Stories Report on Business is following today :
Shoppers Drug Mart stock sinks
Shares of Shoppers Drug Mart Corp. fell sharply on the Toronto Stock Exchange today as analysts slashed their price targets on the stock and warned of the hit to the pharmacy chain from Ontario's drug reforms. Among those measures is a reduction in the cost of generic drugs to 25 per cent of the price of an original brand name, down from 50 per cent.
"Suffice it to say, it just became a lot less profitable to run a pharmacy in Ontario and, eventually, probably Quebec as well," said TD Newcrest analyst Micheal Van Aelst, who cut his 12-month target on the stock to $40 from $52.
Similarly, CIBC World Markets analyst Perry Caicco cut his target to $43 from $47, and his earnings-per-share estimate for 2010 to $2.92 from $2.96, warning that "it is possible that other regimes could adopt similar reimbursement tactics and that [Shoppers']store growth plans could slow."
UBS Securities analyst Vishal Shreedhar, projecting Shoppers will respond by cutting pharmacy services and hours in Ontario, also warned of a "potential ricochet effect" in other provinces: "We note that Quebec and Newfoundland and Labrador have a most favoured nation provision which require that the price offered to the provincial drug plans be equal to the lowest provincial drug prices in Canada."
China reported close to shift in currency policy
Beijing is poised to soon announce a shift in its currency policy, a major development in easing tensions between China and the United States over the yuan, The New York Times reports today. The report comes as U.S. Treasury Secretary Timothy Geithner meets in Beijing with Vice-Premier Wang Qishan. Washington and Beijing have been engaged in a heated dispute over the U.S. push to allow the yuan to appreciate. But Mr. Geithner took some of the steam out of the fight when he announced last weekend he would delay a mid-April decision on whether to label China a "currency manipulator." Chinese officials responded by saying the yuan would rise at some point, but at Beijing's pace. The New York Times said China's central banks pushed for "a stronger but more flexible currency." The model, it said, would be China's shift five years ago, when Beijing allowed its currency to rise 2 per cent against the U.S. dollar overnight, and then trade in a wider range on a daily basis.
The U.S. Treasury Department issued a statement after the meeting, but did not say whether the two men had discussed the currency issue.
Greek debt crisis rattles markets
Stock markets are falling again over mounting fears of a debt default in Greece, where borrowing costs have spiked to their highest since Greece joined Europe's currency union in 2001. The spread between 10-year Greek government bonds and their German equivalents, considered the European benchmark, rose to up to 4.3 percentage points today, and the Athens Stock Exchange fell by almost 5 per cent. Stock and currency markets had calmed for a while after the EU and International Monetary Fund agreed to a support package for Greece, but concerns have reappeared since the Easter break. "The spike in yields shows that markets have little confidence that Greece will stick to fiscal austerity measures or that the Euro-IMF 'aid' agreement will provide any real support," said BMO Nesbitt Burns economist Benjamin Reitzes.
Added Derek Holt and Karen Cordes Woods of Scotia Capital, noting the twists and turns of the country's debt crisis: "A resumption of worries over Greece are making for strong Treasury auctions on safe haven bids this week. The world is ending, the world is ok, heck, nope, it's ending again. Yeesh. It has been over 2,000 years since such drama unfolded in a Greek theatre. Of course the masks being worn are of a different type this time around, and worn by well compensated obfuscators instead of impoverished and somewhat involuntary Athenians. The latest concerns also have to do with revelations of deposit flight from Greek banks so far this year. Somehow Greek debt worries are the catalyst to equity markets asking the heavens what they've done in driving valuations so high, with commodities off a touch as well."
Some real estate markets display 'irrationality'
Shades of Alan Greenspan's famous warning on "irrational exuberance." A survey by Royal LePage Real Estate Services today suggests that the Toronto and Vancouver real estate markets have rebounded to the point of "irrationality." The company's study shows prices across the country rose more than 10 per cent in the first quarter of the year, although results vary from city to city. And, LePage said in a statement, markets are expected to cool as interest rates inevitably rise and the increase in prices slows demand. Notable in the survey is how demand is playing out across Canada.
"In Vancouver and Toronto, for instance, the dramatic unit sales fluctuations exhibit a significant degree of market irrationality: inordinately fearful when faced with poorer markets, and overly enthusiastic when the tables turned," said LePage chief executive officer Phil Soper. "Montreal is an example of a city where the market has been much more stable and homeowners there seem quite happy with the relatively slow pace of change."
Mr. Soper said he expects house prices to continue climbing, but at a slower pace as the year plays out.
Here's a twist on the real estate story: BMO Nesbitt Burns notes that the rise in the Canadian dollar is exaggerating a growing gap between house prices in Canada, where the market has rebounded sharply, and the United States, home of the housing meltdown. The median price for a resale single-family home in the United States is now about $165,000 in Canadian dollars, down from a peak of about $300,000 five years ago. It marks the widest gap relative to average Canadian prices on records dating back to 1980, BMO economist Robert Kavcic said. "Now could be a good time to buy that retirement home, or invest in a beaten up market," he wrote.
Canadian shoppers look south
Attention, shoppers: Canadian consumers are eyeing the United States in greater numbers given the rise in the Canadian dollar . As the dollar hovers around parity with its U.S. counterpart, shoppers are heading across the border for bargains, The Financial Times reports today. "We're very happy with the dollar equalling the loonie," Jim Schlesinger, a Miami investor who acquired the Fashion Outlets of Niagara Falls shopping mall on the U.S. side, told the newspaper. "Even better, Canada did not fall prey to the nonsense we've had in the States. We've been able to maintain solid traffic thanks to the stability of the Canadian customer."
The newspaper also reported that the Walden Galleria in Buffalo, N.Y., saw an increase in Easter shoppers from Canada of up to 25 per cent from a year ago.
Citigroup executives testify
Former officials of Citigroup Inc. say that until the meltdown hit, they were unaware of the trouble with the complex securities that would pave the way to the crisis among the world's banks. Former chief executive officer Charles Prince and one-time U.S. Treasury Secretary Robert Rubin, former chief of Citi's executive committee, are testifying today before the Financial Crisis Inquiry Commission in Washington, where Alan Greenspan sparred yesterday with panel members. Citi was among many financial institutions the world over that ran into trouble when the crisis hit, and, following the former Federal Reserve chairman, appears before the committee today. "Everyone, including our risk managers, other banks and CDO structurers, all believed that these securities held virtually no risk," Mr. Prince said in prepared remarks, according to Bloomberg News. "It is hard for me to fault the traders who made the decisions to retain these positions on Citi's books."
Cogeco posts solid quarter
Cogeco Inc. today posted revenue growth of about 5.1 per cent in its second quarter, rising to $320.4-million, as it turned a profit of $29.8-million or 61 cents a share. This came despite the continued drag from its business in Europe. Analysts said the results were generally in line with what they had projected. Read the story
From today's Report on Business