According to the Financial Post, one of Canada’s largest retailers of Women’s Fashions is looking to raise $300 million in an IPO on the Toronto Stock Exchange by selling 20 million shares. This has raised many eyebrows as this would be one of the largest IPO’s in recent months on the Toronto Stock Exchange. Women’s Fashion IPO’s in Canada are few and far between with one of the last high profile IPOs in this arena being Lululemon (now exclusively trading in the US). Investors looking for new opportunities in this space and seeing the precedent set by Lululemon are likely to consider Aritzia. The question becomes, does the Aritzia IPO offer investors growth? Has the Aritzia hype come and gone?
First, a little about the Aritzia. It’s primarily a Canadian fashion brand that focuses on the demographic of women between the ages of 17-45. The brand offers clothing and accessory options and operates mainly in Canada as well as some larger cities in the US. The brand also has an active lifestyle/yoga line which is sold under the brand ‘TNA”. The company has been in operation since 1984 but really came to prominence over the last few years having taken out leases in major retail centers in Canada. So while the corporation’s presence in Canada and the US has been growing, we go back to the original question posed above, is the company past its prime? Will an IPO of its shares offer investors further growth? We’ll look to Google Trends for any clues.
We isolated searches to Canada since the company primarily operates there. We took a look at the company’s main brands: Aritzia and TNA and put this up against its Canadian competitor Lululemon. In absolute terms, Lululemon has the largest internet presence of each of the brands however search interest in the term appears to have peaked in 2013 and a downward trend formed as of December 2014. The same pattern was observed with TNA. In Aritzia’s favour, its flagship brand has continued to grow and shows no signs of letting up. In fact, it would appear that the brand will soon eclipse Lululemon in absolute searches if the trends continue.
The IPO for Aritzia will value the entire company at approximately $1.87 billion which is significantly smaller than the $8.3 billion market cap currently held by Lululemon. Aritzia currently has 55 stores compared to Lululemon’s 354. With the level of search interest for Aritzia, it would appear that the brand could support a much higher store count which we assume based on the store count/search interest level of Lululemon. If we were to take our chances on where we’ll get growth, we’ll put our money on Aritzia. We await the IPO!