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Aritzia expects 45% sales decline as e-commerce skyrockets

Aritzia expects 45% sales decline as e-commerce skyrockets

Vancouver-based Aritzia Inc. saw online sales skyrocket amid the coronavirus pandemic, but the clothing retailer still expects revenues to decline by 45 per cent in the upcoming quarter.

The company, which reported its full year fiscal 2020 results on Thursday, said it expects net revenues in the first quarter to fall between $105 million and $110 million, a 45 per cent drop from the same time last year. The first quarter includes the three month period ending May 31, when the coronavirus pandemic struck and forced retailers around the world to shutter their physical stores.

Aritzia said it began to see the impact of COVID-19 towards the end of February, when sales began to slow. By mid-March the retailer closed all 96 of its retail locations in Canada and the United States – a significant move, as in-store sales accounted for 77 per cent of the company’s nearly $1 billion sales in the last fiscal year.

While in-store sales disappeared, e-commerce sales grew by more than 150 per cent compared to the same time in 2019, which chief executive Brian Hill said has helped put the company in “a solid financial position.”

The company has also applied for government support in both Canada and the United States. Hill said the retailer will receive about $6 million in support from the Canadian and American governments for each month it qualifies.

“The purpose of the government support was to ensure that people stayed employed and that’s exactly what’s happened at Aritzia,” Hill said.

“It’s given us the ability to keep all of our people employed. That was the intent of the government support and it’s working.”

As the North American economy gradually reopens, Aritzia has also began reopening some of its stores. It expects to have approximately 30 stores open by May 31.

The company also said it is looking at real estate opportunities. Hill said Aritzia is still “understored” when it comes to its physical retail footprint, and is considering opening additional locations.

“If we were in an enviable position in our ability to open up stores before this crisis, we certainly are more so now going forward, because we’re going to be one of the few companies that’s still looking at opening stores,” Hill said. However, he said the company will take its time as the coronavirus pandemic continues.

“We don’t know what this new normal is and we’re going to wait and see before we really commit to anything.”

Aritzia’s net revenue for the year ending March 1 came in at $980.6 million, a 12.2 per cent increase from last year. Comparable sales, a key metric in the retail industry, increased by 7.6 per cent largely due to the company’s growing e-commerce business. Net income also increased 15.1 per cent from $78.7 million last year to $90.6 million.

“While navigating the past few months has unquestionably been challenging, it has highlighted the strength of our operating model and demonstrated that our approach to business sets us apart and can sustain us through the worst of times,” Hill said.

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