Ms. Jennifer Wong reports

ARITZIA REPORTS FOURTH QUARTER AND FISCAL 2023 FINANCIAL RESULTS

Aritzia Inc. has released its financial results for the fourth quarter and full year ended Feb. 26, 2023.

"The outstanding momentum of the Aritzia brand continued through the fourth quarter of fiscal 2023, resulting in net revenue growth of 44 per cent from last year and comparable sales growth of 32 per cent. The strength in our business across all geographies and all channels reflects the tremendous demand for our beautiful, high-quality products from both new and existing clients," said Jennifer Wong, chief executive officer. "For the full fiscal year, our net revenue increased by 47 per cent, led by exceptional growth of 66 per cent in the United States, which now represents more than 50 per cent of our total net revenue. Our retail channel grew by an impressive 53 per cent, while e-commerce net revenue increased 36 per cent in fiscal 2023, underscoring the strength of our everyday luxury experience.

"In fiscal 2024, our focus will be on scaling our infrastructure to match our recent tremendous growth and make strategic investments to fuel our future growth and achieve our long-term goals. While investing for the future, we are also focused on optimizing our processes to more efficiently manage our current business, helping ensure we are positioned to deliver profitable growth for the long term. I am extremely grateful to our highly talented team for their hard work and unwavering commitment to excellence, which continues to propel us toward our goals," concluded Ms. Wong.

Fourth quarter highlights:

• Net revenue increased 43.5 per cent from Q4 2022 to $637.6-million, achieving comparable sales growth of 32.2 per cent compared with Q4 2022.
• U.S. net revenue increased 55.7 per cent from Q4 2022 to $337.5-million, comprising 52.9 per cent of net revenue in Q4 2023.
• Retail net revenue increased 38.4 per cent from Q4 2022 to $363.1-million.
• E-commerce net revenue increased 50.8 per cent from Q4 2022 to $274.5-million, comprising 43.1 per cent of net revenue in Q4 2023.
• Gross profit margin decreased 240 basis points to 38.0 per cent from 40.4 per cent in Q4 2022.
• Net income increased 9.1 per cent from Q4 2022 to $37.3-million.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 19.7 per cent from Q4 2022 to $79.4-million.
• Net income per diluted share was 32 cents per share, compared with 29 cents per share in Q4 2022.
• Adjusted net income per diluted share was 40 cents per share, compared with 34 cents per share in Q4 2022

Strategic accomplishments for fiscal 2023:

• Increased active U.S. clients by 54 per cent during fiscal 2023;
• Achieved 65.8-per-cent growth in U.S. net revenue, through strength in both boutiques and e-commerce, to surpass 50 per cent of total net revenue in fiscal 2023;
• Drove continued momentum in e-commerce, increasing revenue by 36.4 per cent on top of 32.5-per-cent growth in fiscal 2022 and 88.3-per-cent growth in fiscal 2021, comprising 35.1 per cent of net revenue in fiscal 2023;
• Opened eight new boutiques and repositioned five existing boutiques in premier real estate locations, with payback periods tracking ahead of expectations;
• Advanced initiatives to support Aritzia's communities, cultivate diversity and enhance sustainability, including a commitment to set greenhouse gas emission reduction targets by November, 2024.

Outlook

The first quarter of fiscal 2024 is off to a healthy start with the spring and summer collections being well received by clients. Aritzia is on track to deliver expected net revenue in the range of $450-million to $460-million in the first quarter of fiscal 2024. This would reflect a sales increase of 10 per cent to 13 per cent on top of growth of 65 per cent in the first quarter of fiscal 2023. The company continues to see strength in the United States across both its e-commerce and retail channels, as well as continued growth in Canada.

For fiscal 2024, Aritzia currently expects the following:

• Net revenue in the range of $2.42-billion to $2.5-billion, representing an increase of approximately 10 per cent to 14 per cent from fiscal 2023 including the 53rd week; this is led by continued strength in the United States across both channels and continuing growth in Canada, as well as the contribution from retail expansion with:
  • Eight new boutiques and four boutique expansions or repositions, all of which are located in the United States; six of the eight new boutiques will open in the second half of the fiscal year, including three in the last month of the year;
• Gross profit margin to decrease by approximately 200 basis points compared with fiscal 2023, reflecting inflationary pressures, normalized markdowns, preopening lease amortization and additional warehousing costs related to inventory management, partially offset by lower expedited freight costs;
• Selling, general and administrative costs as a percentage of net revenue to increase by approximately 150 basis points compared with fiscal 2023, driven by distribution centre project costs and the annualization of investments in talent and increased retail wages made in the back half of fiscal 2023;
• Capital cash expenditures (net of proceeds from lease incentives) of approximately $220-million.

Over a two-year time period, Aritzia expanded its business from $857-million in annual net revenue in fiscal 2021 to $2.2-billion in fiscal 2023, resulting in a two-year top-line increase of 160 per cent and a new revenue baseline from which the company expects to continue growing. Further, while just 12 months ago, Aritzia expected to generate $1.8-billion in fiscal 2023 net revenue, the end result was an incremental $400-million higher. This unprecedented growth occurred during a period of elevated cost pressures and a highly unpredictable macro environment. During this time, the company prioritized maximizing sales growth and meeting the surging demand for its product.

Management's focus in fiscal 2024 is on building infrastructure to support its higher baseline and ensure scalability for the next phase of growth. Key infrastructure investments include the company's new cornerstone 550,000-square-foot distribution centre in the Toronto area, which will serve as a fulfilment hub for Eastern Canada and eastern United States, repositions of the company's three New York flagships, as well as a new Chicago flagship, expansion of support office space, and e-commerce technology to drive e-commerce 2.0.

While the company anticipates margins will be pressured in the near term, the company expects fiscal 2025 adjusted EBITDA as a percentage of net revenue to, at a minimum, return to fiscal 2023 levels of 16 per cent. This is driven by anticipated benefits from product margin improvements, cost-efficiencies and subsiding transitory cost pressures, including pre-opening lease amortization for the company's new cornerstone distribution centre and flagship boutiques, additional warehousing costs related to inventory management, and distribution centre project costs. These benefits are expected to total 400 basis points relative to fiscal 2024.

The company's management team and board are confident that Aritzia's growth strategies, targeted infrastructure investments and cost-efficiencies will drive sustained double-digit revenue and earnings growth, as reflected in the fiscal 2027 strategic and financial plan.

A discussion of the company's long-term financial plan is contained in the company's press release dated Oct. 27, 2022, "Aritzia Presents its fiscal 2027 Strategic and Financial Plan, Powering Stronger." This press release is available on SEDAR under the company's profile and on the company's website.

Normal course issuer bid

On Jan. 18, 2023, the company announced that the Toronto Stock Exchange had accepted its notice of intention to proceed with a normal course issuer bid to repurchase and cancel up to 3,860,745 of its subordinate voting shares, representing approximately 5 per cent of the public float of 77,214,916 subordinate voting shares, over the 12-month period commencing Jan. 20, 2023, and ending Jan. 19, 2024.

On Feb. 3, 2023, the company announced it had entered into an automatic share purchase plan with a designated broker for the purpose of permitting the company to purchase its subordinate voting shares under the 2023 NCIB during predetermined blackout periods.

Between Jan. 20, 2023, and May 2, 2023, the company repurchased a total of 35,800 subordinate voting shares for cancellation at an average price of $39.42 per subordinate voting share for total cash consideration of $1.4-million under the 2023 NCIB.

Completion of secondary offering

On Nov. 14, 2022, the company announced a secondary offering on a bought deal basis of its subordinate voting shares through a secondary sale of shares by certain entities owned and/or controlled, directly or indirectly, by Brian Hill, founder and executive chair of Aritzia, or Mr. Hill and his immediate family. The 2022 secondary offering of 1.5 million subordinate voting shares raised gross proceeds of $77.4-million for the selling shareholders, at a price of $51.60 per subordinate voting share, and was completed on Nov. 30, 2022. The company did not receive any proceeds from the 2022 secondary offering. Immediately following the closing of the 2022 secondary offering, Mr. Hill remained the company's largest shareholder with an approximately 18.5-per-cent equity interest.

Conference call details

A conference call to discuss the company's fourth quarter results is scheduled for Tuesday, May 2, 2023, at 1:30 p.m. PT/4:30 p.m. ET. To participate, please dial 1-800-319-4610 (North America toll-free) or 1-416-915-3239 (Toronto and overseas long distance). The call is also available by webcast. A recording will be available shortly after the conclusion of the call. To listen to the replay, please dial 1-855-669-9658 and the access code 0008. An archive of the webcast will be available on Aritzia's website.

About Aritzia Inc.

Aritzia is a vertically integrated design house with an innovative global platform, home to an extensive portfolio of exclusive brands for every function and individual aesthetic. It is about good design, quality materials and timeless style that endure and inspire -- all with the well-being of people and planet in mind. It calls this everyday luxury.

Founded in 1984, in Vancouver, Canada, it creates and curates products that are both beautiful and beautifully made, cultivate aspirational environments, offer engaging service that delights, and connect through captivating communications. It prides itself on providing immersive and highly personal shopping experiences at the Aritzia website and in its 110-plus boutiques throughout Canada and the United States to everyone, everywhere.

We seek Safe Harbor.