Roots (ROOT) Q4 2025 earnings summary

Executive summary

• Q4 2024 sales reached CAD 110.8 million, up 2.4% year-over-year, or 4.5% excluding the extra week in 2023.

• Direct-to-consumer (DTC) comparable sales grew 7.5%, the highest since 2017.

• Gross margin expanded by 270 basis points, and adjusted EBITDA rose 9.1% to CAD 25.3 million.

• Net debt reduced by 56.7% to CAD 7.3 million, the lowest ever.

• Announced a share repurchase program for up to 1.3 million shares (10% of public float).

Financial highlights

• DTC sales in Q4 were CAD 101.2 million, up 3.6% (6% excluding the extra week); DTC gross margin was 62.4%, up 250bps.

• Partner and other (P&O) sales declined 8.6% to CAD 9.6 million, mainly due to lower Taiwan wholesale orders, partially offset by China e-commerce and licensing growth.

• Q4 gross profit was CAD 68 million, up 7.2%; gross margin was 61.3%, up 270 bps.

• Q4 net loss was CAD 21.7 million due to a non-cash impairment; excluding this, net income was CAD 15 million, up 2.9%.

• Q4 free cash flow was CAD 39.4 million, up 9.3%.

Outlook and guidance

• Early Q1 2025 shows continued momentum with low double-digit DTC comparable sales growth.

• Expect product margin gains in 2025, though offset by FX headwinds from a stronger U.S. dollar.

• Ongoing investments in marketing, digital innovation, and operational efficiency planned for 2025.

• Expectation of continued inventory optimization and focus on core product categories.

• Healthy inventory and reduced net debt position the company for sustained growth.