Roots Q1 sales hit by DTC

Canada’s Roots on Tuesday said sales were down 9.7 percent to $37.5 million in the first quarter, thanks to lower direct-to-consumer (DTC) sales during the three months.

The lifestyle brand said DTC sales, made up of retail store and e-commerce sales, were $31.4 million, down 11.3% year-over-year, driven by lower markdown sales, as a result of improved inventory position year-over-year.

Growth in full-price seasonal collection sales was offset by missed sales opportunities in certain core fleece collections, due to lack of inventory as a result of stronger than anticipated demand in the prior quarter. The company also lost $0.6 million in sales from the temporary renovation closures of two larger corporate retail stores, and the tightening of consumer discretionary spending in the current macroeconomic environment, according to a press release.

P&O sales (wholesale Roots branded products, licensing to select manufacturing partners and the sale of certain custom products) amounted to $6.1 million during the three months ending May 4.

A decline in lower royalties from the licensing of the Roots brand to select manufacturing partners was largely offset by growth in wholesale sales to the firm’s international operating partner in Taiwan.

Net losses widen during the quarter to ​$8.9 million, compared to a loss of $8 million in the prior-year period.

“We made significant progress on our strategic initiatives this quarter, marked by robust direct-to-consumer margin growth, reduced debt, and enhanced liquidity and free cash flow on a year-over-year basis. We also recently launched our brand ambassador program and debuted our AI-driven replenishment system, which will positively enhance our operations, customer experience, and engagement,” stated Meghan Roach, president and CEO of Roots Corporation.

“Our disciplined approach to inventory management resulted in fewer markdown sales, which created short-term downward pressure on revenue in the first quarter. However, we continued to see positive momentum in many product lines, including solid growth in our adult activewear collection.”