Canadian retailer Roots shares sink to record low on profit drop, outlook downgrade

Roots

05/12/2018 16:10

By Nichola Saminather
    TORONTO, Dec 5 (Reuters) - Roots Corp  ROOT.TO  shares
slumped to a record low on Wednesday after reporting a 44
percent drop in third-quarter profit and downgrading its sales
and earnings targets for fiscal 2019.
    The company known for its trademark beaver logo, rustic
casual wear and Canadian-made leather boots blamed a lack of
marketing, warm weather and strong promotions sales a year ago
for the disappointing performance.  urn:newsml:reuters.com:*:nASB00ZML
    Net income fell to C$2.8 million ($2.09 million), or 7
Canadian cents, in the three months ended Nov. 3, from nearly
C$5 million, or 12 cents a share, the company said in a filing. 
    It said it expects adjusted net income to be between C$20
million and C$24 million for the year ending January 2020, down
from its earlier range of C$35 million to C$40 million. 
    Shares of the company plunged as much as 29.3 percent to
C$3.21, their lowest level since they began trading in October
2017. They were trading down 18.7 percent as of 10:35 a.m. ET
(1535 GMT), while the Toronto stock benchmark was up 1.2
percent. 
    Retailers including Roots have been struggling to maintain
market share and boost sales as shoppers increasingly turn to
e-commerce channels like Amazon.com Inc  AMZN.O .
    "We faced significant headwinds due to three main factors," 
Chief Executive Officer Jim Gabel said in the statement. A lack
of a large marketing campaign, unseasonably warm fall weather
and a boost to sales a year earlier due to promotions linked to
the 150th anniversary of Canada's confederation, were to blame,
he said. 
    The company said revenue in the quarter fell 3 percent to
C$87 million in the quarter, as sales in its retail and
e-commerce segments dropped 8.4 percent. 
    Roots shares have dropped 67 percent this year, versus the
broader index's 6 percent loss.
 ($1 = 1.3387 Canadian dollars)

 (Reporting By Nichola Saminather; editing by Jonathan Oatis)
 ((Nichola.Saminather@thomsonreuters.com; +1-416-687-7604;))