Canada's Roots' Q1 FY25 sales climb 6.7%, net loss narrows to $5.85 mn

The gross profit of the company climbed to Ca$24.6 million, with the overall gross margin expanding 250 basis points (bps) to 61.5 per cent. DTC gross margin rose to 62.9 per cent, reflecting better product costing and reduced discounting, partly offset by foreign exchange pressures and increased freight costs.

Wholesale and partner-operated (P&O) sales dropped to Ca$5.4 million, as international partners adjusted inventory levels. However, this decline was partially offset by robust growth in China’s Tmall e-commerce channel and other lines of business within the segment, Roots said in a press release.

The company reported a net loss of Ca$7.9 million (~$5.85 million) or Ca$0.20 per share, improving from a loss of Ca$8.9 million or Ca$0.22 per share in Q1 FY24. Excluding the impact of share-based compensation, the net loss was Ca$7.4 million. Adjusted EBITDA amounted to a loss of Ca$7.1 million, an improvement of 10.7 per cent YoY when excluding the compensation impact.

Selling, general and administrative (SG&A) expenses increased to Ca$33.3 million, up 4.1 per cent YoY, primarily due to higher marketing investments and a Ca$0.5 million unfavourable revaluation of share-based compensation instruments. Excluding this, the increase was 2.6 per cent.

The company’s inventory rose 14.5 per cent to Ca$40.5 million, reflecting restocking of core collections and increased in-transit goods. Free cash flow was negative at Ca$21.8 million, mainly due to inventory investments and occupancy cost timing.

Net debt stood at Ca$29.6 million, improving from Ca$31.7 million. As of May 3, 2025, the leverage ratio was 1.3x, with Ca$40.6 million drawn under credit facilities and total liquidity of Ca$65.9 million.

“Our first-quarter results, marking the third consecutive quarter of year-over-year growth in sales, gross margin, and adjusted EBITDA, speaks to the growing resonance of the Roots brand and the discipline with which we are executing our strategic priorities,” said Meghan Roach, president and chief executive officer (CEO) at Roots. “From elevated marketing to improved product availability and AI-operational enhancements, we drove meaningful gains across key performance metrics. As we begin 2025, I am proud of how our team continues to innovate and deliver value, while navigating consumer preferences and the evolving retail landscape.”

“Our first quarter results reflect our ongoing commitment to balance top-line growth with cost discipline to improve long-term profitability and operating leverage,” said Leon Wu, chief financial officer (CFO) at Roots. “With a strong balance sheet, we are well-positioned to opportunistically respond to shifting market conditions while sustaining our current momentum.”

ALCHEMPro News Desk (SG)