RYU Apparel Inc. provides shareholder update from CEO and RYU team

VANCOUVER, Feb. 26, 2020 /CNW/ - RYU Apparel Inc. RYU RYPPF ("RYU" or the "Company"), creators of urban athletic apparel, today released a letter from Marcello Leone, CEO, President and Chairman of the Board, to the Company's shareholders. The letter follows below.

Dear Shareholders,

First and foremost, I would like to thank you for your continued support and provide you with a corporate update.

2019 was the most challenging year since inception. However, as a young brand in business, there will always be such challenges.

This letter is aimed to address the current state of RYU, how we intend to overcome challenges and how we intend to position RYU for the future.

In general, the retail landscape is dramatically changing.  The industry is seeing more and more recognizable retailers moving away from traditional brick and mortar strategies to focus on e-commerce. Many retailers are also finding success with a "less is more" approach to physical retail locations.  We are witnessing this success in brands such as Supreme, Kith and A Bathing Ape, which are focused on quality versus quantity of stores.

RYU began with a more exclusive retail approach similar to the brands and strategy mentioned above.  Nevertheless, as an early stage public company, we faced considerable pressure from private wealth financiers, investment bankers and other financial stakeholders to scale and grow quickly.  We believe it is imperative to go back to our roots and continue to build our brand from a "less is more" strategy.

Let me share where we stand today and how we intend to come through this situation stronger and more relevant as a brand.  Our goal is always to create shareholder value.  Many iconic mature brands today have had to endure their own struggles in the early days to be where they are today.

During 2019 the RYU team worked hard to ensure our brand legacy.  In fact, what RYU was able to achieve in four short years is nothing less than amazing.  RYU has shown the ability to be a truly relevant brand with the correct partners, shareholders and stakeholders.  We are grateful for all employees, shareholders, customers and vendors that contributed towards the creation and advancement of RYU's unique brand and culture.

We believe that 2020 will see a major restructuring of RYU and its brand, particularly in Q1 and Q2.

Let me share where we are headed.

Since the beginning of 2019, the Company unwillingly found itself in a challenging financial situation.  We took significant steps to proactively maintain the most important operational efficiencies, with the sole idea of addressing the new status quo and getting the best out of the situation.  The second part of 2019 was entirely focused on re-pivoting the business, reducing expenses and adjusting our business strategy.

Although we saw 2019 perform better than 2018 in terms of revenue, we knew RYU required additional funding in order to get our business back on track for 2020.  This has proven more difficult than we had anticipated, mainly due to RYU's market price.  These are the following steps we have taken in order to address the funding shortages:

1. Manage Inventory - Due to the lack of capital, as in every retail business, the very first aspect of the business to be adversely affected, is the inventory.  While we had planned to expand our offerings, enter more categories and enlarge the volumes, we were compelled to adjust the course to accommodate the requirements of our new status.  We addressed a more static and slower moving inventory (with no new styles for many months) through marketing and promotions, but undoubtedly missed a number of opportunities.
   
   
2. Reduce Costs - The other concurrent effort was to reduce expenses, the first step of which was to significantly reduce the Head Office headcount. As difficult as the process was, the goals dramatically changed, the powerful team being built suddenly became overwhelming and not in line with the new developments.  RYU was forced to do what it has done best since the beginning and operate in a much stronger entrepreneurial way to avoid the risk of falling into a "corporate business" culture.
   
   
3. Close Mall Locations - As part of this new strategy, RYU took advantage of the approaching expiration of the first renewals of some of our mall locations.  In January 2020 RYU closed enclosed mall locations at Sherway Gardens in Toronto and Metrotown just outside of Vancouver.  Going forward, RYU intends to focus on our most impactful street front locations and to continuing to increase our presence in local communities.
   
   
4. Increase E-Commerce - RYU intends to increase its focus on e-commerce to maximize ROI, and simultaneously reach new communities and customers more quickly and efficiently. This follows a growing retail trend to limit the number of physical retail locations by being present only in iconic locations while shifting a larger portion of our investment into e-commerce and digital marketing.
   
   
5. Gain Significant Strategic Partner - We are excited to have the opportunity to potentially partner with a strategic consultant announced on January 29^th, 2020, who is ready to come on board and help RYU go to the next level.  Being in conversations with such a worldwide prominent name is the confirmation that the "RYU Brand is bigger than the Business" and that, despite the financial challenges RYU is facing, our customers and community appreciate what we have accomplished.
   
   
6. Close Financing – We anticipate the closing of the financing to happen on or before March 9^th, 2020. We further expect that this will result in the successful appointment of the strategic consultant as the deadline for execution of the contract was also extended to the same date. The proposed consolidation of RYU shares will follow the closing of the financing on a 10 for 1 basis.  This process has been pre-approved by the TSX Venture Exchange, to help reduce and strengthen the share structure of RYU.

We look forward to completing the financing announced on February 6^th, 2020, with the offer of units at $0.03 per unit, with a full warrant priced at $0.05, as we are all eager to execute the above-mentioned strategies.  We are working tirelessly to make the right decisions and we believe that the plan described will overcome the challenges we faced in the last fifteen months and can propel RYU forward to a more stable, and financially profitable, scenario for its future growth.

Respectfully,

On Behalf of the Board

RYU APPAREL INC.
"Marcello Leone"
Marcello Leone, CEO, President and Chairman of the Board
Tel: +1 604-235-2880

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release contains forward-looking information that involve various risks and uncertainties regarding future events. Such forward-looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance of the Company, such as statements that the store locations under construction have target openings during the summer of 2019. There are numerous risks and uncertainties that could cause actual results and the Company's plans and objectives to differ materially from those expressed in the forward-looking information, including the ability of the company to finance operations, the ability of the management team to execute on its business plan, risks in the apparel industry in general, and delays and risks associated with renovating and opening new store locations. Actual results and future events could differ materially from those anticipated in such information. These and all subsequent written and oral forward-looking information are based on estimates and opinions of management on the dates they are made and are expressly qualified in their entirety by this notice. Except as required by law, the Company does not intend to update these forward-looking statements.

SOURCE RYU Apparel Inc.

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