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Statement fo Financial Position Aritzia Inc. Consolidated Statements of Financial Position As at March 1, 2020 and March 3, 2019 (in thousands of Canadian dollars) 1-Mar-201-Mar-19 Assets Current...

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Statement fo Financial Position
    Aritzia Inc.
    Consolidated Statements of Financial Position
    As at March 1, 2020 and March 3, 2019
    (in thousands of Canadian dollars)
            1-Mar-20    1-Mar-19
    Assets
    Cu
ent assets
    Cash and cash equivalents        117,750    100,897
    Accounts receivable        6,555    4,355
    Income taxes recoverable        2,157    - 0
    Inventory        94,034    112,183
    Prepaid expenses and other cu
ent assets        10,880    18,422
    Total cu
ent assets        231,376    235,857
    Property and equipment        184,637    167,593
    Intangible assets        63,867    64,427
    Goodwill        151,682    151,682
    Right-of-use assets        380,360    - 0
    Other assets        4,315    2,209
    Defe
ed tax assets        20,478    7,606
    Total assets        $ 1,036,715    $ 629,374
    Liabilities
    Cu
ent liabilities
    Accounts payable and accrued liabilities        57,715    62,736
    Income taxes payable        3,198    3,644
    Cu
ent portion of lease liabilities        63,440    - 0
    Defe
ed revenue        29,490    24,231
    Total cu
ent liabilities        153,843    90,611
    Lease liabilities        447,087    - 0
    Other non-cu
ent liabilities        9,451    69,828
    Defe
ed tax liabilities        19,529    20,002
    Long-term debt        74,740    74,624
    Total liabilities        704,650    255,065
    Shareholders’ equity
    Share capital        219,050    199,517
    Contributed surplus        57,221    65,806
    Retained earnings        56,476    109,339
    Accumulated other comprehensive loss        - 682    - 353
    Total shareholders’ equity        332,065    374,309
    Total liabilities and shareholders’ equity        $ 1,036,715    $ 629,374
Statement of Operations
    Aritzia Inc.
    Consolidated Statements of Operations
    As at March 1, 2020 and March 3, 2019
    (in thousands of Canadian dollars)
            1-Mar-20    1-Mar-19
    Net revenue        980,589    874,296
    Cost of goods sold        577,165    531,383
    Gross profit        403,424    342,913
    Operating expenses
    Selling, general and administrative        243,362    215,297
    Stock-based compensation expense        7,790    11,540
    Income from operations        152,272    116,076
    Finance expense        28,319    4,821
    Other income        - 2,185    - 395
    Income before income taxes        126,138    111,650
    Income tax expense        35,544    32,922
    Net income        $ 90,594    $ 78,728
    Net income per share
    Basic        $ 0.84    $ 0.70
    Diluted        $ 0.81    $ 0.67
    Weighted average numbe
    of shares outstanding (thousands)
    Basic        108,411    113,015
    Diluted        112,128    117,358

Annual Report 2020
Aritzia is a
vertically integrated,
innovative design
house and fashion boutique.
We believe in high-quality, beautifully designed product.
We believe in aspirational environments and experiences.
We believe in personalized and knowledgeable client service.
And we believe that all of this should be attainable.
We call this Everyday Luxury.
4 |
To support our growth, we continued to hire top talent from
around the globe, building on our world-class team. And, we
further invested in our technology infrastructure, including a new
marketing platform enabling advanced client communications,
a customer 360 repository giving us a significantly more
comprehensive view of our clients, and Concierge technology
that expanded our call center servicing capabilities.
The Aritzia team and I could not be more pleased that we
delivered yet another strong year nor more confident in our
potential. Our consistent performance reflects Aritzia’s growing
and awareness and affinity in the United States, enduring
customer loyalty in Canada, commitment to continued business
and infrastructure investments, and our ability to execute on our
powerful business model.
COVID-19 RESPONSE
As we entered fiscal 2021, and on the heels of last year’s
success, we have been navigating through the global
pandemic of COVID- 19. The impact of the virus on the global
economy has put an unprecedented amount of pressure on
usinesses all over the world. Although some sectors are
largely immune, the fashion business is not. As COVID-19
spread across North America, we experienced a meaningful
decline in our sales in the first two weeks of March, before
temporarily closing all 96 of our boutiques.
Over the past several months our teams have been working
tirelessly in response to the dynamic nature of the pandemic.
Our priority, from the beginning of this crisis, was to protect
the health and safety of our people, our clients and our
communities. Upon the closure of our boutiques, we took
immediate action to drive eCommerce revenue, adjusting our
product, marketing, and operational strategies appropriately.
Despite the challenges, our beautiful product assortment,
est-in-class Distribution Centre, aspirational website, and
esponse from our loyal clientele lead to eCommerce growth
in excess of 150% through the end of May.
As numerous companies were forced to lay off and furlough
millions of employees across North America, we worked hard
to keep our people employed. Thanks to the dedication of our
team and our loyal clientele who continued to purchase with
us online, we paid out $20 million in salaries to non-working
employees through the Aritzia Community™ Relief Fund. To
show our heartfelt gratitude for those on the virus’ frontline,
we launched our Aritzia Community™ Care Program, gifting
100,000 frontline healthcare workers in Canada and the U.S.
with custom clothing packages, over $10 million in retail
value.
We began a phased reopening of our boutiques on May
7th, with almost all of our boutiques reopened to date. We
ecognized, upon temporarily closing our boutiques, that
significant changes to our in-store experience would be
equired in response to COVID-19. This has included reduced
outique capacity, physical distancing protocols, new health
and sanitization standards, an upgraded cleaning program,
and dedicated Health and Safety Advisors on site. Since we
From our Founder,
Chief Executive Officer & Chairman
TO MY FELLOW SHAREHOLDERS,
This year we cele
ated Aritzia’s 35th anniversary. Throughout
our history, we have delivered our clients everyday luxury
through exceptional service, beautiful product, aspirational
environments in stores and online, with captivating
communications throughout. Since opening our first boutique
in Vancouver’s Oakridge Mall in 1984, our net revenues have
grown to nearly $1 billion. This has been driven by our growth
to 96 boutiques across Canada and the United States and our
accelerating ecommerce business. We now have over 3500
employees, and serve millions of clients annually. As we reflect
on this journey, I am incredibly proud of what we have achieved;
a foundation built to capture the limitless opportunities that lay
ahead.
FISCAL 2020 HIGHLIGHTS
Every year at this time, I have the responsibility and privilege
of looking back over our successes and more
oadly our
strengths, weaknesses, opportunities, and threats. Fiscal 2020
concluded another exceptional year for Aritzia. We delivered
same-store sales increases in both Canada and the United
States and continued accelerated growth in eCommerce,
closing the year with our 22nd consecutive quarter of
comparable sales growth. In line with our five-year target, we
opened five boutiques in the United States and expanded
three boutiques in Canada. In product, we saw exceptionally
strong sales across all
ands and categories while successfully
launching a new
and, Ten by Babaton. And, we expanded
our Super Puff™ program with Mr. Super Puff - our first and
highly successful foray into menswear. During the year, our
and awareness also grew through engaging and innovative
marketing campaigns including an enviable list of paid and
unpaid influencers. We are particularly pleased with the
momentum of our
and in the United States where we finished
the year with revenue growth of 27%.
Fiscal 2020 Annual Report | 5
egan reopening our clients have shown excitement to return
to shopping in our boutiques, reconnecting with their style
advisors, and enjoying the exceptional service and Everyday
Luxury experience they love and expect from us. While we are
not yet able to maximize the demand for in-store shopping
due to the health and safety measures we have put in place,
we are both encouraged and reassured by our clients return.
In addition to our COVID-19 response, the past few months
have seen businesses across the globe be called upon to
lead and be allies of the social justice and racial equality
movement. This deserves our attention, our support, and
significant action. Aritzia continues our support through
external donations and more importantly, by investing $1
million in our own Diversity and Inclusion program to effect
meaningful change from within.
Over the past few months, our processes and systems have
een tested, and our people challenged and stretched to
new levels of performance. Our team’s resilience and creative
efforts have preserved our strong financial position and
successfully safeguarded our business. The closure of all our
outiques for most of the first quarter of fiscal 2021, and the
co
esponding decline in our revenues and our profitability
has been the most challenging period of our history, yet it has
also been a time of tremendous learning and growth and is
presenting us with new compelling opportunities.
LOOKING FORWARD
Although we have earned a unique loyalty in our clients’
closets, we have shared some of that coveted space with
others. As a result of the pandemic’s devastating impact
on many businesses, many
ands we shared her closet
will either not exist or will be a fraction of their size and
scope. The pandemic has not only
ought about change
to the competitive landscape moving forward, it has
also accelerated the shift to the omni-channel shopping
experience. With the closures of our boutiques, our clients
immediately and seamlessly shifted from retail to online.
Now that our boutiques have reopened, our clients have
enthusiastically returned, while also continuing to shop
online. This multi-channel client relationship presents
oundless opportunity to continue to drive revenue both in
out boutiques and online.
ECOMMERCE GROWTH
We continue to invest in compelling and innovative
functionality on aritzia.com, rollout our new Clientele App (a
digital selling tool used by style advisors across our boutique
network), and expand our omni-channel capabilities. We have
een building our digital capabilities for several years and are
well positioned to capitalize on our accelerating eCommerce
usiness.
NEW BOUTIQUE OPENINGS
We are progressing with our pre-COVID boutique opening
plans. Our boutiques continue to be highly profitable as
well as our most effective marketing tool to grow
and
awareness and, with many in North America shuttering
outiques, the real estate opportunities and co
esponding
financial terms are unprecedented. As we are cu
ently
understored, with more premier locations becoming
available, we will continue to explore and capture new
opportunities in prime real estate.
PRODUCT EXPANSION
Prior to COVID-19, our boutiques comprised approximately
77% of our sales, and our entire product strategy was based
on physical and merchandising limitations of our retail
four-walls. Now, our eCommerce channel has achieved a
critical mass such that our product strategies can be based
on the unlimited opportunities of the online environment.
Specifically,
Answered 1 days AfterMar 08, 2022

Solution

Tanmoy answered on Mar 09 2022
27 Votes
Last Name:            2
Last Name:             2
Analytical Review of Aitzia’s Financial Statement 2020
Contents
Introduction    3
Review of Annual Report    4
Analysis    5
Horizontal Analysis    5
Vertical Analysis    5
Overall & Performance Materiality    6
Balances of financial statement    7
Two procedures of 3 balances    7
Cited works    9
Appendix    10
Appendix 1: Horizontal Balance Sheet    10
Appendix 2: Horizontal Statement of Operations    11
Appendix 3: Vertical Balance Sheet Analysis    12
Appendix 4: Vertical Statement of Operations    13
Introduction
Aritzia is a fashion
and company especially for the women, situated in Vancouver, Canada. It was founded by Brain Hall in the year 1984. It deals in selling of variety of lifestyle apparels in various shopping malls and in Oakridge Center in Vancouver. Cu
ently, the company has its stores in 101 locations and employs approximately 3480 employees in North America. It has also launched its e-commerce site in November, 2012 with Aritzia.com. The main aim of the company is to plan, develop and design the seasonal collections. They also partner with the mills, vendors and the manufacturers for delivering extraordinary value at various price points.
Review of Annual Report
By review of the annual report which generally consists of the income statement and the balance sheet of Aritzia we can observe that the revenue generated by the women fashion
and was $980589 as on Mar-2020 compared to $874296 as on Mar-2019. This was an increase by 12% in FY-2020 compared to the previous year 2019. Further, the gross profit of the company was valued at $403424 in Mar-2020 compared to $342913 as on Mar-2019. This was an increase of 18% and signifies that the cost of goods sold was much less in 2020 against the expenses in COGS in 2019. Through this it can be stated that the company has developed and strategized actions which have helped them to lower the costs and enhance the gross profit (Aritzia).
    If we observe the income from operations, it can be stated that the income level has increased in FY-2020 compared to FY-2019 by 31%. Although there was an increase in the tax expenses of the company in FY-2020 compared to FY-2019, yet the net income of Aritzia reflects a 15% increase in FY-2020 compared to the previous year 2019. Further, the net income per share has increase by 20% on FY-2020 compared to 2019. This depicts that the shareholders of the company may be benefitted due to the increase in the net income per share of Aritzia Inc. Hence, EPS is a very important matrix which can be beneficial for the investors (The Economic Times).
Analysis
Horizontal Analysis
According to the horizontal analysis of the balance sheet and statement of operations of Aritzia Inc it can be observed that there was a decline in the total cu
ent assets of the company by 2% in FY-2020 compared to FY-2019. On the other hand, the total cu
ent assets increase by 65% in FY-2020 compared to FY-2019. The increase in total cu
ent assets was generally due to increase in the rights to use assets in FY-2020 to the amount of $380360 compared to FY-2019.
Further, the cu
ent liabilities increased by 70% in FY-2020 compared to FY-2019 and was due to increase in the cu
ent portion of lease liabilities. The total liabilities increased massively by 176% which was due to increase in the lease liabilities. But due to this increase Aritzia has to service more interests than generating earnings from the assets (Appendix 1).
We have already discussed the statement from operations as per the horizontal analysis in the review section of the report (Appendix 2).
Vertical Analysis
As per the vertical analysis of the balance sheet, it can be observed the total cu
ent assets have increased by 37% compared to the total assets in 2019 whereas in 2020 it was 22%. Hence, there was a decline in the total cu
ent assets for Aritzia in 2020 compared to 2019. On the other hand, the total liabilities of the company increase by 68% in 2020 compared to 41% in 2019. This states that Aritzia has to service more interests each year for repayment of the lease liabilities (Appendix 3).
If we observe the vertical statement of operations, it can be observed that the gross profit and income from operations of Aritzia have increased in 2020 compared to 2019 but the percentage of net income remained the same when these factors were evaluated against the revenue of the company (Appendix 4).
Overall & Performance Materiality
    
    01-Mar-2020
    Explanation
    Benchmark
    0.5% of Revenue
    Assumed to be in this range
    % To apply
    0.5% x $980589 = $4903
    The overall materiality is calculated as 0.5% on the total revenue
    Overall Materiality
    $4903
    According to FY-2019, it can be observed that the overall materiality is $4371 (0.5% of $874296). This signifies that as the revenue increases there is a probability of increase in the materiality of the company.
    50% - 75% range
    65% of Overall Materiality
    Performance materiality will be always lower than the overall materiality
    Performance Materiality
    =65% x $4903 = $3187
    We can observe that the performance materiality is lower than the overall materiality which allows to reduce the risk due to many e
ors which are unidentified by the auditors.
We have assumed certain rates based on the above scale for estimation of the materiality for 2020 and 2019. The overall materiality is less in 2020 at $4903 compared to $4371 in 2019 and is a matter of concern for Aritzia Inc while acquisition of new investors.
The performance materiality is assumed to be 65% of the overall materiality. The range of performance materiality is generally between 50% to 75% and we have assumed it to be 65% of overall materiality. Further performance materiality will be always less than the overall materiality. It was found that the performance materiality in 2020 was at $3187 compared to $2841 in 2019. This signifies that the performance materiality for Aritzia Inc. is higher in 2020 compared to the previous year (Accounting Guide, 2021).
Balances of financial statement
1. A
upt increase in the gross profit of Aritzia...
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