National Post (National Edition)
Roots branches out
CANADIAN BRAND WANTS TO OPEN UP TO 14 NEW STORES IN THE U.S. BY THE END OF 2019.
TORONTO • Roots Corp. sees ample room to grow its store base in this country even as it looks to broaden its global footprint beyond North America and Asia.
The apparel, footwear and accessories company reported a sales increase of 10.1 per cent at stores open for more than a year and better than expected earnings in the third quarter, its first public report since completing an initial public offering of shares in October.
The company’s shares have tumbled since they began trading amid broader concerns about bricks and mortar-based retail and the eroding effects of Amazon. The shares were priced at $12 in the public offering, below the $14 to $16 range that was originally planned, and have yet to recover. Shares were up 2.33 per cent Tuesday to $10.55. Retailers have grown cautious about building too many stores while the online segment of their business takes off.
But Roots chief executive Jim Gabel told analysts Tuesday that stores, particularly those renovated to a new format, are an important part of the company’s strategy as it grows its presence online.
“Canada remains far from a mature market for Roots,” Gabel said Tuesday, noting the retailer is looking at 30 “high potential” new locations in this market, where it plans to open eight to 10 new stores by the end of 2019 and renovate up to 33 additional locations.
Roots, which began selling leatherwear and a popular “negative heel” shoe out of a Toronto boutique in 1973, now has 120 locations across Canada, four in the United States, and 138 stores in Taiwan and China with local partners.
By the end of fiscal 2019, the company wants to open 10 to 14 new Roots stores in the U.S., and had signed four leases thus far for 2018, including Boston and Washington, D.C.
Roots is also looking at more than a dozen potential markets outside of North America, Gabel said.
The retailer has been narrowing its assortment to focus on its most productive items and improve margins, cutting the total number of merchandise items by 23 per cent over the past year, and aiming to cut further, to 40 per cent, in fiscal year 2018.
In the meantime, Gabel said the company plans to offer a greater selection in its leather and footwear business, which have much higher average selling prices than its sweatpants, sweatshirts and T-shirts.
Roots said overall sales in the third quarter ended Oct. 28 rose 13 per cent to $89.7 million, up from $79.4 million in the same period last year. Net earnings in the period were $5 million, or 12 cents per share, compared with a profit of $5.9 million (14 cents) in 2016. Expenses associated with the IPO and business investments rose to $40.8 million in the quarter compared with expenses of $32.3 million a year ago.
On an adjusted basis, Roots earned $9.5 million or 23 cents per share, up from $7.6 million (18 cents) in 2016. That beat analysts’ mean estimates of 17 cents, according to Thomson Reuters.
The retailer said it is on track to hit its 2019 year-end financial targets, including annual sales of $410 million to $450 million and adjusted annual net income of $35 million to $40 million.