Aritzia resists rising prices despite inflationary pressures on the retail sector

Canadian clothing chain Aritzia Inc. resists price increases, although inflationary pressures continue to affect the retail sector, including rising raw material costs and increased spending on air-shipping products to circumvent worldwide shipping delays.

“I learned at a very young age that there were two ways to go broke, to be stupid and to be greedy. And we try not to be either,” Aritzia Chief Executive Brian Hill said Wednesday on a conference call to discuss the company’s third-quarter earnings. “…Until we start seeing an erosion of our margins, we see no reason to raise our prices. Believe me, debate happens all the time. It’s usually me who, at the end of the day, stands still and says no.

One of the ways the Vancouver-based company is offsetting cost pressures is by increasing its US dollar sales as Aritzia continues to expand its presence south of the border.

The United States accounted for 44% of the retailer’s third-quarter revenue, and the company plans to ramp up store openings there in the coming year. Mr Hill said another factor offsetting cost pressures is a “concerted effort” to reduce discounts, reduce item counts and shorten the duration of promotional events.

Aritzia reported another strong quarter on Wednesday, with net profit more than doubling through the fall and start of the holiday shopping season.

The company reported net income of $64.9 million in the 13 weeks ended Nov. 28, an increase of 112.9% from the same period a year earlier.

Aritzia also raised its full-year sales outlook and expects net revenues to increase 65-70%. Aritzia’s net revenues increased 62.9% in the third quarter to $453.3 million.

E-commerce sales continued to grow even against the surge in online shopping in 2020. The company saw record order volumes, and digital sales accounted for nearly a third of its revenue in the quarter.

It was the first quarter since the start of the pandemic in which stores were open in all jurisdictions, Hill noted on the call. Store sales are above pre-pandemic levels. Comparable sales – an important measure that does not take into account sales growth related to new store openings – rose 58% in the quarter and 26% compared to before the pandemic.

However, the company noticed that foot traffic to stores had contracted in Canada as the highly contagious Omicron variant of COVID-19 prompted new restrictions. Even though retail businesses have remained open in many places, people are going out less and buying less outlet clothing in Canada, Hill noted.

Aritzia has expanded its product selection, adding more colors and sizes to its most popular items. But the “big work” is yet to come, Mr Hill said on Wednesday, citing plans to launch new product categories, such as underwear and swimwear.

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