FINANCIAL POST

ROOTS STOCK DROPS NEARLY 17% IN ITS MARKET DEBUT.

TORONTO • Shares of retailer Roots Corp. had a less-than-stellar initial public offering, plummeting more than 16 per cent on the stock’s first day of trading.

The stock was priced at $12 per share at market open, but quickly fell to a low of $9.48 by early afternoon. The shares were down 16.67 per cent, at $10.00 on the Toronto Stock Exchange at the close of markets Wednesday.

For the heritage-fashion retailer, the switch from being a private company for more than four decades comes against a challenging retail environment that’s seen numerous bankruptcies, mass store closures and layoffs in recent years.

“We are in the early stages of leveraging our strategic operational investments to support our continued growth in Canada, the United States and internationally,” said Roots CEO Jim Gabel in a released statement. “Our TSX listing provides an additional platform to help us unlock the potential of the Roots brand.”

The debut of Roots as a publicly traded company follows recent initial public offerings by other Canadian fashion companies, including Aritzia Inc. and Canada Goose Holdings Inc. Shares in Canada Goose have soared since they began trading earlier this year, however Aritzia shares are now well below their IPO price.

The bank also warned rising Canadian household debt levels were a risk to the economy. Future rate hikes are expected to have an increasingly acute impact on Canadian families, the bank said, as household debts continue to rise.

Household incomes and wages are also expected to rise in the near term, but that trend could eventually expose more Canadians to costlier debts, particularly as consumer spending remains robust.

“This would provide a boost to economic activity, but it could further exacerbate the macro-economic and financial vulnerabilities associated with high household indebtedness,” the monetary report said.

Canadian household debt as a percentage of disposable income is among the highest in developed nations, according to data from the Organization for Economic Co-operation and Development (OECD).

Canada’s debt-to-disposable income was 175 per cent in 2015, the eighth-highest in the group. Greece, the median country among OECD members in terms of debt-todisposable income, was 119 per cent in 2015.

The BoC decision also cited overheated housing markets as a risk to growth, saying that a sharp fall in regional housing prices “could further weigh on consumption through negative wealth and collateral effects.”

Analysts at Canadian Imperial Bank of Commerce said in a note that “Governor Poloz now appears to be back on the sidelines” as BoC awaits a rise in inflation and a firmer growth in wages.

Douglas Porter, the chief economist at BMO in Toronto, said in a note the bank “sounded considerably more cautious.” BMO now expects the central bank to hike rates next March, rather than January, and is forecasting a total of three hikes in 2018, down from an earlier estimate of four.

Poloz said Canada appeared to be in a ‘sweet spot’ in which the economy was expanding, but that growth doesn’t appear to be accompanied by an equal rise in inflation.

“There does not appear to be any immediate urgency to further increase interest rates, although this ‘sweet spot’ also clearly implies that the current low level of rates will become increasingly unneeded,” Porter said.