Fourth quarter Comparable Sales Growth of
15.1% helped drive 35.3% increase in
full-year Adjusted Net Income Per Share
TORONTO, April 18, 2018 /CNW/ - Roots ("Roots," "Roots
Canada" or the "Company") (TSX: ROOT), an iconic lifestyle brand
with a rich Canadian heritage, today announced its financial
results for the fourth quarter and fiscal year ended February 3, 2018 ("Q4 2017" and "Fiscal 2017",
respectively). All financial results are reported in Canadian
dollars unless otherwise stated. Certain metrics, including those
expressed on an adjusted or comparable basis, are non-IFRS
measures. See "Non-IFRS Measures and Industry Metrics" below.
Fourth Quarter Fiscal 2017 Highlights
- Total sales increased 17.0% to $130.0
million compared to fourth quarter Fiscal 2016 ("Q4
2016")
-
- Direct to Consumer ("DTC") sales increased 17.6% to
$119.8 million compared to Q4
2016
- Comparable Sales Growth of 15.1%
- Gross margin expanded to 58.3% from 57.3% in Q4 2016
-
- Adjusted DTC Gross Margin increased 155 basis points to
60.7% from 59.2% in Q4 2016
- Adjusted EBITDA increased 16.2% to $36.7
million compared to Q4 2016
- Basic Earnings Per Share ("EPS") increased 21.9% to
$0.50 per share compared to Q4 2016,
and Adjusted Net Income Per Share increased 22.9% to $0.59 per share compared to Q4 2016
- Opened two corporate retail stores and relocated and expanded
one store in North America, ending
the quarter with 119 stores
- Opened three partner-operated stores in China and two partner-operated stores in
Taiwan, ending the quarter with 32
stores in China and 110 stores in
Taiwan
Fiscal 2017 Highlights
- Total sales increased 15.7% to $326.1
million compared to fiscal year 2016 ended January 28, 2017 ("Fiscal 2016")
-
- DTC sales increased 16.3% to $284.1
million compared to Fiscal 2016
- Comparable Sales Growth of 12.1%
- Gross margin expanded to 55.8% from 52.2% in Fiscal 2016
-
- Adjusted DTC Gross Margin increased 206 basis points to 59.4%
from 57.3% in Fiscal 2016
- Adjusted EBITDA increased 26.6% to $52.6
million compared to Fiscal 2016
- Basic EPS increased 121.0% to $0.42 per share compared to Fiscal 2016, and
Adjusted Net Income Per Share increased 35.3% to $0.69 per share compared to Fiscal 2016
- Total bank debt of $84.5 million,
down from $104.5 million, and a net
debt leverage ratio of 1.57 down from 2.51 at the end of Fiscal
2016
- Opened eight corporate retail stores, renovated one corporate
retail store, relocated one store, and renovated and expanded three
stores, all in North America
- Opened 13 net new partner-operated stores in Asia (Taiwan
and China)
"In Fiscal 2017, we generated exceptional growth across all
channels and focus geographies." said Jim
Gabel, President and Chief Executive Officer of Roots. "As a
result, we delivered significant improvements in all of our key
financial metrics. For the fourth quarter, holiday sales were
outstanding both in-store and online, driving impressive top and
bottom-line growth. We also continued to execute on the strategic
initiatives in our three-year plan, reducing our SKU count by 27%
compared to Q4 2016, expanding our Canadian and international
retail footprint and enhancing our omni-channel shopping
experience."
Mr. Gabel continued: "We are encouraged by our Fiscal 2017
results. They speak to the strength of our brand and the momentum
we are gaining with our operational investments and strategic
growth initiatives. Since starting the process of modernizing the
Roots brand and transforming the business in Fiscal 2016, we have
delivered eight consecutive quarters of positive Comparable Sales
Growth, as well as notable improvements in gross margin and
Adjusted EBITDA. While we are still in the early stages of
executing our plan, we are even more confident in the significant
long-term growth opportunities in front of us and our ability to
achieve our Fiscal 2019 targets."
Summary of Fourth Quarter and Fiscal 2017 Year-end Financial
Results
Sales
Total Q4 2017 sales increased 17.0% to
$130.0 million from $111.2 million in Q4 2016. Total Fiscal 2017
sales increased 15.7% to $326.1
million from $281.9 million in
Fiscal 2016.
Sales in the DTC segment (corporate retail store and e-commerce
sales) increased 17.6% to $119.8
million compared to $101.9
million in Q4 2016. For Fiscal 2017, DTC sales increased
16.3% to $284.1 million compared to
$244.3 million in Fiscal 2016. The
year-over-year improvement in DTC sales was largely driven by
Comparable Sales Growth of 15.1% and 12.1% for the quarter and
year, respectively, and the benefit of a 53rd week
($3.1 million) in Q4 2017. The
Company's top line growth also reflected the opening of two net new
corporate retail stores since Q4 2016, the renovation of one store,
the relocation of one store, as well as the renovation and
expansion of three stores.
Sales in the Partners and Other segment (wholesale Roots-branded
products, royalties on partner retail sales, licensing to select
manufacturing partners and the sale of certain custom Roots-branded
products) for Q4 2017 were $10.2
million, a 9.8% increase compared to $9.3 million in Q4 2016. For Fiscal 2017, sales
in the Partners and Other segment were $41.9
million, an 11.7% improvement over $37.5 million in Fiscal 2016. On a constant
currency basis, sales in the Partners and Other segment increased
14.5% and 14.1% for Q4 2017 and Fiscal 2017, respectively. The
year-over-year growth in the Partners and Other segment for the
quarter and year were driven by strength across all divisions,
including the opening of 13 net new partner-operated stores in
Asia (Taiwan and China) since Q4 2016.
Gross Profit
Total gross profit for Q4 2017
increased 18.9% to $75.8 million from
$63.7 million in Q4 2016. Fiscal 2017
total gross profit increased 23.7% to $182.0
million, from $147.1 million
in Fiscal 2016.
Q4 2017 gross profit in the DTC segment increased 18.9% to
$71.7 million, from $60.3 million in Q4 2016. Q4 2017 Adjusted DTC
Gross Margin was 60.7%, up 155 basis points from a Q4 2016 Adjusted
DTC Gross Margin of 59.2%. Fiscal 2017 gross profit in the DTC
segment increased 24.8% to $167.6
million, from $134.2 million
in Fiscal 2016, with Adjusted DTC Gross Margin expansion of 206
basis points to 59.4% from 57.3% in Fiscal 2016. Year-over-year
gross margin improvements for Q4 2017 and Fiscal 2017 reflect the
benefits of the Company's merchandising initiatives, including the
two-year implementation of the United Brand Range, that are driving
lower costs and facilitating more full-priced selling, as well as
favorable FX rates on goods purchased in US dollars.
Gross profit in the Partners and Other segment increased 18.0%
to $4.1 million, from $3.4 million in Q4 2016. Fiscal 2017 gross profit
in the Partners and Other segment increased 11.6% to $14.4 million, from $12.9
million in Fiscal 2016. Year-over-year gross profit
improvement in the Partners and Other segment primarily reflects an
increase in sales to the Company's operating partner in
Asia (Taiwan and China).
Selling, general and administrative expenses
Selling, general and administrative expenses for Q4 2017 were
$45.9 million, up 21.1% compared to
$37.9 million in Q4 2016. For Fiscal
2017, selling, general and administrative expenses were
$151.9 million, up 17.3% over
$129.5 million in Fiscal 2016. The
year-over-year increase for Q4 2017 and Fiscal 2017 was primarily
driven by incremental costs to support higher sales, strategic
investments to drive the growth of the business and costs incurred
in relation to the Company's Initial Public Offering.
Adjusted EBITDA
Adjusted EBITDA increased by
16.2% to $36.7 million, from
$31.6 million in Q4 2016. For Fiscal
2017, Adjusted EBITDA increased by 26.6% to $52.6 million, from $41.6
million in Fiscal 2016.
Net Income & Adjusted Net Income
The
effective tax rate was 27.3% for Q4 2017, as compared to 29.1% in
Q4 2016, and 28.3% for Fiscal 2017, as compared to 29.1% in Fiscal
2016. The decrease in the effective tax rate was primarily driven
by fewer non-deductible expenses incurred in Q4 2017 and Fiscal
2017 as compared to the same periods in Fiscal 2016.
Net income increased 21.3% to $20.8
million, or $0.50 per share,
compared to $17.2 million, or
$0.41 per share, in Q4 2016. Net
income for Fiscal 2017 improved 114% to $17.5 million, or $0.42 per share, as compared to $8.2 million, or $0.19 per share, in Fiscal 2016.
Adjusted Net Income increased 22.0% to $24.6 million, or $0.59 per share, compared to $20.2 million, or $0.48 per share, in Q4 2016. Adjusted Net Income
for Fiscal 2017 increased 35.7% to $29.1
million, or $0.69 per share,
compared to $21.5 million, or
$0.51 per share, in Fiscal 2016.
Outlook
Based on the Company's continued strong
financial performance in Fiscal 2017, the power of the Roots brand
and the transformational process the Company is undergoing, Roots
remains confident it is on track to achieve its previously stated
financial targets by the end of Fiscal 2019:
- Sales of $410.0 million to
$450.0 million
- Adjusted EBITDA of $61.0 million
to $68.0 million
- Adjusted Net Income of $35.0
million to $40.0 million
Conference Call and Webcast Information
Roots will
hold a conference call to discuss the Company's fourth quarter and
year-end financial results on April 18,
2018, at 8:00 a.m. ET. All
interested parties can join the call by dialing 647-427-7450 or
1-888-231-8191 and using conference ID: 8499489. Please dial-in 15
minutes prior to the call to secure a line. The conference call
will be archived for replay until April 25,
2018, at midnight and can be accessed by dialing
416-849-0833 or 1-855-859-2056 and entering replay passcode
8499489.
A live audio webcast of the conference call will be available on
the Events and Presentations section of the Company's investor
website at http://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.
About Roots
Established in 1973, Roots is an
iconic Canadian lifestyle brand with a rich heritage and portfolio
of premium apparel, leather goods, accessories and footwear. Roots
delivers products to customers through its store network, online
platform and international partnerships. As of February 3, 2018, Roots' integrated omni-channel
footprint included 116 company retail stores in Canada, three company retail stores in
the United States, 110
partner-operated stores in Taiwan,
32 partner-operated stores in China and a global e-commerce platform. Roots
Corporation is a Canadian corporation doing business as "Roots" and
"Roots Canada".
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 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 Gross Margin, Adjusted DTC
Gross Margin, EBITDA, Adjusted EBITDA, Adjusted Net Income, and
Adjusted Net Income per Share. This press release also refers to
Comparable Sales Growth, a commonly used metric in our industry but
that may be calculated differently compared to other companies. 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 Annual Information Form for the fiscal year ended
February 3, 2018 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.
ROOTS
CORPORATION Consolidated Statement of Financial Position
(In thousands of Canadian dollars)
|
|
|
|
As at February 3,
2018 and January 28, 2017
|
|
|
|
|
February
3,
|
January
28,
|
|
2018
|
2017
|
Assets
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
|
1,809
|
$
|
25,257
|
|
Accounts
receivable
|
6,420
|
4,946
|
|
Inventories
|
35,407
|
32,682
|
|
Prepaid
expenses
|
5,580
|
1,573
|
|
Total current
assets
|
49,216
|
64,458
|
Non-current
assets:
|
|
|
|
Loan
receivable
|
541
|
520
|
|
Fixed
assets
|
36,981
|
31,219
|
|
Intangible
assets
|
203,408
|
208,541
|
|
Goodwill
|
52,705
|
52,705
|
|
Total non-current
assets
|
293,635
|
292,985
|
|
|
|
Total
assets
|
$
|
342,851
|
$
|
357,443
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
18,306
|
$
|
16,448
|
|
Deferred
revenue
|
4,647
|
3,840
|
|
Income taxes
payable
|
6,589
|
5,536
|
|
Current portion of
long-term debt
|
4,984
|
5,550
|
|
Derivative
Obligations
|
1,233
|
–
|
|
Total current
liabilities
|
35,759
|
31,374
|
Non-current
liabilities:
|
|
|
|
Deferred tax
liabilities
|
21,166
|
21,248
|
|
Deferred lease
costs
|
4,815
|
2,154
|
|
Finance lease
obligation
|
894
|
456
|
|
Long-term
debt
|
79,481
|
98,909
|
|
Other non-current
liabilities
|
1,763
|
2,118
|
|
Total non-current
liabilities
|
108,119
|
124,885
|
Total
liabilities
|
143,878
|
156,259
|
Shareholders'
equity:
|
|
|
|
Common
shares
|
195,994
|
195,994
|
|
Contributed
surplus
|
1,675
|
483
|
|
Accumulated other
comprehensive loss
|
(904)
|
–
|
|
Retained
earnings
|
2,208
|
4,707
|
Total shareholders'
equity
|
198,973
|
201,184
|
Total liabilities and
shareholders' equity
|
$
|
342,851
|
$
|
357,443
|
On behalf of the
Board of Directors:
|
|
|
|
"Erol Uzumeri"
|
Director
|
|
|
"Richard P.
Mavrinac"
|
Director
|
ROOTS
CORPORATION
|
|
|
Consolidated
Statement of Net Income
|
|
|
(In thousands of
Canadian dollars, except per share amounts)
|
|
|
|
|
|
For the 53 week
period ended February 3, 2018 and for the 52 week period ended
January 28, 2017
|
|
|
|
|
February 3,
2018
|
January 28,
2017
|
|
|
|
Sales
|
$
|
326,057
|
$
|
281,886
|
|
|
|
|
|
Cost of goods
sold
|
144,059
|
134,733
|
|
|
|
Gross
profit
|
181,998
|
147,153
|
|
|
|
Selling, general and
administrative
expenses
|
151,867
|
129,490
|
|
|
|
Income before
interest expense and income taxes expense
|
30,131
|
17,663
|
|
|
|
Interest
expense
|
5,728
|
6,112
|
|
|
|
Income before income
taxes
|
24,403
|
11,551
|
|
|
|
Income taxes
expense
|
6,902
|
3,366
|
|
|
|
Net
income
|
$
|
17,501
|
$
|
8,185
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.42
|
$
|
0.19
|
Diluted earnings per
share
|
$
|
0.41
|
$
|
0.19
|
|
|
|
|
|
ROOTS
CORPORATION
|
|
|
Consolidated
Statement of Comprehensive Income
|
|
|
(In thousands of
Canadian dollars)
|
|
|
|
|
|
For the 53 week
period ended February 3, 2018 and for the 52 week period ended
January 28, 2017
|
|
|
|
|
February 3,
2018
|
January
28,
2017
|
|
|
|
Net
income
|
$
|
17,501
|
$
|
8,185
|
|
|
|
|
|
Other comprehensive
income (loss), net of
taxes:
|
|
|
|
Items that may be
subsequently reclassified to profit or
loss:
|
|
|
|
|
Effective portion of
changes in fair value of cash flow hedges
|
(2,320)
|
–
|
|
|
Cost of hedging
excluded from cash flow hedges
|
52
|
–
|
|
|
Tax impact of cash
flow hedges
|
604
|
–
|
Total other
comprehensive income
(loss)
|
(1,664)
|
–
|
Total comprehensive
income
|
$
|
15,837
|
$
|
8,185
|
ROOTS
CORPORATION
|
Consolidated
Statement of Changes in Shareholders' Equity
|
(In thousands of
Canadian dollars)
|
|
For the 53 week
period ended February 3, 2018 and for the 52 week period ended
January 28, 2017
|
|
|
|
|
|
|
February 3,
2018
|
Share
capital
|
Contributed
surplus
|
Retained
earnings
|
Accumulated
other
comprehensive
loss
|
Total
|
|
|
|
|
|
|
Balance, January 29,
2017
|
$
|
195,994
|
$
|
483
|
$
|
4,707
|
$
|
–
|
$
|
201,184
|
Net
income
|
$
|
–
|
$
|
–
|
$
|
17,501
|
$
|
–
|
$
|
17,501
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) from
change in fair
|
|
|
|
|
|
|
value of cash flow
hedges,
|
|
|
|
|
|
|
net of income
taxes,
|
–
|
–
|
–
|
(1,664)
|
(1,664)
|
|
|
|
|
|
|
|
Transfer of realized
loss on cash
|
|
|
|
|
|
|
flow hedges to
inventories, net
|
|
|
|
|
|
|
of income
taxes
|
–
|
–
|
–
|
760
|
760
|
|
|
|
|
|
|
|
Distributions
declared
|
–
|
–
|
(20,000)
|
–
|
(20,000)
|
|
|
|
|
|
|
Share-based
compensation
|
–
|
1,192
|
–
|
–
|
1,192
|
|
|
|
|
|
|
Balance, February 3,
2018
|
$
|
195,994
|
$
|
1,675
|
$
|
2,208
|
$
|
(904)
|
$
|
198,973
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28,
2017
|
Share
capital
|
Contributed
surplus
|
Retained
earnings
(deficit)
|
Accumulated
other
comprehensive
loss
|
Total
|
|
|
|
|
|
|
Balance, January 31,
2016
|
$
|
195,744
|
$
|
9
|
$
|
(3,478)
|
$
|
–
|
$
|
192,275
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
–
|
$
|
–
|
$
|
8,185
|
$
|
–
|
$
|
8,185
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
shares
|
250
|
–
|
–
|
–
|
250
|
|
|
|
|
|
|
Share-based
compensation
|
–
|
474
|
–
|
–
|
474
|
|
|
|
|
|
|
Balance, January 28,
2017
|
$
|
195,994
|
$
|
483
|
$
|
4,707
|
$
|
–
|
$
|
201,184
|
ROOTS
CORPORATION
|
|
|
Consolidated
Statement of Cash Flows
|
|
|
(In thousands of
Canadian dollars)
|
|
|
|
|
|
For the 53 week
period ended February 3, 2018 and for the 52 week period ended
January 28, 2017
|
|
|
|
|
February 3,
2018
|
January 28,
2017
|
|
|
|
Cash provided by
(used in):
|
|
|
|
|
|
Operating
activities:
|
|
|
|
Net income
|
$
|
17,501
|
$
|
8,185
|
|
Items not involving
cash:
|
|
|
|
|
Depreciation and
amortization
|
10,886
|
9,803
|
|
|
Share-based
compensation expense
|
1,192
|
474
|
|
|
Impairment of fixed
assets
|
1,281
|
987
|
|
|
Deferred lease
costs
|
847
|
1,622
|
|
|
Amortization of lease
intangibles
|
907
|
1,321
|
|
|
Interest
expense
|
5,728
|
6,112
|
|
|
Income taxes
expense
|
6,902
|
3,366
|
|
|
Interest
paid
|
(5,105)
|
(5,528)
|
|
|
Taxes paid
|
(5,602)
|
(513)
|
|
Change in non-cash
operating working capital:
|
|
|
|
|
Accounts
receivable
|
(1,474)
|
564
|
|
|
Inventories
|
(2,725)
|
5,736
|
|
|
Prepaid
expenses
|
(4,007)
|
(81)
|
|
|
Accounts payable and
accrued
liabilities
|
2,514
|
(2,404)
|
|
|
Deferred
revenue
|
807
|
424
|
|
29,652
|
30,068
|
Financing
activities:
|
|
|
|
Long-term debt
financing costs
|
(999)
|
–
|
|
Repayment of
long-term debt
|
(19,654)
|
(4,163)
|
|
Finance lease
payments
|
(203)
|
–
|
|
Distributions
paid
|
(20,000)
|
–
|
|
Issuance of common
shares
|
–
|
250
|
|
(40,856)
|
(3,913)
|
Investing
activities:
|
|
|
|
Additions to fixed
assets
|
(14,058)
|
(12,813)
|
|
Tenant allowance
received
|
1,814
|
764
|
|
(12,244)
|
(12,049)
|
|
|
|
Increase in
cash
|
(23,448)
|
14,106
|
|
|
|
Cash, beginning of
period
|
25,257
|
11,151
|
|
|
|
Cash, end of
period
|
$
|
1,809
|
$
|
25,257
|
SOURCE Roots Corporation