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Root Q1 2025 Earnings Report
Roots reported a decrease in sales and net income for the first quarter of fiscal 2024, while improving free cash flow and reducing net debt.
Key Takeaways
Roots experienced a decline in total sales and net income in Q1 2024 compared to the previous year, primarily due to lower off-price sales and a disciplined inventory management approach. Despite this, the company saw an increase in DTC gross margin, improved free cash flow, and a significant reduction in net debt.
Total sales decreased by 9.7% to $37.5 million in Q1 2024 from $41.5 million in Q1 2023.
Net income (loss) was ($8.9) million, compared to ($8.0) million in Q1 2023.
Adjusted EBITDA amounted to ($8.0) million, versus ($5.8) million in Q1 2023.
Free cash flow improved to ($14.6) million from ($14.9) million in Q1 2023, and net debt reduced by 22.7% to $31.7 million.
Root
Root
Root Revenue by Segment
Revenue by Segment
Direct-to-Consumer Revenue
CapyFin.comPartners & Other Revenue
CapyFin.com Forward Guidance
The company maintained a disciplined approach to managing operating costs, working capital, and cash flow, which will enable necessary inventory and operating investments to drive growth in the second half of the year.
Positive Outlook
- Continued disciplined approach to inventory management.
- Positive momentum in many product lines, including solid growth in adult activewear.
- Strategic initiatives showing significant progress, including robust direct-to-consumer margin growth.
- Reduced debt and enhanced liquidity and free cash flow year-over-year.
- Launch of brand ambassador program and AI-driven replenishment system expected to enhance operations and customer experience.
Challenges Ahead
- Lower markdown sales created short-term downward pressure on revenue in Q1.
- Missed sales opportunities in certain core fleece collections due to lack of inventory from stronger than anticipated demand in prior quarter.
- Sales decline from temporary renovation closures of two larger corporate retail stores.
- Tightening of consumer discretionary spending in the current macroeconomic environment.
- Unfavorable foreign exchange impact on U.S. dollar purchases.
Revenue & Expenses
Visualization of income flow from segment revenue to net income