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Roots looks to Raptors and Shawn Mendes to reignite sales

Roots looks to Raptors and Shawn Mendes to reignite sales
Business
Roots Corp. is hoping some recent collaborations will boost sales as shares have experienced a bumpy ride since an initial public offering just under two years ago.

The Toronto-based retailer, known for its comforting apparel and beaver logo, plunged as much as 17 per cent to a record low of $2.28 Wednesday after weaker than expected second-quarter earnings. Roots has now shed over $300 million of its value, or more than 75 per cent since pricing its initial public offering at $12 a piece in October 2017.

However, the company remains positive on sales growth amid recent collaboration items. “We remain confident in our ability to deliver year-over-year sales growth in fiscal 2019,” CEO Jim Gabel said in a statement Wednesday morning.

“The power of the Roots brand remains strong. We are a highly sought-after collaborator, most recently releasing a limited-edition Raptors NBA Championship jacket and launching a second capsule collection with multi-platinum singer/songwriter, Shawn Mendes,” Gabel added.

Still, Roots elected to lower its sales outlook, citing “lower than expected DTC sales in the first half of the year and the impact of macroeconomic and geopolitical headwinds” on the company’s Asia business. Roots is scheduled to present at Scotiabank’s consumer conference September 18 in Toronto.

Operational challenges resulting from Roots’ moving into a larger distribution centre will likely eclipse any progress made during the second-quarter, New York-based Jefferies said. While the distribution centre should be more efficient that the former facility in the long-term, the change is adding pressure on near-term fundamentals, analyst Janine Stichter wrote while maintaining a buy recommendation.
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