Roots turns to Raptors and Shawn Mendes to boost sales
Roots Corp. hopes some recent collaborations will boost sales, as stocks have had a tough run since an initial public offering just under two years ago.
The Toronto-based retailer, known for its comforting clothing and beaver logo, plunged as much as 17% to a record low of $ 2.28 on Wednesday after weaker-than-expected profits in the second quarter. Roots has now lost more than $ 300 million of its value, or more than 75% since fixing its initial public offering at $ 12 apiece in October 2017.
However, the company remains positive on sales growth amid recent elements of collaboration. “We remain confident in our ability to drive year-over-year sales growth in fiscal 2019,” CEO Jim Gabel said in a statement Wednesday morning.
“The power of the Roots brand remains strong. We are a much sought-after collaborator, having recently released a limited edition Raptors NBA Championship jacket and launched a second capsule collection with multi-platinum singer / songwriter Shawn Mendes, ”added Gabel.
Still, Roots chose to lower its sales outlook, citing “lower than expected DTC sales in the first half of the year and the impact of macroeconomic and geopolitical headwinds” on the company’s business in Asia. Roots is scheduled to present at the Scotiabank Consumer Conference on September 18 in Toronto.
The operational challenges resulting from the Roots move to a larger distribution center will likely eclipse any progress made in the second quarter, New York-based Jefferies said. While the fulfillment center is expected to be more efficient than the old facility in the long run, the change adds pressure on short-term fundamentals, wrote analyst Janine Stichter while maintaining a buy recommendation.