Aritzia Inc

TSX:ATZ

Earnings Call Transcript 2022-Q3

[Operator]

Thank you for standing by. This is the conference operator. Welcome to Aritzia's Third Quarter Fiscal Year 2022 Earnings Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I will now turn the conference over to Carly Bishop, Executive Manager, Office of the CEO. Please go ahead.

[Carly Bishop]

Thank you, Kyle, and thanks for joining Aritzia's Third Quarter Fiscal 2022 Earnings Conference Call. On the call today, I'm joined by Brian Hill, our Founder, Executive Officer and Chairman; Jennifer Wong, President and Chief Operating Officer; and Todd Ingledew, our Chief Financial Officer. Following management's discussion, we'll host a question-and-answer period open to analysts and investors.Please note that remarks on this call may include our expectations, future plans and intentions that may constitute forward-looking statements. Due to the material impact of COVID-19 on business operations in fiscal 2021, certain references to our pre-pandemic results in the third quarter of fiscal 2020 have been included where management deemed it to be a more meaningful measurement of performance.The uncertain and dynamic nature of COVID-19 and its ongoing impact could continue to materially alter our performance. We would refer you to our most recently filed management's discussion and analysis and our annual information form, which include a summary of the material assumptions as well as risks and factors that could affect our future performance and our ability to deliver on these forward-looking statements. Our earnings release, our earnings release, the related financial statements and the MD&A are available on SEDAR and the Investor Relations section of our website at aritzia.com.I will now turn the call over to Brian.

[Brian James-Beaumont Hill]

Thank you, Carly. And thank you all for joining us this afternoon. Happy New Year. I'm excited to share alongside Jennifer and Todd, our results for the third quarter of fiscal 2022. In Q3, our business continued to surge, surpassing our own high expectations across all geographies and all channels. In the United States, we saw our business further advance at an unprecedented pace. In addition, our entire e-commerce channel sustained its exceptional momentum and retail in both countries flourished, with all boutiques open for the entire quarter for the first time since the start of the pandemic.Our exceptional performance in Q3 and throughout fiscal 2022 has not come without challenges, but a world-class team and their unwavering commitment to excellence and teamwork have enabled us to successfully navigate the ever-changing landscape of the pandemic and the many obstacles that have come with it. For this, I could not be more grateful and proud. As we set our sights on the future, we have extraordinary opportunities ahead of us. We are working hard to deliver on significant demand increases while managing the global headwinds of the pandemic, supply chain disruptions, labor shortages and health and safety protocols.We remain focused on our fundamentals to sustain our growth and delivering our much-loved everyday luxury experience to our expanding client base, while we continue to purposefully invest in the infrastructure required to scale for years to come. While Todd will provide you with a detailed perspective of our Q3 financials, I'm very pleased to share our performance highlights for the quarter. In Q3, we delivered net revenue of $453 million with growth of 63% or $175 million from last year, and growth of 70% or $186 million from 2 years ago. In the United States, our business has further accelerated at an unprecedented pace. Net revenue increased 115% from last year and 116% from 2 years ago, accounting for 44% of our revenue in the quarter. And of a particular note, we have almost doubled our active U.S. client base over the past trailing 12 months.Our e-commerce channel sustained its exceptional momentum as net revenue increased 47% from last year and 162% from 2 years ago, accounting for 33% of our revenue in the quarter. Our retail business flourished with boutiques delivering sales growth of 72% from last year and 45% from 2 years ago, with comparable sales exceeding prepandemic levels in both Canada and United States by 26%. This manifested itself in adjusted EBITDA growing to $109 million, growth of 100% or $55 million from last year. We fueled our surging e-commerce business by further enhancing our digital everyday luxury experience. Beyond optimizing aritzia.com with new and improved features and functionalities across personalization, product discovery, digital gift cards and checkout, we brought our clients an elevated outerwear experience and launched superworld.com, a new immersive branded digital experience to complement our Super World pop-up boutiques. In addition, our omni capabilities initiative is also meaningfully growing in adoption. Jennifer will speak to this shortly. Our retail business continued to exceed our own optimistic expectations. In addition to operating all of our boutiques for the first time since the start of the pandemic, we continued to expand our presence in the United States. We opened a new boutique in Nashville, Tennessee and expanded 4 additional boutiques with our Troy, Michigan expansion breaking opening day and opening weekend sales records. That being said, the strength of our boutique network is our people. They bring our much-loved everyday luxury experience to life with each and every client interaction. Despite shortages in the labor market in both Canada and the United States, we significantly expanded our team this holiday season to ensure every client's needs were fulfilled.Our world-class team not only drove tremendous success throughout the quarter, but delivered record-breaking results during our Black Friday event as almost half of our boutiques including every single one of our 37 U.S. boutiques achieving their top sales day in their history. Shifting gears to product, we saw an outstanding client response to our fall/winter collection. We extended our assortment depth by making strategic investments in expanding key programs with new lengths and sizes, bringing more of our most loved beautiful products to new and loyal clients. At the same time, further headwinds as a result of the pandemic resurgence resulted in meaningful supply chain disruptions, taking shape in the form of factory closures, reduced production efficiency and ongoing shipping delays. Our product and supply chain teams continue to work hard to mitigate these challenges through our geographically diverse supply chain, strategic inventory management and the increased use of expedited freight. Jennifer will also touch on this shortly. In marketing, we effectively reached new and loyal clients by delivering captivating communications through brand and feature-focused product campaigns that seamlessly translated across all channels for our launches of fall/winter and Super World as well as our Black Friday event. I will now turn the call over to Jennifer Wong.

[Jennifer Wong, President, COO, Corporate Secretary & Non]

Thanks, Brian, and good afternoon, everyone. Our operations supported the strong momentum of our business through an incredible third quarter and holiday season. We were all hands on deck to maximize our sales across all areas, setting us up for overwhelming success and exceeding all performance expectations. This is a testament to our world-class team and operations both of which continue to fuel our growth. Today, I'll update on 4 areas within our operations and our lead up to the holiday season. First, our supply chain; second, our digital infrastructure investments; third, our talent landscape; and finally, our progress on ESG. Throughout the quarter, we continued to face pandemic-related global supply chain disruptions head on. Like many in the industry, this included COVID-related factory closures until mid-October and reduced shipping capacities resulting in increased cost. Despite the production disruptions, freight delays and port slowdowns, we successfully navigated these challenges and remain in a solid inventory position to keep up with the high demand. In particular, our product and supply chain teams worked tirelessly to proactively manage and mitigate these industry-wide headwinds through continued geographic diversification, strategic inbound inventory management and the use of expedited freight. On the outbound side, thanks to our strong partnership with FedEx, we also achieved record service levels. E-commerce orders were expedited to clients, and we kept up with the unprecedented demand. All of these efforts kept us well positioned to sustain our sales momentum, especially heading into the holiday and will remain contributing factors as we continue to invest in delivering strong results going forward. I'm extremely proud of our teams for their perseverance and adaptability. They are doing a phenomenal job. Moving to our talent landscape going into Q3, the availability of labor remained extremely challenged in both the U.S. and Canada. In the lead up to the holiday period, the strength of our employer brand, targeted acquisition strategies and competitive wage offerings enabled us to successfully attract and hire the talent we needed to build our seasonal teams across retail, concierge and the DC. We continued our ongoing investments in talent across the business. In particular, we added global luxury experience and expertise to our creative team. This will be key as we continue to elevate our brands through innovative and beautiful product design and deliver on everyday luxury. As our teams grow, we continue to prioritize and invest in our people, operating with an industry-leading health and safety program. This includes best-in-class testing and screening frequency and diligent contact tracing. Most recently, in close partnership with government health authorities, we launched a vaccine clinic in Toronto for 1,400 of our people plus their friends and families and our partners. We know that every decision we make during this time impacts our community as a whole and will keep navigating the uncertainty of COVID-19 with agility and care. And we're certainly not alone in the impact being felt across the industry caused by the Omicron variant and the pressure it has imposed. And while we cannot predict the future, we are doing everything within our control to mitigate its effects. The depth of a dedicated team, together with our best-in-class processes and our ability to mobilize and pivot in the moment have effectively powered us to operate with minimal disruption so far.Despite all of the pandemic-related disruptions, we saw record order and sales volume across all channels this holiday season, particularly during Black Friday and Cyber Monday. Our distribution team delivered exceptional performance yet again as we topped our record for most e-commerce orders processed, not just in a single day, but in a single hour. Our Concierge team kept pace through our event period having handled over 126,000 client interactions, while achieving improved response times and increased sales results. These results demonstrate that once again, our best-in-class infrastructure is the backbone for success in our ability to handle substantially higher volumes. We have a world-class team, and we remain committed to developing our next generation of leaders and recruiting top talent to Aritzia, especially with the outlook for significant growth ahead.Turning to digital infrastructure. In Q3, we remained focused on our fundamentals and strategic infrastructure investments required to scale. We continued to enhance our technology infrastructure to support our accelerating e-commerce business. We launched digital gift cards, giving our clients another way to purchase gifts seamlessly this season. We also implemented site feature and functionality optimization and personalization, product discovery and checkout to elevate our digital experience. As noted on our last call, we launched store inventory visibility known as SIV. By giving our clients the direct ability to locate the product they want, we've not only increased traffic to our stores which has translated to a meaningful lift in sales, we have also increased the capacity for Concierge to focus on higher-value inquiries. Shifting our progress on ESG, Aritzia remains steadfast in our ongoing commitment to people and the planet. We're making encouraging progress in our promise to exclusively source Forest Stewardship Council certified or recycled content paper packaging. Including our holiday packaging this season, we are close to reaching our goal of producing all of our boxes, tissue paper, e-commerce and retail bags entirely with sustainable or certified materials. We know that being responsible is fundamental to fully delivering everyday luxury, and we continue to advance our ESG agenda. I encourage you to visit our Investor Relations page on aritzia.com to learn more about our sustainability commitment and how far we have come in our fiscal 2021 ESG Executive Summary. Finally, with the grateful support of our people and our loyal clientele, we are proud to continue giving back to our communities where we live and work through financial and product donations to Aritzia community partner organization across the U.S. and Canada. This holiday season, we celebrated Giving Tuesday, a global day of giving with a commitment to donate to $10 of every purchase that day. We are pleased to share we reached our $250,000 donation goal. We also donated 4,000 warm winter coats valued at over $1 million. We remain committed to being responsible as we continue to make a meaningful positive impact towards the well-being of our people and the planet. With the busiest season behind us, we remain focused on enabling growth through strategic planning and initiatives for the future. This includes formalizing our multiyear business strategy, which we look forward to sharing with you in the next fiscal year. In closing, I would like to thank our entire team for their hard work, unwavering dedication and resilience in delivering another extraordinary quarter. I'm tremendously proud of the outstanding results we continue to achieve together. I'll now turn the call over to Todd to discuss the financial results.

[Todd Ingledew, Chief Financial Officer]

Thanks, Jennifer, and good afternoon, everyone. Our exceptional performance in the third quarter exceeded even our high expectations. We delivered another record quarter of both top and bottom-line results reflecting our growing brand affinity in the United States and the strength of our e-commerce business. What makes these results so remarkable is that they were accomplished with the backdrop of ongoing supply chain disruptions and labor shortages. For the third quarter, we generated net revenue of $453 million, an increase of 63% or $175 million from last year and 70% or $186 million from 2 years ago. This exceptional performance is driven by the following: First, we continue to see outstanding growth in the United States with net revenue in U.S. dollars of $159 million in the quarter, growing 126% or $88 million from last year and 128% or $89 million from 2 years ago. Our business in the United States comprised 44% of net revenue, up significantly from 33% in the third quarter last year. The sustained momentum in our U.S. business is reflective of the significant acceleration in our U.S. client base, which has nearly doubled in the last 12 months as more and more clients discover the Aritzia brand. Second, our e-commerce business delivered another strong quarter with net revenue of $148 million, an increase of 47% on top of the 79% increase in the third quarter last year. The increased demand for our product manifested in both higher traffic and conversion during the quarter. E-commerce penetration was 33%, up significantly from 21% in the third quarter 2 years ago. Third, retail revenue in the third quarter was $305 million, an increase of 72% or $128 million from last year and 45% or $94 million from 2 years ago.This remarkable growth was driven by both comparable sales and new and repositioned boutiques led by the strength in the United States. Retail comparable sales growth of 58% from last year and 26% from fiscal 2020 pre-pandemic was driven by both double-digit comp growth in Canada and the United States. We delivered gross profit of $210 million, up 67% from $126 million in the third quarter last year. Gross profit margin was 46.4% in the quarter, expanding 110 basis points from 45.3% last year. When compared to fiscal 2020, our gross profit margin expanded to 170 basis points. The improvement in gross profit margin exceeded our expectations with higher leverage on occupancy costs and lower markdowns more than offsetting the expected significantly higher expedited freight.SG&A expenses in the quarter were $110 million or 24.3% as a percentage of net revenue compared to 26.8% last year. The 250 basis point improvement was primarily driven by leverage from increased revenue. When compared to fiscal 2020, our SG&A as a percent of revenue increased by 30 basis points. The increase was primarily driven by continued investment in talent across e-commerce, marketing and IT to support the ongoing and future growth of our business. Overall, adjusted EBITDA in the third quarter was $109 million, an increase of 100% from $55 million last year and 87% from $58 million 2 years ago. Adjusted EBITDA margin was 24.1%, expanding 19.6% last year -- from last year and 21.9% from 2 years ago. The expansion in adjusted EBITDA margin is a testament to the strength of our business and our ability to drive profitable growth despite significant headwinds. Inventory was $177 million at the end of the quarter, up 28% from last year. Throughout the quarter, the team did an outstanding job managing inventory levels to deliver our revenue growth in a challenging environment. We ended the quarter with $306 million of cash and 0 drawn on our $175 million revolving credit facility. We continue to generate significant cash flow and have a strong balance sheet. With this in mind, we announced the implementation of a normal course issuer bid to repurchase and cancel up to 5% or $3.7 million of our subordinate voting shares. Our #1 priority for capital allocation will always be investing in the growth of our business. However, having an NCIB facility in place allows us to buy shares opportunistically and offset the dilution of option exercises over time. Turning to our outlook. We expect net revenue for the fourth quarter to be in the range of $375 million to $400 million, representing a 40% to 50% increase compared to last year. This reflects the robust client demand and continued strength of our business throughout the entire holiday selling season. Since the beginning of January, we have seen revenue pressure due to our third quarter and holiday sales exceeding expectations and correspondingly resulting in meaningfully lower end-of-season sale inventory. That said, our business in the United States remains strong, and we are well positioned for the launch of our exciting new spring collection in February.For the full year, we are increasing our outlook and now expect net revenue to be in the range of $1.425 billion to $1.45 billion, with the top end of the range up $150 million from our previous outlook. The updated outlook implies a full year revenue increase of approximately 65% to 70% from fiscal 2021. We expect gross profit margin improvement seen in the third quarter compared to pre-COVID-19 levels in fiscal 2020 to be similar in the fourth quarter. This reflects leverage on fixed costs and lower markdowns offset by ongoing meaningfully higher expedited freight costs. We expect the increase in SG&A dollars seen in the third quarter compared to pre-COVID-19 levels in fiscal 2020 to be similar in the fourth quarter, driven by continued investments in people, processes and technology in addition to variable costs related to our sales growth. In summary, we are extremely pleased with the strength of our business, particularly with our growth in the United States and the momentum of our e-commerce business. With our strong balance sheet, we will continue accelerating investment in our strategic initiatives and infrastructure. We are confident we are well positioned to maximize the opportunities ahead to drive profitable growth and deliver meaningful shareholder value. With that, I'll now turn the call back to Brian.

[Brian James-Beaumont Hill]

Thanks, Todd. We're excited for the road ahead. We carried our exceptional demand and strong performance into Q4 and throughout the entire holiday season. However, with our third quarter and holiday sales significantly exceeding expectation, resulting in meaningful lower end of season inventory, we have seen revenue pressure since the beginning of the new year. Despite this, as Todd mentioned, our business in the United States remains strong across retail and e-commerce. In the fourth quarter alone, we are expanding our boutique network, including new boutiques in Las Vegas, Washington D.C., technically Virginia, Columbus and Miami. However, growth in both retail and e-commerce is being affected by Omicron-driven restrictions. That said, despite these headwinds, we are well positioned for our launch of our exciting new spring collection in February. As we set our sights on fiscal 2023, our business has never been stronger or better positioned for growth. The foundation our team has built over the past 37 years continues to empower our ability to deliver our much-loved everyday luxury experience of engaging service, beautiful product, aspirational environments and captivating communications for new and loyal clients across all geographies and all channels. As I reflect on our brand acceleration, new client acquisition and the performance of our business, particularly in the United States, I see extraordinary opportunities for Aritzia. While for us having a laser focus on our fundamentals has proven to be successful, our accelerated momentum also opened significant opportunities to further expand our footprint. We will continue to drive digital innovation of our e-commerce channel and omni capabilities, grow our boutique portfolio, expand our product assortment and acquire new clients, all while continuing to strategically invest in our infrastructure and growing our team of world-class talent. As our business continues to accelerate beyond our own high expectations, so does the incredible support of our clients and our people. I am deeply grateful for our team's constant agility, dedication to excellence and tireless hard work that are propelling us towards our goals and for our clients' enduring loyalty.I could not be more excited about the road ahead. We're just getting started. Thank you for joining us today.

[Operator]

[Operator Instructions] The first question comes from Mark Petrie, CIBC.

[Mark Robert Petrie]

Congrats on the results. Obviously, the U.S. momentum remains exceptionally strong. I know your strategy is consistent and stores are the primary marketing tool. But what other vehicles do you believe are drawing so many new people to the brand?

[Brian James-Beaumont Hill]

I'll take that. Thanks for the question, Mark. Welcome. We're doing a little -- we are experimenting with a little bit of digital marketing, not a lot. We did get some -- we did have some influencer activations accumulating with J.Lo did a little favor for us towards the end of the year. But realistically, I think it's our stores. I mean our stores are really, really busy. We have busy stores and every -- anecdotally everywhere we go and everything we hear. Like we walked in 1000 Manhattan about 5 weeks ago checking on the stores, and I mean, I had to wait 5 minutes to get out into SoHo -- 2 minutes to get in SoHo, we didn't have a lineup or a queue. That was the first thing I did when I went inside, I mean busy. And I think we're the place to shop right now in the United States and we can't wait until we get opportunities to continue to open stores. And it's an omni experience, an omni shopping experience. So the stores are fueling our famous -- they're making us famous. And our e-commerce channel is facilitating a lot of these sales now. And so as I've said before, when things are this typically is not one thing that you're doing, right. There's a lot of things that you're doing right and a lot of things you are working in. We don't expect it to always be the case. But right now, everything seems to be normal.

[Mark Robert Petrie]

Yes. Okay. And I know you've been investing in your social media marketing capabilities, but is it fair to assume that you still see that as a continued lever for supporting this type of growth.

[Brian James-Beaumont Hill]

I mean, yes. I mean, anybody who's not using social media right now and comes in all sorts of forms and every time we turn around, whether it be TikTok or something else is new along as you roll through. So everybody is engaging in social media, some more than others. And we're probably doing it a lot less than others. That said, from an investment perspective, that said organically, we're using our channels to leverage as much as we possibly can right now. And we're building a team and we look to be doing more of it in the future. But I think it certainly has helped us here, but I wouldn't say it's underpinned our growth here at the same time.

[Mark Robert Petrie]

Yes. Understood. Could you just talk about where you're at on your goal of doubling SKU count over 5 years and maybe the performance of the extensions that you've executed on so far and what the sort of road map is over the next 12 months?

[Brian James-Beaumont Hill]

I think we're probably 50% of the way there right now. That said, we -- we've got the easy part of the 50%, adding sizes, adding colors, things like that. So the heavy lifting still to come. And I think you'll see us launch a lingerie and swim or intimates and swim this year. But we also have some new collections we need to launch, and we're still in the building phase there. So no time on those, but those will certainly contribute to our goal. But I think we're 50% of the way there. That said, we've completed all the easy things now.

[Mark Robert Petrie]

Okay. And then just one more, if I could. Obviously, there's lots of moving parts on the cost side at both investing to support growth but also external be it labor or supply chain. But what's your sense on price increases in the coming year? And what are your expectations for product margins outside of any gross margin impacts from things like category or promotional mix.

[Brian James-Beaumont Hill]

We're hoping that the growth of our U.S. business will offset inflationary pressures of both the cost of goods that we're selling and the labor or the logistics of getting our product there. Don't know if they will. But certainly, as you can see by our numbers, we've already been dealing with meaningful logistics increases. We don't see them increasing much more because we don't see us needing as much expedited freight as we have this year, hopefully now that we know what we know. That said, we do expect more inflation to come along on both raw materials and labor and therefore, finished goods. But we have a natural arbitrage built in with our increasing mix of U.S. business. So we're hoping they will offset each other. And up to this point in time, they've done a good job with that.

[Operator]

The next question comes from Lorraine Hutchinson of Bank of America.

[Lorraine Corrine Maikis Hutchinson, Managing Director in Equity Research]

Just wanted to follow up on that pricing question. There seem to be inflation in various areas of the business. Would you consider a price increase if some of these transportation headwinds persist longer than expected and combined with raw material costs to really increase the cost of goods upwards of what it's done recently?

[Brian James-Beaumont Hill]

I mean, we always discuss it and debate it. But until we see our margins eroding, we don't see any need to put our prices up. We don't want to be -- I was taught at a very young age, there's 2 ways to go bankrupt, being stupid and being greedy. And we try not to be either or we try to be neither. So I think it's important that we're giving our customers continue to give them value. And until we start seeing erosion of our margins, we don't see any reason to put our prices up. And believe me, this a debate happens all the time. And I'm usually the one at the end of the day, saying holding still and just saying, no, until we see this pressure we're not going to put our prices up. And at this point in time, if nothing else, we've seen our margins increase due to more mix of U.S. dollars and less sale inventory, less sale activity due to sell-throughs at full price. So -- and then on top of that, as I mentioned, we did make a concerted effort to be on sale less and have been working and successfully executing these numbers -- these incredible numbers we're sharing with you today with less sale activity as well. So we're going to continue to try and shrink the windows of off pricing that from a time perspective. We're going to try and shrink the amount of product we're selling off price, which both indirectly increase your margins. We're going to continue to see growth in the United States and in U.S. dollars, which are going to help our margins. And hopefully, these will all continue to offset these inflationary pressures.

[Operator]

The next question comes from Stephen MacLeod of BMO Capital Markets.

[Stephen MacLeod, Analyst]

Congratulations on a great quarter. Just had a couple of questions. Just maybe starting high level. Given the strength that you've seen over the last 2 quarters and actually through the pandemic, how is your view of the market opportunity changed over the last sort of 6 months or 12 months?

[Brian James-Beaumont Hill]

Well, it hasn't really changed. We've been very bullish on our opportunities in the United States for quite some time. The whole idea of international keeps on coming up, but we have such an incredible runway ahead of us in the United States. We're already set up there, building lots of stores there, have relationships with all our partners there. So it's just so much easier with lots of runway ahead of us. So we've been -- it doesn't mean we're ignoring our international where we haven't been, but certainly, our focus has been in the United States. And we're going to probably going to get a little bit more aggressive as far as store openings. I have said on previous calls that, that we run out of runway to some degree in Canada. And so we'll see more of those new stores shifting into the United States and we've already seen that. And as I cited the 4 new store openings are all in the United States. So I see us opening sort of 1 year -- store a year in Canada. I mean there's lots of stores in the United States, and I was looking up competitive retailer today that has 901 stores in the United States, and I think we have 40. So we got a long way to go here. And don't worry, we're not opening 900 stores in the United States. But I think that we're just going to continue doing what we're doing. It seems to be really good thing and where we do stores our e-commerce -- our incredible e-commerce channel is picking that up. So we've done some projections. And if things just continue the way they've been continuing, we're going to have our hands full keeping up with this growth for several, several quarters and many years to come. So we're just going to keep on going at the same rate we are now.

[Stephen MacLeod, Analyst]

Okay. That's great. And I guess, maybe ask a separate way -- different way, sorry. How many stores do you think you can have in the U.S.? Or is that a target that is -- so far, you don't even think about the ceiling necessarily?

[Brian James-Beaumont Hill]

There's very few things we don't think about here at Aritzia. So we certainly think about that. It depends, and we had our Board meeting yesterday, and we were discussing that as we usually do. It's hard to say because it really depends on your volumes your stores are doing. We have stores and you're familiar with what we have in Canada. And we have some stores that are close by to each other just because the stores get really busy. And so we're going to be in the same situation in the United States. As your stores get busier and busier, there's all of a sudden -- where you didn't think you would need a store or put a store, you all said do need one because existing store doesn't -- is too busy and doesn't fulfill the sort of the everyday luxury experience that we're trying to achieve. So you open a new store to take the pressure off those stores. And we're starting to see that more and more in the United States. So sort of markets and stores that we were looking at 2 years ago thinking this is a 1-store market. We're looking at thinking, well, maybe it's not, maybe it's a 2 or 3 store market. And so we'll see. What would be -- I mean, the number is north of 100 for sure, and we'll go from there. But you can solve as well by opening bigger stores. And that's something that people that are following Aritzia for 5, 10, 15, 20 years of notice that our stores are getting bigger and bigger. The real estate isn't always available to open up bigger stores, but that's what all our repositionings are all about is opening the bigger stores. So we're going to continue to do that as well. So we're super excited that retail a year ago, 1.5 years ago, retail is on its death bed, and I need to say it, but maybe I'm getting a little ahead of us, but retail is back and it's certainly back at Aritzia, and you can see by our numbers, it's back. So -- and that's what we do. We're good at e-commerce, we're great at e-commerce, but we're great at retail, too, history is. So we're certainly going to take advantage of it.

[Operator]

The next question comes from Dylan Carden of William Blair.

[Dylan Douglas Carden, Analyst]

Great. So I kind of perked up, I think you had mentioned that the Troy, Michigan store opened to sort of record performance. And I'm just curious now talking about stores in sort of suburban Virginia. As you're in these markets that aren't sort of more of your classical downtown urban markets, are you kind of seeing greater performance in suburban mall type locations. And thinking about some of the more recent openings and the accelerated openings, is that -- can you just kind of give us a sense of what type of stores those will be or they will be kind of more of a mix like your current portfolio?

[Brian James-Beaumont Hill]

I'm going to take that because the real estate department reports in to me. We're still in the top shopping center. Somerset Mall and Troy, Michigan is one of the top shopping centers in the United States. And when we're opening in rural Virginia, it is, it just happens to be a 20-minute drive from D.C. and Tysons Corner is the name of the shopping center. It's one of the top shopping centers in the United States as well. So listen, we're still -- United States is a big place. And as you know, that's where you're from. And there's a lot of credible shopping districts, some shopping centers, some street front locations that we still don't have stores in lots of them. So we're going to continue to push those things through. But we don't really look at it a rural or urban. We seem to be doing incredibly well in both. We seem to do incredibly well, both street front and shopping center. So what we're just looking for is some of the best shopping destinations, and that's how we look at it. We don't really look at it rural or urban. We don't really look at it, and closed or street front or open air. We look at it as shopping destinations, and that's where we focus is being in the best shopping destinations both in Canada and the United States, and maybe one day internationally, we're going to continue along that as far as our strategy is concerned.

[Dylan Douglas Carden, Analyst]

Okay. Fair. And then on the superworld.com, it's kind of a different strategy than you've taken with some of the other -- your other brands. I'm just kind of curious if there's anything to comment on there. Just sort of what you might be testing or why you felt the need to kind of spin that off as a separate online presence, if there's sort of laying the groundwork for maybe bigger growth.

[Brian James-Beaumont Hill]

I mean I think when we get a big product that's important and has its own DNA, that is important, it has its own website, stores and everything else. I mean our store in New York and our store in L.A., they're incredible shopping experiences for our Super World. And if it makes sense to be opening up brick-and-mortar stores, it also makes sense to be opening up online stores specifically for that experience, and that's what we're doing. We're able to cater and shape the brand as we see it with the -- with that brand, both online and stores and not getting sort of not necessarily buried but certainly not in the forefront of Aritzia, which is promoting Aritzia and wide breadth of product we have that the customers expect. So we've done this. It was successful. It was a lot of work. And so we're going to evaluate whether or not we're going to continue to do that or not, we sort of in the next few weeks as we sort of analyze the benefits of it versus the [indiscernible]. As I say, it was very successful, but it was a lot of work on the teams. And so we're going to assess if this is something we're going to continue to do with the plethora of products that we have that our clients are chasing after that are holding their own right. So we'll see what happens there and go from there.

[Dylan Douglas Carden, Analyst]

Got you. And the last one I had was just a point of clarification, maybe Todd or -- the guidance, I'm just curious what that reflects as per and excuse the Yankee here not fully knowing what the restrictions are in Canada. But if the guidance kind of envisions or what kind of restrictions or store limitations the guidance envision, I guess, maybe the way to ask it.

[Todd Ingledew, Chief Financial Officer]

Envisions are current operating conditions that we're under. So right now obviously, what's that run through to the end of February. Yes, exactly.

[Brian James-Beaumont Hill]

And it's not just the conditions. I mean, you drive around now. I was lamenting at one point in time how great it was driving around the city with COVID when COVID and all the restrictions were on because you could get everywhere. And then all the restrictions led off and everybody is going back to the office and you're stuck in traffic jams again. You drive around the cities again back in Toronto and Vancouver and Montreal. It's curfews in Montreal. Toronto is completely shut down right now, restaurants and everything else, I believe. And Vancouver has severe limitations, not so much on retail, but restaurants and things like that, too. So we've rolled the clock back sort of -- it's the tightest it's been in quite some time. So it's not just the actual restrictions themselves. It's the people and the mojo of the people and how much they're interacting, going out, things. And it's noticeably -- the footfall is noticeably down everywhere in Canada. And certainly, people are not buying things, going out again -- to go out again and things like that because you're just locked down in. So it's not quite the same as the initial lockdowns we had 2 years ago, but it's a lot closer to that right now in Canada than it was 6 months ago, I can tell you that.

[Operator]

Next question comes from Derek Dley from Canaccord Genuity.

[Derek Dley, MD & Consumer Products Analyst]

Congrats on just another really strong quarter. Perhaps Jennifer, this one's for you. Just as it relates to the expedited shipping or the air freight that you've been using, have you found that, that's become at all more competitive? And have you been able to lock in contracts to guarantee some space there for the coming year?

[Jennifer Wong, President, COO, Corporate Secretary & Non]

Our logistics team, I think I gave kudos during the last quarter, but I should give kudos to them again this quarter. They have done a phenomenal job of partnering with our freight forwarders and the transportation companies. And when it comes to air freight, it usually is just about who's willing to pay the price. So they've been able to make sure that when they're obtaining [indiscernible] that were first and foremost on the top of the minds of the airlines and the freight forwarders and getting the space, which is most important to us and being prioritized for that is what they've been able to do. So I think, again, it really comes down to our people and just how well of a job they've done in terms of navigating through this and working through the system. So expedited freight for us also includes with the sea freight that we've done, we did negotiate a contract for premium space on the ships when we chose to use the sea freight. So I think if there was -- if anything could have been done, they did it or arrange for it.

[Derek Dley, MD & Consumer Products Analyst]

Okay. That's helpful. And then just coming back to this comment on labor and talent in regions where the brand is newer or cities in the U.S. where you're just opening your first store. How are you finding your ability to recruit talent in those locations?

[Jennifer Wong, President, COO, Corporate Secretary & Non]

Well, there's the obvious that we're newer to the market, but one of the other things that I said was our competitive wage offerings than it is [indiscernible] because we do have a number of different things that we do in order to be competitive in those markets where brand might be lesser known. And at the same time, when we're populating those stores in the newer markets, it's a hybrid of people from the market as well as veterans from our -- from other locations that we bring in so that we can cultivate the culture within the stores and make sure that all of our operating philosophies and practices and standards are brought to that store. And generally speaking, as Brian mentioned in his remarks, we are way more famous particularly in the U.S. than we have been in the past. I do think because of the proliferation of social media and our e-commerce business that's able to grow way better. We're getting famous and we're way more famous than we were in the past, so that helped.

[Operator]

The next question comes from Meaghen Annett from TD Securities.

[Meaghen Annett, Analyst]

Just going back to the potential for international expansion. Understandably, you are capitalizing on your success in the U.S. right now. But is international something that we can expect an update on when you provide your midterm outlook? If you could just update us on when we can expect you to communicate that outlook.

[Jennifer Wong, President, COO, Corporate Secretary & Non]

Yes. As I said, we're working. We formalize that and share that with you, I did say, in the next fiscal year, so next year and maybe at the earliest next quarter. But we'll let you know. And certainly, international is contemplated. I mean, we -- every year when we sit down to do our corporate planning, we're looking at all of our opportunities and prioritizing what makes sense given the upside and what's going on in the environment at the time. And so we've got lots of things to talk about. And the good news is and the hard thing is that we have no shortage of opportunities. That's for sure. And so the hard part will be about prioritizing all of these things and doing it in a way that continues with this phenomenal and sustainable growth. So I won't set a date right now, but we do promise you that we will be sharing that in the coming months.

[Meaghen Annett, Analyst]

Thank you. And just with regards to the SG&A outlook for Q4. Could you detail the main drivers behind that growth? And then going forward, should we expect that rate of growth continue or perhaps for how long?

[Todd Ingledew, Chief Financial Officer]

Yes. So for Q4, as I said, the dollar growth that we saw in Q3 versus FY '20 will continue in Q4. And it's driven by same thing that it's been driven by for the last couple of years, which is ongoing investment in our -- primarily marketing, IT and e-commerce teams within SG&A. And so investment in growing our teams to support and drive the growth that we're seeing. And we would expect that, that will continue. That investment will continue as we grow the business. I think over time, as our e-commerce business continues to become a larger portion of our mix, we will see leverage on SG&A. As obviously, a large part of our SG&A is our variable costs in the stores. And so the e-commerce revenue directly leverage that. So inherently, we will see leverage over time, but we will be continuing to invest.

[Operator]

This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.