In This Article:
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Total Q4 Sales: $110.8 million, up 2.4% year over year.
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Direct-to-Consumer Sales: $101.2 million, up 3.6% year over year.
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Comparable Sales Growth: 7.5% in the Direct-to-Consumer segment.
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Gross Margin: Expanded by 270 basis points to 61.3%.
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Adjusted EBITDA: $25.3 million, up 9.1% from last year.
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Net Debt: $7.3 million, a 56.7% reduction from 2023.
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SG&A Expenses: $45.2 million, up 9.6% from last year.
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Net Income (Excluding Impairment): $15 million, up 2.9% year over year.
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Free Cash Flow: $39.4 million, up 9.3% from Q4 2023.
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Inventory: $41 million, up 13.4% from the end of 2023.
Release Date: April 09, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Roots Corp (RROTF) reported a 4.5% year-over-year sales growth in Q4 2024, excluding the 53rd week in 2023.
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Direct-to-Consumer segment saw a 7.5% increase in comparable sales, marking the highest growth since 2017.
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Gross margin expanded by 270 basis points, reflecting optimized product costs and reduced discounting.
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Net debt was reduced by 56.7% to $7.3 million, the lowest level ever for the company.
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The company successfully executed several marketing initiatives, including the 'Anything Roots, Everything Holiday' campaign, which improved brand engagement and social media impressions.
Negative Points
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Q4 2024 saw a net loss of $21.7 million due to a non-cash impairment on intangible assets.
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SG&A expenses increased by 9.6% in Q4 2024, driven by higher variable selling costs and marketing expenses.
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Partners & Other sales declined by 8.6% in Q4 2024, primarily due to a temporary reduction in wholesale orders in Taiwan.
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The company faces exposure to USD sourcing, which could impact margins due to foreign exchange volatility.
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Despite strong Q4 performance, the company remains cautious about external market dynamics and consumer confidence.
Q & A Highlights
Q: What consumer trends have you observed, and how have tariffs and consumer confidence impacted your business? A: Meghan Roach, President and CEO, noted that Roots has limited exposure to tariffs due to its small US market presence. The company is monitoring consumer confidence and FX impacts in Canada. Despite these concerns, Roots has seen low double-digit growth in Direct-to-Consumer comparable sales in the first quarter. The "Buy Canadian" movement has positively influenced consumer interest, with increased searches for Canadian products on their website.
Q: How is Roots managing exposure to USD sourcing, and what measures are in place to mitigate margin loss? A: Leon Wu, CFO, explained that Roots sources a significant amount of products in USD but also engages in local manufacturing in Canada. The company uses a hedging program to lock in USD costs 12 months in advance, providing predictability and allowing for effective cost management despite FX volatility.