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(RICHARD LAM)
(RICHARD LAM)

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I can't see me in yoga pants: Lululemon 'bullish' on men Add to ...

These are stories Report on Business is following Monday, April 16, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Lululemon targets men It's my personal opinion that men over a certain age probably shouldn't wear yoga pants. But I'll point out today that analysts came away from a meeting with Lululemon Athletica Inc. noting how bullish the retailer has become about menswear.

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Analyst Roxanne Meyer of UBS AG reiterated her "buy" rating and $91 (U.S.) price target on Lululemon shares, saying last Wednesday's meeting with analysts "reinforced its competitive advantages, particularly the strength of its management team, operating model and product innovation."

Ms. Meyer noted how the Canadian yoga wear retailer is preparing for an international expansion, and the level of excitement surrounding potential growth in men's clothing, as well as the possibility of adjacent men's shops.

"One of the highlights was appreciating how bullish the team is regarding the opportunity to grow men’s," Ms. Meyer said in a research report.

"New head of men’s design Rob Blair has hired his global team and will begin to impact product in [the second half of the year] The 'white space' is the premium men’s market; we look for increased fashion, colour and detailing," she added, citing Lululemon's target for menswear to represent 20 per cent of sales within three to four years.

CP battle continues to heat up The battle for shareholders of Canadian Pacific Railway Co. continues to escalate.

As The Globe and Mail's Jacquie McNish and Brent Jang report today, the activist shareholder pushing for change at the railway, Bill Ackman of Pershing Square Capital Management, sent a lengthy letter to CP shareholders urging them to vote for his slate of directors.

"Despite the company’s track record of underperformance, this board has always believed that progress is just around the corner," the letter said.

"Time and time again, the company has announced a new plan, shown a glimmer of operational improvement, only to fail to achieve sustained progress ... The failure has been the execution of those plans by management and the board’s inadequate oversight."

CP has thrown something of a wrench into the works by getting out in front of its first-quarter earnings report, scheduled for Friday and expected to show a jump in profit.

CP says it expects to post earnings per share, diluted, of 80 cents to 83 cents, which would better last year's showing by some 300 per cent. Last year, of course, was marked by weather troubles.

"CP’s shares have re-rated nicely since Pershing Square started accumulating CP’s shares and launched an activism campaign," said analyst Hilda Maraachlian of UBS Securities Canada, who expects earnings per share of 81 cents.

"We believe the potential for further multiple expansion is limited from these levels and any potential upside from [operating ratio]improvement in the near term is already priced in."

Home sales climb Canada's resale housing market picked up some steam as the spring market began, with a sales gain of 2.5 per cent in March over February.

Sales climbed to their highest since April 2010, the Canadian Real Estate Association said today, though the year-over-year level came in at 1.6 per cent, the slowest since last April.

The average of a home slipped by 0.5 per cent to $369,677 from a year earlier, though, the group noted, regional variations are affecting the average.

"Average prices are up from year-ago levels in most large urban centres," said the group's chief economist, Gregory Klump.

"The slight decline in the national average price points to a tug of war between Toronto and Vancouver from the standpoint of their sales mix compared to last year," he said in the CREA report.

"The national average price was skewed higher last spring by record level high-end home sales in some of Vancouver’s priciest neighbourhoods. It was expected that this would not recur this spring, which the latest sales figures confirm. The decline in average price reflects the change in Vancouver’s sales mix, not housing price deflation."

Toronto is "by far the most active housing market in Canada," Mr. Klump added, and has the most impact on average prices.

"It was around this time last year that Vancouver was labelled the hottest housing market in the country," said Toronto-Dominion Bank economist Sonya Gulati.

"Back then, high-end home sales were driving up out-sized sale and price gains. The 2012 data suggest that the accolade has now been given to Toronto. But, both urban cities should experience weakness in 2013-2014 as interest rates begin to inch up from current lows."

Citigroup profit dips Citigroup Inc. today posted a 20-per-cent decline in first-quarter profit, but a better-than-expected showing pushed up its shares.

Citigroup earned $2.9-billion (U.S.) or 95 cents a share in the quarter. Revenue also slipped 2 per cent to $19.4-billion.

“While the operating environment improved in the first quarter, there is still much macro uncertainty and we will continue to manage risk carefully," said chief executive officer Vikram Pandit.

Spain borrowing costs spike Spanish bond yields temporarily spiked again today as the country becomes the new focus of the euro debt crisis,

"Spain’s curve is selling off again and the 10-year Kingdom of Spain note is trading above 6 per cent at 6.09 per cent again," Derek Holt and Dov Zigler of Scotia Capital said today, though the yields later slipped.

"Of note is that Spanish 10s are back at levels seen before the introduction of the [European Central Bank's]two rounds of massive cash injections into the banking sector as central bank stimulus has been fully shaken off by investors reticent to embrace the bonds."

(There's a bit of a controversy in Spain today as King Juan Carlos undergoes treatment for a hip fracture. He'd been on a hunting trip in Botswana.)

Yuan slips The yuan slipped on the first day of trading within the People's Bank of China's new band of 1 per cent, The Globe and Mail's Kevin Carmichael reports today.

The currency dipped 0.19 per cent to close at 6.315 to the U.S. dollar, marking its fastest decline in more than a week.

That’s a blow to those in the United States, Canada and elsewhere who argue that China’s exchange rate is kept artificially low. Chinese officials lately have argued the opposite, saying their currency’s 30-per-cent appreciation over several years has found the yuan’s “equilibrium” value. The first day of trading supports the Chinese.

"The wider trading range clearly indicates that Beijing is now more comfortable with greater daily volatility in the exchange rate and also suggests officials are trying to signal that indefinite [yuan]appreciation should no longer be assumed," said Brian Jackson, senior emerging markets strategist at RBC.

What to watch for this week The Bank of Canada won't hike interest rates tomorrow, but it is expected to change its tone amid a generally brighter economic outlook.

Governor Mark Carney and his colleagues are expected to hold their benchmark rate steady at 1 per cent, which will be followed by the release of their Monetary Policy Report on Wednesday.

The central bank will probably cite a better backdrop and less concern over the euro debt crisis, though warn that risks remain. Indeed, the troubles in Spain and Italy flared up again this week, setting the stage for whatever Mr. Carney has to say.

"The Bank of Canada will sound slightly more hawkish in projecting a narrower output gap with an earlier date to close it, and a bit less fear of a financial panic originating in Europe," said chief economist Avery Shenfeld of CIBC World Markets.

"It’s too early to either hike rates or sound a clear warning of an upcoming move. But the less dovish statement and policy report could have markets pricing-in a bit higher odds of hikes late this year or in early 2013, even though our view is that when we get there, the economy won’t be strong enough to justify them."

Mr. Carney and his colleagues probably aren't about to "abandon deep-seated concerns over the risks inherent in a turbulent macro backdrop" despite the domestic economy's stronger footing, added fixed income strategist Ian Pollick of RBC Dominion Securities.

"The market will read the statement and MPR as hawkish, though we would think it better characterized as less dovish," he said. "Nonetheless, this will likely facilitate upside pressure for rates."

Besides the Bank of Canada, economists expect Statistics Canada to report Friday that consumer prices climbed 0.5 per cent in March, bringing the annual inflation rate to 2.1 per cent.

"While energy prices could see another 0.4 per cent rise from February on the back of gasoline, food inflation has been trending down since late last year, and falling meat prices could contribute to further improvement," Mr. Buchanan said.

"Offsetting better news on that front, firmer domestic auto sales could see reduced vehicle discounting."

Follow on Twitter: @michaelbabad

 
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