Good morning. My name is Christelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Roots Fiscal 2021 first quarter conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. On the call today, we have Meghan Roach, Chief Executive Officer, Mona Kennedy, Chief Financial Officer, Kristen Davies, Head of Investor Relations for Roots.
Before the call begins, the company would like to remind listeners that the call, including the Q&A portion, may include forward-looking statements about current and future plans, expectations and intentions, results, levels of activities, performance, goals or achievements, or any other future or events or developments. This information is based on management's reasonable assumptions and beliefs in light of information currently available to Roots, listeners are cautioned not to place undue reliance on such information. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected. The company refers listeners to its Fiscal 2021 First Quarter Management's Discussion and Analysis and/or its annual information form dated April 7th, 2021, for a summary of the significant assumptions underlying forward-looking statements and certain risks and factors that could affect the company's future performance and ability to deliver on these statements.
Roots undertakes no obligation to update or revise any forward-looking statements made on this call. The Fiscal 2021 First Quarter earnings release, the related financial statements, and the management's discussion and analysis are available on SEDAR as well as on the Roots investor relations website at investors.roots.com. Finally, please also note that all figures discussed on this conference call are in Canadian dollars unless otherwise stated. Thank you. Ms. Davies, you may begin your conference.
Thank you, operator. Good morning, everyone, and thank you for joining us. Meghan Roach, our Chief Executive Officer, will discuss our fiscal 2021 first quarter operational performance as well as our strategic outlook for the fiscal year. She will turn the call over to Mona Kennedy, our Chief Financial Officer, who will discuss our financials in greater detail. After that, we will open up the call to questions. Meghan?
Thank you, Kristen. Good morning, everyone, and thank you for joining us. Over the past 5 quarters, we've navigated unprecedented disruption in our industry as a result of COVID-19. However, by remaining focused on what we can control, we have significantly strengthened the fundamentals of the business, establishing a solid base on which to build long-term profitable growth. Our first quarter results highlight the continued excitement of our customers for the brand with enthusiastic responses to new product initiatives and the positive sell-throughs of beloved classics. They also highlight the continued strength in our omnichannel capabilities as customers take advantage of our multi-channel shopping experience and our success in driving operational and cost efficiencies. In terms of gross margin as achieved specifically, we generated improvements year-over-year as well as significant progress relative to Q1 2019.
During the quarter, we continued to leverage our digital capabilities, our single pool inventory at our distribution center, and our store fleet to successfully serve our customers through an omnichannel lens. E-commerce increased across 50% year-over-year, helping to offset declines caused by store closures. As we have seen in previous periods where our stores were open, our customers are also shopping with high intent to purchase, which resulted in store conversions continuing to outperform prior years. From a product perspective, we generated excitement with new and existing customers through a series of partnerships and collaborations, including Revolutionnaire, Emma Knight, and Adventure Station. We also partnered with LL Cool J on The Weeknd to design limited edition award jackets during the quarter that created significant brand hype. In many cases, these products sold out within days of launching.
Collaborations and partnerships will continue to play an important role in the business going forward. As highlighted in previous quarters, these relationships enable us to speak to new customers, to test new categories, innovate within our core products, and create excitement amongst our loyal customer base. While customers love our collaborations, our heritage pieces also played a significant role in driving our business in the quarter. We continue to see many of our core products in our top sellers, and we released the Roots Retro collection, nine historic styles to incredibly positive customer response. The collection was a relaunch of our beloved Roots logo from the company's archives in updated colors and silhouettes. We also saw an opportunity to attract new customers and give existing customers a reason to buy a new leather item by playing with color this season.
For example, we offered seven new colors in our Banff Bags, a product first launched in 1988 to great success. It's a good reminder that as a brand, we've been around for almost 50 years. We have deep archives of incredible products. We see significant opportunity to continue to innovate with our new products, and as we saw in the quarter, even small things can quickly be very impactful. In line with our strategic shift strategy, we also continue to test new products, particularly those that can be made or finished at our leather factory. In 2020, we demonstrated our ability to successfully expand beyond our made in Canada leather products by producing scrubs and then fabric masks in our factories. In Q1 2021, we tested the previously selected with our first ever limited edition drop of made in Canada fleece embroidered at our leather factory in Toronto.
Each sweatshirt represented three and a half hours of artistry, more than 164,000 stitches in nine sets of hands, and 22 colors of thread. With a small product run, we saw it promised to sell out in a one weekend at a price more than double that of other sweatshirts on the site. Turning briefly to our international business. Taiwan is showing signs of recovery, although we continue to expect volatility as they work through the impacts of multiple waves of COVID-19. China is also progressing in the right direction for us, and we continue to believe in the long-term growth potential of the United States. In both the United States and China, we also continue to believe a digital-led strategy is the most appropriate strategy near term.
At this stage, the majority of our directly operated stores are in Canada, a market that remains significantly challenged by the impacts of COVID-19. As such, our continued success in navigating these unprecedented times is a lot of the strengths of the brand, our products, and our business. Over the longer term, we believe we can extend the strength internationally to drive further growth. Celebrating diversity, equality, equity, inclusion, and delivering on positive impacts within our communities remain important areas of focus for us and integral to the Roots brand. During this quarter, we donated a portion of our sales from our made in Canada fabric masks to select collaboration items with two amazing organizations. The first is The Black Academy, which is dedicated to breaking down barriers of discrimination and combating systematic racism in Canada by elevating inspiring Anglophone and Francophone Black talent across the country.
The second is GEM, our Girls E -Mentorship program designed to help the next generation of women leaders develop professional skills, pursue higher education, and build successful career paths. I'm also personally excited to participate as a mentor in the program for 2021. We also played a role in supporting vaccine rollout here in Ontario. We arranged a vaccination clinic for our team in the surrounding communities of the distribution center, and we also gave employees paid time off to encourage them to get vaccinated. The team worked tirelessly to support the rollout of these vaccinations, and we will continue to do our part in the global fight against the pandemic.
It feels we're currently transitioning to a more hopeful phase, but over the battle continues for many, and our thoughts are with those who have been affected by COVID-19 and the communities and countries that are in early stages in their recovery than we are here in Canada. We also continue to progress our diversity, equality, equity, and inclusion initiatives within our organization. We have created other projects and we're maintaining our momentum behind these efforts, recognizing that long-term meaningful change will take time, and as we all know, the work around diversity, equality, equity, and inclusion is never done. As we look to the second quarter, the uncertainty of the pandemic remains in Canada, including government-mandated store closures that are currently expected to persist through July. Over the last five quarters, we've been focused on what we can control and softly responding to that which we cannot.
While we cannot control the provincial reopening plans or the changes in government subsidy programs, we are maintaining discipline in our operations to help offset these impacts where possible. Overall, we've strengthened the fundamentals of the business over the last five quarters in a way that has positioned us well for future growth. We are optimistic that with the vaccine rollout accelerating, we will start to see increasing recovery as we course. We are confident that as we slowly emerge from this pandemic, customers will continue to seek expressive styles without sacrificing the comfort, quality, and versatility to which they've become accustomed. We also continue to believe that digital convenience will be important to customers going forward. These are all areas of strength for Roots, and in many cases have been for almost 50 years.
With a focus on the long term, we plan to amplify our current plan with great creative, strong product execution, and targeted investments focused on driving profitable growth, all while continuing to support our communities. Before I turn the call over to Mona, I wanted to acknowledge the Roots team and their continued hard work and perseverance. The actions we took in 2020, which have carried forward into 2021, have had a meaningful impact on the business and position us well for a bright future post COVID-19.
Thanks, Meghan, and good morning, everyone. During the first quarter and now into our second quarter, we continue to face headwinds and uncertainty as a result of government-mandated store closures and operating limitations. Nonetheless, in Q1 2021, we delivered sales growth, gross margin expansion, and bottom-line improvements.
Our Q1 results continue to demonstrate a few key factors: customer excitement for and loyalty to the brand, our robust omnichannel capabilities, and our success in driving operational and cost efficiencies. Looking at our financial results in greater detail. Total sales in the first quarter were CAD 37.3 million, up 24.7% from total sales of CAD 29.9 million last year. DTC sales were CAD 31.4 million, a 27.6% improvement over CAD 24.6 million last year. Our year-over-year sales increase was driven by stores, e-commerce, and the P&O segment. Our stores were closed for approximately 30% of the quarter in comparison to 50% last year. We naturally saw higher sales just by the nature of being open for more of the quarter. However, we're also encouraged by having seen sales close to pre-pandemic 2019 and 2020 levels when our stores were all open in the quarter.
In terms of e-commerce, as you have seen in previous quarters, e-commerce growth moderates as stores reopen. However, online sales were still up approximately 50% year-over-year, and that is on top of the growth we achieved in Q1 2020. On the partners and other front, sales were CAD 5.9 million, up from CAD 5.3 million last year.
This was primarily a result of an increase in our Asia partner business in Taiwan, which was significantly impacted by temporary store closures and reduced traffic last year as a result of COVID-19. It was also the result of a shift in timing of wholesale orders that contributed to higher sales in the quarter. We had another quarter of strong growth margin improvements as a result of our continued promotional discipline. At 61.2%, our DTC growth margin for the first quarter improved 320 basis points over the 58% we recorded last year. We continue to manage our expenses tightly while closely monitoring our top-line performance. We recorded CAD 25.9 million in selling, general, and administrative expenses for Q1 2021, down from CAD 27.8 million last year. The year-over-year decrease predominantly reflects our continued effort to reduce costs and increase efficiencies.
These savings were partly offset by higher variable costs as a result of the year-over-year increase in DTC sales, as well as higher costs related to investments in talent and marketing. Our Q1 SG&A also reflects CAD 2.5 million in government wage and rent subsidies, which compares to CAD 1.3 million last year. We realized CAD 1.7 million in SG&A savings related to the U.S., predominantly as a result of the permanent closure of seven of our U.S. stores a year ago. Reflecting our sales growth, gross margin expansion, cost savings, and the benefit of government subsidies that helped offset the impact of store closures in the quarter, we recorded an adjusted EBITDA of negative CAD 2.5 million, a CAD 5 million improvement over negative CAD 7.5 million we recorded in Q1 2020. Turning to inventory. Our inventory balance at the end of the quarter was CAD 42.5 million.
Up slightly over CAD 40.3 million a year ago, it is primarily a result of our pack-and-hold strategy. As I'm sure you're aware, there are industry-wide concerns about delivery delays, largely as a result of the evolving pressures on our supply chain from COVID outbreaks in India, Southeast Asia, as well as congestion at the ports. We aren't seeing any material impact at the moment, as we took precautions early and moved delivery dates up in our calendar. While in some cases product is arriving later than initially planned, it continues to be seasonally relevant. It is the buffers that we have built in that are being squeezed or lost. This is something we continue to monitor very closely, and we can turn to our pack-and-hold inventory, layering it in to bridge delays as needed.
At quarter ends, we had an outstanding revolver balance of CAD 10.5 million and had net cash of CAD 4.1 million, with net debt of CAD 76.4 million, down from CAD 97.3 million in Q1 2020. Subsequent to the quarter, on the back of our strong profitability in 2020, we amended our credit agreements. We extended the original maturity date of September 2022 to September 2024, demonstrating the ongoing support of our lenders. In addition, CIBC reduced our CAD 75 million revolving credit facility to CAD 60 million, reflecting improvements in the borrowing needs of our business. We're pleased with our Q1 results, including the significant improvements in gross margin, SG&A, and adjusted EBITDA relative to Q1 2019, pre-pandemic.
As we're now progressing through Q2 2021 and government restrictions are slowly lifting, we have been able to reopen our stores in Quebec and Nova Scotia, and today we're reopening 26 of our 62 Ontario locations at 15% capacity. Nonetheless, we anticipate having a higher number of temporary corporate retail store closures in Ontario, which is our largest market and typically includes our highest revenue stores in comparison to the second quarter of last year. In addition, we're operating under tighter government-mandated capacity limitations than last year. To partially offset the short-term pressures, we will continue to manage costs and leverage government programs. However, due to the changes in the program, the government wage subsidy is available at a declining rate compared to Q2 2020. To put it into context, in Q2 2020, the subsidy rate was 75%.
Under the new formula, our effective rate would've been less than half of that for the same period. We remain confident in our ability to deliver on the areas of the business within our control. Through all of our efforts over the last five quarters, we have reduced our cost base, captured efficiencies, strengthened the overall fundamentals of the business, all while continuing to build on nearly half a century of brand strength. As such, as government operating restrictions ease and short-term pressures alleviate, we expect to return to recovery. In closing, I wanted to echo Meghan's gratitude for the entire Roots team for another quarter of hard work and commitment despite the ongoing challenges as a result of the pandemic. With that, operator, please open the line to questions.
Thank you. At this time, if you would like to ask an audio question, please press star one. Once again, that is star one to ask an audio question. One moment for your first question. Your first question comes from the line of Brian Morrison with TD Securities.
Hi. Good morning.
Good morning.
Meghan and Mona. First question, you've done a very good job of optimizing your gross margin and SG&A, and I'm curious if you feel maybe outside of scale if there's any additional identifiable buckets for further improvement, maybe specifically through your omnichannel capabilities.
Sorry, Brian, you cut out a little bit there. The sound is not very good. Do you mind repeating your question?
Yeah, sure. Sorry, Mona. Good morning. You've done a very good job of optimizing your gross margin and SG&A. I'm just curious if you feel maybe outside of scale, if there's any additional identifiable buckets for further cost improvement, specifically through your omnichannel capabilities.
Well, I think when I think about margin and cost, those are areas that we're going to continually focus on, as it relates to the business, right? As our omnichannel business kind of expands, we will continue to focus on those areas to increase contribution margins. When I think about cost savings, we've had a number of areas where we've seen permanent cost savings as it relates to the U.S., as it relates to our store labor being more efficient, as it relates to our corporate costs being more efficient. I think those are permanent cost savings that we're going to continue to see. On the margin front, you've seen it kind of now five quarters in a row. We're working on it, and we're seeing great expansion in margins. We're going to continue to work on it.
As it relates to omni, it's going to become more of our business. We're going to see customers basically shopping where they want to shop. That's where our focus is going to shift, and we've got strategies to focus on that as well.
Brian, if I can just add to that, I think the overarching question, Brian, was also are we going to see any significant pockets, especially in omnichannel, that we're going to see more potential cost savings? I think we've identified a few additional areas that we are looking at for cost savings, but I think we, in 2020, took out a lot, and so I don't think you should expect to see significant incremental cost savings coming in the second half of this year.
Okay, then just on a temporary basis, are there any costs associated? I mean, you're doing a very admirable job of the shift between e-commerce and bricks and mortar with the lockdowns. I'm just wondering if there's any costs associated with the shift during the lockdowns, has this hampered your inventory position at all?
No, it hasn't really hampered our inventory position. Being able to fulfill orders from stores and doing curbside has given customers access to inventory. We've been able to actually access the inventory at stores that have been closed. No, I wouldn't say that it has hampered it, and I think we've kind of managed it fine. As you know, in e-commerce, obviously, there's incremental shipping costs that the stores don't have, but also stores have rent that e-commerce doesn't have, right? I wouldn't say it has hampered it or added incremental cost.
Okay, and then last question, I guess. Your pack-and-hold strategy, I'm wondering if there's a specific season that this pertains to. I would have thought that it would have been spring and summer merchandise, and that we would start to see a lessening impact from this.
Our pack-and-hold strategy, it was inventory both for spring and summer, and also for fall and winter, and we had a pretty even split. We also didn't expect that our stores were going to be closed for a lot of Q1 and also a lot of Q2. Obviously the pack-and-hold strategy didn't move as we had strategized. As stores will open in Ontario starting today, we're hoping to kind of see movement in the summer and spring inventory, and then we still have some for the fall as well. The pack-and-hold inventory that we're sitting on for the fall is actually helping us right now given the challenges at the ports and the delay in shipments. We're actually quite happy about that strategy, and it's benefiting us more than we had expected.
I can only presume that you feel this is all current as well.
Yes.
All right. Thank you very much.
Your next question comes from the line of Patricia Baker with Scotiabank.
Good morning, everyone. Congratulations on the hard work in this quarter and the narrowing of the loss. I've got a couple of questions. The first one is, what more can you tell us about your experience in Q1 in the U.S. now that you've got, for all intents and purposes, an online-only strategy there? What did you see in the markets where you closed stores, and the revenue in the U.S. in the quarter, did it align with what you expected would happen along the lines of this new strategy or approach to the U.S. market?
I'll take that one, Patricia. Yeah, I think we're not going to give you specific details as it relates to each market.
No.
It is a level of disclosure we don't go to. What I can say overall is we continue to be happy with our strategy in the U.S. We do believe that a digitally led strategy for us in the near term is the right way to go. We think we have a lot of potential to continue to grow our e-commerce business there, we're happy with the way it's currently performing. It is a small part of our business, there is a lot of opportunity still to drive growth. There's still a lot that we need to do to continue to develop our footprint there.
Okay, thank you for that. Secondly, you noted in the quarter that you had higher marketing expenses, and I just have two questions around that. What is the outlook for marketing for the remainder of the year? Secondly, presumably, given the strong sales that you had, that marketing efforts really provided some fuel to drive the top line and was a worthwhile investment for you?
Yeah, absolutely. I think last year, the pandemic had just started in Q1, right? We did everything we could to cut costs as we had so much uncertainty in front of us.
As we face this year, we're making decisions based on returns. As we're being more strategic with our marketing spending, I would expect a little bit of elevated spending with marketing, just because we're going to be investing in areas where there's return. Also additionally, stores were open more in Q1 of this year, which then results in higher marketing spending and investment as it relates to stores. There's going to be a little bit of linkage around store openings as well.
If I may, I'll ask a third question. Q1 was a quarter where you accomplished a lot in terms of creating excitement, and you pointed out all the number of things that you did with the collaborations and partnerships. Should we expect that same level of innovation or new product and partnerships, et cetera, as we move through the remainder of the year? Or was this just a particularly concentrated effort?
We have a lot of collaborations and partnerships coming later on in the year. We've got a few meaningful ones coming more towards the fall, which is our peak trading period. I think Q1, typically, is a lower sales period for us. We tend to try to push things a little bit more into Q3, Q4, when we see everything more eyes on the brand. That being said, from a product innovation perspective, you should continue to expect to see product innovation from us throughout the year. I'm not sure if you saw in the second quarter, but we've been doing a lot of testing and learning. As an example, our Providence crew that I mentioned at the beginning of the call, which was made in Canada and then embroidered at our leather factory, that was CAD 198 crew, and it sold out in days.
Our typical crew on that line is more in the CAD 78-CAD 84 range. We're continuing to test with premium fleece. We're continuing to test new products as it relates to leather categories. We have new fleece products that come in, and then in the fall, we have a number of new product categories and innovations that are coming in. One of our main focus areas as we go forward is to test innovation in our product categories, and then the seed to scale strategy is quite important to drive future growth. You should definitely continue to see more collaborations and also more innovation in the product range going forward.
Okay, tremendous. I look forward to that. Thank you.
Stephen, your line is open.
Oh, thank you. I must have didn't hear that. Thank you. Good morning. I just wanted to follow up on a couple of things here. Specifically, gross margin performance was quite strong in the quarter. You sort of came out of Q4 expecting gross margin to be flat year-over-year. I'm just curious sort of where you saw outperformance against your expectations through Q1.
Yeah, absolutely. In terms of gross margins, we continue to reduce depth and breadth of promotions as we kind of communicated there over the past few quarters. We saw some additional opportunities this year to reduce some promotions that we didn't think were going to have as much of an impact. For example, we had 20% off in e-commerce last year as the pandemic had just started. Also, we had a customer appreciation event in early March of last year that we didn't do this year. We saw some margin improvement there. We're going to continue to focus on that. I think probably your follow-on question will be, are you going to expect to see similar margin improvements in Q2? I think I would have to say that I don't think so. We're going to continue on these strategies.
As you know, we had already started on these strategies in Q2 of last year, so we're going to be comping some of that, and we don't have a lot of additional promotions to eliminate. We're going to continue to focus on full price sales. Given that we had incremental store closures in Q1 of this year and now going into Q2, there is some inventory that we'll have to get through. We have to kind of see how the customers show up and what the demand for the product is. I wouldn't expect similar margin improvements in Q2, but we're really happy with our results in Q1.
Okay. That's great. Thanks, Mona. Maybe expanding beyond Q2, the way we were thinking about gross margins through the year was this reduced promotional activity continuing, maybe kicking in again a little bit in Q4, assuming more of a normalized environment. Is that still your expectation for the year?
Yes. As you know, in Q4 of last year, we were closed during Black Friday and a few of the highly promotional areas, and we missed some promotional sales. Yeah, I would expect that in Q4, we would see some margin decline associated with having a more normalized environment.
Right. Okay. That's helpful. Thank you. Can you give a little bit of color around your channel profitability in-store versus e-commerce? Just trying to assess how mix through the pandemic and coming out of the pandemic will impact margins as you see shifts between in-store versus e-commerce sales.
From a margin perspective, our profitability in store and in e-commerce are pretty equivalent. I don't think it has really impacted our results by that much. We continue to focus on it. We look at it, and if there is any shift, we correct for it. I would have to say that there isn't really that much of an impact. In e-commerce, we've got more variable costs, so costs will go up and down as units go up, including shipping costs. In stores, obviously, we have more fixed costs. In the kind of the past year, we've been able to turn some of those fixed costs into variable. As you know, we've been able to reduce labor, we've been able to negotiate better rents. I would say they're fairly equivalent. I wouldn't say our profitability has been impacted by too much.
Okay. Thank you. Maybe just finally, it sounds like you're opening only 26 of 62 stores in Ontario, as stores are allowed to reopen today. Is there any reason why you're not opening 62? I guess as you think about ongoing openings, when would you expect to have your full store network opened in Ontario?
Yeah, I'll take that one, Stephen. Unfortunately, the government-mandated closures, the way they've done it is that you can only reopen in Ontario today if you have a street front location. Of our stores, the 62 stores that we have in Ontario, only 26 of them have street front locations. We and other retailers will not be able to open our mall-based stores. The government has indicated that by July 2nd, they're hoping to go and open mall-based stores. We, I think like everyone else, are hoping that happens earlier. For the time being, our expectation is that it will be early July before we can open our full suite of stores in Ontario.
Okay. That's helpful. Okay, thank you so much, and congrats on your performance.
Thank you.
Thank you.
Once again, if you would like to ask an audio question, please press star one. Your next question comes from the line of Matthew Lee with Canaccord.
Hi, good morning.
Good morning.
Morning.
Just given the puts and takes involved with Q2 regarding store openings and e-commerce growth, are you expecting to see similar double-digit DTC growth year-over-year in Q2 versus maybe Q1?
Yeah, Matthew, we're not going to give specific guidance for the quarter. I think that when we look at Q2, we want to make sure that we give you just all the information in terms of what we're seeing in light of the government-mandated changes. I think that what's fair to say is that our stores are going to be closed longer. More stores are going to be closed in Q2 and for a longer period of time than we were last year. In addition to that, the stores that are open are operating at a lower operating capacity. I think you have to take that into consideration. I don't think that the growth that we saw in Q1 is repeatable in Q2 as a result of that.
I think, our stores are opening today and 26 of them at least in Ontario, and we are hoping that we'll see some good returns from our customers and because of the high desirability to get out of the house and go shopping. From that perspective, I think you need to take into consideration that year-over-year from a Q2 perspective, more stores are going to be closed and are operating at a lower capacity than they were in 2020.
Right, okay. Okay, maybe put a different way. If restrictions around COVID are completely removed, as they have been in the U.S., are you guys comfortable with your ability to get your stores back up to full speed right away? Is there maybe a process involved that's required to do so?
From the things that are under our control, we're ready to go. I think it's more about how comfortable the customer is in terms of showing up in stores. I think there's going to be a ramp-up period. Traffic has been down. Customers aren't comfortable going into stores. I think we're going to see declines in traffic. Conversion has been high. Whether that conversion is going to completely offset the traffic decline or how big that traffic decline is going to be, I think are still big question marks. We're going to look at it very closely and as stores open today in Ontario and see how customers are showing up. I don't think it's going to be right up to the way it was and back to normal because customers have an adjustment period that they need to get through.
That's fair. Maybe just with regards to your premium fleece in the quarter, longer term and higher level, should we be expecting Roots to move towards that more premium offering in that price range going forward?
Not as for our full collection. I think the way we view our collection is, just like many other brands, is that it's important for us to have a premium offering within the collection because we have desirability from our existing and new customers to buy into those types of products. We think made in Canada is important. We think, using the skills and the artistry that we have in our leather factory to do different and unique things is something that people are desiring. When we did those premium products before, what we've seen is that it is a mix of existing and new customers. Definitely existing customers who are buying a lower priced item are seeing the craftsman quality of the Roots brand and are interested and excited to buy into something in a more premium level.
You should think about it as it's going to continue to be collaborations where there's cream of the crop, right? We've got a core product offering that we will continue to offer and innovate in. We're going to have premium fleece and other items like other leather items, et cetera, to draw the customer in that is either interesting in a more premium price. We're not proposing this as a shift in strategy where all of our products are going to be premium. It's going to be a nice mix of premium items that are drawing in unique and different customer base, as well as giving our existing loyal customers something special to buy.
Thanks. That's it for me.
We have no further remarks. I will turn back to management for closing remarks.
Thank you, operator. That ends our scheduled call today. Really appreciate all of your time, and look forward to seeing you next quarter.
This concludes today's conference call. You may now disconnect.