Fashion retailers are not usually desirable or acceptable as stock market investments.
Trends in fashions are fickle, shifting rapidly turning that valuable inventory on the books into heavily discounted junk overnight.
Vancouver-based Aritzia Inc. might just be the exception. In 39 years, this retailer has grown from one outlet in the Oakridge Mall in Vancouver to 114 units in Canada and the United States.
The pandemic year of 2019, when stores were closed, was the only poor year for sales which have jumped in recent years.
With 68 stores in Canada and 46 in the United States, there is plenty of opportunity to expand. California, with 10 stores, has the most of any state. Many states have only one Aritzia store.
Expansion has been rapid from 21 stores in 2007 to 79 units 10 years later.
Plans are to expand across the United States. Today only about 10 states have outlets in the U.S.
Aritzia’s investor attraction is more than just expansion. The company watches profit margins and expenses closely with increasing margins often happening.
The $3 million investment in a new store is returned within 12 to 18 months as sales regularly reach $1,000 per square foot. The target market is women aged 14-30, an age when fashion awareness is a high priority, especially among professionals.
Aritzia has no long-term debt and finances expansion from profits. Last year five new stores were opened.
The company recently added men’s wear with an acquisition.
Exclusive lines of branded clothes designed by Aritzia are the chain’s lifeblood
Revenues for the last year increased 64 per cent and were up 53 per cent the previous year.
Profit last year was $1.86 a share compared with $1.53 the year before.
About one-third of the $1.4 billion revenues comes from E-commerce to 200 countries E-commerce revenues increased 150 per cent from 2020 to 2022.
On the Yahoo Finance site nine analyst predictions see the stock price range between $44 and $60 with an average of $50.
Current price is $36.65. The stock sells for 20 times earning — an expected ratio for a profitable fast growing company.
The company is immune to a takeover as the founding Hill family controls the corporation with multiple vote shares.
The stock is not without risk.
Sudden shifts in fashion could cut sales. A recession as may happen can reduce sales. Loss of overseas manufacturing capacity due to geopolitical tensions could hurt.
But this is a stock worth watching and could really dress up an investor’s portfolio.
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at email@example.com
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.