Roots Corp. · TSX:ROOT
Roots — Shareholder Meeting (June 2018)
41 slides from Roots's shareholder meeting presentation, Jun 15, 2018
Slide 1: Fiscal 2017 Annual General Meeting
Fiscal 2017 Annual General Meeting Annual andJUNE General 15, 2018 Meeting JUNE 15, 2018
Slide 2: Jim Gabel, President & CEO
Jim Gabel President & Chief Executive Officer
Slide 3: Agenda
Agenda 1. Formal business 2. Corporate presentation 3
Slide 4: Erol Uzumeri, Chairman of the Board
Erol Uzumeri Chairman of the Board
Slide 5: Disclaimer
Disclaimer All figures discussed in this presentation are stated in $CAD millions, unless otherwise noted. Non-IFRS Measures and Industry Metrics This presentation makes reference to certain non-IFRS measures including certain metrics specific to the industry in which we operate. These measures are
Slide 6: Formal Business
Formal Business • Presentation of Financial Statements • Election of Directors • Re-appointment of Auditors 6
Slide 7: Corporate Presentation
Corporate Presentation
Slide 8: Jim Gabel, President & CEO
Jim Gabel President & Chief Executive Officer
Slide 9: Unlocking the potential of a brand with a 44-year history
Unlocking the potential of a brand with a 44-year history 9 9
Slide 10: Modernizing the Brand, Transforming the Business
Modernizing Transforming the Brand the Business Ensuring the Roots brand consistently Strategically investing in people, appeals to, and connects with, our systems, processes and target global omni-channel consumer, infrastructure to fuel while respecting Roots heritage and accelerated and sustainab
Slide 11: Our Brand Position
Roots Today: The Brand Our Brand Position For the life and style collectors, who, like us, believe clothes should feel as good as they look. Roots is the brand that unites the worlds of cabin and city. As the grounded and groundbreaking connector, we create apparel, leather and footwear with unique
Slide 12: Target Consumer: Life and Style Collector
Target Consumer Life and Style Collector 12
Slide 13: Diversified Product Portfolio
Diversified Product Portfolio Apparel Leather Accessories Kids Footwear 62%* 11%* 12%* 13%* 2%* * Percentage of FY2017 revenue 13
Slide 14: A Product Architecture Rooted in our Heritage
A Product Architecture Rooted in our Heritage Seasonal Excitement ~30% Exciting products for repeat visits On-trend, exciting and new Monthly Perennial Favourites ~50% Seasonal favourites that bring you back year after year Quarterly Fashion-Coloured Basic Sweats + Spring and Summer: Original Sweats
Slide 15: Roots Today: The Business
Roots Today: The Business A Growing Company 44-year track record Authentic premium lifestyle brand with global appeal and world-famous product International footprint Multiple growth levers Significant runway for growth 15
Slide 16: Moving to a Single Global Brand Range
Moving to a Single Global Brand Range • Enhanced products and assortments • Formalized, analysis-driven • Right product, right number approach to building assortment of units to the right locations • Improved costing • Coordinated collections across categories • Greater scalability Sales growth Oper
Slide 17: Leveraging Operational Investments to Drive Sales and Margin Expansion
Leveraging Operational Investments to Drive Sales and Margin Expansion Investments already made Leadership Merchandising Infrastructure eCommerce Functional expertise and consumer-focused strategy POS, HRIS, LMS Further enhancing our operational experience online storefront Accelerating future growt
Slide 18: Growth in Canada: Growing store network in high traffic areas
Growth in Canada: Growing store network in high traffic areas 117 Stores * As at Q1 Fiscal 2018 6-8 * Remainder of new stores to add to achieve end of Fiscal 2019 target of 8-10 new store openings *See Disclaimer – Forward Looking Information 18
Slide 19: Growth in Canada: Renovate and expand high-potential stores
Growth in Canada: Renovate and expand high-potential performing stores Lakeshore Store 20% Before + average sales uplift1 Lakeshore + 20% before average incremental Lakeshore Store contribution margin After 24-28 Store optimizations remaining to achieve * end of Fiscal 2019 target (1) Sales uplift c
Slide 20: Growth in Canada: Amplifying brand communication
Growth in Canada: Amplifying brand communication Grow marketing investment from 2% to 4% of sales by end of Fiscal 2019 • Leveraging 99% aided brand awareness1 • Launching new products • Fostering stronger connections with customers and store communities Increase traffic across omni-channel network
Slide 21: Growth in Canada: e-Commerce, fastest growing part of business
Growth in Canada: e-Commerce, fastest growing part of business • Progressive environment of ongoing innovation • Seamless omni-channel experience • Shipping to more than 50 countries (1) 20-22% * of DTC sales Target by end of Fiscal 2019 (1) In Fiscal 2017. *See Disclaimer – Forward Looking Informat
Slide 22: Strategically Expanding US Footprint
Strategically Expanding US Footprint Current Footprint • 3 locations (NY, MI, UT) • Shipping to all 50 states(1) Current Pipeline • Boston, June 2018 • Washington, August 2018 • Full Omni-channel, Summer 2018 • Chicago, 2019 The Natick Mall, Massachusetts 10-14 Target new locations by end of * Bosto
Slide 23: Expanding in International Markets: Taiwan & China
Expanding in International Markets: Taiwan & China Footprint as at end of Q1 2018 • 112 Taiwan • 30 China New stores Xindian FSS New Taipei City Shanghai No.1 Dept Store Yaohan • 11 new stores H2 Fiscal 2017 • 2 new stores Q1 Fiscal 2018 7-12 * New store opens remaining to achieve end of Fiscal 2019
Slide 24: Expanding in International Markets: other markets
Expanding in International Markets: other markets offer unique potential Hong Kong • Progressing plans for Hong Kong, Singapore and/or Singapore Malaysia with existing partner • Conversations underway with potential partners for expansion into other Malaysia international markets The Rest of the Wor
Slide 25: Deepening Offering in Leather and Footwear: Elevating leather goods
Deepening Offering in Leather and Footwear: Elevating leather goods • Part of our DNA • Leveraging longstanding genuine leather credentials that are deeply valued by our target consumers • Modernizing the range of our leather goods with new styles • Expanding leather customization in select bags and
Slide 26: Deepening Offering in Leather and Footwear: Expanding footwear
Deepening Offering in Leather and Footwear: Expanding footwear • Where Roots started in 1973 • Cornerstone product category potential • Significant footwear experience among management • Premier design and manufacturing partner • Opportunity to significantly grow the business Setting stage for accel
Slide 27: The Right Strategy and the Right Team
The Right Strategy and the Right Team Consumer Investor • Deep-rooted connection with • 44-year track record consumers • Authentic premium lifestyle brand • Recognized as one of Canada’s with global appeal and world- most iconic brands famous product • 24/7 access to brand through • International fo
Slide 28: Financial Review
Financial Review
Slide 29: Jim Rudyk, Chief Financial Officer
Jim Rudyk Chief Financial Officer
Slide 30: Record Fiscal 2017 Results
Record Fiscal 2017 Results COMPARABLE SALES SALES ADJUSTED EBITDA ADJUSTED NET GROWTH GROWTH GROWTH1 INCOME GROWTH1 12.1% +15.7% +26.6% +35.7% Fiscal 2017 Fiscal 2017 Fiscal 2017 Fiscal 2017 Note: See Disclaimer – Non-IFRS Measures and Retail Industry Metrics. 30 (1) A reconciliation of historical A
Slide 31: Comparable Sales Growth
Comparable Sales Growth 12.1% Fiscal 2017 6.4% Q1 Fiscal 2018 8.3% Fiscal 2016 3.3% Q1 Fiscal 2017 Since start of transformation in 2016, Company has delivered 9 consecutive quarters of positive comparable sale growth Note: 31 See Disclaimer – Non-IFRS Measures and Retail Industry.
Slide 32: Sales
Sales Fiscal 2017 Q1 Fiscal 2018 ($ millions) ($ millions) 326.1 51.0 +16.3% YoY Increase in +9.0% YoY Increase in DTC Sales 48.2 DTC Sales 281.9 +15.7% YoY Increase in Total +5.8% YoY Increase in Total Sales Sales Fiscal 2016 Fiscal 2017 Q1 Fiscal Q1 Fiscal 2017 2018 Note: 32 See Disclaimer – Non-I
Slide 33: Adjusted DTC Gross Margin
Adjusted DTC Gross Margin Fiscal 2017 Q1 Fiscal 2018 59.4% 57.3% +206 Basis Points 56.4% 59.1% +271 Basis Points 90% benefit from: ~100% benefit from: • Reductions in costs • Reductions in costs • More favourable • More favourable product mix of higher- product mix of higher- margin items margin ite
Slide 34: Investing in the growth of the business
Key Investments Supporting higher sales Investing Driving long-term growth in the growth • Enhanced consumer experience • More stores • Renovations, relocations of the and expansions • e-Commerce platform • Great leaders and professionals joining business the team • Building a global brand 34
Slide 35: Adjusted EBITDA
Adjusted EBITDA Fiscal 2017 ($ millions) 52.6 41.6 • Sales growth • Gross margin Fiscal 2016 Fiscal 2017 improvements • Strategic investments Q1 Fiscal 2018 ($ millions) in growth Q1 Fiscal 2017 Q1 Fiscal 2018 -1.7 -3.1 Note: 35 See Disclaimer – Non-IFRS Measures and Retail Industry Metrics.
Slide 36: Adjusted Net Income Per Share
Adjusted Net Income Per Share Fiscal 2017 ($) 0.69 0.51 • Better effective tax rate • Reduction in interest Fiscal 2016 Fiscal 2017 expense Q1 Fiscal 2018 ($) Q1 Fiscal 2017Q1 Fiscal 2018 -0.09 -0.11 Note: 36 See Disclaimer – Non-IFRS Measures and Retail Industry Metrics.
Slide 37: Balance sheet
Balance sheet Debt Inventory Capex • Generate strong • Improving turns with • Very low maintenance free cash flow target of 4 capex requirements • Improve net debt • Improving aging • Growth capex primarily leverage ratio focused on retail stores approx. ½ turn YoY and eCommerce • Additional capex i
Slide 38: New Integrated Distribution Centre
New Integrated Distribution Centre Leveraging 44-years of ~$16M capex investment through in-house experience end of Fiscal 2019 Support accelerated • Integrated fulfillment center for long-term growth stores and eCommerce • Bringing Roots-operated retail Single inventory for stores fulfillment and t
Slide 39: Fiscal 2019 Financial Targets
Fiscal 2019 Financial Targets Sales (in $ millions) 410-450 13-17% 282 FY2016A – FY2019E CAGR +300 bps Adjusted DTC margin over FY2016 FY2016A FY2019E Adjusted EBITDA Adjusted Net Income (in $ millions) (in $ millions) 35-40 61-68 42 14-18% 21 18-23% FY2016A – FY2016A – FY2019E CAGR FY2019E CAGR FY2
Slide 40: Modernizing the Brand & Transforming the Business
Modernizing the Brand & Transforming the Business By end of Fiscal 2019 Fiscal 2020 and Beyond 2/ growth from Canada 3 Opportunity to double Strategically investing in growth business in Canada Stronger foothold in US market 100+ store opportunity in the US e-Commerce 20-22% of DTC sales Further gro
Slide 41: Fiscal 2017 Annual General Meeting
Fiscal 2017 Annual General Meeting Annual andJUNE General 15, 2018 Meeting JUNE 15, 2018