TORONTO — Viewed as both a milestone and a passing of the torch, the sale of a majority stake in Roots Canada to the private equity firm Searchlight Capital marks the end of an era for the “rustic luxury” retailer. But for Roots cofounders Michael Budman and Don Green, positioning the 42-year-old chain for new growth in a tough global market made the decision to sell to Searchlight — “One we feel good about.”
“The time had come for us to think about the succession of this company,” Budman said.
Budman, 69, and Green, 66, both have children. “Don has three kids and I have two,” Budman explained.
With their offspring pursuing other careers, the pair found in Searchlight — and, in particular, Erol Uzumeri, the Toronto-based firm’s cofounder and partner — an ally to preserve Roots’ authenticity as a brand and expand its profile in Asia, Europe and the U.S. That expansion includes reviving areas of the business that once had a much higher profile, such as leather footwear.
“We see a tremendous opportunity in doing footwear globally and will pour resources into that aspect of the business as we move ahead,” said Budman.
It also includes investing in marketing, boosting store counts — now at 220 across Canada, the U.S. and Asia — and developing Roots’ e-commerce, which currently accounts for 10 percent of the company’s revenues.
“Frankly, we are just scratching the surface,” said Uzumeri. “This company has a great foundation and has stayed relevant without chasing fast fashion. But we definitely see opportunities to grow in terms of e-commerce, wholesale and retail.”
Searchlight Capital acquired a majority stake in Roots for an undisclosed amount. Budman and Green will remain substantial shareholders and stay actively involved with the company.
Searchlight also has investments in M&M Meat Shops and Hunter Boot Ltd.
According to Maureen Atkinson, a senior partner at the Toronto-based retail consultant firm J.C. Williams, Roots’ decision to sell is good news. “Succession planning always raises big questions. But it’s better that this planning be done in a way that is rationalized and not chaotic,” said Atkinson.
“To a great extent Roots is a very different kind of upscale brand. It’s a lot more rough-and-ready, but from a price point it is in that upscale category,” she added.
Moving forward, Atkinson foresees some small loss of market share to competitors. However, customer loyalty is a huge factor in Roots’ favor. “Roots’ customers feel great ownership of this brand, as well as the rustic story it tells and lifestyle it sells,” said Atkinson. “While it is great to see new blood coming into the company, it is critical that everything Roots stands for is not diluted and that it remains intact for its customers.”
Thus far, Searchlight shows no signs of veering from that mandate. According to Uzumeri, this marriage of resources between Roots and Searchlight was an exciting prospect given the retailer’s strong following and heritage.
Well known for its beaver logo, Roots emerged out of its founders’ love for Canada’s great outdoors, which Budman and Green acquired originally as Detroit teens who spent their summers camping in Ontario’s rugged Algonquin Park. In 1973, Budman and Green launched Roots as a footwear company and opened their first store in Toronto, garnering popularity for their Negative Heel shoes. The duo then moved on to sweatpants and sweatshirts, and gained an international profile by outfitting Olympic athletes and celebrities like Madonna, U2 and The Rolling Stones.
Moreover, through the company’s entertainment merchandising and wholesaling division, which launched in 1984, Roots provided product to such films as “Days of Thunder,” “Jurassic Park,” “Iron Man” and “The Bourne Ultimatum.” Roots also nurtured strategic TV partnerships, creating custom product for such iconic television shows as “Saturday Night Live,” “The Sopranos,” “Friends” and “The X-Files.”
More recently, Budman and Green refocused the company’s energies onto their retailing roots of athletic wear and leather goods. But Roots’ athleticwear, toques and leather bags now is gaining ground with a new generation. That, said Uzumeri, “is unusual and is something that we hope to leverage as we move forward.”
“I remember wearing my Roots track pants and sweatshirts to school. It was part of my daily uniform. But today my own children think this brand is right on point,” said Uzumeri.
That observation helped to sway Budman and Green in Searchlight’s favor.
“Over the years other parties have approached us to sell. But Erol, Don and I had the right chemistry,” said Budman. “Erol and Searchlight understood that Roots had created this high-quality, functional product that was also fashionable,” said Budman.
“They also understood that people love wearing the Roots name on their chest,” he added.
“This proprietary product we have created is one of the few great Canadian brands out there today and resonates with a wide demographic. Erol got all that, as well as our desire to do what’s right for the company and take Roots to the next level.”