VANCOUVER, Jan. 9, 2017 /PRNewswire/ - Aritzia Inc.
("Aritzia" or the "Company") (TSX: ATZ), an innovative design house
and fashion retailer of exclusive brands, today announced financial
results for the third quarter ended November
27, 2016. Unless otherwise indicated, all amounts are
expressed in Canadian dollars. Certain metrics, including those
expressed on an adjusted or comparable basis, are non-IFRS
measures. See "Non-IFRS Measures" below.
Highlights for the Third Quarter Fiscal 2017:
- Net revenue increased by 20.0% to $186.5
million from $155.4 million in
the third quarter last year.
- Comparable sales increased 15.2%, following 15.4% comparable
sales growth in the third quarter last year.
- Gross profit margin increased by 320 basis points to 44.1% from
40.9% in the third quarter last year.
- Adjusted EBITDA increased by 35.4% to $45.4 million from $33.6
million in the third quarter last year. Adjusted EBITDA as a
percent of net revenue was 24.4% as compared to 21.6% in the same
quarter last year.
- During the quarter, a modification to the accounting treatment
of the Company's legacy option plan resulted in a non-cash reversal
of a $28.3 million deferred income
tax asset to income tax expense. This primarily led to a net loss
of $8.1 million, or ($0.08) per share (on a basic and diluted basis)
as compared to net income of $15.6
million, or $0.15 per share
(on a basic and diluted basis), in the third quarter last year.
- Adjusted Net Income increased by 44.7% to $27.5 million, or $0.23 per diluted share (treasury stock method1),
as compared to Adjusted Net Income of $19.0
million, or $0.16 per diluted
share (treasury stock method2), in the third quarter last year.
- During the quarter, the Company opened two new stores, and
repositioned and expanded two existing stores.
Brian Hill, Aritzia's Founder,
Chairman and Chief Executive Officer, commented, "We are pleased to
have delivered strong financial results for the third quarter,
demonstrating the effectiveness of our business model and strategic
initiatives. In addition to delivering another quarter of
double-digit comparable sales growth, we continued to make progress
on our growth plans, including the expansion of our North American
store footprint, and increased penetration of our eCommerce
business. We remain committed to providing customers with
beautifully designed product, an aspirational shopping experience
and exceptional service, underpinned by operational
excellence."
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1 Adjusted Net Income per diluted share for the third
quarter of fiscal 2017 is calculated by dividing Adjusted Net
Income by the total number of outstanding shares plus the total
number of dilutive share options that would be included under the
treasury stock method as at November 27,
2016 (or 117,869,746 diluted shares).
2 The Company effected changes to its share capital
in connection with the IPO completed in the third quarter of fiscal
2017. For comparative purposes, Adjusted Net Income per diluted
share for the third quarter of fiscal 2016 is based on the same
diluted share count as Adjusted Net Income per diluted share for
the third quarter of fiscal 2017.
Third Quarter Summary
All comparative figures below are for the 13-week period
ended November 27, 2016, compared to
the 13-week period ended November 29,
2015.
Net revenue increased by 20.0% to $186.5
million from $155.4 million in
the prior year. The increase was primarily driven by comparable
sales growth of 15.2%, with strong in-store performance and
continued momentum in the Company's eCommerce business, as well as
the revenue from five new store openings and five expanded or
repositioned stores since the third quarter of last year.
Gross profit increased by 29.6% to $82.3
million, or 44.1% of net revenue, compared to $63.5 million, or 40.9% of net revenue, in the
prior year. The 320 basis point increase in gross profit margin was
primarily due to lower product-related costs in addition to
leverage on store occupancy costs.
Selling, general and administrative ("SG&A") expenses
increased by 37.4% to $48.5 million,
compared to $35.3 million in the
prior year. Excluding the impact of initial public offering ("IPO")
related costs of approximately $3.1
million incurred during the quarter, SG&A expenses were
24.3% of net revenue, compared to 22.7% of net revenue in the prior
year. This increase in SG&A was primarily due to higher store
labour costs as we focus on elevating our retail experience, as
well as, continued investment in support office talent and
marketing.
Adjusted EBITDA increased by 35.4% to $45.4 million, or 24.4% of net revenue, compared
to $33.6 million, or 21.6% of net
revenue, in the prior year. Adjusted EBITDA in the quarter excludes
stock-based compensation expense of $4.0
million, IPO-related costs of $3.1
million and unrealized foreign exchange gains on U.S. dollar
forward contracts of $1.1
million. Adjusted EBITDA for the third quarter in the
prior year excludes stock-based compensation of $4.2 million and unrealized foreign exchange
losses on U.S. dollar forward contracts of $0.4 million.
Total stock-based compensation expense of $4.0 million recorded in the quarter reflects
$2.7 million in costs related to the
accounting of the Company's legacy option plan and $1.3 million in costs related to both the
Company's new option plan and director deferred share unit program.
Prior to the IPO, the Company accounted for the time-based options
under the legacy option plan as a stock-based compensation
liability due to the cash settlement feature. As of September 30, 2016, the Company amended the
legacy option plan to remove this cash settlement feature and
accordingly, accounted for the time-based options as an
equity-settled plan from this date forward. As such, the liability
relating to this plan was reclassified to contributed surplus and
the corresponding deferred income tax asset of $28.3 million was reversed to income tax expense.
This non-cash reversal primarily led to a total income tax expense
of $36.5 million in the third quarter
of fiscal 2017.
The reversal of the deferred income tax asset to income tax
expense primarily contributed to a net loss of $8.1 million in the quarter, compared to net
income of $15.6 million in the third
quarter of last year. Excluding the impact of stock-based
compensation and the aforementioned income tax expense resulting
from the reversal of the deferred income tax asset, IPO-related
costs, unrealized foreign exchange gains on U.S. dollar forward
contracts and $2.9 million in debt
refinancing costs related to the IPO, net of related tax effects,
Adjusted Net Income increased by 44.7% to $27.5 million, compared to Adjusted Net Income of
$19.0 million in the third quarter of
last year.
Year-to-Date Summary
All comparative figures below are for the 39-week period
ended November 27, 2016, compared to
the 39-week period ended November 29,
2015.
Net revenue increased by 25.5% to $470.8
million from $375.1 million in
the prior year. The increase was primarily driven by comparable
sales growth of 15.1%, arising from both the strong in-store
performance and continued momentum in the Company's eCommerce
business, as well as the revenue from non-comparable stores.
Gross profit increased by 34.4% to $190.2
million, or 40.4% of net revenue, compared to $141.4 million, or 37.7% of net revenue, in the
prior year. The 270 basis point increase in gross profit margin was
primarily due to lower product-related costs in addition to
leverage on store occupancy costs.
SG&A expenses increased by 34.5% to $129.3 million, compared to $96.1 million in the prior year. Excluding the
impact of the IPO-related costs of approximately $7.7 million incurred year-to-date, SG&A
expenses were 25.8% of net revenue, compared to 25.6% of net
revenue in the prior year.
Adjusted EBITDA increased by 38.3% to $85.4 million, or 18.1% of net revenue, as
compared to $61.7 million, or 16.5%
of net revenue, in the prior year. Stock-based compensation of
$98.6 million was expensed due to
both legacy time-based options adjusted to fair market value up to
September 30, 2016 and the triggering
of legacy performance-based options of $97.3
million in connection with the Company's IPO. Stock-based
compensation of $8.6 million was
expensed in the prior year due solely to the legacy time-based
options. The stock-based compensation expense primarily contributed
to a net loss of $67.6 million,
compared to net income of $22.4
million in the prior year.
Excluding the impact of stock-based compensation and the
aforementioned income tax expense resulting from the reversal of
the deferred income tax asset, IPO-related costs, unrealized
foreign exchange (gains) losses on U.S. dollar forward contracts
and $2.9 million in debt refinancing
costs related to the IPO, net of related tax effects, Adjusted Net
Income increased by 62.5% to $46.3
million, compared to $28.5
million in the prior year.
Recent Developments
The Company had a strong holiday period starting with a
successful Black Friday promotion at the end of the third quarter
of fiscal 2017. This year represented the Company's fourth and
strongest Black Friday sales week, both in stores and online. The
Company's fourth quarter is off to a strong start, with December
comparable sales growth up 12.9% for the 5-week period ended
January 1, 2017. See "Presentation of
Financial Information" and "Forward-Looking Information" below.
Outlook
The Company is looking forward to the opening of its flagship
locations in Los Angeles,
Chicago and San Francisco in fiscal 2018. In addition, the
Company plans to open three new stores and expand or reposition six
existing locations in fiscal 2018. This keeps the Company on track
to open its planned minimum 25 to 30 new locations in North America, and expand or reposition a
minimum of 20 to 25 existing stores between fiscal 2017 and to the
end of fiscal 2021. See "Forward-Looking Information" below.
Consolidated Financial Statements and Management's Discussion
and Analysis
The Company's unaudited condensed interim consolidated financial
statements for the 13-week and 39-week periods ended November 27, 2016 and Management's Discussion and
Analysis ("MD&A") thereon are available under the Company's
profile on SEDAR at www.sedar.com and on Aritzia's investor
relations website at investors.aritzia.com.
Presentation of Financial Information
All figures indicated above with respect to the 5-week period
ended January 1, 2017 are
preliminary, have not been reviewed by the Company's auditors and
are subject to change as the Company's financial results are
finalized. The preliminary results and information (including with
respect to comparable sales growth) constitute forward-looking
information within the meaning of applicable securities laws, are
based on a number of assumptions and are subject to a number of
risks and uncertainties. See "Forward-Looking Information"
below.
Conference Call
A conference call to discuss third quarter results is scheduled
for Monday, January 9, 2017, at
1:30 p.m. PT / 4:30 p.m. ET. A replay will be available shortly
after the conclusion of the call and will remain available until
January 23, 2017. To access the
replay, please dial 1-855-669-9658 and use replay access code 1045.
A webcast will be available after the call and will remain on
Aritzia's investor relations website at investors.aritzia.com for
thirty days.
About Aritzia
Aritzia is an innovative design house and fashion retailer of
exclusive brands. The Company designs apparel and accessories for
its collection of exclusive brands and sells them under the Aritzia
banner. The Company's expansive and diverse range of women's
fashion apparel and accessories addresses a broad range of style
preferences and lifestyle requirements. The Company is well known
and deeply loved by its customers in Canada with growing customer awareness and
affinity in the United States and
outside of North America. The
Company aims to delight its customers through an aspirational
shopping experience and exceptional customer service that extends
across its more than 75 retail stores and its eCommerce business,
aritzia.com.
Non-IFRS Measures including Retail Industry Metrics
This press release makes reference to certain non-IFRS measures
including certain retail industry metrics. These measures are not
recognized measures under IFRS, do not have a standardized meaning
prescribed by IFRS and are therefore unlikely to be comparable to
similar measures presented by other companies. Rather, these
measures are provided as additional information to complement those
IFRS measures by providing further understanding of our results of
operations from management's perspective. Accordingly, these
measures should not be considered in isolation nor as a substitute
for analysis of our financial information reported under IFRS. We
use non-IFRS measures including "EBITDA", "Adjusted EBITDA",
"Adjusted Net Income", "Adjusted Net Income per diluted share", and
"gross profit margin". This press release also makes reference to
"comparable sales growth", which is a commonly used operating
metric in the retail industry but may be calculated differently
compared to other retailers. These non-IFRS measures including
retail industry metrics are used to provide investors with
supplemental measures of our operating performance and thus
highlight trends in our core business that may not otherwise be
apparent when relying solely on IFRS measures. We believe that
securities analysts, investors and other interested parties
frequently use non-IFRS measures including retail industry metrics
in the evaluation of issuers. Our management also uses non-IFRS
measures including retail industry metrics in order to facilitate
operating performance comparisons from period to period, to prepare
annual operating budgets and forecasts and to determine components
of management compensation. Definitions and reconciliations of
non-IFRS measures to the relevant reported measures can be found in
our MD&A.
Forward-Looking Information
Certain information contained in this press release may
constitute forward-looking information under applicable securities
laws, including statements related to the Company's continued
progress on its growth and strategic initiatives, including the
expansion of its North American store footprint and increased
penetration of its eCommerce business (see "Outlook" above), the
Company's preliminary results for the 5-week period ended
January 1, 2017 (see "Recent
Developments" above), and the Company's commitment to deliver
beautifully designed product, an aspirational shopping experience
and exceptional customer service, all driven by operational
excellence. This information is based on management's reasonable
assumptions and beliefs in light of the information currently
available to us and are made as of the date of this press release.
However, we do not undertake to update any such forward-looking
information whether as a result of new information, future events
or otherwise, except as required under applicable securities laws
in Canada. Actual results and the
timing of events may differ materially from those anticipated in
the forward-looking information as a result of various factors,
including those described in "Risk Factors" which are described in
the Company's final prospectus filed in connection with its initial
public offering on September 26, 2016
(the "Prospectus").
The Company cautions that the list of risk factors and
uncertainties is not exhaustive and other factors could also
adversely affect its results. Readers are urged to consider the
risks, uncertainties and assumptions carefully in evaluating the
forward-looking information and are cautioned not to place undue
reliance on such information. See "About this Prospectus –
Forward-looking Information" and "Risk Factors" in the Prospectus
for a discussion of the uncertainties, risks and assumptions
associated with these statements.
SOURCE Aritzia Inc.
