At some companies, the appointment of a new chief executive officer signals a change in leadership, and a new strategic direction. At Vancouver-based retailer Aritzia Inc., ATZ-T which has seen significant growth in recent years, the main priority is to keep the momentum going.
CEO Jennifer Wong, who took over the top job from founder Brian Hill on May 21, is herself a symbol of continuity: Ms. Wong has worked for Aritzia for 35 of its 38 years, starting as a sales associate at a Vancouver store before moving up the corporate ranks, and was already running significant parts of the business. She was named chief operating officer in 2007 and president in 2015.
“We slowly started having me take on some CEO responsibilities in the past few years,” Ms. Wong said in an interview. “And given that we’ve come through with phenomenal success in spite of the pandemic, and are positioned for amazing growth ahead of us with our expansion in the U.S. ... the time felt right.”
But while Aritzia has been growing, challenges lie ahead: Global container-ship delays have forced the retailer to spend much more than usual on shipping by air to get its products to shelves on time. Even as profits have continued to rise, this has taken a bite out of the bottom line. Higher freight costs are expected to continue through this year.
On top of that, although some apparel retailers are benefiting from people dressing up to return to the office and to social events as pandemic restrictions have fallen away, inflationary pressures loom. As the cost of living goes up and consumer confidence falls, shopping behaviours could begin to shift.
“Gas prices are high, interest rates are going up, so mortgage payments are going up for a lot of people. Everything is more expensive. So I would say there is some uncertainty at this point with regards to how that is going to impact a business like Aritzia, which is more discretionary than not,” said Mark Petrie, an analyst with CIBC World Markets. “... How they respond to that, and how their consumer adjusts, is a potentially significant uncertainty.”
Ms. Wong is tasked with navigating that uncertainty, as the company has forecast that it expects to increase its net revenue by 20 per cent in the current fiscal year, to $1.8-billion.
“We haven’t seen any change in momentum for demand at this time, which is really encouraging,” Ms. Wong said. “We’re very much aware of these pressures. Being in business for the last 38 years has shown we have been able to weather different macroeconomic cycles.”
A significant driver of growth will continue to be Aritzia’s expansion into the United States, where it has 41 stores and plans to open eight to 10 more in the coming year. Aritzia sees a foreign-exchange benefit from that business, because products sell in American boutiques for the same prices as in Canada, but in U.S. dollars. The U.S. now accounts for nearly half of Aritzia’s sales, and its American customer base more than doubled in the fiscal year ended Feb. 27 compared with the year before. Ms. Wong led the team responsible for opening Aritzia’s first U.S. stores in 2007. The company has a target of roughly 110 locations.
“As we see more success in the U.S. there might be opportunities to do more than that as we become more famous,” Ms. Wong said.
The U.S. expansion has coincided with falling rents for retail space, Mr. Hill said on a recent call with analysts, which has meant that new stores are providing a quicker return on investment than they have in previous years. Aritzia will be planting a flag with a new location it is building on Fifth Avenue in New York – a 35,000-square-foot store that will be its largest. (Most new stores average around 8,000 square feet.)
The company is also evaluating its e-commerce business in more than 200 countries to see where there might be demand for further store expansion, but remains focused on the United States for now, she added.
Ms. Wong will be overseeing investments to keep up with the expansion, both on the digital side to keep up with changes in e-commerce, and in physical warehouses. The company is building a new distribution centre in Toronto that will open next year – it is the largest infrastructure investment in the company’s history, more than tripling the warehouse space serving the East Coast of Canada and the United States – and is expecting to spend more to expand space serving the West Coast within the next two years.
“It was the fact that we built up our inventory like we did last year, that really drove our sales, and I think that set us apart from other retailers,” Ms. Wong said. “We’re bullish on the sales and we’re bullish on building up our inventory in the right areas that we know will drive the sales.”
With the majority of Aritzia’s sales in private labels such as Wilfred, Babaton and TNA, margins are higher than at retailers who sell products from other brand suppliers. Aritzia is also widening the categories of products it sells, with the recent launch of its first swimwear line, and plans to expand into intimates and further into footwear. Mr. Hill, the founder, will be part of these product developments, as he remains with the company as executive chair. He also plans to continue to be involved in marketing, as well as product and new store expansion.
“I think I add value in some of the more creative areas of the business,” Mr. Hill said. “... I would argue Jennifer is the most qualified fashion executive in North America. So I couldn’t be more thrilled that we’re in a position to hand the reins over to her.”
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