Ms. Meghan Roach reports

ROOTS REPORTS FIRST QUARTER FISCAL 2026 RESULTS & BUSINESS UPDATE

Roots Corp. has released its financial results for its first quarter ended May 2, 2026 (Q1 (first quarter) 2026). Certain metrics, including those expressed on an adjusted basis, are non-IFRS (international financial reporting standards) measures.

Distribution centre transition update

In January, 2026, the company announced its strategic distribution partnership with Metro Supply Chain. The transition is anticipated to be completed by the end of the second quarter. In Q1 2026, the company incurred $1.8-million incremental costs related to this transition, which is primarily driven by the accelerated non-cash depreciation of existing fixed assets. To minimize the cash impacts of the upcoming transition, Roots has shifted additional products to final sale to reduce the transfer of past-season inventory.

Strategic review update

As announced in March, 2026, the company and its board of directors continue to conduct its review of strategic alternatives, which may include, but not limited to, a sale of the company. In Q1 2026, the company incurred $600,000 in incremental consulting and legal costs related to this process.

"Roots delivered first quarter sales growth of 6.5 per cent and comparable sales growth of 3.2 per cent, or 16.6 per cent on a two-year stacked basis, alongside a 20.7-per-cent reduction in net debt year over year. Within the first quarter, we continued to diversify our product offering with both our lifestyle and activewear offerings increasing as a percentage of sales," said Meghan Roach, president and chief executive officer of Roots.

"These results reflect the continued strength of the business as we advance two significant initiatives this year: the transition of our distribution centre to Metro Supply Chain and the review of strategic alternatives being led by our board. The costs associated with these initiatives are reflected in our results. We remain focused on disciplined execution and building long-term value for all our shareholders," continued Ms. Roach.

First quarter highlights:

• Sales were $42.6-million, a 6.5-per-cent increase as compared with $40.0-million in Q1 2025.
• DTC (direct-to-consumer) sales were $35.8-million, a 3.3-per-cent increase as compared with $34.6-million in Q1 2025.
• DTC comparable sales growth was 3.2 per cent.
• Gross margin was 59.9 per cent, as compared with 61.5 per cent in Q1 2025.
• DTC gross margin was 61.3 per cent, as compared with 62.9 per cent in Q1 2025.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) amounted to negative $7.4-million, as compared with negative $7.1-million in Q1 2025.
• Net loss totalled $10.1-million, as compared with $7.9-million in Q1 2025.
• Adjusted net loss, which excludes the impacts of the distribution centre transition and strategic review, along with other non-recurring or unusual costs outside the normal course of operations, was $7.6-million, as compared with $7.4-million last year.
• Net debt decreased 20.7 per cent year over year to $23.4-million

"We are pleased with the continued sales momentum and deleveraging in the first quarter, and we continue to progress on our strategic review and the distribution centre transition initiatives," said Leon Wu, chief financial officer. "We are in the final stages of preparation for our distribution centre move and remain on track to be fully operational at the third party distribution centre by the end of the second quarter."

First quarter overview

Total sales were $42.6-million in Q1 2026, representing an increase of 6.5 per cent from $40.0-million in the first quarter of fiscal 2025. DTC sales (corporate retail store and e-commerce sales) were $35.8-million, a 3.3-per-cent increase from $34.6-million in Q1 2025. The DTC sales growth was reflected in the strong comparable sales growth of 3.2 per cent, delivering a two-year stacked comparable sales growth of 16.6 per cent. This was achieved through positive traffic across both channels, supported by a thoughtfully curated product assortment.

P&O sales (wholesale Roots branded products, licensing to select manufacturing partners and the sale of certain custom products) amounted to $6.8-million in Q1 2026, increasing 26.6 per cent as compared with $5.4-million in Q1 2025. The increase in P&O sales was driven by significant growth across domestic wholesale, custom products and the company's licensing channels. This reflects both the continued expansion of the company's customer base in these channels and stronger volumes with existing customers.

Gross profit was $25.5-million in Q1 2026, as compared with $24.6-million in Q1 2025, representing a year-over-year increase of 3.8 per cent. Gross margin was 59.9 per cent in Q1 2026, as compared with 61.5 per cent in Q1 2025. DTC gross margin was 61.3 per cent in Q1 2026, as compared with 62.9 per cent in Q1 2025. The year-over-year change in the DTC gross margin was driven by a higher temporary mix of final sale price point offerings on select products ahead of the company's distribution centre transition in the following quarter and the unfavorable foreign exchange impact on U.S. dollar purchases. This was partially offset by continued momentum in improvements to the company's product costing.

SG&A (selling, general and administrative) expenses totalled $37.3-million in Q1 2026, as compared with $33.3-million in Q1 2025, representing a year-over-year increase of 12.0 per cent. The increase in SG&A expenses was notably driven by $1.8-million of incremental costs related to the distribution centre transition, the majority of which comprised accelerated depreciation on existing assets, and $600,000 of incremental costs related to the strategic review. Excluding the aforementioned project costs, SG&A expenses increased 4.9 per cent, driven by higher variable selling costs, store-related occupancy costs and personnel costs.

Net loss totalled $10.1-million, or 26 cents per share, in Q1 2026, as compared with a net loss of $7.9-million, or 20 cents per share, in Q1 2025. As the first quarter historically represents approximately 14 per cent of the full-year sales, the impacts of the non-recurring projects had a more pronounced impact on net earnings. Adjusted net loss, which adjusts primarily for the costs of the DC transition and strategic review, was $7.6-million, as compared with $7.4-million in Q1 2025.

Adjusted EBITDA amounted to negative $7.4-million in Q1 2026, as compared with negative $7.1-million in Q1 2025.

Financial position

Inventory was $45.0-million at the end of Q1 2026, as compared with $40.5-million at the end of Q1 2025, representing an increase of $4.5-million or 11.1 per cent. Of the increase, $500,000 was attributable to unfavourable foreign exchange on purchases, while the remaining $4.0-million was primarily driven by higher in-transit inventory to support upcoming selling seasons and higher P&O inventory to support the current momentum.

Free cash flow was negative $19.1-million in Q1 2026, as compared with negative $21.8-million in Q1 2025. The year-over-year improvement in free cash flow was driven by sales growth and continuing management of working capital.

As at the end of Q1 2026, Roots had net debt of $23.4-million, improving from $29.6-million a year earlier. The company's leverage ratio, defined as total net debt to trailing-12-month adjusted EBITDA, was 1.0 times as at the end of Q1 2026. As at the end of Q1 2026, Roots had $32.6-million outstanding under its credit facilities and total liquidity of $53.7-million, including net cash and borrowing capacity available under its revolving credit facility.

Normal course issuer bid

Under its normal course issuer bid (NCIB) program, which commenced April 11, 2025, and terminated on April 10, 2026, the company repurchased 1,286,700 common shares for total consideration of $4.0-million. No common shares were repurchased under the NCIB during Q1 2026.

Conference call and webcast information

Roots will hold a conference call to review its first quarter 2026 results on June 12, 2026, at 8 a.m. ET. All interested parties can join the call by dialling 1-365-657-4084 or 1-833-461-5787 and using conference ID No. 267352366. Please dial in 15 minutes prior to the call to secure a line. The conference call will be archived for replay for a period of 12 months and can be accessed on-line.

A live audio webcast of the conference call will be available on the events and presentations section of the company's investor website. 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.

About Roots Corp.

Established in 1973, Roots is a global lifestyle brand. Starting from a small cabin in Northern Canada, Roots has become a global brand that, as at the end of Q1 2026, operated 96 corporate retail stores and 11 short-term pop-up locations in Canada, two stores in the United States, and an e-commerce platform. Roots has more than 100 partner-operated stores in Asia and the company also operates a dedicated Roots-branded storefront in China. Roots designs, markets and sells a broad selection of products in different departments, including women's, men's, children's and gender-free apparel, leather goods, footwear and accessories. Roots' products are built with uncompromising comfort, quality and style that allows you to feel At Home With Nature. Roots offers products designed to meet life's everyday adventures and provide you with the versatility to live your life to the fullest. Roots also wholesales through business-to-business channels and licenses the brand to a select group of licensees selling products to major retailers. Roots is a Canadian corporation doing business as Roots and Roots Canada.

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