By Aritzia, the Canadian women’s fashion brand, experienced a decrease in profit and margin in the most recent quarter due to higher inventory levels, increased expenses, and implemented discounts.
In the fiscal first quarter that ended on May 28, Aritzia posted a profit of 17.5 million Canadian dollars ($13.2 million), or 15 Canadian cents a share. This is a decline from the 33.3 million Canadian dollars, or 29 Canadian cents a share, earned in the same period last year.
Aritzia’s selling, general, and administrative expenses saw a significant increase of 28% to reach 153.5 million Canadian dollars. However, despite these challenges, revenue still managed to rise by 13% to 462.7 million Canadian dollars. This exceeded management expectations (450 million to 460 million Canadian dollars) as well as analysts’ expectations of 460.2 million Canadian dollars, according to FactSet.
The company’s U.S. business played a crucial role in driving its overall performance, with revenue in this segment growing by 22% to reach 251.9 million Canadian dollars during the quarter.
Meanwhile, Aritzia faced a notable increase in inventory levels, which jumped by 62% to 485 million Canadian dollars. As a result, its gross profit margin decreased by 540 points to 38.9%, mainly due to the implementation of discounts.
Despite these challenges, Aritzia remains determined to normalize its inventory by the end of the second quarter of fiscal 2024. The company expects that by this time, markdowns in fiscal 2024 will not exceed pre-pandemic levels.
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