A survey of North American equities heading in both directions
On the rise
Lululemon Athletica (LULU-Q) beat Wall Street expectations for first-quarter profit and revenue on Wednesday, as a strong China business helped buffer a slowdown in consumer spending on pricey tank tops and leggings in its key North America market.
Lululemon’s shares, which have declined about 40 per cent this year, rose almost 5 per cent on Thursday after the company also approved a US$1-billion increase to its stock repurchase program.
Increased store footprint in China helped improve customer traffic for the brand, countering a slackening demand in the United States from higher cost-of-living pressures.
“China continues to be a major growth engine for Lululemon, as the retailer takes advantage of a relative lack of competition to establish itself as a dominant premium athleisure brand in the market,” said Rachel Wolff, an Emarketer analyst.
Lululemon’s comparable sales increased 6 per cent, a rare single-digit sales rise for the company that has seen double-digit growth over the past two years. Same-store sales in the Americas came in flat compared with last year, while they jumped 26 per cent in China mainland.
The company has also worked to fix recent issues around out-of-stock items in smaller sizes and certain colors, which impacted its U.S. sales during February and March, Citi analyst Paul Lejuez wrote in a client note dated May 29.
The company expects to be in a “more optimal inventory position” in the second half of 2024, CEO Calvin McDonald said on a post-earnings call, adding that Lululemon is addressing “several missed opportunities” in color palette and items such as leggings.
Lululemon’s results bucked a slowdown in consumer spending in North America that has hit higher-end apparel retailers such as Ralph Lauren and Coach parent Tapestry .
A leaner inventory and strong full price selling boosted its gross margin in the quarter, increasing 20 basis points to 57.7 per cent from last year.
The athleisure apparel maker posted quarterly net revenue of US$2.21-billion, edging past analysts’ average estimate of US$2.19-billion, according to LSEG data. Its profit per share of US$2.54 also beat estimates of US$2.38.
The company’s inventory at the end of first quarter decreased 15 per cent to US$1.3-billion.
It hiked its fiscal 2024 earnings per share forecast to a range of US$14.27 to US$14.47 from US$14.00 to US$14.20 and maintained net revenue guidance of between US$10.70-billion and US$10.80-billion.
In a note released before the bell, Mr. Lejuez said: “While the market was bracing for reduced F24 guidance, mgmt raised F24 guidance from $14.00-14.20 to $14.27-14.47, passing through the 1Q beat/leaving the rest of the year unchanged. Mgmt reiterated that challenges in the US assortment are self-inflicted “missed demand opportunities” related to lack of color/smaller sizes in women’s and lack of inventory in key men’s styles (not a competitive issue). Mgmt continues to expect an improvement in 2H trends driven by stronger product innovation and better execution. Importantly, 1Q US store traffic was positive while conversion was weaker, supporting the idea that US weakness is an execution issue. Stepping back, 1Q results were better than feared and while the US is facing challenges, the brand is still in a solid position and int’l growth remains a source of upside.”
Calgary-based fuel distributor Parkland Corp. (PKI-T) was up 0.6 per cent after it said late Wednesday it would sell its Canadian commercial propane business to Avenir Energy for about $115-million in cash amid a push by investors for a strategic review of the company.
Parkland would also exclusively supply fuel to Avenir for 10 years as part of the agreement, the company added.
“This transaction is a big step toward achieving our target of $500-million from the divestment of non-core assets by the end of 2025,” said Ian White, president of Parkland Canada.
Parkland’s largest shareholder Simpson Oil, which holds a 19.7-per-cent stake, had called for a review of strategic alternatives for the company in April, including a sale.
Later in the same month, activist investor Engine Capital backed Simpson Oil’s call.
Transcontinental Inc. (TCL.A-T) rose 8.8 per cent after saying its net earnings attributable to shareholders were $15.9-million, down from $22.2-million a year earlier.
The Montreal-based printer, packager and publisher says revenues were $683.2-million, down from $747.2-million during the same quarter last year.
Net earnings per share were 18 cents, down from 26 cents last year.
President and CEO Thomas Morin says this past quarter, the company pursued cost reduction initiatives “with determination.”
He says Transcontinental is also seeing the results of efforts to improve its product mix toward higher-value products.
This past February, the company announced it was closing its printing press in Saint-Hyacinthe, Que., one of a few recent closures across its network as it struggles with demand for packaging and printing.
Trading platform Robinhood Markets (HOOD-Q) said on Thursday it has agreed to buy crypto exchange Bitstamp for about $200 million in cash, speeding up a broader push into digital assets with its biggest-ever deal.
Robinhood, whose shares were up 6.5 per cent, has been looking to expand its product offerings to become a full-fledged financial services provider.
The acquisition of Bitstamp, which was founded in 2011 and holds 50 active licenses and registrations globally, puts Robinhood in direct competition with industry giants such as Binance and Coinbase.
Bitstamp’s core spot exchange, popular in Europe and Asia, has over 85 tradable assets, and the deal is expected to power the growth of Robinhood Crypto.
“We are in our early days in the EU and we are excited to keep expanding there and beyond. The acquisition of Bitstamp will accelerate our global expansion,” Johann Kerbrat, vice president and general manager of Robinhood Crypto, told Reuters.
The deal, expected to close in the first half of 2025, comes at a time when Robinhood’s crypto business is seeing rapid growth but also facing regulatory hurdles in the United States.
Kerbrat said the company intends to keep communicating with regulators as it moves forward.
Robinhood’s crypto business was the driving force behind a massive first-quarter earnings beat in May, but that same week, it also disclosed that it received a so-called Wells notice from the U.S. Securities and Exchange Commission over tokens traded on its platform.
Lyft (LYFT-Q) is targeting 15-per-cent annual growth in gross bookings through 2027, the ride-hailing firm said at its inaugural investor day, adding that it expects gross bookings from its nascent advertising business to increase eight-fold in the same period.
The company’s shares gained just over 1 per cent on Thursday.
The forecast signals Lyft could maintain its position in the North American ride-sharing market, where it lags Uber, even as both the companies seek to diversify their revenue streams through offerings such as advertising and user subscriptions.
Lyft expects US$400-million in gross bookings from its advertising business in 2027, Zach Greenberger, executive vice president of Lyft’s Partnership Ecosystem, said, compared with US$50-million forecast this year.
The company, like Uber (UBER-N), allows advertisements within its app, as well as on tablets in vehicles and digital screens on top of cars. Lyft launched the business in 2022 and reported a 250-per-cent growth in related revenue in the quarter ending March.
“Advertisers are looking for more targeted and measurable solutions,” Greenberger said, adding that the retail and hospitality industries are using Lyft’s advertising platforms.
Uber, with a larger global presence and more diversified business lines including food ordering and freight services, is targeting US$1-billion in annual ad revenue.
Lyft is targeting gross bookings compound annual growth rate of about 15 per cent between 2024 and 2027 for the full company, and an adjusted core profit margin of about 4 per cent in 2027.
Vista Outdoor Inc. (VSTO-N) increased 3.1 per cent after investment firm MNC Capital raised its offer to acquire sporting and outdoor goods company to US$39.50 per share, or over US$3-billion.
Vista Outdoor had rejected MNC Capital’s proposal last week, despite engaging with the investment firm to increase its bid of US$37.50 per share, saying it undervalued the company and its performance gear business, Revelyst.
The outdoor recreation products maker had said at the time there was significantly more value if Revelyst were to be a standalone company.
MNC Capital said on Thursday its latest offer values Revelyst at over US$1-billion, compared with Vista’s US$570-million it disclosed in an investor presentation on Feb. 1.
On the decline
Airline and tour operator Transat AT Inc. (TRZ-T) was lower by 4 per cent after it posted a deeper loss for the second quarter, even as revenue rose amid stronger demand for travel.
Montreal-based Transat, parent of Air Transat, blamed engine recalls, tougher competition, union strike threats and an economic slowdown for its loss in the second quarter.
Transat lost $54-million, or $1.40 a share, compared with a loss of $29-million (76 cents) in the same quarter of 2023. Revenue rose by 12 per cent to $973-million, from a year ago.
Transat has 25 Airbus A321LRs, some of which are powered by the Pratt and Whitney PW1100G engine that has been recalled. Three of Transat’s A321s have been grounded recently, forcing the airline to lease three Airbus A330s to make up for lost capacity.
Transat said the costs of the new leases coupled with added capacity drove up operating expenses by 16 per cent or $137-million for the quarter.
Employee salaries and benefits rose by 30 per cent amid a hiring spree to back Transat’s expansion plans. Fuel costs, Transat’s third-biggest expense, declined by 2 per cent to $150-million, from the same quarter in 2023.
The airline’s flight attendants accepted a new collective agreement in February, after rejecting two earlier offers, ending a strike threat that created uncertainty for passengers.
Transat said it renegotiated its emergency loan repayment from the federal government, extending the due date on $41-million by 10 months to February, 2026. Transat also received a credit facility worth $337-million from the government to repay customers whose flights were cancelled in the pandemic. This amount bears interest of 8 per cent this year, and 10 per cent next year.
- Eric Atkins
Atco Ltd. (ACO.X-T) finished narrowly lower on news its structures division has signed a deal to buy NRB Ltd., a maker of modular buildings, for $40-million in cash.
ATCO says the acquisition of NRB is part of its plan to expand its manufacturing, operations and sales footprint.
Adam Beattie, president of ATCO Structures, says the company is excited about the opportunity to expand NRB’s modular business capabilities, particularly in the manufacturing of multi-family and affordable housing.
NRB has close to 400 employees and four manufacturing facilities across Canada.
The deal is expected to close near the end of July.
ATCO Structures has manufacturing facilities in Canada, the United States, Mexico, Chile and Australia.
A day after it rallied to record highs with its valuation breaching the US$3-trillion mark and overtaking Apple (AAPL-Q) to become the world’s second most valuable company, Nvidia (NVDA-Q) slipped 1.1 per cent on Thursday.
Nvidia’s stunning gains increasingly power Wall Street’s record run
The surge in Nvidia’s market value above Apple’s marks a shift in Silicon Valley, which the company co-founded by Steve Jobs has dominated since it launched the iPhone in 2007.
Microsoft (MSFT-Q), based in Redmond, Washington, remained the world’s most valuable company at US$3.15-trillion.
“Nvidia is making money on AI right now, and companies like Apple and Meta are spending on AI,” said Jake Dollarhide, chief executive officer at Longbow Asset Management.
“It may be a foregone conclusion that Nvidia will overtake Microsoft as well. There’s a lot of retail money that’s piling in on what they see as a straight shot up.”
Nvidia’s stock has surged 147 per cent so far in 2024, with demand for its top-of-the-line processors far outstripping supply as Microsoft, Meta Platforms and Google-owner Alphabet race to build out their AI computing capabilities and dominate the emerging technology.
U.S.-listed shares of Nio (NIO-N) dropped 6.8 per cent after it posted a quarterly net loss and said it expected its EV deliveries in the second quarter to more than double from a year ago.
Chinese electric vehicle maker Nio said on Thursday it expected deliveries in the second quarter to more than double from a year earlier to between 54,000 and 56,000.
Revenue would also nearly double to about US$2.3-billion in the three-month period starting April, the company said.
The nine-year-old company, however, is still yet to turn profitable. It reported a US$718-million net loss for the first quarter, compared with a loss of US$772-million in the fourth quarter of 2023.
The company, ranked eighth by EV sales in China, saw deliveries of its Nio-branded EVs priced from US$4,000 rebound to more than 20,000 units in May after it lowered fees in a battery rental scheme that encouraged sales.
Like many of its peers, Nio is broadening its customer base and boosting sales with cheaper models amid a bruising price competition in China. The company has also trimmed workforce and deferred long-term projects that would not contribute to financial performance within three years.
It has won approval to build a third factory in China that would boost its total approved production capacity to 1 million cars, almost at par with Tesla’s massive Shanghai plant, Reuters reported on Wednesday.
The F3 plant is located in Huainan city in eastern province of Anhui and will primarily produce vehicles for Nio’s newly launched affordable car brand, Onv
With files from staff and wires