Roots shares hit all-time low after earnings results come up short
The storefront of a Roots location in Toronto is pictured on September 14 , 2017. Retailer Roots Corp. plans to open two new stores in the Washington, D.C. area in August. The company says the new stores are part of its target to have 10 to 14 new U.S. locations by the end of next year. THE CANADIAN PRESS/Chris Young
Tara Deschamps, The Canadian Press
Published Wednesday, September 12, 2018 11:27AM EDT
Last Updated Wednesday, September 12, 2018 6:38PM EDT
TORONTO -- Roots Corp. got a big sales boost from Canada's 150th birthday, but now that the party's over, the apparel brand is facing some troubles.
On Wednesday, the Toronto company known for its heritage-based products and leather goods reported a $4.08-million net loss for its second quarter, compared with a net loss of $3.2 million for the same period last year.
Roots' adjusted net loss was $0.06 per share for the quarter that ended on Aug. 4, falling short of the $0.02 per share expectation from analysts surveyed by Thomson Reuters Eikon and double last year's loss.
Chief executive officer Jim Gabel said the disparity followed a particularly strong second quarter in 2017 -- when there was heightened interest in products emblazoned with Canadian flags, red and white designs and other nods to the country's history.
During a Wednesday conference call with analysts, chief executive officer Jim Gabel said, "We benefited from one-time traffic and sales related to the celebration Canada's 150th birthday throughout 2017, given our strong Canadian heritage and unmatched Canada collection."
Now that the birthday year is over, Gabel said the company is seeing success in its women's dresses, graphic T-shirt and fleece categories, which saw sales jump by 136, 25 and 33 per cent respectively.
But he admitted, there are areas where the company "can be better." There is room for the expansion of seasonally relevant products in warmer months and more lighter weight sweats, dresses and graphic T-shirts, he said.
"We have made good progress on this front, but we haven't transitioned far enough."
The company's stock plummeted on the news, closing down $1.46, or 15.65 per cent to a record low of $7.87, down more than one-third from its IPO price of $12 on Oct. 25.
On the bright side, total sales rose 3.6 per cent to $60.2 million in the second quarter compared to the same period last year, while its comparable sales growth increased 1.1 per cent.
The company faced some headwinds, when the summers brought "ebbs and flows" in store traffic, he said, but consumers are "increasingly embracing" the retailer's e-commerce offerings.
Sales through Roots' shop online and pick-up in-store offering have more than doubled and sales of items purchased online and delivered to consumers' homes rose by 55 per cent year-over-year, he noted.