Roots reports bigger Q1 loss as sales hampered by winter storm

Roots

Canadian retailer Roots Corp. is on track to meet its forecasted growth for the year despite absorbing a hit from a winter storm in the first quarter of its fiscal year, its chief executive said this week.

"While sales in the quarter were good we believe they would have been even stronger had we not faced a major ice storm across approximately 80 per cent of our store network in mid-April," Jim Gabel said in a conference call.

Total sales for the quarter ended May 5 were up 5.8 per cent to $51 million, from $48.2 million.

Sales from corporate retail stores and e-commerce channels accounted for $44.2 million, up nine per cent from $40.5 million in last year's first quarter.

Same-store sales, a key industry metric, increased 6.4 per cent over the same quarter of its last fiscal year, nearly double the 3.3 per cent rate in the first quarter of 2017.

Roots reported a loss of $5.6 million or 13 cents per share, compared with last year's loss of $5.1 million, or 12 cents per share.

Its adjusted net loss was $4.5 million or 11 cents per share, compared with $3.6 million or nine cents per share a year ago.

Analysts had expected a loss of nine cents per share and $54.1 million of revenues, according to Thomson Reuters Eikon.

Roots said it remains confident about achieving its full-year target of between $35 million and $40 million of adjusted net income and between $410 million and $450 million of sales for fiscal 2019.

The first quarter accounts for just 15 per cent of full-year revenues. The second-half of the year generates 70 per cent.

The clothing retailer has been embarking on an expansion strategy into the United States and is opening its first "brand activation centre" this week in Boston that will allow shoppers to familiarize themselves with the Canadian brand.

Athletes from the city's sports franchises, including Canadian players of the Bruins, are expected to be on hand.

Two retail stores will open by the end of June in Boston and two by mid-August in Washington, D.C. area and next spring in Chicago.

Roots wants to open 10 to 14 new American locations by the end of 2019, and as of Feb. 3 operated three U.S. stores.

The company said sales of women's dresses increased 200 per cent in the quarter, men's novelty tops were up 90 per cent and kids outerwear 70 per cent.

Footwear is expected to be in 41 stores and online by the end of the month and will be featured on a dedicated wall.

Roots is also working to open a new distribution centre next year that will service both its retail stores and growing online business.

It currently operates a 60-year-old distribution centre for its stores while e-commerce is handled by a third party.

The new facility near Toronto is expected to be fully operational by mid-2019 and will be twice as big as the current location, have six times the number of shipping and receiving docks and double the ceiling height to accommodate more rack space.

Having everything under one roof will reduce delivery times to customers and stores while increased automation will speed up service and improve productivity.

The $16-million investment is expected to save at least 20 per cent in per-unit costs of goods starting in 2020, analysts were told.

As part of the 45-year-old company's rejuvenation, it listed its shares on the Toronto Stock Exchange in October through an initial public offering.

At the time, the IPO was considered unsuccessful as the initial stock price of $12 per share was below the original proposed range of $14 to $16 each and the stock fell on the first day of trading to close at $10.