Roots, a premium outdoor-lifestyle brand, has released its financial results for the fourth quarter and Fiscal Year 2024.
The company saw sales growth but also a loss in both Q4 and Fiscal 2024 due to a non-cash impairment charge on intangible assets and the associated deferred tax impacts.
“In the fourth quarter of Fiscal 2024, we delivered a 7.5% increase in DTC comparable sales, a 270bps rise in gross margin, and Adjusted EBITDA growth of 9.1% year-over-year. Our strong performance reflects the impressive execution by the team across our strategic initiatives. Customers responded well to our holiday products, our enhanced brand engagement, and our improved omnichannel customer experience,” said Roots CEO Meghan Roach in a statement.
“Our momentum has continued into the first quarter of Fiscal 2025. As we look forward, we remain focused on delivering quality, innovation, and value to our customers while positioning Roots for sustained growth in the quarters ahead.”
Fourth Quarter Highlights:
- Sales were $110.8 million, a 2.4% increase compared to $108.2 million in Q4 2023. Excluding the $2.2 million of sales generated during the additional fiscal week in Q4 2023, sales increased 4.5%
- DTC sales were $101.2 million, a 3.6% increase compared to $97.8 million in Q4 2023, or an increase of 6.0% excluding the additional fiscal week in Q4 2023
- DTC comparable sales growth was 7.5%
- Gross margin was 61.3%, up 270bps compared to 58.6% in Q4 2023
- DTC gross margin of 62.4%, up 250bps compared to 59.9% in Q4 2023
- Net income (loss) totaled ($21.7) million, compared to $14.6 million in Q4 2023
- Excluding the year-end non-cash impairment charge on intangible assets, net income would have been $15.0 million, up 2.9% compared to $14.6 million in Q4 2023
- Adjusted Net Income was $16.0 million, up 9.6% compared to $14.6 million in Q4 2023
- Adjusted EBITDA amounted to $25.3 million, a 9.1% increase from $23.2 million in Q4 2023
- Free cash flow generation increased 9.3% to $39.4 million, resulting in a net debt reduction of 56.7% year-over-year to $7.3 million
Fiscal 2024 Highlights:
- Sales were $262.9 million, a 0.1% increase compared to $262.7 million in F2023. Excluding the $2.2 million of sales generated during the additional fiscal week in F2023, sales increased 0.9%
- DTC sales were $223.3 million, a 0.4% increase compared to $222.5 million in F2023, or an increase of 1.4% excluding the additional fiscal week in F2023
- DTC comparable sales growth was 3.3%
- Gross margin was 59.8%, up 180bps compared to 58.0% in F2023
- DTC gross margin of 62.6%, up 150bps compared to 61.1% in F2023
- Net income (loss) totaled ($33.4) million, compared to $1.8 million in F2023
- Excluding the year-end non-cash impairment charge on intangible assets, net income would have totaled $3.3 million, up 79.7% compared to $1.8 million in F2023
- Adjusted Net Income was $6.0 million, up 41.1% compared to $4.3 million in F2023
- Adjusted EBITDA amounted to $21.3 million, a 7.3% increase from $19.9 million in F2023
Net loss totaled $33.4 million as compared to $1.8 million in F2023, and net loss per share was $0.83 as compared to $0.05 per share in F2023, it reported.
“This decline was entirely driven by a non-cash impairment charge on intangible assets and the associated deferred tax impacts. Based on conservative perspectives of the global economy due to the current market dynamics, the impairment of intangible assets accounting adjustment is calculated through our comparison of the Company’s estimated recoverable value against its carrying value. The Company does not expect the impairment charge to have any impact on its future operations and long-term growth potential, nor affect its liquidity, cash flows, or compliance with any financial and operating covenants,” said the company in a news release.
In an interview with Retail Insider, Roach said she is “really happy” with the financial results.
“If you look at the business, we saw growth across all of our key metrics. We saw comp sales up 7.5%, total sales were up, our gross margins were up about 270 basis points which is fantastic. We saw growth in EDITDA which is amazing . . . The non-cash impairment charge has no impact on the business longer-term. It’s really just like an accounting adjustment. So taking that out we saw growth overall on net income also and we saw reductions in net debt and we saw great growth pre cash flow. It was a really fantastic quarter and if you look at that trending into Q1, we’ve already seen low double-digit comp sales in Q1. I’m pretty happy with the results,” said Roach.
“It just speaks to the strength of the brand and the fact that throughout the year we’ve really been changing around the momentum. Q3 was solid, Q4 was solid and then we’re seeing trending into Q1 solid.”
Roach said the company hopes to reap the benefits of the current Buy Canadian movement.
“What I’ve seen so far is people are searching more for Canadian products and as a Canadian brand I would hope that people are looking at Roots and saying ‘I want to support the Canadian economy, this is a brand that has stores across the country, has manufacturing here, has a distribution centre here, head office here, a Canadian public company,” explained Roach.
“I would hope that people are looking to brands like Roots and going behind it. It’s hard for us to tell so far. We’re seeing the uplift in the first quarter just because we saw so much good momentum coming out of Q4 and into the first quarter even before we saw what was going on with the tariffs. So I’m hoping we will benefit from that but at this point it’s a little too early to tell.”
She said the retailer has very little exposure to the US and from that perspective it hasn’t been significantly affected.
“We’re not directly impacted by the tariffs. What we’re looking at is how does it affect the Canadian consumer spending and also how does it affect the US dollar because we buy a lot of goods in US dollars. We had to look 12 months out. So we’re looking at how that might affect into 2026 but fundamentally for us the tariffs don’t have a direct impact right now, very little.”
The retailer opened a new store in Calgary at CF Chinook Centre in Q4. The brand’s Robson store in Vancouver will open in the summer.
“We have a lot of renovations planned. We’re looking more at some optimizing the existing footprint and then looking at renovating behind some of these key locations. We’re renovating Tremblant, we’re renovating Vaughan Mills. We have a number of smaller store refreshes happening. Right now a lot of our focus is more on optimizing and renovations and less on new store opening with the exception of pop-ups. So we’re definitely looking at pop-ups as we think about the second half of this year, but other than that no substantial store openings planned,” added Roach.
She said the retailer is about eight weeks into its first quarter. She expects volatility to continue in the overall retail industry with the closure of the Bay.
“We feel really good about what we’re doing. We’ve put more money behind branding and marketing. We’ve invested in some really solid products that are coming out. The business overall has seen some really solid momentum. We’re a really great Canadian brand so I’m really hopeful that people look at that and think about this is the time to be buying into brands like Roots who represent the Canadian economy and have a lot of stakes in the ground here. From that perspective, I’m favourable but obviously we can’t really predict what’s going to happen with the tariffs and the counter impact of the Canadian economy as a result of that.
“So obviously we have an optimistic outlook but also a realistic outlook in terms of what could happen over the next six to 12 months.”
“We had another year of strong cash flow generation and achieved meaningful reductions to our net debt,” said Leon Wu, Chief Financial Officer of Roots Corporation. “Combined with a healthy inventory composition, we are well set-up to build on our momentum going into 2025.”
Established in 1973, Roots is a global lifestyle brand. Starting from a small cabin in northern Canada, Roots has become a global brand with over 100 corporate retail stores in Canada, two stores in the United States, and an eCommerce platform, roots.com. It has more than 100 partner-operated stores in Asia, and it also operates a dedicated Roots-branded storefront on Tmall.com in China. Roots designs, markets, and sells a broad selection of products in different departments, including women’s men’s, children’s, and gender-free apparel, leather goods, footwear, and accessories.
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