Retailers all throughout the spectrum have been nervously eyeing jobs reports, confidence figures, and just about anything else in the hope of discovering when shoppers will start feeling good enough to start spending money again. Roots (TSE:ROOT), a Canadian clothing retailer, believes that the answer is sooner than you might think. Investors cheered and sent shares up over 2% in Wednesday afternoon’s trading.
While on an analyst call, Roots’ CEO, Meghan Roach, noted that interest rates were having a lot of impact on consumer spending, and that impact should continue through the first half of this year, which is now itself half complete. Meanwhile, that impact should start to lessen as the second half of 2024 fires up in just under three months.
Of course, that’s dependent on a range of conditions—not least of which is the Bank of Canada actually deciding to cut interest rates—but if those conditions come to pass, then the consumer should feel a little better about picking up some new clothes at Roots, among other things.
Earnings Show Troubling Signs
Such a development can’t come too soon for Roots, who saw earnings decline with the latest report. Its latest quarter featured sales of $108.2 million, which is objectively good. However, that figure pales against the same quarter a year prior, when it brought in $111.5 million. That’s a reduction of 3%; not the kind of thing it will likely have to close stores over, but certainly not the direction they wanted to go.
Nevertheless, Roots has been frantically trying to fight back through recent partnerships with streetwear brand Clot, as well as an attempt to take advantage of the recent Barbie frenzy. Still, that couldn’t provide an expanded growth rate.
Is Roots Stock a Buy?
A look at Roots’ last month of trading saw little action until the end of March when volatility—and most of it negative—kicked in. A major rally recently, however, sent shares spiking, and the end result is that Roots stock is up 4.17% during this timeframe.
