Roots looks to Mendes’s star power after weak Q3 sales
uoots Corp. is looking to a Canadian heartthrob to stitch up the brand’s slowing sales and dropping shares.
The Toronto-based apparel firm launched a collection with singer Shawn Mendes just as it said 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 uudyk 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 Lxchange, to a handful of factors.
“We entered the third quarter facing the same headwinds as /2 — a weaker brand voice in the absence of a larger-scale marketing campaign and having to lap onetime sales related to Canada 150 although on a comparatively small scale,” said uudyk. “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 firm’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 dulled the earnings, uudyk said uoots was looking towards star power. pate in the third quarter, it unveiled a collaboration with OVO, a Erake-backed brand that saw the rapper and other celebrities don uoots apparel.
uoots is hoping to replicate its success with the Mendes line it launched online Wednesday and in stores the day before. It includes a hoodie, sweatpants, T-shirts, a tuque 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 uudyk. “As a fan of uoots from an early age, Shawn’s partnership with uoots 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 uoots 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 ueuters Likon.
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 uoots did its initial public offering.
uoots is also revising its fiscal 2019 target range for adjusted LCITEA (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.