Aritzia Inc.

Thank you for standing by. This is the conference operator. Welcome to Aritzia's first quarter 2024 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I will now turn the conference over to Beth Reed, Vice President, Investor Relations. Please go ahead.

Good afternoon, and thanks for joining Aritzia's first quarter fiscal 2024 earnings call. On the call today, I'm joined by Jennifer Wong, our Chief Executive Officer, and Todd Engledue, our Chief Financial Officer. Following prepared remarks, there will be an opportunity to ask questions. Please note that remarks on this call may include our expectations, future plans, and intentions that may constitute forward-looking information. Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions as well as the competitive environment. Actual results may differ materially from the conclusions, forecasts, or projections expressed by the forward-looking information. We would refer you to our most recently filed management's discussion and analysis and our annual information form, which include a summary of the material assumptions as well as risks and factors that could affect our future performance and our ability to deliver on the forward-looking information. Our earnings release, the related financial statements, and the MD&A are available on CDAR as well as the investor relations section of our website. I'll now turn the call over to Jennifer.

Thanks, Beth. Good afternoon, everyone, and thank you for joining us today. As we discussed on our last call in early May, sales were trending well entering fiscal 2024. And while we're pleased with sales results in Q1, we started to see a deceleration in trends beginning the first week of June. We believe this reflects macroeconomic pressure on our consumer, as well as opportunities in the level of newness in our product assortment. which I will elaborate on shortly. For the first quarter of fiscal 2024, our results were in line with our expectations as we delivered sales of $463 million, an increase of 13% on top of outstanding growth of 65% in the first quarter last year. Comparable sales grew 4.1% on top of 29% last year. This growth was primarily fueled by our business in the U.S., which grew 22%, building upon growth of 81% in the first quarter last year. In Q1, we saw client growth across all geographies and all channels. This was fueled by a strong double-digit increase in our US active client base, building upon outstanding growth of more than 200% over the previous three years. Our retail net revenue increased 14% in Q1, driven by solid comparable sales growth in our boutiques, as well as the progress we've made on our real estate expansion strategy. We opened one new boutique during the quarter, our fifth boutique in the state of Texas, at South Lake Town Square. In Q2, we plan to open a new boutique in International Plaza in Tampa, which is a new market for us. We will also open our two newly expanded boutiques in Shore Hills, New Jersey, and in Boston. The strong performance of our new and expanded boutiques continues to result in better than expected payback periods. E-commerce net revenue grew 13% in Q1, driven by our business in the U.S. and higher conversion rates overall. We made further progress toward delivering E-commerce 2.0 with multiple personalization tests showing increased conversion rates. We will continue to refine our personalization strategies to ensure that we're bringing a captivating and curated experience to our clients throughout their shopping journey online. In product, sales of both client favorites and new products contributed to our growth in Q1, as we introduced successful new styles across multiple key fabric programs. From an inventory perspective, our position continues to normalize, At the end of Q1, inventory was up 62% over last year and we continue to expect growth to more closely align with sales trends by the end of Q2. Over the past two years, our focus was to keep up with the unprecedented demand. Managing through COVID, supply chain issues, and all that came with it, we were working to ensure we successfully met the surging demand for our client favorites and top selling items. In hindsight, this did cause us to be overly focused on existing items and developing newness through variations on these items. While many of our key programs have continued to perform well, we've identified opportunities in the level of newness across our product assortment. We've identified the best In addition to macro factors contributed to the change in our sales trend beginning in the first week of June. The team has refocused on our product pipeline and we will see the benefit of this in the product assortment for spring 2024. Going into fall 2023, we have plans to introduce some additional newness and with a more stabilized supply chain, we are able to return to a more normal operating environment and open to buy. We're confident in our ability to reorder in season for fall winter, and certainly we will be in a stronger position for spring summer 2024. Shifting to supply chain, our new distribution center in the Toronto area, which will serve as a fulfillment hub for Eastern Canada and the Eastern United States, remains on track to go live in late August. We've had very successful hiring events to fill more than 600 roles, and we began onboarding associates last week. We'll be moving our inventory from our third-party facility to the new building in the span of one week in August. We've undertaken a very detailed and methodical planning process to facilitate a smooth transition during which we will leverage our existing fulfillment network. Turning to our strategic investments, our growing recognition has allowed us to continue attracting world-class talent We continue to invest in key roles in product, real estate, and technology while managing our labor count with discipline. We continue to make strategic investments with a long-term view, including scaling our infrastructure to match the unprecedented growth in fiscal 2022 and 2023, as well as building the groundwork for our future growth. In Q1, we completed the upgrade of our point of sale system in Canada with the US on track for completion this week while laying the foundation for future enhancements such as mobile point of sale and additional omnichannel services. While we're thoughtfully investing in our future, we're also focused on optimizing economies of scale to more efficiently operate our current business and ensure scalability for our ongoing growth. We've identified a list of approximately 150 opportunities that we anticipate will deliver annual run rate cost efficiencies of approximately $60 million beginning in the back half of the year. Turning to ESG, I'm proud to share that Aritzia was recognized in the textile exchange's 2022 leaders circle as among the top 10 companies in the fashion industry who made the greatest improvement in sourcing lower impact materials. And in June, we published our second annual ESG report, which outlines our community strategy, performance and goals for the coming years. I will now pass the call over to Todd.