Aritzia Inc. reports first-quarter loss, revenue drop amid COVID-19

Aritzia Inc. reports first-quarter loss, revenue drop amid COVID-19

VANCOUVER — Aritzia Inc. reported a first-quarter loss and revenue drop after temporarily closing all its stores due to COVID-19 health precautions, but the clothing retailer sees an opportunity to expand its business amid the global pandemic.

“It wasn’t easy seeing all our boutiques closed … and the corresponding decline in our revenues and our profitability,” said CEO Brian Hill during a conference call with analysts Thursday after the company released its first-quarter financial results.

The Vancouver-based retailer closed its 96 stores on March 16 and saw a significant decline in sales in the first two weeks of that month.

It beat expectations as it reported a net loss of $26.5 million for the first quarter ended May 31, down from a net income of $16.2 million in the same quarter last year, which ended June 2, 2019.

The adjusted net loss was $24.9 million or 23 cents per diluted share compared with net income of $18.5 million or 17 cents per share rrmfor the first quarter the previous year.

Net revenue totalled $111.4 million, down 43.4 per cent from $196.7 million in the same time last year.

Aritzia’s adjusted net loss was expected to be 25 cents per share on $108.5 million of revenues, according to financial markets data firm Refinitiv.

Despite the drop in overall revenues, e-commerce sales grew more than 150 per cent during the quarter.

Aritzia started a phased reopening of stores on May 7. Thirty had reopened by the end of the quarter and 89 as of July 9. Only seven, including four in Manhattan, remain closed.

Reopened stores have exceeded the company’s expectations so far, said Hill, noting the company is viewing the second quarter “with cautious optimism as we prepare for a period of recovery.”

During the first five weeks of the quarter, reopened stores have performed at 55 per cent to 65 per cent of last year’s revenue levels, he said, calling that “well above our initial expectations.”

“We don’t know what the new normal will hold until sometime next year.”

Aritzia’s net revenue for the first five weeks of the second quarter were down 25 per cent to 30 per cent compared with the same time last year, said chief financial officer Todd Ingledew.

E-commerce revenue remains strong, though growth has moderated since most of the company’s stores have reopened, he said, and is currently trending 50 per cent to 100 per cent higher than last year.

Aritzia plans to open five or six new stores and reposition three existing locations, primarily in the second half of the fiscal year. Half of the leases the company has signed were negotiated after the pandemic began and reflect what he called “compelling post-COVID financial terms.”

Aritzia will also open two pop-up locations in New York and Los Angeles this fall.

The real estate opportunity for Aritzia right now is “unprecedented,” said Hill, noting that the company is understored and many other retailers are shutting their bricks-and-mortar locations.

“More premier locations are becoming available and under increasingly compelling financial terms,” he said.

“So much so, it’s hard to determine at this point if our stores were more profitable prior to COVID-19 … or our new stores will be more profitable as a result of new economics post COVID-19.”

Aritzia is also in a good position thanks to e-commerce growth to expand its product lines by offering different sizes, lengths and colours; as well as new categories, such as swim, intimates, bags, shoes and beauty, he said.

“While this has certainly been a difficult period, it has also been a period of learning and in creating opportunities that weren’t there for us previous to the pandemic.”

Aritzia’s shares gained 59 cents or three per cent to $19.96 in Thursday trading on the Toronto Stock Exchange.

Companies in this story: (TSX:ATZ)

This report by The Canadian Press was first published July 9, 2020.

Aleksandra Sagan, The Canadian Press

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