Roots Corp, the Canada-based premium outdoor-lifestyle brand, reported that same-store sales grew 6.5 percent in the first quarter ended May 2, its seventh consecutive positive quarter. The retailer’s operating loss slightly grew due to costs related to its move to outsource distribution center operations.

Distribution Center Transition Update
In January 2026, the company announced a new 10-year strategic partnership with Canadian third-party logistics provider, Metro Supply Chain. This partnership will result in Roots distribution moving from the current company-operated facility to Metro Supply Chain’s facility in Ontario. The transition is anticipated to be completed by the end of the second quarter. In Q1 2026, the company incurred C$1.8 million incremental costs related to this transition, which is primarily driven by the accelerated non-cash depreciation of existing fixed assets. To minimize the cash impacts of the upcoming transition, Roots has shifted additional products to final sale to reduce the transfer of past-season inventory.

Strategic Review Update
As announced in March 2026, the company and its Board of Directors continue to conduct its review of strategic alternatives, which may include, but are not limited to, a sale of the company. In Q1 2026, the company incurred C$0.6 million in incremental consulting and legal costs related to this process.

First Quarter Highlights
“Roots delivered first quarter sales growth of 6.5 percent and comparable sales growth of 3.2 percent, or 16.6 percent on a two-year stacked basis, alongside a 20.7 percent reduction in net debt year-over-year. Within the first quarter, we continued to diversify our product offering with both our lifestyle and activewear offerings increasing as a percentage of sales,” said Meghan Roach, president and chief executive officer of Roots.

“These results reflect the continued strength of the business as we advance two significant initiatives this year: the transition of our distribution center to Metro Supply Chain, and the review of strategic alternatives being led by our Board. The costs associated with these initiatives are reflected in our results. We remain focused on disciplined execution and building long-term value for all our shareholders,” continued Roach.

  • Sales were C$42.6 million ($30.4 mm), a 6.5 percent increase compared to C$40.0 million in Q1 2025
    • DTC sales were C$35.8 million; a 3.3 percent increase compared to C$34.6 million in Q1 2025
    • DTC comparable sales growth was 3.2 percent
  • Gross margin was 59.9 percent, as compared to 61.5 percent in Q1 2025
    • DTC gross margin of 61.3 percent, as compared to 62.9 percent in Q1 2025
  • Adjusted EBITDA amounted to (C$7.4) million, as compared to (C$7.1) million in Q1 2025
  • Net loss totaled (C$10.1) million, as compared to (C$7.9) million in Q1 2025
    • Adjusted Net Income (Loss), which excludes the impacts of the distribution center transition and strategic review, along with other non-recurring or unusual costs outside the normal course of operations, was (C$7.6) million, as compared to (C$7.4) million last year.
  • Net debt reduced 20.7 percent year-over-year to C$23.4 million.

“We are pleased with the continued sales momentum and deleveraging in the first quarter, and we continue to progress on our strategic review and the distribution center transition initiatives,” said Leon Wu, chief financial officer. “We are in the final stages of preparation for our distribution center move and remain on track to be fully operational at the third-party distribution center by the end of the second quarter.”

First Quarter Overview
Total sales were C$42.6 million in Q1 2026, representing an increase of 6.5 percent from C$40.0 million in the first quarter of fiscal 2025. DTC sales (corporate retail store and eCommerce sales) were C$35.8 million, a 3.3 percent increase from C$34.6 million in Q1 2025. The DTC sales growth was reflected in the strong comparable sales growth of 3.2 percent, delivering a two-year stacked comparable sales growth of 16.6 percent. This was achieved through positive traffic across both channels, supported by a thoughtfully curated product assortment.

P&O sales (wholesale Roots-branded products, licensing to select manufacturing partners, and the sale of certain custom products) amounted to C$6.8 million in Q1 2026, increasing 26.6 percent as compared to C$5.4 million in Q1 2025. The increase in P&O sales was driven by significant growth across domestic wholesale, custom products and our licensing channels. This reflects both the continued expansion of our customer base in these channels and stronger volumes with existing customers.

Gross profit was C$25.5 million in Q1 2026 as compared to C$24.6 million in Q1 2025, representing a year-over-year increase of 3.8 percent. Gross margin was 59.9 percent in Q1 2026 as compared to 61.5 percent in Q1 2025. DTC gross margin was 61.3 percent in Q1 2026 as compared to 62.9 percent in Q1 2025. The year-over-year change in the DTC gross margin was driven by a higher temporary mix of final sale price point offerings on select products ahead of our distribution center transition in the following quarter, and the unfavorable foreign exchange impact on U.S. dollar purchases. This was partially offset by continued momentum in improvements to our product costing.

SG&A expenses totaled C$37.3 million in Q1 2026 as compared to C$33.3 million in Q1 2025, representing a year-over-year increase of 12.0 percent. The increase in SG&A expenses was notably driven by C$1.8 million of incremental costs related to the distribution center transition, the majority of which was comprised of accelerated depreciation on existing assets, and C$0.6 million of incremental costs related to the strategic review. Excluding the aforementioned project costs, SG&A expenses increased 4.9 percent, driven by higher variable selling costs, store-related occupancy costs, and personnel costs.

Net loss totaled C$10.1 million, or 26 cents per share, in Q1 2026, as compared to a net loss of C$7.9 million, or 20 cents per share, in Q1 2025. As the first quarter historically represents approximately 14 percent of the full year sales, the impacts of the non-recurring projects had a more pronounced impact on net earnings. Adjusted Net Loss, which adjusts primarily for the costs of the DC transition and strategic review, was C$7.6 million, as compared to C$7.4 million in Q1 2025.

Adjusted EBITDA amounted to negative C$7.4 million in Q1 2026, as compared to negative C$7.1 million in Q1 2025.

Financial Position
Inventory was C$45.0 million at the end of Q1 2026, as compared to C$40.5 million at the end of Q1 2025, representing an increase of C$4.5 million or 11.1 percent. Of the increase, C$0.5 million was attributable to unfavorable foreign exchange on purchases, while the remaining C$4.0 million was primarily driven by higher in-transit inventory to support upcoming selling seasons, and higher P&O inventory to support the current momentum.

Free cash flow was negative C$19.1 million in Q1 2026, as compared to negative C$21.8 million in Q1 2025. The year-over-year improvement in free cash flow was driven by sales growth and ongoing management of working capital.

As at the end of Q1 2026, Roots had net debt of C$23.4 million, improving from C$29.6 million a year earlier. The company’s leverage ratio, defined as total net debt to trailing 12-month Adjusted EBITDA, was 1.0x as at the end of Q1 2026. As of the end of Q1 2026, Roots had C$32.6 million outstanding under its credit facilities and total liquidity of C$53.7 million, including net cash and borrowing capacity available under its revolving credit facility.

Normal Course Issuer Bid
Under its normal course issuer bid (NCIB) program, which commenced April 11, 2025, and terminated on April 10, 2026, the company repurchased 1,286,700 common shares for a total consideration of C$4.0 million. No common shares were repurchased under the NCIB during Q1 2026.

At the end of Q1, Roots operated 96 corporate retail stores and 11 short-term pop-up locations in Canada, two stores in the United States, and an e-commerce platform, roots.com. The company also has more than 100 partner-operated stores in Asia and operates a dedicated Roots-branded storefront on Tmall.com in China.

Image courtesy Roots