Bloomberg
Aritzia Inc is winning over American teens and 20-somethings with a playbook that looks out of step with today’s often bleak retail environment.
The company offers high-touch service, including personal shoppers. Discounts are rare. And it’s making locations bigger instead of shrinking them.
“The stores are beautiful, and the service is excellent,†said Mark Petrie, analyst at CIBC World Markets who has covered Aritzia since it went public in 2016. “It’s a compelling intersection of value and quality where not a lot of other brands live.â€
Executives call that intersection “everyday luxury,†and it plays out with offerings ranging from $400 double-breasted wool coats to $80 mini dresses. That strategy is clicking in America, where Vancouver-based Aritzia began accelerating store openings a few years ago. US sales over the past 12 months through November have gained 78% to $745 million and are now bigger than its Canadian business, where its first store opened in the 1980s.
The company reported sales and adjusted earnings for its third quarter that topped analysts’ estimates. Aritzia forecast revenue for the current quarter to be as much as C$600 million, surpassing analysts’ projections of C$525.9 million.
But some analysts were concerned about narrowing profit margins from rising costs. The stock declined, but over the long term investors have been rewarded. Aritzia shares are up about about 75% over the past two years, while the SPDR S&P Retail ETF sank 8.1% and the S&P 500 gained 4.8%.
Aritzia stands out with a meticulous focus on customer experience. A team of architects and designers develops each location individually, creating a “bespoke mix of local influences, natural materials, custom furniture and art,†according to the company’s website.
Trying on clothes is also different. Many dressing rooms don’t have mirrors, requiring customers to step into a public area with a communal one to see how items fit. This promotes more interaction with associates to help with styling and recommending additional products.
Its packaging aims to be an outlier, too, with online orders carefully folded and packed inside Aritzia’s crisp, white shopping bags to mimic in-person shopping.
The brand has had the advantage of being a fresh concept in a US market where many big apparel companies such as Gap are losing their luster. Aritzia also has plenty of room to win new converts because it’s still relatively unknown. The company hasn’t done much mainstream marketing. It has instead relied on stores to build awareness. It has fewer than 50 in the US, but with plans to open seven this year.
Brian Hill, who comes from a family of Canadian retail executives, opened the first standalone Aritzia store in an upscale shopping mall in Vancouver in 1984. The purpose was to serve “young women who have significant disposable income, but don’t want disposable clothes,†Hill said in a 2009 interview that came at a time when fast-fashion chains such as H&M and Forever 21 were booming.
About 20 years after its founding, Aritzia operated just 15 stores. But following an investment from private equity firm Berkshire Partners, expansion accelerated, and the chain entered the US in 2007. When Aritzia went public a little less than a decade later and raised C$400 million, it had about 75 locations. (Now it runs 113.).