Roots (ROOT) Q2 2025 earnings summary

Executive summary

• Q2 2024 sales were $47.7M (CAD 47.7 million), down 3.4% year-over-year, with DTC sales at $36.4M and nearly flat comparable sales at -0.2%.

• Adjusted EBITDA loss was $3.1M, stable year-over-year, and net loss improved slightly to $5.2M.

• Activewear and digital channels, especially in the US and China, delivered double-digit growth and are now core offerings.

• Back-to-school period showed growth, supported by strong product portfolio and effective branding and marketing initiatives.

• Inventory and balance sheet improved, with net debt down 20% year-over-year and inventory reduced by 21%.

Financial highlights

• Total sales declined to $47.7M from $49.4M year-over-year, mainly due to select store closures as part of fleet optimization.

• DTC gross margin was 61.7%, down 100bps, while product margin improved by 230bps due to better costing and lower discounting.

• Total gross profit was $26.9M, with gross margin up 90bps to 56.4%.

• SG&A expenses decreased 1.5% to $31.8M, driven by cost management and lower occupancy costs.

• Free cash flow outflow was $9.0M, compared to $7.2M outflow last year.

Outlook and guidance

• Healthy inventory position heading into the second half of the year, with replenished core fleece collections.

• Product margin expansion expected to continue through fiscal 2024, though partially offset by FX and freight cost pressures.

• Anticipates continued growth in U.S. and China digital channels and further benefits from AI-driven inventory allocation.

• Priority on maintaining brand visibility and momentum into the holiday season.

• Management notes improving sales trends and product margins, with continued cost discipline and a strengthened balance sheet.