ROOTS Corporation (ROOT) reported a rise in sales as profits improved slightly in the third quarter of 2021.
The Canadian retailer’s profit margins improved as it continued to cut promotions, selling its clothing and accessories at full price more regularly. (See Analysts’ Top Stocks on TipRanks)
Sales & Earnings
Total sales came in at C$76.3 million in Q3 2021, up 4.6% from C$72.9 million in Q3 2020. Direct-to-Consumer (DTC) sales were C$63.4 million, in line with the prior-year quarter. DTC gross margin was 65.2%, up 140 basis points from Q3 2020 and Q3 2019.
Net loss amounted to C$10.8 million (C$0.25 per share) in the quarter ended October 30, compared with net income of C$10.3 million ($0.25 per share) in Q3 2020.
On an adjusted basis, net income was C$11.7 million (C$0.28 per share), higher than the adjusted net income of C$11.2 million (C$0.27 per share) reported a year ago.
Roots president and CEO Meghan Roach said, “Our concerted efforts over the last seven quarters to reduce discounts resulted in promotional days declining from 81 in Q3 2019 and 49 in Q3 2020 to four in Q3 2021. Combined with our elevated assortments and brand-building marketing, these actions significantly improved our key selling metrics, and we saw double-digit growth in DTC sales during non-promotional periods.
“We were also pleased to achieve these results in light of the industry-wide supply chain disruptions, which limited our ability to showcase new products and to merchandise our full offerings online and in-store.”
Roach added that the company is prepared to meet consumer demand during the fourth quarter holiday season with compelling gifts and healthy inventory levels in-store and online.
During the quarter, Roots started new collaborations, including Révolutionnaire by Roots and the launch of a personalized award jacket designed by Japanese artist Mr. for the Weeknd, on the occasion of the 10th anniversary of his album “Thursday.”
Wall Street’s Take
Three months ago, TD Securities analyst Sabahat Khan reiterated a Hold rating on ROOT with a C$3.50 price target. This implies 17.1% upside potential. As Khan is the only analyst to have given a rating for ROOT in the past three months, the average ROOT price target is C$3.50.
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