Aritzia sees 'unprecedented' growth in the U.S. as sales surge

Aritzia (ATZ.TO) stock initially surged as much as 18 per cent in early trading Thursday after the retailer's sales in the United States grew at an "unprecedented pace" and skyrocketed 174 per cent from last year.

But the Vancouver-based company’s CEO Brian Hill warned that the company is grappling with inflationary pressures across its business and that the retailer is “not immune to the global supply chain disruptions.”

Aritzia, which reported fiscal results after markets closed on Wednesday, said sales in the U.S. hit $118 million, an increase of $75 million from last year to now accounting for 42 per cent of the company’s total sales.

The retailer's stock was up nearly 15 per cent as of 9:45 a.m. ET, trading on the TSX at $46.45 per share.

"We've been in the U.S. since 2007 and although we're growing every year, we've never seen growth like this," Hill told analysts on a conference call on Wednesday, adding that the business in the U.S. grew "at an unprecedented pace" in the quarter.

"There's a lot of great shopping districts and customers in the U.S. that we're not even tapping right now. We just don't see our expansion into the U.S. slowing and if anything, we see it continuing on the same pace it has. We're super excited about it."

The rapid sales growth in the U.S. came as the company reported strong quarterly results, surpassing analyst expectations. Aritzia reported total sales of $350.1 million in its second quarter, up from $200.2 million last year. Adjusted net income came in at $44.4 million, or 39 cents per share, compared to $1 million, or 1 cent per share, during the same time last year.

Analysts had expected Aritzia to earn 21 cents per share in adjusted profit on $296.2 million in revenue, according to data from Refinitiv.

While Aritzia is showing strong signs of growth, Hill said the retailer was "not immune" to the supply chain issues and inflationary constraints hitting the broader retail industry.

Hill said the company has had to increase its use of expedited freight by three to four times its normal frequency as shipping times have doubled compared to last year. It also faced factory disruptions due to the COVID-19 pandemic. However, last year the company increased its inventory levels, which helped the company deal with the surprise supply chain constraints.

Now the company is looking at mitigating inflationary pressures weighing on the broader retail industry.

"We're seeing it everywhere," Hill said of inflation.

"We're seeing it's costing more money to build the stores, it's costing more money to make our products, it's costing more money to ship our products, it's costing more money to hire people and get them on your teams. Everywhere we look, it's costing more."

When asked by an analyst about Aritzia's pricing strategy, given various cost pressures facing the retailer, Hill said many costs are being offset by growth in the U.S. However, he noted that labour, storage and capital expenses to build new stores are expected to go up.

"There are other inflationary pressures over and above our product costs that we are going to have to weigh out and figure out where those are going to land," Hill said.

With files from the Canadian Press

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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