Roots Q1 loss widens despite climbing sales
The Canadian company said sales for the quarter ended May 4, 2019 totaled $54.4 million, up 6.5 percent from $51 million reported during the same period last year.
The increase was largely driven by direct-to-consumer sales including corporate retail store and e-commerce sales, which grew 5.5 percent to $46.6 million from $44.2 million in Q1 2018.
"Our sales growth in the quarter reflects our strength as a seamless omni-channel retailer, the continued success of our renovation and relocation strategy and growth in our partner-operated business in Asia," said Jim Gabel, President and CEO of Roots.
"Increased traffic and higher conversion drove comparable sales growth of 1.5 percent for the quarter, or 8.3 percent on a two-year stacked basis. In addition, we saw positive consumer response to both new products and our recently launched brand campaign."
Still, Roots Corp. recorded a $9.8 million net loss or 23 cents per basic share for the quarter, while its adjusted net loss was equal to 17 cents per share.
Gains were offset by inventory costs associated with a new distribution centre, which is expected to help lower freight and fulfilment costs.
“While we realized short-term pressure on DTC gross margin, it was a result of our meaningful progress in improving our overall inventory position in advance of our move to our new integrated distribution centre in Q2 2019," added Gabel.
The Toronto-based company is continuing to grow in its main markets: Canada, the U.S and Asia.
During the quarter, it opened three partner-operated stores in China and one partner-operated store in Hong Kong along with an online launch on Zalora.com, further expanding its global reach.
As a result, the company said it remains on track to achieve its fiscal 2019 targets of sales between $358 million and $375 million. Meanwhile, adjusted EBITDA is expected to be between $46 million and $50 million, and adjusted net income between $20 million and $24 million.
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