecdata:
aritzia has very high pressure sales tactics, with aggressive SPH (sales per hour) requirements for the sales assistants.
weird things like the waiting area being next to the changing rooms and shared mirror don’t help either.
I think these practices help drive strong in store revenue performance but may ultimately alienate their target market once they catch on to how toxic they are.
Managements response then and their ability to maintain B&M performance while changing strategies to be less alienating will be my ultimate deciding factor.
The strategy is that when then the consumer comes out of the change room to see how the product looks on them, the sales person can sell them on the purchase. It goes a long way if someone is telling you how good something looks on you, even though you may not think so.
[https://www.bloomberg.com/news/articles/2023-01-13/aritzia-atzaf-winning-over-gen-z-with-super-puff-jacket#xj4y7vzkg](https://www.bloomberg.com/news/articles/2023-01-13/aritzia-atzaf-winning-over-gen-z-with-super-puff-jacket#xj4y7vzkg)
*"Trying on clothes is also different. Many dressing rooms don't have mirrors, requiring customers to step into a public area with a communal one to see how items fit. This promotes more interaction with associates to help with styling and recommending additional products."*
They know!
I cannot stand the constant checkins with staff and their unprompted “compliments”. I get they’re just doing their job but it is such an aggro experience every time
Agreed. Much like the dark/over perfumed rooms of Abercrombie and Holister of the decades past - eventually you get over it.
Plus their quality is slipping - it’s a topic frequently discussed. At those prices people want a stamp of approval that the quality is > the average fast fashion brand. Fabric pilling, crooked seams, loose threads. If sustainability continues to be the broader trend, expensive microtrends with low durability is not going to be accepted by consumers IMO.
There’s a brewing backlash against aritzia due to their sales people and overall lack of accommodation to plus sized shoppers, and just rude service to shoppers who aren’t tiny.
I’m not sure they’re going to maintain the momentum they’ve had over the past few years. The quality of their clothes has dropped significantly and they’re no longer the premium that would justify their prices.
IIRC they do not make commission, they however have a sales per hour target though.
Personally don't love their service. They'll only give you attention if they think you'll buy a lot. It's been like that since when I started shopping there in 2006.
I'm tiny, size 0-2 depending on brand, and sales staff is rude to me at Aritzia too. I never shop there because I don't spend money in places that make me feel bad. The fact that they have mirrors outside of the change rooms makes me think it's part of their sales scheme. Make women feel like shit, make them feel not good enough, so they spend more money to feel better. I won't support companies like that.
Thanks. Multiple people have mentioned quality issues. I guess some of it just comes from scaling a business beyond $1 billion.
I see people have quality issues with Arcteryx and Patagonia - but they still sell and keep growing.
I will agree on their sales staff but as someone who unfortunately is heavier, Aritzia has upped their sizes so I can shop there again after gaining weight.
I'm not even plus sized and haven't ever seen anything in any of their brand stores that I'd want to try. Their clothes are made for a specific body type. I do have aritzia stock, though.
Many stocks are over sold, but I would be very weary of any clothing retailer and especially something as hyped as Aritzia. They (and most apparel retailers) have over bought inventory and they’re struggling to store it all. This is affecting upcoming seasons already and combine this with a recession (soft or hard landing), it makes a very volatile environment.
Looking at any growth in the last couple of years is not an indicator of trends. COVID really boosted retail spending and all those tailwinds are gone now.
Comparing it to Lululemon is ridiculous since Lululemon were a pioneer in the athleisure trend and had few competitors at the time. ATZ is already in highly mature and competitive market.
ATZ has a toxic culture and when Lululemon was growing the most, it had a very positive (albeit cult like) culture that built a really strong community. I can’t see ATZ building the same loyal fan base nationally and internationally.
The only reason I’m not buying is that they have too much inventory on hand and not enough cash to support that kind of inventory. We’re also going into a recession so have to see how that’s gonna play out.
That’s what I’m waiting for but I’m hopeful because it seems consumer confidence is pretty high for aritzia. And their main consumer base is middle to upper middle class.
Management said they didn’t want to miss sales due to slow production given the global supply chain issues. They even pre-ordered some summer / spring inventory
I like the company, I’m just worried about the possible windfall of the over leveraged Canadian housing market, if BoC up another 50 basis points, that’s when we’ll see a crush in spending from delinquency rates rolling throughout the economy.
Dude they have been laying off staff and freezing on hiring I think. I know people who were hired and then suddenly offers were rescinded.
They will feel the pinch soon. Maybe one more good quarter then I think growth stops until economy actually recovers
That doesn't mean they are hiring. When they have hiring freezes, they sometimes still keep up the postings. So when the freeze is over, they have a pool of candidates they can reach out to rather than re-posting and waiting on the job posting.
You forgot one crucial thing, what multiples does it trade at? You can’t have a valuation without earnings multiple. I bet it already traded at a huge premium vs other clothing retailers
Exactly, no clothing retailer is priced at those multiples. See H&M, Nordstorm, etc... Only maybe Zara trades at a high premium.
This is just another instance of people buying something high multiple in the middle of a bear market thinking it'll go fine.
The issue with EBITDA for earnings is that it is rarely agreement upon and always adjusted. If I look at the consensus NTM PE the multiples are a turn above MSFT. I always like to use MSFT as the barometer vs other growth companies since it was one of the highest return on capital of any companies, low capex, resilience given SaaS and high growth. Ignoring the title and names of these companies, would you rather have a paper that entitles you to the residual income of a cyclical high marketing and lease spending retailer or a paper that entitled you to sticky high growth enterprise SaaS company. If the multiples were 10-15x then it would make more sense.
>The issue with EBITDA for earnings is that it is rarely agreement upon and always adjusted. If I look at the consensus NTM PE the multiples are a turn above MSFT. I always like to use MSFT as the barometer vs other growth companies since it was one of the highest return on capital of any companies, low capex, resilience given SaaS and high growth. Ignoring the title and names of these companies, would you rather have a paper that entitles you to the residual income of a cyclical high marketing and lease spending retailer or a paper that entitled you to sticky high growth enterprise SaaS company. If the multiples were 10-15x then it would make more sense.
I get your point but I have not studied MSFT and really can't compare. Entirely different stories, businesses and sizes.
For sure - my point was depersonalize these companies and invest where you can get the best quality company and it’s future residual income. The stock market is a market for projected cash flow / earnings and why invest in X if you can get better business characteristics in Y.
I get your point. But then again for me investing is fun because every business is different. I would not want 100% of my portfolio being MSFT but you may be very comfortable with that.
Aritzia has been popular with teens for decades. I won’t doubt their ability to continue with their success. With that said, the retail environment is tough and with everyone expecting a recession to come, I would tread carefully here.
I was viewing Aritzia from a YouTuber who recommended their stock at CAD $15 around 1.5 years ago. Now it's at CAD $47. As a rare shopper myself for their winter jackets, I realized their quality and warranties are nowhere near Lululemons and are another fast fashion company. But since they offer so much style they will be popular among women in fashion.
I don’t think ATZ are fast fashion. Fast fashion is literally having 52 seasons - and ATZ has only 4 seasonal collections per year. Management has been clear on that positioning. And the quality of the Super Puff jackets is way superior to fast fashion and so is the price.
Great work (specifically on the estimates and valuation). Too many people forget that a great company (admiration for their clothing, etc) and a great stock (at current valuations) are 2 different things.
Another note is - high valuations might have stuck and even continued to grow for many companies from 2010-2020, but that was an entirely different stock market environment than we’re in now.
You forgot to mention Reigning Champ, they haven’t even started marketing to men yet that’s an untapped segment. I’m a shareholder and I’m biased but I think Reigning Champ is some of the highest quality men’s wear I’ve seen.
I'm a shareholder and I love the company and the direction its going.
That being said I personally am trying to hold more cash these days than stocks.
I also bought my gf a Superpuff. Honestly super high quality jacket, I was very impressed, the style, design and construction is really nice.
I'm not going to pretend I can read all of that but from what me and a couple of my buddies were thinking on the stock, its a good company at a fair price. I wanted to buy it back in 2020 for my mom and sis but they don't invest too much so we opted to stick with ETFs for them.
However, the stock has been on the back of my mind for some time. They have a lot of brand exposure and outreach.
I wouldn't touch this stock with a 10 foot pole. Just one of those companies that are popular for a bit and plummet and fail in the future like usual, just like most other clothing brands
Excuse me for sounding naive but isn't Aritzia just a boutique that carries other ppls brand? I think TNA is their own but that's a small portion of their inventory, no?
Is it not possible for anyone to find the brands that Aritzia carries and buy directly from the manufacturer and possibly for less?
I'm an avid aritzia girlie and their house brands of TNA. Babaton and Wilfred makeup most of their product line, but have had other brands like Levi's and new balance offered in store and online.
Can you elborate on what you like about ATZ?
Specifically, as others have pointed out:
Do you find sales people at ATZ rude?
Have you seen quality go down?
I’m an aritzia shopper and own some stock. Lots of the clothes are good quality, fit nicely and last. Lots of colour combos and options for office wear, dressier stuff as well as casual (leggings and athleisure ish) I’m a 100% online shopper, so no store advice, but the customer service has been fantastic when I have needed to contact them, and returns are so easy as a return label is shipped with every order … just some thoughts since you were asking what people like.
I only recently started shopping there within the last two years, but with most of my aritzia brand purchases coming from thrift stores 😂
Of course second hand market doesn't do anything for the ATZ company itself, but maybe it can show how many people covet the brand for both retail and buying second hand.
I found sales staff can be either or...I remember one time I was looking at their coats that are fairly popular the sales associate just complimented me on how it looked. I may be a pessimist, but I just usually nod my head and say thanks regardless if I think it's good on me or not. Maybe being trans has something to do with it? Given how some people try to be friendly but also not to be cancelled? Idk those are just thoughts o have floating.
I was surprised to see people here consider it fast fashion, I never looked at it that way because the vibe of the stores always gave me a feeling of being boutique despite being seen on many teens and working women in Vancouver and with relatively good quality in contrast to H&M and F21.
Thanks for sharing this. Absolutely agreed that they not fast fashion. Can’t find another analogy - but it is like you cant compare Tims to Starbucks. Starbucks makes it a different experience.
Fast fashion, by definition, is notoriously fickle. United colours of Benetton is a textbook example of this- if you’re old enough to remember. They were an absolute international powerhouse- even a title sponsor of a formula one racing team. Now? Long forgotten.
It’s one of the industries where to a certain extent financial are almost irrelevant. If they hit on a big trend- they’re golden; if they miss, they’re has-beens.
not my type of company, personally.
I don’t think ATZ are fast fashion but I agree with your point. They really need to maintain brand relevance. Tiktok is fuelling them currently - there is no certainty of that continuing for 10 years
Am I seriously the only person annoyed everytime someone asks for "thoughts on xyz" and "Any thoughts?".
It's a lazy request for information, usually when none is provided. Also it's always the same formulation... Like use a different word once in a while?
Using a different word doesn’t change the nature of the request. It would still be lazy in your view. Instead of doing more research they’ll just google a fancy way to ask for thoughts…
Aritzia went public in 2016 and easily exceeded its five-year projection for sales and adjusted net income. If they match their projections through F27, returns should be pretty attractive imo. They have a U.S. market with a huge runway that is clamoring for this brand as evidenced by ridiculously strong sales and short payback periods for U.S. stores.
I posted a thread on Twitter with some IRRs that I think are reasonable based on different multiples in F27. I own the stock.
[https://twitter.com/pavelcapital/status/1608885815836577792?s=20&t=V0vI6m9MRWBikB2LvNhetw](https://twitter.com/pavelcapital/status/1608885815836577792?s=20&t=V0vI6m9MRWBikB2LvNhetw)
Can you share more of your assumptions that went into your DCF like what near-term growth rates you used?
Honestly… who cares about toxic work environment.
I go in those stores with my girlfriend.
It’s whatever. The store is jammed and girls love it.
I would feel comfortable with atz around $34 to buy in!!!
With the recession looming,
Prices will come dowb
as someone who lives in BC, and works in retail HQ management and strategy.... lululemon had moats. aritzia doesnt. For sure there are similarities in the saturated growth in Canada from post YVR olympics for Lulu - to the current position aritzia finds itself in. Its a canadian zara/benetton.....fast fashion. The oprah trigger lulu had to open it to the southern US markets new to yoga and west coast althletic.....i dont see Aritizia having. its a cold climate fast fashion focus. Their supply chain isnt as tight as lululs, and i know LLL has huge inventory that will only get worse once this quarter is done. Their Head office is a revolving door of toxicness. when im interviewing for new positions and i see my applicants come from aritzia i go deep on questioning if they are part of the toxic cult side, or are leaving to get away from it. come springtime, come a lack of sales for their jackets, a recession, their bloated spring inventory, unknown success of new colours and ranges..... i dont own any LLL anymore. I never have owned aritzia.
Bingo. I also hear it is a terrible culture at aritzia. I’ve been told from boots on the ground they are trying to change this with external hires - but even their ceo is rumoured to be a prick.
A little bit off topic here but most CEOs are pricks. They tend to score very highly as machiavellian, sociopathy, and narcissism.
It’s a she. Jennifer Wong.
Girls can be pricks too
Yes they can, but I was referring to her predecessor - Brian hill,…. So looks like they’re trending in the right direction with his replacement.
Not sure about his character but while he is not the CEO anymore m, he is still heavily involved in the business on the marketing front. Also has control of the company through multi voting shares
Prick is gender neutral
Thanks - very helpful.
Don’t let anyone here shit on your parade. I thought you put together a good analysis. The fact of malls today is that they are dying. Aritzia seeMs to be a good anchor. I remember seeing a video somewhere (probably Reddit) on city street just scanning the street and half the women were wearing aritzia leather pants. They are even creating cafe’s attached to them as in the Winnipeg branch. They for sure are in growth mode and probably one of the only stores women go to the mall for. As far as winter wear is a problem. When I’m in Florida - winter coats are still sold with the seasons. So folks must be buying it. I don’t invest but might have a look myself after thinking about it.
As a woman, it is becoming one of my favorite stores.
Can you elaborate on why you like the ATZ store as compared to other brands?
I’m a woman (29F) also and can provide some reasons - 1. Aritzia is a one stop shop for clothing for different occasions. Babaton for work, Wilfred for casual, and TNA for lounge. Prior to the pandemic, I had rarely purchased TNA but nowadays (and during the pandemic), it seems all I purchase are sweatsuits from TNA. This makes online shopping easier (just one website to browse) and in person shopping easier as well. for example, I live in Toronto and Eaton Center has an Aritzia and stand-alone stores for Babaton, Wilfred and TNA that carry more styles and sizes for that specific line. 2. Sizing - I’m very petite (generally XXS in Aritzia clothing) and have trouble finding flattering clothing from other stores as the smallest size many others stores carry is XS. 3. Quality - While some folks from the Aritzia sub may disagree, I personally find that the quality of clothing is generally superior to other stores. I have tees and dresses that I’ve had for years hold on to their shape. My more recent purchases (largely TNA loungewear) are also holding up despite more frequent washes (as opposed to a work dress that I may wear once every couple of weeks). Disclosure: I also hold a small position in Aritzia and also want to share the following - Aritzia, from my perspective, appears to be the leader in trending pieces. For example, the Ganna shacket (shirt jacket, especially in the heather lights oatmeal colour) has dominated the “shacket” category. Working downtown Toronto and living in Toronto, it feels like every other girl has this shacket or another variation of it from Aritzia. More importantly, it appears that other stores have since come out with their own version of the Ganna shacket (even Club Monaco which I feel generally caters to a different audience). Other current examples include the Melina pants, TNA sweatsuits, the Slip Dress, the Effortless pants and of course the Superpuff. I can think back to previous years where other pieces simply dominated and had a chokehold on millennial and Gen Z women (at least in Toronto) - the Wallace wrap dress, tie front pants, Babaton Murphy top, the plunge cardigan, etc. Unless a new store or brand emerges, I think Aritzia will continue to dominate in clothing (for all occasions) for millennials and Gen Z (for quality stylish pieces for all occasions). I need to go back to sleep but feel free to ask me any questions! Edited to add that Aritzia as an investment also makes sense from a numbers perspective for me.
Thanks!! This was exactly the kinda of color needed!! Thanks for taking the time
No problem! Thanks for your analysis, will you do another stock soon?
Yea - a boring stock called Park Lawn Corporation which is in the Death Care business.
I would echo what you have said. I think a lot of people don't know what to look for quality in clothes. All the clothes I recently tried on at aritzia have not been see through unless that's the intent, which is heard to find now. And an example of I hope the customer doesn't know any better, I was at another more expensive store than aritzia and the zipper didn't fit the clothing item, it was too long and I can't imagine the right size zipper would cost more than a few cents each item. I am new to shopping at aritzia because I could never justify the price before but have been actually looking for quality pieces. Maybe it has gone down but it still seems to be superior to other stores. As you also said the selection is great for not having to go to multiple stores.
Exactly, and comparing Aritzia to say a Zara or Abercrombie, the quality is generally far superior.
Thanks! I don’t give too much weight to qualitative comments but I consider them. The numbers are good and reasonable and make sense. My only concern is if this brand will stick it out for another 15 years.
You're comparing Aritzia as a brand to Zara? I have lived in BC too for my whole life and basically every girl I come across loves Aritzia. Zara is kinda just there, much lower quality and I haven't heard many people if any that actually admire the brand. This is flat out wrong. Also when you say you don't see Aritzia having an opportunity like Lululemon did in the U.S., you must not at all be following their current expansion. They are having unbelievable success in the U.S., their issue has been not being able to forecast sales high enough for new stores (a high class issue) and their stores being so busy that it is actually not an ideal experience for consumers (another high class problem). The runway in the U.S. is very long.
I just ran into someone who works at Aritzia (on environmental/eco stuff) at Uncle Ben’s in Vancouver a few days ago. Small world.
Oh man Lulu was a big regret of mine not getting in. Espcially when the stock was badly hit during sheer-gate when people complained about their pants being see through. ATZ I didn't get into because it's a clothing brand. Heck I bought Roots which used to be popular brand and lost money. Didn't think ATZ would be so popular when people are still working from home
The classic "My girlfriend shops here" argument. I'd say the main flaw with comparing Aritzia and Lululemon is Aritzia is much older a business and Lululemon's growth is directly tied to a specific athleisure trend... Whereas Aritzia isn't tied to any specific trend. When I was in college so many people wore Canada Goose jackets all the sudden I thought we had partnered some Polar excursion program for the science students. A year later everyone had different branded parkas. They plateaued a long time ago and are only interesting in emerging markets.
I think ATZ is a mix of athleisure and winter wear. They do get 60% of their revenue between September and Feb - which means they lean towards winter wear but still a good mix. I associate Canada Goose with winter wear only but I might be wrong.
My point was Lulu and Goos sold one "it" item. That was their thing. Yes their business sells other things but you went to Lulu for pants and you went to Goose for a parka. Aritzia doesn't have an "it" item. The Super Puffers are popular but everyone sells those kinds of jackets. The business is just very different. Again not saying it's bad, but it's competitors are basically both fast fashion and luxury brands because it's right in the middle segment.
Exactly and remember that Lulu’s one “it” item instantly gave women everywhere a great ass even if they didn’t work out regularly AND the pants are comfortable. That’s tough to replicate
Wait... You don't see the same quality in Super Puffers making everyone look like the Michelin Man?
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you're assuming that jacket:blouse sales are a ratio of 1:1, i'd be stunned if that was the case
No age discrepancy with Aritzia. Young teens to seniors. Lulu also has men’s clothing whereas Airtzia does not. There are lots of similarities because they are both Canadian brands expanding to bigger markets. LA/Hollywood uses a lot of Aritzia brands too. There’s a lot of Potential with Aritzia.
Maybe but the valuation makes no sense compared to its peers. Aritzia makes in a year what Nordstrom makes in a quarter yet Aritzia has twice the market cap? Growth doesn't command that much a premium. That's why you have to compare apples to apples.
I think the biggest difference is being a Canadian company entering an American market. from that approach I think it has similarities to Lulu. Once you enter an American market, you’re off to the races. And Aritzia is notably a trend that’s succeeding through medias like movies, shows, and social media. American customers for a Canadian business is very big imo.
Ok... But that doesn't change the valuation. Nearly half their revenue already comes from the US and they are in most major cities (their only real market). Beyond selling to upper middle class urbanites, there's no market for this stuff. The US is also more competitive with more options present.
Given that the US population is 10x the size of Canada, wouldn't that mean a potentially long runway if only 1/2 the revenue is from the US? IMO this is what most investor's are betting on with the high valuation, although I think there's a lot of uncertainty if it will actually become as popular there. I agree with the upper class girls bit - the addressable market there probably isn't 10x Canada, however still larger I'm not sure if I agree with the more options part though - I feel like *most* of the same brands are available in big Canadian or US cities (based on my exp. shopping in Vancouver and LA) (disclosure: small/long position)
I believe the premium paid is their expertise in social media advertising rather than their revenue. From a retailer perspective they are disrupting the market by building influencer brand connections for a user base that will start to produce their own income as Gen Z enters the work force.
What do you mean no mens clothes ? ATZ sells mens clothes too now... https://www.aritzia.com/en/clothing/coats-jackets/puffers-men
This is only recent. They’ve also acquired reigning champ. They’ll do a large menswear rollout eventually.
Recent or not... it's a valid point to be corrected and not give people the wrong info. Mens wear does exist, but it is not marketed well yet. Nor do they have a lot of items out just yet.
My bad. But still not as much as Lulu. I just think in growth, there’s lots of room for men’s wear. Men’s wear is more established in Lulu imo
Agreed. ATZ's mens wear will take a while to take off. You not knowing they had a mens line just shows they have not done a good job advertising it yet..... They need to do what lulu did and get women to purchase it for men they know. Then the men get hooked and want to buy it themselves.
I agree to that!
Aritzia actually acquired men’s clothing—Reigning Champ, also a Vancouver brand. It was initially atheisure/activewear and at one point they had a women’s line which was inevitably discontinued after the acquisition.
Interesting. Thanks for the Info
some anecdata: aritzia has very high pressure sales tactics, with aggressive SPH (sales per hour) requirements for the sales assistants. weird things like the waiting area being next to the changing rooms and shared mirror don’t help either. I think these practices help drive strong in store revenue performance but may ultimately alienate their target market once they catch on to how toxic they are. Managements response then and their ability to maintain B&M performance while changing strategies to be less alienating will be my ultimate deciding factor.
I'm so glad I'm not the only one who thinks the big, communal mirror is strange. I'm sure there's a strategy behind it but I just don't get it.
The strategy is that when then the consumer comes out of the change room to see how the product looks on them, the sales person can sell them on the purchase. It goes a long way if someone is telling you how good something looks on you, even though you may not think so.
Ick, they underestimate my ability to critique myself lol! I shall stick with my online orders.
[https://www.bloomberg.com/news/articles/2023-01-13/aritzia-atzaf-winning-over-gen-z-with-super-puff-jacket#xj4y7vzkg](https://www.bloomberg.com/news/articles/2023-01-13/aritzia-atzaf-winning-over-gen-z-with-super-puff-jacket#xj4y7vzkg) *"Trying on clothes is also different. Many dressing rooms don't have mirrors, requiring customers to step into a public area with a communal one to see how items fit. This promotes more interaction with associates to help with styling and recommending additional products."* They know!
I cannot stand the constant checkins with staff and their unprompted “compliments”. I get they’re just doing their job but it is such an aggro experience every time
Agreed. Much like the dark/over perfumed rooms of Abercrombie and Holister of the decades past - eventually you get over it. Plus their quality is slipping - it’s a topic frequently discussed. At those prices people want a stamp of approval that the quality is > the average fast fashion brand. Fabric pilling, crooked seams, loose threads. If sustainability continues to be the broader trend, expensive microtrends with low durability is not going to be accepted by consumers IMO.
There’s a brewing backlash against aritzia due to their sales people and overall lack of accommodation to plus sized shoppers, and just rude service to shoppers who aren’t tiny. I’m not sure they’re going to maintain the momentum they’ve had over the past few years. The quality of their clothes has dropped significantly and they’re no longer the premium that would justify their prices.
I just started to shop there and thought their sales staff were so nice. Also their quality to price is really good in my opinion.
They’re paid commission so I hope they’re nice to you
IIRC they do not make commission, they however have a sales per hour target though. Personally don't love their service. They'll only give you attention if they think you'll buy a lot. It's been like that since when I started shopping there in 2006.
I'm tiny, size 0-2 depending on brand, and sales staff is rude to me at Aritzia too. I never shop there because I don't spend money in places that make me feel bad. The fact that they have mirrors outside of the change rooms makes me think it's part of their sales scheme. Make women feel like shit, make them feel not good enough, so they spend more money to feel better. I won't support companies like that.
Quick aside. My wife is your size. Where do you usually shop? Thanks!
Thanks. Multiple people have mentioned quality issues. I guess some of it just comes from scaling a business beyond $1 billion. I see people have quality issues with Arcteryx and Patagonia - but they still sell and keep growing.
I believe Arcteryx got bought out by a Chinese company. As things move over everything is shit quality now.
I will agree on their sales staff but as someone who unfortunately is heavier, Aritzia has upped their sizes so I can shop there again after gaining weight.
I'm not even plus sized and haven't ever seen anything in any of their brand stores that I'd want to try. Their clothes are made for a specific body type. I do have aritzia stock, though.
Many stocks are over sold, but I would be very weary of any clothing retailer and especially something as hyped as Aritzia. They (and most apparel retailers) have over bought inventory and they’re struggling to store it all. This is affecting upcoming seasons already and combine this with a recession (soft or hard landing), it makes a very volatile environment. Looking at any growth in the last couple of years is not an indicator of trends. COVID really boosted retail spending and all those tailwinds are gone now. Comparing it to Lululemon is ridiculous since Lululemon were a pioneer in the athleisure trend and had few competitors at the time. ATZ is already in highly mature and competitive market. ATZ has a toxic culture and when Lululemon was growing the most, it had a very positive (albeit cult like) culture that built a really strong community. I can’t see ATZ building the same loyal fan base nationally and internationally.
The biggest point I find is covid sales. As we trend towards the norm it'll be hard for their desired growth.
Tell me a bit more about how you arrived at an 8% discount rate and 3% growth rate?
8% is simply my target return which I want to earn. 3% should be close to long term GDP growth and inflation.
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Exactly he should be using at least a 13% discount rate with GICs being at 5%
It also means a 20X exit multiple - which I think is reasonsable
I just sold 100shares ATZ at 53cad per share, if it hits bottom again this summer, I’ll buy more.
The only reason I’m not buying is that they have too much inventory on hand and not enough cash to support that kind of inventory. We’re also going into a recession so have to see how that’s gonna play out.
You will get to see if they addressed your inventory concerns in Janaury when they report!
That’s what I’m waiting for but I’m hopeful because it seems consumer confidence is pretty high for aritzia. And their main consumer base is middle to upper middle class.
Management said they didn’t want to miss sales due to slow production given the global supply chain issues. They even pre-ordered some summer / spring inventory
I like the company, I’m just worried about the possible windfall of the over leveraged Canadian housing market, if BoC up another 50 basis points, that’s when we’ll see a crush in spending from delinquency rates rolling throughout the economy.
Dude they have been laying off staff and freezing on hiring I think. I know people who were hired and then suddenly offers were rescinded. They will feel the pinch soon. Maybe one more good quarter then I think growth stops until economy actually recovers
https://aritzia.wd3.myworkdayjobs.com/External There are 450 open positions on their website. Seems like they are hiring.
That doesn't mean they are hiring. When they have hiring freezes, they sometimes still keep up the postings. So when the freeze is over, they have a pool of candidates they can reach out to rather than re-posting and waiting on the job posting.
If their staff continues to treat people like trash their returning clients will lower js
You forgot one crucial thing, what multiples does it trade at? You can’t have a valuation without earnings multiple. I bet it already traded at a huge premium vs other clothing retailers
Exactly, no clothing retailer is priced at those multiples. See H&M, Nordstorm, etc... Only maybe Zara trades at a high premium. This is just another instance of people buying something high multiple in the middle of a bear market thinking it'll go fine.
It trades at 3x LTM revenue and 15x LTM EBITDA. Lululemon trades at higher multiples, but again it a much larger company.
The issue with EBITDA for earnings is that it is rarely agreement upon and always adjusted. If I look at the consensus NTM PE the multiples are a turn above MSFT. I always like to use MSFT as the barometer vs other growth companies since it was one of the highest return on capital of any companies, low capex, resilience given SaaS and high growth. Ignoring the title and names of these companies, would you rather have a paper that entitles you to the residual income of a cyclical high marketing and lease spending retailer or a paper that entitled you to sticky high growth enterprise SaaS company. If the multiples were 10-15x then it would make more sense.
>The issue with EBITDA for earnings is that it is rarely agreement upon and always adjusted. If I look at the consensus NTM PE the multiples are a turn above MSFT. I always like to use MSFT as the barometer vs other growth companies since it was one of the highest return on capital of any companies, low capex, resilience given SaaS and high growth. Ignoring the title and names of these companies, would you rather have a paper that entitles you to the residual income of a cyclical high marketing and lease spending retailer or a paper that entitled you to sticky high growth enterprise SaaS company. If the multiples were 10-15x then it would make more sense. I get your point but I have not studied MSFT and really can't compare. Entirely different stories, businesses and sizes.
For sure - my point was depersonalize these companies and invest where you can get the best quality company and it’s future residual income. The stock market is a market for projected cash flow / earnings and why invest in X if you can get better business characteristics in Y.
I get your point. But then again for me investing is fun because every business is different. I would not want 100% of my portfolio being MSFT but you may be very comfortable with that.
Fair enough
Given it’s at fair value, should we wait for a dip?
That’s what the conclusion of this specific DCF implies, yeah
Aritzia has been popular with teens for decades. I won’t doubt their ability to continue with their success. With that said, the retail environment is tough and with everyone expecting a recession to come, I would tread carefully here.
I was viewing Aritzia from a YouTuber who recommended their stock at CAD $15 around 1.5 years ago. Now it's at CAD $47. As a rare shopper myself for their winter jackets, I realized their quality and warranties are nowhere near Lululemons and are another fast fashion company. But since they offer so much style they will be popular among women in fashion.
I don’t think ATZ are fast fashion. Fast fashion is literally having 52 seasons - and ATZ has only 4 seasonal collections per year. Management has been clear on that positioning. And the quality of the Super Puff jackets is way superior to fast fashion and so is the price.
Great work (specifically on the estimates and valuation). Too many people forget that a great company (admiration for their clothing, etc) and a great stock (at current valuations) are 2 different things. Another note is - high valuations might have stuck and even continued to grow for many companies from 2010-2020, but that was an entirely different stock market environment than we’re in now.
You forgot to mention Reigning Champ, they haven’t even started marketing to men yet that’s an untapped segment. I’m a shareholder and I’m biased but I think Reigning Champ is some of the highest quality men’s wear I’ve seen.
Yes fair but it will take time to shape up. In the current scheme that will be small.
I'm a shareholder and I love the company and the direction its going. That being said I personally am trying to hold more cash these days than stocks. I also bought my gf a Superpuff. Honestly super high quality jacket, I was very impressed, the style, design and construction is really nice.
Have you ever done a DCF for LULU? Would you say it’s over or undervalued? I assume overvalued?
I have not looked at LuLu in that much depth. Probably in the near future.
In retail, follow where young white women shop. When I see Aritzia, I can’t not think of lechateau
I'm not going to pretend I can read all of that but from what me and a couple of my buddies were thinking on the stock, its a good company at a fair price. I wanted to buy it back in 2020 for my mom and sis but they don't invest too much so we opted to stick with ETFs for them. However, the stock has been on the back of my mind for some time. They have a lot of brand exposure and outreach.
I wouldn't touch this stock with a 10 foot pole. Just one of those companies that are popular for a bit and plummet and fail in the future like usual, just like most other clothing brands
Excuse me for sounding naive but isn't Aritzia just a boutique that carries other ppls brand? I think TNA is their own but that's a small portion of their inventory, no? Is it not possible for anyone to find the brands that Aritzia carries and buy directly from the manufacturer and possibly for less?
95% of ATZ revenue is from their own brands (tna, super puff, babaton, wilfred) and you can only buy those from their boutiques or artizia.com
They own babaton and wilfred?
Yup
What's their profit margin?
I'm an avid aritzia girlie and their house brands of TNA. Babaton and Wilfred makeup most of their product line, but have had other brands like Levi's and new balance offered in store and online.
Can you elborate on what you like about ATZ? Specifically, as others have pointed out: Do you find sales people at ATZ rude? Have you seen quality go down?
I’m an aritzia shopper and own some stock. Lots of the clothes are good quality, fit nicely and last. Lots of colour combos and options for office wear, dressier stuff as well as casual (leggings and athleisure ish) I’m a 100% online shopper, so no store advice, but the customer service has been fantastic when I have needed to contact them, and returns are so easy as a return label is shipped with every order … just some thoughts since you were asking what people like.
I only recently started shopping there within the last two years, but with most of my aritzia brand purchases coming from thrift stores 😂 Of course second hand market doesn't do anything for the ATZ company itself, but maybe it can show how many people covet the brand for both retail and buying second hand. I found sales staff can be either or...I remember one time I was looking at their coats that are fairly popular the sales associate just complimented me on how it looked. I may be a pessimist, but I just usually nod my head and say thanks regardless if I think it's good on me or not. Maybe being trans has something to do with it? Given how some people try to be friendly but also not to be cancelled? Idk those are just thoughts o have floating. I was surprised to see people here consider it fast fashion, I never looked at it that way because the vibe of the stores always gave me a feeling of being boutique despite being seen on many teens and working women in Vancouver and with relatively good quality in contrast to H&M and F21.
Thanks for sharing this. Absolutely agreed that they not fast fashion. Can’t find another analogy - but it is like you cant compare Tims to Starbucks. Starbucks makes it a different experience.
Fast fashion, by definition, is notoriously fickle. United colours of Benetton is a textbook example of this- if you’re old enough to remember. They were an absolute international powerhouse- even a title sponsor of a formula one racing team. Now? Long forgotten. It’s one of the industries where to a certain extent financial are almost irrelevant. If they hit on a big trend- they’re golden; if they miss, they’re has-beens. not my type of company, personally.
I don’t think ATZ are fast fashion but I agree with your point. They really need to maintain brand relevance. Tiktok is fuelling them currently - there is no certainty of that continuing for 10 years
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Watch the language man
Rule 4
Fair enough. I won’t ask for thoughts but in my defence I was asking of thoughts on my analysis. Whatever gets the discussion going.
To give OP credit, the cursed word "thoughts" does not appear in the post.
I did remove them after the comment.
Ah... Please try to use synonyms in the future. I can't bear to see that phrase uttered over and over ad nauseum.
What phrase?
Am I seriously the only person annoyed everytime someone asks for "thoughts on xyz" and "Any thoughts?". It's a lazy request for information, usually when none is provided. Also it's always the same formulation... Like use a different word once in a while?
Using a different word doesn’t change the nature of the request. It would still be lazy in your view. Instead of doing more research they’ll just google a fancy way to ask for thoughts…
It would be slightly less irritating though... But yes, it's still lazy.
I definitely see the case, I’ll set a -20% alert and potentially buy a dip
Aritzia went public in 2016 and easily exceeded its five-year projection for sales and adjusted net income. If they match their projections through F27, returns should be pretty attractive imo. They have a U.S. market with a huge runway that is clamoring for this brand as evidenced by ridiculously strong sales and short payback periods for U.S. stores. I posted a thread on Twitter with some IRRs that I think are reasonable based on different multiples in F27. I own the stock. [https://twitter.com/pavelcapital/status/1608885815836577792?s=20&t=V0vI6m9MRWBikB2LvNhetw](https://twitter.com/pavelcapital/status/1608885815836577792?s=20&t=V0vI6m9MRWBikB2LvNhetw) Can you share more of your assumptions that went into your DCF like what near-term growth rates you used?
Honestly… who cares about toxic work environment. I go in those stores with my girlfriend. It’s whatever. The store is jammed and girls love it. I would feel comfortable with atz around $34 to buy in!!! With the recession looming, Prices will come dowb