Q3 2022 Aritzia Inc Earnings Call
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Ladies and gentlemen, thank you for standing by the conference will begin momentarily. Thank.
Thank you for your patience.
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Thank you for standing by this is the conference operator, welcome to or if it's just third quarter fiscal year 2022 earnings call.
As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation. There will be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call. It may signal, an operator by pressing star and zero.
I will now turn the conference over to Charlie Bishop Executive manager opposite the CEO . Please go ahead.
Thank you Carl and thanks for joining our rich, yes third quarter fiscal 2022 earnings call on.
On the call today, I'm joined by Brian Hill, our founder and Chief Executive Officer and Chairman.
Jennifer Huang President and Chief operating Officer, and Todd <unk>, our Chief Financial Officer.
Following managements discussion will host a question and answer period open to analysts and investors.
Please note that remarks on this call may include our expectations.
And intentions that may constitute forward looking statements.
Due to the material impact of COVID-19 on business operations in fiscal 2021 .
Certain references to our pre pandemic result in the third quarter of fiscal 2020 had been included where management teams to be a more meaningful measurement of performance.
The uncertain and dynamic nature of COVID-19, and its ongoing impact could continue to materially alter our performance.
We would refer you to our most recently filed management's discussion and analysis and our annual information form.
Which includes a summary of the material assumptions as well as the risks and factors that could affect our future performance and our ability to deliver on these forward looking statements.
Our earnings release, the related financial statements and MD&A are available on SEDAR and the Investor Relations section of our website at <unk> Dot com.
I will now turn the call over to Brian .
Thank you Carla.
Thank you all for joining us this afternoon happy new year.
I'm excited to share alongside Jennifer and Todd our results for the third quarter of fiscal 2022 .
In Q3, our business continued to surge, surpassing our own high expectations across all geographies and all channels.
United States, we saw our business further advance at an unprecedented pace.
In addition, our entire e-commerce channel sustained success exceptional momentum and retail in both countries flourished with all boutiques opened for the entire quarter for the first time since the start of the pandemic.
Okay.
Our exceptional performance in Q3 and throughout fiscal 2022 has not come without challenges.
But our world class team and their unwavering commitment to excellence and teamwork has enabled us to successfully navigate the ever changing landscape of the pandemic and the many obstacles that have come with it.
I could not be more grateful and proud.
As we set our sights on the future we have extraordinary opportunities ahead of us.
We're working hard to deliver on significant demand increases while managing the global headwinds of the pandemic supply chain disruptions labor shortages.
And health and safety protocols.
We remain focused on our fundamentals to sustain our growth and delivering our much loved everyday luxury experience to our expanding client base.
While we continue to purposely invest in the infrastructure required to scale for years to come.
Well Todd will provide you with a detailed perspective, our Q3 financials and very pleased to share our performance highlights for the quarter.
In Q3, we delivered net revenue of 453 million with growth of 63% or $175 million from last year and growth of 70% or $186 million from two years ago.
In the United States, our business has further accelerated in an unprecedented pace net revenue increased 115% from last year and 116% from two years ago accounting for 44% of our revenue in the quarter.
And of particular note we have them.
Most double our active U S client base over the past trailing 12 months.
Yeah.
Our ecommerce channel sustained its exceptional momentum as net revenue increased 47% from last year and 162% from two years ago accounting for 33% of our revenue in the quarter.
Our retail business flourished with boutiques delivering sales growth of 72% from last year and 45% from two years ago with comparable sales exceeding pre pandemic levels in both Canada and United States by 26%.
This manifested itself in adjusted EBITDA growing to a 109 million growth of 100% or $55 million from last year.
We fueled our surging ecommerce business by further enhancing our digital everyday luxury experience.
Beyond optimizing or itchy dog calm with new and improved features and functionalities across personalization product discovery digital gift cards and checkout.
We brought our clients an elevated outerwear experience and large super World Dot Com, a new immersive branded digital experience to complement our super World pop up boutiques.
In addition, our omni capabilities initiative, it's also meaningfully growing in adoption Jennifer will speak to this shortly.
Our retail business continued to exceed our own optimistic expectations. In addition to operating all of our boutiques for the first time since the start of the pandemic. We continued to expand our presence in the United States, We opened a new boutique in Nashville, Tennessee and expanded four additional boutiques with our Troy Mitch.
Again expansion breaking opening day, an opening weekend sales records.
That being said the strength of our boutique network is our people.
They bring our much loved everyday luxury experience to life.
With each and every client interaction.
Despite shortages in the labor market in both Canada, the United States, we significantly expanded our team. This holiday season to ensure every client's needs were fulfilled.
Our world class team not only drove tremendous success throughout the quarter, but delivered record breaking results during our black five day event is almost half of our boutiques, including every single one of our 37 U S boutiques, achieving their top sales day in their history.
Yeah.
Shifting gears to product we saw outstanding client response to our fall Winter collection.
We extended our assortment depth by making strategic investments in expanding key programs with new lengths and sizes.
Bringing more of our most loved beautiful products to new and loyal clients.
At the same time further headwinds as a result of the pandemic resurgence resulted in meaningful supply chain disruptions, taking shape in the form of factory closures reduced production efficiency and ongoing shipping delays.
Our product and supply chain teams continued to work hard to mitigate these challenges through our geographically diverse supply chain strategic inventory management and the increased use of expedited freight.
Jennifer will also touch on that shortly.
In marketing, we effectively reached new and loyal clients by delivering captivating communications through brand and feature focused product campaigns that seamlessly translated across all channels for our launches our fall winter and Super World as well as our Black Friday event.
I will now turn it all over to Jennifer Wong.
Yeah.
Thanks, Brian and good afternoon, everyone.
Our operations supported the strong momentum of our business to an incredible third quarter and holiday season.
We're all hands on deck to maximize yourself across all areas.
It has up for overwhelming success and exceeding all performance expectation. This is a testament to our world class team and operations, both of which continue to fuel our growth.
Today I'll update on four areas within our operation and our lead up to the holiday season.
First our supply chain.
In our digital infrastructure investment.
Third our talent landscape.
And finally, our progress on ESG.
Throughout the quarter, we continued to face the pandemic related global supply chain disruption head on like many in the industry. This included Covid related factory closures until mid October and reduced shipping capacity and reduced shipping capacity is resulting in increased cost.
Despite the production disruptions freight delays and port slowdown we successfully navigated these challenges and remain in a solid inventory position to keep up with the high demand in particular, our product and supply chain teams worked tirelessly to proactively manage and mitigate these industry wide headwinds.
So we continue to geographic diversification strategic inbound inventory management and the use of expedited freight.
On the outbound side, thanks to our strong partnership with Fedex. We also achieved record service level E Commerce orders, where expedite it to clients and we kept up with the unprecedented demand.
All of these efforts kept us well positioned to sustain our sales momentum, especially heading into the holiday and will remain contributing factors as we continue to invest in delivering strong results going forward I'm extremely proud of our teams for their perseverance adaptability. They are doing a phenomenal job.
Moving to our talent landscape going into Q3, the availability of labor remain extremely challenged in both the U S and Canada in the lead up to the holiday period, the strength of our employer brand targeted acquisition strategy and competitive wage offering enabled us to successfully attract and.
Hire the talent, we needed to build our seasonal teams across retail concierge and the D C.
We continued our ongoing investments in talent across the business in particular, we added global luxury experience and expertise to our creative team. This will be key as we continue to elevate our brand through innovative and beautiful product design and deliver an everyday luxury.
As our teams grow we continue to prioritize and invest in our people operating with an industry, leading health and safety program.
This includes best in class testing and screening frequency and diligent contact tracing.
Most recently in close partnership with government Health authorities, we launched a vaccine clinic in Toronto for 1400 of our people plus their friends and family and our partners. We know that every decision we make during this time impacts our community as a whole and we will keep.
Now the gating the uncertainty of COVID-19, with agility and care.
And we're certainly not alone in the impacts being felt across the industry caused by the omicron variant and the pressure it has imposed.
And while we cannot predict the future we are doing everything within our control to mitigate its effect.
I have a dedicated team together with our best in class processes.
And our ability to mobilize and pivot in the moment have effectively powered us to operate with minimal disruption so far.
Yeah.
Despite all of the pandemic related disruptions, we saw record order and sales volume across all channels. This holiday season.
Early during black Friday, and cyber Monday.
Our distribution team delivered exceptional performance yet again as we topped a record for most e-commerce orders process not just in a single day, but in a single hour.
Our concierge team kept pace to our event period, having handled over 126000 client interactions while achieving improved response time and increased sales result.
These results demonstrate that once again, our best in class infrastructure is the backbone for success in our ability to handle substantially higher volumes, we have a world class team and we remain committed to developing our next generation of leaders and recruiting top talent to auryxia.
Especially with the outlook for significant growth ahead.
Turning to digital infrastructure in Q3, we remain focused on our fundamentals and strategic infrastructure investment required to scale.
We continue to enhance our technology infrastructure to support our accelerating E Commerce business, we launched digital gift cards, giving our clients another way to purchase gifts seamlessly. This season, we also implemented state feature and functionality optimization personalization product discovery and checkout to L O.
Our digital experience.
As noted on our last call, we launched store inventory visibility known as says by giving our clients the direct ability to locate the product. They want we've not only increase traffic to our stores, which has translated to a meaningful lift in sales. We have also increased the capacity for concierge.
To focus on higher value inquiries.
Shifting our progress on E. S. G. A ritchie I remain steadfast in our ongoing commitment to people and the planet.
We're making encouraging progress and our promise to exclusively sourced forest stewardship council certified or recycled content paper packaging.
Including our holiday packaging. The season, we are close to reaching our goal of producing all of our boxes tissue paper e-commerce , and retail bags entirely with sustainable or certified materials.
We know that being responsible is fundamental to fully delivering everyday luxury and we continue to advance our ESG agenda.
I encourage you to visit our Investor Relations page on <unk> Dot com to learn more about our sustainability commitment and how far we have come in our fiscal 2021 ESG executive summary.
Okay.
Finally, with the grateful support of our people and our loyal clientele. We are proud to continue giving back to our communities, where we live and work through financial and product donations to Auryxia community partner organizations across the U S and Canada.
This holiday season, we celebrated giving Tuesday, a global day of giving with a commitment to donate $10 of every purchase that day.
We are pleased to share we reached our 250000 dollar donation goal.
We also donated 4000 warm winter coat valued at over $1 million.
We remain committed to being responsible as we continue to make a meaningful positive impact toward the wellbeing of our people and the planet.
With the busiest season behind us we remain focused on enabling growth through strategic planning and initiatives for the future. This includes formalizing our multiyear business strategy, which we look forward to sharing with you in the next fiscal year.
In closing I would like to thank our entire team for their hard work unwavering dedication.
Zillions and delivering another extraordinary quarter I'm tremendously proud of the outstanding results. We continue to achieve together I'll now turn the call over to Todd to discuss the financial results. Thanks.
Thanks, Jennifer and good afternoon, everyone.
Our exceptional performance in the third quarter, it's even exceeded even our high expectations.
We delivered another record quarter of both top and bottom line results, reflecting our growing brand affinity in the United States and the strength of our E Commerce business.
What makes these results. So remarkable is that they were accomplished with the backdrop of ongoing supply chain disruptions and labor shortages.
For the third quarter, we generated net revenue of $453 million, an increase of 63% or $175 million from last year, and 70% or $186 million from two years ago.
This exceptional performance is driven by the following.
First we continue to see outstanding growth in the United States with net revenue in U S dollars of $159 million in the quarter growing 126% or $88 million from last year.
And 128% or $89 million from two years ago.
Our business in the United States comprised 44% of net revenue up significantly from 33% in the third quarter last year.
The sustained momentum in our U S business is reflective of the significant acceleration in our U S client base.
Which has nearly doubled in the last 12 months as more and more clients discover the Auryxia brand.
Second our e-commerce business delivered another strong quarter with net revenue of $148 million, an increase of 47% on top of the 79% increase in the third quarter last year.
The increased demand for our products manifested in both higher traffic and conversion during the quarter.
Ecommerce penetration was 33% up significantly from 21% in the third quarter two years ago.
Third retail revenue in the third quarter was $305 million, an increase of 72% or $128 million from last year, and 45% or $94 million from two years ago.
This remarkable growth was driven by both comparable sales.
And new and repositioned boutiques led by the strength in the United States.
Retail comparable sales growth of 58% from last year and 26% from fiscal 2020 pre pandemic.
It was driven by both double digit comp growth in Canada, and the United States.
We delivered gross profit of $210 million up 67% from 126 million in the third quarter last year.
Profit margin was 46, 4% in the quarter, expanding 110 basis points from 45, 3% last year.
When compared to fiscal 2020, our gross profit margin expanded 170 basis points the.
The improvement in gross profit margin exceeded our expectations with higher leverage on occupancy costs and lower markdowns more than offsetting the expected significantly higher expedited freight.
SG&A expenses in the quarter were $110 million or 24, 3% as a percentage of net revenue compared to 26, 8% last year the.
The 250 basis point improvement was primarily driven by leverage from increased revenue.
When compared to fiscal 2020, our SG&A as a percentage of revenue increased by 30 basis points. The increase was.
Primarily driven by continued investment in talent across e-commerce marketing and it.
To support the ongoing and future growth of our business.
Overall adjusted EBITDA in the third quarter was $109 million, an increase of 100% from $55 million last year, and 87% from $58 million two years ago.
Adjusted EBITDA margin was 24, 1% expanding 19, 6% last year.
From last year and $21 nine from two years ago.
The expansion in adjusted EBITDA margin is a testament to the strength of our business and our ability to drive profitable growth despite significant headwinds.
Inventory was $177 million at the end of the quarter up 28% from last year.
Throughout the quarter the team did an outstanding job managing inventory levels to deliver our revenue growth in a challenging environment.
We ended the quarter with $306 million of cash and zero drawn on our $175 million revolving credit facility.
We continue to generate significant cash flow and have a strong balance sheet.
With this in mind, we announced the implementation of a normal course issuer bid to repurchase and cancel up to 5% or $3 7 million of our subordinate voting shares.
Our number one priority for capital allocation will always be investing in the growth of our business. However, having an M. CIBC facility in place allows us to buy shares opportunistically and offset the dilution of option exercises overtime.
Turning to our outlook.
We expect net revenue for the fourth quarter to be in the range of $375 million to $400 million.
Representing a 40% to 50% increase compared to last year.
This reflects the robust client demand and continued strength of our business throughout the entire holiday selling season.
Since the beginning of January we've seen revenue pressure due to our third quarter and holiday sales exceeding expectations and correspondingly, resulting in meaningfully lower end of season sale inventory.
That said our business in the United States remains strong and we are well positioned for the launch of our exciting new spring collection in February .
Yeah.
For the full year, we are increasing our outlook and now expect net revenue to be in the range of 1.4 to five to $1 45 billion with the top end of the range of $150 million from our previous outlook.
The updated outlook implies a full year revenue increase of approximately 65% to 70% from fiscal 2021.
We expect gross profit margin improvement seen in the third quarter compared to pre COVID-19 levels in fiscal 2020 to be similar in the fourth quarter.
This reflects leverage on fixed costs, and lower markdowns offset by ongoing meaningfully higher expedite and freight costs.
We expect the increase in SG&A dollars seen in the third quarter compared to pre COVID-19 levels in fiscal 2020 to be similar in the fourth quarter driven by continued investments in people processes and technology. In addition to variable costs related to our sales growth.
In summary, we're extremely pleased with the strength of our business, particularly with our growth in the United States and the momentum of our ecommerce business with our strong balance sheet, we will continue accelerating investment in our strategic initiatives and infrastructure.
We are confident we are well positioned to maximize the opportunities ahead to drive profitable growth and deliver meaningful shareholder value.
With that I'll now turn the call back to Brian .
Yeah.
Thank you Todd.
Yeah.
We're excited for the road ahead.
We carried our exceptional demand and strong performance into Q4 and throughout the entire holiday season.
However, with our third quarter and holiday sales significantly exceeding expectation.
Resulting in meaningful lower end of season inventory, we've seen revenue pressure since the beginning of the new year.
Despite this as Todd mentioned, our business the United States remains strong across retail and e-commerce .
In the fourth quarter alone, we are expanding our boutique network, including new boutiques in Las Vegas.
Washington D C tactically, Virginia.
Columbus in Miami.
In Canada, however growth in both retail and e-commerce is being affected by army crop driven restrictions.
That said despite these headwinds we are well positioned for a launch of our exciting new spring collection in February .
As we set our sights on fiscal 2023, our business has never been stronger or better positioned for growth.
The foundation our team has built over the past 37 years continues to empower our ability to deliver a much loved everyday luxury experience of engaging service beautiful product aspirational environments captivating communications for new and loyal clients across all geographies and all channels.
As I reflect on our brand acceleration, new client acquisition and the performance of our business, particularly in the United States I see extraordinary opportunities for ixia.
Well for us having a laser focus on our fundamentals has proven to be successful.
Accelerated momentum also opened significant opportunities to further expand our footprint.
We will continue to drive digital innovation of our E Commerce channel and omni capabilities grow our boutique portfolio expand our product assortment and acquire new clients, all while continuing to strategically invest in our infrastructure and growing our team of world class talent.
As our business continues to accelerate beyond our own high expectations. So does the incredible support of our clients and our people.
I am deeply grateful for our team's can constant agility dedication to excellence and tireless hard work.
That are propelling us towards our goals.
And for our clients enduring loyalty.
I could not be more excited about the road ahead, we're just getting started and thank you for joining us today.
Yeah.
Thank you.
We will now begin the question and answer session.
And the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.
If youre using a speakerphone please pick up your handset before pressing any keys to it.
Your question. Please press Star then two.
The first question comes from Mark Petrie of CIBC. Please go ahead.
Yeah, good afternoon, and congrats on the results obviously the U S momentum remains exceptionally strong I know your strategy is consistent and stores are the primary marketing tool, but what other vehicles do you believe are drawing so many new people to the brand.
I'll take that.
Thanks for the question Mark.
You know we're doing a little we are experimenting with a little bit of digital marketing not a lot.
Now we did get some we did have some influencer activations accumulating with a.
J Lo did a little favor for us towards the end of the year.
But.
You know realistically I think it's our stores I mean, our stores are really really are busy we are busy stores that every anecdotally everywhere, we go and everything we hear.
You know like we walked in.
Manhattan about five weeks ago checking on the stores and.
I mean, I had to wait five minutes to get out into Sellable two minutes to get into so we didn't have a lineup for Q that was the first thing I did want to let it inside the.
Busy and.
I think we are the place to shop right now in the United States and can't wait till we get opportunities to continue to open stores in.
And it's an omni experience and omni shopping experience so.
The stores are fueling our famous you're making this famous and our ecommerce channel and is facilitating a lot of these sales now so.
You know as Ive said before when.
Things are this typically is not one thing that you're doing right. There's a lot of things that youre doing right. One of the things are working.
We don't expect it to always be the case, but right now everything seems to be.
Yeah, Okay, and I know you've been investing in your social media marketing capabilities, but is it fair to assume that you still see that as a as a continued lever for supporting this this type of growth.
I mean, yeah, I mean anybody who is not using social media right now and it comes in all sorts of forms and every time, we turn around and whether it be tick tock or.
Something else is new along.
As you roll through so.
Everybody's engaging in social media some more than others.
We're probably doing it a lot less in others that said.
From from US from an investment perspective that said organically, we are using our channels to leverage as much as we possibly can right now and we're building a team and we look to be doing more of it in the future but.
I think it certainly has helped us here, but I wouldn't say, it's underpinned our growth here at the same time.
Yep understood.
Could you just talk about where you're at on the on your goal of doubling SKU count over five years and and maybe the performance of our the extensions that you've executed on so far and what the.
<unk> sort of roadmap is over the next 12 months.
So I think we're probably 50% of the way there right now that said we are.
We've got the easy part of the 50%, adding sizes, adding colors things like that so.
The heavy lifting still to come.
And I think you'll see us launch a lingerie and swim intimates and swim this year.
But we also have some new collections, we need to launch and we're still in the building phases. There. So no no time on those but.
Those will certainly contribute to our goal.
I think we're 50% of the way there that said we've completed all the easy things now.
Okay, and then just one more if I could obviously, there's lots of moving parts on the cost side.
At both you know investing to support growth, but also external be it labor or supply chain, but what's your sense on price increases are in the coming year and what are your expectations for product margins. You know outside of any you know gross margin impacts from things like category or promotional mix.
We're hoping that the.
The growth of our U S business.
We will offset our inflationary.
Inflationary.
Pressures of both cost of goods that were selling in the.
Flavor or the logistics of getting our product there don't know if they will but.
Certainly as you can see by our numbers, we've already been dealing with.
Meaningful logistics increases, we don't see them increasing much more because we don't see.
US needing as much.
Expedited freight as we have this year hopefully now that we know what we know.
That said, we do expect more inflation to come along and Rob both raw materials and labor and infinite therefore, our finished goods but.
We have a natural arbitrage built in with our <unk>.
Increasing mix of U S business so.
We're hoping they will offset each other and up to this point in time, they've done a good job and good job with that.
I appreciate all the comments and all the best.
<unk>.
The next question comes from Lorraine Hutchinson of Bank of America. Please go ahead.
Thanks, Good afternoon.
I just wanted to follow up on that pricing question, you know there seemed to be inflation in various areas of the business.
Would you consider a price increase.
Some of these transportation headwinds persist longer than expected and combined with raw material costs to really increase the cost of goods upwards of what its done recently.
I mean, we've always we always discuss it.
And debated, but until we see our margins erosion eroding, we don't see any need to put our prices up we don't want to be.
Todd at a very young age is two ways to go bankrupt being stupid I'm being greedy.
And.
We try not to be either or we try to be need in either so I.
I think it's important that we're giving our customers who continued to give them value and until we start seeing erosion of our margins. We don't see any reason to to put our prices up and believe me. This is a debate happens all the time and I'm usually the one at the end of the day is saying you know holdings, holding still and just saying no until we see.
This pressure, we're not going to put our prices up and up to this point in time, if nothing else we've seen our margins increase.
Due to.
You have more mix of U S dollars and.
Less sale inventory less sale activity due to <unk>.
Sell throughs at full price. So you know and then on top of that as I mentioned, we did.
A concerted effort to be on sales less than had been working and successfully executing these numbers. These incredible numbers, we're sharing with you today with less sale activity as well so we're going to continue to.
Try and shrink the windows of off pricing.
From a time perspective, we're going to try and shrink the amount of product, we're selling off price, which both indirectly increase your margins, we're going to continue to see growth in the United States and in U S dollars, which they're going to help our margins.
And hopefully these will all continue to offset.
These are these inflationary.
Pressures.
Thank you.
The next question comes from Stephen Maquila odd of BMO capital markets. Please go ahead.
Oh, Thank you good afternoon, and congratulations on a great quarter.
I had a couple of questions just maybe starting high level.
Given the strength that you've seen over the last two quarters and actually through the pandemic.
How is your view of the market opportunity changed over the last sort of six months or 12 months.
Well it Hasnt really changed we've been very bullish on our opportunities in the United States for quite some time.
The whole idea of of international it keeps on coming up but we have such a incredible runway ahead of us in United States were already set up there.
Building lots of stores there have relationships with all our partners. There. So it's just it's just so much easier with lots of runway ahead of us. So we've been we doesn't mean, we're ignoring our international where we haven't been but certainly our focus has been in the United States and.
We're going to.
Probably going to get a little bit more aggressive as far as store openings I have said on previous calls that that we run out of runway to some degree in Canada, and so we will see more of those new stores shifting into the United States.
And we've already seen that and as I cited those four new store openings are all in the United States.
I see us opening sort of one year's story here in Canada, and there's lots of stores in the United States. I mean, I was looking at the competitive retailer today that has 901 stores in United States and I think we have 40, so we got a long way to go here and now.
Don't worry we're not opening 900 stores in the United States, but.
You know I think that Oh.
We're just going to continue doing what we're doing it seems to be really be kicking in and where we don't have stores. Our ecommerce are incredibly ecommerce channels picking that up so.
You know we've done some projections and if things continue the way they have been continuing we're gonna.
However, hands full keeping up with this growth for several several quarters and many years to come. So we're just going to keep on growing at the same rate and we are now.
Okay. That's that's great and I guess, maybe I should ask the separately separate way.
Oh, sorry.
How many stores do you think you can have in the U S or is that a target that is so far out you don't even think about that.
The ceiling necessarily.
There's very few things, we don't think about here at or NCS. So we certainly think about that.
You know it depends and we had our board meeting yesterday, and we were discussing that as we usually do.
It's hard to say because it really depends on your volumes your stores are doing well.
We have stores in and and.
You're familiar with what we have in Canada, and you know we have some stores that are close by to each other just because the stores get really busy and so we're going to be in the same situation in the United States.
As your stores get busier and busier are there's all of a sudden where you didn't think you would need a store put a store you also do need one because existing store doesn't is too busy and doesn't fulfill the sort of the everyday luxury experience. So we're trying to achieve so you opened a new store to take the pressure off those stores and.
We're starting to see that more and more in the United States, So sort of markets and stores that we were looking at two years ago thinking this as a one store market. We're looking at thinking well, maybe it's not maybe it's a two or three store market and so we'll see what would be I mean, the numbers north of 100 for sure and we'll go from there, but you can.
Solve as well by opening bigger stores and that's something that you know people that are falling rich year for 510, 15, 20 years of notice that our stores are getting bigger and bigger and the real estate isn't always available to open a bigger stores, but that's what all are repositioning czar all about us opening a bigger stores. So we're going to continue to do that as well.
So.
We're super excited to retail.
A year ago year, and a half ago, you know retail is on his deathbed.
To say it but maybe.
Maybe I'm getting a little ahead of us, but retail is back in its certainly back in <unk> you can see by our numbers its back so.
And that's what we do.
Good at ecommerce, where greater e-commerce , but we're great at retail to history, and so we're certainly going to take advantage of.
Yeah.
The next question comes from Dylan Carden of William Blair. Please go ahead.
Great. Thanks, a lot.
I kind of picked up I think you had mentioned that the Troy, Michigan store.
Up into sort of record performance and I'm, just curious now talking about stores and sort of suburban Virginia.
As you're in these markets that arent sort of more of your classical downtown urban markets or are you kind of seen greater performance in suburban mall type locations and thinking about some of the more recent openings in the accelerated openings is that can you just kind of give us a sense of what type of stores. Those will be you will be kind of more of a mix like like your current poor.
Folio.
Okay, I'm going to take that because I buy the real estate Department reports into me.
We're still in the shop shopping Center, Somerset Mall in Troy, Michigan is one of the top shopping centers in the United States and when we're opening in rural Virginia. It is it just happens to be a 20 minute drive from D. C. In Tysons corner is the name of the shopping center and is one of the top shopping center in the United States as well so listen we're we're still in the United States.
Big place and as you know, that's where you're from and then Theres a lot of credible shopping districts. Some you know shopping centers some street front locations.
We still don't have stores in lots of them. So we're going to continue to push those things through but we don't really look at it our rural or urban we seem to be doing incredibly well in both we.
We see we seem to be incredibly well both street front end shopping center.
So while we're just looking for some of the best shopping destinations and that's how we look at it we don't really look at our rural urban we don't really look at it and close to street front or open air we look at it as shopping destinations and Thats, where we focus as being in the best shopping destinations.
Both in Canada, and the United States and maybe one day internationally, we're going to continue along that as far as our strategy is concerned.
Okay Fair and then on the Super World Dot Com, it's kind of a different strategy than you've taken with some of the other.
Your other brands I'm, just kind of curious if theres anything to comment on there is just sort of what you might be testing or why you felt the need to kind of spin that off as a separate.
Online presence, if there's sort of laying the groundwork for maybe bigger growth.
No I mean, I think I think when we get a big product, it's important and has its own DNA that it's important it has its own website stores and everything else I mean, our store in New York and a store in L. A they're incredible shopping experiences for our Super World in it.
Tends to be opening up.
Brick and mortar stores. It also makes sense to be opening up online stores, specifically for that experience and that's what we're doing.
To cater.
Shape the brand as we see it with the.
But with that brand, both online and in stores and not getting.
Not necessarily very bad, but certainly not at the forefront of rich which is promoting it rich.
Wide breadth of product.
Customers expect so.
We've done this.
Was successful it was a lot of work and so we're going to evaluate whether or not we're going to continue to do that or not.
And the next few weeks as we.
Sort of analyze.
The benefits of it versus the agro as I say it was very successful, but there's a lot of work on the team.
We're going to assess if this is something we're going to continue to do with the plethora of products that we have that.
Our clients are chasing after that.
Are holding their own so we'll see what happens there.
And go from there.
Gotcha and then the last one I had was just point of clarification.
Maybe todd or.
The guidance I'm, just curious what that reflects as per <unk>.
And excuse the the Yankee here not fully knowing what the restrictions are in Canada, but this is the guidance kind of.
Or what kind of restrictions or store limitations the guidance revision I guess, maybe the way to ask it.
Oh it envisions our current operating conditions that we're under so right now obviously.
What's that run through to run for the quarter ended at the end of February yes, exactly and it's not just the it's not just the conditions I mean, you drive around now.
Lamb entering at one point in time, how great. It was driving around the city with Covid.
Well I wouldn't come in when Covid and all the restrictions were on because.
You could get everywhere and then you know all of the restrictions led off and everybody is going back to the office and you know youre stuck in traffic jams again, you drive around the cities again back in Toronto, and Vancouver, and Montreal Curfews in Montreal, Toronto is completely shut down right now restaurants, and everything else I believe.
In Vancouver has severe limitations not so much on retail, but restaurants and things like that too. So we roll the clock back sort of.
So it's the tightest it's been in quite some time, so it's not just the actual restrictions themselves at sea is.
The people and the.
The Mojo of the people and how much they're interacting going out things and it's noticeably the footfall is noticeably down everywhere in Canada.
And certainly people are not buying things.
Going out again to go out again and things like that because we just saw.
So it's not quite the same as the initial our initial lockdowns, we had two years ago, but it's it's.
It's a lot closer to that right now in Canada than it was.
Six months ago, I can tell you that.
Yeah.
The next question comes from Derek <unk> from Canaccord Genuity. Please go ahead.
Hi, Thanks, and congrats on another really strong quarter.
Perhaps Jennifer this one's for you just as it relates to the expedited shipping or where are the airfreight that you've been using.
Have you found that that's become at all more competitive and have you been able to lock in contracts.
Guarantee some space there for the coming year.
Our logistics team you know if I I think I gave kudos for it in the last quarter that I should give kudos to them again this quarter.
They have done a phenomenal job of partnering with our freight forwarders and the transportation companies and.
When it comes to airfreight it it usually it gets to that he was willing to pay the high and the price so they've been able to make sure that when they are obtaining quotes that were first and foremost on the top of the minds of the airlines and the freight forwarders and exiting the space, which is which is most important to us being prioritized for that.
What they've been able to do so I think again, it really comes down to our people and just how.
How well of a job they've done in terms of navigating through this and working through the system and so you know expedited freight for US also include.
But the sea freight that we've done we did negotiate a contract for premiums based on on the ships when we chose to use that.
The sea freight so I think you know if there was if anything could have been done they did it or arrange for it.
Okay.
That's helpful and then just.
Coming back to this comment on on on Labor and talent in in regions, where the brand is is newer cities in the U S where you're you know you're just opening their first store how are you finding your ability to recruit talent in most locations.
Oh, well, there's the obvious that were newer to the market, but I'm one of the other things that I cited was a competitive wage offering than it is Clara all because we do have a number of different things that we do in order to be competitive in there.
And might be lesser known and you know at the same time, when we're populating our stores in the newer market. It's a hybrid of people from the market as well.
That shrunk from or from other locations that we may bring in so that we can.
Cultivate the.
Culture within the stores and make sure that all of our operating philosophies and practices and standards are brought to that store.
And generally speaking.
As Brian mentioned.
Our remarks, we are way more famous.
Particularly in the U S than we have been in the past I do think because of the proliferation of social media and.
E Commerce business.
Okay.
Way better.
We're you know, we're getting famous and we're way more famous than we were in the past so that has helped.
Okay, great. Thank you very much.
The next question comes from Megan Annette from TD Securities. Please go ahead.
Thanks, and good afternoon, I'm, just going back to the potential for international expansion Understandably you are capitalizing on your success in the U S. Right now, but is international something that we can expect an update on when you provide your midterm outlook.
If you could just update us on when we can expect you to communicate that outlook.
Yeah. So as I said, we're working you know, we we will formalize that and share that.
With you I did say in the next fiscal year. So.
Next year.
And maybe at the earliest next quarter, but well well, let you know and certainly international is contemplated I mean, we every year when we sit down to do our corporate planning, we're looking at all of our opportunities and prioritizing what makes sense, given the upside and you know and and what's going on in the environment at that time, and so we've got lots of things.
To talk about in that.
The good news is in a hard thing is is that we have no shortage of opportunities that for sure and so the hard part would be about prioritizing all of these things and doing it in a way that continues.
With this phenomenon and sustainable growth. So I won't set a date right now, but we do promise you that we will be sharing that in in the coming months.
Thank you and just with regards to the SG&A outlook for Q4 could you detail. The main drivers behind that growth and then going forward should we expect that rate of growth, Okay, you or perhaps for for how long.
Yes, so for Q4 as I said the.
The dollar growth that we saw in Q3 versus FY 'twenty will continue in <unk>.
Q4, and it's driven by the same thing that it's been driven by for the last couple of years, which is ongoing investment in our primarily marketing.
And e-commerce teams within SG&A, and so investment in and growing our teams to support and drive the growth that we're seeing.
And we would expect that that will continue that investment will continue as we grow the business.
I think over time as our E Commerce business continues to become a larger portion of our mix, we will see leverage.
On SG&A as well.
Obviously, a large part of our SG&A as our variable cost in the stores and so the e-commerce revenue directly levers that inherently we will see leverage over time, but we will be continuing to invest.
Thank you.
This concludes the question and answer session and today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
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