Annual Report 2022
2 |
Aritzia is a vertically-
integrated, innovative
design house and
boutique.
We believe in high-quality, beautifully designed product.
We believe in aspirational environments and experiences.
We believe in personalized and engaging client service.
And we believe that all of this should be attainable.
We call this Everyday Luxury.
Fiscal 2022 Annual Report | 3
From our Founder,
Chief Executive Officer
& Chairman
Fiscal 2022 Highlights
Fiscal 2022 marked another outstanding
year for Aritzia as our business continued to
accelerate beyond our expectations - across all
geographies and all channels. This year, arguably
our strongest performing year in our 38-year
history, we saw net revenue grow to almost $1.5
billion, an increase of 74% from fiscal 2021 and
52% from fiscal 2020. Our team did a phenomenal
job as they embraced the challenge of keeping
up with our extraordinary demand, while
meticulously navigating the ongoing headwinds
of the global landscape, to deliver exceptional
results for our business and bring our much-loved
Everyday Luxury experience of engaging service,
beautiful product, aspirational environments and
captivating communications to our new and loyal
clients.
SALES CHANNEL GROWTH
Driving this exceptional performance was the
continued investment in our sales channels. In
eCommerce, we further enhanced our digital
and omni-channel capabilities to maintain our
strong momentum. eCommerce net revenue
grew to $564 million, an increase of 33% from last
year and 150% from two years ago. In Retail, we
reopened and expanded our boutique portfolio.
Despite dealing with store closures, capacity
restrictions, and labour shortages, our Retail
business surged. Retail net revenue grew to
$930 million, an increase of 116% from last year
and 23% from two years ago. Of particular note,
our comparable boutiques flourished as they
surpassed pre-pandemic productivity levels in
both Canada and the United States by double-
digits, achieving comparable sales growth1 of
59% from last year and 15% from two years ago.
4 |
GEOGRAPHY EXPANSION
Our increased investment into the United
States continues to pay off, as we opened
6 new boutiques in key markets, such as Los
Angeles and Nashville, to a tremendous client
response. As a result, our United States business
accelerated at an unprecedented pace as net
revenue grew to $676 million in Canadian dollars,
an increase of 132% from last year and 100% from
two years ago, and accounted for 45% of net
revenue in fiscal 2022.
PRODUCT EXPANSION
This year, we meaningfully extended our
beautiful product assortment across breadth,
with new styles, and depth, with new colours,
sizes, and lengths. We also laid the foundation
for exciting new products and categories, as
we completed our acquisition and foray into
menswear with Reigning Champ and our first-
ever Swim collection, which launched at the
beginning of fiscal 2023.
BRAND AWARENESS AND CUSTOMER
EXPANSION
Brand awareness and customer expansion
continues to be a priority as we further
accelerated our awareness and brought
Everyday Luxury to significantly more clients
than ever before. We continued to make
significant progress on our path to getting
famous in the United States, as we more than
doubled our active client base.
1 Please see the sections entitled “How We Assess the Performance of Our Business” and
“Non-IFRS Measures including Retail Industry Metrics” of our MD&A dated May 5, 2022
(as included in this Annual Report and available on SEDAR at www.sedar.com) for further
details concerning comparable sales growth.
Aritzia Community™ | Social and
Environmental Responsibility
It is more important than ever, and our
responsibility as an industry leader and global
corporate citizen, that we continue to prioritize
our commitments to our people and planet. In
fiscal 2022, we remained focused on further
strengthening our environmental and social
contributions to accelerate the positive impact
Aritzia is making across our operations and
wider value chain, to ensure we deliver Everyday
Luxury, today and tomorrow.
As the pandemic continued to evolve throughout
the year, we remained unwavering in our
commitment to ensuring the health and safety
of our people, clients, and communities. We
operated with best-in-class testing frequency
and diligent contract tracing, in close
partnership with government health authorities
to navigate the uncertainty of the pandemic
responsibly. Additionally, we provided financial
continuity for our people through the pandemic
as we paid $7 million in Fiscal 2022 through the
Aritzia Community™ Relief Fund, on top of the
$25 million from fiscal 2021.
We continued to uplift and empower our
people, clients, and communities by prioritizing
diversity, equity and inclusion (DE&I) as well. We
were steadfast in our commitment to listening,
learning, and taking action in fiscal 2022.
This year, we further embedded DE&I into our
organization as we partnered with an external
consultant for strategic support and to serve
as our fractional Chief Diversity Officer. For our
people, we launched a series of events during
key affinity months, introduced training sessions,
and welcomed guest speakers with subject
matter expertise to build allyship from within.
That being said, it was just as important to us
to take action with communities as well. To do
this, we grew Aritzia Community™ and expanded
our partnerships with incredible organizations
throughout the year. In fiscal 2022, we donated
100% of the proceeds from two limited-edition
product capsule collections, 4,000 warm winter
coats valued at over $1 million, and $250,000
to celebrate Giving Tuesday – a global day of
giving, while continuing to deliver on our seasonal
product donation program. To date, Aritzia
Community™ has contributed more than $40
million in product donations, financial support
and volunteer hours to non-profits and partners,
positively impacting the lives of more than
445,000 people, and we are just getting started.
In fiscal 2022, we made significant progress on
our sustainability goals across our business. As
we have expanded our product assortment,
we have also adopted more sustainable
manufacturing practices. Focusing not only
on what we make, but also how we make it.
In fiscal 2022, we grew our use of sustainable
fabrics from 40% in our 2021 collections to 60%
in our 2022 Spring/Summer collection. It is not
just our product but the packaging it comes
in that is more sustainable. In fiscal 2022,
we shifted all of our Retail and eCommerce
paper-based packaging to contain recycled or
sustainably certified materials. Additionally, we
evaluated 98% of our finished goods suppliers
against Aritzia’s environmental criteria using the
Higg Facility Environmental Module to ensure
alignment with business requirements and
through our social impact monitoring program,
conducted third-party assessments at 100% of
our finished goods suppliers against Aritzia’s
Supplier Code of Conduct. Our commitment to
the planet extends into all facets of our business.
For the second consecutive year, Aritzia
achieved carbon neutrality across all our stores,
offices, and distribution centers. We disclosed
through CDP Climate Change for the second
year as well, and received recognition on the
CDP Supplier Engagement Leadership board. We
also joined the United Nations Global Compact,
signaling our commitment to the values of
responsible business.
Fiscal 2022 Annual Report | 5
Looking Forward
As we set our sights on the future, our business
has never been stronger or better positioned
to capitalize on the extraordinary growth
opportunities being presented to us. The
foundation our team has built, since we opened
our first boutique in 1984, continues to empower
our ability to deliver our much-loved Everyday
Luxury experience for new and loyal clients.
In my 38 years with Aritzia, I have not only
gained valuable perspective of our business,
but more so, an incredible appreciation for our
people and the contributions each of them have
made to our tremendous success. No one more
so than Jennifer Wong. Which is why we could
not be more excited for her to lead us into the
future as our next CEO.
Jennifer and I began our partnership 35 years
ago. She knows our business inside and out.
Over those 35 years, Jennifer has run almost all
departments within the organization. She has
been instrumental to our accelerated growth,
and has delivered many of the milestones
that we have shared in these annual reports.
Jennifer’s unparalleled leadership style and
dedication to excellence exemplifies our values,
which she was integral in developing, and she
deeply resonates with and inspires our people. I
believe there is no better time and no one better
to lead Aritzia. With her long-term, lasting
approach to strategic growth, I believe she is
perfect for leading us into the future.
Under Jennifer’s leadership, we will announce
our multi-year growth plan later this year, and
continue to fuel our accelerated growth by
driving digital innovation in our eCommerce
channel and Omni capabilities, growing our
boutique portfolio, expanding our product
assortment across depth, breadth and new
categories, and acquiring new clients, all
while continuing to strategically invest in the
infrastructure required to scale for years
to come.
I would like to thank our investors, our almost
7,000 extraordinary team members, and our
clients for their enduring loyalty to Aritzia. I have
been privileged to lead this team and could
not be more excited to continue working on
Aritzia’s long-term growth, as Executive Chair,
maintaining full-time functional area leadership
of Product, Marketing, Real Estate Development,
and Business Development, while supporting
Jennifer as she leads our people and business
into the future, where our outlook has never
been brighter.
Sincerely,
Brian Hill
Chief Executive Officer
6 |
Fiscal 2022 Annual Report | 7
Brands and Products
Aritzia is an innovative design house and boutique. We
conceive, create, develop and retail fashion brands
with a depth of design and quality that provides
compelling value. Each of our exclusive brands has
its own vision and distinct aesthetic point of view. As
a group, they are united by an effortless appeal, a
focus on fit and an of-the-moment point of view. Our
expansive range of fashion apparel and multi-brand
strategy enables us to appeal to our clients across
multiple aspects of their lifestyles and life stages,
producing strong and enduring client loyalty. Exclusive
brands currently represent 95% of Aritzia’s net revenue.
8 |
Destinations
We connect our clients to the energy of our culture
through the products we sell and the environments
we create. We sell our products through our boutiques
and aritzia.com, giving us complete control of the
presentation of our brand and the relationships with
our clients.
We carefully consider each Aritzia destination –
physical and digital – individually, taking care to provide
our clients with aspirational shopping experiences and
exceptional service at every interaction.
We believe there are synergies between our boutiques
and aritzia.com, with the success of each channel
benefiting the other through increased brand
awareness and affinity. We continue to build out omni-
channel capabilities to seamlessly provide an Everyday
Luxury experience for our clients to shop wherever,
whenever and however.
3
Edmonton
Whistler
2
Victoria
1
13
Vancouver
7
Calgary
1
Saskatoon
2
Seattle
1
Portland
1
Winnipeg
1 Quebec City
1
Halifax
Ottawa
2
6
Montreal
Minneapolis
1
30
Toronto
1
Boston
2
San Francisco
1
San Jose
1 Las Vegas
5 Los Angeles
1
San Diego
1
Honolulu
Troy
1
King of Prussia
1
3
Chicago
3
Suburban New York
5
Manhattan
New Jersey
3
1 Denver
Columbus
1
1 Washington DC
1
Tysons
1 Nashville
Canada
68
United States
41
109
boutiques1
1
Dallas
1
Austin
1
Houston
1 Miami
Fiscal 2022 Annual Report | 9
Future Growth
We have a thoughtful approach to growth that is
focused on profitability over the long-term. Supported
by accelerating trends, we continue to make
strategic investments across our people, processes
and technology to capitalize on the unprecedented
opportunities.
1. eCommerce and Omni Innovation
Our eCommerce business was launched in fiscal
2013, quickly surpassing our growth expectations.
Annual increases in online traffic drove eCommerce
revenue growth of more than 36% on a compounded
annual basis from fiscal 2016 to 2020. Our eCommerce
business grew 33% in fiscal 2022 on top of the 88%
growth in fiscal 2021. eCommerce revenue was 38%
of total net revenue in fiscal 2022, compared to 23%
in fiscal 2020, pre-pandemic. Going forward, we will
continue to invest in digital capabilities to provide a
seamless Everyday Luxury experience for our clients
to drive accelerated eCommerce and omni-channel
growth.
2. Geographic Expansion
Operating as our most effective yet profitable
marketing tool, boutique openings are a key pillar of
Aritzia’s growth strategy. Our boutiques drive sales,
build brand awareness, propel significant client
acquisition, and fuel our eCommerce channel. Payback
on our new boutiques continue to accelerate, trending
between 12 to 24 months.
We are seeing unprecedented opportunities for us to
acquire prime real estate. We believe that we have
a meaningful opportunity to expand our boutique
network, particularly in the United States, where
we have identified a minimum of 100 locations that
meet our exacting criteria. We will continue to take
a disciplined approach to boutique openings, with a
fastidious focus on location selectivity.
10 |
3. Product Expansion
Product innovation is a core competency for us and
has been critical to our success. We always look
beyond what ‘is’ to what ‘could be’ by continuously
monitoring the evolving fashion landscape, our brand
portfolio, our product mix and our client base to
identify opportunities for innovation and growth. With
the accelerated shift to digital and as our eCommerce
channel reaches critical mass, our product strategy
can now be based on the unlimited opportunities that
online provides. We see meaningful potential to double
our product offering by fiscal 2025 through:
— Depth (sizes, lengths, colours)
— Breadth (new style development)
— New categories (including swim, intimates
and men’s)
We believe our innovation strategy drives traffic to our
boutiques and aritzia.com and increases brand loyalty
by guiding our mix of brands and products to meet our
clients’ needs. It also allows us to reinforce the appeal
of our brands across a broader range of fashion needs,
increasing our addressable market and ‘share of our
client’s closet’.
4. Brand Awareness and Customer Expansion
Increased brand awareness is driven through real
estate and marketing strategies designed to attract
new clients and deepen loyalty of existing clients.
These strategies are propelling our brand with our
active client base more than doubling in the United
States during fiscal 2022. Our premier real estate
locations, aspirational boutique designs and high-
touch service highlight the unique ethos and aesthetic
of our exclusive brands and Aritzia’s overall dedication
to delivering Everyday Luxury. We extend this
experience online, through digital marketing, reaching
beyond our retail footprint to acquire customers in
relevant segments and keep them engaged with
digitally native content experiences.
Fiscal 2022 Annual Report | 11
ENVIRONMENT, SOCIAL & GOVERNANCE
Our Philosophy
Aritzia recognizes that social and environmental
factors are integral to our long-term success.
We’re committed to supporting all the people our
organization touches, while protecting the planet
that communities and our business rely on. In order
to deliver Everyday Luxury, today and tomorrow, our
goal is to continue strengthening our positive impact
socially and environmentally across our operations and
wider value chain.
Our Priorities
Aritzia’s social and environmental priorities span across
our value chain. From raw material sourcing, third party
manufacturing suppliers, product use and end-of-life,
as well as across our boutiques and offices to our
Distribution Centres. These initiatives are embedded
throughout our organization with oversight shared
across multiple departments. To ignite meaningful
change, we take an evidence-based approach with
a focus on delivering long-term impact. As part of our
social and environmental strategy, we have identified
the following priorities:
1. Attract, develop and retain a high performing team
of world-class talent
2. Deliver positive social impact through our products
and supply chain
3. Drive sustainable practices and solutions across the
product lifecycle
4. Build sustainable and efficient infrastructure across
our boutiques, cafes, offices, DCs and logistics
12 |
Key Achievements in Fiscal 2022
ENVIRONMENT
— Adopted more sustainable fabrics across 40% of
our 2021 collections and 60% of our Spring/Summer
2022 collections, including organic and recycled
cotton, recycled polyester and nylon, amongst
others;
— Evaluated 98% of our finished goods suppliers
against Aritzia’s environmental criteria through
the Higg Facility Environmental Module to ensure
alignment with business requirements;
— For the second consecutive year, Aritzia has
achieved carbon neutrality across our operations
(boutiques, offices and distribution centres),
which account for 100% of Aritzia’s Scope 1 and 2
emissions – this is achieved by reducing energy
use, sourcing renewable energy credits in the
equivalent of our electricity consumption, and
offsetting remaining emissions;
— Completed our second CDP Climate Change
submission and received recognition on the CDP
Supplier Engagement Leadership board; and
— Added Sustainable Product filters on aritzia.com
for our clients.
SOCIAL
— Conducted third party assessments at 100% of
finished goods suppliers against Aritzia’s Supplier
Code of Conduct through our social impact
monitoring program;
— Ensured financial continuity for our people through
the COVID-19 pandemic, by paying $25 million in
fiscal 2021 and $7 million in fiscal 2022 through the
Aritzia Community™ Relief Fund;
— Continued our investment in DE&I and secured
an external consultant to support strategic DE&I
implementation into our organization and serve
as our fractional Chief Diversity Officer, and
continued to emphasize internal engagement
of our employees with a series of affinity month
activations, training sessions and guest speakers
with subject matter expertise in DE&I;
— Donated 4,000 warm winter coats valued at over
$1 million to our Aritzia Community™ partner
organizations across the U.S. and Canada; and
— Celebrated Giving Tuesday – a global day of
giving – with a commitment to donate $10 of every
purchase on that day to Aritzia Community™
partner organizations; we reached our $250,000
donation goal.
GOVERNANCE
— Published Aritzia’s ESG Executive Summary,
outlining our priorities on investors.aritzia.com;
— Formally approved and formed an Environmental
and Social Board Committee to guide and
have oversight of key social and environmental
considerations; and
— Signed on as a participant to the United Nations
Global Compact.
For further details, please visit: https://www.
aritzia.com/en/aritzia/corporateresponsibility/
sustainability.html
Fiscal 2022 Annual Report | 13
Proven Results
Net Revenue ($ millions)
Net Income ($ millions)
19%
CAGR
$1,495
$874
$981
$857
$743
eCommerce
Retail
29%
CAGR
$157
$91
$79
$57
$19
FY2018
FY2019
FY2020
FY2021
FY2022
FY2018
FY2019
FY2020
FY2021
FY2022
Adjusted EBITDA(1)
($ millions)
Adjusted Net Income(1)
($ millions)
22%
CAGR
$289
24%
CAGR
$177
$161
$173
$133
$77
$95
$97
$76
$26
MMaarrggiinn
FY2018
17.9%
FY2019
18.4%
FY2020
17.6%
FY2021
9.0%
FY2022
19.4%
MMaarrggiinn
FY2018
10.2%
FY2019
10.8%
FY2020
9.9%
FY2021
3.0%
FY2022
11.8%
(1) Adjusted EBITDA and Adjusted Net Income are non-IFRS measures, see “Non-IFRS Measures including Retail Industry Metrics” in our Annual Information Form dated May 5, 2022 for an explanation
of the composition of these non-IFRS measures, how these non-IFRS measures provide useful information to an investor, and the purposes for which management uses these non-IFRS measures.
A quantitative reconciliation of Adjusted EBITDA and Adjusted Net Income to Net Income can be found on page 8 of our annual Management’s Discussion & Analysis (“MD&A”) for Fiscal 2022
dated May 5, 2022, which has been included in this Annual Report, page 7 of our annual MD&A for Fiscal 2021 dated May 11, 2021, page 15 of our annual MD&A for Fiscal 2020 dated May 28, 2020,
page 12 of our annual MD&A for Fiscal 2019 dated May 9, 2019, and page 13 of our annual MD&A for Fiscal 2018 dated May 10, 2018, filed on SEDAR at www.sedar.com, which reconciliations are
incorporated herein by reference.
14 |
Operational and Financial Summary
(in thousands of Canadian dollars,
unless otherwise noted)
Fiscal 2022
52 Weeks
Fiscal 2021
52 Weeks
Fiscal 2020
52 Weeks
Fiscal 2019
53 Weeks
Fiscal 2018
52 Weeks
Financial Summary:
Net revenue
Cost of goods sold
Gross profit
Operating expenses
Selling, general and administrative
Stock-based compensation expense
Income from operations
Finance expense
Other expense (income)
Income before income taxes
Income tax expense
$
1,494,630 $
839,678
857,323 $
544,818
980,589 $
577,165
874,296 $
531,383
743,267
447,776
654,952
312,505
403,424
342,913
295,491
392,802
26,131
236,019
25,202
(8,783)
219,600
62,683
250,726
10,691
243,362
7,790
51,088
28,420
(3,534)
26,202
6,975
152,272
28,319
(2,185)
126,138
35,544
215,297
11,540
116,076
4,821
(395)
111,650
32,922
183,857
17,240
94,394
5,221
1,890
87,283
30,190
Net income
$
156,917 $
19,227 $
90,594 $
78,728 $
57,093
Net income per diluted share
$
1.36 $
0.17 $
0.81 $
0.67 $
0.49
Adjusted EBITDA(1)
$
Adjusted Net Income(1)
$
Adjusted Net Income(1) per Diluted Share $
Weighted average number of diluted
shares outstanding (thousands)
289,385 $
176,736 $
76,812 $
172,572 $
26,028 $ 97,388 $
161,045 $
94,543 $
132,716
75,934
1.53 $
0.23 $ 0.87 $
0.81 $
0.65
115,784
112,844
112,128
117,358
116,280
Cash and cash equivalents
Capital cash expenditures (net of
proceeds from lease incentives)(1)
Free cash flow(1)
Percentage of Net Revenue:
Net revenue
Cost of goods sold
$
265,245 $
149,147 $ 117,750 $
100,897 $ 112,475
$
$
(52,607) $ (42,529) $ (36,253) $
117,246 $
221,937 $
36,306 $
(49,862) $
38,874 $
(59,253)
44,342
100.0%
56.2%
100.0%
63.5%
100.0%
58.9%
100.0%
60.8%
100.0%
60.2%
Gross profit
43.8%
36.5%
41.1%
39.2%
39.8%
Operating expenses
Selling, general and administrative
Stock-based compensation expense
Income from operations
Finance expense
Other expense (income)
Income before income taxes
Income tax expense
Net income
Adjusted EBITDA(1)
Adjusted Net Income(1)
Other Performance Metrics:
Year-over-year net revenue growth
(decline)
Comparable sales growth(1)
Boutiques:
Number of boutiques, end of period
New boutiques
Boutiques repositioned into a
flagship boutique
Boutique closure
Boutique closed due to
mall redevelopment
Boutiques expanded or repositioned
26.3%
1.7%
15.8%
1.7%
(0.6%)
14.7%
4.2%
10.5%
19.4%
11.8%
74.3%
n/a
106
6
-
(1)
-
6
29.2%
1.2%
6.0%
3.3%
(0.4%)
3.1%
0.8%
2.2%
9.0%
3.0%
24.8%
0.8%
15.5%
2.9%
(0.2%)
12.9%
3.6%
9.2%
17.6%
9.9%
(12.6%)
n/a
12.2%
7.6%
101
7
(1)
-
(1)
3
96
5
-
-
-
3
24.6%
1.3%
13.3%
0.6%
(0.0%)
12.8%
3.8%
9.0%
18.4%
10.8%
17.6%
9.8%
91
7
(1)
-
-
4
24.7%
2.3%
12.7%
0.7%
0.3%
11.7%
4.1%
7.7%
17.9%
10.2%
11.4%
6.6%
85
6
-
-
-
7
(1) These measures are non-IFRS financial measures. Please see the sections entitled “How We Assess the Performance of Our Business”, “Selected Consolidated
(1) These measures are non-IFRS financial measures. Please see the sections entitled “How We Assess the Performance of Our Business”, “Selected Consolidated Financial Information” and “Non-
Financial Information” and “Non-IFRS Measures including Retail Industry Metrics” of our MD&A dated May 5, 2022 (as included in this Annual Report and available
IFRS Measures including Retail Industry Metrics” of our annual MD&A dated May 5, 2022 (as included in this Annual Report), our annual MD&A for fiscal 2021 dated May 11, 2021, our annual MD&A
on SEDAR at www.sedar.com) for further details concerning Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per Diluted Share, capital cash
for fiscal 2020 dated May 28, 2020, our annual MD&A for fiscal 2019 dated May 9, 2019, and our annual MD&A for fiscal 2018 dated May 10, 2018, and all available on SEDAR at www.sedar.com, for
expenditures (net of proceeds from lease incentives), and free cash flow, including definitions and reconciliations to the relevant reported IFRS measure.
further details concerning Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per Diluted Share, capital cash expenditures (net of proceeds from lease incentives), and free cash flow,
including definitions and reconciliations to the relevant reported IFRS measure.
Fiscal 2022 Annual Report | 15
16 |
Management’s Discussion
& Analysis
18 |
1 Aritzia Inc. MANAGEMENT’S DISCUSSION AND ANALYSIS Fiscal Year Ended February 27, 2022 May 5, 2022 The following Management’s Discussion and Analysis (“MD&A”) dated May 5, 2022 is intended to assist readers in understanding the business environment, strategies and performance and risk factors of Aritzia Inc. (together with its consolidated subsidiaries, referred to herein as “Aritzia”, the “Company”, “we”, “us” or “our”). This MD&A provides the reader with a view and analysis, from the perspective of management, of the Company’s financial results for the thirteen-week and fifty-two week periods ended February 27, 2022. This MD&A should be read in conjunction with the Company’s audited annual consolidated financial statements and accompanying notes Fiscal 2022 (as hereinafter defined). FORWARD-LOOKING INFORMATION Certain statements made in this MD&A may constitute forward-looking information under applicable securities laws. Forward-looking statements are based on information currently available to management and on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions and the competitive environment within the retail industry, in light of its experience and perceptions of historical trends, current conditions and expected future developments, as well as other factors that are believed to be appropriate and reasonable in the circumstances. These statements may relate to our future financial outlook, our leadership transition and its impact on our business, people and growth, our plans relating to our distribution facilities and digital infrastructure, and anticipated events or results and include, our ability to sustain momentum in our business and advance our strategic growth drivers, continued focus on driving digital innovation and eCommerce and Omni capabilities, accelerating boutique growth and expanding our product assortment, acquiring new clients and investing in our infrastructure and growing team, the Company’s response to mitigate anticipated supply chain disruptions, geopolitical risks, inflationary pressures and labour shortages, repurchases under our normal course issuer bid, our outlook for: (i) net revenue in the first quarter of Fiscal 2023, (ii) net revenue in Fiscal 2023, (iii) gross profit margin in Fiscal 2023, (iv) SG&A as a percent of net revenue in Fiscal 2023, (v) net capital expenditure in Fiscal 2023 and (vi) new boutiques and expansion or repositioning of existing boutiques in Fiscal 2023 . Particularly, information regarding our expectations of future results, targets, performance achievements, prospects or opportunities is forward-looking information. As the context requires, this may include certain targets as disclosed in the prospectus for our initial public offering, which are based on the factors and assumptions, and subject to the risks, as set out therein and herein. Often but not always, forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does not anticipate”, “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent our expectations, estimates and projections regarding future events or circumstances. Implicit in forward-looking statements in respect of the Company's expectations for: (i) net revenue of approximately $375 million for the first quarter of fiscal 2023, representing just over a 50% increase compared to last year, (ii) net revenue of approximately $1.8 billion in Fiscal 2023, representing an increase of approximately 20% from Fiscal 2022, (iii) gross profit margin to decrease by approximately 100 bps compared to last year, (iv) SG&A as a percent of net revenue to increase approximately 50 bps to 100 bps compared to last year and (v) net capital expenditures in the range of $110 million to $120 million, are certain current assumptions including the continued acceleration of sales in the United States both in retail and eCommerce channels as well as continued momentum of the Company’s eCommerce business in Canada. The Company’s forward-looking information is also based upon assumptions regarding the overall retail environment, the COVID-19 pandemic and related health and safety protocols and currency exchange rates for Fiscal 2023. Specifically, we have assumed the following exchange rates for Fiscal 2023:
USD:CAD = 1:1.26.
Given this unprecedented period of uncertainty, there can be no assurances regarding: (a) the limitations or
restrictions that may be placed on servicing our clients in reopened boutiques or potential re-closing of boutiques or
the duration of any such limitations or restrictions; (b) the COVID-19-related impacts on our business, operations,
labour force, supply chain performance and growth strategies, (c) our ability to mitigate such impacts, including
ongoing measures to enhance short-term liquidity, contain costs and safeguard the business; (d) general economic
conditions related to COVID-19 and impacts to consumer discretionary spending and shopping habits; (e) credit,
market, currency, commodity market, inflation, interest rates, global supply chains, operational, and liquidity risks
generally; (f) geopolitical events; and (g) other risks inherent to our business and/or factors beyond our control which
could have a material adverse effect on the Company.
Many factors could cause our actual results, level of activity, performance or achievements or future events or
developments to differ materially from those expressed or implied by the forward-looking statements, including,
without limitation, the factors discussed in the “Risk Factors” section of this MD&A and in the Company’s annual
information form dated May 5, 2022 for Fiscal 2022 (the “AIF”). A copy of the AIF and the Company’s other publicly
filed documents can be accessed under the Company’s profile on the System for Electronic Document Analysis and
Retrieval (“SEDAR”) at www.sedar.com.
The Company cautions that the list of risk factors and uncertainties described in the AIF is not exhaustive and other
factors could also adversely affect its results. Readers are urged to consider the risks, uncertainties and assumptions
carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such
information. The forward-looking information contained in this MD&A represents our expectations as of the date of
this MD&A (or as the date they are otherwise stated to be made), and are subject to change after such date. However,
we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as
a result of new information, future events or otherwise, except as required under applicable securities laws.
BASIS OF PRESENTATION
Our audited annual consolidated financial statements and unaudited condensed interim consolidated financial
statements (together, the “consolidated financial statements”) have been prepared in accordance with International
Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), using
the accounting policies described therein. All amounts are presented in thousands of Canadian dollars unless
otherwise indicated. We manage our business on the basis of one operating and reportable segment.
All references in this MD&A to “Q4 2022” are to our 13-week period ended February 27, 2022, to “Q4 2021” are to
our 13-week period ended February 28, 2021 and to “Q1 2023” are to our 13-week period ended May 29, 2022. All
references in this MD&A to “Fiscal 2022” are to our 52-week period ending February 27, 2022, to “Fiscal 2021” are
to our 52-week period ended February 28, 2021, to “Fiscal 2020” are to our 52-week period ended March 1, 2020
and to “Fiscal 2023” are to our 52-week period ending February 26, 2023.
The audited annual consolidated financial statements and accompanying notes for Fiscal 2022 and this MD&A were
authorized for issue by the Company’s Board of Directors.
OVERVIEW
Aritzia is a vertically integrated design house with an innovative global platform, home to an extensive portfolio of
exclusive brands for every function and individual aesthetic. We’re about good design, quality materials and timeless
style that endures and inspires — all with the wellbeing of our People and Planet in mind. We call this Everyday
Luxury.
Founded in 1984, in Vancouver, Canada, we create and curate products that are both beautiful and beautifully made,
cultivate aspirational environments, offer engaging service that delights, and connect through captivating
communications. We pride ourselves on providing immersive, and highly personal shopping experiences at
aritzia.com and in our 100+ boutiques throughout North America to everyone, everywhere.
Everyday Luxury. To Elevate Your World.™
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Fiscal 2022 Annual Report | 19
RECENT EVENTS
Completion of Secondary Offering
On May 13, 2021, the Company announced a secondary offering (the “Secondary Offering”) on a bought deal basis
of its subordinate voting shares through a secondary sale of shares by certain entities owned and or controlled directly
or indirectly by Brian Hill, Chief Executive Officer and Chairman of the Company, or Brian Hill and his immediate
family (the “Selling Shareholders”). The Secondary Offering of 3,040,700 subordinate voting shares raised gross
proceeds of $91.2 million for the Selling Shareholders, at a price of $30.00 per subordinate voting share and was
completed on June 1, 2021. The Company did not receive any proceeds from the Secondary Offering. As part of the
Secondary Offering, during the 13-week period ended May 30, 2021, the Selling Shareholders exchanged 2,600,000
of their multiple voting shares for subordinate voting shares. Following the Offering, Brian Hill remains the Company’s
largest shareholder with an approximately 20% equity interest. Underwriting fees were paid by the Selling
Shareholders, and other expenses related to the Secondary Offering of $0.5 million were paid by the Company.
Closed Acquisition of CYC Design Corporation
On June 25, 2021, the Company successfully completed its acquisition of CYC Design Corporation (“CYC”), a leading
designer and manufacturer of premium athletic wear, Reigning Champ. The Company acquired 75% of CYC based
on a total enterprise value of approximately $63.0 million, with the remaining 25% equity interest held by CYC’s
management shareholders to be converted into the Company’s subordinate voting shares in up to three instalments
from 2024 to 2026.
The acquisition meaningfully accelerates the Company’s product expansion into men’s while bringing incremental
growth to the Company’s already surging women’s eCommerce and U.S. businesses. Capitalizing on the Company’s
world-class operational expertise and infrastructure, men’s, merchandised independently, will become a meaningful
part of the Company’s platform through the CYC acquisition.
Following the close of the transaction on June 25, 2021, Fiscal 2022 results include the consolidation of CYC.
Refinanced Credit Facility
On July 13, 2021, the Company refinanced its term loan and revolving credit facility, extending the term to July 13,
2025. As part of the refinancing, the Company repaid its term loan of $75.0 million and increased its existing revolving
credit facility from $100.0 million to $175.0 million.
Normal Course Issuer Bid
On January 12, 2022, the Company announced the commencement of a normal course issuer bid (“NCIB”) through
the facilities of the Toronto Stock Exchange to repurchase and cancel up to 3,732,725 of the Company’s subordinate
voting shares, representing approximately 5% of the public float of 74,654,507, during the twelve month period
commencing January 17, 2022 and ending January 16, 2023. During Fiscal 2022, the Company repurchased 164,200
Shares for cancellation at an average price of $54.79 per subordinate voting share for total cash consideration of
$9.0 million.
Appointment of Daniel Habashi to the Board of Directors
On January 12, 2022, the Company announced that Daniel Habashi will join Aritzia’s Board of Directors effective
January 14, 2022. Mr. Habashi is the General Manager of TikTok Canada, overseeing content and operations for the
market. Mr. Habashi is recognized by Report on Business Magazine as one of Canada’s best executives. He served
as Chief Marketing Officer of Soho House & Co from 2018 to 2020 and has held leadership positions at Instagram,
Facebook and Microsoft from 2005 to 2017. Mr. Habashi holds a Business Administration Management (Honours)
Degree from Wilfrid Laurier University and an International Management degree from LIUC – Università Cattaneo.
With the addition of Mr. Habashi, Aritzia’s Board of Directors has eight out of ten directors who are independent under
Canadian securities laws.
COVID-19 PANDEMIC
On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a worldwide pandemic. Since
the outbreak, Aritzia’s priorities have been the well-being of our people, clients and supporting the community while
safeguarding the long-term financial strength of our business. In order to ensure the health and safety of our people,
3
20 |
clients and communities, we implemented stringent protocols across our boutiques, distribution centre and support
offices.
First quarter Fiscal 2022
At the start of the first quarter, 18 boutiques were temporarily closed. Retail revenue performance in the first quarter
continued to be impacted by the closure of 34, or half of the Company’s 68 boutiques in Canada for approximately
two-thirds of the quarter. This compares to the closure of all boutiques at the outset of the pandemic on March 16,
2020. At the end of the first quarter in Fiscal 2022, 33 of our boutiques remained temporarily closed. Sales productivity
of open boutiques in the first quarter trended, on average, at 99% of pre-COVID-19 levels in the first quarter of Fiscal
2020 despite occupancy restrictions and limited operating hours. Our eCommerce business delivered 19% revenue
growth compared to the same period last year, on top of the 125% increase in the first quarter of Fiscal 2021 when
all of our boutiques were closed.
Second quarter Fiscal 2022
As at July 12, 2021, all of the Company’s boutiques had reopened. Our eCommerce business revenue continues to
surge with 49% growth over the same period last year on top of the 82% growth that we saw in the second quarter
of Fiscal 2021. Sales in our boutiques were exceptional, exceeding pre-pandemic levels with comparable sales
growing(1) 14% from two years ago in the second quarter of Fiscal 2020.
Third quarter Fiscal 2022
For the first time since the start of the pandemic, all of our boutiques were open for the entire duration of the quarter.
Our net revenues for the third quarter grew 63% over the same period last year, driven by sales growth across all
geographies and all channels. Sales growth in the United States sustained unprecedented momentum, increasing
115% over the same period last year and representing 44% of our total revenue in the third quarter. Our eCommerce
business continued to surge, increasing 47% on top of the 79% increase in the third quarter of Fiscal 2021. Our retail
revenue increased by 72% over the same period last year, achieving comparable sales growth(1) of 58% compared
to last year, while continuing to exceed pre-pandemic levels with comparable sales(1) growth of 26% from two years
ago in the third quarter of Fiscal 2020.
Fourth quarter Fiscal 2022
Our strong performance continued, with all of our boutiques opened, despite the emergence of the COVID-19
Omicron variant and reintroduction of capacity restrictions in our Ontario and Quebec boutiques. Our net revenues
for the fourth quarter grew 66% over the same period last year, driven by ongoing strength in our business across all
geographies and all channels. Revenue growth in the United States increased 109% over the same period last year,
representing 49% of our total revenue in the fourth quarter. Our eCommerce business grew 21% on top of a strong
81% increase in Q4 2021. Our retail revenue increased by 123% over the same period last year, achieving
comparable sales growth(1) of 60% compared to last year, while continuing to exceed pre-pandemic levels with
comparable sales growth(1) of 13% from two years ago in the fourth quarter of Fiscal 2020.
In addition, we undertook initiatives in support of our people during the pandemic, including paying $25 million in
Fiscal 2021 and $7 million in Fiscal 2022 through the Aritzia CommunityTM Relief Fund to ensure financial continuity
for our people during boutique closures and to enable seamless boutique reopening.
The extent of the impact of COVID-19 on future periods will depend on future developments, including the duration
or resurgence of the pandemic, the related government responses and any resulting health and safety measures or
directives put in place by public health authorities, which are uncertain and cannot be predicted. Aritzia believes its
eCommerce business is well-positioned to moderate these impacts.
See also the “Forward-Looking Information” and “Risk Factors” sections of this MD&A and in our AIF.
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Fiscal 2022 Annual Report | 21
FINANCIAL HIGHLIGHTS
We refer the reader to the section entitled “How We Assess the Performance of Our Business” of this MD&A for the
definition of the items discussed below and, when applicable, to the table entitled “Selected Consolidated Financial
Information” for reconciliations of non-IFRS measures with the most directly comparable IFRS measure.
Q4 2022
⎯ Net revenue increased 66.1% to $444.3 million from Q4 2021
⎯ USA revenue increased by 108.8% to $216.8 million from Q4 2021 and 127.9% from Q4 2020, comprising
48.8% of net revenue in Q4 2022
⎯ eCommerce revenue increased by 21.4% to $182.0 million from Q4 2021, comprising 41.0% of net revenues in
Q4 2022
⎯ Retail revenue increased by 123.0% to $262.4 million from Q4 2021, achieving comparable sales growth(1) of
60% compared to Q4 2021
⎯ Gross profit margin(1) increased to 40.4% from 38.5% in Q4 2021
⎯ Net income increased to $34.2 million, from $16.1 million in Q4 2021
⎯ Adjusted EBITDA(1) increased to $66.3 million from $35.2 million in Q4 2021
⎯ Adjusted Net Income(1) of $0.34 per diluted share, compared to $0.16 per diluted share in Q4 2021
Fiscal 2022
⎯ Net revenue increased 74.3% to $1.5 billion, compared to $857.3 million in Fiscal 2021
⎯ USA revenue increased by 131.8% to $676.1 million from Fiscal 2021 and 100.3% from Fiscal 2020,
comprising 45.2% of net revenue in Fiscal 2022
⎯ eCommerce revenue increased by 32.5% to $564.3 million from Fiscal 2021, comprising 37.8% of net revenues
in Fiscal 2022
⎯ Retail revenue increased by 115.6% to $930.3 million from Fiscal 2021
⎯ Gross profit margin(1) increased to 43.8% from 36.5% in Fiscal 2021
⎯ Net income increased to $156.9 million from $19.2 million in Fiscal 2021
⎯ Adjusted EBITDA(1) increased to $289.4 million from $76.8 million in Fiscal 2021
⎯ Adjusted Net Income (1) of $1.53 per diluted share, compared to $0.23 per diluted share in Fiscal 2021
Strategic Accomplishments for Fiscal 2022
⎯ Grew active US clients by over 100% in the 12 month period
⎯ Achieved 131.8% growth in USA revenue, through strength in both our boutiques and eCommerce
⎯ Drove continued momentum growing eCommerce revenue by 32.5% on top of 88.3% growth last year, to
comprise 37.8% of net revenue in fiscal 2022
⎯ Strategically managed global supply chain disruptions to ensure product availability to meet demand
⎯ Opened six new boutiques and repositioned six existing boutiques in premier real estate locations
⎯ Launched store inventory visibility, digital gift cards and other digital capabilities as we accelerated investments
across infrastructure and talent to support future growth
⎯ Advanced initiatives to support Aritzia’s communities, cultivate diversity and enhance sustainability
(1) See the sections below entitled “How We Assess the Performance of our Business”, “Selected Consolidated Financial Information” and
“Non-IFRS Measures including Retail Industry Metrics” for further details concerning gross profit margin, comparable sales growth, Adjusted
EBITDA, Adjusted Net Income and Adjusted Net Income per diluted share including definitions and reconciliations to the relevant reported IFRS
measure.
OUTLOOK
The Company’s strong momentum continued into the first quarter of fiscal 2023. Aritzia is on-track to deliver net
revenue of approximately $375 million, representing just over a 50% increase compared to last year. This reflects
continued strength in the United States across both its retail and eCommerce channels, as well as, strong recovery
of the Company’s business in Canada. This revenue range for the first quarter reflects all boutiques opened with no
COVID-19 related restrictions in place, compared to last year when 50% or 34 of the Company’s boutiques in Canada
were mandated to close for approximately two-thirds of the quarter.
For fiscal 2023, Aritzia currently expects the following:
⎯ Net revenue of approximately $1.8 billion, representing an increase of approximately 20% from fiscal 2022. This
is led by continued strength in the Company’s business in the United States across both channels, as well as
22 |
5
continued growth in Canada driven by its eCommerce business and recovery in its boutiques, and contribution
from its retail expansion with:
⎯ Eight to ten new boutiques with all but one in the United States, including Forum Shops in Las Vegas and
Aventura Mall in Miami already opened; and
⎯ Four to five boutique expansions or repositions, including three to four locations in Canada and one in the
United States.
⎯ Gross profit margin to decrease by approximately 100 bps compared to last year, reflecting ongoing impacts from
global supply chain disruptions, inflationary pressure, and discontinued COVID relief subsidies;
⎯ SG&A as a percent of net revenue to increase approximately 50 bps to 100 bps compared to last year, reflecting
ongoing investments to fuel our future growth;
⎯ Net capital expenditures in the range of $110 million to $120 million, comprised of:
⎯ Boutique network growth,
⎯ New distribution centre in the Greater Toronto area, and
⎯ Ongoing investments in technology, infrastructure to enhance the Company’s eCommerce capabilities and
omni-channel experience, and support office expansion.
The foregoing outlook is based on management’s current strategies and may be considered forward-looking
information under applicable securities laws. Such outlook is based on estimates and assumptions made by
management regarding, among other things, general economic and geopolitical conditions and the competitive
environment as well as further COVID-19 resurgences. Readers are cautioned that actual results may vary. See also
the “Forward-Looking Information” and “Risk Factors” sections of this MD&A and in our AIF.
SELECTED FINANCIAL INFORMATION
The following table summarizes our recent results of operations for the periods indicated. The selected consolidated
financial information set out below has been derived from our audited annual consolidated financial statements and
related notes. The selected consolidated financial information set out below for Q4 2022 and Q4 2021 is unaudited.
6
Fiscal 2022 Annual Report | 23
Selected Consolidated Financial Information
(in thousands of Canadian dollars, unless otherwise noted)
Financial Summary:
Net revenue
Cost of goods sold
Gross profit
Operating expenses
Selling, general and administrative
Stock-based compensation
Income from operations
Finance expense
Other expense (income)
Income before income taxes
Income tax expense
Net income
Net income per diluted share
Adjusted EBITDA(2)
Adjusted Net Income (2)
Adjusted Net Income (2) per Diluted Share
Weighted average number of diluted shares outstanding
(thousands)
Cash and cash equivalents
Capital cash expenditures (net of proceeds from lease
incentives)(2)
Free cash flow(2)
Percentage of Net Revenue:
Net revenue
Cost of goods sold
Gross profit
Operating expenses
Selling, general and administrative
Stock-based compensation expense
Income from operations
Finance expense
Other expense (income)
Income before income taxes
Income tax expense
Net income
Adjusted EBITDA(2)
Adjusted Net Income (2)
Q4 2022
13 Weeks
Q4 2021
13 Weeks
Fiscal 2022
52 Weeks
Fiscal 2021
52 Weeks
$
444,322
264,816
$
267,525
164,600
$ 1,494,630
839,678
$
857,323
544,818
179,506
102,925
654,952
312,505
120,221
5,725
53,560
6,092
740
46,728
12,503
34,225
0.29
66,303
39,475
0.34
$
$
$
$
$
72,357
4,193
26,375
6,464
(2,129)
22,040
5,970
16,070
0.14
35,205
17,678
0.16
$
$
$
$
$
116,774
114,052
392,802
26,131
236,019
25,202
(8,783)
219,600
62,683
156,917
1.36
289,385
176,736
1.53
115,784
$
$
$
$
$
250,726
10,691
51,088
28,420
(3,534)
26,202
6,975
19,227
0.17
76,812
26,028
0.23
112,844
265,245
$
149,147
$
265,245
$
149,147
(16,434) $
(37,047) $
(9,415) $
(24,936) $
(52,607) $
$
221,937
(42,529)
36,306
$
$
$
$
$
$
$
$
100.0%
59.6%
100.0%
61.5%
100.0%
56.2%
100.0%
63.5%
40.4%
38.5%
43.8%
36.5%
27.1%
1.3%
12.1%
1.4%
0.2%
10.5%
2.8%
7.7%
14.9%
8.9%
27.0%
1.6%
9.9%
2.4%
(0.8%)
8.2%
2.2%
6.0%
13.2%
6.6%
26.3%
1.7%
15.8%
1.7%
(0.6%)
14.7%
4.2%
10.5%
19.4%
11.8%
29.2%
1.2%
6.0%
3.3%
(0.4%)
3.1%
0.8%
2.2%
9.0%
3.0%
Other Performance Metrics:
Year-over-year net revenue growth (decline)
Comparable sales growth(2)
Boutiques:
Number of boutiques, end of period
New boutiques
Repositioned to flagship boutique
Boutique closure
Boutique temporarily closed due to mall redevelopment
Boutiques expanded or repositioned
(2) Please see “How We Assess the Performance of Our Business” section of this MD&A for further details on these financial and operating
measures.
101
1
(1)
-
-
-
106
2
-
(1)
-
1
106
6
-
(1)
-
6
(2.9%)
n/a
74.3%
n/a
66.1%
n/a
(12.6%)
n/a
101
7
(1)
-
(1)
3
24 |
7
The following table provides a reconciliation of net income to EBITDA, Adjusted EBITDA, Adjusted Net Income and
Adjusted Net Income per Diluted Share for the periods indicated.
Reconciliation to Non-IFRS Measures
(in thousands of Canadian dollars, unless otherwise noted)
Reconciliation of Net Income to EBITDA and Adjusted
Q4 2022
13 Weeks
Q4 2021
13 Weeks
Fiscal 2022
52 Weeks
Fiscal 2021
52 Weeks
EBITDA:
Net income
Depreciation and amortization
Depreciation on right-of-use assets
Finance expense
Income tax expense
EBITDA
Adjustments to EBITDA:
$
34,225 $
12,110
17,593
6,092
12,503
16,070 $
10,723
16,410
6,464
5,970
156,917 $
44,569
68,058
25,202
62,683
19,227
38,871
66,278
28,420
6,975
82,523
55,637
357,429
159,771
Stock-based compensation expense
Rent impact from IFRS 16, Leases(3)
Unrealized loss (gain) on equity derivative contracts
Fair value adjustment of NCI in exchangeable shares
liability
Fair value adjustment for inventories acquired in CYC
Acquisition costs of CYC
Secondary Offering transaction costs
5,725
(22,939)
994
4,193
(21,985)
(2,640)
26,131
(90,048)
(11,192)
10,691
(89,949)
(3,701)
-
-
-
-
-
-
-
-
2,000
1,902
2,633
530
-
-
-
-
Adjusted EBITDA
Adjusted EBITDA as a percentage of net revenue
66,303
14.9%
35,205
13.2%
289,385
19.4%
¤
$ 76,812
9.0%
Reconciliation of Net Income to Adjusted Net Income:
Net income
Adjustments to net income:
Stock-based compensation expense
Unrealized loss (gain) on equity derivatives contracts
Fair value adjustment of NCI in exchangeable shares
liability
Fair value adjustment for inventories acquired in CYC
Acquisition costs of CYC
Secondary Offering transaction costs
Related tax effects
Adjusted Net Income
Adjusted Net Income as a percentage of net revenue
Weighted Average Number of Diluted Shares
Outstanding (thousands)
Adjusted Net Income per Diluted Share
Note (3) Rent Impact from IFRS 16, Leases
Depreciation of right-of-use assets, excluding fair value
adjustments
Interest expense on lease liabilities
Rent impact from IFRS 16, Leases
$
34,225 $
16,070 $
156,917 $
19,227
5,725
994
-
-
-
-
(1,469)
4,193
(2,640)
26,131
(11,192)
10,691
(3,701)
-
-
-
-
55
2,000
1,902
2,633
530
(2,185)
-
-
-
-
(189)
39,475 $
8.9%
17,678 $
6.6%
176,736 $
11.8%
26,028
3.0%
116,774
114,052
115,784
0.34 $
0.16 $
1.53 $
112,844
0.23
Q4 2022
13 Weeks
Q4 2021
13 Weeks
Fiscal 2022
52 Weeks
Fiscal 2021
52 Weeks
(17,460)
(5,479)
$
(16,410) $
(5,575)
(67,702) $
(22,346)
(66,278)
(23,671)
(22,939)
$
(21,985) $
(90,048) $
(89,949)
$
$
$
$
8
Fiscal 2022 Annual Report | 25
The following table reconciles cash used in investing activities to capital cash expenditures (net of proceeds from
lease incentives) for the periods indicated.
(in thousands of Canadian dollars)
Reconciliation of Cash Used in Investing Activities to
Capital Cash Expenditures (Net of Proceeds From
Lease Incentives):
Cash used in investing activities
Acquisition of CYC Design Corporation, net of cash acquired
Proceeds from lease incentives
Q4 2022
13 Weeks
Q4 2021
13 Weeks
Fiscal 2022
52 Weeks
Fiscal 2021
52 Weeks
$
(20,734) $
(11,368) $
-
4,300
-
1,953
(99,576) $
32,555
14,414
(50,848)
-
8,319
Capital cash expenditures (net of proceeds from lease
incentives)
$
(16,434) $
(9,415) $
(52,607) $
(42,529)
The following table reconciles net cash generated from operating activities to free cash flow for the periods indicated.
(in thousands of Canadian dollars)
Reconciliation of Net Cash Generated from Operating
Activities to Free Cash Flow:
Net cash generated from operating activities
Interest paid on credit facilities
Proceeds from lease incentives
Repayments of principal on lease liabilities
Purchase of property, equipment and intangible assets
Q4 2022
13 Weeks
Q4 2021
13 Weeks
Fiscal 2022
52 Weeks
Fiscal 2021
52 Weeks
$
733 $
613
4,300
(21,959)
(20,734)
5,438 $
890
1,953
(21,849)
(11,368)
338,353 $
2,491
14,414
(66,300)
(67,021)
125,628
4,651
8,319
(51,444)
(50,848)
Free cash flow
$
(37,047) $
(24,936) $
221,937 $
36,306
The following tables provide selected consolidated financial information for the three most recently completed fiscal
years.
Selected Consolidated Financial Information
(in thousands of Canadian dollars)
Net revenue
Net income
Net income per share
Basic
Diluted
Selected Consolidated Financial Position Data
(in thousands of Canadian dollars)
Total assets
Total non-current liabilities
Fiscal 2022
52 Weeks
Fiscal 2021
52 Weeks
Fiscal 2020
52 Weeks
1,494,630 $
156,917
857,323 $
19,227
980,589
90,594
1.42
1.36
0.18
0.17
0.84
0.81
As at
As at
February 27, 2022
February 28, 2021
As at
March 1, 2020
1,424,586 $
506,450
1,140,737 $
531,279
1,036,715
550,807
$
$
SUMMARY OF FACTORS AFFECTING PERFORMANCE
Since the outbreak of COVID-19 and the resulting emergency measures put in place by federal, provincial, state and
local governments across North America, we have seen, and expect to continue to see, a direct, material adverse
impact to many of the factors affecting our performance. The extent of the impact of such emergency measures, will
depend on future developments, including the duration and severity of COVID-19 in the local markets in which we
operate, which are uncertain and cannot be predicted.
26 |
9
We generally believe that our performance and future success depend on a number of factors that present significant
opportunities for us. These factors are also subject to a number of inherent risks and challenges, some of which are
discussed below. See also the “Risk Factors” section of this MD&A and in our AIF.
Our Brand and Products
Our exclusive fashion brands offer a strategic mix of exclusive brands that have been thoughtfully conceived, created,
and developed. We believe that a key area of differentiation for us is that we design apparel and accessories for our
collection of exclusive brands. Our multi-brand strategy gives us control over our products and provides us with the
flexibility to optimize our brand mix as needed to address changes in client demand and fashion preferences, which
has been critical to our growth while also reducing risk.
Our exclusive brands are supported by in-house design teams focused on creating beautiful, quality products that
align with the unique positioning, look and feel of each brand. Each of our exclusive brands has its own vision and
distinct aesthetic point of view. As a group, they are united by an unwavering commitment to superior fabrics,
meticulous construction and relevant, effortless design.
Exclusive brands currently represent over 96% of Aritzia’s net revenue. Our broad product assortment includes t-
shirts, blouses, sweaters, jackets, coats, pants, shorts, skirts, dresses, denim, intimates, swimwear, accessories, and
men’s wear (resulting from our acquisition of CYC) for each season. We maintain a flexible mix of historically
successful items and new seasonal styles. Our changing product mix is a blended reflection of client demands and
fashion trends. This strategic mix helps us to drive client conversion by delivering fashion must-haves, while still
generating a meaningful proportion of revenue from our fashion essentials. We complement our exclusive product
mix with a strategically chosen selection of premium denim, accessories and footwear from leading contemporary
third-party brands. Our expansive and diverse range of women’s fashion apparel and accessories addresses a broad
range of style preferences and lifestyle requirements for our clients, producing strong and enduring client loyalty.
Product Strategy
We control the design, merchandise planning, sourcing, production and retail functions of our exclusive brands and
complement this with third-party brands as appropriate. This strategy allows us to ensure that we have the right
product, at the right time, at the right price, in the right quantity and in the right place. Product design and quality are
meticulously evaluated and controlled by us, from fabrics to trims, and styling to fit. In Fiscal 2021 we implemented
our Product Lifecycle Management system to further support our product strategy and processes. This system has
allowed us to consolidate and manage all of our product development data and tools into a single place and improved
our focus on innovation and product quality, increase speed to market where appropriate, and ultimately has
optimized manufacturing costs.
Creative Development
We have talented teams of in-house designers who focus on creating products featuring high quality fabrics,
considered detailing, sophisticated construction and superior fit. Our product design and development process builds
on proven sellers while taking new fashion trends into account with the goal of creating fashion must-haves each
season. Our in-house technical team ensures all products are executed in a manner that is consistent with our design
and delivers superior fit and sophisticated construction in the production of our exclusive brands. We partner with
best in class mills and suppliers to create and sample garments, which are fit-tested twice before production. We
ensure that the quality of our raw materials and the finished product are all held to our high standards and the
expectations of our clients.
Merchandise Planning
Our demand-driven merchandise planning, buying and inventory strategies have been developed and refined for
more than three decades, and are designed to ensure that we have the right product, at the right time, at the right
price, in the right quantity and in the right place.
Each year we develop product in two or four seasonal collections for our exclusive brands. We generate a meaningful
proportion of revenue from our proven sellers while driving excitement through new seasonal product assortment.
We buy in initial quantities that allow us to gauge client demand and follow up with larger orders when proven
successful to maximize revenue. We analyze sales data in order to make inventory adjustments and to respond to
the latest trends. Our inventory management processes and systems provide us with the ability to optimize inventory
across our channels to ensure that each boutique and aritzia.com is merchandised with products that resonate with
10
Fiscal 2022 Annual Report | 27
local preferences. By actively monitoring sell-through rates and managing the mix of product categories in our
boutiques and aritzia.com, we are able to respond to emerging trends in a timely manner, minimize our dependence
on any particular category, style or fabrication and preserve a balanced, coordinated presentation of merchandise
within each boutique while being able to offer our client the entire assortment online. We believe that our disciplined
merchandise planning strategy allows us to optimize inventory levels and maximize full-price sales.
Sourcing and Production
We contract and maintain direct relationships with a diversified base of independent suppliers and manufacturers for
our exclusive brands who provide us with the flexibility to source high quality materials and products at competitive
costs. We believe that our approach of sourcing a majority of our raw materials and working directly with suppliers
and manufacturers enhances our ability to create beautiful and high-quality products in a timely manner.
We source the majority of our raw materials directly from mills, trim suppliers and manufacturers, located primarily in
China, Italy, Japan, South Korea, and Taiwan which we believe to be best in class that uphold our standards for
quality, lead time and cost. Our finished goods are sourced from manufacturers located primarily in Cambodia, China,
Peru, Portugal, Romania, Sri Lanka and Vietnam. We continue to monitor and diversify our supplier base, taking into
consideration the geo-political and economic environment to mitigate risk. Capacity planning with our manufacturers
is done at the beginning of the season to ensure flexibility. We engage third parties to inspect our manufacturers’
factories to ensure quality control and engage independent expert service providers to conduct factory audits for
compliance with local laws and regulations and global standards. We have implemented and enforce a Supplier Code
of Conduct and initiatives to increase transparency with respect to the origins of our raw materials.
Boutiques
We have developed our boutique network in a measured and disciplined manner. We have a portfolio of boutiques
situated in premier real estate locations in high performing retail malls and high streets in North America. Our strong
boutique sales productivity continues to make us a sought-after tenant for top quality locations in premier shopping
destinations. In addition to opening new Aritzia and exclusive brand boutiques (e.g. Wilfred, Babaton, Super World,
and TNA), we generate attractive returns on capital by enhancing elements of our existing boutiques (including
footprint, layout and assortment) through carefully considered boutique expansions and repositions.
See also the “COVID-19 Pandemic” section of this MD&A.
The following table summarizes the change in Aritzia’s boutique count for the periods indicated (excluding CYC
boutiques).
Q4 2022
Q4 2021
Fiscal 2022
Fiscal 2021
Number of boutiques, beginning of period
New boutiques
Repositioned to a flagship boutique
Boutique closure
Boutique temporarily closed due to mall redevelopment
105
2
-
(1)
-
101
1
(1)
-
-
Number of boutiques, end of period
Boutiques expanded or repositioned
106
1
101
-
101
6
-
(1)
-
106
6
96
7
(1)
-
(1)
101
3
In addition, CYC had four boutiques as at February 27, 2022.
eCommerce and Omni-Channel Innovation
Launched in fiscal 2013, our eCommerce business quickly surpassed our growth expectations and has continued to
experience growth year over year in online traffic. We continue to invest in our digital capabilities to support our
eCommerce business:
⎯ Drive our omni-channel growth and capabilities – Our clients shop both online and in our boutiques, and we
believe there are synergies between our boutique network and aritzia.com, with the success of each channel
benefiting the other through increased brand awareness and affinity. We launched store inventory visibility to
allow clients to pre-shop our boutiques. Our clients have responded positively and as a result, we are seeing an
improvement in retail sales driven from store inventory visibility as well as a reduction in call volume to our
Concierge team regarding store inventory availability. We are now focusing our efforts on buy online, ship from
store, buy online, pickup from store and omni order history. Due to the growth of our omni-channel client base,
we anticipate significant benefit from the evolution of these omni services.
⎯ Capitalize on digital marketing channels to drive client acquisition and retention – We are directing resources with
a renewed focus on digital marketing, including programs centred on search engine optimization enhancements,
refinement of our email marketing, and further leveraging our social media. We made numerous technical
enhancements to improve our search engine optimization results, including navigation bread crumbs, improved
product descriptions, and data driven category naming. We are pleased with the positive impact this has had on
new client visits.
⎯ Deliver personalized experiences – We are in the early phases of leveraging advanced business intelligence and
behaviour analytics to further enhance our understanding of our clients. This includes optimizing our online
operations to enhance personalization which we believe will drive higher conversion and client loyalty. We have
begun to customize merchandising and content experience based on geography and climate and will continue to
evolve personalized experiences into Fiscal 2023. We are planning on leveraging personalization technology in
Fiscal 2023 which will allow us to be more targeted and nimble as we scale our capabilities.
⎯
Improve the digital experience to enhance the shopping experience online – Aritzia is focused on improving the
digital experience across all devices (e.g., desktop, mobile, tablet) to work towards making shopping frictionless.
We continue to implement a number of core optimizations including user reviews and fit guides, enhancing site
search functionality, landing page templates, and numerous checkout improvements to reduce client friction. The
core areas of our client’s digital journey including discovery, evaluating, and purchase are continuously improved
resulting in increased conversion rate and average order value. We have also re-set our optimization program,
embedding a culture of test and learn on how we go to market with new features and capabilities. For example,
we have tested the optimal placement of visual size and fit guides on our category and product pages.
Distribution Facilities
Our current distribution network consists of three distribution centres, two in Canada and one in the United States,
that are well positioned to service our boutiques and eCommerce business. We operate our distribution centre located
in New Westminster, British Columbia, while the distribution centres located in Mississauga, Ontario and Columbus,
Ohio are operated by third-party logistics providers. Our inventory is centrally managed, and shared amongst our
boutiques and eCommerce business.
Our distribution centre in New Westminster, British Columbia is a 223,000 square foot facility. We continue to upgrade
our warehouse management system to enhance our supply chain system flexibility and scalability. During Fiscal
2020, we completed expansions at both of our third-party distribution centres in Mississauga, Ontario and Columbus,
Ohio, from 75,000 square feet to 150,000 square feet and from 138,000 to 240,000 square feet, respectively. In total,
we added 177,000 square feet of space, representing an approximately 80% increase in size for these facilities. We
have started retro-fitting work in our New Westminster, British Columbia and Columbus, Ohio distribution centres in
order to expand capability and capacity to accommodate the surge of eCommerce growth without having to add more
space. These expansions support both our retail and eCommerce businesses with added capacity to handle higher
levels of throughput. Our current facilities are set up to flexibly manage multi-channel and omni-channel demands,
as our business continues to grow.
In Fiscal 2022 we broke ground on a new facility that we will be operating in Vaughan, Ontario. This new facility will
be in-sourced and will replace our existing 150,000 square feet distribution centre operated by a third-party logistics
provider with a new 552,300 square feet distribution centre operated by Aritzia. It is anticipated that the new facility
will be operational by Fiscal 2024.
Systems and Infrastructure
Our focus on building our digital infrastructure impacts everything we do. In our view, digital is about more than just
our technology and eCommerce operations, it runs through the business all the way from design to the service we
deliver in boutiques. We use best-in-class information systems to support the major functional aspects of our
business. Ongoing upgrades and investments are expected to increase our efficiency and support our growth.
Enterprise Management
Across the organization, we use SAP, a sophisticated enterprise resource planning system, to provide business
process support and intelligence across customer, marketing, Concierge, merchandise planning, inventory
28 |
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12
improvement in retail sales driven from store inventory visibility as well as a reduction in call volume to our
Concierge team regarding store inventory availability. We are now focusing our efforts on buy online, ship from
store, buy online, pickup from store and omni order history. Due to the growth of our omni-channel client base,
we anticipate significant benefit from the evolution of these omni services.
⎯ Capitalize on digital marketing channels to drive client acquisition and retention – We are directing resources with
a renewed focus on digital marketing, including programs centred on search engine optimization enhancements,
refinement of our email marketing, and further leveraging our social media. We made numerous technical
enhancements to improve our search engine optimization results, including navigation bread crumbs, improved
product descriptions, and data driven category naming. We are pleased with the positive impact this has had on
new client visits.
⎯ Deliver personalized experiences – We are in the early phases of leveraging advanced business intelligence and
behaviour analytics to further enhance our understanding of our clients. This includes optimizing our online
operations to enhance personalization which we believe will drive higher conversion and client loyalty. We have
begun to customize merchandising and content experience based on geography and climate and will continue to
evolve personalized experiences into Fiscal 2023. We are planning on leveraging personalization technology in
Fiscal 2023 which will allow us to be more targeted and nimble as we scale our capabilities.
⎯
Improve the digital experience to enhance the shopping experience online – Aritzia is focused on improving the
digital experience across all devices (e.g., desktop, mobile, tablet) to work towards making shopping frictionless.
We continue to implement a number of core optimizations including user reviews and fit guides, enhancing site
search functionality, landing page templates, and numerous checkout improvements to reduce client friction. The
core areas of our client’s digital journey including discovery, evaluating, and purchase are continuously improved
resulting in increased conversion rate and average order value. We have also re-set our optimization program,
embedding a culture of test and learn on how we go to market with new features and capabilities. For example,
we have tested the optimal placement of visual size and fit guides on our category and product pages.
Distribution Facilities
Our current distribution network consists of three distribution centres, two in Canada and one in the United States,
that are well positioned to service our boutiques and eCommerce business. We operate our distribution centre located
in New Westminster, British Columbia, while the distribution centres located in Mississauga, Ontario and Columbus,
Ohio are operated by third-party logistics providers. Our inventory is centrally managed, and shared amongst our
boutiques and eCommerce business.
Our distribution centre in New Westminster, British Columbia is a 223,000 square foot facility. We continue to upgrade
our warehouse management system to enhance our supply chain system flexibility and scalability. During Fiscal
2020, we completed expansions at both of our third-party distribution centres in Mississauga, Ontario and Columbus,
Ohio, from 75,000 square feet to 150,000 square feet and from 138,000 to 240,000 square feet, respectively. In total,
we added 177,000 square feet of space, representing an approximately 80% increase in size for these facilities. We
have started retro-fitting work in our New Westminster, British Columbia and Columbus, Ohio distribution centres in
order to expand capability and capacity to accommodate the surge of eCommerce growth without having to add more
space. These expansions support both our retail and eCommerce businesses with added capacity to handle higher
levels of throughput. Our current facilities are set up to flexibly manage multi-channel and omni-channel demands,
as our business continues to grow.
In Fiscal 2022 we broke ground on a new facility that we will be operating in Vaughan, Ontario. This new facility will
be in-sourced and will replace our existing 150,000 square feet distribution centre operated by a third-party logistics
provider with a new 552,300 square feet distribution centre operated by Aritzia. It is anticipated that the new facility
will be operational by Fiscal 2024.
Systems and Infrastructure
Our focus on building our digital infrastructure impacts everything we do. In our view, digital is about more than just
our technology and eCommerce operations, it runs through the business all the way from design to the service we
deliver in boutiques. We use best-in-class information systems to support the major functional aspects of our
business. Ongoing upgrades and investments are expected to increase our efficiency and support our growth.
Enterprise Management
Across the organization, we use SAP, a sophisticated enterprise resource planning system, to provide business
process support and intelligence across customer, marketing, Concierge, merchandise planning, inventory
12
Fiscal 2022 Annual Report | 29
management, production, costing, order management, finance, accounting, reporting and analysis. As the backbone
of our infrastructure, this system has the flexibility to support global and multi-channel expansion.
Clients – Omni Project
Our Omni Project builds on the foundation of our point-of-sale system and our investment in digital selling tools to
enable omni-channel capabilities such as store inventory visibility, buy online, ship from store and buy online, pickup
in store. The project includes multiple work streams spanning a store order fulfillment solution, the physical
optimization of our backroom spaces, foundational order sourcing technology, and enhancements to our digital
customer experience.
⎯ Store Inventory Visibility – Launched in Fiscal 2022, this functionality enhances the client experience on
aritzia.com by providing visibility of product availability in stores. This initiative drives cross-channel shopping
behavior and reduces contacts to our Concierge team by enabling customers to self-serve on common
product availability related questions.
⎯ Buy Online, Ship From Store – Launching in Fiscal 2023, along with foundational systems to enable future
omni channel capabilities. This new capability introduces store inventory online, ensuring our full product
assortment is available on aritzia.com. It also enables strategic targeting of inventory across our network of
boutiques and minimizes delivery time to our clients.
⎯ Buy Online, Pickup In Store – Launching in Fiscal 2023, this functionality provides clients with the option to
pick up their online order in store. Building on Store Inventory Visibility, this capability further integrates the
online and in-store experiences leveraging the exceptional service in our boutiques to deliver an elevated,
yet convenient experience.
We are also focused on improving the availability of fulfillment data and analytics. We believe that reporting
optimizations and visibility into key performance indicators will help to set our boutique teams up to maintain accurate
inventory and monitor performance on key fulfillment metrics.
Concierge
Launched in Fiscal 2020, this integrated solution enhances our client experience throughout the lifecycle of their
purchase. It is also a revenue generating opportunity as we personalize each client interaction through our client care
centre. This platform was instrumental in supporting the significant increase in client care engagements during Fiscal
2021 as a direct result of the surge in eCommerce volumes.
Boutiques
We utilize Oracle Retail as our point-of-sale system to facilitate client transactions and fulfill boutique-initiated orders
across our network to provide a seamless shopping experience for our clients. We are currently working on a fulfilment
app which will allow boutiques to fulfil eCommerce orders as well as enable buy online and pick up in-store
capabilities.
eCommerce
aritzia.com is powered by Salesforce Commerce Cloud since its launch in fiscal 2013. With our eCommerce business
growing, we continue to invest in our digital capabilities. In Fiscal 2022 we launched store inventory visibility, digital
e-gift cards, SuperWorld.com, personalized merchandising, and design enhancements and improvements throughout
the client journey. We have seen a positive impact to our retail sales with the launch of store inventory visibility, as
well as decreased call volume to our Concierge team regarding store inventory. Digital gift card adoption was
immediate during holiday 2021 and clients received access to the gifts cards immediately, and we reduced
operational costs as well as reduced packaging. Our SuperWorld.com online experience propelled our brand and
allowed us to showcase the unique Super World brand aesthetic while distinguishing from the look and feel of
aritzia.com. We saw improvements to our conversion rate driven by our thoughtful merchandising strategy,
prioritizing relevant styles to shoppers based on our unique point of view and where clients live. Our branding and
design evolution has also manifested itself online, creating a compelling and elevated look and feel that is consistent
with our brand objectives.
Going forward, we continue to evolve and refine our omni-channel capabilities to further elevate our clients’ shopping
experience, to provide a centralized view of inventory and unlock order fulfillment capabilities to improve cross
channel activities such as, buy online, ship from store and buy online, pickup in store. We are also directing resources
30 |
13
with a renewed focus on digital marketing and increasing the use of data analytics to improve online conversion and
client loyalty through increased personalization.
Product
We utilize SAP technologies to manage our enterprise inventory system of record. In Fiscal 2021, we successfully
completed and implemented Centric 8 PLM Software, a new Product Lifecycle Management System (“PLM”), to
support our ongoing product expansion strategy. Supporting our Creative, Technical Development and Manufacturing
teams, our PLM application is used to manage all of the data and support all of the processes to bring a product to
market (from concept to commercialization). This system consolidates and centralizes all of our product development
data and tools to improve our focus on innovation and product quality, increase speed to market where appropriate,
and ultimately optimize manufacturing costs.
Distribution and Logistics
Blue Yonder is the primary system used in our distribution centre in New Westminster, British Columbia to support
our fulfilment processes. We will also be using Blue Yonder in our new distribution centre in Vaughan, Ontario when
it is operational. We continue to upgrade our warehouse management system to enhance our supply chain system
flexibility and scalability to support our boutique and eCommerce growth initiatives.
Business Support
We utilize Workday as our human resource information system. This integrated platform supports strategic human
capital decisions for our growing business.
In Fiscal 2021, we established a new Data & Analytics function to maximize the value of our data. Leveraging our
existing investments and the capability of Google Cloud, we are building capacity across our people, processes and
technology to further enhance efficiencies and decision making in our operations.
We continue to migrate our workloads to the cloud in order to scale our technology with our growing business and to
provide greater resiliency and flexibility to support the business.
Furthermore, during COVID-19, we were able to effectively support the move to a flexible, remote business model;
supporting initiatives and leveraging our systems in different ways. We continue to invest in identity and access
management programs including multi-factor authentication technologies, and third-party company engagements to
proactively monitor security, conduct penetration testing, and support compliance validation.
See also the “COVID-19 Pandemic” section of this MD&A.
Environment, Social & Governance (ESG)
Aritzia recognizes that as a leader in the fashion industry and for our long-term success, we have a responsibility to
continue to accelerate our ESG commitments and performance. To deliver Everyday Luxury, for today and tomorrow,
we will strengthen the environmental and social contributions that amplify the positive impact Aritzia is making across
our operations and wider value chain.
Our ESG priorities are distributed across our value chain from raw material sourcing and third-party manufacturing,
our owned and directly operated boutiques, offices and distribution centres, through to our products’ use and end of
life impacts. We have prioritized efforts based on our material impacts and risks in line with The Sustainability
Accounting Standards Board’s reporting framework for the Apparel, Accessories and Footwear industry as well as
Aritzia’s internally conducted materiality assessment.
For a detailed discussion on ESG, refer to the “Environment, Social & Governance (ESG): Our Impacts and our
Progress” section of the Company’s AIF, which is available on SEDAR at www.sedar.com.
Consumer Trends
The apparel industry is subject to shifts in consumer trends, preferences and consumer spending and our revenue
and operating results depend, in part, on our ability to respond to such changes in a timely manner. Our differentiated
multi-brand strategy gives us control over our products and provides us with the flexibility to optimize our brand mix
as needed to address changes in consumer demand and fashion preferences, which has been a critical driver of the
consistency of our growth. Our diversified mix of exclusive brands satisfies a broad range of fashion needs, which
14
Fiscal 2022 Annual Report | 31
allows us to attract a wide client base and increases our addressable market. Our revenue is also impacted by
discretionary spending by consumers, which is affected by many factors that are beyond our control, including, but
not limited to, general economic conditions, consumer disposable income levels, consumer confidence levels,
consumer debt, the cost of basic necessities and other goods and the effects of weather, natural disasters or global
pandemics. We believe that our track record demonstrates the success of our exclusive brand strategy at responding
to changes in fashion demands through all stages of economic cycles.
Seasonality
The women’s apparel industry is seasonal in nature, with a higher proportion of net revenue and operating income
generated in the second half of the fiscal year, which includes the back-to-school and holiday seasons. We also have
higher working capital requirements in the periods preceding the launch of new seasons as we receive and pay for
new inventory. We manage our working capital needs through cash flow from operations and our revolving credit
facility.
Average quarterly share of annual net revenue over the last three completed fiscal years is as follows:
First fiscal quarter
Second fiscal quarter
Third fiscal quarter
Fourth fiscal quarter
Yearly total
17%
24%
29%
30%
100%
Weather
Extreme weather conditions in the areas in which our boutiques are located could adversely affect our business and
financial results. For example, frequent or unusually heavy snowfall, ice storms, rainstorms or other extreme weather
conditions over a prolonged period could make it difficult for our clients to travel to our boutiques and thereby reduce
our revenue and profitability. This is potentially mitigated by our clients’ ability to buy our products through aritzia.com.
Our business is also susceptible to unseasonable weather conditions. For example, extended periods of
unseasonably warm temperatures during the winter season or cool weather during the summer season could render
a portion of our inventory incompatible with those unseasonable conditions, which could adversely affect our ability
to execute our strategy to effectively present seasonal inventory.
Competition
We operate in the women’s apparel industry, primarily within the North American market. We are strategically
positioned in the global fashion landscape between fast fashion and luxury. We compete with a diverse group of
specialty apparel retailers, department stores, fast fashion retailers, athletic retailers and other manufacturers and
retailers of branded apparel. Market participants compete on the basis of, among other things, the location of
boutiques, the breadth, style, quality, price and availability of merchandise, the level of client service and brand
recognition. We believe that we successfully compete on the basis of several factors that include our strategic mix of
exclusive brands, offering of a combination of high quality products at an attainable price point, our refined and proven
merchandise planning strategy, our focus on providing an aspirational shopping experience and exceptional client
service, our premier real estate portfolio and our market positioning, collectively resulting in a fashion brand loved by
women all over the world.
Foreign Exchange
The majority of our net revenue is derived in Canadian dollars while the vast majority of our cost of goods sold is
denominated in U.S. dollars. Fluctuations in the exchange rate of the Canadian dollar versus the U.S. dollar could
materially affect our gross profit margins and operating results. From time to time, we use foreign currency forward
contracts to mitigate risks associated with forecasted U.S. dollar merchandise purchases sold in Canada, but there
can be no assurances that such strategies will prove to be successful. See “Financial Instruments” and “Risk Factors”
sections of this MD&A.
32 |
15
HOW WE ASSESS THE PERFORMANCE OF OUR BUSINESS
In assessing the performance of our business, we consider a variety of financial and operating measures that affect
our operating results.
Net revenue reflects our sale of merchandise, less returns and discounts. Retail revenue at point-of-sale is measured
at the fair value of the consideration received at the time the sale is made to the customer, net of discounts and
estimated allowance for returns. For merchandise that is ordered and paid in a boutique and subsequently picked up
by or delivered to the customer, revenue is deferred until control of the merchandise has been transferred to the
customer. eCommerce revenue is recognized at the date of estimated delivery to the customer, and measured at the
fair value of consideration received, net of discounts and an estimated allowance for returns. Revenues are reported
net of sales taxes collected for various governmental agencies.
Comparable sales growth is a retail industry metric used to explain our total combined revenue growth in
eCommerce and established boutiques. Comparable sales from established boutiques is calculated based on
revenue from boutiques that have been opened for at least 56 weeks, and excludes boutiques that were expanded
or repositioned, boutiques in centres where we opened a new additional boutique and boutiques significantly
impacted by nearby construction and other similar disruptions during this period. Our comparable sales growth
calculation excludes the impact of foreign currency fluctuations. We apply the prior year’s average quarterly exchange
rate to both current year and prior year comparable sales to achieve a consistent basis for comparison (i.e. on a
constant currency basis).
Due to temporary boutique closures from COVID-19, which resulted in boutiques being removed from our comparable
store base, we believe total comparable sales growth is not currently representative of our business and therefore
we have not reported figures on this metric in this MD&A. Instead, we may make a temporary reference in this MD&A
to retail comparable sales growth from established boutiques which is calculated as comparable sales growth with
the exclusion of eCommerce revenue growth.
Gross profit reflects our net revenue less cost of goods sold. Cost of goods sold includes inventory and product-
related costs, variable lease payments and other occupancy-related expenses, as well as depreciation expense for
our boutique and distribution centre assets. Our cost of goods sold may include different costs compared to other
retailers. Gross profit margin is impacted by the components of cost of goods sold, product mix and markdowns. We
define gross profit margin as our gross profit divided by our net revenue.
Selling, general and administrative (“SG&A”) expenses consists of selling expenses that are generally variable
with net revenue and general and administrative operating expenses that are primarily fixed. Our SG&A expenses
also include depreciation and amortization expenses for all support office assets and intangible assets. We expect
our SG&A expenses to increase as we continue to open new boutiques, grow our eCommerce business, increase
brand awareness and invest in our infrastructure and people.
SG&A expenses as a percentage of net revenue, excluding strategic investments in technology and infrastructure,
are usually higher in the lower-volume first and second quarters, and lower in the higher-volume third and fourth
quarters because a portion of these costs are relatively fixed. Our SG&A expenses may include different expenses
compared to other retailers.
EBITDA is defined as consolidated net income before depreciation and amortization, finance expense and income
tax expense.
Adjusted EBITDA is a useful measure of operating performance, as we believe it provides a more relevant picture
of operating results in that it excludes the effects of financing and investing activities by removing the effects of
interest, depreciation and amortization expenses that are not reflective of underlying business performance and other
one-time or non-recurring expenses. We use Adjusted EBITDA to facilitate a comparison of our operating
performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors
and trends affecting our business. We define Adjusted EBITDA as consolidated net income before depreciation and
amortization, finance expense and income tax expense, adjusted for the impact of certain items, including stock-
based compensation expense, unrealized gains or losses on equity derivative and forward contracts, a deduction of
interest expense and depreciation relating to our leases to reflect an estimate of rent expense, fair value adjustment
for inventories acquired in CYC, fair value adjustments of NCI in exchangeable shares liability and other non-cash
items and/or items that we consider non-recurring and not representative of our ongoing operating performance.
Because Adjusted EBITDA excludes certain non-cash items, we believe that it is less susceptible to variances in
actual performance resulting from depreciation and amortization and other non-cash charges.
16
Fiscal 2022 Annual Report | 33
Adjusted Net Income (per Diluted Share) is a useful measure of performance, as we believe it provides a more
relevant picture of results by excluding the effects of expenses that are not reflective of underlying business
performance and other one-time or non-recurring expenses. We use Adjusted Net Income to facilitate a comparison
of our performance on a consistent basis from period-to-period and to provide for a more complete understanding of
factors and trends affecting our business. We define Adjusted Net Income as consolidated net income, adjusted for
the impact of certain items, including stock-based compensation expense, unrealized gains or losses on equity
derivative and forward contracts, fair value adjustment for inventories acquired in CYC, fair value adjustments of NCI
in exchangeable shares liability and other non-cash items and/or items that we consider non-recurring and not
representative of our ongoing operating performance, net of related tax effects. We define Adjusted Net Income per
Diluted Share by dividing Adjusted Net Income by the weighted average number of diluted shares outstanding.
Capital cash expenditures (net of proceeds from lease incentives) is a useful measure as we believe it is a more
useful indicator of the net cash capital investment relating to our boutiques and infrastructure. We define capital cash
expenditures (net of proceeds from lease incentives) as cash used in investing activities, excluding cash used in
business combinations, less proceeds from lease incentives.
Free cash flow is an important metric because it is an indicator of how much cash is available for business
acquisitions, debt repayment, share repurchases and other investing and financing activities. Our sustained ability to
generate free cash flow is an indicator of the financial strength of our business, as we require regular capital
expenditures to build and maintain boutiques and invest in infrastructure. We define free cash flow as net cash
generated from operating activities excluding interest paid on credit facilities, plus proceeds from lease incentives,
less repayments of principal on lease liabilities and cash used for the purchase of property, equipment and intangible
assets.
NON-IFRS MEASURES INCLUDING RETAIL INDUSTRY METRICS
This MD&A makes reference to certain non-IFRS measures including certain retail industry metrics. These measures
are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided
as additional information to complement those IFRS measures by providing further understanding of our results of
operations from management’s perspective. Accordingly, these measures should not be considered in isolation or as
a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures including
“EBITDA”, “Adjusted EBITDA”, “Adjusted Net Income”, “Adjusted Net Income per Diluted Share”, “capital cash
expenditures (net of proceeds from lease incentives)”, and “free cash flow.” This MD&A also makes reference to
“gross profit margin” as well as “comparable sales growth”, which are commonly used operating metrics in the retail
industry but may be calculated differently compared to other retailers. Gross profit margin and comparable sales
growth are considered supplementary measures under applicable securities laws. Our comparable sales growth
calculation excludes the impact of foreign currency fluctuations. These non-IFRS measures, including retail industry
metrics, are used to provide investors with supplemental measures of our operating performance and thus highlight
trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We believe
that securities analysts, investors and other interested parties frequently use non-IFRS measures, including retail
industry metrics, in the evaluation of issuers. Our management also uses non-IFRS measures, including retail
industry metrics, in order to facilitate operating performance comparisons from period to period, to prepare annual
operating budgets and forecasts and to determine components of management compensation. For definitions and
reconciliations of these non-IFRS measures to the relevant reported measures, please see the “How We Assess the
Performance of Our Business” and “Selected Consolidated Financial Information” sections of this MD&A.
34 |
17
RESULTS OF OPERATIONS
Analysis of Results for Fourth Quarter Fiscal 2022
Consolidated Statements of Operations
(in thousands of Canadian dollars, unless otherwise noted)
Q4 2022
Q4 2021
Net revenue
Cost of goods sold
Gross profit
Operating expenses
Selling, general and administrative
Stock-based compensation
Income from operations
Finance expense
Other expense (income)
Income before income taxes
Income tax expense
Net income
Net income per diluted share
Adjusted EBITDA(1)
Adjusted Net Income (1)
Adjusted Net Income (1) per Diluted Share
$ 444,322
264,816
100.0% $ 267,525
164,600
59.6%
100.0%
61.5%
179,506
40.4%
102,925
38.5%
120,221
5,725
53,560
6,092
740
46,728
12,503
27.1%
1.3%
12.1%
1.4%
0.2%
10.5%
2.8%
72,357
4,193
27.0%
1.6%
26,375
6,464
(2,129)
9.9%
2.4%
(0.8%)
22,040
5,970
8.2%
2.2%
$
$
$
$
34,225
7.7% $
16,070
6.0%
0.29
$
0.14
66,303
39,475
0.34
14.9% $
8.9%
$
35,205
17,678
0.16
13.2%
6.6%
Net revenue increased by 66.1% to $444.3 million, compared to $267.5 million in Q4 2021. The Company continues
to see an unprecedented acceleration of sales in the United States, where net revenues increased by 108.8% to
$216.8 million, compared to $103.8 million in Q4 2021.
⎯ eCommerce revenue increased by 21.4% to $182.0 million, compared to $149.9 million in Q4 2021. The
Company’s eCommerce business continued its momentum, building on the 81.1% increase in Q4 2021.
⎯ Retail revenue increased by 123.0% to $262.4 million, compared to $117.7 million in Q4 2021. The increase in
revenue was led by outstanding performance of our comparable and new boutiques in the United States, strong
double digit comparable sales growth(1) in Canada, as well as boutique revenue from 39 of our boutiques which
were closed for the majority of Q4 2021. Boutique count at the end of Q4 totaled 106 compared to 101 boutiques
at the end of Q4 2021.
The following table provides net revenue by channel and geographic location for the periods indicated.
(in thousands of Canadian dollars)
Q4 2022
Q4 2021
eCommerce revenue
Retail revenue
Net revenue
Canada
United States
Net revenue
$
$
$
$
181,968 $
262,354
444,322 $
149,864
117,661
267,525
Q4 2022
Q4 2021
227,524 $
216,798
444,322 $
163,681
103,844
267,525
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Fiscal 2022 Annual Report | 35
Gross profit increased by 74.4% to $179.5 million, compared to $102.9 million in Q4 2021. Gross profit margin was
40.4%, compared to 38.5% in Q4 2021. The improvement in gross profit margin was primarily due to leverage on
occupancy costs, lower markdowns, and the strengthening of the Canadian dollar, partially offset by higher expedited
freight costs as a result of global supply chain disruptions.
SG&A expenses increased by 66.1% to $120.2 million, compared to $72.4 million in Q4 2021. SG&A expenses were
27.1% of net revenue, compared to 27.0% in Q4 2021. The increase in SG&A expenses was primarily due to variable
selling costs associated with the increase in revenue and continued investment in talent, technology, and marketing
initiatives.
Depreciation and amortization increased by $2.6 million to $29.7 million, compared to $27.1 million in Q4 2021.
The following table provides the depreciation and amortization expense for the periods indicated.
(in thousands of Canadian dollars)
Q4 2022
Q4 2021
Depreciation and amortization
Depreciation on right-of-use assets
Total depreciation and amortization
$
$
12,110 $
17,593
29,703 $
10,723
16,410
27,133
Stock-based compensation expense was $5.7 million, compared to $4.2 million in Q4 2021.
Included in Q4 2022 is $3.0 million in expenses related to the accounting for the Company’s deferred, restricted, and
performance share units and $2.7 million in expenses primarily related to the accounting for options under the
Company’s long-term incentive plan (the “Omnibus Plan”).
We use equity derivative contracts to offset our cash flow variability of the expected payment associated with our
deferred and restricted share units. Unrealized gains and losses related to these equity derivative contracts are
recorded in other (income) expense.
Included in Q4 2021 is $2.5 million in expenses related to the accounting for our deferred and restricted share units,
$1.6 million in expenses primarily related to the accounting for options under our Omnibus Plan and $0.1 million in
expenses related to the accounting for options under our legacy option plan.
Finance expense decreased by $0.4 million to $6.1 million, compared to $6.5 million in Q4 2021. The decrease in
finance expense was primarily due to a reduction in interest expense from having repaid the term loan of $75.0 million
in Q2 2022.
Other expense was $0.7 million, compared to other income of $2.1 million in Q4 2021.
Other expense of $0.7 million in Q4 2022 primarily relates to:
⎯ unrealized loss on equity derivative contracts of $1.0 million,
⎯ unrealized and realized operational foreign exchange losses of $0.2 million, partially offset by
⎯
interest and other income of $0.5 million
Other income of $2.1 million in Q4 2021 primarily related to:
⎯ unrealized gain on equity derivative contracts of $2.6 million,
⎯
⎯ unrealized and realized operational foreign exchange losses of $1.1 million.
interest income of $0.6 million, partially offset by
Income tax expense is recognized based on management’s best estimate of the weighted average annual income
tax rate expected for the full fiscal year. To the extent that forecasts differ from actual results, adjustments are
recognized in subsequent periods. The statutory income tax rates for Q4 2022 and Q4 2021 were 26.6% and 26.7%,
respectively.
Income tax expense was $12.5 million, compared to $6.0 million in Q4 2021 and the effective tax rates for Q4 2022
and Q4 2021 were 28.0% and 27.1%, respectively. The effective tax rates are driven by the proportionate amount of
non-deductible stock-based compensation expense on equity settled plans relative to net income.
36 |
19
Net income was $34.2 million, an increase of 113.0% compared to $16.1 million in Q4 2021. The increase in net
income was primarily due to a 66.1% increase in net revenue, partially offset by the Company’s continued investment
in talent, technology and marketing initiatives.
Net income per diluted share was $0.29, compared to $0.14 in Q4 2021, primarily due to the factors discussed
above.
Adjusted EBITDA(1) was $66.3 million, or 14.9% of net revenue, an increase of 88.3% compared to $35.2 million,
or 13.2% of net revenue in Q4 2021. The increase in Adjusted EBITDA as a percentage of net revenue was primarily
due to a 66.1% increase in net revenue, partially offset by the Company’s continued investment in talent, technology
and marketing initiatives.
Adjusted Net Income(1) was $39.5 million, an increase of 123.3% compared to $17.7 million in Q4 2021, primarily
due to the factors discussed above.
Adjusted Net Income(1) per Diluted Share was $0.34, an increase of 112.5% compared to $0.16 in Q4 2021,
primarily due to the factors discussed above.
Cash and cash equivalents at the end of Q4 2022 totaled $265.2 million compared to $149.1 million at the end of
Q4 2021. In the last twelve months, the Company has repaid its $75.0 million term loan and funded initial payment of
$32.9 million for the acquisition of CYC. The Company currently has zero drawn on its revolving credit facility.
Inventory at end of Q4 2022 was $208.1 million, compared to $171.8 million at the end of Q4 2021. The Company
continues to manage its inventory position to meet demand despite global supply chain disruptions.
Capital cash expenditures (net of proceeds from lease incentives)(1) were $16.4 million in Q4 2022, compared
to $9.4 million in Q4 2021.
Analysis of Results for Fiscal 2022
Consolidated Statements of Operations
(in thousands of Canadian dollars, unless otherwise noted)
Fiscal 2022
Fiscal 2021
Net revenue
Cost of goods sold
Gross profit
Operating expenses
Selling, general and administrative
Stock-based compensation expense
Income from operations
Finance expense
Other expense (income)
Income before income taxes
Income tax expense
Net income
$ 1,494,630
839,678
100.0% $ 857,323
544,818
56.2%
100.0%
63.5%
654,952
43.8%
312,505
36.5%
392,802
26,131
26.3%
1.7%
250,726
10,691
29.2%
1.2%
236,019
25,202
(8,783)
15.8%
1.7%
(0.6%)
219,600
62,683
14.7%
4.2%
51,088
28,420
(3,534)
26,202
6,975
6.0%
3.3%
(0.4%)
3.1%
0.8%
$ 156,917
10.5% $
19,227
2.2%
Net income per diluted share
$
1.36
$
0.17
Adjusted EBITDA(1)
Adjusted Net Income(1)
Adjusted Net Income(1) per Diluted Share
$ 289,385
176,736
1.53
$
19.4% $
11.8%
$
76,812
26,028
0.23
9.0%
3.0%
20
Fiscal 2022 Annual Report | 37
Net revenue increased by 74.3% to $1.5 billion, compared to $857.3 million in Fiscal 2021. The Company has seen
an unprecedented acceleration of sales in the United States, where net revenues increased by 131.8% to $676.1
million compared to $291.7 million in Fiscal 2021. The Company also saw meaningful growth in Canada where net
revenue increased by 44.7% to $818.5 million, compared to $565.6 million in Fiscal 2021.
The following table provides net revenue by channel and geographic location for the periods indicated.
(in thousands of Canadian dollars)
Fiscal 2022
Fiscal 2021
eCommerce revenue
Retail revenue
Net revenue
Canada
United States
Net revenue
$
$
$
$
564,340 $
930,290
1,494,630 $
425,929
431,394
857,323
Fiscal 2022
Fiscal 2021
818,495 $
676,135
1,494,630 $
565,591
291,732
857,323
Gross profit increased by 109.6% to $655.0 million, compared to $312.5 million in Fiscal 2021. Gross profit margin
was 43.8%, compared to 36.5% in Fiscal 2021. The improvement in gross profit margin was primarily due to leverage
on occupancy costs, lower markdowns, the strengthening of the Canadian dollar, and lower warehousing and
distribution costs, partially offset by higher expedited freight costs as a result of global supply chain disruptions and
lower rent abatements.
SG&A expenses increased by 56.7% to $392.8 million, compared to $250.7 million in Fiscal 2021. SG&A expenses
were 26.3% of net revenue, compared to 29.2% in Fiscal 2021. Excluding the benefit of government payroll subsidies,
the increase in SG&A expenses was 42.2%. The increase in SG&A expenses was primarily due to variable selling
costs associated with the increase in revenue and continued investment in talent, technology, and marketing
initiatives.
Depreciation and amortization increased by $7.5 million to $112.6 million, compared to $105.1 million in Fiscal
2021.
The following table provides the depreciation and amortization expense for the periods indicated.
(in thousands of Canadian dollars)
Fiscal 2022
Fiscal 2021
Depreciation and amortization
Depreciation on right-of-use assets
Total depreciation and amortization
$
$
44,569 $
68,058
112,627 $
38,871
66,278
105,149
Stock-based compensation expense was $26.1 million, compared to $10.7 million in Fiscal 2021.
Included in Fiscal 2022 is $16.0 million in expenses related to the accounting for the Company’s deferred, restricted,
and performance share units and $10.1 million in expenses primarily related to the accounting for options under the
Company’s Omnibus Plan.
We use equity derivative contracts to offset our cash flow variability of the expected payment associated with our
deferred and restricted share units. Unrealized gains and losses related to these equity derivative contracts are
recorded in other (income) expense.
Included in Fiscal 2021 is $5.5 million in expenses primarily related to the accounting for options under our Omnibus
Plan, $4.7 million in expenses related to the accounting for our deferred and restricted share units and $0.5 million in
expenses related to the accounting for options under our legacy option plan.
Finance expense decreased by $3.2 million to $25.2 million, compared to $28.4 million in Fiscal 2021. The decrease
in finance expense was primarily due to a reduction in interest expense from having repaid the term loan of $75.0
million in Q2 2022 and no amounts drawn on the revolving credit facility compared to Fiscal 2021, along with lower
interest expense on lease liabilities in Fiscal 2022.
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21
Other income was $8.8 million, compared to $3.5 million in Fiscal 2021.
interest and other income of $1.6 million and
Other income of $8.8 million in Fiscal 2022 primarily relates to:
⎯ unrealized gain on equity derivative contracts of $11.2 million,
⎯
⎯ unrealized and realized operational foreign exchange gains of $1.2 million, partially offset by
⎯
⎯
⎯
transaction costs relating to the acquisition of CYC of $2.6 million,
fair value adjustments of NCI in exchangeable shares liability of $2.0 million, and
transaction costs relating to the Secondary Offering of $0.5 million.
Other income of $3.5 million in Fiscal 2021 primarily related to:
⎯ unrealized gain on equity derivative contracts of $3.7 million,
interest and other income of $1.6 million, partially offset by
⎯
⎯ unrealized and realized operational foreign exchange losses of $1.8 million.
Income tax expense is recognized based on management’s best estimate of the weighted average annual income
tax rate expected for the full fiscal year. To the extent that forecasts differ from actual results, adjustments are
recognized in subsequent periods. The statutory income tax rates for Fiscal 2022 and Fiscal 2021 were 26.6% and
26.7%, respectively.
Income tax expense was $62.7 million, compared to $7.0 million in Fiscal 2021 and the effective tax rates for Fiscal
2022 and Fiscal 2021 were 28.8% and 26.6%, respectively. The effective tax rates are driven by the proportionate
amount of non-deductible stock-based compensation expense on equity settled plans relative to net income.
Net income was $156.9 million, compared to $19.2 million in Fiscal 2021. The increase in net income was primarily
due to a 74.3% increase in net revenue, partially offset by the Company’s continued investment in talent, technology
and marketing initiatives.
Net income per diluted share was $1.36, compared to $0.17 in Fiscal 2021, primarily due to the factors discussed
above.
Adjusted EBITDA(1) was $289.4 million, or 19.4% of net revenue, compared to $76.8 million, or 9.0% of net revenue
in Fiscal 2021. The increase in Adjusted EBITDA as a percentage of net revenue was primarily due to a 74.3%
increase in net revenue, partially offset by the Company’s continued investment in talent, technology and marketing
initiatives.
Adjusted Net Income (1) was $176.7 million, compared to $26.0 million in Fiscal 2021, primarily due to the factors
discussed above.
Adjusted Net Income (1) per Diluted Share was $1.53, compared to $0.23 in Fiscal 2021, primarily due to the factors
discussed above.
Capital cash expenditures (net of proceeds from lease incentives)(1) were $52.6 million in Fiscal 2022, compared
to $42.5 million in Fiscal 2021.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal uses of funds are for operating expenses, capital expenditures and debt service requirements. We
believe that cash generated from operations, together with amounts available under our credit facility, are expected
to be sufficient to meet our future operating expenses, capital expenditures, debt service requirements and return to
shareholders (share buybacks). Our ability to fund future operating expenses, capital expenditures, debt service
requirements and return to shareholders (share buybacks) will depend on, among other things, our future operating
performance, which will be affected by general economic, financial and other factors, including factors beyond our
control. See “Summary of Factors Affecting Performance”, “Recent Events” and “Risk Factors” of this MD&A for
additional information. We review investment opportunities in the normal course of our business and may make select
investments to implement our business strategy when suitable opportunities arise. Historically, the funding for any
such investments has come from cash flows from operating activities and/or our revolving credit facility.
22
Fiscal 2022 Annual Report | 39
Revolving Credit Facility
As at February 27, 2022, we have a $175.0 million revolving credit facility. No amounts were drawn on the revolving
credit facility as at February 27, 2022. See the “Recent Events” section of this MD&A.
In addition, we also have letters of credit facilities of $75.0 million, secured pari passu with the revolving credit facility.
The interest rate for the letters of credit is between 1.00% and 2.50%.
See “Contractual Obligations – Off-Balance Sheet Arrangements and Commitments” for letters of credit issued.
The revolving credit facility agreement contains restrictive covenants customary for credit facilities of this nature,
including restrictions on us and each credit facility guarantor, subject to certain exceptions, to incur indebtedness,
grant liens, merge, amalgamate or consolidate with other companies, transfer, lease or otherwise dispose of all or
substantially all of its assets, liquidate or dissolve, engage in any material business other than the fashion retail
business, make investments, acquisitions, loans, advances or guarantees, make any restricted payments, enter into
transactions with affiliates, repay indebtedness, enter into restrictive agreements, enter into sale-leaseback
transactions, ensure pension plan compliance, sell or discount receivables, enter into agreements with unconditional
purchase obligations, issue shares, create or acquire a subsidiary or make any hostile acquisitions.
Cash Flows
The following table presents cash flows for the periods indicated.
(in thousands of Canadian dollars)
Q4 2022
Q4 2021
Fiscal 2022
Fiscal 2021
Net cash generated from operating activities
Net cash used in financing activities
Cash used in investing activities
Effect of exchange rate changes on cash and cash
equivalents
$
733 $
5,438 $
(20,171)
(20,734)
(17,969)
(11,368)
338,353 $
(124,093)
(99,576)
125,628
(40,586)
(50,848)
(515)
(990)
1,414
(2,797)
Change in cash and cash equivalents
$
(40,687) $
(24,889) $
116,098 $
31,397
Analysis of Cash Flows for the Fourth Quarter and Fiscal 2022
Cash Flows Generated from Operating Activities
For Q4 2022, cash flows generated from operating activities totaled $0.7 million, compared to $5.4 million in Q4 2021.
This change was primarily attributable to a higher use of working capital due to timing of payments and an increase
in income taxes paid, offset by an increase in income from operations.
For Fiscal 2022, cash flows generated from operating activities totaled $338.4 million, compared to $125.6 million in
Fiscal 2021. This change was primarily attributable to an increase in income from operations and lower use of working
capital due to the timing of payments, partially offset by an increase in income taxes paid.
Cash Flows Used in Financing Activities
For Q4 2022, cash flows used in financing activities totaled $20.2 million, compared to cash flows of $18.0 million in
Q4 2021. Financing activities in Q4 2022 primarily relate to the repayment of principal on lease liabilities and the
repurchase of subordinate voting shares for cancellation, partially offset by proceeds received from options exercised
and proceeds received from lease incentives. Financing activities in Q4 2021 primarily relate to the repayment of
principal on lease liabilities, partially offset by proceeds received from lease incentives and proceeds received from
options exercised.
For Fiscal 2022, cash flows used in financing activities totaled $124.1 million, compared to $40.6 million in Fiscal
2021. Financing activities in Fiscal 2022 primarily relate to a $75.0 million term loan repayment, the repayment of
principal on lease liabilities, the repurchase of subordinate voting shares for cancellation, partially offset by proceeds
received from lease incentives and proceeds received from options exercised. Financing activities in Fiscal 2021
primarily relate to the repayment of principal on lease liabilities and include the drawdown and subsequent repayment
of $100.0 million of our revolving credit facility, partially offset by proceeds received from lease incentives and
proceeds received from options exercised.
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Cash Flows Used in Investing Activities
For Q4 2022, cash flows used in investing activities totaled $20.7 million, compared to $11.4 million in Q4 2021.
Investing activities in Q4 2022 and Q4 2021 primarily relate to new boutiques, boutique expansions and repositions,
and distribution center projects.
For Fiscal 2022, cash flows used in investing activities totaled $99.6 million, compared to $50.8 million in Fiscal 2021.
Investing activities in Fiscal 2022 primarily relate to the acquisition of CYC, net of cash assumed of $32.6 million and
new boutiques, boutique expansions and repositions, and distribution center projects. Investing activities in Fiscal
2021 relate to new boutiques and boutique expansions and repositions, as well as investments in our Product
Lifecycle Management system.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table summarizes our significant undiscounted maturities of our contractual obligations and
commitments as at February 27, 2022.
(in thousands of Canadian dollars)
Accounts payable and accrued liabilities
Lease liabilities
Contingent consideration
Non-controlling interest in exchangeable shares liability
Minimum lease commitments with future
commencement dates
Less than
1 year
1 to
5 years
More than
5 years
$
179,344 $
106,371
6,619
-
-
333,332
6,618
39,300
$
- $
135,408
-
-
Total
179,344
575,111
13,237
39,300
1,541
46,048
74,969
122,558
Total contractual obligations and commitments
$
293,875 $
425,298
$
210,377 $
929,550
OFF-BALANCE SHEET ARRANGEMENTS
Our third party manufacturers purchase raw materials on our behalf to be used for future production. As at February
27, 2022, we had purchase obligations of $155.9 million, which represent commitments for fabric expected to be
used during upcoming seasons, made in the normal course of business.
We enter into trade letters of credit to facilitate the international purchase of inventory. We also enter into standby
letters of credit to secure certain of our obligations, including leases and duties related to import purchases. As at
February 27, 2022, letters of credit totaling $43.5 million have been issued.
Other than those items disclosed here and elsewhere in this MD&A and our consolidated financial statements, we do
not have any material off-balance sheet arrangements or commitments as at February 27, 2022.
FINANCIAL INSTRUMENTS
In connection with the acquisition of CYC, we entered into two financial instruments that will be revalued on a recurring
basis in the consolidated financial statements: contingent consideration and non-controlling interest in exchangeable
shares liability. Changes in the fair value of these two financial instruments are recorded in net income.
Contingent consideration
We have a contingent consideration under the CYC purchase agreement that is based on future operating results of
CYC during the measurement period ending January 31, 2023. As at February 27, 2022, the Company recorded a
contingent consideration liability of $13.2 million.
Non-controlling interest in exchangeable shares liability
In conjunction with the acquisition, CYC issued exchangeable shares to minority shareholders (“exchangeable
shareholders”) in exchange for their 25% share of the total common shares at acquisition. The exchangeable shares
allow the holders to put back their shares to CYC in the following periods: one-third from May 1, 2024 to August 31,
2024, one-third from May 1, 2025 to August 31, 2025, and one-third from May 1, 2026 to August 31, 2026 (the “put
options”). In the event that the exchangeable shareholders do not exercise the put option by August 31, 2026, we
24
Fiscal 2022 Annual Report | 41
have an open-ended call option, but not an obligation, to purchase all of the shares held by the exchangeable
shareholders (the “call option”).
The exercise prices of the put option and the call option are based on certain specific operating results of CYC in the
most recently completed fiscal year prior to exercise, subject to a capped enterprise value of $60.0 million (remaining
25% purchase). Upon exercise, the options are settled through a variable number of the Company’s shares based
on a volume weighted average price (VWAP) of the Company’s shares for 30 consecutive trading days.
As at February 27, 2022, the fair value of the non-controlling interest in exchangeable shares liability was $35.5
million.
Equity derivative contracts
We have equity derivative contracts to hedge the share price exposure on our cash-settled deferred and restricted
share units. These contracts are not designated as hedging instruments for accounting purposes. Changes in the fair
value of equity derivative contracts are recorded in net income. As at February 27, 2022, the equity derivative
contracts had a positive fair value of $15.6 million which is recorded in prepaid expenses and other current assets.
RELATED PARTY TRANSACTIONS
During the year ended February 27, 2022, we made payments of $4.9 million (February 28, 2021 - $4.2 million) for
lease of premises and management services and $1.0 million (February 28, 2021 - $0.7 million) for the use of an
asset wholly or partially owned by companies that are owned by a director and officer of the Company. As at February
27, 2022, the outstanding balance of lease liabilities owed to these companies was $13.3 million (February 28, 2021
- $11.6 million). As at February 27, 2022, $0.5 million was included in accounts payable and accrued liabilities
(February 28, 2021 - $0.2 million). These transactions were measured at the amount of consideration established at
market terms.
TRANSACTIONS WITH KEY MANAGEMENT
Key management includes our directors and executive team. Compensation awarded to key management includes:
(in thousands of Canadian dollars)
Q4 2022
Q4 2021
Fiscal 2022
Fiscal 2021
Salaries, directors’ fees and short-term
benefits
Stock-based compensation
$
$
1,114
1,232
555 $
1,827
4,906 $
8,685
$
2,346
$
2,382 $
13,591 $
3,860
4,135
7,995
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of consolidated financial statements in accordance with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Estimates and assumptions are continuously evaluated and are based on
management’s best judgments and experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period
in which the estimates are revised and in any future periods affected. Actual results may differ from these estimates.
The following discusses the most significant accounting judgments and estimates made by management in
preparation of the consolidated financial statements:
Return Allowances
Recognizing provisions for sales return allowances requires the use of estimates of the return rate of merchandise
based on historical return patterns.
Valuation of Finished Goods Inventory
Inventory is stated at the lower of cost and net realizable value. We periodically review our inventories and make
provisions which requires the use of estimates related to product quality, damages, future demand, selling prices,
and market conditions.
42 |
25
Impairment of Goodwill and Indefinite Life Intangible Assets
Goodwill and indefinite life intangible asset impairment testing requires the use of estimates in the impairment testing
model. On an annual basis, we test whether goodwill and indefinite life intangible assets are impaired. The
recoverable value is determined using discounted future cash flow models, which incorporate estimates regarding
future events, specifically future cash flows, growth rates and discount rates. We use judgment in determining the
grouping of assets to identify our CGUs for purposes of testing for impairment. In testing for impairment, goodwill
acquired in a business combination is allocated to the group of CGUs that are expected to benefit from the synergies
of the business combination, which involves judgment.
Leases
We estimate the incremental borrowing rate used for calculating lease liabilities and right-of-use assets. We
determine the incremental borrowing rate of each leased asset as the rate of interest that we would have to pay to
borrow, over a similar term with a similar security, the funds necessary to obtain an asset of similar value to the right-
of-use asset in a similar economic environment.
We exercise judgment in determining the appropriate lease term at the lease commencement date. We exercise
judgment on whether we will exercise available renewal or termination options, and thus include such options in the
lease terms. We consider all facts and circumstances that create an economic incentive to exercise a renewal or
termination option.
Business Combinations
Business combinations require judgment in applying the acquisition method of accounting and estimates to value
identifiable assets and liabilities at the acquisition date. We may engage independent third parties to determine the
fair value of inventory, property and equipment and intangible assets. Assumptions and estimates are used to
determine cash flow projections, including the period of future benefit, future growth and discount rates, among other
factors. The values place on the acquired assets and liabilities assumed affect the amount of goodwill recorded on
an acquisition.
Non-Controlling Interest in Exchangeable Shares Liability
Non-controlling interest in exchangeable shares involves uncertainty in estimating the fair value of the obligation on
a recurring basis. The fair value estimate includes inputs associated with expected volatility, anticipated timing and
discount rate associated with the obligation.
SIGNIFICANT NEW ACCOUNTING STANDARDS
Standards Issued But Not Yet Adopted
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
In January 2020, IASB issued Classification of Liabilities as Current or Non-Current, which amends IAS 1 –
Presentation of Financial Statements. The narrow scope amendments affect only the presentation of liabilities in the
statement of financial position and not the amount or timing of its recognition. It clarifies that the classification of
liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and
specifies that classification is unaffected by expectations about whether an entity will exercise its right to defer
settlement of a liability. It also introduces a definition of ‘settlement’ to make clear that settlement refers to the transfer
to the counterparty of cash, equity instruments, other assets or services. The amendments are effective for annual
reporting periods beginning on or after January 1, 2023. Earlier application is permitted. The Company does not plan
to early adopt the amendments to IAS 1. The Company is currently assessing the potential impact of these
amendments.
Definition of Accounting Estimates (Amendments to IAS 8)
In February 2021, the IASB issued Definition of Accounting Estimates, which amends IAS 8. The amendments
introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the financial
statements that are subject to measurement uncertainty. The amendments also clarify the relationship between
accounting policies and accounting estimates by specifying that a company develops an accounting estimate to
achieve the objective set out by an accounting policy. The amendments are effective for annual periods beginning
26
Fiscal 2022 Annual Report | 43
on or after January 1, 2023 with earlier adoption permitted. The Company is currently assessing the potential impact
of these amendments.
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
In February 2021, the IASB issued Disclosure of Accounting Policies, which amends IAS 1 and IFRS Practice
Statement 2. The amendments are intended to help preparers in deciding which accounting policies to disclose in
their financial statements. The amendments to IAS 1 require companies to disclose their material accounting policy
information rather than their significant accounting policies. The amendments also clarify that accounting policies
related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be
disclosed, and not all accounting policy information that relates to material transactions, other events or conditions is
material to the financial statements. The amendment to IFRS Practice Statement 2 adds guidance and examples to
the materiality practice statement, which explains how to apply the materiality process to identify material accounting
policy information. The amendments are effective for annual periods beginning on or after January 1, 2023 with earlier
adoption permitted and are to be applied prospectively. The Company is currently assessing the potential impact of
these amendments.
Financial Instruments (Amendments to IFRS 9)
As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued an amendment to IFRS
9. The amendment clarifies which fees should be included when assessing whether the terms of a new or modified
financial liability are substantially different from the terms of the original financial liability. These fees include only
those paid or received between the borrower and the lender, including fees paid or received by either the borrower
or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged
on or after the beginning of the annual reporting period in which the entity first applies the amendment. The
amendment is effective for annual reporting periods beginning on or after January 1, 2022 with earlier adoption
permitted. The Company is currently assessing the potential impact of these amendments.
Deferred Tax related to assets and liabilities arising from a single transaction (Amendments to
IAS 12)
In May 2021, the IASB issued targeted amendments to IAS 12 – Income Taxes to specify how companies account
for deferred tax on transactions such as leases and decommissioning obligations. In specific circumstances,
companies are exempt from recognizing deferred tax when they recognize assets or liabilities for the first time.
Previously, there had been some uncertainty about whether the exemption applied to transactions such as leases
and decommissioning obligations transactions for which companies recognize both an asset and a liability. The
amendments clarify that the exemption does not apply and that companies are required to recognize deferred tax on
such transactions. The aim of the amendments is to reduce diversity in the reporting of deferred tax on leases and
decommissioning obligations. The amendments are effective for annual reporting periods beginning on or after
January 1, 2023, with early application permitted. The Company is currently assessing the potential impact of these
amendments.
RISK FACTORS
For a detailed description of risk factors associated with the Company, including COVID-19 risks, refer to the “Risk
Factors” section of the Company’s AIF, which is available on SEDAR at www.sedar.com.
In addition, we are exposed to a variety of financial risks in the normal course of operations including foreign
exchange, interest rate, credit, liquidity and equity price risk, as summarized below. Our overall risk management
program and business practices seek to minimize any potential adverse effects on our consolidated financial
performance.
Risk management is carried out under practices approved by our Audit Committee. This includes reviewing and
making recommendations to the Board of Directors on the adequacy of our risk management policies and procedures
with regard to identifying the Company’s principal risks and implementing appropriate systems and controls to
manage these risks. Risk management covers many areas of risk including, but not limited to, foreign exchange risk,
interest rate risk, credit risk, liquidity risk and equity price risk.
44 |
27
Foreign Exchange Risk
We source the majority of our raw materials and merchandise from various suppliers in Asia and Europe with the
vast majority of purchases denominated in U.S. dollars. Our foreign exchange risk is primarily with respect to the U.S.
dollar but we have limited exposure to other currencies as well. We may use foreign exchange forward contracts to
mitigate risks associated with forecasted U.S. dollar merchandise purchases sold in Canada.
Interest Rate Risk
We have a revolving credit facility which provides available borrowings in an amount up to $175.0 million. Because
the revolving credit facility bears interest at a variable rate, we are exposed to market risks relating to changes in
interest rates on outstanding balances. As at February 27, 2022, no advances were made under the revolving credit
facility.
Credit Risk
Credit risk refers to the possibility that we can suffer financial losses due to the failure of our counterparties to meet
their payment obligations. We are exposed to minimal credit risk. We do not extend credit to clients, but do have
some receivable exposure in relation to tenant improvement allowances. To reduce this risk, we enter into leases
with landlords with established credit history, and for certain leases, we may offset rent payments until accounts
receivable are fully satisfied. We deposit our cash and cash equivalents with major financial institutions that have
been assigned high credit ratings by internationally recognized credit rating agencies. We only enter into derivative
contracts with major financial institutions, as described above, for the purchase of foreign currency forward contracts.
Liquidity Risk
Liquidity risk is the risk that we cannot meet a demand for cash or fund our obligations as they come due. We manage
liquidity risk by continuously monitoring actual and projected cash flows, taking into account the seasonality of our
revenue, income and working capital needs. The revolving credit facility is used to maintain liquidity.
Equity Price Risk
We are exposed to risk arising from the cash settlement of our deferred and restricted share units, as an appreciating
subordinate voting share price increases the potential cash outflow. We record a liability for the potential future
settlement of our deferred and restricted share units by reference to the fair value of the liability. We may use equity
derivative contracts to offset our cash flow variability of the expected payment associated with our deferred and
restricted share units. We only enter into equity derivative contracts with major financial institutions.
DISCLOSURE CONTROLS AND PROCEDURES
Management is responsible for establishing and maintaining a system of disclosure controls and procedures over the
public disclosure of financial and non-financial information regarding the Company. Such controls and procedures
are designed to provide reasonable assurance that all relevant information is gathered and reported to senior
management on a timely basis, including the CEO and the CFO, so that they can make appropriate and timely
decisions regarding public disclosure, including information contained in annual and interim filings, including the
consolidated financial statements, MD&A, AIF, and other documents and external communications.
As required by CSA National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings
(“NI 52-109”), an evaluation of the adequacy of the design (quarterly) and effective operation (annually) of the
Company’s disclosure controls and procedures was conducted under the supervision of management, including the
CEO and CFO, as at February 27, 2022. Based on that evaluation, the CEO and the CFO have concluded that the
design and operation of the system of disclosure controls and procedures were effective as at February 27, 2022.
Although the Company’s disclosure controls and procedures were operating effectively as of February 27, 2022,
there can be no assurance that the Company’s disclosure controls and procedures will detect or uncover all failures
of persons within the Company to disclose material information otherwise required to be set forth in the Company’s
regulatory filings.
28
Fiscal 2022 Annual Report | 45
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is also responsible for establishing and maintaining adequate internal controls over financial reporting
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial reports
for external purposes in accordance with IFRS. The Company’s internal controls over financial reporting include, but
are not limited to, detailed policies and procedures relating to financial accounting and reporting, and controls over
systems that process and summarize transactions. The Company’s procedures for financial reporting also include
the active involvement of qualified financial professionals, senior management and its Audit Committee.
As also required by NI 52-109, management, including the CEO and CFO, evaluated the adequacy of the design
(quarterly) and the effective operation (annually) of the Company’s internal control over financial reporting as defined
in NI 52-109, as at February 27, 2022. In making this assessment, management, including the CEO and CFO, used
the framework set forth in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, the CEO and the CFO have concluded that
the design and operation of the Company’s internal control over financial reporting, as defined by NI 52-109, were
effective as at February 27, 2022.
In designing such controls, it should be recognized that due to inherent limitations, any control, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives and may
not prevent or detect misstatements. Additionally, management is required to use judgment in evaluating controls
and procedures. Therefore, even when determined to be designed effectively, disclosure controls and internal control
over financial reporting can provide only reasonable assurance with respect to financial statement preparation and
presentation.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter and year ended February
27, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
CURRENT SHARE INFORMATION
As of May 4, 2022, an aggregate of 89,225,919 subordinate voting shares, 21,937,349 multiple voting shares and no
preferred shares are issued and outstanding. All of the issued and outstanding multiple voting shares are, directly or
indirectly, held or controlled by Brian Hill, our principal shareholder, Founder and Chief Executive Officer. As of May
4, 2022, an aggregate of 8,495,035 options and 96,836 performance share units to acquire subordinate voting shares
are outstanding.
ADDITIONAL INFORMATION
Additional information relating to the Company, including the Company’s AIF, is available on SEDAR at
www.sedar.com. The Company’s subordinate voting shares are listed for trading on the Toronto Stock Exchange
(“TSX”) under the symbol “ATZ”.
46 |
29
SUMMARY OF CONSOLIDATED QUARTERLY RESULTS AND CERTAIN PERFORMANCE MEASURES
The following table summarizes the results of our operations for the last eight most recently completed quarters. This
unaudited quarterly information, other than Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per Diluted
Share, free cash flow and comparable sales growth, has been prepared in accordance with IFRS. Due to seasonality,
the results of operations for any quarter are not necessarily indicative of the results of operations for the fiscal year.
Consolidated Quarterly Results
(in thousands of Canadian
dollars, unless otherwise noted)
Fiscal
2022
Fiscal
2021
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Financial Summary:
Net revenue
Cost of goods sold
Gross profit
SG&A
Income (loss) from operations
Net income (loss)
Net income (loss) per share
Net income (loss)
per Diluted Share
Adjusted EBITDA (4)
Adjusted Net Income (Loss)(4)
Adjusted Net Income (Loss)(4) per
Diluted Share
Weighted average number of
Diluted Shares (in thousands)(5)
$
$
$
$
$
$
Cash and cash equivalents
Capital cash expenditures (net of
proceeds from lease incentives)(4) $
$
Free cash flow
$
Percentage of Net Revenue:
Net revenue
Cost of goods sold
Gross profit
SG&A
Income (loss) from operations
Net income (loss)
Adjusted EBITDA (4)
Adjusted Net Income (Loss)(4)
Other Performance Metrics:
Net revenue growth
Comparable sales growth(4)
Boutiques:(6)
Number of boutiques, beginning
of period
New boutiques added
Repositioned to a flagship
boutique
Boutique closure
Boutique temporarily closed due
to mall redevelopment
Number of boutiques, end of
period
Boutiques expanded or
repositioned
444,322 $ 453,323 $ 350,069 $ 246,916 $ 267,525 $ 278,254 $ 200,155 $ 111,389
98,328
264,816
13,061
179,506
43,511
120,221
(31,429)
53,560
(26,471)
34,225
(0.24)
129,719
70,436
60,151
8,138
(874)
(0.01) $
243,181
210,142
110,084
90,949
64,941
152,171
126,083
74,707
48,004
30,502
164,600
102,925
72,357
26,375
16,070
193,873
156,196
92,115
55,819
39,848
137,808
109,108
70,382
35,691
17,903
0.16 $
0.15 $
0.28 $
0.59 $
0.36 $
0.31 $
0.29 $
0.56 $
0.35 $
0.16 $
0.14 $
0.27 $
(0.01) $
(0.24)
66,303 $ 109,289 $
71,199 $
39,475 $
72,891 $
44,411 $
40,902 $
21,651 $
35,205 $
17,678 $
54,565 $
32,188 $
12,274 $
1,034 $
(25,232)
(24,872)
0.34 $
0.61 $
0.39 $
0.19 $
0.16 $
0.29 $
0.01 $
(0.23)
116,774
116,140
115,265
114,711
114,052
112,903
112,550
109,353
265,245 $ 305,932 $ 131,796 $ 157,878 $ 149,147 $ 174,036 $ 207,254 $ 224,313
(16,434) $
(20,318) $
(37,047) $ 169,704 $
(9,333) $
77,347 $
(6,522) $
11,933 $
(9,415) $
(24,936) $
(10,383) $
68,387 $
(10,586) $
(15,200) $
(12,145)
8,055
100.0%
59.6%
40.4%
27.1%
12.1%
7.7%
14.9%
8.9%
100.0%
53.6%
46.4%
24.3%
20.1%
14.3%
100.0%
55.4%
44.6%
26.3%
15.9%
11.4%
100.0%
55.8%
44.2%
28.5%
14.5%
7.3%
100.0%
61.5%
38.5%
27.0%
9.9%
6.0%
100.0%
54.7%
45.3%
26.8%
17.3%
11.0%
100.0%
64.8%
35.2%
30.1%
4.1%
(0.4%)
100.0%
88.3%
11.7%
39.1%
(28.2%)
(23.8%)
24.1%
15.7%
20.8%
12.7%
16.6%
8.8%
13.2%
6.6%
19.6%
11.6%
6.1%
0.5%
(22.7%)
(22.3%)
66.1%
n/a
62.9%
n/a
74.9%
n/a
121.7%
n/a
(2.9%)
n/a
4.1%
n/a
(17.0%)
n/a
(43.4%)
n/a
105
2
-
(1)
-
106
1
104
1
-
-
-
105
4
102
2
-
-
-
104
1
101
1
-
-
-
102
-
101
1
(1)
-
-
101
-
97
5
-
-
(1)
101
2
97
-
-
-
-
97
1
96
1
-
-
-
97
-
Notes:
(4)
See “How We Assess the Performance of Our Business” for definitions of Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per
Diluted Share, which are non-IFRS measures and comparable sales growth, which is a supplementary measure. See also “Non-IFRS Measures including Retail
Industry Metrics”.
(5)
Weighted average number of diluted shares is provided for purposes of calculating Adjusted Net Income (Loss) per Diluted Share.
CYC had four boutiques as at February 27, 2022 which are excluded from the boutique count.
(6)
30
Fiscal 2022 Annual Report | 47
48 |
Financial
Statements
Independent auditor’s report
To the Shareholders of Aritzia Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Aritzia Inc. and its subsidiaries (together, the Company) as at February 27, 2022
and February 28, 2021, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at February 27, 2022 and February 28, 2021;
the consolidated statements of operations for the years then ended;
the consolidated statements of comprehensive income for the years then ended;
the consolidated statements of changes in shareholders’ equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
50 |
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended February 27, 2022. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of the brand intangible asset acquired
and the exchangeable shares liability
recognized in the CYC Design Corporation
(CYC) acquisition
Refer to note 2 Summary of significant accounting
policies, note 4 Critical accounting estimates and
judgments, note 5 Acquisition of CYC Design
Corporation and note 13 Financial instruments to
the consolidated financial statements.
The Company acquired 75% of the common shares
of CYC for a total consideration of $46.1 million on
June 25, 2021. The fair value of the identifiable
assets acquired included $27.4 million of intangible
assets, of which $26.2 million relates to a brand
(the brand intangible asset). Management applied
judgment in estimating the fair value of the brand
intangible asset. To estimate the fair value of the
brand intangible asset, management used the relief
from royalty method using a discounted cash flow
model. Management developed assumptions
related to future growth rates and the discount rate.
As part of the acquisition, the shareholders holding
the remaining common shares of CYC exchanged
their common shares for exchangeable shares,
which represent a financial liability for CYC as they
can be put back to CYC by holders at specified
future dates in exchange for a variable number of
the Company’s shares. The fair value of the
exchangeable shares liability was determined to be
$33.5 million on acquisition. Management applied
judgment in estimating the fair value of the
exchangeable shares liability. To estimate the fair
value of the exchangeable shares liability,
Our approach to addressing the matter included the
following procedures, among others:
Read the purchase agreement.
Tested how management estimated the fair
value of the brand intangible asset which
included the following:
o Tested the mathematical accuracy and
underlying data used by management in
the discounted cash flow model.
o Evaluated the reasonableness of the future
growth rates applied by management by
considering the current and past
performance of Aritzia and the acquired
company CYC.
o Professionals with specialized skill and
knowledge in the field of valuation assisted
in evaluating the appropriateness of
management’s relief from royalty method
and the reasonableness of the discount
rate.
With the assistance of professionals with
specialized skill and knowledge in the field of
valuation, developed an independent point
estimate of the fair value of the exchangeable
shares liability using the Monte Carlo
simulation, which included the following:
o Developed an independent expectation for
the assumptions related to the gross profit
expected volatility and the gross profit
discount rate.
Fiscal 2022 Annual Report | 51
Key audit matter
How our audit addressed the key audit matter
management used the Monte Carlo simulation. The
Monte Carlo simulation includes assumptions
related to the gross profit expected volatility and the
gross profit discount rate.
o Compared the independent point estimate
to management’s estimate to evaluate the
reasonableness of the fair value of the
exchangeable shares liability.
Tested the disclosures, including the sensitivity
analysis, made in the consolidated financial
statements with regards to the exchangeable
shares liability.
We considered this a key audit matter due to the
judgment by management in estimating the fair
value of the brand intangible asset and the
exchangeable shares liability, including the
development of assumptions relating to future
growth rates, the discount rate, the gross profit
expected volatility and the gross profit discount
rate. This in turn led to auditor judgment and
subjectivity and a high degree of audit effort in
performing procedures and evaluating audit
evidence relating to the assumptions used by
management. The audit effort involved the use of
professionals with specialized skill and knowledge
in the field of valuation.
Inventory
Refer to note 2 Summary of significant accounting
policies, note 4 Critical accounting estimates and
judgments and note 6 Inventory to the
consolidated financial statements.
As at February 27, 2022, the Company held
inventory of $208.1 million including finished goods
in transit of $69.7 million. Inventory is carried at the
lower of cost and net realizable value. Cost is
determined using weighted average costs. Cost of
inventory includes the cost of merchandise and all
costs incurred to deliver inventory to the Company’s
distribution centres.
We considered this a key audit matter due to the
number of inventory locations at which inventory
was held and the audit effort involved in testing the
inventory.
Our approach to addressing the matter included the
following procedures, among others:
Tested the operating effectiveness of relevant
controls relating to the accounting for inventory,
including the mathematical accuracy of the
weighted average cost method.
Tested a sample of inventory items to purchase
invoices.
Observed the inventory count process for all
distribution centres and for a sample of
boutiques near year-end and performed
independent test counts.
Tested on a sample basis, the finished goods in
transit at year-end by agreeing to third party
shipment documents, inventory receipts to
distribution centres, and purchase invoices.
52 |
Key audit matter
How our audit addressed the key audit matter
Tested on a sample basis, inventory received
post year-end to shipping documents to assess
whether inventory was recorded appropriately
at year-end.
Tested how management determined net
realizable value, which included testing a
sample of inventory items to the most recent
retail prices of the inventory items.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
Fiscal 2022 Annual Report | 53
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
54 |
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Robert Coard.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, British Columbia
May 5, 2022
Fiscal 2022 Annual Report | 55
Aritzia Inc.
Consolidated Statements of Financial Position
As at February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars)
Assets
Cash and cash equivalents
Accounts receivable
Income taxes recoverable
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment
Intangible assets
Goodwill
Right-of-use assets
Other assets
Deferred tax assets
Total assets
Liabilities
Accounts payable and accrued liabilities
Income taxes payable
Current portion of contingent consideration
Current portion of lease liabilities
Deferred revenue
Total current liabilities
Lease liabilities
Other non-current liabilities
Contingent consideration
Non-controlling interest in exchangeable shares liability
Deferred tax liabilities
Long-term debt
Total liabilities
Shareholders’ equity
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
Commitments and contingencies (note 21)
Note
February 27,
2022
February 28,
2021
$
5,6
1, 13
7
5,8
5,8
5,9.
$
10 $
5,13
9
9
11
5,13
5,13
5
12
$
14 $
$
265,245 $
8,147
6,455
208,125
33,564
521,536
223,190
87,398
198,846
362,887
4,271
26,458
1,424,586 $
179,344 $
58,917
6,619
86,724
55,721
387,325
417,067
22,359
6,618
35,500
24,906
-
893,775 $
149,147
6,202
4,719
171,821
23,452
355,341
189,568
62,049
151,682
363,417
2,886
15,794
1,140,737
131,893
8,287
-
71,452
37,563
249,195
423,380
15,059
-
-
17,985
74,855
780,474
251,291 $
56,342
223,553
(375)
530,811
1,424,586 $
228,665
56,606
75,216
(224)
360,263
1,140,737
Approved by the Board of Directors
______Brian Hill Director ______John Currie Director
The accompanying notes are an integral part of these consolidated financial statements.
56 |
Aritzia Inc.
Consolidated Statements of Operations
For the years ended February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, except number of shares and per share amounts)
Net revenue
Cost of goods sold
Gross profit
Operating expenses
Selling, general and administrative
Stock-based compensation expense
Income from operations
Finance expense
Other expense (income)
Income before income taxes
Income tax expense
Net income
Net income per share
Basic
Diluted
Note
February 27,
2022
February 28,
2021
17, 20 $
1, 18
1,494,630 $
839,678
654,952
1
15, 18
9, 12, 18
5, 13, 18
392,802
26,131
236,019
25,202
(8,783)
219,600
19
$
62,683
156,917 $
857,323
544,818
312,505
250,726
10,691
51,088
28,420
(3,534)
26,202
6,975
19,227
16 $
16 $
1.42 $
1.36 $
0.18
0.17
Weighted average number of shares outstanding (thousands)
Basic
Diluted
16
16
110,401
115,784
109,487
112,844
The accompanying notes are an integral part of these consolidated financial statements.
Fiscal 2022 Annual Report | 57
Aritzia Inc.
Consolidated Statements of Comprehensive Income
For the years ended February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars)
February 27,
2022
February 28,
2021
Net income
$
156,917 $
19,227
Other comprehensive income
Items that are or may be reclassified subsequently to net income:
Foreign currency translation adjustment
Comprehensive income
(151)
156,766 $
$
458
19,685
The accompanying notes are an integral part of these consolidated financial statements.
58 |
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Fiscal 2022 Annual Report | 59
Aritzia Inc.
Consolidated Statements of Cash Flows
For the years ended February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars)
Operating activities
Net income for the period
Adjustments for:
Note
February 27,
2022
February 28,
2021
$
156,917 $
19,227
Depreciation and amortization
Depreciation on right-of-use assets
Fair value adjustment for inventory acquired in CYC Design
Corporation
Fair value adjustment of non-controlling interest in exchangeable
shares liability
Finance expense
Stock-based compensation expense
Amortization of deferred lease inducements
Unrealized gain on equity derivative contracts
Income tax expense
Rent concessions relating to lease liabilities
Cash generated before non-cash working capital balances
and interest and income taxes
Net change in non-cash working capital
Cash generated before interest and income taxes
Interest paid
Interest paid on lease liabilities
Income taxes paid
Net cash generated from operating activities
Financing activities
Proceeds from revolving credit facility
Repayment of revolving credit facility
Payment of financing fees
Repayment of principal on lease liabilities
Proceeds from lease incentives
Proceeds from options exercised
Shares repurchased for cancellation
Repayment of long-term debt
Net cash used in financing activities
Investing activities
Acquisition of CYC Design Corporation, net of cash acquired
Purchase of property and equipment
Purchase of intangible assets
Cash used in investing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents – Beginning of year
Cash and cash equivalents – End of year
Supplemental cash flow information (note 23)
7, 8
9
5
5, 18
18
15, 18
13, 18
19
1, 9
23
9
12
12
12
9
15
14
12
5
7
8
$
44,569
68,058
1,902
2,000
25,202
26,131
(1,056)
(11,192)
62,683
(3,800)
371,414
18,723
390,137
(2,491)
(23,128)
(26,165)
338,353
-
-
(651)
(66,300)
14,414
11,473
(8,029)
(75,000)
(124,093)
(32,555)
(65,427)
(1,594)
(99,576)
1,414
116,098
149,147
265,245 $
38,871
66,278
-
-
28,420
10,691
(934)
(3,701)
6,975
(13,903)
151,924
3,913
155,837
(4,651)
(22,887)
(2,671)
125,628
100,000
(100,000)
-
(51,444)
8,319
3,062
(523)
-
(40,586)
-
(50,255)
(593)
(50,848)
(2,797)
31,397
117,750
149,147
The accompanying notes are an integral part of these consolidated financial statements.
60 |
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
1 Nature of operations and basis of presentation
Nature of operations
Aritzia Inc. and its subsidiaries (collectively referred to as the “Company”) are a vertically integrated design
house. The Company is a creator and purveyor of Everyday Luxury, home to an extensive portfolio of exclusive
brands for every function and individual aesthetic. The Company provides immersive and highly personal
shopping experiences at aritzia.com and in 100+ boutiques throughout North America.
Aritzia Inc. is a corporation governed by the Business Corporations Act (British Columbia). The address of its
registered office is 666 Burrard Street, Suite 1700, Vancouver, B.C., Canada, V6C 2X8.
The Company’s subordinate voting shares are listed on the Toronto Stock Exchange under the stock symbol
“ATZ”.
Basis of presentation
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The
consolidated financial statements have been prepared on a historical cost basis, except for derivative
instruments, non-controlling interest in exchangeable shares liability, deferred share units and restricted share
units, as disclosed in the accounting policies set out in note 2. These consolidated financial statements are
presented in Canadian dollars, unless otherwise noted.
The Company’s fiscal year-end is the Sunday closest to the last day of February, typically resulting in a 52-
week year, but occasionally giving rise to an additional week, resulting in a 53-week year. All references to
2022 and 2021 represent the fiscal years ended February 27, 2022 and February 28, 2021, respectively.
Seasonality of operations
The Company’s business is affected by the pattern of seasonality common to most retail apparel businesses.
Historically, the Company has recognized a significant portion of its operating profit in the third and fourth
quarters of each fiscal year as a result of increased net revenue during the back-to-school and holiday
seasons.
These consolidated financial statements were authorized for issue on May 5, 2022 by the Company’s Board of
Directors (“Board”).
COVID-19 Pandemic
On March 12, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. On March
16, 2020, in line with recommendations by public health officials and guidance from local government
authorities, the Company temporarily closed all of its retail boutiques in Canada and the United States. On May
7, 2020, the Company began a phased reopening of its retail boutiques. As part of the reopening plan, the
Company implemented extensive health and safety measures designed to protect its people, clients and
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Fiscal 2022 Annual Report | 61
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
communities. As of September 9, 2020, all of the Company’s boutiques had reopened. Beginning November
23, 2020 and through the fourth quarter of Fiscal 2021, as a result of the resurgence of COVID-19 and in line
with government regulations, the Company temporarily reclosed 39 of its boutiques primarily located in Ontario
and Quebec. As at February 28, 2021, 18 of these boutiques remained temporarily closed. Through the first
quarter of Fiscal 2022, all of the Company’s boutiques were reopened but 34 boutiques were temporarily re-
closed based on government and health authority guidance in Ontario, Quebec and Nova Scotia. As at July 12,
2021, all of the Company’s boutiques had reopened.
In accordance with the relevant government and health authority guidance, the Company continues to operate
its distribution centers and boutiques under stringent health and safety protocols that include occupancy
restrictions, physical distancing and enhanced cleaning programs.
During the year ended February 27, 2022, the Company recognized payroll subsidies of $1.8 million (February
28, 2021 – $32.6 million), which were recorded as a reduction in the associated eligible salaries and wage
costs, recognized in cost of goods sold and selling, general and administrative expenses in the consolidated
statements of operations. During the year ended February 27, 2022, the Company also recognized rent
subsidies of $1.2 million (February 28, 2021 - $1.1 million) which were recorded as a reduction in boutique
occupancy costs in cost of goods sold in the consolidated statements of operations. As at February 27, 2022,
the Company had $2.1 million (February 28, 2021 - $5.0 million) of payroll subsidies and $nil (February 28,
2021 - $1.1 million) of rent subsidies receivable recorded in prepaid expenses and other current assets.
During the year ended February 27, 2022, the Company recognized $5.6 million (February 28, 2021 - $17.5
million) of rent and occupancy concessions in cost of goods sold and selling, general and administrative
expenses in the consolidated statement of operations.
The CARES Act in the United States further allows the immediate expensing of qualified leasehold
improvement property purchased after December 31, 2017 and the carry back of net operating losses to prior
years. These two measures resulted in the Company recognizing an income taxes receivable of $4.5 million, to
be applied to income taxes payable in prior periods and a decrease to total income tax expense of $nil
(February 28, 2021 - $2.0 million).
The Company’s operations continue to be impacted by the ongoing global challenges related to the COVID-19
pandemic. The extent of the impact of COVID-19 on future periods will depend on future developments,
including the duration or resurgence of the pandemic, related government responses and the impact on the
global economy, which are uncertain and cannot be predicted. Future closures of the Company’s boutiques
could result in the reassessment of impairment of property and equipment, definite and indefinite life intangible
assets, right-of-use assets and goodwill, and a provision to the net realizable value of the Company’s
inventories.
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Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
2 Summary of significant accounting policies
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries,
including Aritzia LP and CYC Design Corporation, domiciled in Canada, and United States of Aritzia Inc.,
domiciled in the U.S. All intercompany transactions and balances are eliminated on consolidation and
consistent accounting policies are applied across the Company.
Business combinations
The Company accounts for business combinations using the acquisition method when the acquired set of
activities and assets meets the definition of a business and control is transferred to the Company. The
Company assesses whether the set of assets acquired includes an input and substantive process and whether
the acquired set of assets has the ability to produce outputs.
The consideration transferred (including cash and contingent consideration) in the acquisition is measured at
fair value, as are the identifiable net assets acquired at the date of the acquisition. The fair value of the
purchase consideration is allocated to the fair values of the tangible and intangible assets acquired and
liabilities assumed.
Contingent consideration that is classified as a liability is remeasured at fair value at each reporting date and
subsequent changes in the fair value are recognized in profit and loss.
Goodwill is measured at cost, being the difference between the acquisition date fair value of consideration
transferred, including the recognized amount of any non-controlling interest in the acquiree over the net fair
value amount of the identifiable assets acquired and the liabilities assumed, all measured as at the acquisition
date.
The fair values of inventories acquired in a business combination are determined based on the estimated
selling price in the ordinary course of business less the estimated costs of sale, and a reasonable profit margin
based on the effort required to complete and sell the inventories.
The fair values of property and equipment acquired in a business combination are based on either the cost
approach or market approach, as applicable. Under the cost approach, the current replacement cost or
reproduction cost for each major asset is calculated. Under the market approach, the market value of property
is the estimated amount for which a property could be exchanged on the date of valuation between a willing
buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties each act
knowledgeably and willingly.
The fair values of brands acquired in a business combination are determined using a relief from royalty method
using a discounted cash flow model. The fair value of off-market leases acquired in a business combination is
determined based on the present value of the difference between market rates and rates in the existing leases.
The fair values of non-compete agreements acquired in a business combination are determined using a with-
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Fiscal 2022 Annual Report | 63
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
and-without approach based on the difference between two discounted cash flow models and consideration for
likelihood of competition.
The purchase price allocation may be provisional during a measurement period of up to one year to provide
reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities
assumed. Measurement period adjustments are recognized in the period in which the adjustment amount is
determined and adjustments to fair values and allocations are retrospectively adjusted.
Transaction costs associated with the acquisition are expensed as incurred.
Non-controlling interest in exchangeable shares liability
Non-controlling interest in exchangeable shares liability represents exchangeable shares that can be put back
to the Company’s subsidiary at the option of the holder and are measured initially at its fair value at the date of
acquisition. Subsequent changes in the fair value are recognized in profit and loss. The portion of the change in
fair value attributable to changes in the Company’s own credit risk is recognized in other comprehensive
income.
Functional and presentation currency
The functional currency for each entity included in these consolidated financial statements is the currency of the
primary economic environment in which the entity operates. These consolidated financial statements are
presented in Canadian dollars, which is the Company’s functional and presentation currency.
Translation of other foreign currency transactions and balances
Foreign currency transactions are translated into the functional currencies using the exchange rates at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at the
reporting date exchange rates, are recognised in profit or loss. Other non-monetary consolidated statement of
financial position items denominated in foreign currencies are translated into the functional currencies using the
exchange rates at the date of the transactions.
U.S. operations
Assets and liabilities of the Company’s U.S. operations have a functional currency of U.S. dollars and are
translated into Canadian dollars at the exchange rate in effect at the reporting date. Revenues and expenses
are translated into Canadian dollars at average exchange rates during the reporting period. The resulting
translation adjustments are included in other comprehensive income.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and investments in money market instruments with an
original maturity of less than three months. As at February 27, 2022 and February 28, 2021, the Company had
no investments held in money market instruments classified as cash equivalents.
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64 |
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Prepaid expenses and other current assets
Prepaid expenses and other current assets comprise of equity derivative contracts, prepaid expenses,
deposits, packaging supplies, payroll subsidies and rent subsidies.
Inventory
Inventory, consisting of finished goods and raw materials, is carried at the lower of cost and net realizable
value. Cost is determined using weighted average costs. Cost of inventories includes the cost of merchandise
and all costs incurred to deliver inventory to the Company’s distribution centres including freight and duty.
The Company periodically reviews its inventories and makes provisions as necessary to appropriately value
obsolete or damaged goods. In addition, as part of inventory valuations, the Company accrues for inventory
shrinkage for lost or stolen items based on historical trends.
Property and equipment
Property and equipment are measured at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditures that are directly attributable to the acquisition of the asset, including any
costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software
that is integral to the functionality of the related equipment is capitalized as part of that equipment.
The Company capitalizes borrowing costs incurred as part of the financing of the acquisition and construction of
property and equipment. Maintenance and repairs are expensed as incurred. Cost and related accumulated
depreciation for property and equipment are removed from the accounts upon their sale or disposition and the
resulting gain or loss is reflected in the results of operations.
Depreciation is recognized in net income on a straight-line basis over the estimated useful lives of each
component of an item of property and equipment, commencing when the assets are ready for use, as follows:
Computer hardware and software
Furniture and equipment
Leasehold improvements
3 - 7 years
3 - 10 years
shorter of lease term and estimated useful life
Estimates of useful lives, residual values and methods of depreciation are reviewed annually. Any changes are
accounted for prospectively as a change in accounting estimate. Depreciation expense is recorded in the
consolidated statements of operations in cost of goods sold and selling, general and administrative expenses.
Intangible assets
Intangible assets are recorded at cost and include trade names, trademarks, non-competition agreements and
internally developed computer software.
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Fiscal 2022 Annual Report | 65
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Costs to purchase any trademarks from third parties are capitalized and amortized over the useful lives of the
assets. Cost includes all expenditures that are directly attributable to the acquisition or development of the
asset.
The Company capitalizes, in intangible assets, direct costs incurred during the application and infrastructure
development stages of developing computer software for internal use. All costs incurred during the preliminary
project stage, including project scoping, identification and testing of alternatives, are expensed as incurred.
The Aritzia and Reigning Champ trade names have been determined to have an indefinite life and are not
amortized. The remaining intangible assets are amortized on a straight-line basis over their estimated useful
lives as follows:
Other trade names and trademarks
Non-compete agreements
Computer software
term of registration or
up to a maximum of 20 years
5 years
3 - 7 years
Estimates of useful lives, residual values and methods of amortization are reviewed annually. Any changes are
accounted for prospectively as a change in accounting estimate. Amortization expense is recorded in the
consolidated statements of operations in selling, general and administrative expenses.
Impairment of assets
Assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Goodwill and intangible assets that have an indefinite useful life are
not subject to amortization and are tested annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired.
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the greater of the cash generating units (“CGU”) fair value less costs of
disposal and value in use. For the purposes of non-boutique related non-financial assets, CGUs are grouped at
the lowest level that the assets are monitored for internal management purposes and for which largely
independent cash flows are generated. Non-financial assets, other than goodwill, that suffered an impairment
are reviewed for possible reversal of the impairment at the end of each reporting period.
Leases
The Company assesses whether a contract is or contains a lease at the inception of the contract. Leases are
recognized as a right-of-use asset and corresponding lease liability at the lease commencement date. The
lease liability is measured at the present value of the future fixed and in-substance fixed payments and variable
lease payments that depend on an index or rate over the lease term, less any lease incentives receivable,
discounted using the lessee’s incremental borrowing rate, unless the implicit interest rate in the lease can be
easily determined. Lease liabilities are subsequently measured at amortized cost using the effective interest
rate method.
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Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Lease terms applied are the contractual non-cancellable periods of the lease, plus periods covered by renewal
or termination options, if the Company is reasonably certain to exercise those options. Lease liabilities are
remeasured (with a corresponding adjustment to the right-of-use asset) when there is a change in the lease
term, a change in the future lease payments resulting from a change in an index or rate used to determine
those payments, or when the lease contract is modified and the lease modification is not accounted for as a
separate lease.
The right-of-use assets include the initial measurement of the corresponding lease liabilities, lease payments
made at or before the commencement date, any initial direct costs, less any lease incentives received before
the commencement date. The right-of-use assets are subsequently measured at cost and are depreciated on a
straight-line basis from the date the underlying asset is available for use over the lease term.
Lease payments for assets that are exempt through the short-term exemption and variable lease payments that
do not depend on an index or rate are not included in the measurement of the lease liabilities and are
recognized in cost of goods sold and selling, general and administrative expenses as incurred. Lease
incentives received for variable payment leases are deferred and amortized as a reduction in recognized
variable rent expenses over the related lease terms. Proceeds from lease incentives are recognized as
financing cash flows in the consolidated statement of cash flows.
Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of a
past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks
specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is
recognized as a finance cost.
An asset retirement obligation is a legal obligation associated with the retirement of tangible long-lived assets
that the Company may be required to settle. The Company’s asset retirement obligations are primarily
associated with leasehold improvements that the Company is contractually obligated to remove at the end of a
lease. At inception of a lease with such conditions, the Company recognizes the best estimate of the fair value
of the liability, with a corresponding increase in the carrying value of the related asset. The liability, recorded in
other non-current liabilities, is estimated based on a number of assumptions requiring management’s judgment,
including boutique closing costs, cost inflation rates and discount rates, and is accreted to its projected future
value over time. The capitalized asset is depreciated over its useful life. Upon satisfaction of the asset
retirement obligation conditions, differences between the recorded asset retirement obligation liability and the
actual retirement costs incurred are recognized as a gain or loss in the consolidated statements of operations.
Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual
provision of the financial instrument. Financial assets are derecognized when the contractual rights to receive
cash flows from the financial asset expire and financial liabilities are derecognized when obligations under the
contract expire, are discharged or cancelled. The Company’s financial assets, which includes cash and cash
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Fiscal 2022 Annual Report | 67
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
equivalents and accounts receivable, are classified as amortized cost. The Company’s financial liabilities, which
includes accounts payable and accrued liabilities, lease liabilities and long term debt, are classified as
amortized cost. The Company’s equity derivative contracts, contingent consideration and non-controlling
interest in exchangeable shares liability are classified as fair value through profit or loss (“FVTPL”).
Financial assets are initially measured at fair value and subsequently measured at amortized cost using the
effective interest method if both of the following conditions are met and they are not designated as FVTPL:
(i)
the financial asset is held within a business model whose objective is to hold financial assets to collect
contractual cash flows; and
(ii)
the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely
payments of principal and interest on the principal amount outstanding. All financial assets not
classified as amortized cost as described above are measured at FVTPL.
Financial liabilities are initially measured at fair value, less any directly attributable transaction costs, and
subsequently measured at amortized cost using the effective interest method.
Changes of the fair value of financial instruments classified as FVTPL are recorded in profit or loss in the period
in which they arise. Gains and losses on financial instruments classified at amortized cost are recognized in
profit or loss when the financial instruments are derecognized, modified or impaired.
Financial assets and financial liabilities are measured at fair value using a valuation hierarchy for disclosure of
fair value measurements. The determination of the applicable level within the hierarchy of a particular asset or
liability depends on the inputs used in the valuation as of the measurement date, notably the extent to which
the inputs are market-based (observable) or internally derived (unobservable). Observable inputs are inputs
that market participants would use in pricing the asset or liability based on market data obtained from
independent sources. Unobservable inputs are inputs based on a company’s own assumptions about market
participant assumptions using the best information available. The hierarchy is broken down into three levels
based on the reliability of inputs as follows:
Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that a company
has the ability to access at the measurement date.
Level 2 - Valuations based on quoted inputs other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly through corroboration with observable market
data.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value
measurement.
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Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Share capital
Multiple voting shares and subordinate voting shares are classified as shareholders’ equity. Incremental costs
directly attributable to the issuance of shares are shown in equity as a deduction, net of tax, from the proceeds
of the issuance. When share capital recognized as equity is re-purchased for cancellation, the amount of
consideration paid, which includes directly attributable costs, net of tax, is recognized as a deduction from
equity. The excess of the purchase price over the carrying amount of the shares is charged to retained
earnings.
Revenue recognition
The Company recognizes revenue when control of the goods or services has been transferred to the customer.
Revenue is measured at the fair value of the amount of consideration to which the Company expects to be
entitled to, including variable consideration, if any, to the extent that it is highly probable that a significant
reversal will not occur.
Net revenue reflects the Company’s sale of merchandise, less returns and discounts. Retail revenue at point-
of-sale is measured at the fair value of the consideration received at the time the sale is made to the customer,
net of discounts and estimated allowance for returns. For merchandise that is ordered and paid for in a
boutique and subsequently picked up by or delivered to the customer, revenue is deferred until control of the
merchandise has been transferred to the customer. eCommerce revenue is recognized at the date of estimated
delivery to the customer, and measured at the fair value of the consideration received, net of discounts and an
estimated allowance for returns. Shipping fees charged to customers are recorded as revenue.
Revenues are reported net of sales taxes collected for various governmental agencies.
Receipts from the sale of gift cards are treated as deferred revenue. When gift cards are redeemed for
merchandise, the Company recognizes the related revenue. The Company estimates gift card breakage, to the
extent there is no requirement for remitting card balances to government agencies under unclaimed property
laws, and recognizes revenue in proportion to actual gift card redemptions as a component of net revenue.
Cost of goods sold
Cost of goods sold includes inventory and product-related costs, occupancy costs, and depreciation expense
for the Company’s boutiques and distribution centres.
Selling, general and administrative
Selling, general and administrative expenses consist of selling expenses that are generally variable with
revenues and general and administrative operating expenses that are primarily fixed. Selling, general and
administrative expenses also include depreciation and amortization expense for all support office assets and
intangible assets.
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Fiscal 2022 Annual Report | 69
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Employee benefits
Short-term employee benefit obligations, which include wages, salaries, compensated absences and bonuses,
are expensed as the related service is provided.
Termination benefits are recognized as an expense when the Company has demonstrated commitment,
without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal
retirement date.
Government grants
The Company recognizes government grants when there is reasonable assurance that the Company has met
the requirements of the grant program, and that the grant will be received. The Company recognizes
government grants as a reduction to the related expense that the grant is intended to offset.
Income tax expense
Current and deferred income taxes are recognized in the Company’s net income, except to the extent that they
relate to a business combination or items recognized directly in equity or other comprehensive income.
Current taxes are recognized for the estimated taxes payable or receivable on taxable income or loss for the
current year and any adjustment to income taxes payable in respect of previous years. Current income taxes
are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end
date.
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from
its tax base, except for taxable temporary differences arising on the initial recognition of goodwill and temporary
differences arising on the initial recognition of an asset or liability in a transaction that is not a business
combination, and at the time of the transaction affects neither accounting nor taxable income or loss. In
addition, deferred tax liabilities are not recognized for taxable temporary differences arising on investments in
subsidiaries, associates and joint ventures where the reversal of the temporary difference can be controlled and
it is probable that the difference will not reverse in the foreseeable future. The amount of deferred tax provided
is based on the expected manner of realization or settlement of the carrying amount of the asset and liability,
using tax rates enacted or substantively enacted at the year-end date.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to
the extent that it is probable that future taxable profits will be available against which they can be utilized. The
carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the
asset to be recovered.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income
tax levied by the same taxation authority on either the taxable entity or different taxable entities where there is
an intention to settle the balances on a net basis.
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70 |
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Stock-based compensation expense
Stock Option Plans
Prior to the Company’s initial public offering (the “IPO”) the Company had a legacy equity incentive plan (the
“Legacy Plan”) pursuant to which it had granted time-based and performance-based stock options to directors,
employees, consultants and advisors.
Concurrent with the IPO, the Company implemented a long-term incentive plan (the “Omnibus Plan”), pursuant
to which it can grant time-based stock options to acquire subordinate voting shares to directors, executive
officers, employees and consultants.
For awards with service conditions that are subject to graded vesting, compensation cost is recognized on a
straight-line basis over the requisite service period for each separately vesting portion of the award as if the
award was, in substance, multiple awards. In addition, the total amount of compensation expense to be
recognized is based on the number of awards expected to vest and is adjusted to reflect those awards that do
ultimately vest.
Deferred Share Units and Restricted Share Units
The Company has a Director Deferred Share Unit (“DSU”) Program for non-employee board members and a
Restricted Share Unit (“RSU”) Program for employees and consultants. DSUs and RSUs are grants of notional
subordinate voting shares that are redeemable for cash based on the market value of the Company’s shares
and are non-dilutive to shareholders. The cost of the service received as consideration is initially measured
based on the market value of the Company’s shares at the date of grant. The grant-date fair value is
recognized as stock-based compensation expense with a corresponding increase recorded in other liabilities.
DSUs and RSUs are remeasured at each reporting date based on the market value of the Company’s shares
with changes in fair value recognized as stock-based compensation expense for the proportion of the service
that has been rendered at that date.
Performance Share Units
The Company has a Performance Share Unit (“PSU”) Program for senior management. A PSU represents the
right to receive a subordinated voting share settled by the issuance of treasury shares or purchased on the
open market or the cash equivalent at the market value of a share at the vesting date or a combination of cash
and shares at the discretion of the Board. PSUs vest on the third anniversary of the award date and are earned
only if certain performance targets are achieved and can decrease or increase if minimum or maximum
performance targets are achieved.
Net income per share
Basic net income per share is calculated by dividing the net income for the fiscal year attributable to
shareholders of the Company by the weighted average number of multiple voting shares and subordinate
voting shares outstanding during the year.
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Fiscal 2022 Annual Report | 71
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Diluted net income per share is calculated by dividing the net income for the fiscal year attributable to
shareholders of the Company by the weighted average number of multiple voting shares and subordinate
voting shares outstanding during the year, plus the weighted average number of subordinate voting shares that
would be issued on exercise of dilutive options granted, as calculated under the treasury stock method, and the
dilutive impact of PSUs granted and the non-controlling interest in exchangeable shares liability.
3 Significant new accounting standards
Standards issued but not yet adopted
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
In January 2020, IASB issued Classification of Liabilities as Current or Non-Current, which amends IAS 1 –
Presentation of Financial Statements. The narrow scope amendments affect only the presentation of liabilities
in the statement of financial position and not the amount or timing of its recognition. It clarifies that the
classification of liabilities as current or non-current is based on rights that are in existence at the end of the
reporting period and specifies that classification is unaffected by expectations about whether an entity will
exercise its right to defer settlement of a liability. It also introduces a definition of ‘settlement’ to make clear that
settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The
amendments are effective for annual reporting periods beginning on or after January 1, 2023. Earlier
application is permitted. The Company does not plan to early adopt the amendments to IAS 1. The Company is
currently assessing the potential impact of these amendments.
Definition of Accounting Estimates (Amendments to IAS 8)
In February 2021, the IASB issued Definition of Accounting Estimates, which amends IAS 8. The amendments
introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the financial
statements that are subject to measurement uncertainty. The amendments also clarify the relationship between
accounting policies and accounting estimates by specifying that a company develops an accounting estimate to
achieve the objective set out by an accounting policy. The amendments are effective for annual periods
beginning on or after January 1, 2023 with earlier adoption permitted. The Company is currently
assessing the potential impact of these amendments.
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
In February 2021, the IASB issued Disclosure of Accounting Policies, which amends IAS 1 and IFRS Practice
Statement 2. The amendments are intended to help preparers in deciding which accounting policies to disclose
in their financial statements. The amendments to IAS 1 require companies to disclose their material accounting
policy information rather than their significant accounting policies. The amendments also clarify that accounting
policies related to immaterial transactions, other events or conditions are themselves immaterial and as such
need not be disclosed. The amendment to IFRS Practice Statement 2 adds guidance and examples to the
materiality practice statement, which explains how to apply the materiality process to identify material
accounting policy information. The amendments are effective for annual periods beginning on or after January
1, 2023 with earlier adoption permitted and are to be applied prospectively. The Company is currently
assessing the potential impact of these amendments.
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Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Financial Instruments (Amendments to IFRS 9)
As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued an amendment to
IFRS 9. The amendment clarifies which fees should be included when assessing whether the terms of a new or
modified financial liability are substantially different from the terms of the original financial liability. These fees
include only those paid or received between the borrower and the lender, including fees paid or received by
either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that
are modified or exchanged on or after the beginning of the annual reporting period in which the entity first
applies the amendment. The amendment is effective for annual reporting periods beginning on or after January
1, 2022 with earlier adoption permitted. The Company is currently assessing the potential impact of these
amendments.
Deferred Tax related to assets and liabilities arising from a single transaction (Amendments to
IAS 12)
In May 2021, the IASB issued targeted amendments to IAS 12 – Income Taxes to specify how companies
account for deferred tax on transactions such as leases and decommissioning obligations. In specific
circumstances, companies are exempt from recognizing deferred tax when they recognize assets or liabilities
for the first time. Previously, there had been some uncertainty about whether the exemption applied to
transactions such as leases and decommissioning obligations transactions for which companies recognize both
an asset and a liability. The amendments clarify that the exemption does not apply and that companies are
required to recognize deferred tax on such transactions. The aim of the amendments is to reduce diversity in
the reporting of deferred tax on leases and decommissioning obligations. The amendments are effective for
annual reporting periods beginning on or after January 1, 2023, with early application permitted. The Company
is currently assessing the potential impact of these amendments.
4 Critical accounting estimates and judgments
The preparation of consolidated financial statements in accordance with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Estimates and assumptions are continuously evaluated
and are based on management’s best judgments and experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates
are recognized in the period in which the estimates are revised and in any future periods affected. Actual
results may differ from these estimates.
Significant judgments and estimates made by management in the process of applying accounting policies and
that have the most significant effect on the amounts recognized in the consolidated financial statements include
the following:
Return allowances, which requires the Company to utilize estimates of the return rate of merchandise based
on historical return patterns.
The provision recorded to remeasure inventories based on the lower of cost and net realizable value
(note 6), which requires the Company to utilize estimates related to product quality, damages, future
demand, selling prices, and market conditions. The Company records a write-down if the cost exceeds net
realizable value of inventory, based on the above factors.
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Fiscal 2022 Annual Report | 73
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Goodwill and indefinite life intangible asset impairment testing, which requires management to make
estimates in the impairment testing model. On an annual basis, the Company tests whether goodwill and
indefinite life intangible assets are impaired. The recoverable value is determined using discounted future
cash flow models, which incorporate estimates regarding future events, specifically future cash flows,
growth rates and discount rates (note 8). The Company uses judgment in determining the grouping of
assets to identify its CGUs for purposes of testing for impairment. In testing for impairment, goodwill
acquired in a business combination is allocated to the group of CGUs that are expected to benefit from the
synergies of the business combination, which involves judgment.
Incremental borrowing rate used for calculating lease liabilities and right-of-use-assets. The Company
estimates the incremental borrowing rate of each leased asset as the rate of interest that the Company
would have to pay to borrow, over a similar term with a similar security, the funds necessary to obtain an
asset of similar value to the right-of-use asset in a similar economic environment (note 9).
Lease terms, which requires judgment on whether the Company is reasonably certain, at the lease
commencement date, it will exercise available renewal or termination options, and thus include such options
in the lease terms (note 9). The Company considers all facts and circumstances that create an economic
incentive to exercise a renewal or termination option.
The Company uses judgment in applying the acquisition method of accounting for business combinations
and estimates to value identifiable assets and liabilities at the acquisition date. The Company may engage
independent third parties to determine the fair value of inventory, property and equipment and intangible
assets. Assumptions and estimates are used to determine cash flow projections, including the period of
future benefit, future growth and discount rates, among other factors. The values placed on the acquired
assets and liabilities assumed affect the amount of goodwill recorded on an acquisition.
Non-controlling interest in exchangeable shares liability involves uncertainty in estimating the fair value of
the obligation on a recurring basis. The fair value estimate includes inputs associated with expected
volatility, anticipated timing and discount rate associated with the obligation.
5 Acquisition of CYC Design Corporation
On June 25, 2021, the Company acquired 75% of the common shares in CYC Design Corporation (“CYC”), a
leading designer and manufacturer of premium athletic wear, Reigning Champ. This acquisition will accelerate
the Company’s product expansion into men’s wear. The results of operations, financial position, and cash flows
of CYC have been included in the Company’s consolidated financial statements since the date of acquisition.
Total aggregate consideration for the acquisition of the 75% of the common shares was $46.1 million which
consisted of cash consideration of $32.9 million and future cash consideration (the “contingent consideration”).
The contingent consideration is based on the future operating results of CYC during the measurement period
ending January 31, 2023, and payable in two instalments in May 2022 and May 2023. As at the date of
acquisition, the Company recorded a contingent consideration liability of $13.2 million and was based on its
expected outcome at the end of the earnout period (note 13).
74 |
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Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
As part of the acquisition, the remaining shareholders of CYC exchanged their common shares for
exchangeable shares. The exchangeable shares can be put back to CYC at specified future dates in May to
August in each of 2024, 2025 and 2026, for a formula-based amount dependent on the future performance of
CYC in exchange for shares of the Company, resulting in a liability (note 13). The Company also has the ability
to call the exchangeable shares in August 2026. The formula-based amount is subject to a capped enterprise
value of CYC. As the exchangeable shares are a liability, the Company has treated the acquisition as an
acquisition of a 100% interest in the entity, with the non-controlling interest in exchangeable shares liability
included in the fair value of the acquired assets and liabilities.
The acquisition date fair values are as follows:
Fair value of consideration
Cash paid
Contingent consideration (note 13)
Assets acquired
Cash
Accounts receivable
Inventory
Prepaid expenses and other current assets
Property and equipment
Intangible assets:
Brand
Non-compete agreements
Goodwill
Right-of-use assets
Liabilities assumed
Accounts payable and accrued liabilities
Income taxes payable
Deferred revenue
Lease liabilities
Deferred tax liabilities
Net assets acquired
Non-controlling interest in exchangeable shares liability (note 13)
As at June
25, 2021
32,878
13,237
46,115
323
1,244
8,600
303
2,670
26,200
1,200
47,164
8,264
95,968
1,170
1,081
208
6,264
7,630
16,353
79,615
(33,500)
46,115
$
$
$
$
$
$
$
$
Goodwill is attributable to the expected synergies to be achieved from integrating CYC into the Company’s
existing business. Goodwill is non-deductible for tax purposes.
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Fiscal 2022 Annual Report | 75
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
For the period from the date of acquisition to February 27, 2022, CYC contributed revenue of $17.1 million and
net income of $0.4 million. If the acquisition had occurred on March 1, 2021, management estimates that CYC’s
revenue would have been $25.3 million and net income would have been $0.8 million for the year ended
February 27, 2022.
In connection with the acquisition, during the year ended February 27, 2022, the Company recognized $2.6
million in acquisition-related costs which were expensed as incurred. These costs are included in other
expense (income) and include transaction costs such as fees for advisory and professional services.
6
Inventory
Finished goods
Finished goods in transit
Raw materials
Inventory
February 27,
2022
February 28,
2021
$
$
$
131,954
69,656
6,515
208,125
$
120,182
48,888
2,751
171,821
The Company records a reserve to value inventory to its estimated net realizable value. This resulted in an
expense in cost of goods sold of $8.3 million for the year ended February 27, 2022 (February 28, 2021 - $4.8
million). No inventory write-downs recorded in previous periods were reversed.
All of the Company’s inventory is pledged as security for the revolving credit facility (note 12).
As part of the CYC acquisition on June 25, 2021, the Company acquired inventory with a fair value of $8.6
million at the time of acquisition. During the year ended February 27, 2022, the Company also recognized $1.9
million relating to the purchase price fair value adjustment in cost of goods sold for inventory sold.
76 |
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Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
7 Property and equipment
Leasehold
improvements
Furniture
and
equipment
Computer
hardware
Computer
software
Construction-
in-progress
Total
Cost
Balance, March 1, 2020
Additions
Transfers from construction-in-
$
progress
Transfer to intangibles
Dispositions
Foreign exchange
Balance, February 28, 2021
Additions
Additions related to CYC
acquisition (note 5)
Transfers from construction-
$
in-progress
Dispositions
Foreign exchange
233,099 $
24,034
56,563 $
7,851
18,039
2,510
$
6,954
225
$
15,655 $
10,888
330,310
45,508
11,758
-
(10,185)
(5,630)
1,333
-
(4,143)
(1,094)
602
-
(2,595)
(188)
905
(889)
(382)
(17)
(14,598)
-
-
(380)
-
(889)
(17,305)
(7,309)
253,076 $
38,091
60,510 $
10,185
18,368
4,059
$
6,796
773
$
11,565 $
18,443
350,315
71,551
2,083
9,898
(7,481)
535
500
1,267
(2,734)
103
77
169
(740)
17
10
-
(288)
-
-
2,670
(11,334)
-
46
-
(11,243)
701
Balance, February 27, 2022 $
296,202 $
69,831 $
21,950
$
7,291
$
18,720 $
413,994
Accumulated depreciation
Balance, March 1, 2020
Depreciation
Dispositions
Foreign exchange
Balance, February 28, 2021
Depreciation
Dispositions
Foreign exchange
$
$
100,145 $
23,919
(10,185)
(2,420)
111,459 $
27,982
(7,481)
418
27,811 $
7,584
(4,143)
(583)
30,669 $
8,406
(2,734)
103
$
$
12,435
3,225
(2,595)
(139)
12,926
3,631
(740)
25
$
$
5,282
811
(382)
(18)
5,693
735
(288)
-
- $
-
-
-
- $
-
-
-
145,673
35,539
(17,305)
(3,160)
160,747
40,754
(11,243)
546
Balance, February 27, 2022 $
132,378 $
36,444 $
15,842
$
6,140
$
- $
190,804
Net carrying value
Balance, February 28, 2021
$
Balance, February 27, 2022 $
141,617 $
163,824 $
29,841 $
33,387 $
5,442
6,108
$
$
1,103
1,151
$
$
11,565 $
18,720 $
189,568
223,190
Construction-in-progress primarily includes build costs for boutiques not yet opened and distribution center
projects not put into use.
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Fiscal 2022 Annual Report | 77
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
8 Goodwill and intangible assets
Indefinite life
trade name
Definite life
trade name Trademarks
Computer
software
Non-compete
agreements
Construction-
in-
progress
Total
Intangible
assets
Goodwill
Cost
Balance, March 1, 2020 $
Additions
Transfers from
construction-in-
progress
Transfers from property,
plant and equipment
Dispositions
Balance, February 28,
2021
Additions
Additions related to
CYC acquisition
(note 5)
Dispositions
Balance, February 27,
2022
Accumulated
amortization
46,092 $
17,175 $
-
-
-
-
-
-
-
-
$
46,092 $
17,175 $
-
26,200
-
-
-
-
2,009 $
-
32,209 $
625
-
-
-
2,070
889
(471)
2,009 $
-
35,322 $
90
- $
-
-
-
-
- $
-
2,070 $
-
99,555 $
625
151,682
-
(2,070)
-
-
-
- $
1,674
889
(471)
100,598 $
1,764
151,682
-
-
-
-
-
-
-
(56)
1,200
-
-
-
27,400
(56)
47,164
-
$
72,292 $
17,175 $
2,009 $
35,356 $
1,200 $
1,674 $
129,706 $
198,846
Balance, March 1, 2020 $
Amortization
Dispositions
Balance, February 28,
2021
Amortization
Dispositions
Balance, February 27,
2022
Net carrying value
Balance, February 28,
Balance, February 27,
2021
2022
$
$
$
$
- $
-
-
- $
-
-
11,553 $
656
-
12,209 $
656
-
1,709 $
23
-
1,732 $
28
-
22,426 $
2,653
(471)
24,608 $
2,971
(56)
- $
-
-
- $
160
-
- $
-
-
- $
-
-
35,688 $
3,332
(471)
38,549 $
3,815
(56)
- $
12,865 $
1,760 $
27,523 $
160 $
- $
42,308 $
-
-
-
-
-
-
-
46,092 $
4,966 $
277 $
10,714 $
- $
- $
62,049 $
151,682
72,292 $
4,310 $
249 $
7,833 $
1,040 $
1,674 $
87,398 $
198,846
Construction-in-progress includes internally generated computer software not put into use.
Until December 19, 2005, the operations of the Company were owned by a private, closely held Canadian
company. On December 19, 2005, Berkshire purchased the majority of the operations through a newly created
company, Aritzia Capital Corporation (renamed to Aritzia Inc.). The acquisition transaction was treated as a
business combination and the identified assets and liabilities that were acquired were measured at their
acquisition date fair values, including goodwill and the indefinite life trade name.
On June 25, 2021, the Company acquired 75% of the common shares in CYC Design Corporation, a leading
designer and manufacturer of premium athletic wear. The acquisition transaction was treated as a business
combination which resulted in $47.2 million recognized as goodwill and $26.2 million allocated to the CYC
brand name, known as Reigning Champ (note 5).
78 |
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Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Management has grouped goodwill that arose on the CYC acquisition with the existing goodwill, based on the
expected future benefits to be derived. Goodwill is monitored corporately at the level of the Company’s single
operating segment. In assessing goodwill for impairment, the Company compared the aggregate recoverable
amount of its operating segment to its respective carrying amount. The recoverable amount has been
determined based on the higher of the value in use and fair value less costs of disposal. The Company
performed its annual impairment test of goodwill on the first day of the fourth quarter in fiscal 2022 and fiscal
2021.
The recoverable amount of goodwill was based on value in use, calculated using discounted cash flows over
five years with a terminal value generated from continuing use of the group of CGUs. Specific cash flow
estimates were projected based on historical operating results, expected annual growth assumptions and a
terminal growth rate to extrapolate the cash flow projections. The growth rate applied to the terminal values is
based on the Bank of Canada’s target inflation rate. A pre-tax discount rate of 8.25% and a terminal growth
assumption rate of 2.0% were used in the model. A decrease in the growth assumptions by 1.00% would not
cause the carrying amount to exceed the estimated recoverable amount. An increase of the pre-tax discount
rate by 1.00% would not cause the carrying amount to exceed the estimated recoverable amount.
The Company’s indefinite life trade names include Aritzia and Reigning Champ (note 5). As there is no
foreseeable limit to the period over which the assets are expected to generate net cash inflows, these
intangible assets are considered to have indefinite useful lives. Indefinite life trade names were tested for
impairment on the first day of the fourth quarter in fiscal 2022 and fiscal 2021 using the relief from royalty
method to value the brands at the impairment testing date.
As at February 27, 2022 and February 28, 2021, management has determined that there was no impairment of
goodwill or the indefinite life trade names.
9 Leases
The Company has the right to use real estate properties for its boutiques, distribution centers and support
offices under non-cancellable lease agreements, together with periods covered by an option to extend or
terminate, if the Company is reasonably certain it will exercise those options.
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Fiscal 2022 Annual Report | 79
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
The following table reconciles the change in right-of-use assets for the year ended February 27, 2022:
Cost
Balance, February 28, 2021
Additions, net of lease incentives received
Fair value adjustment on CYC leases (note 5)
Modifications
Foreign exchange
Balance, February 27, 2022
Accumulated depreciation
Balance, February 28, 2021
Depreciation
Amortization of fair value adjustment on CYC leases
Modifications
Foreign exchange
Balance, February 27, 2022
Net carrying value
Balance, February 28, 2021
Balance, February 27, 2022
Right-of-use
assets
$
$
$
$
$
$
484,012
68,066
2,000
(6,879)
2,579
549,778
120,595
67,702
356
(2,787)
1,025
186,891
363,417
362,887
The following table reconciles the change in lease liabilities for the year ended February 27, 2022:
Balance, February 28, 2021
Additions
Interest expense on lease liabilities (note 18)
Repayment of interest and principal on lease liabilities
Rent concessions applicable to lease liabilities
Modifications
Foreign exchange
Balance, February 27, 2022
Current portion of lease liabilities
Long-term portion of lease liabilities
Lease liabilities
Lease
liabilities
494,832
82,143
22,346
(89,428)
(3,800)
(4,812)
2,510
503,791
86,724
417,067
503,791
$
$
$
During the year ended February 27, 2022, the Company expensed $14.4 million of variable lease payments,
which are not included in the lease liabilities (February 28, 2021 - $2.9 million).
80 |
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Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
During the year ended February 27, 2022, the Company expensed $1.7 million of lease payments relating to
short-term or low value leases for which the recognition exemption was applied and these payments were not
included in the lease liabilities (February 28, 2021 – 1.0 million).
The future undiscounted minimum lease payments for the Company’s leases for its premises, excluding other
occupancy charges and variable lease payments, are as follows:
Less than 1 year
Between 1 and 5 years
More than 5 years
Future undiscounted minimum lease payments
$
$
106,371
333,332
135,408
575,111
As at February 27, 2022, the Company had future undiscounted minimum lease payments of $122.6 million for
leases committed to but not yet commenced (February 28, 2021 - $53.5 million).
10 Accounts payable and accrued liabilities
Trade accounts payable
Other non-trade payables
Employee benefits payable
Current portion of Director Deferred Share Unit Program and
Restricted Share Unit Program liability (note 15)
Accounts payable and accrued liabilities
11 Other non-current liabilities
February 27,
2022
February 28,
2021
$
$
$
124,506
12,469
38,494
3,875
179,344
$
96,540
11,521
23,040
792
131,893
February 27,
2022
February 28,
2021
Director Deferred Share Unit Program and Restricted Share Unit
$
15,736
$
6,930
Program liability (note 15)
Deferred lease inducements
Asset retirement obligations
Deferred payroll taxes
Other non-current liabilities
6,250
373
-
$
22,359
$
6,920
357
852
15,059
12 Bank indebtedness and long-term debt
On July 13, 2021, the Company refinanced its term loan and revolving credit facility, extending the term to July
13, 2025. As part of the refinancing, the Company repaid its term loan of $75.0 million and increased its
existing revolving credit facility from $100.0 million to $175.0 million. The Company incurred $0.7 million of
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Fiscal 2022 Annual Report | 81
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
financing fees as part of the refinancing during the year ended February 27, 2022. Fees paid on the
establishment of revolving credit facilities are deferred and recorded in other assets as a prepayment for
liquidity services and amortized over the term of the facility.
The revolving credit facility bears interest at BA, LIBO or Prime plus a marginal rate between 0.50% and 2.50%
(February 28, 2021 – 0.50% and 2.50%). Up to $10.0 million of the facility can be drawn upon by way of a
swingline loan. As of February 27, 2022 and February 28, 2021, no advances were made under the revolving
credit facility.
During the year ended February 27, 2022 the Company incurred $0.6 million of interest (February 28, 2021 -
$3.2 million), at a weighted average rate of 2.21% (February 28, 2021 – 2.53%).
The Company also has letters of credit facilities of $75.0 million, secured pari passu with the revolving credit
facility. The interest rate for the letters of credit is between 1.00% and 2.50%. As at February 27, 2022, the
amount available under these facilities was reduced to $31.5 million (February 28, 2021 - $33.7 million) by
certain open letters of credit (note 21(b)).
The revolving credit facility is collateralized by a first priority lien on all property and equipment, leased real
property interests and inventory. In addition, the Company is required to maintain certain financial covenants.
As at February 27, 2022 and February 28, 2021, the Company was in compliance with all financial covenants.
13 Financial instruments
Fair value of financial instruments
The following tables show the carrying amounts and fair values of financial assets and liabilities, including their
levels in the fair value hierarchy and accounting classification:
Classification
Fair Value
Level
Carrying Value
Fair Value
As at February 27, 2022
Financial assets
Cash and cash equivalents
Accounts receivable
Equity derivative contracts
Financial liabilities
Accounts payable and accrued
liabilities
Lease liabilities
Contingent consideration
Non-controlling interest in
Amortized cost
Amortized cost
FVTPL
Amortized cost
Amortized cost
FVTPL
exchangeable shares liability
FVTPL
$
$
1
2
2
2
2
3
3
$
$
265,245
8,147
15,561
179,344
503,791
13,237
35,500
265,245
8,147
15,561
179,344
503,791
13,237
35,500
(22)
82 |
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Classification
Fair Value
Level
Carrying Value
Fair Value
As at February 28, 2021
Financial assets
Cash and cash equivalents
Accounts receivable
Equity derivative contracts
Financial liabilities
Accounts payable and accrued
liabilities
Lease liabilities
Long-term debt (net of deferred
financing fees)
Amortized cost
Amortized cost
FVTPL
Amortized cost
Amortized cost
Amortized cost
$
$
1
2
2
2
2
2
$
149,147
6,202
4,369
149,147
6,202
4,369
131,893
494,832
$
74,855
131,893
494,832
75,000
There were no transfers between the levels of the fair value hierarchy for the years ended February 27, 2022
and February 28, 2021.
The carrying value of cash and cash equivalents, accounts receivable and accounts payable and accrued
liabilities approximates their fair value due to the immediate or short-term maturity of these financial
instruments.
Equity derivative contracts
The Company has equity derivative contracts (total return swaps) to hedge the share price exposure on its
cash-settled DSUs and RSUs. These contracts are not designated as hedging instruments for accounting
purposes. During the year ended February 27, 2022, the Company recorded an unrealized gain of $11.2 million
for the change in fair value for these contracts in the consolidated statements of operations in other expense
(income) (February 28, 2021 - $3.7 million). As at February 27, 2022, the equity derivative contracts had a
positive fair value of $15.6 million (February 28, 2021 – $4.4 million) which is recorded in prepaid expenses and
other current assets in the consolidated statements of financial position.
Contingent consideration
The Company has a contingent consideration under the CYC purchase agreement that is based on future
operating results of CYC during the measurement period ending January 31, 2023. As at the acquisition date of
CYC on June 25, 2021, the Company recorded a contingent consideration liability of $13.2 million (note 5).
During the period from the date of acquisition to February 27, 2022, there was no change in fair value of the
contingent consideration.
Non-controlling interest in exchangeable shares liability
In conjunction with the acquisition, CYC issued exchangeable shares to minority shareholders (“exchangeable
shareholders”) in exchange for their 25% share of the total common shares at acquisition. The exchangeable
shares allow the holders to put back their shares to CYC in the following periods: one-third from May 1, 2024 to
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Fiscal 2022 Annual Report | 83
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
August 31, 2024, one-third from May 1, 2025 to August 31, 2025, and one-third from May 1, 2026 to August 31,
2026 (the “put options”). In the event that the exchangeable shareholders do not exercise the put options by
August 31, 2026, the Company has an open-ended call option, but not an obligation, to purchase all of the
shares held by the exchangeable shareholders (the “call option”).
The exercise prices of the put options and the call option are based on certain specific operating results of CYC
in the most recently completed fiscal year prior to exercise, subject to a capped enterprise value of $60.0
million (remaining 25% purchase). Upon exercise, the options are settled through a variable number of the
Company’s shares based on a volume weighted average price (VWAP) of the Company’s shares for 30
consecutive trading days.
The fair value of the non-controlling interest in exchangeable shares liability is estimated initially, and on a
recurring basis, based on a Monte Carlo simulation that has been used to simulate the potential fluctuations in
CYC’s operating results over the period to exercise. The fair value of the call option is embedded in the fair
value of the non-controlling interest in exchangeable share liability. The cash flows associated with the
modelled operating results are then discounted back to the valuation date.
The fair value of the non-controlling interest in exchangeable shares liability was estimated based on the Monte
Carlo simulation using the following assumptions:
Initial business enterprise value (100%)
Gross profit expected volatility
Gross profit discount rate
Expected life
February 27,
2022
$63.0 million
20.0%
13.0%
4.5 years
June 25,
2021
$63.0 million
20.0%
12.5%
5.2 years
A 1.0% increase (decrease) in the gross profit discount rate would result in a $1.0 million decrease and $0.5
million increase, respectively, in the amount of the non-controlling interest in exchangeable shares liability.
A 5.0% increase (decrease) in gross profit would result in a $1.0 million increase and $1.5 million decrease,
respectively, in the amount of the non-controlling interest in exchangeable shares liability.
As at the acquisition date of CYC on June 25, 2021, the fair value of the non-controlling interest in
exchangeable shares liability was $33.5 million. During the period from the date of acquisition to February 27,
2022, the change in the fair value of the non-controlling interest in exchangeable shares liability was $2.0
million, and was recorded in other expense (income).
14 Share capital
On May 13, 2021, the Company announced a secondary offering (“Secondary Offering”) on a bought deal
basis of its subordinate voting shares through a secondary sale of shares by certain entities owned and or
controlled directly or indirectly by Brian Hill, Chief Executive Officer and Chairman of the Company, or Brian Hill
and his immediate family (the “Selling Shareholders”). The Secondary Offering of 3,040,700 subordinate voting
shares raised gross proceeds of $91.2 million for the Selling Shareholders, at a price of $30.00 per subordinate
(24)
84 |
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
voting share and was completed on June 1, 2021. The Company did not receive any proceeds from the
Secondary Offering. As part of the Secondary Offering, during the year ended February 27, 2022, the Selling
Shareholders exchanged 2,600,000 of their multiple voting shares for subordinate voting shares. Underwriting
fees were paid by the Selling Shareholders, and other expenses related to the Secondary Offering of $0.5
million were paid by the Company.
On January 12, 2022, the Company announced the commencement of a normal course issuer bid (the “NCIB”)
to repurchase and cancel up to 3,732,725 of its subordinate voting shares, representing approximately 5% of
the public float of 74,654,507, over the 12-month period commencing January 17, 2022 and ending January 16,
2023. All repurchases are made through the facilities of the Toronto Stock Exchange and are done at market
prices. The amounts paid above the average book value of the subordinate voting shares are charged to
retained earnings. During the year ended February 27, 2022, the Company repurchased a total of 164,200
subordinate voting shares for cancellation at an average price of $54.79 per subordinate voting share.
As at February 27, 2022, there were 21,937,349 multiple voting shares and 89,181,069 subordinate voting
shares issued and outstanding. There were no preferred shares issued and outstanding as at February 27,
2022. Neither the multiple voting shares nor the subordinate voting shares issued have a par value.
15 Stock options
The Company has granted stock options under the Legacy Plan and the Omnibus Plan.
Legacy Plan
Following completion of the IPO in October 2016, no additional options will be granted under the Legacy Plan.
The options vest annually pro rata on the anniversary of the grant date over a period of five years. All issued
options expire after 10 to 15 years from the date granted.
Transactions for stock options granted under the Legacy Plan for the years ended on February 27, 2022 and
February 28, 2021 were as follows:
February 27, 2022
February 28, 2021
Number
of
stock
options
Weighted
average
exercise
price
Number
of
stock
options
Weighted
average
exercise
price
Outstanding, at beginning of year
3,059,324
$
5.13 3,624,983
$
4.85
Exercised
Outstanding, at end of year
Exercisable, at end of year
(845,441)
2,213,883
2,213,883
$
$
4.56
(565,659)
5.35 3,059,324
5.35 2,988,322
$
$
3.37
5.13
5.08
(25)
Fiscal 2022 Annual Report | 85
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Information relating to stock options outstanding under the Legacy Plan and exercisable as at February 27,
2022 is as follows:
Exercise
prices per
share
Number of
stock
options
$3.15 to $4.96
$4.97 to $6.44
$6.45 to $7.09
870,754
680,955
662,174
2,213,883
Stock options outstanding
Stock options exercisable
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise
price
Number of
stock
options
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise
price
2.62
3.40
4.10
3.30
$4.16
$5.49
$6.76
870,754
680,955
662,174
$5.35 2,213,883
2.62
3.40
4.10
3.30
$4.16
$5.49
$6.76
$5.35
Stock-based compensation expense in relation to the options under the Legacy Plan for the year ended
February 27, 2022 was nil (February 28, 2021 – 0.5 million).
Omnibus Plan
The options vest annually pro rata on the anniversary of the grant date over a period of five years. All issued
options expire after seven years from the date granted.
Transactions for stock options granted under the Omnibus Plan for the years ended February 27, 2022 and
February 28, 2021 were as follows:
February 27, 2022
February 28, 2021
Number
of
stock
options
Weighted
average
exercise
price
Number
of
stock
options
Weighted
average
exercise
price
Outstanding, at beginning of year
5,208,278
$
16.12 4,158,524
$
15.22
Granted
Exercised
Forfeited
Outstanding, at end of year
Exercisable, at end of year
1,777,158
(483,534)
(121,403)
6,380,499
2,980,285
$
$
35.21 1,272,766
(78,263)
15.76
(144,749)
31.84
21.16 5,208,278
15.37 2,363,805
$
$
18.82
14.73
14.87
16.12
15.13
86 |
(26)
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Information relating to stock options outstanding under the Omnibus Plan and exercisable as at February 27,
2022 is as follows:
Stock options outstanding
Stock options exercisable
Exercise
prices per
share
Number of
stock
options
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise
price
Number of
stock
options
Weighted
average
remaining
contractual
life (years)
$12.99 to $15.10
$15.11 to $18.51
$18.52 to $59.75
1,844,825
2,570,924
1,964,750
6,380,499
2.66
3.61
8.81
4.94
$13.83 1,432,294
$17.25 1,497,837
50,154
$33.18
$21.16 2,980,285
2.67
2.55
5.14
2.65
Weighted
average
exercise
price
$13.85
$16.65
$20.42
$15.37
The weighted average fair value of stock options estimated at the grant date for the year ended February 27,
2022 was $12.86 (February 28, 2021 - $6.68).
The weighted average fair value of the time-based stock options granted during the year ended February 27,
2022 was estimated at the date of grant based on the Black-Scholes option pricing model using the following
assumptions:
Dividend yield
Expected volatility
Risk-free interest rate
Expected life
Exercise price
0.0%
38.5% to 39.4%
0.9% to 1.6%
5.0 to 7.0 years
$30.98 to $59.75
Stock-based compensation expense in relation to the options under the Omnibus Plan for the year ended
February 27, 2022 was $10.1 million (February 28, 2021 - $5.5 million).
Director Deferred Share Unit (“DSU”) Program
Each eligible director receives a portion of his or her annual director retainer in DSUs. DSUs vest when
granted, but are not redeemable for cash settlement until the eligible director ceases to be a member of the
Board. The Company is required to record a liability for the potential future settlement of the DSUs at each
reporting date by reference to the fair value of the liability. The fair value of the recorded liability in relation to
the DSUs was $7.6 million at February 27, 2022 (February 28, 2021 – $4.6 million), with an expense of $4.0
million for the year ended February 27, 2022 (February 28, 2021 - $2.2 million), recorded as stock-based
compensation expense.
(27)
Fiscal 2022 Annual Report | 87
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Transactions for DSUs granted for the years ended February 27, 2022 and February 28, 2021 were as follows:
Outstanding, at beginning of year
Granted
Settled in cash
Outstanding, at end of year
Vested, at end of year
February 27,
2022
February 28,
2021
Number of
DSUs
Number of
DSUs
153,111
26,339
(25,624)
153,826
153,826
108,959
44,152
-
153,111
153,111
The weighted average fair value of the grant price for the year ended February 27, 2022 was $40.21 (February
28, 2021 - $21.73).
Restricted Share Unit (“RSU”) Program
RSUs vest on the third anniversary of the award date and at that time, are redeemable for cash based on the
market value of the Company’s shares. The Company is required to record a liability for the potential future
settlement of the RSUs at each reporting date by reference to the fair value of the liability. The fair value of the
recorded liability in relation to the RSUs was $12.0 million as at February 27, 2022 (February 28, 2021 – $3.1
million), with an expense of $10.9 million for the year ended February 27, 2022 (February 28, 2021 - $2.5
million), recorded as stock-based compensation expense.
Transactions for RSUs granted for the years ended February 27, 2022 and February 28, 2021 were as follows:
Outstanding, at beginning of year
Granted
Settled in cash
Forfeited
Outstanding, at end of year
Vested, at end of year
February 27,
2022
February 28,
2021
Number of
RSUs
Number of
RSUs
349,046
364,324
(37,247)
(23,277)
652,846
145,790
208,405
-
(5,149)
349,046
-
-
The weighted average fair value of the grant price for the year ended February 27, 2022 was $36.96 (February
28, 2021 - $19.33).
88 |
(28)
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Performance Share Unit (“PSU”) Program
In January 2021, the Company implemented a Performance Share Unit (“PSU”) Program. A PSU represents
the right to receive a subordinated voting share settled by the issuance of treasury shares or purchased on the
open market or the cash equivalent at the market value of a share at the vesting date or a combination of cash
and shares at the discretion of the Board. PSUs vest on the third anniversary of the award date and are earned
only if certain performance targets are achieved and can decrease or increase if minimum or maximum
performance targets are achieved.
Transactions for PSUs granted for the year ended February 27, 2022 were as follows:
Outstanding, at beginning of year
Granted
Outstanding, at end of year
Vested, at end of year
February 27,
2022
Number of
PSUs
-
96,836
96,836
-
The weighted average fair value of the grant price for the year ended February 27, 2022 was $36.94. Stock-
based compensation expense in relation to the PSUs for the year ended February 27, 2022 was $1.1 million.
16 Net income per share
a) Basic
Basic net income per share is calculated by dividing the income attributable to shareholders of the Company by
the weighted average number of multiple voting shares and subordinate voting shares outstanding during the
period. As all the classes of shares are subject to the same distribution rights, the Company performs the net
income per share calculations as if all shares are a single class.
Net income attributable to shareholders of the Company
Weighted average number of shares outstanding during the year
(thousands)
Basic net income per share
February 27,
2022
February 28,
2021
$
$
156,917 $
19,227
110,401
1.42 $
109,487
0.18
(29)
Fiscal 2022 Annual Report | 89
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
b) Diluted
Net income per diluted share is calculated by dividing the income attributable to shareholders of the Company
by the weighted average number of multiple voting shares and subordinate voting shares outstanding during
the period adjusted for the effects of potentially dilutive stock options, PSUs and the non-controlling interest in
exchangeable shares liability.
Net income attributable to shareholders of the Company
Weighted average number of shares for net income per diluted share
(thousands)
Net income per diluted share
February 27,
2022
February 28,
2021
$
$
156,917 $
19,227
115,784
112,844
1.36 $
0.17
For the year ended February 27, 2022, 737,577 stock options, along with the non-controlling interest in
exchangeable shares liability were not included in the calculation of diluted net income per share as they were
anti-dilutive (February 28, 2021 – 1,661,125).
17 Net Revenue
Net revenue disaggregated for eCommerce and boutiques was as follows:
eCommerce revenue
Retail revenue
Net revenue
18 Expenses by nature
Cost of goods sold
Inventory and product-related costs and occupancy costs
Depreciation expense on right-of-use assets
Depreciation expense on property and equipment
Cost of goods sold
90 |
February 27,
2022
February 28,
2021
$
564,340 $
930,290
425,929
431,394
$
1,494,630 $
857,323
February 27,
2022
February 28,
2021
$
740,219 $
65,688
33,771
450,018
64,405
30,395
$
839,678 $
544,818
(30)
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
Personnel expenses
Salaries, wages and employee benefits
Stock-based compensation expense (note 15)
Government payroll subsidies (note 1)
Personnel expenses
Finance expense
Interest expense on lease liabilities (note 9)
Interest expense and banking fees
Amortization of deferred financing fees
Finance expense
Other expense (income)
Realized foreign exchange loss (gain)
Unrealized foreign exchange loss (gain)
Fair value adjustment of non-controlling interest in exchangeable shares
liability
Unrealized gain on equity derivative contracts (note 13)
Acquisition costs of CYC (note 5)
Secondary Offering costs (note 14)
Interest and other income
February 27,
2022
February 28,
2021
316,877 $
26,131
(1,834)
341,174 $
223,294
10,691
(32,603)
201,382
February 27,
2022
February 28,
2021
22,346 $
2,555
301
25,202 $
23,671
4,537
212
28,420
February 27,
2022
February 28,
2021
1,685
(2,839)
$
(1,399)
3,149
$
$
$
$
$
2,000
(11,192)
2,633
530
(1,600)
-
(3,701)
-
-
(1,583)
(3,534)
Other expense (income)
$
(8,783) $
(31)
Fiscal 2022 Annual Report | 91
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
19
Income taxes
a)
Income tax expense
Current period
Adjustments with respect to prior periods
Current tax expense
Origination and reversal of temporary differences
Adjustments with respect to prior periods
Changes in substantively enacted tax rates
Deferred tax (recovery) expense
Income tax expense
b) Reconciliation of effective tax rate
February 27,
2022
February 28,
2021
$
$
$
$
$
73,746 $
135
73,881 $
(11,428) $
(178)
408
(11,198) $
8,752
(3,978)
4,774
(776)
2,977
-
2,201
62,683 $
6,975
The Company’s income tax expense differs from that calculated by applying the combined substantively
enacted Canadian federal and provincial statutory income tax rates for the years ended February 27, 2022 and
February 28, 2021 of 26.6% and 26.7%, respectively, as follows:
February 27,
2022
February 28,
2021
219,600 $
26,202
58,414 $
6,991
$
$
Income before income taxes
Expected income tax expense
Increase (decrease) in income taxes resulting from:
Non-deductible stock-based compensation
Non-deductible fair value adjustment of non-controlling interest in
exchangeable shares liability
Foreign tax rate differences
Other
U.S. CARES Act (note 1)
3,008
540
331
390
-
Income tax expense
$
62,683 $
92 |
1,609
-
38
302
(1,965)
6,975
(32)
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
c) Deferred income tax
The tax effects of the significant temporary differences that comprise deferred tax assets and liabilities as at
February 27, 2022 and February 28, 2021 are as follows:
Leases
Inventory
Deferred revenue
Accounts payable and accrued liabilities
Deferred lease incentives
Stock-based compensation
Financing and share issuance costs
Other
Net operating loss
Charitable contributions
Deferred tax assets
Property and equipment
Goodwill and intangible assets
Other
Deferred tax liabilities
Net deferred tax asset (liability)
The net change in deferred income tax liabilities is recorded as follows:
Deferred tax (recovery) expense recorded in net income
Deferred tax liability related to CYC Design acquisition (note 5)
Deferred tax expense recorded in other comprehensive (loss) income
Net change in deferred tax liabilities
February 27,
2022
February 28,
2021
38,186 $
14,837
3,553
3,175
1,795
1,075
1,000
702
537
101
64,961 $
31,770 $
31,606
33
63,409 $
35,772
946
2,799
4,079
2,075
892
901
913
186
385
48,948
26,627
24,478
34
51,139
1,552 $
(2,191)
February 27,
2022
February 28,
2021
(11,198) $
7,630
(175)
(3,743) $
2,201
-
939
3,140
$
$
$
$
$
$
$
Of the deferred income tax balances, the Company expects $28.8 million of the deferred tax assets to be
recovered within 12 months and $10.1 million of the deferred tax liabilities to be settled within 12 months.
The Company intends to indefinitely reinvest the undistributed earnings of its foreign subsidiaries; accordingly,
the Company has not recorded a deferred tax liability on these earnings.
(33)
Fiscal 2022 Annual Report | 93
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
20 Segment information
The Company defines an operating segment on the same basis that it uses to evaluate performance internally
and to allocate resources by the Chief Operating Decision Maker (the “CODM”). The Company has determined
that the Chief Executive Officer is its CODM and there is one operating segment. Therefore, the Company
reports as a single segment. This includes all sales channels accessed by the Company’s clients, including
sales through the Company’s eCommerce website and sales at the Company’s boutiques.
The following table summarizes net revenue by geographic location of the Company’s clients:
Canada
United States
Net revenue
February 27,
2022
February 28,
2021
$
$
818,495 $
676,135
1,494,630 $
565,591
291,732
857,323
The Company’s non-current, non-financial assets (property and equipment, intangible assets and goodwill, and
right-of-use assets) are geographically located as follows:
Canada
United States
Non-current, non-financial assets
21 Commitments and contingencies
a) Product purchase obligations
February 27,
2022
February 28,
2021
$
$
534,419 $
337,902
872,321 $
458,729
307,987
766,716
At February 27, 2022, the Company had purchase obligations of $155.9 million (February 28, 2021 - $69.8
million), which represent commitments for fabric expected to be used during upcoming seasons, made in the
normal course of business.
b) Letters of credit
At February 27, 2022, the Company had open letters of credit of $43.5 million (February 28, 2021 - $41.3
million).
22 Related party transactions
The Company is ultimately controlled by AHI Holdings Inc. and related entities which are controlled by a
director and officer of the Company.
94 |
(34)
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
The Company entered into the following transactions with related parties:
a) During the year ended February 27, 2022, the Company made payments of $4.9 million (February 28, 2021
- $4.2 million) for lease of premises and management services and $1.0 million (February 28, 2021 – $0.7
million) for the use of an asset wholly or partially owned by companies that are owned by a director and
officer of the Company. At February 27, 2022, $0.5 million was included in accounts payable and accrued
liabilities (February 28, 2021 - $0.2 million). As at February 27, 2022, the outstanding balance of lease
liabilities owed to these companies was $13.3 million (February 28, 2021 - $11.6 million). These
transactions were measured at the amount of consideration established at market terms.
b) Key management includes the Company’s directors and executive team. Compensation awarded to key
management includes:
Salaries, directors’ fees and short-term benefits
Stock-based compensation expense
Key management compensation
23 Supplemental cash flow information
Accounts receivable
Inventory
Prepaid expenses and other current assets
Other assets
Accounts payable and accrued liabilities
Deferred revenue
Net change in non-cash working capital balances
Accrued purchases of property and equipment
Accrued purchases of intangible assets
February 27,
2022
February 28,
2021
$
$
4,906 $
8,685
13,591 $
3,860
4,135
7,995
February 27,
2022
February 28,
2021
$
(3,107) $
(28,997)
1,913
(1,538)
32,899
17,553
18,723 $
(3,183)
(79,508)
(9,332)
1,265
85,386
9,285
3,913
$
$
9,196 $
172
2,940
-
(35)
Fiscal 2022 Annual Report | 95
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
24 Financial risk management
The Company is exposed to a variety of financial risks in the normal course of operations including currency,
equity price, credit and liquidity risk, as summarized below. The Company’s overall risk management program
and business practices seek to minimize any potential adverse effects on the Company’s consolidated financial
performance.
Risk management is carried out under practices approved by the Company’s Audit Committee. This includes
reviewing and making recommendations to the Board on the adequacy of the Company’s risk management
policies and procedures with regard to identifying the Company’s principal risks and implementing appropriate
systems and controls to manage these risks. Risk management covers many areas of risk including, but not
limited to, foreign exchange risk, interest rate risk, equity price risk, credit risk and liquidity risk.
a)
Market risk
Currency risk
The Company is exposed to foreign exchange risk on foreign currency denominated transactions,
monetary assets and liabilities denominated in a foreign currency, and net investments in foreign
operations. The Company sources the majority of its raw materials and merchandise from various
suppliers in Asia and Europe with the vast majority of purchases denominated in U.S. dollars. In addition,
the Company operates boutiques in the United States. The Company’s foreign exchange risk is primarily
with respect to the U.S. dollar and the Company has limited exposure to other currencies. Foreign
currency forward contracts are used from time to time to mitigate risks associated with forecasted U.S.
dollar merchandise purchases sold in Canada.
As at February 27, 2022, a $0.05 variation in the Canadian dollar against the U.S. dollar on net monetary
accounts in U.S. dollars would, with all other variables being constant, have an approximate favourable (or
unfavourable) impact of $0.1 million on net income.
Interest rate risk
The Company has a revolving credit facility which provides available borrowings in an amount up to
$175.0 million. Because the revolving credit facility bears interest at a variable rate, the Company is
exposed to market risks relating to changes in interest rates on outstanding balances. As at February 27,
2022, no advances were made under the revolving credit facility.
Equity price risk
The Company is exposed to risk arising from the cash settlement of our deferred and restricted share
units, as an appreciating subordinate voting share price increases the potential cash outflow. We record a
liability for the potential future settlement of our deferred and restricted share units by reference to the fair
value of the liability. We use equity derivative contracts (total return swaps) to offset our cash flow
variability of the expected payment associated with our deferred and restricted share units. We only enter
into equity derivative contracts with major financial institutions. As at February 27, 2022, an increase (or
(36)
96 |
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
decrease) in the Company’s share price by $1.00 would result in an increase (or decrease) of $0.4 million
in the fair value of the liability.
b) Credit risk
Credit risk is the risk of an unexpected loss if a counterparty to a financial instrument fails to meet its
contractual obligations. Financial instruments that potentially subject the Company to credit risk consist of
cash and cash equivalents, accounts receivable, and derivative contracts used to hedge market risks. The
Company offsets credit risks associated with cash and cash equivalents by depositing its cash and cash
equivalents with major financial institutions that have been assigned high credit ratings by internationally
recognized credit rating agencies. The Company is exposed to credit risk on accounts receivable from its
landlords for tenant allowances. To reduce this risk, the Company enters into leases with landlords with
established credit history and, for certain leases, the Company may offset rent payments until accounts
receivable are fully satisfied. The Company only enters into derivative contracts with major financial
institutions.
c) Liquidity risk
Liquidity risk is the risk that the Company cannot meet a demand for cash or fund its obligations as they
come due. Liquidity risk also includes the risk of not being able to liquidate assets in a timely manner at a
reasonable price. The Company manages liquidity risk through various means, including monitoring actual
and projected cash flows, taking into account the seasonality of its revenue, income and working capital
needs. The Company’s revolving credit facility is used to maintain liquidity. As at February 27, 2022 and
February 28, 2021, no advances were made under this revolving credit facility. As at February 27, 2022,
the Company also has letter of credit facilities of $75.0 million (February 28, 2021 – $75.0 million), of
which $43.5 million of letters of credit were outstanding (February 28, 2021 – $41.3 million).
The following table summarizes the undiscounted contractual maturities of the Company’s financial
liabilities as at February 27, 2022:
Accounts payable and accrued liabilities
Lease liabilities
Contingent consideration
Non-controlling interest in exchangeable
$
Less than
1 year
1 to
5 years
More than
5 years
179,344 $
106,371
6,619
333,332
6,618
- $
- $
135,408
-
Total
179,344
575,111
13,237
shares liability
Total
-
39,300
-
39,300
$
292,334 $ 379,250 $
135,408 $
806,992
(37)
Fiscal 2022 Annual Report | 97
Aritzia Inc.
Notes to Consolidated Financial Statements
February 27, 2022 and February 28, 2021
(in thousands of Canadian dollars, unless otherwise noted)
25 Capital management
The Company’s objectives when managing capital are to:
ensure sufficient liquidity to enable the internal financing of capital projects thereby facilitating its growth;
provide a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business; and
maintain a flexible capital structure that optimizes the cost of capital at an acceptable risk and preserves
the ability to meet financial obligations.
The Company defines capital as its revolving credit facility and shareholders’ equity. The Company’s primary
uses of capital are to finance increases in non-cash working capital along with capital expenditures for new
boutique additions, existing boutique expansion and renovation projects, and other infrastructure investments.
The Company currently funds these requirements out of its internally generated cash flows.
The Company is subject to financial covenants and collateral pursuant to its revolving credit facility presented in
note 12.
98 |
(38)
Board of Directors and
Executive Officers
Information for
Shareholders
BOARD OF DIRECTORS
Aldo Bensadoun
John Currie
Daniel Habashi
Brian Hill
David Labistour
John Montalbano
Marni Payne
Glen Senk
Marcia Smith
Jennifer Wong
Director, Member of
Compensation and Nominating
Committee
Lead Independent Director,
Chair of Audit Committee,
Member of Compensation and
Nominating Committee
Director, Member of
Environmental and Social
Committee
Founder, Chief Executive Officer
and Chairman, Director
Director, Member of Audit
Committee, Chair of
Environmental and Social
Committee
Director, Member of Audit
Committee, Member of
Environmental and Social
Committee
Director, Chair of Compensation
and Nominating Committee
Director
Director, Member of
Compensation and Nominating
Committee, Member of
Environmental and Social
Committee
President, Chief Operating
Officer and Corporate
Secretary, Director
EXECUTIVE OFFICERS
Brian Hill
Jennifer Wong
Todd Ingledew
Karen Kwan
Dave MacIver
Pippa Morgan
Founder, Chief Executive Officer
and Chairman
President, Chief Operating
Officer and Corporate
Secretary
Chief Financial Officer
Chief People and Culture Officer
Chief Information Officer
Executive Vice President, Retail
SUPPORT OFFICE
611 Alexander St, Suite 118
Vancouver, British Columbia V6A 1E1, Canada
aritzia.com
+1 604 251 3132
INVESTOR INQUIRIES
investor@aritzia.com
TRANSFER AGENT
TSX Trust
tsxtis@tmx.com
1-866-600-5869
ANNUAL SPECIAL AND
SPECIAL MEETING
July 6, 2022
Virtual meeting details as outlined in Aritzia’s
Management Information Circular
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
STOCK EXCHANGE LISTING
Aritzia’s subordinate voting shares are
traded on the Toronto Stock Exchange (TSX)
under the symbol ATZ
Aritzia’s financial reports, regulatory
filings and news releases are available
at sedar.com and on our website at
investors.aritzia.com.
Fiscal 2022 Annual Report | 99