Roots (TSX:ROOT) has been a disappointment since its initial public offering in late 2017. Shares have been in a steady decline since the spring of 2018. Disappointing internal results and anxiety over the "retail apocalypse" has driven investor sentiment into the latter half of 2019.
The company is set to release its second quarter fiscal 2020 results on September 11. This comes after a first quarter loss that deepened from the prior year. Its direct-to-consumer gross margin fell to 54.7% in Q1 FY2020 compared to 59.1% in Q1 FY2019. Roots put much of its focus on improving its inventory position and leveraging discounts to achieve short-term goals.
As far as value is concerned, Roots stock looks appealing. Shares boast a price-to-earnings ratio of 14.6 and a favourable price-to-book of 0.5. Its P/E sits around the industry average. The stock also has an RSI of 26 as of mid-afternoon trading on September 9. This puts Roots in technically oversold territory ahead of its earnings release.
Clothing stocks have been a risky proposition over the course of this decade. Even high-growth retailers like Canada Goose are seeing their stocks suffer due to broader pessimism around the industry.
Roots has struggled over the past year, posting no earnings-per-share growth. The value argument can be made for Roots stock ahead of its next earnings release, but I’d prefer other high-growth options in this sector right now.
