Author: Consultant

Three-year robust sales run ends amid pull back on home improvements

Home Depot couldn’t keep its protracted robust sales streak going any longer. The home improvement chain reported a dismal quarter as consumer spending on home improvement projects – which was buoyed by the stay-at-home pandemic lifestyle – come to a screeching halt.

The retailer posted disappointing sales for its first quarter and lowered its outlook for the year after customers slowed their spending. Home Depot (HD) said sales fell 4.5% at stores open at least a year during its latest quarter, and its income decreased 6.4% from the same stretch a year ago.

Total revenue for the quarter slipped 4.2% versus a year ago, to $37.3 billion. The retailer also cited falling lumber prices and weather-related challenges, including heavy rains in California during the period, for denting its sales.

“After a three-year period of unprecedented growth for our sector, during which we grew sales by over $47 billion, we expected that fiscal 2023 would be a year of moderation for the home improvement market,” Home Depot CEO Ted Decker said Tuesday.

The company also lowered its sales expectations for the year. It expects sales to decline between 2% and 5% in 2023 from a year prior.

Home Depot hits the brakes: Three-year robust sales run ends amid pull back on home improvements | CNN Business

Automaker Stellantis has stopped all construction at a more-than C$5 billion ($3.74 billion) electric vehicles battery manufacturing plant in Windsor, Canada, over a disagreement with the federal government about subsidies, a spokesperson for the company said on Monday.

“Effective immediately, all construction related to the battery module production on the Windsor site has stopped,” the spokesperson said.

A spokesperson for Canada’s Innovation Minister, Francois-Philippe Champagne, did not immediately respond to a request for comment.

The move comes days after the carmaker and South Korea’s LG Energy Solution Ltd (373220.KS) said they were implementing “contingency plans” related to a more-than C$5 billion ($3.74 billion) battery plant investment in Canada.

Champagne, who described the deal as Stellantis’s largest ever in the Canadian auto sector when it was announced, on Friday said the “auto industry is crucial to the Canadian economy and to the hundreds of thousands of Canadian workers”.

LGES and Stellantis announced their battery plant investment in the country last year, aiming for an annual production capacity in excess of 45 gigawatt hours (GWh) and expected to create an estimated 2,500 new jobs in the Windsor area.

In April, Canada had also agreed to provide up to C$13 billion in subsidies and a C$700 million grant to lure Volkswagen AG into building its North American battery plant in the country.

Canada’s deal with the German automaker for a battery gigafactory, announced this year, is the biggest single investment ever in the country’s electric-vehicle supply chain.

• Turkey’s presidential and parliamentary elections on May 14 could hardly come at a more polarized moment for the country of 85 million.
• Incumbent President Recep Tayyip Erdogan is in the fight for his political life after two decades in power.
• Opposition leader Kemal Kilicdaroglu is gaining in polls as Turks face a cost-of-living crisis and the current government is accused of becoming increasingly authoritarian.

https://www.cnbc.com/2023/05/12/turkeys-erdogan-faces-toughest-test-yet-in-landmark-election-with-high-stakes.html

Monday May 15

Japan machine tool orders

Euro zone industrial production

(8:15 a.m. ET) Canadian housing starts for April. The Street is projecting an annualized rate increase of 4 per cent.

(8:30 a.m. ET) Canadian wholesale trade for March. Estimate is a decline of 0.4 per cent from February.

(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for May.

(9 a.m. ET) Canadian existing home sales and average prices for April. Estimates are year-over-year declines of 18.0 per cent and 3.5 per cent, respectively.

(9 a.m. ET) Canada’s MLS home price index for April. Estimate is a decline of 12.0 per cent year-over-year.

(10:30 a.m. ET) Bank of Canada’s Financial Systems Survey for Spring 2023.

Earnings include: Africa Oil Corp.; Centerra Gold Inc.; Constellation Software Inc.; Headwater Exploration Inc.; K92 Mining Inc.; Premium Brands Holdings Corp.; Seabridge Gold Inc.

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Tuesday May 16

China industrial production, retail sales and fixed asset investment

Euro zone GDP and trade deficit

(8:30 a.m. ET) Canadian CPI for April. The Street is projecting an increase of 0.5 per cent from March and up 4.2 per cent year-over-year.

(8:30 a.m. ET) Canadian manufacturing sales and new orders for March. Estimates are month-over-month increases of 0.5 per cent and 0.6 per cent, respectively.

(8:30 a.m. ET) U.S. retail sales for April. Consensus is an increase of 0.8 per cent from March.

(9:15 a.m. ET) U.S. industrial production for April. Consensus is flat month-over-month with capacity utilization declining 0.1 per cent to 79.7 per cent.

(10 a.m. ET) U.S. NAHB Housing Market Index for May.

(10 a.m. ET) U.S. business inventories for March.

Earnings include: Baidu Inc.; Dream Unlimited Corp.; Home Depot Inc.; Lithium Americas Corp.; Park Lawn Corp.

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Wednesday May 17

Japan GDP and industrial production

Euro zone CPI

(8:30 a.m. ET) Canadian construction investment for March.

(8:30 a.m. ET) Canada’s international securities transactions for March.

(8:30 a.m. ET) U.S. housing starts (and revisions) for April. The Street is expecting an annualized rate decline of 1.4 per cent.

(8:30 a.m. ET) U.S. building permits (and revisions) for April. Consensus is flat.

Also: Canadian and U.S. new motor vehicle sales for March.

Earnings include: Cisco Systems Inc.; Cresco Labs Inc.; Macy’s Inc.; Target Corp.; TJX Companies Inc.

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Thursday May 18

Japan trade deficit

(8:30 a.m. ET) Canada’s new housing price index for April. Estimate is flat month-over-month and down 0.1 per cent year-over-year.

(8:30 a.m. ET) U.S. initial jobless claims for week of May 13. Estimate is 250,000, down 14,000 from the previous week.

(8:30 a.m. ET) U.S. Philadelphia Fed Index for May.

(10 a.m. ET) U.S. existing home sales for April. Consensus is an annualized rate decline of 3.3 per cent.

(10 a.m. ET) U.S. leading indicator for April.

(11 a.m. ET) Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers hold a press conference on the Financial Systems Review.

Earnings include: Alibaba ADR; Applied Materials Inc.; CAE Inc.; Canada Goose Holdings Inc.; Lightspeed Commerce Inc.; Walmart Inc.

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Friday May 19

Japan CPI

Germany PPI

(8:30 a.m. ET) Canadian retail sales for March. Consensus is a rise of 1.4 per cent month-over-month.

(8:30 a.m. ET) Canadian household and mortgage credit for March.

(10 a.m. ET) U.S. quarterly services survey for Q1.

(11 a.m. ET) U.S. Fed Chair Jerome Powell joins a panel on “Perspectives on Monetary Policy” in Washington.

Also: G7 summit in Hiroshima begins (through Sunday).

Earnings include: Deere & Co.

Published: 5/12/2023 3:22 PM ET

Crude oil prices fell on Friday on the dollar’s strength and worries about the outlook for energy demand.

Fears of the U.S. falling into a recession and the impasse in debt ceiling talks boosted dollar’s safe-haven appeal and hurt oil prices.

U.S. Treasury Secretary Janet Yellen warned that a default on the U.S. debt would be catastrophic and was “unthinkable.”

Fears of a banking sector crisis deepened after PacWest announced it lost almost a tenth of deposits in the first week of May.

Federal Reserve Governor Michelle Bowman said in a speech today that interest rates will need to remain sufficiently restrictive for some time to bring inflation down and create conditions that will support a sustainably strong labor market.

The dollar index surged to 102.71, gaining about 0.65%.

West Texas Intermediate Crude oil futures ended lower by $0.83 or about 1.2% at $70.04 a barrel.

Brent crude futures were down $0.72 or 0.95% at $74.26 a barrel a little while ago.

Edward Moya, Senior Market Analyst at OANDA says crude prices are weighed down by the dollar rally and demand concerns emerging from both the U.S. and China.

“News that the US could potentially refill the SPR should mean that we won’t make fresh monthly lows, but that doesn’t mean we can’t see prices soften a bit further here,” he says.

According to a report from Baker Hughes, the total number of total active drilling rigs in the United States fell by 17 this week after falling by 7 last week. It is the largest single-week drop in the number of oil and gas rigs in the United States since June 2020.

The total rig count fell to 731 this week, just 17 rigs higher than the rig count this time in 2022.

Oil rigs in the United States fell by 2 this week to 586. Gas rigs fell by 16 to 141. Miscellaneous rigs rose by 1.

Published: 5/12/2023 5:24 PM ET

After a slightly positive start, the Canadian market slipped into negative territory around mid morning, and despite losing further ground, recovered to end with a small gain on Friday.

The mood was cautious amid concerns about slowing growth in the U.S. and China.

The benchmark S&P/TSX Composite Index ended with a gain of 2.01 points or 0.01% at 20,419.62. The index, which climbed to 20,492.07 in early trades, touched a low of 20,346.90 around mid afternoon. The index shed about 0.6% in the week.

Technology stocks drifted lower, while shares from utilities, industrials, healthcare and materials sectors posted gains. Energy, financials and consumer sector stocks ended on a mixed note.

Shawcor Ltd. (SCL.TO) shares soared nearly 11%. The company reported net income of $25.23 million for the first quarter of 2023, compared with net loss of $6.9 million in the year-ago quarter.

Park Lawn Corporation (PLC.TO) climbed 8.8% after reporting net earnings of $4.58 million for the first quarter of 2023.

Stelco Corporation (STLC.TO), Brookfield Infrastructure Corporation (BIPC.TO), Boyd Group (BYD.TO), Franco-Nevada Corporation (FNV.TO), Canadian Pacific Kansas City (CP.TO), TFI International (TFII.TO) and Teck Resources (TECK.A.TO) gained 1.3 to 3.3%.

Air Canada (AC.TO) reported net income of $4 million for the first quarter of 2023, as against net loss of $974 million in the year-ago quarter. The stock gained about 0.5%.

CI Financial Corp (CIX.TO) plunged more than 17%. The company has agreed to sell a 20% minority investment in its US wealth management business to a group of institutional investors.

Nuvei Corporation (NVEI.TO), Maple Leaf Foods (MFI.TO), Ag Growth International (AFN.TO), Nutrien (NTR.TO), Constellation Software (CSU.TO) and Shopify Inc (SHOP.TO) ended lower by 2 to 4%.

Onex Corporation (ONEX.TO) ended 2.7% down. Onex reported net loss of $2.87 million for the quarter ended March 2023, compared with net income of $1.89 million in the year-ago quarter.

May 10, 8:07AM CDT

Holding company George Weston Ltd. (WN) has raised its quarterly dividend 8% after reporting strong first-quarter earnings.

George Weston has controlling stakes in the Choice Properties real estate investment trust and Loblaw Companies, Canada’s biggest supermarket chain. It also owns the grocery brands President’s Choice, No Name and Joe Fresh.

The company announced that it will increase its quarterly dividend payment to stockholders to 71.3 cents per share from 66 cents per share previously.

The increased payment comes after George Weston reported a Q1 profit of $426 million or $3.01 per share, which was up from $363 million or $2.45 per share a year earlier.

Revenue for the quarter ended March 31 totalled $13.13 billion, up 6% from $12.41 billion in the year earlier quarter.George Weston’s stock has gained 13% in the last 12 months to trade at $174.95 per sha

Air Canada AC-T +0.10%increaseposted its second consecutive profitable quarter on Friday, signalling Canada’s largest airline is slowly leaving behind the financial ruin of the pandemic as travellers return to the skies.

Air Canada’s profit in the first three months of 2023 reached $4-million, compared to a loss of $974-million in the same period of 2022. Operating revenue almost doubled to $4.9-billion from the year-ago quarter due to higher demand for air travel.

When compared with the pre-pandemic quarter of 2019, sales are up by 10 per cent, Air Canada said in the earnings report, released before markets opened on Friday morning.

“Our first-quarter financial results exceeded both internal and external expectations and we expect demand to persist, supported by strong advance bookings for the remainder of the year,” Michael Rousseau, Air Canada’s chief executive officer, said in a statement accompanying the earnings release.

On a diluted per-share basis, Air Canada lost 3 cents a share, compared with $2.72 a share in the year-earlier quarter. Cash flow for the first quarter rose by $1-billion to $1.4-billion, compared with a the same quarter of 2022.

Walter Spracklin, a stock analyst at Royal Bank of Canada, said in a note to clients the results are better than he expected. He pointed to Air Canada’s strong seat bookings in the short term, but said it will be important to watch how demand holds up amid a weakening global economy and competition from discount airlines.

“Demand and pricing is expected to weaken post-summer, [but] we are mindful of a potential structural shift in the nature of airline demand that may see travel hold up despite a weakening economy,” Mr. Spracklin wrote.

Fadi Chamoun, an analyst at BMO Financial Group, said Air Canada’s first-quarter results exceeded expectations due in part to strong ticket sales and fuller planes.

For the first quarter of 2023, Air Canada’s passenger revenues more than doubled, and more than half the increase came from international markets. Revenue per available seat mile, an industry measure of efficiency, rose by 39 per cent, from the year-ago quarter. Costs per available seat mile rose by 2.5 per cent.

The company’s shares are up by 10 per cent this year on the Toronto Stock Exchange.

Montreal-based Air Canada is the country’s largest airline, controlling about half of the domestic market, according to Cirium. Calgary’s WestJet has about 31 per cent.

Air Canada last week raised its profit outlook for 2023 amid strong demand and lower fuel prices. Full-year adjusted earnings before interest, taxes, depreciation and amortization will be between $3.5-billion and $4-billion, up from the previous target of $2.5-billion and $3-billion.

The World Health Organization this week declared an end to the COVID-19 global health emergency, more than three years after it took hold. The pandemic killed millions of people, closed borders and sent the airline industry into a financial crisis.

Air Canada’s losses for the three years of the pandemic total $9.9-billion. In the fourth quarter of 2022, Air Canada made a profit of $168-million, its first profitable period since the onset of the pandemic.

Consumers feeling the sting of inflation are cutting back on non-essential purchases, as they face higher interest rates on their mortgages and steep prices for basic necessities such as groceries.

What is emerging in the retail landscape is in many ways a reversal of the trends seen during the COVID-19 pandemic – when supply chains struggled to keep up with surging demand for big-ticket items such as appliances and furniture, as well as for products such as bicycles and outdoor gear to keep people entertained when travel was restricted.

Canadian Tire Corp. Ltd. CTC-A-T -2.47%decrease was just the latest retailer to point to these trends on Thursday, reporting that demand for discretionary products has weakened, and that shoppers have begun to seek out lower-priced essential products.

The company’s credit card data revealed that overall consumer spending has slowed for the first time since 2020, chief executive officer Greg Hicks told analysts on a conference call to discuss first-quarter financial results. And data from Canadian Tire’s loyalty program showed spending declining at stores across all income groups.

“The current high inflation rates have led customers to prioritize essential products over higher-ticket discretionary ones,” Mr. Hicks said on the call, adding that shoppers are “mindful” of their spending as they renew mortgages at higher interest rates, and also return to spending money in areas that declined during the pandemic, such as travel and restaurant dining.

Other companies have noted similar trends. Last month, Whirlpool Corp. WHR-N -0.82%decreasereported a revenue decline as shifting consumer sentiment led to fewer big-ticket appliance purchases.

And United Parcel Service Inc. UPS-N -1.73%decrease reported that it saw buying behaviours change, with discretionary purchases softening as overall U.S. retail sales contracted in March. Food is making up a larger percentage of household budgets and American consumers are directing their disposable income “away from goods to services,” UPS chief executive Carol Tomé told analysts on a call in April to discuss the company’s earnings.

Across the shipping industry, freight rates have fallen and demand for shipping hard goods has dropped sharply in recent months, as inventories climb. Canadian Tire recently exited a dedicated ocean freight contract at a one-time $13.5-million cost, as the company expects to lock in more favourable ocean freight costs in the near future.

Inventory levels in spring and summer products are elevated across the retail industry, TJ Flood, president of Canadian Tire Retail, told analysts on Thursday’s call. Mr. Flood said that promotional intensity is likely to heat up, particularly in discretionary categories.

While purchases of essential items such as pet food and automotive products remained relatively strong in the first quarter, Canadian Tire reported on Thursday that its earnings were affected by changing consumer behaviours, as well as an unusually warm winter and a slow start to spring that contributed to weakened demand for seasonal products.

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Canadian Tire reported its overall revenue declined by 3.4 per cent in the 13 weeks ended April 1, to $3.7-billion.

Comparable sales – an important metric that tracks sales growth not tied to new store openings – fell by 4.8 per cent at Canadian Tire stores. Comparable sales at the company’s Mark’s chain grew by 4.8 per cent, and were up by 3.7 per cent at Sport Chek on higher sales of athletic and casual clothing. Revenue for the Helly Hansen brand grew by 22.9 per cent compared with the prior year.

Revenue in Canadian Tire’s financial services segment grew by 11.5 per cent to $38.1-million.

As weather has turned more favourable following the end of the first quarter, business has improved, with sales up 3 per cent at the end of April, Mr. Flood said.

Canadian Tire reported its net income fell to 42.8-million, or 14 cents a share, in the first quarter, compared with $217.6-million, or $3.05 a share, in the same period last year. The company reported that roughly 87 cents of the hit to its earnings was related to costs from the fire that broke out on March 15 at one of its largest distribution centres in Brampton, Ont. Normalized earnings excluding those costs amounted to $1 per diluted share, which fell short of analysts’ expectations.

The company recorded $67.7-million in costs related to the fire in the quarter – including for cleanup and building repairs – which have not yet been offset by the payout of insurance claims. The company continues to incur costs and expects to recognize insurance recoveries in future quarters.

The retailer lost millions of dollars worth of inventory in the fire, and experienced a roughly $20-million decrease in income because of delayed shipments and disruptions to its supply chain. On Thursday, executives said the facility should return to full operations in the second half of the year. In the meantime, Canadian Tire has been forced to shift important products to other distribution centres and to set up temporary facilities to manage shipments to stores.