Annual l and General ral Meetin ing JUNE 15, 2018 JUNE 15, 2018 - - PowerPoint PPT Presentation

Annual l and General ral Meetin ing

JUNE 15, 2018

Fiscal al 2017 Annua nual l Genera ral l Meeting ing

JUNE 15, 2018

President & Chief Executive Officer

Jim Gabel

Agenda

1. Formal business 2. Corporate presentation

3

Chairman of the Board

Erol Uzumeri

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 not recognized measures under 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 Adjusted DTC Gross Margin, EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted net income per share. This presentation also refers to comparable sales growth, a commonly used metric in our industry but that may be calculated differently compared to other companies. 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. Definitions and reconciliations of non-IFRS measures to the relevant reported measures can be found in our Management Discussion &Analysis (MD&A) dated June 12, 2018 under “Cautionary Note Regarding Non-IFRS Measures and Industry Metrics”, which is available on SEDAR at www.sedar.com.

Forward-Looking Information

Certain information in this presentation 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 are made as of June 15, 2018. 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 MD&A and Annual Information Form dated April 17, 2018, which are available on SEDAR at www.sedar.com, for a discussion of the uncertainties, risks and assumptions associated with these forward-looking 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.

5

6

Formal Business

• Presentation of

Financial Statements

• Election of Directors
• Re-appointment of Auditors

Corporate Presentation

President & Chief Executive Officer

Jim Gabel

9

Unl nlocking the

• cking the

po poten tential tial of

• f a

a br bran and d wi with a th a 44 44-year year hi history story

9

Ensuring the Roots brand consistently appeals to, and connects with, our target global omni-channel consumer, while respecting Roots heritage and longstanding core values. Strategically investing in people, systems, processes and infrastructure to fuel accelerated and sustainable long-term growth.

Moderni rnizi zing ng the Br Brand Transfo sform rming ing the Busine ness ss

10 10

Roots Today: The Brand

Our Brand Position

11 11

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 Legendary Feel, so our consumers can confidently express their best self.

Target Consumer

Life and Style Collector

12 12

13 13

Diversified Product Portfolio

* Percentage of FY2017 revenue

Footwear

2%*

Kids

13%*

Accessories

12%*

Leather

11%*

Apparel

62%*

A Product Architecture Rooted in our Heritage

14 14 World famous iconic pieces

Seasonal favourites that bring you back year after year

Exciting products for repeat visits

Monthly Quarterly + Seasonal All-Year-Round

Seasonal Excitement ~30% Perennial Favourites ~50% Enduring Icons ~20%

Roots Today: The Business

44-year track record Authentic premium lifestyle brand with global appeal and world-famous product International footprint Multiple growth levers Significant runway for growth

A Growing Company

15 15

Moving to a Single Global Brand Range

16 16

• Enhanced products and assortments
• Right product, right number
• f units to the right locations
• Coordinated collections across categories

Operating efficiencies Gross margin improvement

• Formalized, analysis-driven

approach to building assortment

• Improved costing
• Greater scalability

Sales growth Fewer markdowns Increased units per transaction

Editing out slow-sellers and amplifying the best products

Leveraging Operational Investments to Drive Sales and Margin Expansion

17 17

+

Investments already made Accelerating future growth Margin expansion Comparable sales growth Leadership

Functional expertise and

• perational experience

Merchandising

consumer-focused strategy

Infrastructure

POS, HRIS, LMS

eCommerce

Further enhancing our

• nline storefront

Growth in Canada: Growing store network in high traffic areas

18 18

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

* *

20%

average sales uplift1

Growth in Canada: Renovate and expand high-potential performing stores

19 19

+

20%

+

average incremental contribution margin

Lakeshore before Lakeshore after

24-28

Store optimizations remaining to achieve end of Fiscal 2019 target

Lakeshore Store

After

Lakeshore Store

Before

*

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

20 20

Increase traffic across omni-channel network

Growth in Canada: e-Commerce, fastest growing part of business

• Progressive environment of
• ngoing innovation
• Seamless omni-channel experience
• Shipping to more than 50 countries

21 21

20-22%

• f DTC sales

Target by end of Fiscal 2019 *

Strategically Expanding US Footprint

Washington Chicago Boston

The Natick Mall, Massachusetts

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

22 22

10-14

Target new locations by end of Fiscal 2019

*

Expanding in International Markets: Taiwan & China

Shanghai No.1 Dept Store Yaohan Xindian FSS New Taipei City Taipei 101

7-12

New store opens remaining to achieve end of Fiscal 2019 target

23 23

Footprint as at end of Q1 2018

• 112 Taiwan
• 30 China

New stores

• 11 new stores H2 Fiscal 2017
• 2 new stores Q1 Fiscal 2018

*

Expanding in International Markets: other markets offer unique potential

• Progressing plans for Hong

Kong, Singapore and/or Malaysia with existing partner

• Conversations underway with

potential partners for expansion into other international markets

24 24

Ho Hong ng Kong

• ng

Singapor ngapore Ma Mala laysia sia Th The Rest st of

• f

the he Wor

• rld

ld

24 24

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 jackets, to enhance connection with the consumer

25 25

Setting stage for accelerated growth in Fiscal 2019

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

26 26

Setting stage for accelerated growth in Fiscal 2019

The Right Strategy and the Right Team

27 27

• Deep-rooted connection with

consumers

• Recognized as one of Canada’s

most iconic brands

• 24/7 access to brand through

seamless omni-channel

• Product and brand values that

have resonated for more than four decades – stronger today

• 44-year track record
• Authentic premium lifestyle brand

with global appeal and world- famous product

• International footprint
• Multiple growth levers
• Significant runway for growth

Consumer Investor Positioned for continued growth

Financial Review

Chief Financial Officer

Jim Rudyk

Record Fiscal 2017 Results

12.1%

Fiscal 2017

COMPARABLE SALES GROWTH

+15.7%

Fiscal 2017

SALES GROWTH

+26.6%

Fiscal 2017

ADJUSTED EBITDA GROWTH1

+35.7%

Fiscal 2017

ADJUSTED NET INCOME GROWTH1

30 30

Comparable Sales Growth

8.3%

Fiscal 2016

12.1%

Fiscal 2017

3.3%

Q1 Fiscal 2017

6.4%

Q1 Fiscal 2018

31 31

Since start of transformation in 2016, Company has delivered 9 consecutive quarters of positive comparable sale growth

Sales

Fiscal 2017

($ millions)

Q1 Fiscal 2018

($ millions)

Fiscal 2016 Fiscal 2017

+16.3%

YoY Increase in DTC Sales

+15.7%

YoY Increase in Total Sales

Q1 Fiscal 2017 Q1 Fiscal 2018

+9.0% +5.8%

281.9 326.1

48.2 51.0

32 32

YoY Increase in DTC Sales YoY Increase in Total Sales

Adjusted DTC Gross Margin

Fiscal 2017 Q1 Fiscal 2018

+206

Basis Points

56.4% 59.1%

Q1 Fiscal 2017 Q1 Fiscal 2018

+271

Basis Points ~100% benefit from:

• Reductions in costs
• More favourable

product mix of higher- margin items

• More full-price selling

Negligible net F/X gains 33 33 90% benefit from:

• Reductions in costs
• More favourable

product mix of higher- margin items

• More full-price selling

10% net F/X gains

57.3% 59.4%

Fiscal 2016 Fiscal 2017

Key Investments

Supporting higher sales Driving long-term growth

• Enhanced consumer experience
• More stores
• Renovations, relocations

and expansions

• e-Commerce platform
• Great leaders and professionals joining

the team

• Building a global brand

34 34

In Inve vesting sting in in the the gr growth

• wth
• f
• f the

the bu busi siness ness

Adjusted EBITDA

• Sales growth
• Gross margin

improvements

• Strategic investments

in growth

35 35

Fiscal 2017

($ millions)

41.6 52.6

Fiscal 2016 Fiscal 2017

• 1.7
• 3.1

Q1 Fiscal 2017 Q1 Fiscal 2018

Q1 Fiscal 2018

($ millions)

Adjusted Net Income Per Share

36 36

• Better effective tax rate
• Reduction in interest

expense

0.51 0.69 Fiscal 2016 Fiscal 2017

• 0.09
• 0.11

Q1 Fiscal 2017Q1 Fiscal 2018

Fiscal 2017

($)

Q1 Fiscal 2018

($)

Balance sheet

37 37

• Generate strong

free cash flow

• Improve net debt

leverage ratio

• approx. ½ turn YoY
• Improving turns with

target of 4

• Improving aging
• Very low maintenance

capex requirements

• Growth capex primarily

focused on retail stores and eCommerce

• Additional capex

investments based on growth of business

Debt Inventory Capex

New Integrated Distribution Centre

Leveraging 44-years of in-house experience Support accelerated long-term growth Single inventory for stores and eCommerce Improve speed, productivity and overall throughput Drive efficiencies Anticipated cost per unit savings of 20% or more in Fiscal 2020 and beyond1

38 38

~$16M capex investment through end of Fiscal 2019

• Integrated fulfillment center for

stores and eCommerce

• Bringing Roots-operated retail

fulfillment and third-party eCommerce fulfillment into single Roots-operated facility

• 209,000 sq. ft
• 40 shipping/receiving docks
• 30 ft racking
• Tier 1 Warehouse Management

System

• Increased automation

Fiscal 2019 Financial Targets

39 39

Sales

(in $ millions)

282 410-450

FY2016A FY2019E

Adjusted EBITDA

(in $ millions)

42 61-68

FY2016A FY2019E

Adjusted Net Income

(in $ millions)

21 35-40

FY2016A FY2019E

FY2016A – FY2019E CAGR

13-17%

FY2016A – FY2019E CAGR

14-18%

FY2016A – FY2019E CAGR

18-23%

+300 bps

Adjusted DTC margin over FY2016

Modernizing the Brand & Transforming the Business

40 40

2/3 growth from Canada

Strategically investing in growth Stronger foothold in US market e-Commerce 20-22% of DTC sales Expanding presence in Taiwan and China Positioned to enter new international markets Solid foundation for growth in leather and footwear Opportunity to double business in Canada 100+ store opportunity in the US Further growth of e-Commerce as percent of total DTC sales Stronger global brand with larger international presence Accelerated growth in leather and footwear

By end of Fiscal l 2019 Fiscal l 2020 0 and Beyond

Annual l and General ral Meetin ing

JUNE 15, 2018

Fiscal al 2017 Annual l General Meeting

JUNE 15, 2018