UBS has reiterated its 'buy' rating on Aritzia Inc (TSX:ATZ) , saying investments in store expansion, product diversification, brand relevance and digital capabilities should support sustained growth, with the Canadian fashion retailer targeting nearly double its revenue by financial year 2032.
The broker maintained its C$228 (approx. US$164) price target after attending Aritzia's investor day in New York on 27 October, where management outlined plans to increase revenue to C$9.5 billion (US$6.84 billion) to C$10.5 billion (US$7.56 billion) by FY2032 and expand adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin by about 100 basis points to 21%.
UBS expects the company's earnings per share to grow at a compound annual rate of 27% over five years, with potential earnings beats over the next 12 months helping drive the shares towards its price target.
The US remains central to the growth strategy, accounting for about 85% of expected incremental revenue, as Aritzia targets high-teens growth through comparable-store sales, digital expansion and new boutiques.
The retailer expects its US boutique network to increase to 160 locations by FY2027 from 87 in FY2027, with potential to exceed 200 stores, while opening 12 to 14 new boutiques annually and repositioning five to seven existing locations.
Product diversification offers another growth opportunity, with UBS highlighting denim as an immediate priority because it accounts for less than 5% of Aritzia's sales , compared with about 20% to 30% at many peers.
Management sees around C$1.5 billion (US$1.08 billion) in additional revenue potential from assortment expansion by FY2032, including longer-term opportunities in handbags, footwear, jewellery, beauty and warm-weather products.
International operations could generate about C$500 million (US$360 million) in revenue by FY2032, split roughly equally between digital sales and boutiques.
UBS said the targeted 21% EBITDA margin would balance efficiency gains and favourable sales mix with continued investment in technology, products, international expansion, brand development and talent.
