By: Jamie Murray, CFA
In an era defined by digital commerce, Aritzia is proving that the in-store experience is more critical than ever. The brand is making a significant investment in experiential retail with the launch of massive, beautifully designed flagship stores that act as powerful brand billboards. This deep dive into Aritzia’s expansion sets out how this physical retail strategy is central to its success, creating an immersive environment that drives brand loyalty, captures high-value customers, and creates a halo effect that boosts its online sales and supports its ambitious plans for international growth.
Flagships on the rise
We recently had the opportunity to visit Aritzia’s new Flagship Boutiques in New York City. Aritzia has a strong presence in New York City, with four locations in Manhattan (its first NYC store opened in 2012). The two flagship stores commenced operations in late 2024 and represented the strategic relocation of established boutiques within their respective areas. A third Flagship is slated to open in the Flatiron District this fall.
Figure 1: Aritzia NYC Flagships Soho (left) and Fifth Avenue (right)
Source: MWG
Marketing and advertising have undergone significant change in the age of e-commerce, where the whole world is your addressable market. No longer do customers need to be physically close to a store’s footprint as modern distribution systems can profitably serve most of the target market. This has led to a reframing of marketing from “drive to our store” to “drive website traffic,” which can be improved by raising the visibility of the brand to create greater awareness.
Digital ad tools from Meta and Google are a cost-effective way to enhance marketing return-on-investment (Google featured its Aritzia campaign here) but major retailers are also finding the Flagship store to be a key pillar. Flagship stores are experiential locations that serve a purpose beyond location-based return on investment. They exist to build a brand’s image as a billboard in high foot traffic areas or to amplify social media by generating online buzz. Often, flagships include additional services, such as technical support or workshops that allow customers to experience the brand’s ecosystem.
Our first stop was to Aritzia’s SoHo Flagship, located on Broadway in the heart of SoHo’s shopping district. The store is three levels and includes its branded A-OK Café on the lower level. The store was bustling with shoppers and was extremely well merchandised when we visited, staying true to the high-end brand experience Aritzia stores provide. The 5th Avenue store, while less busy when we visited in the early afternoon, is situated five blocks south of Central Park and kitty-corner to Saks iconic 5th Avenue location, providing a second highly visible presence in Manhattan. We believe the stores, each spanning over 30,000 square feet, took over ~24 months to design and build. This video featuring Aritzia CEO Jennifer Wong speaks to the attention to detail at the Soho location.
By management accounts, the leases were signed on very favourable terms in the depths of the Pandemic when physical retail traffic and travel were at their lows. Importantly, the large floorplan provides an opportunity for Aritzia to carry an expanded inventory compared with what is carried in its typical 8,000-10,000 square foot boutiques. The expanded inventory was on full display at each location, which had a well stocked but spacious vibe.
Aritzia’s future with flagships.
Aritzia is committed to a true omni-channel approach, with new store locations providing strong economics on a standalone basis and the added benefit of increased e-commerce sales in markets with new stores. Figure 2 provides Aritzia’s Google Trend Score, which we use as a proxy for brand awareness, by state. It measures the relative Google search activity in major markets. This means that its brand awareness in New York State, which has the highest score (79), is approximately 200% greater than its brand awareness in Texas (26). Said differently, a New Yorker is 3x more likely to do a Google search for Aritzia than a Texan. Older Aritzia markets tend to have higher Google Trends scores, likely due to the brand awareness built over time.
Figure 2. Using Google Trends as a proxy, Aritzia’s brand awareness is correlated to the date of the first store opening.
Source: MWG, Google Trends, Company Reports
The company has line of sight to ~150 U.S. store locations over time, more than double the 66 U.S. locations in existence in its most recent quarter. The company will continue to infill stores in both new and existing markets where it sees valuable real estate and unmet demand. However, we believe the company, having realized the power of e-commerce during the pandemic, may also lean more into larger format stores.
In addition to the two Manhattan stores, Aritzia opened a Flagship on the Magnificent Mile in Chicago (its largest store at over 40,000 square feet). These three stores form the pillar of a new store format for Aritzia. With total square footage of >100,000 square feet, the flagships represent an acceleration in its footprint and accounts for 17% of U.S. square footage by our estimates. Essentially, each of these new Flagship stores is akin to opening four standard 8,000 square foot locations.
In Canada, its flagship stores are somewhat smaller. The company has previously referred to its 19,000 square foot Yorkdale store as a Flagship and its Toronto Bloor St. location (~11,00 square feet) uses the term flagship on its website. Finally, we estimate its iconic Robson Store in Vancouver is ~13,000 square feet.
It is quite clear that Aritzia is finding success with these new large-format stores. Management indicated that there may be only a few more suitable locations in North America for these storefront mega-Flagships, but we believe the average store size will continue to increase and be a driver of higher store productivity.
International: The next frontier
We believe that Aritzia can also accelerate growth by opening new stores outside of the U.S. and Canada. With its mega-flagship model proving successful in the , Aritzia can have a large impact on brand awareness in an entire country like the United Kingdom (London), Australia (Melbourne, Sydney) and Europe (Paris, Barcelona, Rome), where its brand awareness is in its infancy. It is already planting the seeds for this next phase by revamping its international website to feature local languages and currency as well as an assortment of merchandise curated to the customers’ climate. The recent launch of its mobile app (its Digital Flagship) can only serve to accelerate this expansion.
Aritzia’s stock has appreciated 79% year-to-date given strong sales growth that has in part been due to its new Flagship strategy. Despite its success, the company’s sales (in USD) have just eclipsed $2B. True global brands at scale, like Inditex (Zara), H&M and Lululemon can generate 10x as much sales and have market capitalizations 3-4 times larger than that of Aritzia. We believe the company is on its way to reaching these levels.