Thank you for standing by. This is the conference operator. Welcome to Aritzia's 4th Quarter and Full Year and 0. I will now turn the conference over to Helen Kelly, Vice President of Investor Relations. Fiscal year fiscal 2020.
Thank you, Sherryse, and thank you for joining us for Aritzia's 4th quarter and full year fiscal 2021 earnings conference call. And Todd Ingledew, our Chief Financial Officer. Following management's discussion, we'll host a question and answer period open to analysts and investors. Fiscal year 2019. The uncertain and dynamic nature of COVID-nineteen and its ongoing impact could continue to materially alter our performance.
We will refer you to our most recently filed management's fiscal year fiscal year fiscal year fiscal year 2019. Our earnings release, the related forward looking statements. Our earnings release, the related financial statements and MD
and A as well as
the most recently filed AIF are available on SEDAR
Thank you, Helen. Good afternoon, everybody, and thank you for joining us. Together with Jennifer and Todd, I'm pleased to report our Q4 and year end results, while providing insight into the exciting year ahead. Q4 ended what was unquestionably the most challenging year in our history. I'm incredibly proud of how our team navigated the uncertainty with discipline, resilience and agility and in light of this, fiscal year.
It was a year where we remember for not only what we accomplished, but how we accomplished it. Fiscal 2020. And as we begin fiscal 2022, we are extremely well positioned to capitalize on the many growth opportunities ahead fiscal 2020 1 shortly. I'll start by sharing the highlights of our sustained strong performance. In the Q4, our net revenue decreased by just 2.9% from the prior year, with ironically the U.
S. Actually being up 9.2 percent. This is in spite of ongoing occupancy restrictions, reduced operating hours and the reclosure of 57% 39 of our boutiques in Canada for the majority of the quarter. Furthermore, our e commerce business continued to surge Growing by an impressive 81% from the 4th quarter last year. Turning to the full year, our net revenue decreased by just 12.6 fiscal year 2019.
We expect to drive e commerce growth 88%, ending up comprising approximately 50% of our net revenues for the year, fiscal 2020. Our results enabled us to generate free cash flow and improve our strong liquidity position, which allowed us to continue to invest during this turbulent year. Given the 81% growth in e commerce over Q4, sustaining what was already a consistently accelerating part of our business over the course of the year. We continue to invest in new digital features and functions. This included the expanding rollout of our client app, fit analytics, Afterpay and digital concierge amongst others.
Together, they significantly enhanced our online capabilities, mirroring the same everyday lecture experience our clients enjoy in our boutiques with further opportunities underway. For Q4 in our boutiques, we saw the United States to begin to recover. However, it was disappointing that in Canada we began the quarter with 18 boutique reclosures, growing to 39 boutiques reclosed by Boxing Day, right at the start of our holiday sale period. Fiscal year. Despite these ongoing pressures throughout the year, we continued our strategy to expand our boutique network thoughtfully with fastidious location selectivity, exceptional financial terms and a downside safeguards in place.
By early Q4, we successfully opened 7 new boutiques and expanded 3 existing boutiques. In support of both our e commerce and retail businesses, we advanced the kickoff of our omni capabilities initiative designed to grow our multi channel client relationship. We expect the launch of the various initiatives throughout the year. Turning to product, we are extremely pleased with the performance of our fallwinter collection. However, we had the high class problem of chasing inventory throughout the period.
Fiscal year fiscal year. On the backdrop of what was going on at the time, we thought having lower inventory was a wise position to take, although in hindsight we were too conservative. Therefore, given our continued growth in e commerce and accelerating business in the United States, We intentionally ended the quarter in a meaningfully higher inventory position in order to fuel the potential of these channels. We are very pleased with this decision as we are already seeing positive results in our Q1 revenue. At the end of Q4, we launched our springsummer product fiscal year.
Our clients immediately responded with excitement for both the welcome change of seasons and the prospect of a gradual return to more normal activities with the rollout of the vaccination programs led by the United States.
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Our everyday luxury offering with captivating communications seamlessly spanning our e commerce site, social media platforms and in our boutiques. From a holiday campaign to our springsummer brand launches. We also continue to pay our paid media pilot and our creative never more engaging, resonating with our existing clients online, through our social channels and in our boutiques, fiscal year 2019. COVID-nineteen's impact made it more important than ever that we uphold our commitments to our people and our planet. As Jennifer will speak to in greater detail, fiscal year 2019.
Reflect the remarkable resilience of our team. Our clients affinity to our brand of everyday luxury and the strength of our multi channel business, even under the most difficult circumstances. As we begin to here in North America hopefully put the pandemic behind us, fiscal year 2020. The insightful and bold decisions we made together with our continued strategic investments have already served us well fiscal 2019, as evidenced by incredibly successful start to fiscal 2022. I will now turn the call over to Jennifer to provide some perspective on our operations.
Fiscal year fiscal
2019. Thanks, Brian, and good afternoon, everyone. Echoing Brian's comments, I am so proud of what our team has achieved together this past year. Fiscal 2021 results demonstrate our resiliency as we successfully adapted to the changing environment, while still driving Aritzia forward. Fiscal year as well as our path forward.
First, I'll provide some color on the continued agility demonstrated by our distribution and logistics team 3rd, an update on our ongoing investments in talent and finally, our progress on ESG. Throughout the year, our DC and logistics teams have responded quickly to the global supply chain disruptions brought on by the pandemic, Caused by Inbound Logistics. For instance, in response to delays caused by limited vessels and sailings, we ramped up the use of airfreight fiscal year 2020. These decisions reduced potential delays by 30% to 50%. Fiscal year fiscal
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And in response to the transformative growth in our e commerce business this past year, we are analyzing our distribution network to inform our strategic investments going forward. Included in our business going forward. Included in our capital expenditures for fiscal 2022 is the expansion of our Vancouver DC. Fiscal year 2020 and e commerce growth. We're also planning an expansion of our Toronto area DC and I look forward to sharing more with you on this in the coming months.
Turning now to digital and reflecting on our performance in fiscal 2021, as Brian noted, fiscal year fiscal year. We capitalized on meaningful increases in traffic and conversion, accelerating the shift online with impressive results. 58% revenue growth in our e commerce channel. We made significant improvements to aritzia.com to make our clients' shopping experience more seamless, convenient and enjoyable. We launched over 400 site enhancements during the year, at a 99.96 percent uptime.
Specifically during Q4, to Shop by adding 3 searchable sustainability attributes. Clients can now search for product by their organic, fiscal year 2019. And lastly, enhancing omni channel capabilities remains one of our Top Priorities. As I noted on our last earnings call, we plan to launch store inventory visibility this fiscal year and pilot buy online ship from store and buy online pickup in stores prior to fiscal 2023. Fiscal year fiscal year.
We expect these initiatives to drive sales and conversion, ensuring our clients can shop precisely when, where fiscal year 2019. As we unlock the value of the inventory across our network. To fuel our growth and support the execution of our 4 strategic growth initiatives, we continue to invest in developing our people and recruiting top talent. In Q4, the Aritzia team grew fiscal year 2020. We recruited a new Vice President.
This department will be pivotal in driving our digital growth and personalization. And with the resurgence of our U. S. Business, on the wider value chain. We made encouraging progress on this commitment in the past year, and we have outlined a list of our ESG fiscal year 2019.
And here I'd like to share some highlights of our sustainability efforts in fiscal 2021.
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fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year. Quarter. And as I noted earlier, we've adopted more sustainable fabrics across a full 40% of our springsummer 2021 collection, quarter, including organic and recycled cotton and recycled polyester and nylon. And we became Fiscal Year. We are now on track to our Q1 and Scope 2 Emissions.
And we're especially proud of the initiatives to further fiscal year 2018. We conducted our inaugural DE and I employee survey and committed $1,000,000 to develop our DE and I program. We continue to support women and girls in need by gifting Super Puffs through the YWCA and donating the full proceeds from our first ever International Women's Day capsule collection. Session. And last but not least, through the Aritzia Community Care Program, we gifted 15,000 healthcare heroes with custom clothing packages.
And tomorrow, we'll gift our final 10,000 packages fiscal year 2019. And I here would just like to add my personal thanks to all of you working in healthcare out there. In closing, our results are a testament to our values and the strength of our underlying operational foundation. Despite ongoing disruption and uncertainty, we continue to invest heavily in people, fiscal year 2019 and have a meaningful positive impact on our long term success. I'll now turn the call over to Todd to discuss our financial results.
Thanks, Jennifer, and good afternoon, everyone. The 4th quarter was not without its challenges. However, given the environment, we are extremely pleased with the performance of our business. We generated net revenue of $268,000,000 fiscal year fiscal year, a decrease of just 3% from last year. This was despite a $57,000,000 shortfall in revenue from the closure of 39 boutiques in Canada for the majority of the quarter, as well as another $18,000,000 related to severe pressure from occupancy restrictions and reduced operating hours in our open boutiques.
Notably, our e commerce business delivered an 81% $67,000,000 increase in revenue, almost completely offsetting the shortfall from our retail boutiques. Fiscal year. Lastly, our business in the United States had positive revenue growth of 9% or $8,700,000 over last year, Signaling the start of the recovery. Gross profit was $103,000,000 in the 4th quarter,
fiscal year 2019.
Gross profit margin was 38.5%, up 120 basis points from last year, driven by a number of puts and takes. We had meaningfully lower markdowns, the result of stronger than expected sell through during the regular fall winter season, fiscal year 2019, which left us with less sale product and gross profit also benefited from $3,000,000 in rent abatements and government wage subsidies. These improvements were partially offset by 3 factors, higher warehousing and distribution center costs resulting from the growth In our e commerce business, deleverage from lower retail revenue and continued investment in talent to support our product expansion strategy. SG and A expenses were $72,000,000 up $8,000,000 or 13% from last year. The increase was driven by continued investment in talent across e commerce, U.
S. Retail, marketing and IT to support the future growth of our business. SG and A also included $3,000,000 of expenses related to health and safety protocols. Overall, we generated $35,000,000 of adjusted EBITDA in the 4th quarter or 13% of net revenue compared to $42,000,000 last year. Turning to the full year, as Brian mentioned, fiscal 2021 was without a doubt the most challenging year in Aritzia's history.
Despite the difficulties created by the global pandemic, we are extremely pleased with the performance of our business. Net revenue for the year was $857,000,000 down only 13%, despite boutiques being effectively closed for 33% of the year and open boutiques being impacted by severe occupancy restrictions. Importantly, we took swift action to drive our e commerce business, which delivered revenue growth of 88% to comprise 50% of net revenues in fiscal 2021, more than double the 23% revenue penetration of last year. While gross profit margin for the year declined due to higher warehousing and distribution costs and pressure from the deleverage associated with lower retail revenue, The underlying product margins were flat for the year despite the promotional environment in the 1st and second quarter. Fiscal year.
We also saw deleverage from SG and A in the year. However, this was driven by the decision to keep all of our people employed throughout the pandemic and our decision to continue investing in talent, processes and technology throughout the year to fuel our growth post pandemic. Adjusted EBITDA was $77,000,000 far higher than our expectations when the pandemic started. Fiscal year. We ended the year with a cash balance of $149,000,000 a 26% increase compared to $118,000,000 last reflecting the strength of our operating cash flow and the extension of our inventory payment terms.
Including full access fiscal year 2019. To the $100,000,000 under our revolving credit facility, we ended the year with $249,000,000 of liquidity. Importantly, we improved our strong liquidity position throughout the year, enabling us to continue investing in our strategic initiatives fiscal year. Inventory was $172,000,000 at the end of the fiscal year, fiscal year 2019, up 83% from last year. As Brian commented, we are confident we have an optimal mix of product assortment and inventory levels for the remainder of the springsummer season to capitalize on the momentum in our business and maximize sales.
Shifting now to our outlook for Q1 and the full fiscal year for 'twenty two. We are extremely pleased with the acceleration in our business in the Q1 to date, which reflects the enthusiastic client response to our springsummer collections. Fiscal year
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fiscal 2020. Compared to fiscal 2021, implying a revenue target of approximately 234,000,000 for the quarter, fueled by the acceleration of sales in the United States and the continued growth in our e commerce business across North America. These results are exceptional, especially given the fact that 50% or 34 of our boutiques in Canada were mandated to reclose starting on April 8 and are expected to remain closed for the remainder of the quarter. I will now provide some perspective on our financial outlook for the full fiscal year. Fiscal 2022 outlook anticipates a continued recovery in the retail environment and assumes no further deterioration from COVID-nineteen and related shutdowns.
Net revenue growth is expected to be 30% to 35% comparative fiscal 2021. This reflects acceleration of our sales in the United States and continued growth in our e commerce business. The ongoing recovery of our retail performance in Canada as well as the contribution from our retail expansion. With 6 to 8 new boutique openings in the United States and 6 boutique repositions, 4 in Canada 5th quarter in the United States. Gross profit margin is expected to be relatively flat compared to pre COVID-nineteen levels fiscal 2020, reflecting leverage on fixed costs and the strengthening of the Canadian dollar, offset by continued investment in talent to drive our ongoing product expansion strategy.
SG and A as a percent of net revenue is expected to modestly increase fiscal 2020 as accelerated investments in people, processes and technology more than offset the leverage on fixed costs. Fiscal year fiscal year. In addition, we expect to incur approximately $10,000,000 in operating expenses related to COVID-nineteen protocols Weighted to the first half of the year. Finally, we are planning net capital expenditures in the range of $55,000,000 to $60,000,000 fiscal year fiscal year. This amount is comprised of boutique build costs, net of tenant improvement allowances and ongoing investments in technology and infrastructure.
Over the past year, our people have demonstrated remarkable resilience and our business has delivered better than anticipated results as we adapted to this difficult environment. The investments we continue to make throughout the pandemic have positioned us well to take full advantage of the post pandemic environment. There is no doubt we are emerging from this period a stronger organization. The exceptional acceleration of sales in the United States and continued growth in our e commerce channel in the Q1 is evidence of the growing strength of our multi channel business. We are excited about all the opportunities ahead and are looking forward to the day fiscal year 2019.
With that, I'll now turn the call back to Brian.
Firebright Future. While the uncertainty of the pandemic remains, with the ongoing closure of 50% Our e commerce business is continuing to surge, our U. S. Business is flourishing and we're optimistic fiscal year
fiscal year
2020. Capitalizing on our accelerated multi channel client relationship quarter. As discussed, we have a full team in place to launch later this year, our omni capabilities project. We will continue to invest in new digital capabilities, fiscal year 2019, both online and in our boutiques, including ongoing personalizational developments, enhancements to our international site and the continued rollout of our digital selling tools. 2nd, geographical retail expansion with a focus on the United States.
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year fiscal year. Fiscal 2020 2, we plan to open 6 to 8 new boutiques in the United States, including The Grove in Los Angeles, Woodberry Commons in New York 4 in Canada and 2 in
the United States. 3rd,
development through all product divisions. We will continue to expand our beautiful and multi dimensional product lines this year. We'll launch new categories including our swim line later this fall and our Intimates line for summer 2022. Our clients will also enjoy extended depth, including color, quarter length and more inclusive sizing range for our top selling items and breadth, including warm and hot weather product, as well as expanded denim assortment and the introduction of our Super Bowl collection. All this contributing to our on track 5 year plan to double our style count.
And 4th, brand awareness in both the United States and internationally. We have a comprehensive strategy and development to further capitalize on our exciting growth opportunities in the United States, complementing our boutique openings and expansion plans. In doing so, we expect to significantly increase our brand awareness, while also growing our bench strength in digital marketing in this flourishing market. To support these 4 growth drivers, we'll continue to invest in infrastructure. This includes adding to our high performance team, fiscal year.
Our strategic targeted goals at all levels, consistently enhancing the efficiency of our processes, enriching our technology suite Through the hard work of our team and the resilience and adaptability of our operations, we're in extremely exciting position. With our surging e commerce in the United States businesses, we're investing strategically, capitalizing on the balance opportunities fiscal 2020 and elevating our clients' much loved everyday luxury experience. As we close out fiscal 2021, I would like to thank our investors and year fiscal year. I'm humbled and privileged to continue to lead our dedicated team
quarter. With that, Charisse, can we open the
line up for questions? Absolutely. We will now begin the question and answer session. And 2. We will pause for a moment as callers join the queue.
The first question comes from Mark Altschwager with Baird. Please go ahead.
Good afternoon. Thanks for taking my questions. I guess first, just with respect to the revenue guidance, Can you talk about how you're thinking about the trajectory of the recovery through the year relative to the pre COVID levels? Yes, the guide seems to imply deceleration on the growth versus pre COVID levels after Q1. Now, I know U.
S. Is benefiting from stimulus in Q1, but you're Still dealing with some significant restrictions in Canadian stores. So I guess I'm trying to understand how you're thinking about some of the puts and takes there as we move through the year.
Hi, Mark. The 110% They were growing off of FY 'twenty one. If you project calculate the growth off of FY 'twenty, The growth is actually consistent, effectively consistent from Q1 through for the rest of the year. It's just because in Q1, obviously, our revenue was much more depressed than the rest of The year last year because all the stores were closed for the majority of the quarter. And so therefore, we're going from 110% over FY 'twenty one Compared to 30 to 35 over for the full year.
But if you compare against FY 'twenty, quarter. The ranges are relatively consistent.
Fair enough. That's helpful. Quarter. And then just maybe bigger picture for Brian, now that we've kind of concluded the original sort of 5 year plan, obviously, the final year being a little bit different than we all We're anticipating, but just any broader perspective on how you're thinking about the revenue and earnings growth algorithm over the next several years?
Yes, it's really too bad because we're on track with everything and we actually should be using this call to announce our next 3 or 4 or 5 year plan, whatever we decided to do. As far as algorithms go, I actually haven't thought a lot about algorithms, Statistics and Calculus University. So can you just explain to me what you mean by the algorithm? Are you talking about leverage or what are you talking about here?
Yes, I just mean how we should be thinking about kind of the top line growth rates over the next few years and where you think the margin structure will go?
I don't see our margins changing too much other than we're going to be doing more and more business in the U. S. And our margins are better in the U. S. So I think our gross margins will improve.
Is that fair, Todd? And that's just purely from a mix perspective. I don't see our margins year. On a product perspective as far as we have a pretty consistent margin. We know what our customers expect from a value proposition and I'm not sure And I think due to sustainability and things like that, we don't want to chase.
We've never been one to chase the lowest producer and everything So we're comfortable with our supply chain. We're comfortable with the margins. We're pretty comfortable with everything that we have and The sustainability aspect of our product, although we are continuing trying to improve it, but we're pretty comfortable with all our suppliers.
So we're not out
chasing different countries and different exchange rates and things. So I don't see our margin changing much per se. I see From our cost of goods, I do see it from the mix, as I mentioned. But I do see our business accelerating in the U. S.
I mean, if Q1 is any and I know business is In general, pretty good right now in Q1, the retail business in the U. S. But Canada is harder to It's a little bit more challenging in Canada because we haven't really come out of it. I don't know if it's going to look like the same kind of recovery in Canada as it does in the United States and we're 3 months behind. I don't know if it's slower.
I don't know the economic situation in Canada and we certainly don't have the growth runway we have In Canada that we have in the U. S. So I see us growing in Canada fiscal year. We're really banking and really seeing some great upticks in our business in the U. S.
And biggest we've Quite frankly and we really think we're getting famous and we're slowly opening these stores in new markets and fiscal year. We have 3 stores in Texas now and we have store in Colorado, we're in Pennsylvania now. We have a whole bunch coming in various other states. And so we just think that we're going to see expanded revenue growth. We have so much room in the United States, That's where we're going
to get our growth from.
So we're pretty excited about that.
It's really helpful. Thanks for all the detail and best of luck.
The next question comes from Irene Nattel with RBC Capital Markets. Please go ahead.
Thanks and good afternoon. Just following on those last comments. If we think about the very strong performance Can you talk about sort of the mix? What are people buying as things reopen? Presumably, you saw sort of the cadence and the geographic mix tied to what reopened when.
Quarter. And also wondering, given the sort of the rate, the profile in the U. S. That's being raised, whether you're seeing your geographic mix of sales shift a little bit within the U. S.
I mean, I'll talk to some and Todd can take some. He's kind of looking at me wondering what Let him take it. But, yes, we are certainly seeing our geographic expand. I mean that's why we're opening in Florida and different places like that. We have a really great store in Florida and it just happens to be e commerce.
And so, we're seeing some great expansion from an e commerce perspective in the United States and states that we had Essentially zero business in 3, 4 years ago. So we're seeing that happen. And we're seeing quarter. When we open the stores that accelerates even more. So we're pretty excited about that.
What's the other part of the question Irene?
The product mix of like Are we seeing the same type of products?
It's interesting you're saying that Irene because we're there's 2 I mean let's face it, the U. S. And Canada are in 2 different states right now. We're still locked down and so we're still selling lots of at home clothing. We have seen Our U.
S. Business, so the products have started to change in the U. S. They're going out a little bit more. Obviously, it's a summer collection, so it's a little bit different.
But we are seeing a little our dresses pick up and our going out clothing pick up a lot more in the U. S. I mean it was fiscal year. We pivoted very quickly and the team did a remarkable job, but we had some incredible sort of professional and more dressy and going out clothing. It was really driving our business for a few years leading up to the pandemic.
So, it will be interesting to see how much of that comes back and if There's been some permanent changes. Obviously, people aren't going to be going to the office as much, but we'd like to think people are going to be going out as much And requiring this clothing and what's so great about our model is we do casual, we do dressy, we do summer, we do winter, we do everything so well. So, The team, I'm really proud of them and their shifts and we've started to see the shift in the U. S. We have yet to see it in Canada though.
Yes. We're all still woefully depressed and locked down here. And then just one final question, if I may. I was really going to sort of the brand and the brand reach and the brand visibility. As you're generating this momentum, How are things with the influencer strategy and with the sort of the key strategies, are you finding it easier now?
Are you
We're certainly seeing more people who work in the industry coming to us, Maybe not the influencers, but the people that hire and book the influencers and things like that. We've hired some pretty meaningful positions It's interesting to see what's going to happen with influencers. Obviously, there's been a major shift From Instagram to TikTok, and there's a whole different set of players there. I think Some of the typical go to imagery and things that was in Instagram that was perhaps driving sales pre pandemic Change during the pandemic as people's lives changed. It will be interesting to see if they go back to that kind of imagery and lifestyle and if that resonates.
Fiscal year. So we saw a shift from pre pandemic to during the pandemic. We saw a shift in The imagery and the influence that was going on out there and I think it actually changed what influencers people were actually following and engaging with. And we think we're going to see another one here as well, coupled with the move to TikTok and some of the other platforms. So, We're seeing different we don't get influencers approaching us directly, although we do have a lot of celebrities wearing our clothing on a regular basis.
But what we are seeing is people coming to us and saying, hey, we can help you and we'd like to come work for you and join the team. So We're certainly capitalizing on that.
That's great. Thank you.
The next question comes from Mark Petrie with CIBC. Please go ahead.
Hey, good afternoon. Could you just talk more about the drivers of the e commerce growth? I'm sure it differs Significantly in Canada versus the U. S, but the evolution you've seen in terms of new customers discovering the brand Or sort of the substitutions from stores? And then also just what you're seeing in terms of on the actual site Conversion rates over the course of the year and given all of your investments.
Yes.
We're still work in progress on some of these data because it's changed like the U. S. Has certainly changed with all the stores opening and our retail stores in the U. S. Doing so well.
There's And so we're seeing who's moved and who hasn't moved from there. In the U. S, we're seeing We initially when the pandemic started, we saw a shift from people that were shopping in retail shopping online, but we also have had a huge influx and increase in new customers who hadn't previously shopped at Aritzia at all. We're ironically still seeing a lot of new customers come into our retail stores too on a very high rate right now. And then in Canada, it was mostly the shift.
I mean most young ladies shop with us in Canada already. So it was mostly a shift from retail to Our online channel, that'll be interesting to see on that shift and what goes back and what's not. I mean, we're trying to track We're trying to it takes a while to figure out if you've actually had lapsed a customer or you've lost a customer. And so we're kind of working on a lot of that. It takes A lot of people have measurements of a year, some people have measurements of 2 years.
So it will be interesting to see what happens there. Our strategy is to make sure though that the customers that were shopping retail that then came and started shopping online
remain as omni customers. They go back to
retail, but they continue to shop online because we've They go back to retail, but they continue to shop online because they've proven to be the best customers that we have. And in the U. S, it's More of a acquisition play, Canada is more of a retention play and making sure those customers are activated and retained, whereas in the U. It's a big activation play and that's what our strategy is in the U. S.
Still.
Yes, understood. Okay. And then I just want to ask about the denim category. It's been a couple of years since the launch. We've seen you guys adapt and expand the offering.
It's sort of topical. It seems like you're well positioned in terms of the trends in that category. But could you tell us More about what you're seeing in the denim business and maybe just in terms of context, how would you think that that would rank, that category would rank In the opportunities you see in your assortment for taking more share of wallet.
We've expanded our denim We started off with Denim Form and we ran with that for a few years, Just more or less building our infrastructure and capabilities around that. We've now recently and are in the process and we haven't launched them all, but we're coming up with denim categories in our Babatund, Wilfred and T and A and Sunday Best and some of those brands. Quarter. So we were kind of the target was to get our we have 3 different sources of denim. We have external third party brands.
We have our denim form brand and we have our brands, our existing clothing brands And the target was to have a balance between the 3 of those. We're obviously doing a great job in the denim form and the 3rd party brands, but now our growth is focused on our brand denim that are in our exclusive brands And building that out. And so we're launching Babatund, I think for fall, but it might be for spring, I'm not sure. Wilfred's launching and everything else. Quarter.
Those are more fashion focused whereas denim forms more basics focused. Surprisingly, we're actually seeing some We're really resonating with non denim within our denim collection as well. So that's actually been a pleasant surprise. So we're on track. I think we're from an infrastructure perspective, we're moving into a second phase where we're doubling down on our infrastructure as far as production capabilities, QA capabilities.
Denim is a very hands on business. So we have certainly it's been a little harder to operate with year. Our inability to travel certainly something that's far more hands on in the factories, in the mills and connecting with people. And so, It's actually been our denim people travel more than our clothing people. And so this has been a little bit difficult for them, but quarter.
We're super excited with where denim is and we're right on track to where we had planned several years ago when we launched it and we're right on track with how we're 5th quarter process in rolling out now into our other brands and we're staying true to what the plan was and it seems to be working.
And can you give any context with regards to the magnitude of the opportunity versus some of the other Sales driving initiatives you have in terms of SKU expansion and new categories?
Yes, I mean, I think, when I hired our Head of Denim, she came in and I said, what percent do you think Denim will make up of our sales and she said, well, I hope it's 50. I said, if you get to 10, I'm going to be ecstatic.
I think
that it really depends. The problem with denim is denim is difficult. I mean, I've said all along, people have heard me say it a 1000 times here. Levi's created the 501 and they've spent 100 years coming trying to find an encore to the 501. They built an incredible business, but nothing is still I don't see beneath the covers there, but I think they still sold more 501s in any other denim they've had.
So it's not an easy category whereas some of the other low hanging fruit in our product Categories like adding length and adding color and things is so simple for us. So I actually like to think that Perhaps maybe some of these other category expansions are actually going to be more important. And as we continue to open up in Southern California fiscal year 2019. In Florida, Hawaii and places like that, our warm weather offering is going to be meaningful for us because It's fine for spring and summer, but come fall and winter, it's a challenge selling coats and parkas and things like that in areas and it's
fiscal year fiscal year. It's going to
make up more and more and
more of our business. And as you can see looking at the population map in the U. S, a lot of people live in the Southern United States and our products resonating, But it's resonating in spring and summer, so we have to make sure it's also resonating in fall and winter. So there's a whole bunch of categories and I think really When I had a board meeting and I list them all out, the input that I got back was Slow down a little. You can't do all these things at once.
So, we have all sorts of opportunities on our product and we're just going to make fiscal year. Sure, we plan for them and strategically put them in order and phase them out properly. But certainly, some of them are easier than And I would say denim, I wouldn't say is the hardest, but it's in the sort of top third of hardest to actually go out and expand and Q3 for sure compared to some of the others.
That's very helpful. Thanks. I'll pass the line and all the best.
Thank you.
The next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead.
Thank you. Good evening. Good afternoon. I just wanted to think about, if you look back over the last year, obviously, the resilience of the business has really The business has really shone through and the consumer response and engagement has been very strong in terms of e commerce As well as in store. But I'm just curious, if you think back, is there anything that you would identify or point to as potentially Consumer shopping behavior or consumer consumption behavior that might be more permanent as you begin to exit the pandemic?
I think from purely a product perspective, I think We had a whole bunch of core product and sort of go to product in Canada and in the U. S, The customer was not our clients weren't coming to us for that. They weren't coming to us for our basic pants and fleece and things like that and that's now changed. It's changed meaningfully. So one of the things that you can Show all the fashion you want, but you make money in this business selling the meat and potatoes of the product and We weren't selling.
We weren't the place to go to. And in previous shocks in the United States and previous accelerations and different trends, When things got a little tighter in the U. S. And this or that, it actually hurt our business more in the U. S.
Than it did in Canada. And in this particular case, We're just finding a resilience of our brand. It's just obvious in looking what we're selling and looking where go to place now go to shop in the United States, would that be online or in our stores? And I don't think we were before. So We've been seeing and noticing that.
I think so I guess it's really biggest thing we've seen is a category expansion The second thing we've noticed is back to our brand is our new stores are opening up higher. When we used to when we were originally going public and we penciled out new stores in Canada and the U. S, we had a far Longer ramp in the United States than we are seeing now. Our new stores in places like Glendale And in Philadelphia and in places, we've noticed a huge recognition and hitting the ground running Way more than we were 3, 4, 5 years ago and certainly more than we were 10 years ago. And is that Because of the pandemic, I don't know specifically it is.
I know it's certainly hurt our competition. I think our inventory being clean and Launching with new product rather than selling older product throughout the last year has been really helpful for us. I think our decision to have A lot of inventory, new inventory and fresh inventory this spring, I think has helped us quite a bit. So, I don't know if there's any been too many specific small things other than some big Moving things that I think is changing and I just think our place, particularly in the U. S, In the mindset of the consumer in the U.
S, we're a player now. They know who we are. They're showing up. They're on our website, as I mentioned. We've seen our business in Online in Florida and places like that expand.
And quite frankly, that's why we're opening up stores in Nashville and Charlotte, places like that. I mean, we're doing good business in these places now, whereas 5 years ago, we weren't and I was a lot more concerned about how we're going to make money in some of these secondary markets and we're actually doing really well in the secondary markets. And as you know with the size of the United States has opened up a plethora of opportunities for So it's really been the brand recognition, it's been the clients coming to us everywhere now for the staples they need. It's repeat customers coming to us and all that's very exciting.
Yes, That's great. And then thinking about that strong momentum in the U. S, you mentioned some DC investments in Vancouver and Toronto, that's part of this CapEx. Are you going to be needing to make further DC investments in the U. S.
To meet this strong demand?
Well, if you recall hi, Stephen, it's Jennifer. If you recall, I did announce a couple of quarters ago that we did expand our Ohio We expanded the space there that we felt would last us at least 3 to 5 years from that point forward. Fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year fiscal year
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year fiscal year. Quarter. And so right now, what we're doing, as I mentioned in my remarks, is that we're conducting a centroid analysis, essentially a network analysis that will allow us to really plan out where we need our DC nodes. We are contemplating some form of expansion in the U. S,
Fiscal. Brian, I think you mentioned that you found that your omnichannel customers were typically spent, I think it was 3 times more than someone who was in store e commerce only. Are you still seeing that kind of multiplier effect?
Yes, I mean that hasn't changed in several years and I haven't really looked at it since the last fiscal year. I suspect it hasn't changed because it was very similar for years and then I think my team would come tell me, Hey, Brian, we got a 911 here. They're not spending as much or running into my office if they're spending more than 3 to 1, probably come running until 4 to 1, but no, we haven't seen that change. The key thing here for us is making sure These customers that weren't able to shop retail, they all moved a lot of them that moved to online stay in both channels And that is going to be super important for us. And so we're really working on strategies around that.
Okay. Okay, that's great. Thank you very much.
The next question comes from Dylan Carden with William Blair.
You kind of set up my question perfectly there. I was just curious, the implied Q1 guidance growth in the United States seems pretty profound. And I'm just wondering if you could give any color around kind of the Give and take between the two channels online and retail sort of embedded in that number kind of what you're seeing as
the world opens back up
Hi, Dylan. Yes, what I would say is that we are seeing continued acceleration of our e commerce business and strength in our boutique Traffic and Business as well. So it's really is across both channels that we're seeing
Okay. And then I guess you've touched on it a couple of times on this call, just sort of the maybe the new geographies in the country or is this sort of just following migration patterns in the United States more than anything?
It's really following a migration pattern except for the fact Our targets are higher now. When I was when we were sitting down looking at with the team looking at Our goals and planning of how much business these would do. Whoever has been taking the over has So, we're that's why we're getting more and more excited is seeing how good our business in Houston is 50% more than we thought it would be even presently. Our business in Austin is 50% better. Our business in Glendale is meaningfully better.
Like we have we're opening these stores and we're doing meaningfully better than we thought we'd be doing. So we're super We'll see what happens as we start opening in the Southeast. Hopefully, we experience the same thing. But there's opportunities in Vegas. There's opportunities in Phoenix.
There's opportunities all The place in the United States and the Southern United States with a lot of people. It's not just Miami, it's Orlando, it's Fort Lauderdale. It's all sorts 5th Great customers we have in the United States and there's some great shopping centers and obviously our e comm ships everywhere. So, This is what's so exciting. It's just the fact that we seem to have unlocked Southern United States a little bit too more than we had in the past.
So that's what's super exciting. It just opens up a wall to tomorrow.
That's what it sounds like. Are you rethinking the box at all as far as size or location? And I guess geography is a little different, but just location within these
It's funny you asked that because there was some hesitancy a few years ago of taking on larger locations in It doesn't matter whether we're in Canada, United States or Northern United States, Southeast, Southwest, We're after the same size box. In Austin, we have a really big store. We have an old Apple store That we took and it's doing extremely well and it's a big store. And so we're looking our store in Topanga, I think it's over 10,000 feet, which Our average that we're out looking for is 8. So, we're super excited about the opportunities.
We're getting great real estate. And there's not that many people opening new stores. There really isn't that many people opening sizable new stores. So, the landlords, We're making great partnership with the landlords right now. They want us and we want the real estate and so it's been great.
Fiscal year. But no, we're not changing our footprint. It doesn't matter where it is. I mean, we need to show our product. And one of the things that we found is particularly with our category fiscal year.
We can't have our stores holding 5% or 8% of our product. They need to hold meaningfully more of our products. So we need to make They're expanding and they're representing the brand properly and representing all customers. We have a wide range of customers And so both from an age perspective and an income perspective and everything else. So it's important that we're able to showcase a good representation
The next question comes from Patricia Baker with Scotiabank. Please go ahead.
Good afternoon, everyone. Thank you very much for letting the call go after 5:30 so I could get my questions in. Jennifer, thanks so much for giving us the overview of your approach fiscal year 2019 and strategy behind ESG and your accomplishments. And just with reference to something you mentioned about Q4 that you launched search function so that your customers can filter looking for organic recycled and responsible for 5th quarter. Probably too early for you to give us any details about that, but are you already seeing that that's something that's expected your customer
You're right. It is probably too early to have real fiscal year. But I will say anecdotally, it's a feature that internally we're very, very, very excited about. Quarter. And externally, we've heard lots of great qualitative feedback that this is the direction that people want to see us go in.
And we do believe that 1st and foremost it makes shopping our goal is always to make the shopping online easier and more seamless 5th quarter and easier to navigate, where to find specific products and specific attributes of our products and with sustainability being so important quarter. As well as the content of our sustainability factors, whether it's recycled or organic increasing in our product and fiscal year. We're feeling very positive about it and we're getting just really great qualitative feedback on it. We'll share more as we learn more.
Okay, super. And I'm not surprised you're getting great feedback on that. And then just one last question. You talked about investing in talent and you referenced that you've now hired 5th Q and A U. S.
President of Retail. Can you give us any details on the background of this hire? And I can understand why now because you're growing so fast there. Just a little bit more detail on that specific hire.
Absolutely. I personally I met her and interviewed her along with our Head of Retail. She's a seasoned professional and comes from luxury. She's Obviously, born and raised U. S.
Citizens and we feel that she knows the market and all of the regions in the U. S. Extremely well. We felt we really connected in terms of the exceptional client experience to offer fiscal year. Very grassroots and loved connecting with people, both our own people as well as our clients externally facing.
And I think she's actually right now, even as I said, she's in the West year fiscal year. I think she's in New York. I think I talked to her. She was in New York yesterday when I talked to her. So She has no problem traveling and what I love about her is that she sets a real example in terms of how we want fiscal year 2019.
And I think I've said it a few times now, I think She's very client centric and we've just been like super impressed with her. She's only been with us a few months, but we've been super impressed with her.
And Answer Session. I would like to turn the conference back over to Helen Kelly for any closing remarks.
Thank you, Charisse, and thanks for everyone for joining us this very busy earnings afternoon. Sorry, our call ran a few minutes late. Fiscal year. The team will be available after the call to answer any questions you may have. And in this environment, please continue to take care.
We look forward to speaking with you again very soon. Thanks.
Bite. This concludes Today's Conference Call. You may disconnect your lines. Thank you for participating and have a pleasant