Pacific Trader: Is Aritzia the TSX’s best retail reopening play?

The boutique chain's shares have already surpassed their pre-pandemic high.

Credit: Courtesy of Aritzia

Aritzia steered its retail offering toward leisurewear during the pandemic

The boutique chain’s shares have already surpassed their pre-pandemic high

The stock: Since Aritzia (TSX:ATZ) debuted on the Toronto and New York stock exchanges in 2016, the best time to buy its shares always seemed to be a year ago. If there was an exception, it came, well, a year ago, when the first wave of lockdowns didn’t bode well for the young-women’s fashion retailer. Its stock plunged like a party dress’s neckline from over $25 in February to $10.59 on March 18, 2020, a week after the World Health Organization declared a global pandemic.

The drivers: By June, a couple of things had become clear. Few, if any, of Aritzias 100-odd stores in Canada and the U.S. would remain closed outright through the balance of 2020 (though hygiene measures and limitations on the number of customers would be costly), and the chains online sales were roaring ahead. So the year wasnt going to be a write-off.

As the pandemic wore on, investors grew steadily more bullish, to the point that ATZ shares are now roughly 20 percent ahead of their pre-pandemic high. With reopening on the horizon, will the little boutique spun out of Hills of Kerrisdale deliver on the markets lofty expectations? Or will sweatpants (ahem, joggers) extend their streak as the go-to all-day attire?

Word on the street: “ATZ appears on track to more than double revenues from full-year 2016 to 2022 (estimate), one year later than previously anticipated due to COVID,” says RBC Dominion Securities analyst Irene Nattel, who has a $32 target on the stock. Having never once closed a store due to poor sales performance in 35-plus years, Nattel notes, the company has more recently shown itself able to adapt to the shift to leisurewear during the pandemic and to ramp up its e-commerce channel.

Or as the more ebullient Motley Fool contributor Joey Frenette writes: “Once people [are] feeling safer heading back to shopping malls, with extra disposable income to put to work, I think Aritzia could really take its growth to the next level, and the stock’s price of admission will likely have expanded to unthinkable heights.”

NOTEWORTHY: Mednow, a virtual pharmacy and health-care company based in Vancouver, begins trading on the TSX Venture Exchange under the symbol MNOW on March 9.