Aritzia Inc. (ATZ) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining Aritzia's First Virtual Annual General Meeting of Shareholders. As a result of the COVID-19 pandemic and our continued priority to safeguard the health and safety of our shareholders, directors and our team, we made the decision to hold this year's Annual General Meeting in a virtual-only format that is being streamed via live webcast. Our agenda today includes the formal business of the meeting that will be conducted by Jennifer Wong, our President, Chief Operating Officer and Corporate Secretary; followed by remarks from Brian Hill, our Founder, Chief Executive Officer and Chairman. We will conclude with a question-and-answer period open to shareholders, at which time, Brian Hill; Jennifer Wong; John Currie, our Independent Lead Director; Todd Ingledew, our CFO; and Ada San, our General Counsel, will be available to respond to any appropriate questions. Please note that our remarks and responses to questions today may include our expectations, future plans and intentions that may constitute forward-looking statements. We will refer you to our most recently filed management's discussion and analysis and annual information form, which include a summary of the material assumptions as well as certain material risks and factors that could affect our future performance and our ability to deliver on these forward-looking statements. And with that, I would like to turn the meeting over to Jennifer to lead us through the formal business of the meeting.

Good afternoon, everyone. Thank you all for coming to Aritzia's First Virtual Annual General Meeting of Shareholders. I have been appointed by the Board of Directors to be the chair for today's meeting. During the formal business portion of the meeting, please note that only registered shareholders or their duly appointed proxy holders are permitted to vote or otherwise participate and ask questions in the meeting. As this meeting is being held virtually via live audio webcast, we would like to clarify a few procedural matters relating to the conduct of the meeting. Number one, questions in respect of a motion can be submitted by a registered shareholder or duly appointed proxy holder using the question platform service of Lumi. Please note that there will be a slight delay in the publication of the communications received. [Operator Instructions] Three, questions will only be addressed during the question period at the end of the meeting, provided that questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the meeting at the discretion of the chair. Four, voting will be opened at the beginning of the meeting and will be conducted by a single electronic ballot. Only registered shareholders and duly appointed proxy holders of Aritzia are permitted to vote and will be able to vote throughout the formal part of this meeting. You will receive a message on the Lumi platform requesting you to register your votes at the appropriate time and will have a set amount of time to do so, which will be clearly indicated. So we will now proceed with the formal portion of the meeting. I call to order the annual meeting of the company's shareholders. With the consent of the meeting, I appoint Ada San, General Counsel of the company, to act as Secretary of the meeting. In addition and with the consent of the meeting, I appoint TSX Trust Co, through its representatives, as Scrutineer. The purpose of -- the purposes of today's meeting are set out in detail in the management information circular dated July 31, 2020. Copies of the circular were made available to shareholders on or around August 14, 2020, together with the notice of the meeting and the form of proxy. Accordingly, unless there is any objection, I will dispense with the reading of the notice of the meeting. I have received a declaration prepared by our transfer agent, TSX Trust Co, indicating that either a notice of this meeting and the accompanying proxy materials or the notice-and-access notice, as applicable, was duly mailed to shareholders of record as of July 31, 2020. I direct that a copy of the notices and circular and the declaration of mailing be kept by the Secretary with the records of the meeting. The Scrutineers' report indicates that shareholders holding in the aggregate more than 15% of the voting rights attached to shares entitled to be voted at the meeting are present in person or represented by proxy. As this meets the quorum requirements in the company's articles, we may proceed with the meeting. A copy of the final report on attendance will be filed with the records of the meeting. For the purposes of the meeting today, voting on all matters will be conducted by a single electronic ballot. Voting will be opened at the beginning of the meeting and available throughout the formal part of this meeting for all registered shareholders and duly appointed proxy holders. You will receive a message on the Lumi platform requesting you to register your votes and will have a set amount of time to do so, which will be clearly indicated. Under the company's articles, the chair of the meeting can propose motions and no motion proposed at a meeting of shareholders is required to be seconded. In order to expedite the meeting, I will propose certain motions and will not call for a seconder. I now declare that this meeting was properly called and duly constituted for the transaction of business. The polls are now open. Please register your votes by accessing the voting page when prompted and pressing on the for or withhold buttons next to the name of each proposed director and next to the resolution with respect to the appointment of PricewaterhouseCoopers LLP as the auditors of the company. You will have time to vote throughout the formal part of the meeting. The first item of business is the presentation of the company's consolidated financial statements for the fiscal year ended March 1, 2020, as well as the auditors' report thereon. These financial statements and the auditors' report were made available on the SEDAR website under the company's profile and on the company's website on May 28, 2020. The financial statements were also made available on the TSX Trust site on August 14, 2020, as required for notice and access. Noting no objection, I will dispense with the reading of the auditors's report. We will entertain any questions with respect to the company's consolidated financial statements in the question period following the formal portion of this meeting. Let me now move on to the next item on today's agenda. The next matter to be acted upon is the election of 10 individuals to the Board of Directors. The term of office of the directors is from today until the next Annual Meeting of Shareholders or until such time as their successors have been duly elected or appointed. As described in the circular, the company has adopted a majority voting policy pursuant to which any director nominee who receives more votes withheld than for must submit his or her resignation promptly, and such resignation must be accepted by the Board other than in exceptional circumstances. The circular contains information on each of the 10 nominees recommended for election as directors. As outlined in the circular, the following directors have each been nominated to hold office until the close of the next annual meeting of the shareholders or until his or her successors are duly elected or appointed. They are: Brian Hill, Jennifer Wong, Aldo Bensadoun, John E. Currie, Ryan Holmes, David Labistour, John Montalbano, Marni Payne, Glen Senk and Marcia Smith. Each of the persons nominated has confirmed that he or she is prepared to serve as a director. Each of them qualifies as a director under the provisions of the British Columbia Business Corporations Act. Given that no nominations were received in accordance with the advanced notice provisions contained in the company's articles, I declare the nominations to be closed. I move to nominate the directors as set forth in the circular. If there is no discussion, as mentioned at the beginning of this meeting, voting today will be conducted by a single electronic ballot. And the polls are currently open, so you can vote on the election of each director as you see fit. [Voting]

We will now move on to the next item of business. The next item of business is the appointment of the auditors of the company for the ensuing year and to authorize the directors of the company to fix the remuneration of the auditors. The Audit Committee of the Board has approved, subject to shareholder confirmation, the appointment of PricewaterhouseCoopers LLP as the auditors of the company. I move that PricewaterhouseCoopers LLP be appointed auditors of the company until the next Annual Meeting of Shareholders and that the directors be authorized to fix their remuneration. As there is no discussions and the polls are currently open, you may vote on the appointment of auditors as you see fit. If you haven't voted already, please do so now. [Voting]

I now declare the polls closed. Once the electronic balloting closes, the voting page will close and your votes will be automatically submitted. I would now like to ask that the Scrutineers compile the report regarding the results of voting on all business matters. While the Scrutineers are completing their report, I will ask whether there is other formal business to be brought before this meeting. As there is no other business to be brought before this meeting. I have received the Scrutineers' report and declare the following: Each of the 10 nominees have been elected as directors of the company to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed. Second, PricewaterhouseCoopers LLP is hereby appointed as auditor of the company and the Board of Directors is authorized to fix their remuneration. Final voting numbers will be posted on SEDAR. If there is no further business to be brought before this meeting, I move that the formal portion of today's meeting be concluded, and I declare the formal portion of this meeting closed. I would now like to turn over the floor to Brian Hill, Founder and CEO, to provide a few remarks before we move on to the question-and-answer period.

Thank you, Jennifer, and thank you, everyone, for joining us this afternoon. Fiscal 2020 marked our 35th anniversary and yet another exceptional year at Aritzia. We delivered same-store sales increases in both Canada and the United States. Our e-commerce growth continued to accelerate, and we closed out the year with our 22nd consecutive quarter of comparable same-store sales growth. We opened 5 boutiques in the United States and expanded 3 boutiques in Canada as per our 5-year plan. We saw exceptionally strong product sales across all brands and categories while successfully launching Ten by Babaton, a new brand within our Babaton atelier line, and we expanded our Super Puff program with Mr. Super Puff, our first and highly successful foray into menswear. Our brand awareness grew through engaging and innovative marketing campaigns, including an enviable list of paid and unpaid influencers. We are also particularly pleased with our brand momentum in the United States, where we finished the year with revenue growth of 27%. To support our growth, our world-class team continued to develop with additional -- addition of top talent from around the globe, enriching our retail, e-commerce, product and marketing leadership teams, respectively. We also further invested in our technology infrastructure with new innovative systems, such as our Customer 360 initiative and a sophisticated marketing communications platform. All of us on the Aritzia team are proud that we delivered yet another strong year, and we are confident in the potential that lies ahead. Our consistent performance reflects our growing brand awareness and affinity in the United States, enduring client loyalty in Canada, our ongoing commitment to business and infrastructure investments and our ability to execute on our powerful business model. As we entered fiscal 2021 and on the heels of last year's success, we were challenged to navigate through the global pandemic of COVID-19, with our top priorities being our financial viability and the health and safety of our people, our clients and our communities. The moment we closed our boutiques, we took immediate action to drive e-commerce revenue, resulting in e-commerce growth in excess of 150% through the end of May. As companies throughout North America were forced to lay off and furlough millions of employees, we worked hard to keep our people employed. Thanks to our dedicated team and our loyal clientele who continued to purchase with us online, we paid out $20 million through our Aritzia Community Relief Fund to those employees directly or indirectly impacted by our boutique closures. We also wanted to show our heartfelt gratitude for those on the virus frontline. To do this, we launched our community -- Aritzia Community Care Program, gifting 100,000 frontline health care workers in Canada and the United States with custom clothing packages. This program represented over $10 million in retail value. We began a phased reopening of our boutiques on May 7, with all our locations now reopened. Since we began reopening, our clients have returned to shopping in our boutiques with enthusiasm. They have reconnected with their style advisers and are enjoying the exceptional service and everyday luxury experience they love and expect from Aritzia. In addition to our COVID-19 response, in recent months, we and all companies have been called upon to lead and be allies of the social justice and racial equality movement. This deserves our attention, our support and significant action. Aritzia continues our support through external donations and importantly by investing $1 million in our own diversity and inclusion program to effect meaningful change from within. Over the past several months, our processes and systems have been tested, and our people challenged and stretched to new levels of performance. Our team's resilience and creative efforts have preserved our strong financial position and successfully safeguarded our business. Now as our clients' desire for omnichannel shopping experience accelerates, we have compelling opportunities to take advantage of this ever-changing landscape. To drive e-commerce growth, we continue to invest in innovative functionality on aritzia.com, rollout of our new clientele app and expand our omnichannel capabilities. We have been investing in digital for several years, and we are well positioned to capitalize on our rapidly growing e-commerce business. Our boutiques continue to be highly profitable as well as our most effective marketing tool to grow our brand awareness. With many in North America shuttering their stores, the real estate opportunities and corresponding financial terms are unprecedented. We are progressing with our pre-COVID new boutique opening plans. And as we are currently understored, with more premium locations becoming available, we will continue to explore and capture new opportunities in prime real estate. Before COVID-19 began, our boutiques comprised roughly 77% of our sales, and our entire product strategy was based on physical and merchandising limitations of our retail four-walls. Now our e-commerce channel has achieved a critical mass such that our product strategies can be based on the unlimited opportunities online. Specifically, we are well positioned to significantly expand our product lines in depth, including sizes, lengths and colors; breadth, specifically new style development; and categories such as swim, bags, shoes, beauty and intimate. We are well underway in building the infrastructure of people, processes and technology to capitalize on this incredibly exciting product expansion opportunity. We are also taking full advantage of the availability of world-class talent at all levels. Between the job security we offer to all of our people, our community outreach and our growing reputation as a fashion retailer with a compelling future, more top-tier talent are attracted to us now than I've seen in my entire career. So we embrace and deliver on the opportunities ahead. We remain deeply committed to our responsibility as an industry leader to do right socially and environmentally. With a dedicated team continuing to determine our impacts, develop targets and execute on our sustainability road map, I'm enthusiastic about how we can further contribute in this important area. We deeply appreciate you, our shareholders, for your ongoing confidence in our business and our team. And thank you to our Board of Directors, for your wise counsel and support. Finally, I remain grateful and humbled by our entire Aritzia team working diligently together to support each other, serve our clients and drive our strategies forward. They are, without a doubt, some of the best in the business. With product expansions through a rapidly growing e-commerce channel, deepening omnichannel capabilities, opening new premier locations and further strengthening of our team with new top talent and progressing on our sustainability contributions, there is much to look forward to in our bright future. Once again, thank you for joining us. And we look forward to reporting in a few weeks our second quarter results and more details on the exciting progress we are making. I will now turn the call back over to Jennifer Wong for our question-and-answer period.

Thank you, Brian. [Operator Instructions] With there being no questions, we are now conducting -- concluding the question-and-answer portion of this meeting. We all want to thank you again for joining us this afternoon, and please enjoy the rest of your day.