Canadian apparel and lifestyle brand Roots Corporation has reported a strong second quarter (Q2) for fiscal 2025 (FY25) ended August 2, with total sales rising 6.3 per cent year-over-year (YoY) to $50.8 million. The direct-to-consumer (DTC) sales, comprising retail stores and e-commerce, climbed 12.7 per cent YoY to $41 million, supported by a robust 17.8 per cent comparable sales growth across both channels.
The results reflect strong customer response towards the company’s ongoing brand investments and curated product offerings, as well as improvements to enhance the omnichannel customer experience, Roots Corporation said in a press release.
Partners & Other (P&O) sales, which include wholesale, licensing, and custom products, fell 14.2 per cent to $9.7 million, mainly due to reduced wholesale orders from Roots’ international partner as it optimised inventory levels.
The gross profit of the company increased 14.5 per cent YoY to $30.8 million, while gross margin expanded 430 bps to 60.7 per cent, aided by a higher-margin sales mix. DTC gross margin rose to 63.2 per cent, up 150 basis points (bps) from last year, benefitting from improved product costing and lower discounting, partially offset by foreign exchange headwinds.
The selling, general and administrative (SG&A) expenses rose 9.1 per cent to $34.7 million, reflecting higher variable costs from stronger sales, increased marketing spend, and personnel expenses. Adjusted for share-based compensation revaluation, SG&A expenses were up 7 per cent.
Roots reported a net loss of $4.4 million, or $0.11 per share, improving from a loss of $5.2 million, or $0.13 per share, in the prior-year quarter. Excluding the impact of cash-settled share-based compensation, the net loss narrowed to $4 million, an improvement of nearly 27 per cent YoY.
The adjusted EBITDA improved 32 per cent to negative $2.1 million, from a loss of $3.1 million in Q2 FY24. On an adjusted basis excluding share-based impacts, EBITDA stood at a loss of $1.8 million, a 47.9 per cent improvement from last fiscal.
Free cash flow improved to $6.9 million, up 22.9 per cent from $9 million in the same quarter of FY24. Net debt was reduced 6.5 per cent YoY to $38.1 million, reflecting stronger financial discipline.
The company also repurchased 491,500 shares for $1.5 million under its normal course issuer bid during the quarter.
Inventory at the end of Q2 stood at $49.9 million, reflecting a healthy alignment with growth in direct-to-consumer sales. The increase ensures stronger stock positions for year-round core collections and supports upcoming seasonal launches for autumn and the holiday period.
Net debt closed the quarter at $38.1 million, with a leverage ratio of 1.6x on trailing twelve-month Adjusted EBITDA. The company also reported $40.9 million outstanding under its credit facilities and total liquidity of $41.3 million, including borrowing capacity under its revolving facility.
“Roots delivered a strong second quarter with comparable sales up 17.8 percent, reflecting the strength of our brand and the resonance of our products with consumers,” said Meghan Roach, president and chief executive officer (CEO) of Roots Corporation. “This momentum was supported by innovative collaborations, a compelling product assortment, and our focus on creating meaningful customer experiences. As we continue to strengthen our brand and deepen engagement with our loyal community, we are focused on creating long-term value.”
For the first half (H1) of fiscal 2025 (FY25), sales grew 6.5 per cent to $90.7 million, with DTC sales went up 11.6 per cent at $75.7 million and comparable sales growth of 16.1 per cent. P&O sales declined 13.2 per cent to $15.1 million.
The gross profit in H1 rose to $55.4 million, or 61 per cent of sales. The net loss for H1 improved to $12.3 million from $14.1 million in Q2 FY24.
Roots expects momentum to carry into the second half (H2) of fiscal 2025, driven by strong brand positioning, improved customer engagement, and ongoing operational efficiency. The company will continue to balance investments in growth with strategies to reduce debt and enhance long-term shareholder value.
