Q & A Highlights

Q : Can you share the comparable sales growth assumption behind your Q4 revenue growth guidance of 28% to 31%? A : Our guidance reflects trends consistent with how we exited Q3 in November, putting us in the high teens from a comp perspective. Trends in both Canada and the United States have accelerated quarter to date. We thought it prudent to base our guidance on how we exited Q3 rather than current trends.

Q : What factors are contributing to Aritzia's current success compared to six months ago? A : Our success is due to several factors: a strong product assortment, optimized inventory, record store openings including flagships, amplified marketing and PR, and favorable weather. Our operations executed excellently across the board, contributing to our strong performance.

Q : Given the stronger top line, why didn't you adjust the margin guidance for Q4? A : We expect a 400 basis points expansion in gross profit for Q4, up from our previous guidance. We are reinvesting the leverage we're seeing in incremental marketing due to its success and momentum. We expect continued SG&A leverage into fiscal '26.

Q : How have the new flagship stores performed, and what surprises have you encountered? A : The flagships have exceeded expectations, serving as brand-compelling marketing vehicles and increasing international exposure. Financially, SoHo and Fifth Avenue are tracking close to a two-year payback, while Chicago will take longer due to complex construction issues.

Q : What is driving the impressive digital sales growth, and what is the target for digital marketing as a percentage of sales? A : Digital growth is primarily driven by traffic, supported by store openings, flagship buzz, and performance marketing. Digital marketing remains a very low-single-digit percentage of sales. We aim for digital to become a larger proportion of our business, though our stores are also performing strongly.

Q : How are you preparing for potential tariff impacts, and what is your current percentage of manufacturing in China? A : We've been diversifying our manufacturing for years, with the majority now outside China. A 10% tariff increase on Chinese goods would have less than a 30-basis-point impact before mitigating actions. We focus on maintaining product quality with our long-standing manufacturing partners.

Q : What factors contributed to the sequential acceleration in sales each month of Q3? A : The acceleration was broad-based, driven by strong US business, e-commerce growth, mid-single-digit comp growth in existing stores, and improved Canadian performance. Our growth is primarily fueled by the US and new store openings.

Q : Can you provide a breakdown of the drivers behind the gross margin expansion in Q3? A : The 430-basis-point gross margin expansion was driven by IMU improvements, lower markdowns, spend management, and lower warehousing costs, despite higher freight costs. We expect continued improvement into FY26.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

This article first appeared on GuruFocus .