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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Aritzia Inc    ATZ   CA04045U1021

ARITZIA INC (ATZ)
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Canadian apparel firm Roots battered on debut by tough retail conditions

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10/25/2017 | 05:31pm CEST

TORONTO (Reuters) - Canadian apparel company Roots Corp began life as a publicly listed company on Wednesday in Toronto on a grim note, as investors balked at buying into an industry beset by cut-throat competition and shrinking margins.

Shares of the company, known for its trademark beaver logo, rustic casual wear and Canadian-made leather goods, opened at C$11.50, down 4.2 percent from their initial public offering price of C$12. They slumped 16.3 percent from the IPO price to C$10.05 at 1110 EST (1510 GMT).

Roots raised C$200 million ($158 million) in the IPO.

Roots' bleak performance is the latest in a string of tribulations for the Canadian bricks-and-mortar retail industry. Besieged by competition from online players like Amazon.com Inc <AMZN.N>, profit margins for the sector have shrunk to under 5 percent.

"With the various problems facing retailers, there's concern about buying into what's essentially a retail store product," said David Cockfield, portfolio manager at Northland Wealth Management in Toronto.

Roots has 116 stores in Canada and four in the United States, as well as 109 partner-operated stores in Taiwan and 27 in China, according to its IPO prospectus. The company also ships to 54 countries through its website.

A Roots spokesperson could not be immediately reached for comment.

Roots' IPO price was reduced from the marketing range of C$14 to C$16, underscoring the company's modest growth outlook and broader challenges for brick-and-mortar retailers.

Roots, in its prospectus, said it had compound annual growth in sales of about 14 percent in 2014 to 2016. That lagged rival Canada Goose Holdings Inc.'s (>> Canada Goose Holdings Inc) <GOOS.N> 38 percent and fashion retailer Aritzia Inc's (>> Aritzia Inc) 20 percent rate over a similar period. [nL2N1MD1A8]Canada Goose surged 40 percent from its IPO price on its trading debut in Toronto in March, and has appreciated 7.5 percent since it began trading, compared with a 2 percent gain in the Toronto Stock Exchange's S&P/TSX composite index. <.GSPTSE>.

Still, it has fallen 21 percent from its June peak, slammed by the challenging retail environment, which most recently led to the collapse of department store chain Sears Canada.

Canada Goose fell 1.8 percent to C$25.65 in morning trading on Wednesday. Aritzia lost 0.4 percent to C$11.50, while the Toronto stock benchmark slipped 0.3 percent.

(Reporting By Nichola Saminather; Editing by Chizu Nomiyama and David Gregorio)

By Nichola Saminather

Stocks treated in this article : Aritzia Inc, Canada Goose Holdings Inc
Stocks mentioned in the article
ChangeLast1st jan.
ARITZIA INC 0.16% 18.38 Delayed Quote.44.60%
CANADA GOOSE HOLDINGS INC -0.61% 65.36 Delayed Quote.65.65%
S&P/TSX COMPOSITE INDEX 0.05% 15418.4 Delayed Quote.-4.90%
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Financials (CAD)
Sales 2019 869 M
EBIT 2019 125 M
Net income 2019 82,8 M
Finance 2019 54,2 M
Yield 2019 -
P/E ratio 2019 26,44
P/E ratio 2020 22,16
EV / Sales 2019 2,44x
EV / Sales 2020 2,10x
Capitalization 2 178 M
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Mean consensus OUTPERFORM
Number of Analysts 9
Average target price 21,5  CAD
Spread / Average Target 17%
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Managers
NameTitle
Brian Hill Chairman & Chief Executive Officer
Jennifer Wong President, COO, Secretary & Director
Todd Ingledew Chief Financial Officer
Dave MacIver Chief Information Officer
Aldo Bensadoun Independent Director
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