These are stories Report on Business is following Thursday, July 3, 2014.
Lululemon on rise
Shares of Lululemon Athletica Inc. jumped today amid reports that its founder and former chief is testing the private equity waters on a potential bid.
It was already known that Chip Wilson, who lost an initial round to take on the board of the yoga wear retailer, was talking with Goldman Sachs Group Inc. about what to do next given his 28-per-cent stake in the company.
Now, The Wall Street Journal reports that Mr. Wilson’s advisers are talking to private-equity firms, Leonard Green & Partners among them.
Lululemon has suffered a series of setbacks, eroding the value of its shares. But that doesn’t mean a takeover wouldn’t be costly given that it’s worth some $6-billion (U.S.), and Mr. Wilson would have to pay a hefty premium to win control.
No deal is near, the news organization reported, but investors are clearly relishing the idea of a takeover.
A spokesman for Mr. Wilson wouldn’t say much about the report, telling the Reuters news agency that there has been much speculation about what he may decide.
“Chip will decide if and when he wants to do a transaction of any sort,” he said.
- David Parkinson in ROB Insight (for subscribers); Wilson's going-private idea may be Lululemon's best option
U.S. sees better jobs market
America’s jobless rate is now at its lowest level since the month that the meltdown began.
The U.S. economy churned out a better-than-expected 288,000 jobs last month, and the unemployment rate declined to 6.1 per cent, its lowest since September 2008.
At the same time, the U.S. Labor Department revised its numbers from April and May, showing even greater job creation, our Washington correspondent Kevin Carmichael reports.
Today’s reading is the latest in a string of positive economic reports from the United States.
“Despite the rapid decline in the unemployment rate, which is now getting pretty close to the 5.5-per-cent rate that Fed officials view as the long-run equilibrium rate, we are still not seeing any significant pick-up in wage growth,” said Paul Ashworth, the chief U.S. economist at Capital Economics, referring to the fact that the report showed average hourly earnings rising 2 per cent from a year earlier, down from 2.1 per cent in May.
“Accordingly, we suspect that Fed officials will continue to cling to the view that there is still plenty of slack in the labour market,” he added.
“We are not convinced, however, and expect wage growth to accelerate in the second half of this year.”
Trade deficit shrinks
Canada’s exporters have something to cheer about today: A marked pick-up in May.
The country’s trade deficit narrowed to just $152-million in May from $961-million in April as exports rose 3.5 per cent, outpacing the 1.6-per-cent jump in April, Statistics Canada said.
Exports are now at their second-highest value on record, according to the federal agency.
Actually, export volumes rose 4.2 per cent in May, while prices slipped 0.7 per cent.
Import volumes rose 2.4 per cent, with a price dip of 0.8 per cent.
The auto and related parts industries led the push on both sides of the ledger.
Exports to the United States rose 2.1 per cent, while imports from America dipped 0.2 per cent, widening Canada’s surplus with its biggest trading partner to $4.8-billion.
There was a noticeable push in exports to other countries, up 8.3 per cent, which again outpaced the rise in imports of 5.1 per cent.
“The gain in exports is a positive from the [Bank of Canada’s view, though the recent strength in the loonie could hamper performance from here,” said Nick Exarhos of CIBC World Markets.
- Canadian trade deficit narrows to $152-million in May
- U.S. trade deficit narrows as exports hit record high
The warning to Ontario by Moody’s Investor Service is a shot across the bow that threatens a full-scale downgrade.
“The risks are clearly to another downward ratings adjustment,” chief economist Craig Wright of Royal Bank of Canada said today.
As The Globe and Mail’s Adrian Morrow reports, Moody’s changed its outlook for Ontario to “negative” and warned of a downgrade late yesterday.
Ontario plans to miss its short-term deficit targets, though has pledged to meet its original timeline. Economists, though, have warned of the difficulty given the province’s weak economic outlook, raising questions about the ability to balance the books.
“Ontario’s newly elected majority Liberal government will deliver a throne speech today with a long-term plan that will echo much of what was outlined in this year’s budget,” said senior economist Robert Kavcic of Bank of Montreal, referring to the proposed budget that sparked the election and is expected to be re-introduced.
“With that in mind, Moody’s came knocking last night, slapping a negative outlook on the province’s credit rating.”
Ontario’s fiscal 2014-15 deficit is projected at $12.5-billion, or 1.7 per cent of gross domestic product.
- Adrian Morrow: Moody's issues warning about Ontario's growing deficit
- Why Ontario needs deficit 'credibility' fast
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ROB Insight (for subscribers)