Canadian fashion brand Aritzia Inc.'s sales momentum continued unabated in its latest quarter, appearing nearly immune to the spending pullback plaguing much of the retail industry amid high inflation.
"Consumer demand is not letting up and we're not seeing any notable changes in behaviour," Aritzia CEO Jennifer Wong said during a conference call on Wednesday to discuss the company's third-quarter results.
"What we're seeing is a tremendous amount of consistency between who's shopping with us, what they're buying (and) their average basket size."
The Vancouver-based clothing retailer said net revenue for the quarter ending Nov. 27 was a record $624.6 million, representing an increase of 38 per cent compared with a year earlier.
The company's e-commerce revenue grew 36 per cent in the quarter — on top of 47 per cent growth last year.
While sales in Canada were up 22 per cent, Aritzia's U.S. sales climbed 58 per cent compared with a year ago.
The sales growth comes despite Statistics Canada's advance retail sales estimate for November suggesting sales dropped 0.5 per cent compared with October. In the U.S., the Department of Commerce said retail sales south of the border fell 0.6 per cent in November.
Yet during that same month, Aritzia said its retail sales hit an all-time high.
"In e-commerce, on one of the very first days of the (Black Friday) event, we had our highest day ever, and then beat that record again on Black Friday itself," Wong said. "During sale periods, e-commerce is becoming a larger and larger contributor to our growth."
She attributed the brand's strength despite economic conditions to its "unique positioning in the marketplace of everyday luxury."
"There's really no one that does what we do or comes close to what we do," Wong said.
The clothing store leans heavily on social media to attract shoppers, including an influencer program with paid collaborations, the company said.
"The Aritzia brand is resonating incredibly well on social media with our clients who are doing the talking for us," Wong said. "Our views on TikTok have surpassed two billion and are growing at a rate of nearly 100 million every month."
Meanwhile, the company ended the quarter with inventory up 187 per cent compared with the same period last year.
"The supply chain environment was dynamic and uncertain at the time we began placing orders for fall and winter products over 12 months ago," Wong said.
Aritzia ordered inventory early just as freight timelines improved, resulting in inventory arriving even sooner than anticipated, she said.
But shoppers hoping for a blowout sale due to the higher stock levels may be disappointed.
"We expect markdowns in (the fourth quarter) to be no greater than pre-pandemic levels," Wong said. "We are confident with the composition of our inventory, which is heavily concentrated in client favorites and has certainly enabled the strong sales growth we have delivered."
Still, the higher inventory levels are weighing on Aritzia.
"Our distribution centres are being pressured and we are seeing additional costs related to handling all of the inventory," Aritzia chief financial officer Todd Ingledew said during the conference call. "But we're more than pleased with the composition of that inventory."
On pricing, Aritzia is raising prices "opportunistically and appropriately," Wong said.
"We're always looking at our pricing," she said. "We have kept our prices stable up until now ... we're continuing to take a close look and looking at opportunities where we can look at our pricing."
This report by The Canadian Press was first published Jan. 12, 2023.
Companies in this story: (TSX:ATZ)
Brett Bundale, The Canadian Press
