ROOTS CORPORATION Improved profitability in fiscal 2020 and demonstrated strength of omni-channel capabilities with eCommerce sales up more than 60% for the quarter
Fiscal 2020 Business Highlights
- Demonstrated strength of the Company's market position around comfort and quality with increased demand for major product categories and positive sell-throughs of new products, driving substantial gross margin expansion.
- Increased eCommerce sales 50% year-over-year, partially offsetting the impact of pandemic-related store closures for 31% of the year (35% for Q4 2020), and generated nearly 50% of F2020 Direct-to-Consumer ("DTC") sales online, facilitated by the Company's omni-channel platform.
- Improved profitability year-over-year by actively managing costs across all areas of the business.
- Achieved profitability in the
U.S. with transition to a digitally-led strategy, including closing seven stores, which resulted in the elimination of significant Adjusted EBITDA losses and eCommerce growth rates in excess of 65% in the fourth quarter. - Effectively managed liquidity with a 53% year-over-year increase in available liquidity as at the end of F2020 and a reduction in leverage from 3.7x fiscal 2019 ("F2019") Adjusted EBITDA to 1.6x F2020 Adjusted EBITDA.
- Repurposed a portion of Company-operated leather factory for non-medical face mask production, establishing a new revenue stream and donating a portion of the proceeds to charity
- Donated more than
$2.0 million in products and financial support to charitable organizations acrossCanada .
Fiscal 2020 Financial Highlights
- Total sales of
$240.5 million , compared to$329.9 million in F2019. - DTC sales of
$208.2 million , compared to$287.8 million in F2019. - Gross margin of 58.1%, compared to 53.4% in F2019.
- DTC Gross Margin of 61.1%, up 490 basis points from 56.2% in F2019.
- Selling, general and administrative expenses of
$113.9 million (excluding fixed asset impairment of$0.9 million ), down from$169.1 million in F2019 (excluding fixed asset impairment of$19.2 million ). - Adjusted EBITDA of
$38.7 million , a 48.6% increase from$26.1 million in F2019. - Net income per share of
$0.31 , improved from a net loss per Share of ($1.47 ) in F2019. - Adjusted Net Income per Share of
$0.39 , improved from$0.10 per Share in F2019.
Fourth Quarter Fiscal 2020 Highlights
- Total sales of
$99.4 million , compared to$127.5 million in the fourth quarter of
fiscal 2019 ("Q4 2019"). - DTC sales of
$91.8 million , compared to$119.1 million in Q4 2019. - Gross margin of 59.2%, compared to 54.4% in Q4 2019.
- DTC Gross Margin of 59.8%, up 460 basis points from 55.2% in Q4 2019.
- Selling, general and administrative expenses of
$38.1 million (excluding fixed asset impairment of$0.9 million ), down from$50.2 million in Q4 2019 (excluding fixed asset impairment of$19.2 million ). - Adjusted EBITDA of
$26.1 million , in line with$26.1 million in Q4 2019. - Net income per share of
$0.29 , improved from a net loss per Share of ($1.06 ) in Q4 2019. - Adjusted Net Income per Share of
$0.39 , improved from$0.31 per Share in Q4 2019.
"In fiscal 2020, we navigated unprecedented disruption in our industry; however, as a result of the team's resilience, determination and passion, we ended the year stronger than we started," said
Summary of Fiscal 2020 Full-Year and Fourth Quarter Results
Sales
Total F2020 sales were
For Q4 2020, typically the Company's seasonally strongest quarter, total sales were
Gross Profit
As a result of the negative impact of COVID-19 on overall sales, Roots F2020 total gross profit was
F2020 Gross Margin was 58.1%, up from 53.4% in F2019. Gross Margin for Q4 2020 was 59.2%, up from 54.4% in Q4 2019. The 470-basis point and 480-basis point improvement for F2020 and Q4 2020, respectively, predominantly reflects the Company's decision to decrease promotional breadth and depth year-over-year. While the reductions in promotions likely placed some downward pressure on sales in the short term, the Company believes it is beneficial to the brand and profitability of the business over the long term.
Selling, General and Administrative Expenses ("SG&A")
F2020 SG&A was
F2020 SG&A also reflects
For Q4 2020, SG&A was
Q4 2020 SG&A also reflects
Adjusted EBITDA, Net Income (Loss) & Adjusted Net Income (Loss)
Reflecting factors discussed above, Adjusted EBITDA (which excludes the impact of IFRS 16, Leases ("IFRS 16") and non-cash impairments) was
F2020 net income improved to
Q4 2020 net income improved to
COVID-19 Business Update
In the fourth quarter of 2020, in response to a second wave of government mandated lockdowns, the Company temporarily closed corporate retail stores within certain regions of
This month, in accordance with further changes to provincial guidelines, the Company has shifted its store operations to curbside pick-up and eCommerce fulfillment only for certain regions in
Conference Call and Webcast Information
Roots will hold a conference call to discuss the Company's fiscal 2020 year-end and fourth quarter 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.
See Roots Consolidated Financial Statements and the Company's Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year and fourth quarter ended
About Roots
Established in 1973, Roots is a premium outdoor-lifestyle brand. We unite the best of cabin and city through unmistakable style built with uncompromising comfort and quality. We offer a broad range of products designed for life's everyday adventures, including women's and men's apparel, leather goods, footwear, accessories, and kids, toddler and baby apparel. Starting from a little cabin in
Non-IFRS Measures and Industry Metrics
Roots has historically reported Comparable Sales Growth (Decline) as an additional metric to demonstrate the performance of its DTC business. However, as a result of the negative impacts COVID-19 has had on the apparel retail operating environment, including periods of store closures, phased re-openings and retail store operating limitations, the Company does not believe that Comparable Sales Growth (Decline) is a representative metric of fiscal 2020 performance.
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 IFRS, do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures are not intended to represent, and should not be considered as alternatives to net income or other performance measures derived in accordance with IFRS as measures of operating performance or operating cash flows or as a measure of liquidity. In addition to our results determined in accordance with IFRS, we use non-IFRS measures including DTC Gross Margin, EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted Net Income (Loss) per Share. 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. Definitions and reconciliations of non-IFRS measures to the relevant reported measures can be found in our MD&A under "Cautionary Note Regarding Non-IFRS Measures and Industry Metrics", which is available on SEDAR at www.sedar.com or the Company's Investor Relations website at https://investors.roots.com.
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 are 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.
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As at | |||||
2021 | 2020 | ||||
Assets | |||||
Current assets: | |||||
Cash | $ | 9,166 | $ | 949 | |
Accounts receivable | 7,165 | 7,158 | |||
Inventories | 42,401 | 40,152 | |||
Prepaid expenses | 3,137 | 5,418 | |||
Total current assets | 61,869 | 53,677 | |||
Non-current assets: | |||||
Loan receivable | 608 | 585 | |||
Lease receivable | 1,187 | 1,511 | |||
Fixed assets | 47,981 | 55,694 | |||
Right-of-use assets | 79,995 | 128,322 | |||
Intangible assets | 190,777 | 193,079 | |||
7,906 | 7,906 | ||||
Total non-current assets | 328,454 | 387,097 | |||
Total assets | $ | 390,323 | $ | 440,774 | |
Liabilities and Shareholders' Equity | |||||
Current liabilities: | |||||
Bank indebtedness | $ | – | $ | 7,226 | |
Accounts payable and accrued liabilities | 25,850 | 20,252 | |||
Deferred revenue | 5,759 | 6,011 | |||
Income taxes payable | 5,955 | 2,008 | |||
Current portion of lease liabilities | 22,197 | 26,569 | |||
Current portion of long-term debt | 4,984 | 4,984 | |||
Derivative obligations | 418 | 158 | |||
Total current liabilities | 65,163 | 67,208 | |||
Non-current liabilities: | |||||
Deferred tax liabilities | 15,891 | 13,942 | |||
Long-term portion of lease liabilities | 78,989 | 124,590 | |||
Long-term debt | 66,100 | 84,528 | |||
Total non-current liabilities | 160,980 | 223,060 | |||
Total liabilities | 226,143 | 290,268 | |||
Shareholders' equity: | |||||
Share capital | 197,333 | 196,903 | |||
Contributed surplus | 3,682 | 3,407 | |||
Accumulated other comprehensive income (loss) | (227) | (116) | |||
Retained earnings (deficit) | (36,608) | (49,688) | |||
Total shareholders' equity | 164,180 | 150,506 | |||
Total liabilities and shareholders' equity | $ | 390,323 | $ | 440,774 | |
On behalf of the Board of Directors:
"Erol Uzumeri" Director
"Richard P. Mavrinac" Director
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For the 52-week periods ended | |||||
2021 | 2020 | ||||
Sales | $ | 240,506 | $ | 329,865 | |
Cost of goods sold | 100,767 | 153,676 | |||
Gross profit | 139,739 | 176,189 | |||
Selling, general and administrative expenses | 114,807 | 188,308 | |||
– | 44,799 | ||||
Gain from deconsolidation of | 4,774 | – | |||
Income (loss) before interest expense and | |||||
income taxes expense (recovery) | 29,706 | (56,918) | |||
Interest expense | 11,741 | 15,567 | |||
Income (loss) before income taxes | 17,965 | (72,485) | |||
Income taxes expense (recovery) | 4,885 | (10,456) | |||
Net income (loss) | $ | 13,080 | $ | (62,029) | |
Basic earnings (loss) per share | $ | 0.31 | $ | (1.47) | |
Diluted earnings (loss) per share | $ | 0.31 | $ | (1.47) | |
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For the 52-week periods ended | |||||||
2021 | 2020 | ||||||
Net income (loss) | $ | 13080 | $ | (62029) | |||
Other comprehensive income, net of taxes: | |||||||
Items that may be subsequently reclassified to profit or loss: | |||||||
Effective portion of changes in fair | |||||||
value of cash flow hedges | 362 | 425 | |||||
Cost of hedging excluded from | |||||||
cash flow hedges | (22) | 362 | |||||
Tax impact of cash flow hedges | (91) | (210) | |||||
Total other comprehensive income | 249 | 577 | |||||
Total comprehensive income (loss) | $ | 13,329 | $ | (61,452) | |||
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For the 52-week periods ended | |||||||||||
Accumulated | |||||||||||
Retained | other | ||||||||||
Share | Contributed | earnings | comprehensive | ||||||||
capital | surplus | (deficit) | income | Total | |||||||
Balance, | $ | 196,903 | $ | 3,407 | $ | (49,688) | $ | (116) | $ | 150,506 | |
Net income | – | – | 13,080 | – | 13,080 | ||||||
Net gain from change in fair | |||||||||||
value of cash flow hedges, | |||||||||||
net of income taxes | – | – | – | 249 | 249 | ||||||
Transfer of realized loss on cash | |||||||||||
flow hedges to inventories, net | |||||||||||
of income taxes | – | – | – | (360 | (360) | ||||||
Share-based compensation | – | 705 | – | – | 705 | ||||||
Issuance of shares | 430 | (430) | – | – | – | ||||||
Balance, | $ | 197,333 | $ | 3,682 | $ | (36,608) | $ | (227) | $ | 164,180 | |
Accumulated | |||||||||||
Retained | other | ||||||||||
Share | Contributed | earnings | comprehensive | ||||||||
capital | surplus | (deficit) | income (loss) | Total | |||||||
Balance, | $ | 196,853 | $ | 3,975 | $ | 13,608 | $ | 268 | $ | 214,704 | |
Adjustment on adoption of IFRS 16 | – | – | (1,267) | – | (1,267) | ||||||
Balance, | $ | 196,853 | $ | 3,975 | $ | 12,341 | $ | 268 | $ | 213,437 | |
Net loss | – | – | (62,029) | – | (62,029) | ||||||
Net gain from change in fair | |||||||||||
value of cash flow hedges, | |||||||||||
net of income taxes | – | – | – | 577 | 577 | ||||||
Transfer of realized loss on cash | |||||||||||
flow hedges to inventories, net | |||||||||||
of income taxes | – | – | – | (961) | (961) | ||||||
Share-based compensation | – | (518) | – | – | (518) | ||||||
Issuance of shares | 50 | (50) | – | – | – | ||||||
Balance, | $ | 196,903 | $ | 3,407 | $ | (49,688) | $ | (116) | $ | 150,506 | |
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For the 52-week periods ended | |||||
2021 | 2020 | ||||
Cash provided by (used in): | |||||
Operating activities: | |||||
Net income (loss) | $ | 13,080 | $ | (62,029) | |
Items not involving cash: | |||||
Depreciation and amortization | 33,325 | 39,606 | |||
Share-based compensation expense (recovery) | 705 | (518) | |||
Impairment of fixed assets and right-of-use assets | 2,048 | 22,398 | |||
Impairment of goodwill | – | 44,799 | |||
Gain from deconsolidation of | (4,774) | – | |||
Unrealized losses on forward contracts | 105 | – | |||
Gain on lease modification | (310) | (520) | |||
Rent concessions related to practical expedient | (3,525) | – | |||
Interest expense | 11,741 | 15,567 | |||
Income taxes expense (recovery) | 4,885 | (10,456) | |||
Interest paid | (4,337) | (5,904) | |||
Payment of interest on lease liabilities | (6,724) | (9,048) | |||
Taxes refunded (paid) | 1,056 | (2,200) | |||
Change in non-cash operating working capital: | |||||
Accounts receivable | (7) | (531) | |||
Inventories | (4,540) | 9,381 | |||
Prepaid expenses | 2,281 | 1,025 | |||
Accounts payable and accrued liabilities | 6,165 | (2,039) | |||
Deferred revenue | (252) | 513 | |||
50,922 | 40,044 | ||||
Financing activities: | |||||
Issuance (repayment) of long-term debt | (14,000) | 9,000 | |||
Long-term debt financing costs | (148) | (163) | |||
Repayment of Term Credit Facility | (4,984) | (4,984) | |||
Payment of principal on lease liabilities, net of tenant allowance | (12,383) | (17,436) | |||
(31,515) | (13,583) | ||||
Investing activities: | |||||
Additions to fixed assets | (3,423) | (22,320) | |||
Deconsolidation of | (541) | – | |||
(3,964) | (22,320) | ||||
Increase in cash | 15,443 | 4,141 | |||
Cash and bank indebtedness, beginning of period | (6,277) | (10,418) | |||
Cash and bank indebtedness, end of period | $ | 9,166 | $ | (6,277) | |
SOURCE
© Canada Newswire, source
