First Look With Surveillance: Stocks Jump, Unswayed Fed
We’ve been wondering how major Canadian retail companies would fare after Walmart and a long list of other U.S. retailers got walloped in recent weeks amid warnings about inflationary pressures and inventory woes, among other headaches. Today, we heard from Canadian Tire, and it missed adjusted profit expectations by a wide margin ($3.11 versus $3.60). While expenses jumped in its retail unit due to marketing costs and having more stores open, the real drag on profit was because of its lower-profile finance operations. Kumutha will dig into that.
MORE FROM THE CANADIAN CONSUMER FILES
Cineplex is profitable again. The movie theatre operator posted $1.3 million in net income in the second quarter, marking a milestone after a punishing couple of years of pandemic existence. Attendance surged 866 per cent (!) year-over-year, thanks to a lineup of blockbusters that inspired movie theatres to chow down: concession revenue per patron climbed to a record of $8.84 in the quarter. Apart from the results, there’s also this interesting nugget in the release: Cineplex said it has retained Moelis & Company as a financial advisor to help “maximize and monetize the value” of the judgment in the legal fight with Cineworld, stemming from the failed takeover attempt. That judgment $1.24 billion in damages owed to Cineplex, is heading to the Ontario Court of Appeals next month. Cineplex CEO Ellis Jacob joins us at 1:10 p.m. EDT.
Canada Goose’s second-quarter revenue surged 24.2 per cent, which Chief Executive Dani Reiss said “reflect strong early leading indicators.” We should be wondering how those indicators will hold up with persistent inflation and recession worries. Or maybe those worries aren’t as pronounced for the company’s affluent clientele.
Business is booming at Pizza Pizza. The ubiquitous chain’s royalty corporation said after markets closed yesterday that its same-store sales surged 20.3 per cent in the second quarter. A year ago, those sales at stores open at least a year inched up 0.8 per cent. CEO Paul Goddard joins us at 9:40 a.m. EDT.
Indigo Books & Music’s revenue jumped 18.9 per cent year-over-year in the second quarter amid what the company described in a release as a “resurgence of reading” — thanks in part to its partnership with TikTok. Nevertheless, it posted a wider adjusted loss due to the usual (supply chain, inflation, etc.) drags on margins.
U.S. futures are suggesting there’s still some fuel it the tank after yesterday’s relief rally that was catalyzed by U.S. inflation at a mere 8.5 per cent. And we’ve got another gauge of price trends this morning, as the U.S. producer price index eased up in July, with a 9.8 per cent year-over-year rise (from 11.3 per cent in June). We’ll flag here the S&P/TSX Composite Index closed yesterday at its highest level in two months thanks to many of the usual suspects, including Brookfield Asset Management, which this morning said it raised a record US$56 billion since the end of the first quarter and highlighted “a number of attractive investment opportunities.” Also of note in the context of market moves: the Canada Pension Plan Investment Board this morning posted a rare negative return (4.2 per cent) due largely to losses in its exposure to public equities.
EVRAZ SHOPPING NORTH AMERICAN ASSETS
The Russian steelmaker, whose business and billionaire backer (Roman Abramovich) have been hit by sanctions stemming from Russia’s invasion of Ukraine, is looking to sell its North American operations, which includes four facilities in Saskatchewan and Alberta, employing about 1,800 people in this country. We’ll look into potential buyers, and the complexities of a transaction in light of sanctions.
OTHER NOTABLE STORIES
- Manulife Financial’s net profit tumbled to $1.09 billion in the second quarter from $2.65 billion a year earlier, largely due to market volatility. Its core earnings slipped far more modestly and edged past expectations thanks to growth in its Canadian operations, whereas its Asian unit was hampered by COVID-19 restrictions.
- Linamar crushed second-quarter profit expectations ($1.68 per share versus the $1.38 estimate) as some of the challenges it’s been dealing with (along with others in the auto industry) appeared to abate. Sales in its mobility division jumped 25 per cent year-over-year, thanks in part to “an improvement in adverse conditions with supply related issues.” In its release, Linamar said it also increased pricing in both of its major divisions to help mitigate the inflationary pressures it faces. CEO Linda Hasenfratz joins us at 10:30 a.m. EDT.
- The Walt Disney Co.’s revenue soared 26 per cent in its fiscal third quarter, led by gains in its parks, experiences and products division as the reopening boom continued to play out. But we know most of the attention is focused on the Disney+ streaming business, where the number of paid subscribers exceeded expectations, and with a new ad-supported offering launching Dec. 8 in the U.S.
- Birchcliff Energy said it second-quarter adjusted funds flow surged 217 per cent to a record $285.5 million as the good times keep rolling in the energy patch. The natural gas producer also said it net income hit a record in the period, and laid claim to a 65 per cent plunge in its total debt. However, it’s leaving the quarterly dividend unchanged for now at $0.02/share, while continuing to target an annual payout of at least $0.80 per share next year.
- Similarly, Peyto Exploration said its funds from operations surged 151 per cent year-over-year to $205.9 million in the second quarter, and said it “eagerly looks forward to even further increases…as existing hedges roll off in the near term.”
- Canadian Apartment Properties Real Estate Investment Trust has pricing power working in its favour. It said it was able to raise rents 11 per cent on suite turnovers during the second quarter, more than double the year-ago hike of 4.9 per cent.
- We’ll watch Primo Water (remember the old Cott Corp.?) today after it raised its full-year revenue growth and adjusted profit forecasts.
- Notable data: U.S. PPI and initial jobless claims
- Notable earnings: Brookfield Asset Management, Canadian Tire, Canada Goose Holdings, Onex, Vermilion Energy, Shawcor, Wheaton Precious Metals, Cineplex, Park Lawn, Hut 8 Mining, Algonquin Power & Utilities, CI Financial, Freshii, Rivian Automotive