- Sales reached
$63.5 million , down 9.0% from$69.8 million in Q3 2022- DTC full-price sales increased 3.0% as compared to Q3 2022
- Gross margin attained 58.4% compared to 56.5% in Q3 2022
- DTC gross margin of 62.4%, compared to 60.7% in Q3 2022
- Net income totaled
$0.5 million compared to$2.2 million in Q3 2022 - Adjusted EBITDA amounted to
$5.5 million compared to$7.3 million in Q3 2022 - Inventory balance of
$61.4 million , was down 15.7% year-over-year - Net debt reduced 10% year-over-year to
$52.9 million
"Our full-priced sales have shown resilience, underscoring the appeal of our latest products and the success of our intensified marketing strategies in the third quarter. However, the prevailing economic headwinds have altered consumer spending patterns and in the third quarter, we maintained a promotional discipline which influenced our off-price sales dynamics," commented
SELECT FINANCIAL INFORMATION (in '000s of CAD$, except where noted) | Third quarter ended | Year-to-date | ||||
|
| Change |
|
| Change | |
Total sales | 63,534 | 69,782 | (9.0 %) | 154,434 | 160,655 | (3.9 %) |
Direct-to-Consumer ("DTC") sales | 52,203 | 56,858 | (8.2 %) | 124,712 | 132,697 | (6.0 %) |
Partners & Other ("P&O") sales | 11,331 | 12,924 | (12.3 %) | 29,722 | 27,958 | +6.3 % |
Gross profit | 37,118 | 39,428 | (5.9 %) | 89,040 | 93,992 | (5.3 %) |
Gross margin1 | 58.4 % | 56.5 % | +190 bps4 | 57.7 % | 58.5 % | +80 bps4 |
Selling, General and Administrative | 33,788 | 33,830 | (0.1 %) | 99,132 | 95,761 | +3.5 % |
Subsidies and abatements2 | - | 51 | - | - | 456 | - |
Net income (loss) | 519 | 2,209 | (76.5 %) | (12,781) | (6,287) | (103.3 %) |
Net income (loss) per share | (80.0 %) | (106.7 %) | ||||
Adjusted EBITDA3 | 5,522 | 7,276 | (24.1 %) | (3,309) | 3,443 | (196.1 %) |
1 | Gross margin is a supplementary financial measure that measures our gross profit as a percentage of sales. |
2 | Subsidies and abatements are reported as a reduction to the related expense, either as a decrease to cost of goods sold or to SG&A expenses. |
3 | Adjusted EBITDA is a non-IFRS Measure. See "Non-IFRS Measures and Industry Metrics" below. |
4 | Basis points ("bps"). |
"We continue to make significant progress towards improving our inventory position, reducing by 15.7% year-over-year compared to an increase of 33% to start the year." said Leon Wu, Chief Financial Officer of Roots. "Combining the full-price sell-through of goods from our prior pack-and-hold strategy with tightened ordering, we achieved this inventory decline while simultaneously reducing our discounting. The lower inventory level gives us greater flexibility towards responding to consumer demand in the products they love and helps maintain a strong level of annual free cash flow."
"The optimization of our inventory levels also contributed towards the strengthening of our balance sheet, with net debt decreasing by 10%. These achievements, amid a challenging economic landscape, underscores the inherent robustness of our brand and provides us with the ability to continue investing in sustainable, long-term growth,"
THIRD QUARTER OVERVIEW
Total sales decreased 9.0% to
P&O sales (wholesale Roots branded products, licensing to select manufacturing partners and the sale of certain custom products) amounted to
Gross profit reached
SG&A expenses totaled
Net income totaled
Adjusted EBITDA amounted to
YEAR-TO-DATE RESULTS
For the first nine months of fiscal 2023, total sales amounted to
Net income (loss) was
Adjusted EBITDA totaled
FINANCIAL POSITION
Inventory was
As at
NORMAL COURSE ISSUER BID
Under its Normal Course Issuer Bid ("NCIB") program, Roots repurchased 102,700 common shares of the Company ("Shares") for a total consideration of
CONFERENCE CALL AND WEBCAST INFORMATION
Roots will hold a conference call to review its third quarter 2023 results on
A live audio webcast of the conference call will be available on the Events and Presentations section of the Company's investor website at https://investors.roots.com or by following the link here. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available on the Company's website for one year.
NON-IFRS MEASURES AND INDUSTRY METRICS
This press release makes reference to certain non-IFRS measures including certain metrics specific to the industry in which we operate. These measures are not recognized measures under International Financial Reporting Standards as issued by the
We believe these non-IFRS measures and industry metrics provide useful information to both management and investors in measuring our financial performance and condition and highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. For further information regarding these non-IFRS measures, please refer to "Cautionary Note-Regarding Non-IFRS Measures and Industry Metrics" in our management's discussion and analysis for Q3 2023, which is incorporated by reference herein and is available on SEDAR at www.SEDAR.com or the Company's Investor Relations website at https://investors.roots.com.
The table below provides a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the periods presented:
CAD $000s | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | |||
Net income (loss) | 519 | 2,209 | (12,781) | (6,287) | |||
Add the impact of: | |||||||
Interest expense (a) | 2,552 | 2,375 | 7,124 | 6,436 | |||
Income taxes expense (recovery) (a) | 259 | 1,014 | (4,435) | (1,918) | |||
Depreciation and amortization (a) | 7,358 | 7,310 | 22,246 | 21,688 | |||
EBITDA | 10,688 | 12,908 | 12,154 | 19,919 | |||
Adjust for the impact of: | |||||||
SG&A: Rent expense excluded from net income (loss) as a | (5,792) | (5,729) | (17,352) | (17,405) | |||
SG&A: Purchase accounting adjustments (b) | (12) | (12) | (33) | (5) | |||
SG&A: Stock option expense (c) | 99 | 97 | 332 | 409 | |||
SG&A: Changes in key personnel (d) | 404 | – | 1,453 | (5) | |||
SG&A: Non-recurring legal fees (e) | 87 | 12 | 87 | 530 | |||
SG&A: Other non-recurring items (f) | 48 | – | 50 | – | |||
Adjusted EBITDA(g) | 5,522 | 7,276 | (3,309) | 3,443 |
______________ | |
Notes: | |
(a) | The impact of IFRS 16 in Q3 2023 and Q3 2022 was: (i) a decrease to SG&A expenses of |
(b) | As a result of the Acquisition, the Company recognized an intangible asset for lease arrangements in the amount of |
(c) | Represents non-cash share-based compensation expense in respect of our Legacy Equity Incentive Plan, Legacy Employee Option Plan, and Omnibus Equity Incentive Plan. |
(d) | Represents expenses incurred in respect of the Company's efforts to recruit for vacancies in key management positions and severance costs associated with employee separations relating to such positions. |
(e) | Represents non-recurring legal costs that are outside the scope of normal operations. |
(f) | In Q3 2023 and YTD 2023, represents one-time costs that do not reflect the underlying profitability of the business, including consulting fees related to inventory valuations used to pursue reduced financing costs. |
(g) | Adjusted EBITDA excludes the impact of IFRS 16. If the impact of IFRS 16 was included for Q3 2023 and Q3 2022, Adjusted EBITDA would have been |
ABOUT ROOTS
Established in 1973, Roots is a global lifestyle brand. Starting from a small cabin in northern
FORWARD-LOOKING INFORMATION
Certain information in this press release contains forward-looking information. This information is based on management's reasonable assumptions and beliefs in light of the information currently available to us and is made as of the date of this press release. Actual results and the timing of events may differ materially from those anticipated in the forward-looking information as a result of various factors. Information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. Statements containing forward-looking information are not facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements.
See "Forward-Looking Information" and "Risk Factors" in the Company's current Annual Information Form for a discussion of the uncertainties, risks and assumptions associated with these statements. Readers are urged to consider the uncertainties, risks and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. We have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law.
SOURCE
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