Clothing retailer Dynamite raises prices 9% amid trade tensions
Shares on Tuesday rose by the most since the company went public last year after it reported strong first-quarter results, including higher revenue.
'If you extrapolate, the cost of our goods with or without tariffs is really a negligible piece of the average unit,' CEO Andrew Lutfy said in an interview.
Dynamite shifted production away from China during its first quarter to avoid higher tariffs on US imports. 'Most of our goods were manufactured in China,' Lutfy said. Now, products going to the US are 'actually the minority of our goods — we cut it by 50%, which is ridiculously agile.'
Transferring production to Asian countries such as Bangladesh and Cambodia came with one downside: 'There's been such a rush to those other countries that prices have actually gone up in those other markets. All the supply-chain inefficiencies are showing up,' Lutfy said, adding the company's input costs are up 'marginally.'
The Mount Royal, Que.-based firm owns about 300 stores in Canada and the US under the Garage and Dynamite banners. The firm's gross margin was 62.1% in the quarter ended May 3, down by 1.8 percentage points from the same period a year ago due mainly to the impact of US levies.
During the quarter, revenue increased by 20% to C$227 million ($167 million) from the previous year, and adjusted diluted earnings were 25 Canadian cents per share, beating analyst estimates by 3 cents, according to data compiled by Bloomberg.
The retailer revised its 2025 outlook for comparable store sales growth to a 7.5%-to-9% range from a 5%-to-6.5% range.
Lutfy said Dynamite can perform well in uncertain times because it sells relatively inexpensive apparel. 'Here in an environment where no one wants to pile on debt right now, we're at the other end of that spectrum, which is affordable indulgences. So a C$30 top is just going to make you happy. It's the price of a martini.'
'Groupe Dynamite product is resonating, real estate optimization is improving store productivity, and pricing/sourcing mitigation actions are offsetting tariffs,' TD Cowen analyst Brian Morrison wrote in a note to clients. 'Its solid outlook supports our view that Groupe Dynamite's valuation is too punitive.'
Dynamite's stock rose by as much as 18% in Toronto Tuesday, but remains below its initial public offering price of C$21. It was C$19.37 at 2:53 p.m.
'We're a new company, we're a new IPO and they want to see sustained performance,' Lutfy said of the market's reaction so far.
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