Roots says ‘pack and hold’ plan for unsold inventory will help avoid price drops
Canadian clothing retailer Roots Corp is entering its busiest sales period with high inventory levels and a “pack and hold” plan to clear backlogs.
The company’s chief executive Meghan Roach said on Tuesday the store’s best-selling season is the second half of the year, which typically accounts for about 70 percent of annual sales.
Roots is entering this peak period with “good inventory levels” – up 15% year-over-year – largely made up of its core clothing collections, she said on a call. conference.
Higher inventory levels at some US retailers have raised concerns about unsold goods leading to rampant discounting, eroding margins and margins.
Roots chief financial officer Mona Kennedy said: “We are aware of market concerns about high inventory levels at certain retailers, which could lead to price drops.
“At Roots, we believe our inventory is less prone to potential declines.”
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The brand’s apparel is primarily comprised of “limited, low-risk fashion products,” giving Roots the option to “pack and hold” excess inventory if needed, she said.
This means that any unsold merchandise at the end of the season can be put into storage until next year, when it will be placed back on store shelves.
It’s a strategy that usually won’t work for fashion retailers that drastically change their clothing collections each season, but an option for a retailer like Roots with a vintage look. than.
Kennedy says the company’s core collection accounts for about two-thirds of its inventory, making it an efficient method of packaging and keeping backlogs.
Her comments come as Roots reported a loss of $3.2 million in its most recent quarter compared with a loss of about $1.2 million a year ago, even as its total revenue grew by more than 20 percent. %.
The retailer said losses amounted to 8 cents per share in the quarter ended July 30, compared with a loss of 3 cents per share in the same quarter last year.
The company’s second-quarter revenue came in at $47.8 million, up from $38.9 million a year earlier.
The increase comes as the company’s retail and e-commerce sales grew to $38.5 million from $30.4 million a year ago, while partner and other partners reached $9.3 million, up from $8.5 million in the same quarter last year.
Roach said the company’s revenue growth in the second quarter was driven primarily by higher in-store traffic.
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