A Roots store is seen in downtown Montreal, on May 19, 2020.Christinne Muschi/Christinne Muschi/The Globe and
Even as its online business more than tripled, Roots Corp.'s sales were cut nearly in half in its first quarter due to the impact of store closures during the COVID-19 pandemic.
The Toronto-based retailer reported on Friday that its sales fell to $29.9-million in the thirteen weeks ended May 2, compared to $54.4-million in the same period last year.
Like many retailers, the company closed its North American stores in mid-March, and temporarily laid off staff; 74 of those 116 stores have now reopened, with new safety measures in place. The stores are also offering curb-side pickup. Recovery in store traffic has differed by region, but shoppers who are coming back have the intent to buy something, and conversion rates at the stores have gone up, according to the company.
Roots is now considering how to "optimize" its brick-and-mortar store footprint, CEO Meghan Roach said on a conference call to discuss the results on Friday. The retailer will also begin evaluating product design in an attempt to build sales in core product categories such as sweats, and will look for "greater agility" from its Canadian leather factory to respond to trends.
"While comfort and quality will always remain the primary focus at Roots, we have an opportunity to put more innovation into our products," Ms. Roach said, adding that the company will refocus on brand-building initiatives such as design collaborations and special collections, to attract customers.
During the pandemic, as offices scaled back and people began working from home, Roots saw higher sales for its sweatpants, especially among men -- a trend it expects to continue. With the approach of summer, Roots has seen sales shift to items such as shorts and sweat dresses.
In China, where Roots has 37 stores operated by a partner, locations had closed earlier and began to reopen during the first quarter. Its 115 partner-operated stores in Taiwan and two in Hong Kong operated at reduced hours. Traffic to the stores in Asia continues to be lower than pre-pandemic levels.
The company's partner and other sales, which includes its royalties on sales in Asia as well as its wholesale and licensing businesses, fell to $5.3-million in the quarter, down from $7.7-million in the prior year.
Roots has coped with the disruption caused by COVID-19 by cutting costs. In addition to the temporary layoffs, it reduced salaries for head offices staff, the management team and the board of directors. Roots also secured wage subsidies from the Canadian government. The company has cut down on its orders for more store inventory and has frozen capital spending. Roots did not pay rent on any of its stores in April, and has been negotiating with landlords, securing rent abatements or deferrals in some cases. Negotiations with its largest landlords are ongoing. Roots has also been working with suppliers to find other ways to reduce costs.
The company reported a net loss of $7.8-million or 18 cents per share, compared to a net loss of $9.8-million or 23 cents per share in the prior year.
In late April, Roots announced that seven of its nine U.S. stores would not reopen, and filed for bankruptcy for its U.S. subsidiary.
Typically retailers report a comparable sales metric, which shows sales growth not accounted for by store openings or closures. Roots declined to report comparable sales on Friday, saying that with widespread store closures, it did not believe the figure would be "representative" of its performance.
Roots also announced on Friday that it has hired the former vice president of design for Canada Goose, Karuna Scheinfeld, as its new chief product officer. Ms. Scheinfeld will join the company in early July. The appointment ends a six-month search following the resignation of the company's chief merchant Nancy Lepler in December.
Roots has gone through a turbulent period, with high turnover in its management ranks -- its chief executive officer, chief financial officer and two chief merchants left the company last year. In December, former CEO Jim Gabel departed as the board of directors called for “renewed leadership.” Ms. Roach had been filling in as interim CEO since then, and on May 26 the company announced she had been appointed CEO.
Personal finance columnist Rob Carrick offers some tips to help you maintain financial flexibility as markets drop and businesses shut down over COVID-19.
The Globe and Mail
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.