A survey of North American equities heading in both directions
On the rise
Shares of Dollarama Inc. (DOL-T) increased 10 per cent after it forecast annual and quarterly sales above estimates on Thursday, betting on consistent demand for its discounted groceries and essentials.
Discount store operators have seen steady demand, even as other retailers struggled with softer sales as cost-conscious consumers increasingly stick to a budget when shopping.
Consumers in Canada and the United States have been looking for cheaper deals on items, ranging from cleaning supplies to groceries and apparel as they fend off steeper costs of rentals and fuel.
The Montreal-based discount store operator reported quarterly sales of $1.63-billion, up from $1.47-billion a year earlier, while analysts on average estimated $1.61-billion, as per LSEG data.
Discount retailers are effectively tapping into consumer preferences for cost-effective shopping, seizing market share from traditional department stores, in the face of soaring interest rates, analysts note.
Excluding items, Dollarama posted an adjusted profit of $1.15 per share for the quarter, above expectations of $1.06 per share.
Its gross margin was 44.5 per cent of sales, compared with 43.5 per cent in a year-ago quarter, due to lower inbound shipping costs.
The company expects annual comparable store sales growth in the range of 3.5 per cent to 4.5 per cent, largely above analysts’ estimates of 3.73 per cent.
In a research note, Stifel analyst Martin Landry said: “Dollarama reported strong Q4FY24 EPS of $1.15, up 26 per cent year-over-year and higher than our estimate of $1.04 and consensus at $1.06. Same-store-sales increased by 8.7 per cent Y/Y, higher than our estimate of 6 per cent and consensus of 5.4 per cent, driven by an 11.2-per-cent increase in number of transactions and a decrease of 2.2 per cent in transaction size. Management introduced a FY25 guidance calling for same-store-sales growth of 3.5-4.5 per cent Y/Y, in-line with our expectations of 4 per cent and consensus of 3.7 per cent. The company expects gross margin to be stable Y/Y at the mid-point, and for SG&A expense as a percentage of sales to increase by 35bps Y/Y, suggesting that FY25 EPS should range between $3.80-$4.10, or $3.95 at the mid-point, which is slightly higher than our estimate and consensus of $3.88. We expect Dollarama’s shares to react well to the Q4FY24 results and FY25 guidance, especially given the shares were weak heading into the quarter.”
BlackBerry Ltd. (BB-T) rose 2.9 per cent in the wake of reporting a surprise fourth-quarter profit on Wednesday after the bell, helped by higher demand for its cybersecurity services amid growing online crimes and high-profile hacks
The Waterloo, Ont.-based security software provider announced revenue of US$173-million, exceeding the consensus estimate on the Street of US$154.8-million, according to LSEG data. Adjusted net income came in at US$16-million versus analysts’ expectation of a loss of US$22.4-million, while adjusted earnings per share of 3 US cents was also stronger than anticipated (a loss of 3 US cents).
For the first quarter of its current fiscal year, it expects revenue of US$130-138-million, falling below the US$147.7-million estimate. A full-year projection of US$586-million to US$616-milllion was also lower than the consensus forecast (US$655.3-million).
BlackBerry Ltd. says it uncovered another US$55-million in cost savings in its latest quarter, when it reported a US$56-million loss.
But chief financial officer Steve Rai says, “there’s still more opportunities to be more efficient.”
On a Wednesday call to discuss the Waterloo, Ont.-based technology company’s latest financial results, he said there’s a number of structural items, ranging from legal entity structures to simplifying IT systems and back office infrastructure, that the company can undertake.
“Those types of things are bigger rocks and that doesn’t happen overnight,” he told analysts.
“We’ll obviously actively (be) looking at how to go about that and formulating the plans to execute on those.”
In the company’s third quarter it reduced its head count by about 200.
In a note, CIBC World Markets analyst Todd Coupland said: “Blackberry’s Q4/F24 results were better than FactSet estimates. However, its FQ1 and F2025 guidance were below FactSet F2025 growth expectations with management’s guide implying a 7-per-cent year-over-year decline in Cyber and only 6-per-cent Y/Y growth in IoT at the midpoint. Despite this, what appears to be a more conservative outlook and positive EBITDA should positively impact Blackberry’s share price in our view.
“Blackberry indicated it was on track to establish standalone IoT and Cybersecurity divisions as well as right-size their cost structures to increase the available options for maximizing shareholder value. The Cyber unit also remains on track with a goal to be cash flow positive by Q4/F25 (February 2025). Our view is that if this progress continues, it will open up options including a possible divestiture of its Cyber unit. We rate Blackberry Neutral with a US$3.50 price target.”
Levi Strauss & Co. (LEVI-N) raised its annual profit forecast on Wednesday, citing the apparel maker’s recent cost savings from job cuts and less aggressive discounts on its jeans and denim clothing, sending its shares soaring.
In a bid to cut costs, Levi’s has reduced its global corporate workforce, including trimming the number of senior leadership positions. It has also consolidated its operations in Europe and exited lower-margin businesses, such as its Denizen brand and footwear enterprise.
Levi’s cost-cutting campaign has helped its stock recover about 13 per cent this year.
The apparel retailer recorded a restructuring charge of US$116-million in the first quarter.
However, Chief Financial Officer Harmit Singh said the jeans maker was “feeling good” about a more “stable” U.S. consumer in an interview with Reuters on Wednesday..
Its adjusted profit was 26 US cents per share in the first quarter ended Feb. 25, above expectations of 21 US cents.
“The company’s earnings blowout and raised forecast shows the iconic brand is hitting its stride with consumers,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.
Yet, Levi’s sales through its wholesale channels - which include department stores such as Macy’s and other retailers such as Walmart - fell by 19 per cent on a constant-currency basis, a steeper decline than a 3-per-cent drop in the fourth quarter.
Higher full-price sales and lower product costs led Levi’s gross margins to rise by 240 basis points to 58.2 per cent in the first quarter, from 55.8 per cent a year earlier.
But the San Francisco-based firm said it continues to expect full-year revenue to grow in the range of 1 per cent to 3 per cent.
The denim maker said it expects an adjusted profit between US$1.17 and US$1.27 per share for 2024, up from its prior forecast of US$1.15 to US$1.25. Analysts had expected a profit of US$1.21 per share before the guidance update.
Its net revenue fell about 7.8 per cent to US$1.56-billion in the first quarter, narrowly beating estimates of US$1.55-billion, according to LSEG data.
Conagra Brands Inc. (CAG-N) topped Wall Street estimates for third-quarter revenue and profit on Thursday, as demand for its pantry staples and frozen food items recovered with more consumers looking to cook meals at home in the face of sticky inflation.
Shares of the Slim Jim beef jerky maker jumped after the company also raised its annual adjusted operating margin forecast and said its cost-saving attempts were paying off.
Conagra has veered towards lowering prices in some categories such as its refrigerated and frozen foods segment, and increasing promotions to appeal to budget-conscious consumers.
Packaged food companies have been looking to stem the fall in volumes, which have been battered in recent times due to consistent price hikes.
Conagra reported a 1.8-per-cent decrease in total volumes in the quarter, less than the 2.9-per-cent drop in the preceding three-month period.
Volumes in its grocery and snacks segment fell 0.8 per cent, compared with a 3.7-per-cent decrease in the second quarter.
Easing supply chain concerns have also helped counter the impact from waning price hike benefits. Conagra raised its annual operating margin forecast to 15.8 per cent from 15.6 per cent.
“The efficiency of our operations in Q3 resulted in cost savings that enabled us to fund investment while maintaining gross margin,” said CFO Dave Marberger in a statement.
The Healthy Choice-parent’s net sales were US$3.03-billion for the quarter ended Feb. 25, beating analysts’ average estimate of US$3.01-billion, according to LSEG data.
Excluding items, the company posted third-quarter profit of 69 US cents per share, topping the Street estimate of 65 US cents.
Etsy Inc. (ETSY-Q) gained ground after Elliott Investment Management’s managing partner Jesse Cohn said on Wednesday he believes e-commerce platform will generate “significant, multi-year upside.”
Elliott, one of the world’s most prominent investors, has a 13-per-cent economic stake in Etsy, including both common shares and swaps, a person familiar with the matter told Reuters in February.
At the Sohn Conference in New York on Wednesday, Mr. Cohn said Elliott’s stake was over 10 per cent. He said he sees room for “product engagement and monetization opportunities,” comparing Etsy to Pinterest (PINS-N), another company to which Elliott appointed a board member in 2022.
Mr. Cohn said Etsy has potential to add more buyers and increase the amount of money they spend on the platform, for instance.
In February, Etsy appointed Elliott’s portfolio manager Marc Steinberg to its board.
Nikola (NKLA-Q) was up on Thursday after it beat estimates for quarterly deliveries of hydrogen fuel cell trucks as the electric-vehicle maker looks to move away from its battery-powered trucks.
The company said it has delivered 40 vehicles in the first quarter compared with estimates of 30 units, according to four analysts polled by Visible Alpha.
It had said it would return all battery-powered trucks to customers by early third quarter after resolving an issue that caused coolant leaks in the battery pack leading to fires.
On the decline
Ford Motor Co. (F-N) turned lower in afternoon trading after it said Thursday it is delaying the launch of its new three-row electric vehicles it will build at its assembly complex in Oakville, Ont. to 2027 from 2025.
The No. 2 U.S. automaker said the delay “will allow for the consumer market for three-row EVs to further develop and enable Ford to take advantage of emerging battery technology.” Separately, Ford said it will delay deliveries of an all-new EV truck it will build at a new plant in western Tennessee until 2026. Ford said last year it planned to begin production in late 2025 and build up to 500,000 electric trucks annually.
Ford Chief Financial Office John Lawler told investors last year Ford would delay some of its planned multibillion-dollar investment in new EV and battery production capacity, citing “tremendous downward pressure” on prices.
Ford had promised to retool the Ontario plant to make EVs during contract bargaining in 2020 with Canada’s Unifor union. Ford said Thursday the overhaul of the Oakville assembly plant is set to begin in the second quarter of this year as planned.
General Motors (GM-N) said in October it would delay production of electric pickup trucks at its plant in Michigan’s Orion Township by a year.
Massachusetts-based Amylyx Pharmaceuticals Inc. (AMLX-Q) slid after announcing it will withdraw its amyotrophic lateral sclerosis (ALS) drug - its only product in the market - from the U.S. and Canada after the treatment failed in a key late-stage trial.
The drugmaker on Thursday also announced a 70-per-cent reduction in its workforce. It had 384 full-time employees at the end of 2023.
The ALS drug, branded Relyvrio, was approved in 2022 after lobbying by patient groups who pointed to limited options to treat the potentially fatal disease.
The drug, which has a list price of US$158,000 per year in the U.S., generated sales of about US$381-million in 2023.
Amylyx expects to incur charges of about US$19-million as part of its restructuring, expected to be completed by the end of the third quarter.
Shares closed about 83 per cent lower and more than US$1-billion was wiped out from its market value on March 8 after the company disclosed it was considering withdrawing the treatment.
With files from staff and wires
David Leeder