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Introduction & Market Context
Roots Corp (TSX:ROOT) presented its Q2 2025 financial results on September 10, 2025, showcasing continued momentum with its fourth consecutive quarter of growth across key metrics. The iconic Canadian apparel retailer reported a 6.3% increase in total sales to $50.8 million, building on the positive trajectory seen in Q1 2025 when sales grew by 6.7%.
The company’s stock closed at $3.17 on September 9, 2025, and has shown resilience with a 52-week range of $1.80 to $3.34, according to market data. Following the Q1 results earlier this year, Roots experienced a 4.23% stock price increase, reflecting growing investor confidence in the company’s strategic direction.
Quarterly Performance Highlights
Roots delivered impressive Direct-to-Consumer (DTC) performance in Q2 2025, with sales reaching $41.0 million, a 12.7% increase compared to $36.4 million in the same period last year. Most notably, the company achieved DTC comparable sales growth of 17.8%, marking the highest comparable quarter since its IPO in 2017.
As shown in the following chart of quarterly sales performance:
Total sales reached $50.8 million, up 6.3% from $47.7 million in Q2 2024. However, Partners & Other (P&O) sales declined by 14.2% to $9.7 million, primarily due to reduced wholesale sales to international operating partners. Despite this decline, the P&O segment delivered a 10.1% increase in gross profit, demonstrating improved efficiency.
Gross margin showed significant improvement across the business, as illustrated in this margin analysis:
Total gross margin increased by 430 basis points to 60.7%, while DTC gross margin improved by 150 basis points to 63.2%. This expansion was primarily driven by a 170 basis point increase from improved DTC product costing and lower discounting, partially offset by unfavorable foreign exchange impacts on U.S. dollar purchases.
Detailed Financial Analysis
Despite the seasonal nature of Roots’ business, which typically results in small operating losses during the first half of the year, the company demonstrated meaningful progress in its profitability metrics.
The following chart details the company’s adjusted EBITDA and net loss performance:
Adjusted EBITDA loss narrowed to $2.1 million (4.2% of sales) from $3.1 million (6.6% of sales) in Q2 2024, representing a 32% improvement. When excluding the impacts of deferred share unit (DSU) revaluation expenses, Adjusted EBITDA improved by an even more substantial 47.9%.
Net loss decreased to $4.4 million from $5.2 million in the prior year, while adjusted net loss per share improved to $0.09 from $0.11. The company noted that excluding DSU revaluation expense impacts, net loss would have improved by 26.8%.
Roots maintained a strong balance sheet position, as shown in the following financial highlights:
Net debt decreased by 6.5% to $38.1 million compared to $40.8 million in Q2 2024. The company reported total liquidity of $41.3 million and a leverage ratio of approximately 1.6x. Inventory levels increased by 13.5% year-over-year to $49.9 million, positioning the company well for the upcoming fall and holiday seasons. During the quarter, Roots repurchased 492,000 common shares for $1.5 million under its Normal Course Issuer Bid (NCIB) program.
Strategic Initiatives
Roots continued to execute on its multi-pronged omnichannel strategy during Q2, with a focus on creating compelling products, offering seamless customer experiences, and implementing impactful branding initiatives.
The company’s product strategy showed strong results across multiple categories, as illustrated here:
Lifestyle, active, and sweats categories all delivered growth during the quarter, underscoring the success of strategic diversification efforts. A key product launch was the new Roam collection within the active category, featuring proprietary BreatheFit technology that offers moisture-wicking, odor-resistant, and stain and water repellent properties.
Brand engagement was enhanced through high-visibility collaborations with Molson Canadian and Canada Dry, which drove national awareness, summer demand, and consumer engagement. The Molson Canadian × Roots co-branded drop featured Salt & Pepper fleece can holders launched around Canada Day, while the Canada Dry × Roots vintage-inspired capsule was supported by a Toronto pop-up event.
The company also made progress on improving its store footprint, opening a new Vancouver flagship store in July and renovating its Mont-Tremblant location with locally inspired design and modern digital elements. These initiatives align with Roots’ commitment to enhancing its omnichannel capabilities and physical retail experience.
Forward-Looking Statements
Looking ahead, Roots expressed optimism about its continued momentum, noting that the first five weeks of Q3 2025, which included the back-to-school period, showed positive trends. This aligns with the outlook provided in Q1, where the company had indicated continued momentum in the early weeks of Q2.
The company highlighted that its balance sheet remains strong with declining net debt and ample liquidity to support future growth initiatives. Inventory is described as healthy, with improved availability in key collections to support sales for the upcoming peak season.
Roots continues to leverage technological advancements, integrating AI technologies to streamline workflows and reduce time to market. The automated replenishment system is enabling better alignment of product offerings with customer demand, supporting the company’s operational efficiency goals.
As Roots moves into the second half of fiscal 2025, which historically accounts for approximately 70% of annual sales and typically generates stronger earnings, the company appears well-positioned to build on its four consecutive quarters of growth in sales, gross margin, and adjusted EBITDA.
Full presentation:
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