Roots lowers fiscal 2019 outlook on weak Q3 sales
today Dec 5, 2018
Canadian company Roots Corp. said on Wednesday that it is lowering its fiscal 2019 outlook due to negative sales that have continued to persist through its first nine months of 2018.
Total sales for the third quarter, ended November 3, 2018, fell 3 percent to $87 million, as compared to $89.7 million in the third quarter of fiscal 2017, while comparable sales declined 13.4 percent.
Net income was $2.8 million, or $0.07 per share, compared to $5.0 million, or $0.12 per share, in Q3 2017.
Adjusted net income was $4.7 million, or $0.11 per share, down from $9.6 million, or $0.23 per share, in Q3 2017.
The drop during the quarter, which was “well below” expectations, was attributed to the absence of a large marketing campaign and unseasonably warm fall weather. The third quarter of 2017 also saw one-time traffic and sales related to Canada 150, compared to 2018.
Roots says it now expects sales of $358 million to $375 million, compared to sales of $410 million to $450 million.
The company is also lowering its fiscal 2019 target range for adjusted EBITDA to between $46 million and $50 million, compared to $61 million and $68 million, as well as its adjusted net income target range to between $20 million and $24 million from its previous target range of between $35 million and $40 million.
The company is also slowing its retail expansion plans, particularly in the U.S. While the company had panned to open 10 to 14 new U.S. stores in fiscal 2019, it now only expects to open 5 to 6 stores.
Still, Jim Gabel, President and Chief Executive Officer of Roots, said Q4 was off to a good start and was hopeful of the launch of the its new Shawn Mendes capsule collection.
"Traffic and comparable sales strengthened as we moved through the quarter and have continued to do so into Q4 2018, including encouraging Black Friday and Cyber Monday results and the successful release of our Shawn Mendes capsule collection," Gabel said, in a news statement.
"We remain extremely confident in the Company's long-term growth opportunities. Roots is an iconic brand with a 45-year history of delighting our consumers with great products and engaging experiences. Looking to fiscal 2019, we expect to continue to deliver growth."
The company currently operates 125 stores in North America, 115 stores in Taiwan and 33 in China.
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