Roots reports 8.5% decrease in Q3 sales
Canadian outdoor lifestyle brand Roots announced on Friday a sales drop of 8.5% for the third quarter, due to economic headwinds.
The Canadian company said sales decreased to $69.8 million in the third quarter ended October 29, 2022, down from $76.3 million in the third quarter of fiscal 2021.
In particular, DTC sales were $56.9 million, down 10.4% year-over-year. The decrease was attributed to economic headwinds in the latter part of the third quarter and an intensified promotional environment. The company also saw an accelerated consumer shift from fleece products towards its lifestyle assortments, which represents a smaller portion of its offering.
Likewise, partner and other (P&O) sales rose 0.5% to $12.9 million in Q3 2022, mainly due to a favourable foreign exchange impact, along with growth in sales of custom Roots-branded products sold to business clients and sales through Tmall.com in China. The results were partially offset by a reduction in the company's business in Taiwan and lower royalties on licensed product sales.
Net income totaled $2.2 million, or $0.05 per share, in Q3 2022, versus $10.8 million, or $0.25 per share, in Q3 2021.
"Despite headwinds in the third quarter, we maintained a strong financial position, reducing our net debt by 21% and lowering our net working capital position by 10%," said Mona Kennedy, chief financial officer of Roots.
"Although we expect short-term pressure on our gross margins from economic and promotional forces, our strategy to reduce discounting on core styles remains unchanged. While comfortable with our inventory levels at the end of the third quarter, we expect a combination of factors, including cost increases primarily related to our shift to organic cotton, our pack-and-hold strategy on core inventory, and lower sales, to raise our year-end inventory balances."
Year-to-date, total sales were up 5.3% over sales in the first nine months of fiscal 2021, reaching $160.7 million. DTC sales rose 6% to $132.7 million in YTD 2022 as compared to YTD 2021, while P&O sales improved 2.4% to $28.0 million during the period.
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