Canadian clothing retailer files for IPO
Canadian retailer Roots plans massive expansion
Canadian clothing retailer, Roots, is planning to go public. It has applied to list on the Toronto Stock Exchange under the symbol ROOT. It plans huge expansion across international markets which include North America, China, Taiwan, Singapore and Malaysia in phases. With the listing on the stock exchange, the four-decade old heritage-fashion retailer will up move from being a private company. It faces the challenges of a retail environment that has seen numerous bankruptcies, and mass store closures and layoffs in recent years. The retailer follows other Canadian fashion companies that have brought initial public offerings. The retailer, which operates 120 stores in North America, provides poor boy style hats and woolly winter mitts. The company’s products have adorned Canada’s Olympic athletes apart from consumers.
The company operates 136 stores in Taiwan and China in partnership. It plans a number of new stores in North America that includes 10 stores in Canada and 14 in the United States by the end of its 2019 financial year. The retailer also eyes 25 more locations in Taiwan and China during the same period. It also plans more partnerships in other markets.
“When you have such large expansion goals and projections, then it makes sense to go forward with an IPO,”
said Tamara Szames, a Canadian fashion and apparel analyst for the NPD Group.
The initial public offering would provide some of the capital necessary to fund the expansion plan.
The price and the number of shares being sold by Searchlight, Budman and Greenwas not immediately disclosed. The private investment purchased a majority stake in Roots in 2015.
The company’s IPO comes against “a favourable backdrop,” said Craig Fehr, principal investment strategist at Edward Jones Investments.
Investor sentiment is quite positive, equity markets have a lot of momentum behind them and stock prices are up across the board, he said.
Additionally, Roots disclosed financial growth in its preliminary prospectus that’s quite strong, he said, a good sign that it’s managing ongoing disruption to the retail industry.
Shares of Toronto-based winter-coat maker Canada Goose have soared more than 40 per cent since they began trading earlier this year, but shares of Aritzia have struggled and fallen well below their IPO price.
Fehr said that a company with a niche offering like Canada Goose is more likely to succeed.
Investors may be more comfortable betting on a luxury retailer whose parkas sell for upwards of $1,400, added Szames, than on Aritzia, which sells its goods at a price range where many retailers are struggling.
Roots, which points to its leather goods and footwear products as a possible area of expansion, could position itself in a high price bracket, Szames said.
However, both IPOs had one thing in common, she said, highlighting that each stock soared on the first day of trading.
Szames anticipates Roots will be seen as a similarly hot item.
“We’re going to see that surge,”
she said, adding no one can predict what will happen next.
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