Roots eyeing store expansion in U.S. two years after retreat

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Roots Corp. ROOT-T is eyeing future store expansion in the U.S., two years after the company closed seven locations there and its U.S. subsidiary filed for bankruptcy.

Roots abandoned its U.S. store expansion strategy in the spring of 2020, as locations there had continued to underperform and pressures on the business mounted owing to the COVID-19 pandemic. The Toronto-based retailer maintained its e-commerce presence in the U.S., and kept two long-standing stores in Michigan and Utah open.

In recent months, Roots has been focusing more on growth in the U.S. and China, hiring dedicated public-relations agencies in both markets, opening a store on Chinese e-commerce platform Tmall, and working to build brand awareness with customers. In the U.S., Roots has been engaged in partnerships with influencers such as Canadian-born singer the Weeknd, to help market the brand. In February, the artist wore a custom Roots varsity jacket to celebrate his birthday in Las Vegas.

“We have over the last six months-plus been re-establishing our presence outside of Canada,” Roots chief executive officer Meghan Roach said on a conference call Thursday to discuss the company’s financial results.

The retailer is hoping to continue expanding its digital sales and to launch pop-up stores before eventually opening new permanent locations in the U.S., she said.

“We haven’t given specific direction on how we are going to grow in that marketplace from a store expansion perspective, but needless to say, in the medium term, we are focused on continuing to expand that marketplace,” Ms. Roach said.

Roots has 107 stores in Canada and more than 100 partner-operated stores in Taiwan, as well as locations in China and Hong Kong.

The past year has seen continued sales growth for Roots, a far cry from the state of the business just before the pandemic hit. By early 2020, the company had been losing money and multiple executives had departed, including CEO Jim Gabel that January. Ms. Roach came to Roots from its largest shareholder, Searchlight Capital Partners, shortly afterward.

Roots grew its profit significantly in the fourth quarter, reporting net income of $18.1-million or 43 cents a share, compared to $12.3-million or 29 cents a share in the same period a year earlier.

The company reported $121.3-million in sales in the 13 weeks ended Jan. 29, up 22 per cent compared to the same period the prior year.

Part of the company’s recent sales growth has been driven by a strategy to reduce the number of discounts it offers on products. Roots reduced its promotional days from 213 in fiscal 2019, to 140 in fiscal 2020 and just 23 days in the past fiscal year.

In the coming year, Roots expects to increase prices on some of its products. Many retailers have been doing the same, as costs for shipping, wages and raw materials have gone up.

For the full year ended Jan. 29, Roots reported net income of $22.8-million or 54 cents a share, compared to $13.1-million or 31 cents a share in the prior year. The company’s sales grew by 13.9 per cent to $273.8-million.

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