An analyst says he remains bullish on Aritzia Inc. despite the Canadian retailer’s announcement Thursday that it’s lowering guidance for the upcoming quarter.
Martin Landry, managing director of Stifel Canada, told BNN Bloomberg in a Friday interview that despite some expected sales weakness in the months ahead, Aritzia is primed for growth over the long term.
“The company is a high-growth story and is having a successful expansion in the U.S.,” he said.
“I think today, investors are pricing in the guidance reduction… profitability is going down a little bit, but I think this is near-term noise and longer term, the story’s intact.”
On Thursday, the retailer trimmed its third-quarter sales outlook to between $675 million and $700 million, below the average of $738 million Bloomberg-tracked economists were expecting.
In the second quarter, meanwhile, the company beat on revenue estimates, bringing in $616 million – above the $583 million expected. Investors seemed to react negatively to the mixed results on Friday, as the stock was down more than six per cent in midday trading in Toronto.
Landry said he believes Aritzia will weather any near-term share-price volatility and continue to grow its retail fashion business in the U.S., where there are countless opportunities to expand.
“It’s not the Canadian side of things… in Canada, they’re extremely well penetrated, it’s the expansion in the U.S. For Canadian retailers, it’s not always easy to expand in the U.S., and for Aritzia, it’s working,” he said.
“Sales in the U.S. were up 24 per cent (year-over-year); it’s the biggest growth rate of the last six quarters, so things are gaining traction.”
Landry argued that if investors step back and examine Aritzia’s trajectory over the next two or three years, they’ll see “a very compelling growth story.”
“There’s a lot of growth still ahead,” he said.
“We’re expecting a 50 per cent increase in (earnings per share) next year, so we’re talking about big numbers, successful expansion in the U.S., clean balance sheet, no debt… there’s a lot of positive news here.”
With files from Bloomberg News