Canadian clothing chain Aritzia Inc. is resisting raising its prices, even as inflationary pressures continue to affect the retail industry – including rising costs for raw materials, and mounting expenses from bringing in products by air to get around global shipping delays.
“I was taught at a very young age there’s two ways to go bankrupt, being stupid and being greedy. And we try not to be either,” Aritzia chief executive officer Brian Hill said on Wednesday during a conference call to discuss the company’s third-quarter earnings. “… Until we start seeing erosion of our margins, we don’t see any reasons to put our prices up. Believe me, the debate happens all the time. I’m usually the one at the end of the day, holding still and saying no.”
One of the ways the Vancouver-based company is offsetting cost pressures is through more U.S.-dollar sales, as Aritzia continues to expand its presence south of the border.
The United States accounted for 44 per cent of the retailer’s third-quarter revenue, and the company plans to accelerate store openings there in the coming year. Mr. Hill said another factor offsetting cost pressures is a “concerted effort” to pare back discounts, marking down fewer items and reducing the length of promotional events.
Aritzia reported another strong quarter on Wednesday as its net profit more than doubled during the fall and early holiday shopping season.
The company reported $64.9-million in net profit in the 13 weeks ended Nov. 28, an increase of 112.9 per cent compared to the same period a year earlier.
Aritzia also raised its full-year sales outlook, and expects net revenue to increase by 65 to 70 per cent. Aritzia’s net revenue increased by 62.9 per cent in the third quarter to $453.3-million.
E-commerce sales have continued to grow even compared to the surges in online purchasing in 2020. The company saw record order volumes, and digital sales made up nearly one-third of the company’s revenue in the quarter.
This was the first quarter since the beginning of the pandemic in which stores were open in all jurisdictions, Mr. Hill noted on the call. Store sales are above prepandemic levels. Comparable sales – an important metric that does not count sales growth tied to new store openings – rose by 58 per cent in the quarter, and 26 per cent compared to before the pandemic.
However, the company has noticed foot traffic to stores has contracted in Canada as the highly contagious Omicron variant of COVID-19 has led to renewed restrictions. Even though retail has remained open in many places, people are out less and are shopping for going-out clothing less in Canada, Mr. Hill noted.
Aritzia has been expanding its product selection, adding more colours and sizes in its most popular items. But the “heavy lifting” is still to come, Mr. Hill said on Wednesday, citing plans to launch new product categories, such as intimates and swimwear.
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Susan Krashinsky Robertson