Roots lowers long-term estimates after weak third-quarter 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 falling more than 20 per cent to $3.59 in midday 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 3 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 toward star power. Late in the third quarter, it unveiled a collaboration with OVO, a Drake-backed brand that saw the rapper and other celebrities don Roots apparel.

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.