A survey of North American equities heading in both directions
On the rise
Shares of Lululemon Athletica Inc. (LULU-Q) closed flat after raising its fourth-quarter sales and profit forecasts on Monday, in a sign that deeper discounts and deals spurred more customers to shop for the company’s products during the holiday season.
This comes after the sportswear maker forecast tepid holiday quarter results early last month.
CFO Meghan Frank said on Monday the company was pleased with its performance during the holiday season. “Our sales trend remains balanced across channels, categories and geographies, enabling us to raise our guidance,” Frank said in a statement.
Holiday sales for 2023 were mixed as retailers looked to draw in penny-pinched shoppers with steep discounts, according to estimates from Adobe Analytics and Mastercard data.
In December, yoga pants maker Lululemon said it had experienced strong performance during the Thanksgiving weekend, but also noted that it was mindful of the macroeconomic environment.
Lululemon now expects fourth-quarter revenue to be between US$3.170-billion and US$3.190-billion, compared with its previous forecast range of US$3.135-billion to US$3.170-billion.
It projects current-quarter profit per share to be in the range of US$4.96 to US$5.00, compared with its previous expectations of US$4.85 to US$4.93.
Lululemon, however, left its selling, general, and administrative expenses forecast unchanged.
Montreal-based Transat AT Inc. (TRZ-T) was higher by 4.2 per cent on the premarket announcement of a new tentative agreement with the union representing its 2,100 flight attendants.
The proposed contract between the airline and the Canadian Union of Public Employees comes after the flight attendants rejected an earlier agreement reached in December.
Details of the new tentative deal were not immediately available.
The company says if the proposed agreement is approved it will be in place for the next five years.
The contract for Air Transat’s flight attendants based at airports in Montreal and Toronto expired on Oct. 31, 2022.
In November, Air Transat flight attendants voted to approve a strike mandate if a new contract could not be reached.
Morguard Corp. (MRC-T) increased 3.6 per cent after saying it has signed a deal to sell a portfolio of 14 hotels for $410-million as part of its plan to focus on its core real estate investments, including office, industrial, retail and multi-suite residential properties.
The package includes Marriott, Hilton, IHG and independent hotels in major cities across Canada.
Morguard chair and chief executive Rai Sahi says the company has strategically divested its hotel portfolio to align with its objectives of strengthening the company’s balance sheet while owning a high-quality portfolio of income producing real estate.
The company will keep ownership of two hotels including the dual-brand Hilton Garden Inn and Homewood Suites in Ottawa and the Inn at the Quay in New Westminster, B.C.
After it repays $48.7-million in first-mortgage debt, Morguard says its net proceeds from the sale will be $361.3-million.
The deal is subject to customary closing conditions and is expected to close in the first quarter of 2024.
Abercrombie & Fitch (ANF-N) on Monday raised its forecast for fourth-quarter and annual net sales, after strong demand for its apparel brands during the key holiday shopping period.
The company and Lululemon Athletica (LULU-Q), which also raised its sales forecast for the period, benefited from a focus on fresh styles.
The retailers also maintained healthy profit margins as limited inventory overhang helped them sell at full-prices in a discount-heavy holiday shopping season.
“The Abercrombie & Fitch women’s business is expected to achieve its highest-ever fourth quarter sales complemented by an acceleration in men’s growth,” said CEO Fran Horowitz.
Abercrombie’s shares, which more than tripled in 2023, turned higher after initial losses and gained 6.3 per cent on Monday.
The Gilly Hicks parent now expects fourth-quarter net sales to rise in the high teens percentage range, compared with its previous forecast of net sales up low double digits.
The apparel maker bumped up its annual net sales forecast to growth in the range of 14 per cent to 15 per cent, from its earlier expectation of 12 per cent to 14 per cent.
Moderna Inc.(MRNA-Q) reported preliminary 2023 sales of US$6.7-billion for its COVID vaccine, surpassing the lower end of its full-year forecast, while reiterating its goal of returning to sales growth in 2025.
Shares of the vaccine maker rose 3.9 per cent in Monday trading.
In November, Moderna had said it would only hit the lower end of its previous forecast range of US$6-billion to US$8-billion. The US$6.7-billion prelim sales figure includes about US$600-million of deferred revenue related to Moderna’s efforts with the global vaccine alliance GAVI.
Demand for COVID vaccines has fallen sharply since 2021, when the shots first became available.
Moderna still gained share in the U.S. COVID-19 market from rival Pfizer, increasing its hold to 48 per cent in the 2023 fall season from 37-per-cent share in 2022. But weak sales of the vaccine have weighed on the stock’s performance, dragging it nearly 45 per cent last year. The company reaffirmed its goal to break even in 2026 and said it continues to expect about US$4-billion in sales this year from its shots for COVID and respiratory syncytial virus (RSV).
Regulatory approvals for the RSV shot are expected in the first half of this year. Moderna also expects to report late-stage data from its next-generation COVID shot and a combination flu/COVID shot in 2024.
The vaccine maker intends to seek regulatory approvals in 2024 for its seasonal flu shot, which generated a stronger immune response against all four A and B strains of the virus compared with traditional flu shots in a late-stage trial.
On the decline
Boeing (BA-N) shares fell 8 per cent on Monday following the temporary grounding of some of its best-selling 737 MAX jets by the U.S. aviation regulator.
A piece of fuselage tore off an Alaska Airlines 737 MAX 9 jet on Friday following takeoff from Portland, Oregon forcing pilots to turn back. The U.S. Federal Aviation Administration (FAA) subsequently ordered the temporary grounding of some narrow-body MAX 9 jets.
Alaska Air (ALK-N) and United Airlines (UAL-Q), the other U.S. carrier that operates the jet, also declined.
Spirit AeroSystems (SPR-N), which manufactured and initially installed the fuselage part on the brand new MAX 9 jet in question, plummeted over 11 per cent, deepening the gloom around the supplier recently recovering from a string of quality problems.
Wall Street analysts viewed the accident as a temporary setback to Boeing, but some took a dim view of a series of quality problems related to the 737 MAX family of aircraft.
“It highlights a history of quality escape problems, particularly at Spirit AeroSystems. Quality escapes are not acceptable in an industry in which single failures can have serious consequences,” Bernstein analysts said.
Boeing-rival Airbus’ shares rose on Monday. The European planemaker has expanded its market share since two Boeing MAX crashes in 2018 and 2019 that killed nearly 350 people and led to the MAX’s worldwide grounding for 20 months.
Airbus will announce that it delivered 735 planes last year, beating Boeing to remain the world’s largest planemaker for the fifth year in a row, industry sources said.
Reuters last week reported that the number would reach the mid-730s, beating the company’s target of 720.
Some analysts said the problem appeared to be a one-off manufacturing issue, rather than a design issue that is more costlier to fix. They also noted the number of aircraft affected was small.
“The earlier generation 737-900ER had the same approach to the door and there have been no incidents on millions of flights,” Bernstein added.
Boeing has delivered 214 of the 737 MAX 9 jets, or 16 per cent of the more than 1,300 MAX aircraft in service, most of which can still fly, including 737 MAX 9 jets with ordinary doors instead of the replacement panels.
“A serial manufacturing issue could require a design or manufacturing change for Boeing or the responsible supplier, but we would not expect an outsized cost,” Melius Research analyst Robert Spingarn said
More Gildan shareholders say they will support a dissident slate of directors
In an open letter, the board says Gildan co-founder Glenn Chamandy was the right leader for much of his tenure but that it had lost trust and confidence in his ability to grow an increasingly complex organization.
Gildan’s board replaced Mr. Chamandy late last year with former Fruit of the Loom executive Vince Tyra.
Mr. Chamandy has said he was terminated without cause after four decades with the company.
U.S. investment firm Browning West is seeking to replace five directors at Gildan, appoint Michael Kneeland as chair and reinstate Chamandy as chief executive.
The move by Browning West has been backed by other large Gildan’s shareholders including Jarislowsky Fraser, Turtle Creek Asset Management Inc. and Oakcliff Capital.
U.S.-listed shares of Shell (SHEL-N) were lower after it flagged impairment charges of up to US$4.5-billion for the fourth quarter, mainly related to the Singapore refining and chemicals hub the oil major is looking to sell.
Ahead of fourth-quarter results on Feb. 1, the company also said gas trading would be significantly higher than the previous three-month period, while oil trading results were expected to be significantly lower over the same period.
Shell’s liquefied natural gas (LNG) production volumes were expected to come in at 6.9 million to 7.3 million metric tons, a slightly higher range from its previous guidance. That comes after Shell restarted production late last month at its giant Prelude LNG facility offshore Australia following four months of maintenance.
Shell’s upstream production is set to come in at 1.83 to 1.93 million barrels of oil equivalent per day in the fourth quarter.
Meanwhile, its chemicals and products division is expected to post an adjusted earnings loss for the period, it added.
The changes led analysts at Barclays to lower Shell’s forecast fourth-quarter adjusted operating result to US$5.9-billion, down 11 per cent from their previous estimates.
Shell said it would take non-cash, post-tax impairments of US$2.5- to US$4.5-billion in the quarter.
That includes up to US$2.1-billion for the 237,000 barrels per day (bpd) refinery and a 1 million metric ton per year ethylene plant on Singapore’s Bukom and Jurong islands, for which it had announced a strategic review last year.
Johnson & Johnson (JNJ-N) dipped after it said on Monday it had agreed to buy drug developer Ambrx Biopharma (AMAM-Q) for US$2-billion to gain access to its portfolio of targeted cancer therapies.
J&J will pay US$28-per share of Ambrx, which represents a premium of about 105% to the stock’s last close.
Ambrx is developing therapies that belong to the class of drugs called antibody drug conjugates (ADC), which are described by researchers as “guided missiles” to target cancer cells and minimize damage to healthy tissue.
J&J’s acquisition is the latest deal announced in the space. In November, AbbVie (ABBV-N) said it would buy ADC-developer ImmunoGen for US$10.1-billion in cash.
With files from staff and wires
David Leeder