TORONTO — Clothing retailer Roots Corp. plans to close permanently nearly all of its U.S. stores as they continue to underperform in a retail environment exacerbated by the COVID-19 pandemic.
The company announced it will close seven of nine stores south of the border. That includes locations in Boston, Washington and Chicago, as well as a pop-up location in the Woodbury Common, N.Y.
The decision comes as these stores continue to generate losses for the Toronto-based retailer. The company's U.S. stores that were opened within the last three years drove a $6 million adjusted EBITDA loss in the company's most recent financial year.
The closures also come as a result of an increasingly challenging discretionary retail environment due to the novel coronavirus, said Meghan Roach, interim chief executive officer, during a conference call with analysts Wednesday after the company released its fourth-quarter and full-year financial results.
In order to close the stores quickly and cost effectively, it filed for a Chapter 7 bankruptcy for its American subsidiary, Roots USA Corp., she said.
"This step should not be perceived as: we're exiting the U.S. market," she said.
The company's two long-standing American stores in Michigan and Utah will remain open. These are an important part of the company's heritage and have well-established customer bases, she said.
In addition to the two locations, Roots believes online sales in the near term is the best approach to the American market.
The news came as the company announced other cost-savings measures to help it navigate the impact of the coronavirus.
"We have acted quickly to reduce expenses and capital expenditures to COVID-19," said chief financial officer Mona Kennedy.
The company's focus for this fiscal year was generating cash flow so it had already taken significant steps, she said, but it has made "substantial further reductions."
The board of directors is forgoing compensation for three months and senior leadership has temporarily reduced their salaries by 25 per cent, she said. All head office staff salaries have been reduced as well.
Roots reduced forward inventory expenses where possible, minimized discretionary spending and stopped capital investments, she said. It continues to work with partners, suppliers and others to identify additional areas for cost savings.
Kennedy declined to provide a dollar figure for cost savings so far when asked by an analyst during the call.
In mid-March, the company temporarily closed its retail stores in North America and its leather factory in Canada. At the time, it temporarily laid off store and factory employees. It is now reviewing potential opportunities to bring those employees back using various government relief programs.
The retailer posted a loss of $44.6 million or $1.06 per share for the quarter ended Feb. 1, compared with a profit of $18.3 million or 43 cents per share in the same quarter a year earlier.
Sales totalled $127.5 million, down from $130.8 million in the same quarter a year ago.
On an adjusted basis, Roots earned $13.3 million or 31 cents per share, compared with $22.3 million or 53 per share a year earlier.
Roots shares surged 18.7 per cent, gaining 17 cents at $1.08 in afternoon trading on the Toronto Stock Exchange.
This report by The Canadian Press was first published April 29, 2020.
Companies in this story: (TSX:ROOT)
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