Canada markets close in 6 hours 27 minutes

Canada's Aritzia eyes more U.S. expansion next year as popularity surges

The Aritzia store where Meghan Markle shopped according to local media is pictured in Toronto, Ontario, Canada, May 11, 2018. (REUTERS/Carlo Allegri)

Aritzia Inc. said it plans on opening at least six new stores in the United States next year, as its popularity continues to rapidly grow in the American market.

Revenue from U.S. sales grew by 40 per cent in the third quarter alone, the company reported after the markets closed on Wednesday, thanks to the popularity of its more than two dozen existing American stores, as well as investments in e-commerce and marketing campaigns.

“Our business in the United States is so good right that we feel we can open up in any premier shopping destinations in the United States and so extremely well,” Aritzia chief executive Brian Hill told analysts on a conference call on Wednesday.

“The way things are going, everything we’re opening is profitable now, so we’re continuing to explore where we can and pick the ones we think will be the most profitable.”

While Hill would not disclose the exact locations of the six new stores (the company is still in the midst of finalizing some of its lease agreements), he said two will be in the existing market in-and-around Manhattan. The four remaining boutiques will open in markets where Artizia has yet to open stores, in “extremely high AAA centres with extremely good locations and large footprints.” There are no definitive store openings planned for Los Angeles, but Hill said that may happen the following year.

“If you actually draw the map and figure out where our next stores would be, we’re just … slowly working our way down the eastern seaboard and continuing down the west and mid-west,” Hill said.

The Meghan Markle effect

CIBC analyst Mark Petrie wrote in a note that Aritzia’s strength in the U.S. market is in part a reflection of its revamped marketing capability and increased focus on social media.

“We believe this has been an important driver of accelerating growth in the U.S., and expect to see the company continue to leverage this capability and market opportunity,” Petrie wrote. “More broadly, Artizia has clearly built e-commerce into a strength and an important driver of brand awareness and customer engagement, and in turn, sales and earnings.”

It certainly helps when you seem to have celebrities lining up to wear your product – without even getting paid to. During the conference call on Wednesday, Hill pointed to a list of celebrities who have worn Aritzia product voluntarily, including Hailey Baldwin Bieber, Gigi and Bella Hadid, Kaia Berger, and – perhaps most importantly – Meghan Markle.

Markle wore the company’s Wilfred Cocoon coat at a public appearance, which promptly sent it flying off the shelves. The company also launched what it called a “extraordinary successful” marketing campaign with Kendall Jenner, who has 100 million Instagram followers.

At the same time, Aritzia launched its first outlet-style boutique at the Toronto Premium Outlets two months ago, and said it has already been successful enough to pay back original capital investors. But despite its immediate success, Hill warned that customers and shareholders shouldn’t expect the company to become more outlet focused. 

“To be clear, this is not the start of an outlet rollout,” Hill said. “That being said, selectively leveraging outlets to move discontinued merchandise is something we’ll continue to explore going forward.”

Aritzia’s net revenues in the third quarter climbed by 18.8 per cent from $204.4 million last year to $242.9 million. The company’s same store sales grew 12.9 per cent, ahead of the 10 per cent initially forecast by CIBC, marking the 17th consecutive quarter of positive growth.

Aritzia’s stock was down nearly 2 per cent as of 2:12 p.m. ET on Thursday.

Download the Yahoo Finance app, available for Apple and Android.