Home / Business / Aritzia Inc. expects 45 per cent drop in net revenue in first quarter due to COVID-19

Aritzia Inc. expects 45 per cent drop in net revenue in first quarter due to COVID-19

Vancouver-based retailer Aritzia going public

An Aritzia store is shown in Vancouver. (File photo)

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    VANCOUVER — Clothing retailer Aritzia Inc. expects its net revenue is about 45 per cent lower for the current quarter compared with the same time last year due to COVID-19 related store closures and despite a significant spike in online sales.

    The company expects net revenue for the three months ending May 31 to fall to between $105 million and $110 million, compared with about $197 million in the first quarter last year, the company said Thursday.

    "This reflects two weeks of decelerating retail revenues in March prior to our boutique closures," said CEO and founder Brian Hill during a conference call with analysts.

    Aritzia saw sales in stores slow in the first two weeks of March as the coronavirus pandemic unfolded in Canada. On March 16, the company shuttered its 96 stores in Canada and the U.S. in an effort to help curb the spread.

    However, Aritzia experienced strong e-commerce revenues for the quarter, he said.

    Artizia reoriented its online merchandise toward products more relevant for the country’s efforts to stay home as much as possible. The company also removed minimum spends in order to qualify for free shipping and relaxed its return policy, among other measures.

    "Even though our overall business was down significantly as a result of our boutique closures, our e-commerce revenue growth has been in excess of 150 per cent compared to last year," he said, noting that’s helped enable the company to avoid any layoffs or furloughs during the pandemic.

    Artzia also expects to receive about $6 million from Canadian and American government support programs for each month that it qualifies, which has helped keep its employees at their jobs.

    The retailer prioritized investing in digital selling tools, including a new app it has been piloting since mid-May, said Jennifer Wong, president and chief operating officer.

    Twenty-five stylists are using the new Clientele App to connect with their top clients. The app allows them to view client profiles and purchase histories; call, text or email clients; and curate looks and share styles, among other functionalities that intend to drive traffic and sales to the retailer’s website.

    "We have already seen some encouraging early results."

    The company has started to slowly reopen some of its boutiques as of May 7 and expects to have about 30 of its locations opening by the end of the first quarter.

    Its financial outlook came as the company reported results for its most recent quarter.

    Aritzia saw net revenue for the fourth quarter ended March 1 grow 6.3 per cent to $275.4 million compared with $259.1 million in the same quarter the previous year.

    Net income totalled $21.7 million, up 16 per cent from $18.7 million in the fourth quarter of the previous year.

    Adjusted net income for the quarter fell 6.6 per cent to $23.4 million or 21 cents per diluted share, compared with $25.1 million or 21 cents per diluted share at the same time last year.

    The company’s "results were solid although a thread shy of forecast," wrote Irene Nattel, an analyst with RBC Dominion Securities Inc., in a note.

    She noted that Aritzia’s estimated first-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss of $24 million to $28 million is larger than her previously published forecast of a positive $3.5 million.

    "Strong demand during the COVID-19 period is an outstanding outcome given consumer spending focused on necessities during the period."

    This report by The Canadian Press was first published May 28, 2020.

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