TORONTO, April 7, 2022 /CNW/ - Roots ("Roots," "Roots
Canada" or the "Company") (TSX: ROOT), a premium outdoor-lifestyle
brand, today announced its financial results for its fiscal year
and fourth quarter ended January 29,
2022 ("F2021"and "Q4 2021", respectively). All financial
results are reported in Canadian dollars unless otherwise stated.
Certain metrics, including those expressed on an adjusted basis,
are non-IFRS measures. See "Non-IFRS Measures and Industry Metrics"
below. The Company has presented certain metrics in this press
release as compared to its results during the fourth quarter and
fiscal year ended January 30, 2021
("Q4 2020" and F2020", respectively) and to its fourth quarter and
fiscal year ended February 1, 2020
("Q4 2019" and "F2019", respectively), its last full year
prior to the onset of the pandemic.
"Our fourth quarter and full year results reflect the enduring
strength of the Roots brand and the actions we have taken to
establish a strong operating platform from which to execute our
growth strategy. With a rich heritage, a compelling product
offering, an elevated omnichannel experience, and a continuation of
our fiscal and operational discipline, we continue to see an
opportunity for Roots to expand its global customer base. I want to
thank the entire team for delivering these results and continuing
to remain passionate advocates for the brand," said Meghan Roach, President and Chief Executive
Officer.
Fiscal 2021 Business Highlights
- Provided an engaging omnichannel experience by leveraging the
Company's unified inventory across retail and eCommerce to more
seamlessly meet customer needs.
- Elevated the brand with the launch of sought-after collections
that capitalize on Roots authentic heritage and align with
consumers' desire for sustainability and inclusivity.
- Demonstrated flexibility and agility by successfully navigating
global supply chain challenges.
- Improved profitability through continued reduction in
promotions and operational efficiencies gained across the
business.
- Strengthened the balance sheet by reducing net debt by more
than $35 million and repurchasing
approximately 205,000 common shares ("Shares") under the Company's
Normal Course Issuer Bid ("NCIB") established in mid-December.
- Extended commitment to Environmental, Social, Governance
("ESG") efforts through:
-
- Expanded product-related initiatives focused on sustainability
and special product collaborations and collections and moving
towards preferred fibres and materials.
- Joined textile and leather industry organizations that promote
environmental best practices.
- Continued focus on internal and external Diversity, Equity,
Equality, and Inclusion ("DEEI") initiatives.
- Supported team members, customers, and surrounding communities
through "Roots Cares" initiative by donating a portion of customer
sales to local non-profit organizations as well as in-kind
donations.
Fiscal 2021 Financial Highlights
- Total sales of $273.8 million, up 13.9% from $240.5
million in F2020.
-
- Direct-to-Consumer ("DTC") sales of $235.8 million, up
13.3% from $208.2 million in F2020.
- Gross margin of 59.5%, as compared to 58.1% in F2020 and 53.4%
in F2019.
-
- DTC gross margin of 62.6%, up 150 basis points ("bps") from
61.1% in F2020, and up 640 bps from 56.2% in F2019.
- Selling, general and administrative expenses of $122.9
million, up from $114.8 million in F2020.
- Adjusted EBITDA of $50.1 million, a 29.4% increase
from $38.7 million in F2020, and a 92.3% increase from
$26.1 million in F2019. See
"Non-IFRS Measures and Industry Metrics".
- Net income of $22.8 million
($0.54 per share), up from
$13.1 million ($0.31 per share) in F2020.
- Adjusted Net Income of $27.5
million ($0.65 per share), up
from $16.5 million ($0.39 per share) in F2020. See "Non-IFRS Measures
and Industry Metrics".
Fourth Quarter 2021 Business and Financial Highlights
- Delivered the fourth consecutive quarter of year-over-year
top-line growth with total sales of $121.3
million, up 22.0% compared to Q4 2020. Sales growth was
achieved even with the strategic decision to reduce promotions and
inventory delays caused by supply chain disruptions.
- Expanded DTC gross margin by 150 bps to 61.3%, up from 59.8% in
Q4 2020 and up 610 bps from 55.2% in Q4 2019, despite 270 bps of
pressure caused by elevated freight costs.
- Remained committed to our promotional discipline and reduced
promotional days to 19 compared to 26 promotional days in Q4 2020,
and 66 days in Q4 2019.
- Launched collaborations with John
Tavares of the Toronto Maple Leafs and Better Gift Shop with
our iconic Beaver, which drove brand awareness and customer
excitement around our key trading period.
- Increased Adjusted EBITDA to $30.6
million, from $26.1 million in
both Q4 2020 and Q4 2019. See "Non-IFRS Measures and Industry
Metrics".
- Increased net income to $18.1
million ($0.43 per share), up
from $12.3 million ($0.29 per share) in Q4 2020.
- Adjusted Net Income of $20.3
million ($0.48 per share), up
from $16.3 million ($0.39 per share) in Q4 2020. See "Non-IFRS
Measures and Industry Metrics".
Mona Kennedy, Chief Financial
Officer, added: "We had a strong end to the year with increased
sales, expansion in gross margin and improved operating
profitability, reflecting the successful execution of our strategy
by the team. Our ability to reduce promotional days to 23 in
2021 from 140 in 2020, and 213 in 2019, led to gross margin
expansion of 140 bps even with increases in freight costs resulting
from industry-wide supply chain disruptions. We ended the year with
a strong balance sheet that provides the flexibility to invest in
our future growth and return value to our shareholders through the
NCIB. We will continue to execute our strategy with a focus on
financial discipline and believe we remain well positioned in the
near and long-term."
Summary of Fiscal 2021 Full-Year and Fourth Quarter
Results
Sales
Total F2021 sales were $273.8
million, up 13.9% from total sales of $240.5 million in
F2020. F2021 DTC sales (corporate retail store and eCommerce sales)
were $235.8 million, up 13.3% from $208.2 million in
F2020. The year-over-year increase was predominantly due to growth
in store sales, which were less impacted by COVID-19 related
closures during F2021 as compared to F2020, partially offset by
continued reduction in promotional days, down from 140 in F2020 to
23 in F2021. On average, corporate retail stores were closed for
approximately 20% of F2021 in comparison to approximately 30% of
F2020. eCommerce revenues continue to be elevated compared to
pre-pandemic levels.
For Q4 2021, typically the Company's strongest quarter, total
sales were $121.3 million, up 22.0% from total sales
of $99.4 million in Q4 2020, and down less than 5% from
$127.5 million in Q4 2019. Q4 2021
DTC sales were $110.6 million, up from $91.8
million in Q4 2020, but down 7.1% from Q4 2019. The
year-over-year increase in Q4 2021 versus Q4 2020 was primarily
driven by growth in store sales, which were less impacted by
COVID-19 related closures and restrictions during Q4 2021. Stores
were open for the entirety of Q4 2021 as compared to being closed
for 35% of Q4 2020. The strength was partially offset by a
decline in eCommerce sales due to a return to in-person shopping in
Q4 2021.
Roots F2021 Partners and Other sales (wholesale
Roots-branded products, royalties on partner retail sales,
licensing to select manufacturing partners and the sale of certain
custom Roots-branded products) were $38.0 million, up
from $32.3 million in F2020, primarily reflecting
strength in the Company's Asia
business due to higher volumes, a new agreement with the Company's
international operating partner, and strong growth in sales of
custom Roots-branded products to business clients, partially offset
by an unfavorable foreign exchange impact. For Q4 2021, Partners
and Other sales were $10.7 million, up from $7.6 million
in Q4 2020.
Gross Profit
Roots F2021 total gross profit
was $162.9 million, up 16.5% from $139.7 million in
F2020, outpacing total revenue growth. For Q4 2021, total gross
profit was $72.4 million, up 22.9% from $58.9
million in Q4 2020. Total gross profit in Q4 2021 was 5% above
pre-pandemic levels of Q4 2019, despite lower revenues reflecting
the success of the Company's strategy for profitable growth through
a reduction in promotions.
F2021 DTC gross margin was 62.6%, up from 61.1% compared to
F2020 and up substantially from 56.2% in F2019. DTC gross margin
for Q4 2021 was 61.3%, up from 59.8% in Q4 2020, and significantly
higher than 55.2% in Q4 2019. The improvements in DTC gross margin
reflect the Company's decision to decrease the depth and breadth of
promotions. The number of promotional days in F2021 was 23 as
compared to 140 in 2020 and 213 in 2019 resulting in discount rates
being reduced by half. This improvement was partially offset by
higher freight premiums due to inflationary pressure in shipping
and the use of higher cost air freighting due to supply chain
disruptions. Delayed receipts impacted the Q4 2021 gross margin by
270 bps and F2021 by 190 bps.
Selling, General and Administrative Expenses
("SG&A")
For F2021, SG&A was $122.9 million, up 7.0% from F2020 SG&A of
$114.8 million. The increase
partially reflects a $6.0 million
decrease in temporary rent abatements and government subsidies in
F2021 compared to F2020. Excluding these one-time impacts, SG&A
increased $2.1 million, or 1.6%
primarily driven by higher store payroll costs as stores faced
fewer COVID-19 related closures, and investments in talent and
marketing. The aforementioned costs were partially offset by
reduced non-cash impairments, lower volume-driven eCommerce costs,
and savings related to the permanent U.S. store closures. For Q4
2021, SG&A was $45.7 million, up 17.1% from $39.0
million in Q4 2020. The year-over-year increase partially
reflects a $3.0 million decrease
in temporary rent abatements and government subsidies in Q4 2021 as
compared to Q4 2020. Excluding these one-time impacts, SG&A
expenses increased $3.7 million, or
8.7%, reflecting higher store payroll costs associated with stores
being fully open and investments in talent and marketing, partially
offset by a reduction in non-cash impairment charges.
Adjusted EBITDA, Net Income & Adjusted Net
Income
Reflecting factors discussed above, Adjusted EBITDA
(which excludes the impact of IFRS 16 Leases ("IFRS
16")) was $50.1 million for F2021, a 29.4% increase
from $38.7 million in F2020, and up 92.3% from $26.1 million in F2019. Adjusted EBITDA for Q4
2021 was $30.6 million, compared to $26.1 million in both Q4 2020 and Q4
2019.
F2021 net income improved to $22.8 million,
or $0.54 per Share, from net income of $13.1 million in F2020, or $0.31 per Share. Adjusted Net Income improved to
$27.5 million or $0.65 per Share in F2021, compared to
$16.5 million or $0.39 per Share in F2020, and $4.0 million, or $0.10 per Share in F2019.
Q4 2021 net income improved to $18.1
million, or $0.43 per Share,
from net income of $12.3 million, or
$0.29 per Share in Q4 2020. Adjusted
Net Income for Q4 2021 was $20.3
million, or $0.48 per Share,
an increase from $16.3 million or
$0.39 per Share in Q4 2020, and
$13.3 million, or $0.31 per Share, in Q4 2019.See "Non-IFRS
Measures and Industry Metrics".
Roots Cares
For over 47 years, Roots has been
committed to giving back to and partnering with communities in
need. With the Company's values of community, integrity,
freedom, and being genuine in mind, Roots is committed to embracing
individuality through respect, acceptance, representation, and
empowerment. The Company's philanthropic endeavors, now branded as
"Roots Cares", are focused on amplifying the values shared with
customers. During the year, Roots donated $1.0 million worth of cash and in-kind
donations to various organizations within the communities in
which Roots operates.
Normal Course Issuer Bid
On December 14, 2021, the Company announced its
intention to commence an NCIB for its Shares through the facilities
of the Toronto Stock Exchange (or other alternative Canadian
trading systems) to purchase for cancellation up to 2,172,928 of
its Shares, representing 10.0% of the Company's "public float",
during the 12-month period commencing December 16, 2021 and ending December 15, 2022.
In conjunction with the NCIB, the Company entered into an
automatic share purchase plan ("ASPP") with a designated broker for
the purpose of permitting Roots to purchase Shares for cancellation
under the NCIB during regularly scheduled blackout periods during
the term of the NCIB.
During F2021, the Company purchased for cancellation an
aggregate of 204,575 Shares, at an average price of $3.23 per Share, under the NCIB.
Conference Call and Webcast Information
Roots will
hold a conference call to discuss the Company's fiscal 2021
year-end and fourth quarter results on April
7, 2022, at 8:00 a.m. ET. All
interested parties can join the call by dialing 416-764-8659 or
1-888-664-6392 and using conference ID: 77777912. Please dial in 15
minutes prior to the call to secure a line. The conference call
will be archived for replay until April 14,
2022, at midnight, and can be accessed by dialing
416-764-8677 or 1-888-390-0541 and entering replay passcode: 777912
#.
A live audio webcast of the conference call will be available on
the Events and Presentations section of the Company's investor
website at https://investors.roots.com or by following the link
here. Please connect at least 15 minutes prior to the conference
call to ensure adequate time for any software download that may be
required to join the webcast. An archived replay of the webcast
will be available on the Company's website for one year.
See Roots Consolidated Financial Statements and the Company's
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the fiscal year and fourth quarter ended
January 29, 2022, on the Company's
investor website at https://investors.roots.com and on SEDAR
at www.SEDAR.com. Please also see the Company's Consolidated
Financial Statements and related Management's Discussion and
Analysis for the fiscal year and fourth quarter ended February 1, 2020 on SEDAR at www.SEDAR.com for
additional information relating to the Company's pre-COVID-19
fiscal year 2019 financial results.
About Roots
Established in 1973, Roots is a global
lifestyle brand. Starting from a small cabin in northern
Canada, Roots has become a global
brand with over 100 corporate retail stores in Canada, two stores in the United States, and an eCommerce platform,
www.roots.com, that serves over 55 international markets. We have
more than 100 partner-operated stores in Asia, and we also operate a dedicated
Roots-branded storefront on Tmall.com in China. We design, market, and sell a broad
selection of products in different departments, including women's
men's, children's, and gender-free apparel, leather goods,
footwear, and accessories. Our products are built with
uncompromising comfort, quality, and style that allows you to feel
at home with nature. We offer products designed to meet life's
everyday adventures and provide you with the versatility to live
your life to the fullest. We also wholesale through
business-to-business channels and license the brand to a select
group of licensees selling products to major retailers. Roots
Corporation is a Canadian corporation doing business as "Roots" and
"Roots Canada".
Non-IFRS Measures and Industry Metrics
Roots has
historically reported Comparable Sales Growth (Decline) as an
additional metric to demonstrate the performance of its DTC
business. Commencing in the first quarter of F2020, the Company's
DTC segment was significantly impacted by COVID-19. As a result of
the negative impacts COVID-19 has had on the apparel retail
operating environment, including periods of store closures, phased
re-openings and retail store operating limitations, the Company
does not believe that Comparable Sales Growth (Decline) is a
representative metric of performance in affected periods.
Management will continue to monitor and evaluate the effects of
COVID-19 and will resume the evaluation of Comparable Sales Growth
(Decline) when year-over-year results are no longer significantly
impacted by COVID-19.
This press release makes reference to certain non-IFRS measures
including certain metrics specific to the industry in which we
operate. These measures are not recognized measures under
International Financial Reporting Standards as issued by the
International Accounting Standards Board ("IFRS"), do not have a
standardized meaning prescribed by IFRS and, therefore, may not be
comparable to similar measures presented by other companies.
Rather, these measures are provided as additional information to
complement those IFRS measures by providing further understanding
of our results of operations from management's perspective.
Accordingly, these measures are not intended to represent, and
should not be considered as alternatives to net income or other
performance measures derived in accordance with IFRS as measures of
operating performance or operating cash flows or as a measure of
liquidity. In addition to our results determined in accordance with
IFRS, we use non-IFRS measures including EBITDA, Adjusted EBITDA,
Adjusted Net Income (Loss), and Adjusted Net Income (Loss) per
Share. We believe these non-IFRS measures and industry metrics
provide useful information to both management and investors in
measuring our financial performance and condition and highlight
trends in our core business that may not otherwise be apparent when
relying solely on IFRS measures. For further information regarding
these non-IFRS measures, please refer to "Cautionary Note-Regarding
Non-IFRS Measures and Industry Metrics" in our management's
discussion and analysis for F2021 (the "MD&A"), which is
incorporated by reference herein and is available on SEDAR at
www.SEDAR.com or the Company's Investor Relations website at
https://investors.roots.com. For reconciliations of F2021, F2020,
and F2019 EBITDA, Adjusted EBITDA, Adjusted Net Income, and
Adjusted Net Income per Share to net income (loss), the most
directly comparable measure calculated in accordance with IFRS,
please see "Selected Consolidated Financial Information –
Reconciliation of Net income (Loss) to EBITDA, Adjusted EBITDA,
Adjusted Net Income, and Adjusted Net Income per Share" below.
Roots has historically reported Comparable Sales Growth
(Decline) as an additional metric to demonstrate the performance of
its DTC business. Commencing in the first quarter of F2020, the
Company's DTC segment was significantly impacted by COVID-19. As a
result of the negative impacts COVID-19 has had on the apparel
retail operating environment, including periods of store closures,
phased re-openings and retail store operating limitations, the
Company does not believe that Comparable Sales Growth (Decline) is
a representative metric of performance in affected periods.
Management will continue to monitor and evaluate the effects of
COVID-19 and will resume the evaluation of Comparable Sales Growth
(Decline) when year-over-year results are no longer significantly
impacted by COVID-19.
Forward-Looking Information
Certain information in
this press release contains forward-looking information. This
information is based on management's reasonable assumptions and
beliefs in light of the information currently available to us and
is made as of the date of this press release. Actual results and
the timing of events may differ materially from those anticipated
in the forward-looking information as a result of various factors.
Information regarding our expectations of future results,
performance, achievements, prospects or opportunities or the
markets in which we operate is forward-looking information.
Statements containing forward-looking information are not facts but
instead represent management's expectations, estimates and
projections regarding future events or circumstances. Many factors
could cause our actual results, level of activity, performance or
achievements or future events or developments to differ materially
from those expressed or implied by the forward-looking
statements.
See "Forward-Looking Information" and "Risk Factors" in the
Company's current Annual Information Form for a discussion of the
uncertainties, risks and assumptions associated with these
statements. Readers are urged to consider the uncertainties, risks
and assumptions carefully in evaluating the forward-looking
information and are cautioned not to place undue reliance on such
information. We have no intention and undertake no obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by applicable securities law.
Selected Consolidated Financial Information
In
thousands of Canadian dollars except per Share amounts, unless
otherwise noted
Consolidated Statement of Financial Position
As at January 29, 2022 and
January 30, 2021
|
|
January 29,
2022
|
|
January 30,
2021
|
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash
|
$
|
34,161
|
$
|
9,166
|
|
Accounts
receivable
|
|
5,984
|
|
7,165
|
|
Inventories
|
|
41,256
|
|
42,401
|
|
Prepaid
expenses
|
|
3,969
|
|
3,137
|
|
Loan
receivable
|
|
633
|
|
–
|
|
Derivative
assets
|
|
470
|
|
–
|
|
Total current
assets
|
|
86,473
|
|
61,869
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
Loan
receivable
|
|
–
|
|
608
|
|
Lease
receivable
|
|
–
|
|
1,187
|
|
Fixed
assets
|
|
42,847
|
|
47,981
|
|
Right-of-use
assets
|
|
68,000
|
|
79,995
|
|
Intangible
assets
|
|
188,479
|
|
190,777
|
|
Goodwill
|
|
7,906
|
|
7,906
|
|
Total non-current
assets
|
|
307,232
|
|
328,454
|
|
Total
assets
|
$
|
393,705
|
$
|
390,323
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
28,307
|
$
|
25,850
|
|
Deferred
revenue
|
|
6,338
|
|
5,759
|
|
Income taxes
payable
|
|
6,704
|
|
5,955
|
|
Current portion of
lease liabilities
|
|
22,190
|
|
22,197
|
|
Current portion of
long-term debt
|
|
4,613
|
|
4,984
|
|
Derivative
obligations
|
|
–
|
|
418
|
|
Total current
liabilities
|
|
68,152
|
|
65,163
|
|
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
|
|
Deferred tax
liabilities
|
|
17,383
|
|
15,891
|
|
Long-term portion of
lease liabilities
|
|
65,947
|
|
78,989
|
|
Long-term
debt
|
|
56,166
|
|
66,100
|
|
Total non-current
liabilities
|
|
139,496
|
|
160,980
|
|
Total
liabilities
|
|
207,648
|
|
226,143
|
|
Shareholders'
equity:
|
|
|
|
|
|
Share
capital
|
|
195,070
|
|
197,333
|
|
Contributed
surplus
|
|
4,107
|
|
3,682
|
|
Accumulated other
comprehensive income (loss)
|
|
346
|
|
(227)
|
|
Retained earnings
(deficit)
|
|
(13,466)
|
|
(36,608)
|
|
Total shareholders'
equity
|
|
186,057
|
|
164,180
|
|
Total liabilities and
shareholders' equity
|
$
|
393,705
|
$
|
390,323
|
Consolidated Statement of Net Income (Loss)
For the 13-week fourth quarter and 52-week fiscal years ended
January 29, 2022, January 30, 2021, and February 1, 2020
13-week fourth quarter results are unaudited
|
|
|
|
|
|
|
|
January 29,
2022
(13 weeks)
|
January 30,
2021
(13 weeks)
|
February 1,
2020
(13 weeks)
|
January 29,
2022
(52 weeks)
|
January 30,
2021
(52 weeks)
|
February 1,
2020
(52 weeks)
|
|
Sales
|
$
|
121,294
|
$
|
99,397
|
$
|
127,453
|
$
|
273,834
|
$
|
240,506
|
$
|
329,865
|
|
Cost of goods
sold
|
48,942
|
40,543
|
58,163
|
110,977
|
100,767
|
153,676
|
|
Gross
profit
|
72,352
|
58,854
|
69,290
|
162,857
|
139,739
|
176,189
|
|
Selling, general
and
|
|
|
|
|
|
|
|
administrative
expenses
|
45,688
|
39,009
|
69,445
|
122,850
|
114,807
|
188,308
|
|
Goodwill
impairment
|
–
|
–
|
44,799
|
–
|
–
|
44,799
|
|
Gain from
deconsolidation of
|
|
|
|
|
|
|
|
RTS USA
Corp.
|
–
|
–
|
–
|
–
|
4,774
|
–
|
|
Income (loss) before
interest
|
|
|
|
|
|
|
|
expense and income
taxes
|
|
|
|
|
|
|
|
expense
(recovery)
|
26,664
|
19,845
|
(44,954)
|
40,007
|
29,706
|
(56,918)
|
|
Interest
expense
|
2,021
|
2,421
|
3,962
|
8,808
|
11,741
|
15,567
|
|
Income (loss) before
income
|
|
|
|
|
|
|
|
taxes expense
(recovery)
|
24,643
|
17,424
|
(48,916)
|
31,199
|
17,965
|
(72,485)
|
|
Income taxes
expense
|
|
|
|
|
|
|
|
(recovery)
|
6,532
|
5,080
|
(4,339)
|
8,436
|
4,885
|
(10,456)
|
|
Net Income
(loss)
|
$
|
18,111
|
$
|
12,344
|
$
|
(44,577)
|
$
|
22,763
|
$
|
13,080
|
$
|
(62,029)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
$
|
0.43
|
$
|
0.29
|
$
|
(1.06)
|
$
|
0.54
|
$
|
0.31
|
$
|
(1.47)
|
|
Diluted earnings
(loss) per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
$
|
0.42
|
$
|
0.29
|
$
|
(1.06)
|
$
|
0.53
|
$
|
0.31
|
$
|
(1.47)
|
Consolidated Statement of Comprehensive Income
For the 52-week fiscal years ended January 29, 2022 and January 30, 2021
|
January 29,
2022
|
January 30,
2021
|
|
|
|
|
Net income
|
$
|
22,763
|
$
|
13,080
|
|
|
|
|
Other comprehensive
income, net of taxes:
|
|
|
|
Items that may be
subsequently reclassified to profit or loss:
|
|
|
|
Effective portion of
changes in fair value of cash flow hedges
|
211
|
362
|
|
|
|
|
Cost of hedging
excluded from cash flow hedges
|
(35)
|
(22)
|
|
|
|
|
Tax impact of cash
flow hedges
|
(47)
|
(91)
|
|
Total other
comprehensive income
|
129
|
249
|
|
|
|
|
Total comprehensive
income
|
$
|
22,892
|
$
|
13,329
|
Consolidated Statement of Changes in Shareholders'
Equity
For the 52-week fiscal years ended January 29, 2022 and January 30, 2021
|
January 29,
2022
|
Share
capital
|
Contributed
surplus
|
Retained
earnings
(deficit)
|
Accumulated
other
comprehensive
income (loss)
|
Total
|
|
|
|
|
|
|
|
Balance, January 30,
2021
|
$
|
197,333
|
$
|
3,682
|
$
|
(36,608)
|
$
|
(227)
|
$
|
164,180
|
|
|
|
|
|
|
|
Adjustment on
amendment of IFRS 16
|
–
|
–
|
85
|
–
|
85
|
|
Balance, January 31,
2021
|
$
|
197,333
|
$
|
3,682
|
$
|
(36,523)
|
$
|
(227)
|
$
|
164,265
|
|
|
|
|
|
|
|
Net income
|
–
|
–
|
22,763
|
–
|
22,763
|
|
|
|
|
|
|
|
Net gain from change
in fair value of cash flow hedges, net of income taxes
|
–
|
–
|
–
|
129
|
129
|
|
|
|
|
|
|
|
Transfer of net
realized loss on cash flow hedges to inventories, net of income
taxes
|
–
|
–
|
–
|
444
|
444
|
|
|
|
|
|
|
|
Share-based
compensation
|
–
|
655
|
–
|
–
|
655
|
|
|
|
|
|
|
|
Issuance of
Shares
|
265
|
(230)
|
–
|
–
|
35
|
|
|
|
|
|
|
|
Purchase of
Shares
|
(2,528)
|
–
|
294
|
–
|
(2,234)
|
|
|
|
|
|
|
|
Balance, January 29,
2022
|
$
|
195,070
|
$
|
4,107
|
$
|
(13,466)
|
$
|
346
|
$
|
186,057
|
|
January 30,
2021
|
Share
capital
|
Contributed
surplus
|
Retained
earnings
(deficit)
|
Accumulated
other
comprehensive
income (loss)
|
Total
|
|
|
|
|
|
|
|
Balance, February 1,
2020
|
$
|
196,903
|
$
|
3,407
|
$
|
(49,688)
|
$
|
(116)
|
$
|
150,506
|
|
|
|
|
|
|
|
Net income
|
–
|
–
|
13,080
|
–
|
13,080
|
|
|
|
|
|
|
|
Net gain from change
in fair value of cash flow hedges, net of income taxes
|
–
|
–
|
–
|
249
|
249
|
|
|
|
|
|
|
|
Transfer of net
realized gain on cash flow hedges to inventories, net of income
taxes
|
–
|
–
|
–
|
(360)
|
(360)
|
|
|
|
|
|
|
|
Share-based
compensation
|
–
|
705
|
–
|
–
|
705
|
|
|
|
|
|
|
|
Issuance of
Shares
|
430
|
(430)
|
–
|
–
|
–
|
|
|
|
|
|
|
|
Balance, January 30,
2021
|
$
|
197,333
|
$
|
3,682
|
$
|
(36,608)
|
$
|
(227)
|
$
|
164,180
|
Consolidated Statement of Cash Flows
For the 52-week fiscal years ended January 29, 2022 and January 30, 2021
|
January
29,
|
January
30,
|
|
2022
|
2021
|
|
Cash provided by
(used in):
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
Net income
|
$
|
22,763
|
$
|
13,080
|
|
Items not involving
cash:
|
|
|
|
Depreciation and
amortization
|
29,994
|
33,325
|
|
Share-based
compensation expense
|
655
|
705
|
|
Impairment, net of
reversals, of fixed assets and right-of-use assets
|
649
|
2,048
|
|
Gain from
deconsolidation of RTS USA Corp.
|
–
|
(4,774)
|
|
Unrealized losses on
forward contracts
|
–
|
105
|
|
Gain on lease
modification
|
(438)
|
(310)
|
|
Rent concessions
related to practical expedient
|
(2,595)
|
(3,525)
|
|
Interest
expense
|
8,808
|
11,741
|
|
Income taxes
expense
|
8,436
|
4,885
|
|
Settlement of
de-designated forward contracts
|
(109)
|
–
|
|
Interest
paid
|
(2,862)
|
(4,337)
|
|
Payment of interest on
lease liabilities
|
(5,360)
|
(6,724)
|
|
Income taxes refunded
(paid)
|
(6,433)
|
1,056
|
|
Change in non-cash
operating working capital:
|
|
|
|
Accounts
receivable
|
1,181
|
(7)
|
|
Inventories
|
1,145
|
(4,540)
|
|
Prepaid
expenses
|
(832)
|
2,281
|
|
Accounts payable and
accrued liabilities
|
886
|
6,165
|
|
Deferred
revenue
|
579
|
(252)
|
|
56,467
|
50,922
|
|
Financing
activities
|
|
|
|
Repayment of long-term
debt
|
–
|
(14,000)
|
|
Long-term debt
financing costs
|
(931)
|
(148)
|
|
Repayment of Term
Credit Facility
|
(9,984)
|
(4,984)
|
|
Proceeds from issuance
of Shares
|
35
|
–
|
|
Purchase of
Shares
|
(663)
|
–
|
|
Payment of principal
on lease liabilities, net of tenant allowance
|
(15,521)
|
(12,383)
|
|
(27,064)
|
(31,515)
|
|
Investing
activities
|
|
|
|
Additions to fixed
assets
|
(4,408)
|
(3,423)
|
|
Deconsolidation of RTS
USA Corp.
|
–
|
(541)
|
|
(4,408)
|
(3,964)
|
|
|
|
|
Increase in
cash
|
24,995
|
15,443
|
|
|
|
|
Cash and bank
indebtedness, beginning of period
|
9,166
|
(6,277)
|
|
|
|
|
Cash, end of
period
|
$
|
34,161
|
$
|
9,166
|
Reconciliation of Net income (Loss) to EBITDA, Adjusted
EBITDA, Adjusted Net Income, and Adjusted Net Income per
Share
For the 13-week fourth quarter and 52-week fiscal years ended
January 29, 2022, January 30, 2021, and February 1, 2020
|
CAD
$000s
|
Q4
2021
|
|
Q4
2020
|
|
Q4
2019
|
|
F2021
|
|
F2020
|
|
F2019
|
|
Net income
(loss)
|
18,111
|
|
12,344
|
|
(44,577)
|
|
22,763
|
|
13,080
|
|
(62,029)
|
|
Add the impact
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
(a)
|
2,021
|
|
2,421
|
|
3,962
|
|
8,808
|
|
11,741
|
|
15,567
|
|
Income taxes expense
(a)
|
6,532
|
|
5,080
|
|
(4,339)
|
|
8,436
|
|
4,885
|
|
(10,456)
|
|
Depreciation and
amortization (a)
|
7,391
|
|
8,661
|
|
10,506
|
|
29,994
|
|
33,325
|
|
39,606
|
|
EBITDA
|
34,055
|
|
28,506
|
|
(34,448)
|
|
70,001
|
|
63,031
|
|
(17,312)
|
|
Adjust for the
impact of:
|
|
|
|
|
|
|
|
|
|
|
|
|
COGS: Inventory
provision (b)
|
465
|
|
835
|
|
–
|
|
465
|
|
835
|
|
–
|
|
COGS: P&O Duty
Reimbursement (c)
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
175
|
|
COGS: DC Relocation
Project (d)
|
–
|
|
–
|
|
297
|
|
–
|
|
45
|
|
840
|
|
SG&A: DC
Relocation Project (d)
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1,648
|
|
SG&A: Rent expense
excluded from net income (loss) due to IFRS 16 (a)
|
(5,709)
|
|
(5,883)
|
|
(7,441)
|
|
(23,445)
|
|
(25,631)
|
|
(29,347)
|
|
SG&A: IFRS 16:
Impairment of ROU assets (a)
|
305
|
|
1,162
|
|
3,215
|
|
305
|
|
1,162
|
|
3,215
|
|
SG&A: Purchase
accounting adjustments (f)
|
4
|
|
42
|
|
58
|
|
70
|
|
169
|
|
582
|
|
SG&A: Stock option
expense (g)
|
23
|
|
176
|
|
(1,045)
|
|
656
|
|
705
|
|
(518)
|
|
SG&A: Fixed asset
impairment (h)
|
344
|
|
886
|
|
19,183
|
|
344
|
|
886
|
|
19,183
|
|
SG&A: Goodwill
impairment (i)
|
–
|
|
–
|
|
44,799
|
|
–
|
|
–
|
|
44,799
|
|
SG&A: Gain from
the deconsolidation of RTS USA Corp. (j)
|
–
|
|
–
|
|
–
|
|
–
|
|
(4,774)
|
|
–
|
|
SG&A: Chapter 7
filing costs (j)
|
131
|
|
43
|
|
–
|
|
131
|
|
1,283
|
|
–
|
|
SG&A: Changes in
key personnel (k)
|
924
|
|
324
|
|
1,165
|
|
1,161
|
|
1,036
|
|
2,339
|
|
SG&A: Other
non-recurring items (l)
|
79
|
|
–
|
|
270
|
|
451
|
|
1
|
|
464
|
|
Adjusted
EBITDA(m)
|
30,621
|
|
26,091
|
|
26,053
|
|
50,139
|
|
38,748
|
|
26,068
|
|
CAD
$000s
|
Q4
2021
|
|
Q4
2020
|
|
Q4
2019
|
|
F2021
|
|
F2020
|
|
F2019
|
|
Net income
(loss)
|
18,111
|
|
12,344
|
|
(44,577)
|
|
22,763
|
|
13,080
|
|
(62,029)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse the impact
of IFRS 16:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent expense excluded
from net income (loss) (a)
|
(5,709)
|
|
(5,883)
|
|
(7,441)
|
|
(23,445)
|
|
(25,631)
|
|
(29,347)
|
|
Depreciation on ROU
assets (a)
|
4,518
|
|
5,620
|
|
6,244
|
|
18,373
|
|
21,047
|
|
24,721
|
|
Impairment on ROU
assets (a)
|
305
|
|
1,162
|
|
3,215
|
|
305
|
|
1,162
|
|
3,215
|
|
Interest on lease
liabilities (a)
|
1,252
|
|
1,466
|
|
2,261
|
|
5,360
|
|
6,724
|
|
9,048
|
|
Deferred tax impact
(a)
|
(97)
|
|
(609)
|
|
(519)
|
|
(157)
|
|
(839)
|
|
(1,414)
|
|
Total IFRS 16 impacts
reversed
|
269
|
|
1,756
|
|
3,760
|
|
436
|
|
2,463
|
|
6,223
|
|
Add the impact
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
COGS: Inventory
provision (b)
|
465
|
|
835
|
|
–
|
|
465
|
|
835
|
|
–
|
|
COGS: P&O Duty
Reimbursement (c)
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
175
|
|
COGS: DC Relocation
Project (d)
|
–
|
|
–
|
|
297
|
|
–
|
|
45
|
|
840
|
|
SG&A: DC
Relocation Project (d)
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1,648
|
|
SG&A: Amortization
of intangible assets acquired by Searchlight (e)
|
576
|
|
575
|
|
692
|
|
2,298
|
|
2,302
|
|
3,539
|
|
SG&A: Purchase
accounting adjustments (f)
|
4
|
|
42
|
|
58
|
|
70
|
|
169
|
|
582
|
|
SG&A: Stock option
expense (g)
|
23
|
|
176
|
|
(1,045)
|
|
656
|
|
705
|
|
(518)
|
|
SG&A: Fixed asset
impairment (h)
|
344
|
|
886
|
|
19,183
|
|
344
|
|
886
|
|
19,183
|
|
SG&A: Goodwill
impairment (i)
|
–
|
|
–
|
|
44,799
|
|
–
|
|
–
|
|
44,799
|
|
SG&A: Gain from
the deconsolidation of RTS USA Corp. (j)
|
–
|
|
–
|
|
–
|
|
–
|
|
(4,774)
|
|
–
|
|
SG&A: Chapter 7
filing costs (j)
|
131
|
|
43
|
|
–
|
|
131
|
|
1,283
|
|
–
|
|
SG&A: Changes in
key personnel (k)
|
924
|
|
324
|
|
1,165
|
|
1,161
|
|
1,036
|
|
2,339
|
|
SG&A: Other
non-recurring items (l)
|
79
|
|
–
|
|
270
|
|
451
|
|
1
|
|
464
|
|
Total
adjustments
|
2,546
|
|
2,881
|
|
65,419
|
|
5,576
|
|
2,488
|
|
73,051
|
|
Tax effect of
adjustments
|
(668)
|
|
(709)
|
|
(11,333)
|
|
(1,302)
|
|
(1,520)
|
|
(13,227)
|
|
Adjusted Net
Income(n)
|
20,258
|
|
16,272
|
|
13,269
|
|
27,473
|
|
16,511
|
|
4,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income per Share(o)
|
$0.48
|
|
$0.39
|
|
$0.31
|
|
$0.65
|
|
$0.39
|
|
$0.10
|
|
|
_____________
|
|
Notes:
|
|
(a)
|
The impact of IFRS 16
in Q4 2021, Q4 2020, and Q4 2019 was: (i) an increase/(decrease) to
SG&A expenses of ($886), $899, and $2,018, respectively, which
comprised the impact of depreciation and impairment on the
right-of-use ("ROU") assets, net of the exclusion of rent payments
from SG&A expenses, (ii) an increase in interest expense of
$1,252, $1,466, and $2,261, respectively, arising from interest
expense recorded on the lease liabilities in the period, and (iii)
a deferred tax impact of $97, $609, and $519, respectively, based
on tax attributes on the ROU assets and lease liabilities balances
recorded. The impact of IFRS 16 in F2021, F2020, and F2019 was: (i)
a decrease to SG&A expenses of $4,767, $3,422, and $1,411,
respectively, which comprised the impact of depreciation and
impairment on the ROU assets, net of the exclusion of rent payments
from SG&A expenses, (ii) an increase in interest expense of
$5,360, $6,724, and $9,048, respectively, arising from interest
expense recorded on the lease liabilities in the period, and (iii)
a deferred tax impact of $157, $839, and $1,414, respectively,
based on tax attributes on the ROU assets and lease liabilities
balances recorded.
|
|
(b)
|
Represents a non-cash
inventory provision on specific raw material and seasonal inventory
styles that no longer align with the Company's strategic product
direction.
|
|
(c)
|
Represents a one-time
reimbursement paid by Roots to its international partner related to
import taxes in Taiwan incurred by the partner on certain footwear
categories shipped from China.
|
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(d)
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In the fiscal year
ended February 2, 2019, the Company commenced preparations for the
relocation from two separate facilities – its legacy retail-only
distribution centre and its third-party online order fulfillment
and distribution facility – to a single fully-integrated
Roots-operated distribution centre (the "DC Relocation Project").
During the period of transition which continued into F2020, the
Company incurred expenses related to, among other things, training,
testing and administrative costs, along with rent and other
operating costs, in connection with the need to operate two
distribution centres simultaneously. These expenses would not be
incurred as part of normal business operations and are not
recurring.
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(e)
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As a result of the
Company's acquisition of assets from Roots Canada Ltd., Roots
U.S.A. Inc., and Roots America L.P., and the outstanding shares of
Roots International ULC effective December 1, 2015 (the
"Acquisition"), intangibles relating to customer relationships of
$7,766 with a useful life of 10 years and licensing arrangements of
$25,910 with useful lives ranging from four to 13 years were
recognized in accordance with IFRS 3, Business Combinations.
The amortization expense resulting from the recognition of these
intangible assets are non-cash in nature and are a direct result of
the Acquisition. If the Acquisition had not occurred, such
intangibles would not have been recognized and, consequently, the
associated expenses would not have been incurred. Management is of
the view that these costs do not reflect the underlying
profitability of the business and would, therefore, reduce the
ability to compare such underlying results to historical periods
prior to the Acquisition.
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(f)
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As a result of the
Acquisition, the Company recognized an intangible asset for lease
arrangements in the amount of $6,310, which when excluding the
impacts of IFRS 16, is amortized over the life of the leases and
included in SG&A expenses. In management's view, this cost does
not reflect the underlying profitability of the business and would
reduce the ability to compare such underlying results to historical
periods prior to the Acquisition.
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(g)
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Represents non-cash
share-based compensation expense in respect of the Company's equity
incentive plans.
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(h)
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Represents a non-cash
impairment charge (net of reversals) taken against certain fixed
assets for stores where the recoverable amount is deemed to be
below the carrying value. Of the total non-cash impairment
charge taken in Q4 2019 and F2019, $12,738 pertains to impairment
of leasehold improvements at the U.S. stores subsequently closed on
April 29, 2020, during the liquidation of the Company's wholly
owned subsidiary, RTS USA Corp, pursuant to Chapter 7 of Title 11
of the United States Code (the "Chapter 7 filing").
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(i)
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Represents a non-cash
impairment charge taken against goodwill of the DTC cash generating
unit, as the recoverable amount is deemed to be below the carrying
value.
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(j)
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Under the Chapter 7
filing, control of RTS USA Corp. no longer rests with the Company,
but rather with the court-appointed trustee in charge of
administering the case. Accordingly, the Company is no longer
consolidating the assets, liabilities, or operating results of RTS
USA Corp. and recorded a net gain of $4,774 in relation to the
deconsolidation in F2020. In addition, the Company also incurred
$1,283 of costs in F2020 and $131 in F2021, primarily associated to
professional service fees and other costs incurred in relation to
the Chapter 7 filing. Management is of the view that the gain
arising from the deconsolidation of RTS USA Corp. and the Chapter 7
filing costs would not be incurred as part of the Company's normal
business operations and are not recurring.
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(k)
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Represents expenses
incurred in respect of the Company's efforts to recruit for
vacancies in key management positions and severance costs
associated with such employee separations.
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(l)
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Represents one-time
costs associated with projects that Management has determined are
infrequent in nature and, accordingly, such matters do not reflect
the underlying profitability of the business and their inclusion
would, therefore, reduce the ability to compare such underlying
results to historical periods.
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(m)
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Adjusted EBITDA
excludes the impact of IFRS 16. If the impact of IFRS 16, net of
impairments on the ROU assets, was included for Q4 2021, Q4 2020,
and Q4 2019, Adjusted EBITDA would have been $36,021, $30,771, and
$30,221, respectively. If the impact of IFRS 16, net of impairments
on the ROU assets, was included for F2021, F2020, and F2019,
Adjusted EBITDA would have been $73,209, $63,049, and $51,618,
respectively.
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(n)
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Adjusted Net Income
excludes the impact of IFRS 16. If the impact of IFRS 16, net of
impairments on the ROU assets, was included for Q4 2021, Q4 2020,
and Q4 2019, Adjusted Net Income would have been $19,986, $14,486,
and $9,466, respectively. If the impact of IFRS 16, net of
impairments on the ROU assets, was included for F2021, F2020, and
F2019, Adjusted Net Income would have been $26,986, $13,925, and a
net loss of $(2,632), respectively.
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(o)
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Adjusted Net Income
per Share has been calculated based on the weighted average number
of Shares outstanding during the period. The weighted average
number of Shares during Q4 2021, Q4 2020, and
Q4 2019 was 42,218,446, 42,198,082, and 42,124,451,
respectively. The weighted average number of Shares during F2021,
F2020, and F2019 was 42,221,249, 42,170,369, and 42,122,962,
respectively.
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SOURCE Roots Corporation