These are stories Report on Business is following Wednesday, June 12, 2013.
One of these things is not like the other
The OECD may rank Canada’s real estate market as one of the most overvalued in the world, but don’t equate that with bubbly.
Angel Gurria, the secretary-general of the Organization for Economic Co-operation and Development told The Wall Street Journal that Canada’s housing market, which has cooled of late, is not in bubble territory, and, separately, that the Canadian economy is in decent shape.
“An overvalued housing market and a bubble are not the same thing,” Mr. Gurria said.
“The housing market has been building very steadily over a period based on growth, jobs, good income, and a Canadian economy that’s been in good shape,” he told the news organization’s David George-Cosh on the sidelines of the economic conference in Montreal.
“Frankly, it’s not a bubble in the sense of great big speculation in the property. I think there will be a cull in some investment in the sector, which will see prices stabilize over time.”
Last week, an OECD study ranked Canada among the top three where overvalued properties are concerned, behind Belgium and Norway. It also warned of potential trouble in the event of a shock, though no one is projecting that.
Mr. Gurria's comments come as a fresh reading today showed Canadian home prices rose 2 per cent in May.
While prices in Vancouver and Victoria sank, others climbed over the course of the year, according to today’s Teranet-National Bank house price index.
Canada’s housing has cooled as sales have plunged, though prices have remained intact after Finance Minister Jim Flaherty’s attempts to tame the mortgage market and engineer a soft landing.
Today’s reading matches the 2-per-cent gains of April, meaning it’s still the slowest increase since late 2009.
But prices in seven of the 11 cities studied did better than the national average.
Quebec City chalked up gains of 6.5 per cent, Calgary and Hamilton, 5.8 per cent, Winnipeg, 4.6 per cent, and Edmonton 4 per cent.
In Toronto, which along with Vancouver has become the focus of the country’s real estate angst, prices rose 3.9 per cent.
Month-to-month, prices rose 1.1 per cent from April.
In Vancouver, prices rose 0.7 per cent on the month, though they slipped 0.8 per cent in Victoria.
“Although stronger than expected, May’s price increase from April is not exceptionally large,” said senior economist Marc Pinsonneault of National Bank.
“Indeed, it is below the average of 1.2 per cent in May in the last 12 years (including a recession year),” he said in a research note accompanying the release of the index.
“Without Calgary and Edmonton, the composite index would have risen just 0.9 per cent in May, the second-lowest increase for that month in the last 12 years. So, last May’s increase in the composite index is not a display of strength in the Canadian home resale market. However, it is consistent with an overall balanced market … as soft conditions in most of the eastern provinces and B.C. are offset by tight market conditions in the Prairies.”
Mr. Pinsonneault added he does not expect “a marked acceleration” in annual prices in the near future.
Mr. Gurria also praised former prime ministers Jean Chretien and Paul Martin for putting Canada on the path to fiscal health, where it stands today under the Harper government.
“All together, I’d say that Canada is reaping the rewards of past virtue and also present good practices,” he said. “It would be good if there were many more countries like that.”
- Canadian homes among most overvalued in OECD ranking
- Wall Street Journal (subscription): OECD's Gurria doesn't equate hot housing market with bubble
Sobeys strikes deal with Safeway
Canada’s Sobeys Inc. has struck a $5.8-billion deal with Safeway Inc. to buy the assets of Canadian Safeway, which boasts more than 200 groceries, dozens of gas stations, liquor shops and manufacturing outlets.
Sobeys, a unit of Empire Co. Ltd., said it would become a leading grocer in western Canada, and No. 1 in Alberta, in particular.
"Sobeys expects to benefit from increased economies of scale,” said Sobeys chief executive officer Marc Poulin.
“We anticipate capturing annual cost synergies of approximately $200-million within three years, through integrating and modernizing distribution networks, reducing cost in procurement, administration and marketing, and leveraging Sobeys' IT infrastructure."
CRTC eyes overhaul
Canada’s broadcast regulator wants to rip up the rules governing the TV industry to give consumers more flexible viewing options and make it easier for television providers to compete with online challengers eager to steal their subscribers, The Globe and Mail's Steve Ladurantaye reports.
“It’s time to ask if the assumptions that lie beneath our current regulatory policies still hold true,” Jean-Pierre Blais, chairman of the Canadian Radio-television and Telecommunications Commission, said today.
The CRTC will launch consultations in the fall to ask Canadians how the broadcast system should be changed to serve their needs, followed by broader discussions with those in the television industry to consider how they deliver content into more than 12 million Canadian homes.
Canada to unveil new rules
The Canadian government plans to introduce mandatory reporting standards for domestic energy companies and miners about payments they make to foreign governments, The Globe and Mail’s Paul Waldie reports from London.
Prime Minister Stephen Harper made the announcement in London today after meeting with a group of business people.
“Canada is recognized as a world leader in promoting transparency and accountability in the extractive sector both at home and around the world,” the prime minister said on what has become a hot topic in Canada and one that will be on the agenda when G8 leaders meet in Northern Ireland next week.
Cliffs suspends work
Cliffs Natural Resources Inc. is putting on hold the environmental assessment work for its $3-billion chromite extraction project in the Ring of Fire region of Northern Ontario.
The company says the decision to temporarily suspend the activities is because of delays related to the environmental assessment process, land surface rights and talks with Ontario, The Globe and Mail's Bertrand Marotte reports.
It's the latest in an increasingly complicated regulatory process to get started on the mine as well as on a transportation corridor to get the chromite ore to the Sudbury area for processing.
HBC loss narrows
Hudson’s Bay Co. is making strides in its home base, but not so much in the United States.
Same-store sales, a key measure in retailing, climbed 7.6 per cent in the first quarter of the year at its Hudson’s Bay operations, HBC said today, but its Lord & Taylor unit lagged.
Over all, HBC sales rose in the quarter to $884-million from $848.2-million, while its loss narrowed to $80.7 million, or 67 cents a share, from $129.7-million or $1.24, The Globe and Mail's Marina Strauss reports.
"Our strong sales growth can be attributed to several factors, including improvements in store productivity, increased e-commerce sales, and our partnership with Topshop/Topman,” said chief executive officer Richard Baker.
“These strategic initiatives drove gains at Hudson's Bay, which continues to outperform its competitors. At Lord & Taylor, our sales performance was impacted by unfavourable year over year weather patterns."
Internet giants push back
Facebook Inc. and Google Inc., caught up in the controversy of a U.S. data-snooping program, are pushing back against Washington and its spy agencies.
Both of the Internet companies said yesterday they want the ability to tell the public how many requests they get under national security programs.
“Google has worked tremendously hard of the past 15 years to earn our users’ trusts,” Google’s chief legal officer, David Drummond, said in a letter to Attorney General Eric Holder and FBI chief Robert Mueller.
“For example, we offer encryption across our services; we have hired some of the best security engineers in the world; and we have consistently pushed back on overly broad government requests for our users’ data.”
The controversy surrounds a program known as PRISM, which targets the data of foreigners and trolls for information from e-mails, online chats, pictures, video conferencing and social networking. It snoops via Facebook, Google, Yahoo Inc., Apple Inc., Microsoft Corp., YouTube, Skype and others.
Google’s Mr. Drummond said the Internet search company complies with “valid legal requests” under the Foreign Intelligence Surveillance Act, but that some reports about the government having “unfettered access” to data are wrong.
“However, government nondisclosure obligations regarding the number of FISA national security requests that Google receives, as well as the number of accounts covered by those requests, fuel that speculation,” Mr. Drummond said, asking for permission to publicly disclose the number of requests, and the scope of those demands.
“Google’s numbers would clearly show that our compliance with these requests falls far short of the claims being made,” he added. “Google has nothing to hide.”
Facebook’s general counsel, Ted Ullyot, also asked for permission to publish the numbers, but went further, encouraging “all governments to be much more transparent about all programs aimed at keeping the public safe.”
He, too, called for the ability to provide Facebook users with a “transparency report” that would give a full account of the requests made, and how the social networkers responds.
“In the past, we have questioned the value of releasing a transparency report that, because of exactly these types of government restrictions on disclosure, is necessarily incomplete and therefore potentially misleading to users,” Mr. Ullyot said, adding Facebook now wants that ability.
- Read the Facebook statement
- Read the Google letter
- Ex-CIA worker admits to disclosing U.S. surveillance program details
- Cyber whistleblower tests U.S., China's leaders new post-summit ties
- Data-collection program got green light from MacKay in 2011
- Doug Saunders (for subscribers): Edward Snowden, unlike Bradley Manning, falls into a great whistleblower tradition
- U.S. secretly gathering data on foreigners abroad from Internet firms
- Why Canadians should fear clandestine U.S. snooping program
- Privacy watchdog slams current law, warns Canada 'too far behind'
- Globe Editorial: U.S. surveillance of law-abiding citizens is dangerous and wrong
- Washington Post: NSA slides explain the Prism data-collection program
Lululemon 'bigger than one person'
Shares of Lululemon Athletica Inc. sank again today, following on the heels of yesterday's rout, while analysts reminded investors that the company is “bigger than one person.”
Shares of the yoga retailer plunged by 17 per cent yesterday after the surprise announcement late the day before that Christine Day was resigning as chief executive officer when her replacement is named.
Analysts cited the turmoil at the Vancouver-based company, despite strong quarterly results, with several positions now to be filled. Some also slashed their price targets on the stock.
Analyst Camilo Lyon of CanacaccordGenuity met with Ms. Day and board members in Chicago, an event that reminded him that Lululemon’s “culture and success are bigger than one person,” he said in a research note today.
“Our key takeaway is that the growth strategies that have been implemented over the last five years are fundamentally intact and should not change going forward,” Mr. Lyon said.
“While we believe Ms. Day’s reasons for stepping down largely reflect personal choices about the next steps in her career path, her decision was in no way influenced by the product quality control issues.”
He was referring to the mid-March recall of some Luon yoga pants that were see-through.
Mr. Lyon today reiterated his “buy” recommendation on the shares.
“As the initial shock of her departure dissipates, and more comfort is gained in the succession plans, we expect the stock to rebound,” he said.
- Lululemon shares take a dive on news of CEO's impending departure
- Sean Silcoff in ROB Insight (for subscribers): Four reasons why Lululemon will bounce back
Streetwise (for subscribers)
- Dealers, dividend investors welcome Surge Energy deal
- Another member of GMP's old guard departs
- Directors' group backs Quebec model on unwanted takeover bids
- Newfoundland and Labrador economy Canada's 'runaway leader': forecast
- Why Europe has so much riding on German court ruling
- Canada's manufacturing investment pitch needs to be about value
ROB Insight (for subscribers)
- Stiff upper lipped response to recession will divide U.K.
- Hedge funds' Abenomics play driving U.S. markets
- Skepticism over May jobs surge doesn't add up
- Oxford Properties moves ahead with new Toronto office tower
- Long goodbye: Carney farewell bashes cost Canadians about $30,000
- Americans living in Canada face looming IRS tax deadline
- Greek unions call 24-hour strike over state TV closure
- Euro zone industrial output shows surprise rise in April
- U.K. unemployment falls slightly
- Vodafone confirms move on German cable giant Kabel Deutschland