On September 14 it was reported that clothing brand Roots Ltd. filed for an initial public offering seeking to raise $200 million for the share sale and aiming for a market valuation of $700 million. Roots reported improved sales in 2016 but falling profits which may give investors pause as another clothing company looks to throw its hat in the ring. Roots Ltd. plans to file under ROOT on the Toronto Stock Exchange.
Canadian clothing manufacturer and retailer Canada Goose Holdings Inc (TSX:GOOS)(NYSE:GOOS) debuted on the Toronto Stock Exchange on March 16 and has seen its stock price increase 13.3% since then. The company has also boasted two straight quarters that beat analyst expectations and saw director-to-consumer sales and wholesale business sales shoot up.
The last few years have seen smaller Canadian retailers like Reitmans, Danier Leather, Mexx Canada, Le Château, and others shrink as conventional retail is under assault from e-commerce competitors like Amazon.com, Inc. With this in mind, does it make sense to target the Roots Ltd. IPO?
In spite of challenges and not yet becoming profitable I like Canada Goose for its electric brand recognition, the top quality of its product, and its commitment to the expansion to other seasonal wear. Roots Ltd. is another quality brand but functions as more of a middle retailer, though one with a loyal customer base stretching its history back to 1973.
I would hold off buying shares before seeing further results from the company demonstrating it can show growth in profit into 2018.
