Good morning. Roots Corp. announced it has launched a “strategic review,” which could include a sale. The future of the company, founded in the seventies as a niche shoemaker and built over the years into a fixture of Canadian retail, is in focus today.
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In the news
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Inside a Roots store yesterday in Toronto's Eaton Centre. The company has grown from a niche shoemaker in 1973 to more than 100 stores across Canada.Sammy Kogan/The Globe and Mail
In focus
Roots on the ground
In 1973, the two founders of Roots launched their first product: A “negative heel” shoe, designed to keep the hind-foot lower than the toe. The footwear, which provided “a base to plant you firmly in touch with Mother Earth,” is the inspiration for the retailer’s name.
The product sold out quickly, and over the years one store in Toronto grew into more than 100 across Canada, two in the United States and another 100 partner-operated stores across Asia.
The shoe was, and still is, marketed by the company as footwear that improves posture by mimicking the feel of walking on sand – a sensation that may be familiar to a business whose path through Canada’s retail landscape has been uneven but enduring.
The company’s announcement this week that it would examine a “range of options” comes nearly a decade after it went public on the TSX with sales expectations that later proved too ambitious. I spoke with retailing reporter Susan Krashinsky Robertson on what the review says about the company and the challenges it faces today.
First, perhaps the most basic but curious question: Why now?
Roots’ share price has been fairly stagnant over the past year, and while the company’s sales have been improving, profitability has declined. This will be an opportunity to see if there are buyers in the market for this 53-year-old Canadian brand, or if other major changes are needed to push Roots in the right direction.
I was surprised to learn Roots started out with shoes. How has it grown from such a niche product to an iconic Canadian brand?
Decades before “cottagecore” became an online phenomenon, that’s essentially the concept on which Roots built its identity. Fleecy sweatpants and hoodies, “cabin socks” and the ubiquitous beaver logo all helped to cement the brand’s cozy Canadiana image.
It all goes back to – desperately trying to avoid a pun here – the origins of the company. Co-founders Michael Budman and Don Green first met at Camp Tamakwa in Ontario’s Algonquin Park in the 1960s. And Roots burnished that identity over the years as the former official designer of the Olympic uniforms for Team Canada. Remember when our athletes wore red flat caps and varsity jackets?
Roots has also become known for other leather goods such as bags and jackets, but the loungewear is its bread and butter.
Does a strategic review necessarily signify confidence or concern?
Plenty of companies will conduct regular strategic reviews of their businesses, but this kind of announcement – signalling that a number of options could be on the table, including a sale – is relatively unusual.
But we know that Roots has underperformed expectations it set out in its initial public offering in 2017. At that time, the company estimated annual sales would grow to a range of $410-million to $450-million by 2019. But it later walked back that guidance, and in the fiscal year ended Feb. 1, 2025, total revenue was $262.7-million. In a research note on Tuesday, TD Cowen analyst Brian Morrison wrote that the company consistently has strong free cash flow, but that it has a “limited growth profile.”
The negative heel shoe from Roots, circa 2017. I have to say, as someone who has the posture of a question mark, I'm curious.Louie Palu/The Globe and Mail
Roots’ fortunes rest predominantly on its Canadian stores. How does an uncertain economic outlook weigh on the company, and might that factor into its perceived value?
When shoppers are feeling the pinch, they may be slightly less inclined to spend $98 on a sweatshirt.
And like many retailers, Roots is challenged by the fact that all this economic uncertainty is leading Canadian consumers to look for deals. Since she took over the company in 2020, CEO Meghan Roach has been doing a lot of work to clean up its operations – including cutting back on the number of products Roots sells at a discount – but promotional pressure is real right now as Canadian retailers fight for customers.
What happens next?
First, it’s important to note that a sale may not happen. It’s just one of the possibilities that Roots could be considering during this review, but the company’s announcement stressed that there is no certainty the process will result in a transaction.
The company might evaluate its store footprint and whether the stores are performing as well as they could be. Industry-watchers I spoke with noted that Roots could do with refreshing the look of its brick-and-mortar stores.
It’s clear that Roots has a strong heritage, but just how much can it capitalize on that to draw in new shoppers? These are all questions the board – and any potential buyers – may be considering.
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Pushing up
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More files we’re following today
By the numbers: U.S. measures of global supply chains, trade prices and productivity will offer a few ways to look at how the White House’s foreign policies are playing out domestically.
At the bell: Earnings today include Aecon Group Inc., Canadian Natural Resources Ltd., Canfor Corp., Maple Leaf Foods Inc., Spin Master Corp. and Methanex Corp.
Morning update
Global markets were muted as an expanding Middle East conflict weighed on market sentiment.
Wall Street futures were mixed, while TSX futures edged down even as commodity prices climbed.
Overseas, the pan-European STOXX 600 was up 0.32 per cent in morning trading. Britain’s FTSE 100 rose 0.26 per cent, Germany’s DAX gained 0.18 per cent and France’s CAC 40 advanced 0.26 per cent.
In Asia, Japan’s Nikkei closed 1.9 per cent higher, while Hong Kong’s Hang Seng advanced 0.28 per cent.
The Canadian dollar traded at 73.34 U.S. cents.