Clothing stocks were very volatile over the past decade. Many clothing retailers with a large brick-and-mortar presence found themselves in financial trouble as e-commerce exploded in the 2010s.
Companies that avoided this fate have managed to establish a strong e-commerce footprint. Aritzia (TSX:ATZ) serves as a great case study for how modern clothing companies can succeed.
Shares of Aritzia have climbed 55% year-over-year as of close on January 17. The stock has already increased nearly 30% in 2020 so far. Aritzia released its third-quarter fiscal 2019 results on January 9.
Comparable sales growth rose 12.9% year-over-year in Q3 2019, which represented the 17th consecutive quarter of positive sales growth. Net revenue rose 18.8% to $242.9 million and net income climbed 16.1% to $32.6 million.
Its e-commerce growth was fueled by search engine and core site optimizations. The company will continue to lean on growth in its online channels to drive earnings into the next decade.
For fiscal 2020, Aritzia’s boutique pipeline will bring its largest single-year expansion in the United States. It aims to launch six new boutiques south of the border in the next fiscal year, and three to four boutique expansions and/or repositions.
I love Aritzia’s business model and its growth has been very encouraging since the launch of its IPO. However, the stock is expensive right now. Shares possess a high price-to-earnings ratio of 31 and a sky-high price-to-book value of 8.8.
The stock last had an RSI of 82, which puts it well into technically overbought territory. Now looks like an opportune time for shareholders to take profits.
