Lack of fleece inventory contributes to Roots reporting $8.9M Q1 loss, sales drop

TORONTO — Roots Corp. says it lost $8.9 million in its latest quarter as it missed out on some sales because it didn't have enough of its fleece products to keep up with demand and is still seeing shoppers grapple with economic headwinds.

The Toronto-based apparel retailer's first-quarter result announced Monday compared with a loss of $8.0 million a year earlier.

The loss amounted to 22 cents per share for the quarter ended May 4, compared with a loss of 19 cents per share a year earlier, while sales totalled $37.5 million for the most recent quarter, down from $41.5 million in the same quarter last year.

Meghan Roach, chief executive of Roots, attributed much of the decline to a fall in the company's corporate retail store and e-commerce sales, which amounted to $31.4 million, down from $35.4 million a year ago.

Some of the decline may have come from consumers rethinking purchases because of high inflation and interest rates. Meanwhile, Roots held lower amounts of inventory than it has in the past and resorted to fewer discounts, which may also have weighed on sales.

Roach said parsing out which had the biggest impact is "difficult."

"We did see a decline in markdown sales, so obviously the consumer discretionary spending (is) more pressured," Roach said on a Monday call with analysts.

"If we had more inventory to put on markdown, obviously we think that could have potentially risen sales a bit more."

Roots has spent the last few quarters paring down its markdowns, a strategy which can wean shoppers off waiting to make purchases in hopes of finding a deal later.

Supply also factored into the lower sales Roots saw in its last quarter.

"We faced some inventory challenges in our Cooper fleece category which performed very well in Q4, but left us with insufficient supply to satisfy demand," Roach said.

In a statement to The Canadian Press following Monday's call, Roach said Roots expects to have a "healthy inventory" of core fleece products by the start of its third quarter.

She is also optimistic about the company's recent growth in its adult activewear division and recent renovations at two of its larger stores, including its Eaton Centre flagship location in Toronto. The space's facade has now been refreshed with its layout revamped to better showcase its merchandise and digital screens added.

This report by The Canadian Press was first published June 10, 2024.

Companies in this story: (TSX:ROOT)

Tara Deschamps, The Canadian Press