Toronto-based Roots reported sales grew 6.8 percent in the third quarter as same-store sales climbed 6.3 percent and wholesale revenues expanded 15.3 percent. Earnings were about flat in the period as increased marketing and hiring expenses offset the sales growth and higher gross margins.

All financial results for the quarter and nine months ending November 1 are reported in Canadian dollars unless otherwise stated.

“Roots delivered strong third-quarter results, with growth driven by consumers’ positive response to our products, enhanced marketing efforts, and improved in-store execution,” said Meghan Roach, president and chief executive officer of Roots Corporation. “Even in a dynamic retail environment, our heritage, quality, and focus on comfort continued to differentiate the brand and drive engagement across our omnichannel platform. We remain disciplined in execution and committed to strengthening the foundations of the brand to support long-term value creation.”

“While early in the fourth quarter, we continue to experience positive trends,” continued Roach.

Third Quarter Highlights

  • Sales were C$71.5 million, a 6.8 percent increase compared to C$66.9 million in Q3 2024
  • DTC sales were C$56.8 million, a 4.8 percent increase compared to C$54.2 million in Q3 2024
  • DTC comparable sales growth was 6.3 percent
  • Gross margin was 60.8 percent, up 80bps compared to 60.0 percent Q3 2024
  • DTC gross margin of 65.4 percent, up 140bps compared to 64.0 percent in Q3 2024
  • Net income totaled C$2.3 million, decreasing 4.5 percent from C$2.4 million in Q3 2024
  • Excluding the impacts from the revaluation of cash settled instruments under our share-based compensation plan, net income would have been C$2.4 million, improving 1.5 percent compared to C$2.3 million in Q3 2024
  • Adjusted EBITDA amounted to C$7.5 million, a 5.3 percent improvement from C$7.1 million in Q3 2024
  • Excluding the impacts from the revaluation of cash settled instruments under our share-based compensation plan,
  • Adjusted EBITDA would have been C$7.6 million, improving 7.3 percent compared to C$7.0 million in Q3 2024
  • Net debt reduced 5.9 percent year-over-year to C$44.1 million
  • The company repurchased 415,200 common shares for C$1.3 million under its normal course issue bid

 

“Our disciplined approach to investing in strategic growth continues to deliver results,” said Leon Wu, chief financial officer. “We have sustained positive sales momentum and maintained the underlying margins of those sales, supporting a stronger balance sheet with year-over-year reductions in net debt.”

Third Quarter Review
Total sales were C$71.5 million in Q3 2025, representing an increase of 6.8 percent from C$66.9 million in the third quarter of fiscal 2024 (“Q3 2024”). DTC sales (corporate retail store and eCommerce sales) were C$56.8 million, a 4.8 percent increase from C$54.2 million in Q3 2024. The DTC sales growth was reflected in the strong comparable sales growth of 6.3 percent, driven by enhancements to the omnichannel customer experience. This was further complemented by strong customer engagement with its elevated brand initiatives and 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$14.6 million in Q3 2025, increasing 15.3 percent compared to C$12.7 million in Q3 2024. The increase in P&O sales was driven by earlier orders by our wholesale operating partner in Taiwan for the upcoming holiday and spring selling seasons, a portion of which was fulfilled in the fourth quarter last year, as well as higher domestic wholesale sales of custom Roots-branded products.

Gross profit reached C$43.4 million in Q3 2025 compared to C$40.2 million in Q3 2024, representing a year-over-year increase of 8.1 percent. Gross margin was 60.8 percent in Q3 2025 compared to 60.0 percent in Q3 2024. DTC gross margin was 65.4 percent in Q3 2025, up 140 basis points from 64.0 percent in Q3 2024. The increase in DTC gross margin was driven by product margin expansion from improved costing and lower discounting. The unfavourable foreign exchange impact on U.S. dollar purchases were offset by improved freight costs.

SG&A expenses totaled C$38.2 million in Q3 2025 compared to C$34.5 million in Q3 2024, representing a year-over-year increase of 10.6 percent. The increase was primarily driven by C$3.7 million from higher variable costs from increased sales and strategic investments in marketing and personnel. SG&A expenses in Q3 2025 also reflect C$0.3M in incremental U.S. duties paid on eCommerce sales, as well as C$0.7M of higher share-based compensation expense and costs associated with changes in key personnel.

Net income totaled C$2.3 million, or C$0.06 per share, in Q3 2025, compared to a net income of C$2.4 million, or C$0.06 per share, in Q3 2024. Excluding the impacts from cash settled instruments under our share-based compensation plan, net income would have been C$2.4 million, increasing 1.5 percent compared to C$2.3 million in Q3 2024.

Adjusted EBITDA amounted to C$7.5 million in Q3 2025, improving from C$7.1 million in Q3 2024. Excluding the impacts from cash settled instruments under our share-based compensation plan, Adjusted EBITDA would have been C$7.6 million, increasing 7.3 percent compared to C$7.0 million in Q3 2024.

Year-To-Date Results
For the first nine months of fiscal 2025 (“YTD 2025”), total sales amounted to C$162.2 million, representing an increase of 6.6 percent compared to the first nine months of fiscal 2024 (“YTD 2024”), which amounted to C$152.1 million. DTC sales increased 8.6 percent to C$132.5 million, with comparable sales growth of 11.5 percent, while P&O sales decreased by 1.2 percent to C$29.7 million. Gross profit was C$98.8 million, or 60.9 percent of sales, up from C$89.2 million, or 58.6 percent of sales, last year.

Net loss totaled (C$10.0) million, or (C$0.26) per share, improving from (C$11.7) million, or (C$0.29) per share, last year. Excluding the impacts from cash settled instruments under our share-based compensation plan, net loss would have been (C$9.1) million, improving 24.6 percent compared to (C$12.1) million last year.

Adjusted EBITDA amounted to (C$1.7) million, improving from (C$4.0) million in the corresponding period last year. Excluding the impacts from cash settled instruments under our share-based compensation plan, Adjusted EBITDA would have been (C$0.8) million, improving 81.0 percent compared to (C$4.3) million last year.

Financial Position
Inventory was C$66.6 million at the end of Q3 2025, as compared to C$60.4 million at the end of Q3 2024, representing an increase of C$6.2 million or 10.3 percent. Of the increase, C$0.7 million was driven by the higher foreign exchange paid on our purchases. The remaining increase supports our improved inventory position ahead of the peak holiday selling periods, and higher in-transit inventory to support sales for the upcoming year.

Free cash flow was (C$4.6) million in Q3 2025, compared to (C$6.0) million in Q3 2024. The year-over-year improvement in free cash flow was driven by sales growth and ongoing management of working capital, partially offset by higher capital investments in the quarter.

As at the end of Q3 2025, Roots had net debt of C$44.1 million, improving from C$46.9 million a year earlier. The company’s leverage ratio, defined as total net debt to trailing 12-months Adjusted EBITDA, was 1.9x as at the end of Q3 2025. As at the end of Q3 2025, Roots had C$52.4 million outstanding under its credit facilities and total liquidity of C$34.5 million, including net cash and borrowing capacity available under its revolving credit facility.

Image courtesy Roots