Aritzia Inc (TSX:ATZ) remains an "EPS compounder" whose long-term growth story is being underappreciated by investors focused on near-term comp sales normalization, according to UBS, which reiterated a Buy rating on the retailer with a C$216 price target.
The brokerage forecasts roughly 15% revenue and 26% EPS compound annual growth rates through fiscal 2031, driven by US expansion, digital growth and margin expansion. UBS said this growth profile positions Aritzia as a niche compounder capable of continued outperformance within the specialty retail sector, justifying a premium valuation.
The US is expected to remain the company's primary growth engine. UBS said Aritzia's upcoming Investor Day should reinforce that its next strategic cycle will be "overwhelmingly US-led."
Management has pointed to an opportunity for 180 to 200 US boutiques, compared with 76 at the end of fiscal 2026, while Canada appears increasingly mature. UBS expects roughly 85% of Aritzia's incremental revenue growth through fiscal 2031 to come from the US market.
International expansion, meanwhile, is seen as a longer-term growth lever rather than a near-term driver. UBS estimates Aritzia's long-term international opportunity exceeds C$3.3 billion in revenue, representing about 1% share of the mid-tier women's apparel market outside North America.
The bank's analysis suggests only about C$150 million of that revenue could be captured by fiscal 2031, with a range of C$75 million to C$225 million depending on execution. UBS said international markets should become more relevant to its fiscal 2032 through 2036 estimates and to terminal value than to the company's next five-year plan.
UBS pointed to two upcoming catalysts it believes could help remove the overhang on the stock. Aritzia's forward price-to-earnings multiple has de-rated to 22 times from 27 times since its last earnings print, despite a beat-and-raise quarter, largely on concerns over a comp sales slowdown.
The bank sees fiscal second-quarter 2027 earnings and the October 27 Investor Day as key events, with the earnings report expected to provide sales guidance for the company's toughest comparison period and the Investor Day expected to lay out the company's next growth framework.
The Investor Day also falls near the one-year anniversary of Aritzia's mobile app launch, which materially boosted sales growth, giving investors a clearer view of underlying demand trends beyond that initial launch benefit.
UBS expects sales and EPS beats over the next 12 months to catalyze further stock outperformance.
