Thank you for standing by. This is the conference operator. Welcome to Aritzia's fourth quarter 2026 earnings conference call. As a reminder, all participants are in listen only mode. 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 one 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.
Thanks, operator, and thank you all for joining Aritzia's fourth quarter fiscal 2026 earnings call. On the call today, I'm joined by Jennifer Wong, our Chief Executive Officer, and Todd Ingledew, our Chief Financial Officer. As a reminder, 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 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 SEDAR+ as well as the investor relations section of our website. I'll now turn the call over to Jennifer.
Thanks, Beth. Good afternoon, everyone. Thank you for joining us today. We're thrilled to have delivered yet another quarter of standout financial results. Our consistent performance is a direct reflection of our team's ability to execute impeccably on our three strategic growth levers: geographic expansion, digital growth, and increased brand awareness. We feel robust demand for the Aritzia brand while continuing to grow our awareness in the U.S. and drive enduring client loyalty in Canada. What's even more exciting is that fiscal 2027 is off to a great start. Our exceptional momentum has continued into the first quarter. In Q4, we achieved record quarterly net revenue of CAD 1.2 billion. That's an outstanding 33% increase compared to last year. Comparable sales grew 28%, even as we lapped growth of 26% last year.
This was driven by double-digit growth in all geographies and all channels. Our exceptional broad-based performance spanned our extensive portfolio of exclusive brands. I could not be more pleased. Outstanding net revenue growth of 38% in the U.S. and 24% in Canada highlight the strength and amplification of the Aritzia brand across geographies. In the U.S., our results were fueled by 15 highly successful new and repositioned boutiques over the last year, exceptional momentum in our digital channel, supported by our new mobile app and strategic investments in marketing, as well as outstanding comparable sales growth across our existing boutiques. In Canada, our success was primarily driven by exceptional momentum in digital and outstanding comparable sales growth across our boutiques. Our new boutique in Vancouver and our two repositions in the past year are delivering excellent results.
Our success was broad-based across channels, underscoring the strength of our omni-channel business. In retail, we delivered an increase in net revenue of 35%. Our performance was driven by outstanding comparable sales growth, primarily due to higher traffic. This was fueled by the increasing affinity for our brands, which we supported with our strategic investments in marketing. Our growth was also driven by our real estate expansion strategy. Over the past 12 months, retail square footage growth was in the mid-teens. We opened a total of 14 new and four repositioned boutiques. In the fourth quarter, this included five new boutiques, all in the United States, as well as one reposition in Quebec. Our real estate strategy continues to yield exceptional results. Our boutiques enhance brand recognition, drive new client acquisition, and support digital growth, particularly in new markets.
In fiscal 2026, the new boutiques we opened in the U.S. are tracking to pay back in less than a year. This continues to beat our target of 12-18 months. In digital, net revenue increased 29%. That's on top of 48% growth in Q4 last year. Traffic was the primary driver of growth, driven by our investment in full funnel marketing. We're attracting high-value clients across a diversified mix of owned and paid channels. With our increasing brand affinity, we're driving more efficient acquisition and stronger retention. In addition, this full funnel marketing is driving clients to both our boutiques and digital sites. We continue to enhance and extend our digital selling channels through brand storytelling and world-class commerce features.
First, we benefited from ongoing website enhancements, such as continuing to improve personalized search, leveraging immersive multimedia content, and building a more responsive site. Second, app adoption has been phenomenal, with continued strong monthly downloads and active client engagement. We're seeing our clients not only visit, but shop the app multiple times per week. Third, our international e-commerce improvements continue to pay off, with sales up more than 53% year-over-year. Notably in Q4, we drove an increase in omnichannel clients of more than 30%. This is yet another indicator of the growing love for our brand. Turning to product, our amazing team continued to deliver a balanced mix of high-quality products at obtainable price points. Our assortment resonated extremely well across all regions, reflecting the widespread love that clients have for our brand.
We supported robust demand with our meticulous focus on inventory management, which drove lower markdowns during our fall/winter seasonal sale. For spring, we introduced freshness with new styles and new color launches, from fleece to cashmere to lighter weight outerwear and dresses. We drove excitement throughout the season. We also continue to see strength in the iconic franchises for which we are well known and loved. Our Everyday luxury marketing campaign continues to help grow brand awareness and introduce Aritzia to new audiences. This fueled another quarter of strong new client acquisition. In all channels and geographies, more clients than ever before shopped the Aritzia brand. At the same time, we remain focused on deepening our connection with existing clients. Strong double-digit growth across new, existing, and reactivated clients has been a key contributor to the outstanding momentum in our business.
In Q4, we also announced our acquisition of the Fred Segal brand, including the lease of Fred Segal's original beloved flagship destination in Los Angeles. This is an iconic brand that redefined experiential retail and shaped L.A.'s stylistic and cultural identity for decades. We're thrilled to embark on a new chapter for Fred Segal as we reimagine the brand for a new generation. As I mentioned earlier, fiscal 2027 is off to an excellent start. Our strong momentum continues into the current quarter, driven by exceptional client demand for our spring and summer collections. Our business has never been better positioned for growth. It's underpinned by the strength of the Aritzia brand, our proven operating model, and our healthy balance sheet. Having already achieved our fiscal 2027 revenue target one year early, we look forward to sharing our next strategic roadmap in the fall.
Meanwhile, we remain steadfast in further advancing our three strategic growth levers: geographic expansion, digital growth, and increased brand awareness. We also continue to strategically invest in world-class infrastructure to help ensure we drive scalable growth for the long term. In fiscal 2027, we have another robust pipeline of 12-13 new boutiques in premier locations, as well as four to five repositions. This year will enter four new markets: Birmingham, Fort Worth, New Orleans, and St. Louis. Our proven real estate expansion strategy continues to be our most consistent, predictable driver of growth. In our digital channel, we have several initiatives to support continued momentum. These include ongoing digital marketing optimizations as well as channel expansion.
We're launching a new SMS program, we're expanding our affiliate influencer program, and we're investing more in awareness tactics across the platforms where our clients spend the most time and where we're seeing incremental gains. We're also launching an international marketing pilot, AI-driven search engine advancements, and additional mobile app features. Of course, we expect new boutique openings to continue fueling digital sales. In terms of brand awareness, our new boutiques and ongoing marketing investments are proven multi-year strategies to help grow the Aritzia brand in the United States. We're becoming increasingly well known and loved, and the opportunity for growth remains immense. Regarding infrastructure, our new distribution center in British Columbia is on track to open next week. In addition, we expect to begin work on a second distribution center in the U.S. later this year or early next year.
Key technology investments in fiscal 2027 include merchandise and workforce planning software, RFID, and mobile app upgrades. We're also scaling AI across our workflows to make our people even more productive. As always, we operate with a long-term focus and balance investing for the future with driving sustainable, profitable growth. Last but not least, I want to express my deep gratitude to our people for their unwavering dedication to excellence and teamwork. The strength of our brand is unprecedented. On behalf of everyone, I can say we could not be more excited about the journey ahead. With that, I'll now hand it over to Todd to discuss the details of our financial performance.
Thanks, Jennifer. Good afternoon, everyone. In the fourth quarter of fiscal 2026, we delivered record net revenue of CAD 1.2 billion. This represents a 33% increase from last year, driven by outstanding growth in both the United States and Canada. We also generated meaningful gross profit margin expansion and SG&A leverage, all resulting in a 39% increase in adjusted net income per diluted share. Turning to the details of our performance, the 33% increase in net revenue was well above our guidance of 23%-26%. Comparable sales grew 28% in the quarter, generating an exceptional two-year stack of 54%. This was driven by broad-based strength across channels and geographies. There are four key factors that continue to underpin our outstanding performance. First, exceptional demand for our winter and spring products, supported by extremely well-positioned inventory.
Second, our digital initiatives led by our popular new mobile app. Third, boutique square footage growth in the mid-teens. Fourth, our strategic brand and digital marketing investments, which generated significant traffic growth and new client acquisition. In the United States, fourth quarter net revenue increased 38% to CAD 755 million. Our U.S. retail business was driven by square footage growth of approximately 25%. This included a total of 15 highly productive new and repositioned boutiques over the last 12 months. In addition, we delivered outstanding comp growth in our existing boutiques. In our U.S. digital business, our performance continued to be fueled by strong traffic growth. In Canada, net revenue increased 24% to CAD 431 million. This was driven by outstanding comparable sales growth in both digital and our boutiques.
Our digital initiatives, including our new mobile app and strategic marketing investments, fueled momentum and helped to keep our brand top of mind. Turning to our sales channel, net revenue in our retail channel increased 35% to CAD 698 million. This was driven by double-digit comparable sales growth in our existing boutiques in both Canada and the United States, as well as the strong performance of our new and repositioned boutiques. Our growing boutique portfolio continues to be our most predictable driver of top-line growth. In our digital channel, net revenue increased 29% to CAD 488 million, resulting in a remarkable two-year stack of 77%. Robust traffic growth continued to be the primary driver of our performance. In the fourth quarter, digital represented 41% of net revenue.
We delivered gross profit of CAD 514 million, an increase of 35% compared to the fourth quarter last year. Gross profit margin expanded 90 basis points to 43.3% despite 390 basis points of pressure related to tariffs and the suspension of the de minimis exemption. We more than offset these headwinds through lower markdowns, IMU improvements and leverage on store occupancy costs. SG&A expenses for the quarter were CAD 312 million, leveraging 110 basis points as a percentage of net revenue to 26.3%. The improvement was primarily driven by expense leverage and savings from our smart spending initiative. Adjusted EBITDA was CAD 221 million, an increase of 37% compared to the fourth quarter last year.
Adjusted EBITDA as a percentage of net revenue expanded 60 basis points to 18.6%. Excluding the non-operational FX impacts this year and last, adjusted EBITDA margin expanded 200 basis points. Again, this is despite 390 basis points of pressure from tariffs and the suspension of the de minimis. We've now delivered consistent margin improvement for eight consecutive quarters. This demonstrates our ability to strengthen our margins while continuing to invest in the growth of our business. Turning to the balance sheet, inventory was CAD 495 million at the end of the fourth quarter, up 31% from last year and closely aligned with our sales growth. We remain pleased with the quantity and composition of our inventory, which continues to be well-positioned to drive sales.
Our liquidity position at the end of the fourth quarter is strong with CAD 592 million in cash, no debt and zero drawn on our CAD 300 million revolving credit facility. During the fourth quarter, we repurchased approximately 897,000 shares, returning CAD 104 million to shareholders. This resulted in a total of approximately 1.4 million shares repurchased for CAD 145 million in fiscal 2026. We are renewing our NCIB, and we plan to continue to opportunistically repurchase shares in fiscal 2027. Turning to our outlook, the strong momentum in our business has continued into the first quarter of fiscal 2027. Our spring/summer product is resonating extremely well, and we continue to support robust demand with disciplined inventory management.
Given quarter-to-date trends, we expect net revenue in the first quarter to be in the range of CAD 900 million-CAD 925 million. This represents an increase of 36%-39% compared to the first quarter of fiscal 2026. This is driven by double-digit comparable sales growth and the contribution from our boutique openings. We expect gross profit margin in the first quarter to increase approximately 225-275 basis points, despite approximately 200 basis points of incremental pressure from tariffs and the suspension of the de minimis exemption. The anticipated increase is driven by ongoing IMU improvements and occupancy cost leverage. We forecast SG&A as a percentage of net revenue to be down 50-100 basis points compared to the first quarter last year.
Expense leverage and savings from our smart spending initiative are partially offset by strategic investments in infrastructure to support our growth. Turning to the full fiscal year, we are forecasting net revenue in the range of CAD 4.4 billion-CAD 4.6 billion. This represents growth of approximately 19%-24% from fiscal 2026, driven by mid to high teens comparable sales growth and the contribution from our boutique openings. In fiscal 2027, we plan to open approximately 12-13 new boutiques and reposition four to five existing boutiques. The openings this year will deliver total square footage growth in the low teens. We forecast gross profit margin to increase 150-200 basis points compared to last year.
This reflects ongoing IMU improvement and occupancy cost leverage, partially offset by approximately 50 basis points of incremental tariff and de minimis pressure. Our outlook includes global tariffs in the U.S. at 10% and the ongoing suspension of the de minimis exemption for the remainder of the year. Our outlook does not include the benefit of any potential tariff refunds. SG&A as a percentage of net revenue is expected to be flat to down 50 basis points compared to fiscal 2026, as expense leverage and savings from our smart spending initiative are partially offset by strategic investments in infrastructure to support our growth. We expect depreciation and amortization in fiscal 2027 of approximately CAD 130 million compared to CAD 111 million in fiscal 2026.
We expect adjusted EBITDA as a percentage of net revenue to be approximately 19%, primarily driven by improvements in gross profit margin. We expect CapEx for fiscal 2027 of approximately CAD 250 million. This includes CAD 210 million related to investments in new and repositioned boutiques expected to open in both fiscal 2027 and fiscal 2028. As a reminder, our most recent new boutiques continue tracking to pay back in approximately one year or less, exceeding our target of 12-18 months. In closing, our sustained momentum further strengthens our confidence in our growth drivers. As Jennifer mentioned, we are proud to have reached our fiscal 2027 revenue target one full year early. With our significant expansion opportunities, proven track record, and strong financial foundation, we are well-positioned to continue driving consistent profitable growth. Thank you.
With that, operator, let's please open up the lines for questions.
Thank you, to join the question queue you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speaker phone please pickup your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Luke Hannan with Canaccord Genuity. Please go ahead.
Thanks. Good afternoon, everyone, and congratulations on the very strong results. I wanted to start first with a higher level question, I guess, just overall when it comes to the clientele that you're bringing into your boutiques and bringing in online now, and when it comes to your marketing dollars, what is the tilt, I guess, between re-engaging existing customers or those who have interacted with you in the past versus going out and bringing in new customers or clientele rather to the Aritzia brand?
Good afternoon. Thanks, Luke. Thanks for your question. What we're finding is it's across all three categories, really. Obviously driven by new client acquisition growth, primarily in the U.S., but what we're really pleased to see is client acquisition in both countries. We're continuing to retain, and our existing client, we're seeing strength in that. Now what we're really pleased to see is a reactivated client who we haven't seen shop with us for over 12 months coming back. We're really pleased across all three categories, and certainly our overall active client base continuing to grow significantly.
I also wanted to follow up, Jen, you touched on, in your prepared remarks about how much more efficiently you're managing the assortments, and that's one of the reasons why you're able to generate lower markdowns compared to a year ago. Can you just give us a little bit more granularity on what exactly that means? Is it just that you're managing the existing assortment that you have a lot more smartly? Are you being more strategic in your buys of new product? Or can you just shed some light on what exactly is working for you there?
I mean, I couldn't be more proud of the team and the work that we've done in product, particularly over the last couple of years. You know, all of the above, essentially. It starts with having the right assortment and the right range, and we've done a phenomenal job of having product that is really resonating with the customer, across, you know, across everything. Across category, styles, colors, you know, everything seems to be working. You know, one of the strengths of our business is our planning and allocation function.
We have honed our merchandising strategy now over decades and continue to refine it, and in particular, in the last couple of years have refined it tremendously, which has allowed us to have the right composition of inventory, the right depth of inventory, and making sure that we continue to fuel the demand that we're seeing, and staying on top of it. It's been absolutely phenomenal.
That's great. Last one for me, and then I'll pass the line and Todd, maybe this one's for you. You finished the year with almost CAD 600 million in cash on hand, which is very impressive. You did talk about renewing the NCIB, I'm sure you'll be active there, but even if we were to take that into consideration, there should still be plenty for you to work with there. I mean, what else should we be looking for beyond the buyback that you'll be putting your cash towards?
I would say, obviously, CapEx is the first use of our excess cash. We have meaningful investments in our stores this year, CAD 250 million. Making a large investment there with increases for not only FY 2027, but for FY 2028 in the square footage expansion. We are currently planning to, you know, assuming, you know, opportunistic buying, spend approximately CAD 200 million on our NCIB. Beyond that, we don't have any other plans at this point. We will, as I said, you know, evaluate opportunistically throughout the year our level of repurchasing.
Understood. Thank you very much. Congratulations.
Thank you.
That we can get to everyone on the call today, please limit yourself to 1 question and a related follow-up. The next question comes from Jon Keypour with Goldman Sachs. Please go ahead.
Hey, everybody. Good afternoon. Thank you for the question. I'm just wondering about the gross margin guide for 1Q. It looks like tariffs sequentially get better by, let's just call it 200 basis points. If we take the 80 basis points of expansion in 4Q and add it to the 200 basis points of tariff improvement, that gets you around 280 basis points. I'm just wondering what's baked into the lower end of that guide, the 225 basis points, and what might be able to get us over the 275 basis points ?Thank you.
Yeah. Thanks, John. For the full fiscal year, we're expecting gross profit expansion, expecting that it'll be strongest in the first quarter. We have 150-200 basis points of expansion for the full year, but 225-275 basis points in the first quarter. That's just due almost entirely to the strength of our revenue that we're expecting in the first quarter. You know, with our guide of 36%-39%, we're obviously gaining meaningful leverage on our fixed costs within our gross profit. For the balance of the year, we're expecting gross profit to be in the range of 150-200 basis points of expansion.
That moderation, again, is really related to the revenue growth being slightly moderated for the back half of the year, as well as normalized markdowns in the back half, and then additional occupancy and depreciation costs related to our new distribution center. As we sit here today, Q1 will be our strongest quarter from a gross profit perspective.
All right. Thank you.
The next question comes from Irene Nattel with RBC Capital Markets. Please go ahead.
Thanks and good afternoon and congratulations on a great quarter. As you noted, new boutique openings are an incredible predictor of revenue growth. You mentioned four new markets that you're going in. Can you tell us where the other stores are going to be? Can you also tell us what your data is showing you about sort of how robust is the existing customer base in these new markets?
I'll take the customer question, and then I'll let Todd answer on the store locations. You know, we're finding that across the board We have an extremely loyal client in all, in pretty much all markets. What's really encouraging to see is that the new clients that we are acquiring in these new markets stay with us, and that's essentially been our model now for decades as well. We're attracting a true core customer to Aritzia who are an everyday luxury client, and we're continuing to captivate more and more clients as we continue our boutique build out.
Great. Yeah, from a new store perspective, we have one new store here in Vancouver, and that's the only one in Canada planned for this year, and the rest are all in the United States. They're really, I mean, across the board, but I guess I can quickly run through it. Save the four that were mentioned on the call, we have one opening in Atlanta, another opening in Dallas, Fort Worth, is also on the docket. Cleveland, Ohio, Las Vegas, one more in Florida, another one in Woodlands in Texas, and then one in California in Carlsbad. It's really across the country, north, south, east, west, that we're looking at opening new stores this year in the United States.
That's really helpful, thank you. Just as a follow-up, clearly all the new stores are opening really strongly. Are you seeing any differentials sort of regionally in terms of how they open and the quick maturation, or is it really just across the board?
It really is across the board. I mean, what we're seeing as a more general statement is that as soon as we open stores in new and existing markets, but it's particularly noteworthy in new markets, is they are performing right out of the gate. In the past, you know, several years ago, we would talk about a ramp, a bit of a ramp that would occur. Right now, I mean, we see lineups before you know, the day we open. Again, really amazing to see.
That's great. Thank you.
Thank you.
The next question comes from Martin Landry with Stifel. Please go ahead.
Hi, good afternoon. Congrats on your great results. On the back of, you know, the success in North America, I'm just wondering a little bit, at what point do you look at expanding internationally? Is this, you know, a near-term opportunity within the next one to two years, or is this more of a long-term opportunity?
Martin, thank you for your question. We are technically international. We launched our international e-commerce site this past year and really pleased to see that we're actually shipping in the last six months, we've shipped to 137 countries around the world. Technically, I would say that we are international, but as it relates to store boutiques, you know, that's something that I've always envisioned, that Aritzia is a global brand and everyday luxury needs to be taken around the world. Right now we're focused on the U.S. We have a ton of runway in the U.S. still to go. We only have 76 boutiques in the U.S. We've talked about having 180-200 stores in the U.S. Certainly we're focused on the growth in the U.S. at the moment.
We're in the process of researching and gathering information from our e-commerce site about the international customer, and certainly we have an international customer shopping with us in the U.S. I think that bodes very well for our future internationally. We'll share more on our long-range plan coming this fall. You'll hear more then.
Okay, fair enough. Just to better understand your success in the U.S., is there like a category, is there a collection that resonated really well with customers during the quarter?
I mean, everything is working well, literally everything. It truly is broad-based across all our categories, styles, colors, you name it. I mean, obviously we have our franchise programs, whether it be the Super Puff, our fleece. We have beautiful tailored coats, you know, from cashmere to dresses, like it really is all working very well. I suppose you can't have results this good unless it is all working well. I'm just really happy it's all resonating with the customer.
Understood. Congrats. Thank you.
Thank you.
The next question comes from Mark Petrie with CIBC. Please go ahead.
Yeah, thanks. Good afternoon. I wanted to ask about your approach to marketing. Obviously that's evolved over the years. I'm just curious how, you know, just given your success and significant step up in brand awareness, particularly in the last year or two, how you've adapted it, sort of over that timeframe, adapted your marketing. Hoping you could just give some examples what you've done differently, and then what that tells you about your brand and the opportunities from here.
Yeah. Most recently, we've taken an integrated marketing approach and really approached the full funnel marketing. You know, there was a time when we hadn't done any performance marketing. It was all brand oriented. About two years ago, in order to accelerate digital, we incorporated performance marketing specifically, and that's really made a difference in both channels, quite frankly, but certainly has helped with accelerating our digital business. Now we're looking at it in more of a comprehensive approach and a more integrated approach. Certainly top of funnel is extremely important in order to create that brand awareness and in order to create that demand.
I think, you know, we're refining it with a great balance between brand marketing and performance marketing and doing things that are intelligent and creative and not necessarily just your traditional marketing. That said, you know, that hasn't necessarily meant that we've increased our marketing spend as a percentage of sales. We've been able to keep that spend maintained at a low single-digit level of our revenue, and it is really absolutely working for us.
Yeah, thanks for that. I guess just to follow up, you sort of addressed it there, but the spend is consistent as a percentage of sales, and then is that still assumed for fiscal 2027 as well?
Yes, that's right. Low single-digit % of sales obviously is growing to measure it with our revenue growth. It's, you know, so it's increasing, but as a percentage it is maintaining same level.
Yeah, understood. Okay, all the best.
Thank you.
The next question comes from Ike Boruchow with Wells Fargo. Please go ahead.
Hey, everyone. Let me add my congrats. Just bigger picture question on what you're seeing in the U.S. market today, not necessarily your own business. Clearly see your business is outperforming and not having any issues at all. Just competitively in the mall, are you seeing, you know, the retailers you guys compete against start to break any price? Do you see any volatility there on promo? Just kinda curious, just state of the union over the past month or so. It just feels like it's been a little bit more of a volatile market. Curious if you guys have seen that competitively, even though clearly it's not affecting you. Thanks.
Generally speaking, we're not really seeing marked changes in the consumer behavior. Certainly, there's always trading places and positions, I suppose, between different competitors. Obviously, our business is very strong. We're not seeing any letup in demand. The people are there. The traffic is there. The great news is we're benefiting from it.
Great. Thank you.
The next question comes from Brian Morrison with TD Cowen. Please go ahead.
Thanks. Todd, just following up on the marketing commentary. It was mentioned that it's flat as a percentage of sales for fiscal 2027. If that's the case, can you just walk me through your SG&A guide of flat to favorable by 50 basis points? 'Cause the top line would imply material increments or SG&A leverage. Can you just give me a bridge to support the SG&A segment of your guide and also define what you refer to as strategic initiatives?
Yeah, absolutely. As we said, for the fiscal year, we're expecting SG&A to be flat to down 50 basis points. It's really just a continuation of what we've been doing over the last several years, which is balancing our margin expansion with investments, you know, to drive our business and frankly, also enable our growth in the future. We have therefore, you know, a long list of projects across all areas of the business that we are currently investing in to build that infrastructure. You know, whether that's our distribution center network expansion, you know, we've talked about the merch planning software, a digital roadmap, customer initiatives, RFID, workforce planning.
We literally have an exhaustive list of projects, and that's why I've been communicating that, you know, we expect our margin expansion to primarily be coming from gross profit margin expansion as opposed to SG&A leverage. We are planning, as I said, for some SG&A leverage. We're just making investments that are, you know, offsetting what we would have been driving from a leverage perspective.
Okay. Then can you just update me on the tariff rates you're incurring from your three key sourcing markets now? I realize tariffs are a headwind in H1 within inventory, is it going to be a tailwind in the second half from lower realized tariff rates?
Yeah. We're from our key markets, we're currently paying the global surcharge of 10%, and that's how we've developed our outlook for the year with that global surcharge at 10%. You know, obviously also assuming the ongoing suspension of the de minimis. You know, as was pointed out actually already, we are expecting about 200 basis points of tariff pressure in Q 1, because last year we effectively had no pressure in the first quarter. As the pressure started to ramp last year, you know, we're now lapping that in Q 2. We have minimal incremental pressure for Q 2, and it actually becomes a slight benefit in the back half of the year. That's the cadence of the tariff pressure.
Obviously that's again, at the 10% level that we're paying in most of our markets today.
Thanks very much. Congratulations.
The next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead.
Thank you. Good evening, everyone. I'll add my congrats to the very strong quarter and guidance, congratulations. I guess my first question was just around the CapEx. You talked about, you know, increasing that total three-year CapEx number to CAD 900 million. I'm just curious, when you think about your new boutique opening plan for the next two years, does it incorporate or does it factor in like larger boutiques, or are you gonna be opening any more flagships?
Yeah. This fiscal year in FY 2027, the average new boutique is right around 11,000 square feet, very consistent with We were approximately 10,000 sq ft on average in FY 2026. Looking out to FY 2028, we do have two flagships planned for that year, do anticipate, you know, the square footage starting to expand slightly on a per store basis. It's primarily the flagships in FY 2028 that are being invested in in FY 2027 that is causing the higher spend in FY 2027.
Right. Okay, that's helpful. Maybe for my second question, Jennifer, you talked about the split between owned versus paid channels when it comes to marketing and I guess, engaging with your, with your customers, clients. I was just wondering if you could give a little bit more color around sort of how you're approaching that balance.
We have always prioritized our own channels. That's obviously the one that we wanna have the highest return on. Our own channels is where we have prioritized in the past and continue to prioritize, and then we've augmented it with the paid channels. As I had explained earlier, I think with Mark , the paid is what we've introduced more recently, and also see a huge return on it. A lot of our traffic has been driven by the paid marketing.
That's great. Thank you.
The next question comes from Michael Glen with Raymond James. Please go ahead.
Oh, hey. Thanks. Just a couple for me. You mentioned the RFID rollout during the opening remarks. Can you talk to the timing then maybe the type of gains that you're expecting benefits to be realized when you have that rolled out?
Yeah. The planned pilot will be sometime this fall with a full rollout in early next year, January, February of next year. I mean, the key benefit from RFID at the beginning anyways, is inventory accuracy in the stores. You know, instead of doing inventory once every, you know, three times a year, we'll be able to do it once a week. That will mean that we have more, you know, more accurate inventory in the stores and therefore have the right product in the right place at the right time more often, it will drive incremental revenue. You know, we have some estimates that are meaningful, but, you know, I think I'd be hesitant to communicate them until we run the pilot, et cetera.
You know, it's obviously a good step for us, and it will have many other operational benefits, once it's in place.
Okay, just to go back to the capital allocation question earlier. Has there been contemplated at all , the initiation of a dividend or any type of special dividend as part of the capital allocation strategy?
We discussed on a fairly frequent basis with both the audit committee, the board, and internally what our plans are, but we have no plans at this point to implement a dividend. It doesn't mean down the road at some point it won't be on the docket, but it's not in the near future.
Thank you.
The next question comes from Mauricio Serna with UBS. Please go ahead.
Great. Good afternoon. Thanks for taking my questions. Just wanted to ask, the quarter to date, could you talk about where you are, and the implied comps in your guide for the first quarter? Then just maybe a quick follow-up on Canada as for the year as you're lapping like, you know, very outsized growth for a relatively mature market for you. Like, how are you thinking about the growth of Canada, full year fiscal 2027? Thank you.
I'll take that. We have guided to total revenue growth of 36%-39% for Q1, and embedded within that is comp of approximately 30%. You know, as indicated by the total revenue growth, we're doing extremely well thus far in the first quarter, and we're, you know, three weeks and a few days away from finishing the quarter, obviously, you know, confident in the trajectory. From a Canada perspective, you know, sort of getting into the breakdown between the two countries, our total revenue growth for the year, as you've seen, is 19%-24%, and it's driven by momentum in both countries. We're expecting both Canada and the U.S. to see continued momentum, you know, the U.S. will continue to be leading our growth.
Got it. Just one final one on the boutiques. You guided for 12, 13 this year. You've had the last couple of years that rate, which, you know, it's been above kind of like what you guided on your investor day. Is it fair to assume, like, the run rate should be more around 12 to 13 boutiques on a normalized basis? Thank you.
Yes. Yeah. We've been at that level for the last couple of years now and expect to continue at that pace. We'll be obviously providing our plans for FY 2028 and beyond at our Investor Day in October. For now, I would say, yeah, very safe to assume 12-13.
Great. Thanks so much, and congratulations on the results.
The next question comes from Joe Civello with Truist. Please go ahead.
Hey, guys. Congratulations on the great results. It seems like you brought spring inventory to market a bit early in January this year, and we saw it working super well despite freezing temps in New York, so kudos there. Just wondering if that's a strategic shift we should continue to see moving forward.
That's a great question. We did launch spring earlier this year. In fact, we actually launched fall a little bit earlier too. What we're finding is in the transition weeks from one season to the next, that introducing some fresher product into the, into the stores and very effective. Certainly, depending on the region, what we're finding is there are regional nuances with whether it be climate or, like, the weather or events that are happening regionally. Back to school is earlier in the U.S. compared to Canada. These are all these little nuances where the transition period's important. The timing of the product is has been critical to our success.
Got it. Makes sense. Just a financial question. Can you guys say what the DC investments are baked into the current guidance? Sorry if I missed that.
Yeah. There's about CAD 40 million for infrastructure projects that's included in our CapEx expectations for this year. Only about a quarter of that is related to the completion of our DC here at our in Vancouver. And then we have a small amount allocated for the potential start of a new distribution center in the U.S. We currently don't have a location or site or, you know. That's still very much in the planning phases, and there isn't a meaningful distribution center cost within the CapEx number for this year.
Got it. I appreciate it. Thanks so much, guys.
Thank you.
The next question comes from Chris Li with Desjardins. Please go ahead.
Hi, good afternoon, and thanks for taking my question. Jennifer, I think last quarter you gave some good numbers on the mobile app in terms of the downloads and the percentage of transactions that are coming from the app. I was wondering if it's possible you can share with us an update on those trends.
Thank you for your question. Essentially things are holding strong. If I had to sum it up, things are holding very strong with the mobile app. We couldn't be more thrilled with the response. It has been tremendous. We've mentioned that it's contributing high single-digit incrementally to our e-commerce sales.
That is still holding true. Right out of the gate, we appear to be performing in the range of our best-in-class peers, where it's accounting for 20%-40% of our e-com sales total. The week-over-week downloads continues to be strong and remains consistent. We're seeing that the clients who are shopping on the app convert at a higher rate. They visit the app more frequently, and that's both for browsing and for purchasing. It's been tremendous.
That's great. Just in terms of the downloads, I remember last quarter you also mentioned that initially a lot of the downloads were from existing customers. In recent months, are you seeing that growth maybe skewing to more new customers as the word of mouth continues to spread?
There's no question that the majority of the downloads are from our most, you know, loyal and sort of engaged clients. The majority of the downloads are with existing customers. A good portion, we're finding, is that we are acquiring new clients as well with the app, which is interesting. Some of the reactivated clients that I had mentioned in general earlier on the call, is through our app, which is really interesting. Again, on all points, the app has been a huge success.
That's great. Congrats and, all the best.
Thank you.
The next question comes from Corey Tarlowe with Jefferies. Please go ahead.
Yeah. Thanks. I guess given the strong results, why acquire a business like Fred Segal? Then also, Todd, on freight, some of your competitors, whether it's apparel or footwear, have called out, you know, seeing some sort of impact from surcharges, whether it's several dozen basis points, whatever it might be. I don't know, I don't recall that you called it out. I'm just curious if you did, if I missed it. Or could you talk about anything you're seeing from a freight perspective? Thanks so much.
In case this is the last question, I'll start with the freight part of the answer. You know, we have seen higher fuel surcharges and air freight costs. We have included those at the level they're at today in our outlook. You know, assuming things stay consistent with where they are today, we have that baked in. Obviously, if it grows incrementally, we would have further pressure. We have it in as of today.
I have to tell you on the Fred Segal acquisition, I was in L.A. when we made the announcement, the public announcement, and it was incredible, the response it received. It was quite overwhelming, I think, for all of us. We actually held an event at the Fred Segal location, and the number of people who drove by as we were setting up in the days leading up to that event, who pulled over and rolled down their window and said, "Congratulations. What an amazing move. That is a phenomenal move. You guys made such a great move." Everybody had a memory. They had a memory of their first this or their first that, or they remember back when, and there was such an excitement and such a buzz for it.
I think, you know, the move You know, I will even say Beth here told me as we were waiting for the call to start that she bought her first fancy, quote-unquote, pair of jeans there. She made a point of going to see Fred Segal when she went to L.A. I mean, the, the nostalgia for the brand and just how big of a deal it is in that city is amazing. We have seen this as an opportunity to capitalize on a brand name, the Fred Segal name, that we think will be brand propelling for us and will elevate brand awareness for Aritzia in a very important market on the West Coast. Really excited to reimagine what Fred Segal means to for a new generation.
You know, I think that the media, the earned media value of the announcement alone has already paid back some. That's why.
Got it. That's very helpful. Just one more follow-up for Todd. The top line guide is for, I believe, 19%-24% for the full year with SG&A flat to levering 50 basis points. Are we to assume that, let's say, like 19% sales growth would be the leverage point on comp, or is there embedded conservatism within that? How should we be thinking about what your leverage point is on fixed costs? Thanks so much.
Yeah. I wouldn't say that our guide is reflective of our leverage point. We're going to be investing to ensure we hit that level. You know, up to, investing up to ensuring that we hit that level, and it's not really about, where we lever. I would say we're well past our lever point at 19%-24% revenue growth.
Understood. Thank you so much, and best of luck.
Thank you.
This concludes the question and answer session and today's conference call. Thank you for joining, and have a pleasant day. You may now disconnect your line.