Roots lowers long-term estimates after weak Q3 sales

TORONTO — Roots Corp. is looking to a Canadian heartthrob to stitch up the brand’s slowing sales and dropping shares.

The Toronto-based apparel company has launched a capsule collection with singer Shawn Mendes just as it announced sales fell “well below” its own expectations in the third quarter, causing it to lower sales and earnings estimates from targets set when it went public in October 2017.

Chief financial officer Jim Rudyk attributed the performance, which caused shares to trade near all-time lows after closing down 22.5 per cent to $3.52 in Wednesday trading on the Toronto Stock Exchange, to a handful of factors.

“We entered the third quarter facing the same headwinds as Q2 — a weaker brand voice in the absence of a larger-scale marketing campaign and having to lap one-time sales related to Canada 150 although on a comparatively small scale,” said Rudyk.

“In addition we saw unseasonably warm fall weather that persisted through approximately two thirds of the quarter. As a result, we faced negative consumer traffic trends, which translated into negative sales growth.”

He revealed the company’s total sales for the three months ended Nov. 3 were $87 million, down three per cent from $89.7 million last year.

To counter the slowdown and other factors that put a damper on the earnings, Rudyk said Roots was looking towards star power. Late in the third quarter, it unveiled a collaboration with OVO, a Drake-back brand that saw the rapper and other celebrities don Roots apparel.

Roots is hoping to replicate its success with the Mendes line it launched online Wednesday and in stores the day before. The collection includes a hoodie, sweatpants, T-shirts, a toque and a custom-designed jacket retailing for nearly $600.

“The initiative has been successful so far and is the first step in an ongoing collaborative relationship with Shawn,” said Rudyk. ”As a fan of Roots from an early age, Shawn’s partnership with Roots is further proof of the diversity and power of our brand. We are excited to see where this relationship can go.”

The Mendes partnership has its work cut out for it because Roots said in its latest quarter that net income was $2.8 million or seven cents per share, down from $5 million or 12 cent per share last year.

Adjusted net income was $4.7 million or 11 cents per share, down from $9.6 million or 23 cents per share in last year’s third quarter.

Analysts had estimated $90.6 million of revenue and 16 cents per share of adjusted earnings, according to Thomson Reuters Eikon.

The company is now estimating between $358 million and $375 million of sales in fiscal 2018, compared with the estimated range of $410 million to $450 million when Roots did its initial public offering.

Roots is also revising its fiscal 2019 target range for adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to between $46 million and $50 million, from its prior guidance of between $61 million and $68 million, along with adjusted net income of between $20 million and $24 million from its previously stated target range of between $35 million and $40 million.

Just Posted

Gasoline Alley Harley Davidson hosts 7th annual Toy Run

Bikers jumped on their motorcycles this weekend to help make Christmas better… Continue reading

Innisfail RCMP locate drugs during traffic stop

A Rocky Mountain House man is facing charges after Innisfail RCMP located… Continue reading

Expert says acquittal of Alberta parents in boy’s death unlikely to set precedent

CALGARY — A law professor says the acquittal of an Alberta couple… Continue reading

Take Back the Night rally marches through downtown Red Deer

Dozens marched through the city’s downtown chanting, “Red Deer unite, take back… Continue reading

Houston area sees relief, rescues after Imelda leaves 4 dead

HOUSTON — Emergency workers used boats Friday to rescue about 60 residents… Continue reading

Your community calendar

Tuesday Bower Place Community Association Seniors Card and Coffee party at 1:30… Continue reading

Missing hiker found safe after spending night on North Vancouver mountain

VANCOUVER — Rescue crews have found a missing female hiker safe after… Continue reading

Trudeau was only one in dark makeup at 2001 party but nobody took offence: attendee

VANCOUVER — A man who attended an “Arabian Nights” gala held by… Continue reading

McKenna defends Canada’s climate credibility amid Trudeau controversy

OTTAWA — Liberal cabinet minister Catherine McKenna says Canada still has credibility… Continue reading

Blue Jays rookie Bo Bichette trying to “be smart” with head injury

NEW YORK — Blue Jays rookie shortstop Bo Bichette says he’s feeling… Continue reading

Climate activists step up protests in Britain and France

PARIS — Environmental activists in Britain and France stepped up campaigns Saturday… Continue reading

Man from Winnipeg who was hiking alone found dead in Banff National Park

LAKE LOUISE, Alta. — A hiker has been found dead in Banff… Continue reading

Singh campaigns in Toronto, May in Winnipeg, as Liberal and Tory leaders pause

OTTAWA — Jagmeet Singh and Elizabeth May are continuing on the campaign… Continue reading

Most Read