Aritzia Inc. (ATZ) Earnings Call Transcript

Welcome to the Annual General Meeting of Aritzia Inc. Please note that the meeting will be recorded. I would like to introduce Beth Reed, VP, Investor Relations of the company. Ms. Reed, the floor is yours.

Good afternoon, everyone. Thank you for joining Aritzia's Virtual Annual General Meeting of Shareholders. To facilitate increased shareholder attendance and participation, the meeting will be conducted in a virtual-only format that is being streamed via live webcast. Our agenda today includes the formal business of the meeting that will be conducted by John Currie, our Lead Director; followed by remarks from Jennifer Wong, our CEO. We will conclude with a general question-and-answer period open to registered shareholders and duly appointed proxy holders at which time, Jennifer Wong, Brian Hill, our Founder and Executive Chair; and Todd Ingledew, our CFO, will be available to answer and respond to proper questions. Please note that our remarks and responses to questions today may include our expectations, future plans and intentions that may constitute forward-looking statements. Actual results could differ materially from the conclusions, forecasts or projections in the forward-looking information. Certain material factors and assumptions were applied in drawing the conclusions and making the forecasts and projections as reflected in the forward-looking information. We would refer you to our most recently filed management discussion and analysis and annual information form, which include additional information about the material risks that could cause actual results to differ materially from the conclusions, forecasts and projections in the forward-looking information and the material factors and assumptions used to develop the forward-looking information. Our management's discussion and analysis and annual information form are available on SEDAR+ and on the Investor Relations section of the Aritzia website. And with that, I would like to turn the meeting over to John Currie, our Lead Director, to lead us through the formal business of the meeting.

Good afternoon, and thank you for coming to Aritzia's Virtual Annual General Meeting of Shareholders. I've been appointed by the Board of Directors to be the chair for today's meeting. During the meeting, please note that only registered shareholders or their duly appointed proxy holders, including beneficial shareholders who have appointed themselves as proxy are permitted to vote or otherwise participate and ask questions during the meeting. As this meeting is being held virtually via live audio and slide show webcast, we would like to clarify a few procedural matters relating to the conduct of the meeting. Questions in respect of a motion can be submitted by a registered shareholder or duly appointed proxy holder using the Question platform service of TSX Trust. When asking a question, please indicate your name, which entity you represent, if any, and confirm that you are a registered shareholder or a duly appointed proxy holder. Proper questions that do not relate specifically to the business of the meeting will be addressed during the question period at the end of the meeting. Questions relating to the procedural matters or directly related to the motions before the meeting will be addressed during the meeting prior to the closing of the polls. Voting will be open at the beginning of the meeting and will be conducted by electronic ballots. Only registered shareholders and duly appointed proxy holders of Aritzia are permitted to vote and will be able to vote throughout the formal part of this meeting. I will give a 15-second warning before I announce that balloting is closed. The electronic ballots will be opened for all resolutions at the same time. This will allow you to vote on each resolution immediately or throughout the meeting. If you have already voted by proxy, you do not need to vote again during the meeting as your vote has been recorded and will be counted by the scrutineer. Registered shareholders who have already submitted a valid proxy and want to vote again by electronic ballot at the meeting will be revoking any previously submitted proxies and only the electronic ballots submitted today at the meeting will be counted. If we encounter any technical difficulties, please remain logged on, and we will resume as soon as possible. We will now proceed with the formal portion of the meeting. I call to order the Annual General Meeting of Aritzia's shareholders. With the consent of the meeting, I appoint Ada San, VP, Legal and Corporate Secretary of the company, to act as Secretary of the meeting. In addition, and with the consent of the meeting, I appoint TSX Trust Company, through its representatives, as scrutineer. The scrutineer will report on the number of subordinate voting shares and multiple voting shares represented in person and by proxy at this meeting, tabulate the votes and report the results. The purposes of today's meeting are set out in detail in the Management Information Circular, dated May 14, 2026. Copies of the circular were made available to shareholders on or around June 5, 2026, together with the Notice of the Meeting, the Form of Proxy and the Voting Instruction Form, as applicable. Accordingly, unless there is any objection, I will dispense with the reading of the Notice of Meeting. I received a declaration prepared by our transfer agent, TSX Trust Company, indicating that either a notice of this meeting and the accompanying proxy materials or the Notice-and-Access notice as applicable, was duly mailed to shareholders of record as of the record date, May 14, 2026. I direct that a copy of the notices and circular and the declaration of mailing be kept by the Secretary with the records of this meeting. The scrutineer's report indicates that shareholders holding, in the aggregate, more than 15% of the voting rights attached to shares entitled to be voted at the meeting are present in person or represented by proxy. As this meets the quorum requirements of the company's articles, we may proceed with the meeting. A copy of the final report on attendance will be filed with the records of the meeting. For the purposes of the meeting today, voting on all matters will be conducted by electronic ballot. Voting will be opened at the beginning of the meeting and available throughout the formal part of this meeting for all registered shareholders and duly appointed proxy holders. You will receive a message on your screen when the online ballots are available. I will announce when voting will close, which will be approximately 15 seconds after the conclusion of the formal items of business. Under the company's articles, the Chair of the meeting can propose motions and no motion proposed at a meeting of shareholders is required to be seconded. In order to expedite the meeting, I will propose certain motions and will not call for a seconder. I now declare that this meeting was properly called and duly constituted for the transaction of business. I now declare the polls open on all resolutions. If you are a registered shareholder or duly appointed proxy holder, the electronic ballots will now be available on your screen. Please register your votes by pressing on the for or withhold buttons next to the name of each proposed director and next to the resolution with respect to the appointment of PricewaterhouseCoopers LLP as the auditors of the company and authorizing the directors to fix their remuneration. Please register your vote by pressing on the for or against buttons next to the resolution with respect to the advisory vote on the company's approach to executive compensation. You will now have time to vote throughout the formal part of the meeting. The first item of business is the receipt of the company's consolidated financial statements for the fiscal year ended March 1, 2026, as well as the auditor's report thereon. These financial statements and the auditor's report were made available on SEDAR+ under the company's profile and on the company's website on May 7, 2026. The financial statements were also made available on the TSX Trust site on June 5, 2026, as required for notice and access. Noting no objection, I will dispense with the reading of the auditor's report. We will respond to any proper questions with respect to the company's consolidated financial statements in the question period following the formal portion of this meeting. We will now move to the next item on today's agenda. The next matter to be acted upon is the election of 9 individuals to the Board of Directors. The term of office of the directors is from today until the end of the next Annual Meeting of Shareholders or until such time as their successors have been duly elected or appointed. As described in the circular, the company has adopted a majority voting policy pursuant to which any director nominee who receives more votes withheld than for must submit their resignation promptly, and such resignation must be accepted by the Board, other than in exceptional circumstances. The circular contains information on each of the 9 nominees recommended for election as directors. As outlined in the circular, the following director nominees have each been nominated to hold office until the close of the next annual meeting of the shareholders or until their successors are duly elected or appointed. They are Brian Hill, Jennifer Wong, John Currie, Nick Drake, David Labistour, Doug Mack, Marni Payne, Glen Senk and Marcia Smith. Persons nominated have confirmed that they are each prepared to serve as a director. Each of them is qualified as a director under the provision of the British Columbia Business Corporations Act. Given that no nominations were received in accordance with the Advanced Notice Provisions contained in the company's articles, I declare the nominations to be closed. I move to nominate the directors as set forth in the circular. If there is no further discussion, as mentioned at the beginning of this meeting, voting today will be conducted by electronic ballots and the polls are currently open, so you can vote on the election of each director as you see fit. We will now move on to the next item of business. The next item of business is the appointment of the auditors of the company who will serve until the end of the next Annual Meeting of Shareholders and to authorize the directors of the company to fix the remuneration of the auditors. The Board, on the recommendation of the Audit Committee, has approved, subject to shareholder approval, the appointment of PricewaterhouseCoopers LLP as the auditors of the company. I move that PricewaterhouseCoopers LLP be appointed auditors of the company until the end of the next Annual Meeting of Shareholders and that the directors be authorized to fix their remuneration. As there is no discussion and the polls are currently open, you may vote on the appointment of auditors as you see fit. The next item of business is the advisory vote on the company's approach to executive compensation. I move that the advisory nonbinding resolution in respect of the company's approach to executive compensation as set out in the circular be approved. As there is no discussion and the polls are currently open, you may vote on the advisory vote on the company's approach to executive compensation, as you see fit. If you have not voted already, please do so now. After 15 seconds, the voting page will disappear and your electronic ballot will automatically be submitted. The time is now 3:46, and the ballots will close on all resolutions in 15 seconds. [Voting]

Voting is now closed. I would now like to ask that the scrutineers compile a report regarding the results of voting on all business matters. While the scrutineers are completing their report, I will ask whether there is any other formal business to be brought before this meeting. As there is no other business to be brought before this meeting, and I have received the scrutineer's report, I declare the following: each of the 9 nominees have been elected as directors of the company to serve until the end of the next Annual Meeting of Shareholders or until their successors are elected or appointed. PricewaterhouseCoopers LLP is hereby appointed as auditor of the company for a term ending at the end of the next Annual Meeting of Shareholders and the Board of Directors is authorized to fix their remuneration. The advisory nonbinding resolution in respect to the company's approach to executive compensation as set out in the circular is approved. Final voting numbers will be posted on SEDAR+. As there is no further business to be brought before this meeting, I declare the formal portion of the meeting closed. I would like to turn over the floor to Jennifer Wong, our CEO, to provide a few remarks before we move on to the question-and-answer period.

Thanks, John. Good afternoon, and thanks, everyone, for joining us today. In fiscal 2026, we drove a 35% increase in net revenue, resulting in a strong 4-year compound annual growth rate of 25% and achieved our fiscal 2027 net revenue target of $3.5 billion to $3.8 billion 1 year early. Our strong performance is a direct reflection of our team's ability to execute impeccably on our 3 strategic growth levers, geographic expansion, digital growth and increased brand awareness. We fueled robust demand for the Aritzia brand while continuing to grow brand awareness in the United States and drive enduring client loyalty in Canada. Our strategic accomplishments for fiscal 2026 include the following: we generated unparalleled demand for the Aritzia brand supported by strong inventory management, which fueled 26.5% comparable sales growth. We refined our digital and brand marketing strategies to help protect and propel the Aritzia brand, growing brand awareness and generating new client acquisitions. We opened 14 new boutiques and repositioned 4 existing boutiques, including another iconic brand-compelling flagship located in Manhattan's Flatiron District. We launched the Aritzia app, providing clients with greater access to the company's product assortment, styling expertise and guidance and exclusive product and content. We delivered a 260 basis point improvement in adjusted EBITDA as a percentage of net revenue despite 260 basis points of pressure from tariffs and the elimination of the de minimis exemption. Our sales growth in fiscal 2026 was driven by continued strong digital momentum, our geographic expansion strategy and double-digit comparable sales growth in our existing boutiques. We continue to expand our portfolio of boutiques in premier locations with our retail net revenue growing to $2.41 billion, a 35% increase from last year. In digital, our performance was driven by the increasing affinity for our brand, strong inventory management, our focus on full funnel marketing and the launch of our mobile app. In fiscal 2026, our digital net revenue grew to $1.29 billion, increasing 36% year-over-year. Throughout fiscal 2026, our real estate expansion strategy continued to yield impressive results. Our new boutiques continue to perform better than our payback expectation of 12 to 18 months. Net revenue in our United States business grew to $2.28 billion in fiscal 2026, an increase of 44% from last year. In fiscal 2026, the United States generated 61% of our total net revenue, and we continue to have tremendous opportunity for growth ahead of us. In the United States, we see potential for a minimum of 180 to 200 boutiques compared to just 76 at the end of fiscal 2026. In fiscal 2026, the launch of our mobile app achieved exceptional results and surpassed even our highest expectations. We also continue to refine our digital performance marketing strategy to help grow brand awareness in the United States, amplify our product franchises and drive customer engagement. Further, we launched our enhanced international website, featuring an elevated client experience. During fiscal 2026, our full funnel everyday luxury campaign continues to help grow brand awareness and introduce Aritzia to new audiences. In addition to our beautiful products and real estate expansion strategy, this propelled us further towards widespread recognition across the United States where our active client base has grown at a 30% CAGR over the past 4 years. At the same time, we remain focused on deepening our connection with our loyal existing clients across all channels and geographies, more clients than ever before shop the Aritzia brand. Underpinned by the strength of the Aritzia brand, our proven operating model and our healthy balance sheet, our business has never been better positioned for growth. Having already achieved our fiscal 2027 revenue target 1 year early, we look forward to sharing our next strategic road map in the fall. Meanwhile, we remain steadfast in further advancing our 3 strategic growth levers while continuing to invest in infrastructure to support our growth. We have a robust pipeline of boutiques opening in fiscal 2027 with a focus on increasing our presence in existing markets as well as broadening our reach across the United States. Our total square footage growth is expected to be in the low teens, with the vast majority occurring in the United States. In digital, we have initiatives underway to support our continued momentum in the years ahead, such as ongoing digital marketing optimization, client engagement initiatives and additional mobile app features. Last but not least, our new boutiques and ongoing marketing investments are proven multiyear strategies to help grow brand awareness in the United States. We're becoming increasingly well known and loved in the U.S.A. yet the opportunity for growth remains immense. To help ensure we drive scalable growth for the long term, we continue strategically investing in world-class infrastructure. As always, we operate with a long-term focus and balanced investing for the future while driving profitable growth. To our shareholders, thank you for your continued support and your trust in our business plan. I have great confidence in our team, Aritzia's consistent performance is a testament to their ability to execute with excellence.

Thank you, Jennifer. We will now move on to the question and answer portion of the meeting. As mentioned at the beginning of the meeting, when asking your question on the question feature of the virtual meeting platform, please indicate your name, the entity you represent, if any, and confirm you are a registered shareholder or a duly appointed proxy holder. Please keep your questions short and succinct. We may consolidate questions that are repetitive or overlap in the interest of all those logged on today. We will not address any questions or statements that are, among other things, irrelevant to the business and affairs of the company, related to material nonpublic information of the company, related to personal grievances, derogatory or are otherwise in bad taste, repetitive of questions or statements already made by another participant or out of order or not otherwise suitable for the conduct of the meeting as determined by the Chair. We will now give registered shareholders and duly appointed proxy holders, including beneficial shareholders who have appointed themselves as proxy a brief moment to type in their questions if you have not already done so. There being no questions, we are now concluding the question-and-answer portion of the meeting. Thank you all again for joining us this afternoon and enjoy the rest of your day.

Thank you for attending today's meeting. You may now disconnect. Goodbye.