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Where the Canadian dollar stands: Worse than Argentina, better than Mongolia

These are stories Report on Business is following Monday, Jan. 13, 2014.

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Loonie troubles
Canada's currency finds itself in interesting company today after getting whacked in the first couple of weeks of the new year.

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As of this morning, noted chief currency strategist Camilla Sutton of Bank of Nova Scotia, the Canadian dollar had lost 2.2 per cent so far this year.

That's better than the South African rand, the Lesotho loti, the Namibian dollar, Swaziland's lilangeni and Mongolia's tugrik, though worse than the Guyanese and Argentine currencies.

The loonie, as Canada's dollar coin is known, has tumbled for the past year, driven below 92 cents U.S. last week by disappointing trade and jobs reports, among other factors. It was back above that mark today.

Also at play is a dovish Bank of Canada and snowballing negative sentiment where the currency is concerned.

"A weak CAD is indeed good for exporters and economic fundamentals in the medium term; however, the weakening reflects a near-term deterioration in the fundamental landscape, which was highlighted by last week's economic data releases and relative central bank policy."

Lululemon cuts outlook
Shares of Lululemon Athletica Inc. plunged today after the retailer cuts its fourth-quarter outlook, warning it has seen store traffic and sales "decelerate meaningfully."

The yoga wear company said today it now projects sales in a range of $513-million (U.S.) to $518-million, down from its earlier $535-million to $540-million.

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Profit is expected to be 71 cents a share to 73 cents, a drop from the earlier 78 cents to 80 cents.

"We're on track to deliver on our sales and earnings guidance through the month of December; however, since the beginning of January, we have seen traffic and sales trends decelerate meaningfully," said chief financial officer John Currie.

"Based on this recent performance and assuming these trends continue through the remainder of January, we are reducing our outlook for the fourth quarter."

Lululemon shares tumbled almost 17 per cent.

Today's profit warning comes after a string of setbacks for the Vancouver-based yoga wear company.

It has struggled through troubles related to see-through clothing, and a recall, the departure of its chief executive officer, and the resignation as chairman of founder Chip Wilson after he told a TV interviewer that "some women's bodies just actually don't work" for its yoga pants, which sparked a backlash.

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Its stock sank in mid-December after third-quarter profit climbed to $66.1-million, or 45 cents a share, but at the same time it its full-year sales and profit outlook for the second consecutive quarter.

It based its latest forecast on comparable store sales, a key retailing measure, in the "negative to low-to-mid single digits" for the fourth quarter that ends in early February.

"As we end 2013, we are starting to see the results of the significant investments we mad throughout this past year to strengthen and enhance our back-of-house product operations structure," Mr. Currie said in a statement today.

"While we realize that it will require continued investment and time to get best-in-class status, with our new leadership in place we are very focused on building on this stronger foundation to executive our long-term growth strategies."

The company has filled several key positions, including naming Laurent Potdevin as its new CEO early last month.

Chrysler eyes investment
Chrysler Group LLC is looking at an investment of more than $1-billion (U.S.) at its minivan plant in Windsor, Ont., chief executive officer Sergio Marchionne says.

"You can't do a new minivan for less than $1-billion," Mr. Marchionne told reporters at the North American International Auto Show in Detroit today, The Globe and Mail's Greg Keenan reports. "It's a multibillion-dollar commitment."

But the size of the investment means governments need to step up to the plate with what he called "a partnership" or financial assistance.

The Windsor plant has been one of the most successful and profitable plants in the Chrysler empire for more than three decades under several different ownership groups.

Google buys Nest
Google Inc. turned up the heat today – sorry, I couldn't resist – with a $3.2-billion (U.S.) cash deal for Nest Labs Inc.

Nest has been around for a couple of years, with a goal "to reinvent unloved but important devices in the home such as thermostats and smoke alarms," as Google put it.

"They're already delivering amazing products you can buy right now - thermostats that save energy and smoke/CO alarms that can help keep your family safe," said Google chief Larry Page.

Goldcorp goes after Osisko
Canada's Goldcorp Inc. has put a spark into a mining sector that has seen little in the way of deals recently, unveiling an unsolicited $2.6-billion takeover bid for Osisko Mining Corp., whose shares surged on the proposal by almost 21 per cent to above the proposed bid price.

As The Globe and Mail's Bertrand Marotte and Rachelle Younglai report, Goldcorp announced today that it plans a cash-and-stock offer worth $5.95 a share.

"From a financial and strategic perspective, this offer represents a compelling transaction that is consistent with our strategy of improving the overall quality of our portfolio," said chief executive officer Chuck Jeannes.

Goldcorp said a takeover would be "consistent" with its strategy of "disciplined portfolio enhancement" and a focus on investing in regions with little political risk.

Beaming ...
Things may be somewhat hostile in the mining sector, but they're clinking glasses today in the spirits industry.

Shares of Beam Inc. soared today after Japan's Suntory Holdings Ltd. struck a massive deal to acquire the U.S. spirits giant whose offerings include Jim Beam and Maker's Mark bourbons, among others.

The combined company will include Laphroaig Scotch, Courvoisier cognac, Bowmore scotch and (we can't forget this one) Canadian Club whisky.

The deal is $83.50 a share in cash, valued by the companies at $16-billion, including debt.

"I believe this combination will create a spirits business with a product portfolio unmatched throughout the world," said Suntory president Nobutada Saji.

Brewers fined
You can get away with a lot, but fixing beer prices is just going too far.

If it happened here, it would be downright unCanadian.

Germany's antitrust police announced today they have fined several brewers and seven people for fixing prices on bottled and draft beer over a two-year period ending in 2008.

The move by the Bundeskartellamt, or Federal Cartel Office was sparked by "an application for leniency" by Anheuser-Busch InBev, which wasn't fined.

"As a result of our investigations we were able to prove the existence of price-fixing agreement between breweries, most of which were based purely on personal and telephone contacts," said Andreas Mundt, the president of the Bundeskartellamt.

"The price increases of five to seven euros per hectolitre for draught beer in 2006 and 2008 were agreed on this basis. In 2008, a price increase was agreed for bottled beer with the intention of making the 20-bottle crates one euro more expensive."

The companies were fined 106.5-million, or the equivalent of about $14.5-million (U.S.).

BlackBerry shorts decline
Does BlackBerry Ltd. have its mojo back under new CEO John Chen?

Since plumbing 10-year lows a month ago, the stock has risen by more than 50 per cent – even factoring in a sell-off today, The Globe and Mail's Sean Silcoff writes.. Short interest – the number of BlackBerry shares that pessimistic investors have sold with the intent of buying them back at a lower price – has plummeted, to 107.2 million shares on Dec. 31 on the NASDAQ, down from 150.7 million shares a month earlier.

"Insolvency is off the table for now so hedge funds who are short-term in nature and were betting on bankruptcy in six months have scrambled to cover" their short positions by buying back the stock, said Jefferies analyst Peter Misek.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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