Will Slowing Inflation Lead to Interest Rate Cuts?

[00:00:00] Welcome back to the Canadian Investor podcast.

[00:00:17] We're here for our regular Thursday and news episode.

[00:00:21] It's me and Dan Kinn.

[00:00:22] Dan, you must be feeling pretty awesome.

[00:00:25] Their Oilers won last night.

[00:00:27] It wasn't easy, but they ended up making it through to the next round, beating the Vancouver

[00:00:31] Canucks.

[00:00:32] And for the Canucks fan, sorry, but join the club.

[00:00:37] Montreal Canadians have been out for quite some time now.

[00:00:40] Yeah, the Oilers are the only Canadian team left.

[00:00:43] I think in the last 10 minutes there, I probably aged a year.

[00:00:47] I was like, oh, this game, Vancouver's barely touched the puck.

[00:00:51] This game's over.

[00:00:52] Then one's in, then two's in.

[00:00:54] And I'm like, oh my God, I might have to turn this thing off and go have a walk or something.

[00:00:58] But yeah, they pulled it off.

[00:00:59] They always make it interesting.

[00:01:00] It seems like Edmonton specifically always makes it interesting.

[00:01:04] But we'll see what happens against Dallas.

[00:01:07] Yeah.

[00:01:08] I mean, that what happens when you don't have that much stability in that, right?

[00:01:14] So it's always a bit of a wild card with Edmonton.

[00:01:16] Definitely a wild card.

[00:01:18] But yeah, they pulled it off.

[00:01:20] Congratulations to all Edmonton fans here.

[00:01:23] And obviously, Canada's hopes to bring the Stanley Cup back is resting on the Oilers.

[00:01:30] So we'll have to see if it comes true in a couple of weeks from now.

[00:01:34] But we'll get started.

[00:01:35] A lot of news and earnings to talk about.

[00:01:39] You'll start us off with Canadian CPI, which actually just came out this morning before we recorded.

[00:01:45] Yeah, the CPI report actually came in pretty good.

[00:01:49] I mean, the CPI came in at 2.7%, which is down from the 2.9% gain witnessed in March.

[00:01:55] 2.7% was generally right in line with what was expected, maybe a little bit lower.

[00:02:01] So food inflation was down quite a bit.

[00:02:04] It came in at 1.4% on the month.

[00:02:06] So this is down from the 1.9% gain in March.

[00:02:10] But the one thing that is particularly still strong is restaurant pricing.

[00:02:15] So food eaten at restaurants, that growth came in at 4.3%.

[00:02:20] It's down from the 5.1% that we saw in March.

[00:02:24] But I mean, that's still way too high.

[00:02:27] Restaurants are going through some pretty harsh times.

[00:02:31] I mean, we even, I don't know if you saw this, but Red Lobster just filed for bankruptcy.

[00:02:36] They're going bankrupt.

[00:02:37] Really?

[00:02:37] Okay.

[00:02:38] Yeah.

[00:02:39] I haven't ate there in probably, oh God, it's got to be 20 years.

[00:02:43] I never really liked it that much.

[00:02:44] But yeah, they just released bankruptcy like either yesterday or this morning.

[00:02:51] Okay.

[00:02:52] Red Lobster.

[00:02:53] Yeah, I mean, I must have been definitely pre-pandemic for me.

[00:02:58] You know, I liked it.

[00:03:01] It was just not that cheap for a seafood place.

[00:03:04] So it's kind of like there's oftentimes other options I find around the city in

[00:03:08] Ottawa that are as good and similar pricing.

[00:03:12] And when I have the option between going to a chain or more local place,

[00:03:17] I'll typically choose a more local place.

[00:03:19] Yeah.

[00:03:20] And it's like, I even remember back, like the last time I would eat there,

[00:03:23] I was probably in junior high.

[00:03:24] And I remember my parents talking about how expensive it was.

[00:03:26] So I can't even imagine with all this going on,

[00:03:29] like with restaurant pricing growth and all that, how expensive it was.

[00:03:32] But yeah, they went belly up this morning.

[00:03:36] So the one interesting thing is rent increases, especially in Alberta.

[00:03:43] So like our real estate market is just like absolutely bonkers here right now.

[00:03:47] Rental prices are up 16.2% year over year.

[00:03:51] So this is double the national average.

[00:03:53] And they pretty much say it's because of intra-provincial migration.

[00:03:57] So people are clearly moving from higher cost cities.

[00:04:01] I don't exactly know where, but I would imagine places in Ontario,

[00:04:04] BC and they're moving to Alberta, which is causing a huge surge in demand in

[00:04:10] terms of just real estate and rent.

[00:04:13] Real estate prices are like, they're growing at some of the fastest rates

[00:04:17] we've seen in a while here.

[00:04:18] But just overall, inflation slowed in every province outside of Ontario,

[00:04:23] BC and New Brunswick.

[00:04:24] And even then the upticks weren't really all that much.

[00:04:28] Core CPI, which would remove volatility of gas and food prices,

[00:04:32] that came in at 2.6%, which is down from 2.9% in March.

[00:04:38] And I mean, if we look to the underlying data, it's pretty clear what is fueling

[00:04:41] inflation right now.

[00:04:42] And it's kind of been this story for like probably a year now.

[00:04:46] Shelter costs remain elevated, which should be eased to a certain extent with

[00:04:51] rate cuts.

[00:04:51] But I think the one key issue here is that I don't think they're going to be

[00:04:56] able to slow it down all that much unless like it's a material cut because even

[00:05:00] if they cut even 100 basis points, you're probably resulting in a bump in mortgages,

[00:05:06] a bump in rent costs.

[00:05:07] So the market is now pricing in a 55% chance of a cut in June.

[00:05:13] This is up from 39% earlier.

[00:05:15] But I mean, these forecasts are so strange.

[00:05:17] Like I remember when they recorded CPI last, I remember it was at like 70%

[00:05:21] or something that they were going to cut in June.

[00:05:23] So it must have fallen from 70% down to 39 and now back up to 55.

[00:05:29] The Canadian dollar obviously facing some pressure after this announcement.

[00:05:32] I mean, simple explanation possible when Canadian policy rates are lower than say

[00:05:36] the United States creates less demand for the Canadian dollar as rates are more

[00:05:40] attractive in other countries.

[00:05:43] When we look to just individual segments again, shelter up 6.4% year over year.

[00:05:50] Household stuff like furnishings, equipment are down 2.1%.

[00:05:54] Clothing and footwear down 2.6%.

[00:05:57] Transportation up 3% obviously with fuel still remaining high.

[00:06:02] Recreation, education, things like that down to 1%.

[00:06:06] I did see because they report this on the news every morning and a lot of

[00:06:10] the interviews that they did, people were saying like, oh, I don't really

[00:06:15] notice anything in terms of prices, prices coming down.

[00:06:18] I think that's a misconception of a lot of people.

[00:06:22] Slowing inflation doesn't mean deflation.

[00:06:26] Prices are never going to come down.

[00:06:29] I mean, they could, but the object here to slow the rate of the increases.

[00:06:34] Exactly.

[00:06:35] The rate of the increase is slowing down, but prices are still increasing

[00:06:41] and you have to keep in mind it has a compounding effect too, right?

[00:06:45] So they've increased a lot over the last four years and then even if

[00:06:49] the pace of inflation is slowing because it's on a higher dollar value,

[00:06:54] it may still feel like prices are increasing and maybe not even,

[00:07:00] income not keeping up with those increasing prices.

[00:07:03] But yeah, you're completely right.

[00:07:04] A lot of people I think are expecting deflation when slowing inflation

[00:07:09] just means that it's not increasing as fast, but they're still elevated.

[00:07:14] If you're kind of looking for prices to come back down to what they were,

[00:07:18] I mean there's almost zero chance of that happening.

[00:07:22] They're elevated, they're probably here to stay.

[00:07:24] Now the objective is to just get it back to that 2% target.

[00:07:29] I mean this is a pretty good fodder for the Bank of Canada

[00:07:34] to at least consider cutting in June.

[00:07:36] I mean it's pretty tough for Canadians right now, but I mean food's slowing down

[00:07:40] in a big way which is good because that's something that hits pretty much absolutely

[00:07:45] everybody.

[00:07:46] Shelter's still way too high, but you could see some relief in terms of that

[00:07:51] when rate cuts happen.

[00:07:52] But overall, I mean this does give them a bit more incentive to cut in June.

[00:07:57] We'll see if they do.

[00:07:58] Well yeah and the one that seems to be sticky is this one here

[00:08:01] for the Joint TCI listeners that I'm highlighting.

[00:08:04] So services slowed down on a month-to-month basis to 0.2%.

[00:08:09] So that's definitely good, but year over year still 4.2%

[00:08:14] and that's proven to be pretty sticky

[00:08:16] and that's definitely a number I'm sure they're keeping an eye on.

[00:08:20] And you know I think you explained it well aside from that.

[00:08:24] I think it'll be interesting to see what the Bank of Canada decides to do.

[00:08:28] From my perspective, I mean it does give them a little more leeway if they want

[00:08:33] to put in a cut or two just because the reasoning behind cutting

[00:08:38] is that you have to be careful if you cut too much

[00:08:41] because it could lower the Canadian dollar because you know foreign dollars

[00:08:47] can go to the US and get a higher yield on those government bonds for example.

[00:08:53] So if it does lower the Canadian dollar at the very least since inflation

[00:08:57] seems to be coming down and I am saying like seems with a big asterisk

[00:09:01] because it's only been a couple months now.

[00:09:04] It may give them a little more flexibility there but then we saw the 90,000 you know job

[00:09:10] report whether that's revised or not in the future.

[00:09:13] I would say it's probably going to be revised

[00:09:15] and if I had to bet probably revised down.

[00:09:19] But again that does you know kind of put some weight on the other side of the equation

[00:09:24] where maybe they decide not to cut because those job numbers are strong.

[00:09:29] So it'll be interesting there's a lot of conflicting data.

[00:09:32] They definitely have a bit more leeway if they want to do it but it really

[00:09:37] do they want to pounce on it now or wait a bit you know down the line we'll have to see.

[00:09:41] Yeah that's another thing too like they're not just gonna see one or two reports and

[00:09:46] like they probably need to see a natural like a consistent progression downwards.

[00:09:51] A lot of people see these like a single report and they're like oh

[00:09:53] they should be cutting rates.

[00:09:55] I mean we've seen it you know the next month it can blow above expectations so

[00:10:00] they need to see pretty much a steady decrease which I mean that has been

[00:10:04] happening for the most part here in Canada.

[00:10:07] We seem to be in a lot better shape than the U.S. on that front because I believe

[00:10:11] you'll go over U.S. next which is reporting a bit higher numbers but that's pretty much all

[00:10:17] I have to say on the Canadian end of things.

[00:10:20] Yeah and the last thing I'll add here is the main downward contributors so

[00:10:25] in terms of actual declining inflation.

[00:10:28] So these are things that you know they're the biggest changes but at the same time

[00:10:33] they're not really things that will impact most people.

[00:10:35] At least people are struggling the only one would be fresh vegetables which are down 3.6%

[00:10:41] on a month over month basis so that's versus March but travel tours are down 7.5%.

[00:10:47] How is that a big plus for most people I don't think it really is.

[00:10:51] Air transportation down 5.7%.

[00:10:54] I'm sure that helps some people that may have to travel for different reasons but again

[00:11:00] a lot of this may be discretionary for a lot of people.

[00:11:03] The purchase of digital media down 13% again it's nice but does it really matter all that

[00:11:11] much and furniture down 1% again nice but I think people will probably keep their couch or

[00:11:17] whatever it is piece of furniture a little longer.

[00:11:19] So I thought it was interesting because a lot of the main downward contributors

[00:11:24] are probably not things that matter to most people at least not those who are struggling

[00:11:29] making payments on a month to month basis.

[00:11:32] You'll see in the contributors like the increases is pretty much outside of women's clothing is

[00:11:38] pretty much things that impact everybody and then the downward ones are

[00:11:42] things that are I mean impact very few people overall so I mean it's still

[00:11:48] pretty tough environment.

[00:11:50] Yeah definitely.

[00:11:53] Now we'll move on to this US CPI one.

[00:11:55] So the headline CPI came in lower than expected at 3.4% but marginally lower it was pretty close

[00:12:02] to target.

[00:12:03] The monthly increase was 0.3% so if you put that on a year basis is 3.6%.

[00:12:09] Food prices were flat month to month and up 2.2% year over year.

[00:12:15] Energy rose 2.6% year over year but was up 1.1% month over month.

[00:12:21] Now something to keep an eye on because that could fuel inflation if it keeps going up.

[00:12:27] Natural gas is one to really zone in on you know both in Canada but also in the US

[00:12:33] because prices are very low right now but they have been rising and if we're seeing

[00:12:39] more and more power consumption natural gas is definitely a logical choice there

[00:12:45] and also nuclear energy and according to the US Energy Administration

[00:12:50] natural gas is used to generate 43% of the electricity in the US so that's a key point

[00:12:56] here because an increase in natural gas prices will clearly have an upward impact on inflation

[00:13:02] and I wouldn't be surprised if that increases because of the electricity demand like I've

[00:13:07] mentioned that we will probably see in the coming months and years.

[00:13:11] Electricity costs rose 5.1% year over year but were actually down 0.1% month over month.

[00:13:18] New vehicles were down 0.4% year over year while used cars and trucks were down 6.9% year over year.

[00:13:25] Services less energy remained sticky a bit like Canada at 5.3% year over year and 0.4% month

[00:13:31] over month and core CPI which is all items less food and energy was up 0.3% on a month

[00:13:37] over month basis which would bring the annualized rate to 3.6%. The main takeaways for me

[00:13:44] is still higher than the Fed's target at 3.4% again which kind of places the Bank of Canada

[00:13:50] in a bit of a conundrum here because now you've had presidents of various federal reserves in

[00:13:56] the US kind of coming out and being more hawkish meaning that rates will slightly

[00:14:02] stay higher for longer they want to see some sustained proof that inflation is slowing down

[00:14:11] prices are still increasing and headlines saying that inflation is cooling just means

[00:14:15] that the rate of inflation is slowing but like you mentioned prices still are increasing

[00:14:21] and individual inflation prints can be volatile and I think that's really important to reinforce

[00:14:27] and the Fed again won't be likely to cut until inflation is going back closer to their

[00:14:33] 2% target unless they decide to actually do a 180 and you know maybe they tolerate 3% inflation

[00:14:41] who knows but they've been pretty steadfast on saying that 2% is the target

[00:14:46] yeah they could just move the goalpost I guess and make 3% the new target if they can't

[00:14:51] get it down there but I imagine for now they're gonna they're gonna keep trying to

[00:14:55] get it down to 2% the one interesting thing is is the used used auto price auto prices like

[00:15:01] prices of used vehicles so I own Boyd like they're an auto body and glass company and they

[00:15:07] they reported their earnings I think it was like last week and like during the pandemic

[00:15:13] they saw like insane demand like they couldn't keep up to it because most of their

[00:15:18] revenue is through insurers like vehicle collisions and because of the like skyrocketing

[00:15:23] price of used auto vehicles used automobiles like there's no insurance write-offs right so

[00:15:29] they tend to repair a ton and now they're kind of seeing like it go a full 180 so now that

[00:15:35] used used vehicle prices are falling they're noticing that insurers are just writing a check

[00:15:40] and writing vehicles off instead of getting the repair just because prices are starting

[00:15:44] to normalize so I mean it's crazy just like how much that used vehicle market was just

[00:15:51] going bonkers in during the pandemic I think mostly a supply thing but yeah oh yeah

[00:15:57] I would imagine this will continue to fall I mean well people couldn't get their hands on a new car

[00:16:04] right so they would go to the use market because they need a car and we were forging it we bought

[00:16:09] our car right before the craziness and our second car right after the craziness so we

[00:16:15] bought the second one in September the first one in like early 2021 just before the prices

[00:16:21] started going up and our the one we bought them I would look from time to time later in 2021 2022

[00:16:28] even early 2023 and our car actually gained appreciating asset yeah appreciate it exactly

[00:16:35] so you know who says a car is not an investment yeah exactly I remember when they were they were

[00:16:41] like flipping teslas people are buying teslas and flipping them and profiting yeah the

[00:16:46] I mean this that one stood out to me seven percent year over year I would expect that

[00:16:50] to continue to decline because used prices are still nuts no definitely well we'll move on because

[00:16:56] we have quite a few things to touch on you want to get started with earnings with lightspeed

[00:17:00] commerce earnings yeah so lightspeed had a pretty strong rebound quarter the stock ended up

[00:17:07] you know increasing around 22% after the earnings were released but it's pretty

[00:17:11] important to consider the fact it dropped by 11% leading into the earnings and I think most of this

[00:17:16] was because of Shopify I think Shopify reported and there was there was a big kind of a big

[00:17:21] sell-off in regards to lightspeed and just other payment processors but they reported year over

[00:17:27] year revenue up 25% transaction based revenue grew by 40% and subscription based revenue by

[00:17:33] 7% so subscription revenue is seeing a pretty big slowdown it's been a big driver of growth

[00:17:39] for the company their subscriptions revenue would primarily be from stuff like their point

[00:17:44] of sale systems for retail stores restaurants things like that so one of the company's primary

[00:17:49] strategies over the last year or so here has been to acquire more high-end clients with

[00:17:55] larger revenue streams so obviously the higher the revenue the less likely the company will

[00:17:59] churn in terms of subscription services a small business obviously that's earning $100,000 and

[00:18:05] is struggling they might churn their point of sale system whereas you know a company making

[00:18:10] 500,000 a million dollars a year in transaction volume it's highly unlikely to happen and plus

[00:18:15] the added revenue obviously earns more for lightspeed on the year the company's customers

[00:18:21] that have gross transaction volume of more than 500,000 grew by 5% and the customers with

[00:18:27] more than 1 million a year in gross transaction volume increased by 6% I loan I do own

[00:18:32] lightspeed but this is kind of a data point that they've started reporting that does bother me

[00:18:37] a bit because the data is nice to know but the real number that I believe investors would

[00:18:42] want to know and one that they don't report is the customer growth or the lack thereof

[00:18:47] of their smaller clients because you can be adding a ton of larger clients but if you're

[00:18:52] churning a ton of smaller clients I mean it might offset it they only report increases

[00:18:58] they have a lot of small clients too like that's one thing I've noticed ever since you know

[00:19:03] I've taken a bit more of an interest in lightspeed and I've noticed going to small

[00:19:09] shops like a lot of them have the lightspeed point of sale exactly so that's something I've

[00:19:16] noticed myself thankfully most of the shots I've been to they seem to be doing well but again

[00:19:21] you're completely right I mean I feel like the backbone of their business is on those smaller

[00:19:26] businesses yeah and I mean I would like this is speculation by me but I would imagine if the

[00:19:32] numbers were good they would report them you know what I mean like they're reporting larger

[00:19:37] you know solid growth with larger clients but they just don't report the smaller clients

[00:19:42] I believe if they were still growing in that regard they would probably report it so who

[00:19:46] knows like how that end of the business is doing on a full year basis the company posted

[00:19:51] revenue growth of 24% transaction volume growth of 37% and subscription growth of 8%

[00:19:58] and they plan to hit profitability on an adjusted EBITDA basis in fiscal 2024 they did that

[00:20:04] around 1.3 million but this adjusted EBITDA figure factors in stock-based compensation

[00:20:10] which accounted for a huge chunk of it so the company posted a net loss of 163 million on the

[00:20:17] year and stock-based comps made up 73 million of that so it's a pretty big chunk way too high in

[00:20:24] my opinion but it has been going down that said in fiscal 2023 the company posted a net loss of

[00:20:31] 1 billion dollars and in 2024 they lost 163 million so the path to profitability it's still

[00:20:37] getting a bit better but I'm not sure I'd put much for reliance on adjusted EBITDA especially

[00:20:41] with stock-based comps in there making up so much of it too like it it's kind of an easy

[00:20:46] way for companies like this to report better than underlying numbers I mean they issued guidance

[00:20:53] in which they expect to grow at a 20% clip or more next year and adjusted EBITDA to hit 40

[00:20:59] million which would be pretty close to a 35-fold increase from fiscal 2024

[00:21:05] and they appointed Dax De Silva again the founder of Lightspeed back to being the permanent

[00:21:10] CEO he was there then he left then the the other CEO I can't remember his name pretty much

[00:21:17] botched it in a very short amount of time and they got rid of him and brought Dax back on

[00:21:23] but overall it's funny because I thought the other CEO was brought on to kind of put some

[00:21:28] restraint on the spending and have a more operational person than Dax who was more of a

[00:21:36] kind of growth and more of a you know bigger picture kind of guy yeah and he the other CEO

[00:21:43] made a release on how they were going to continue to try and like grow through

[00:21:48] acquisition and spend money and the stock I remember it absolutely bombed and then like he

[00:21:54] kind of got he didn't go public too much after that and then they kind of weeded him

[00:21:58] out and brought brought Dax back in so I mean at this point I think it's more of a

[00:22:03] like a PR type thing I mean the stock price has taken a beating from all-time highs I believe

[00:22:10] it was like 150 some dollars at one point and now it's probably trading in the low 20s

[00:22:15] yeah even sub 20 dollars so we'll see if he turns things around its competition is really

[00:22:21] fierce they should be able to hold their own there as you mentioned their payment processing

[00:22:26] systems are very popular ton of retail companies use them golf courses they got

[00:22:30] tee time bookings I mean all that type of stuff once like the fact that they're still growing

[00:22:35] at a 20% clip right now it's still pretty impressive I think when the macro environment

[00:22:39] picks up a bit I think they'll be able to grow that even further but it was a pretty

[00:22:43] solid quarter after you know a relatively weak one the quarter prior yeah the the COE

[00:22:49] replace was JP Chauvet yeah that's the guy yeah so no I mean it'll be interesting I

[00:22:55] totally agree with you I think for me it's when I'm more interested looking at the big thing

[00:23:01] that I don't love about the company is just a competition space yeah so they could very well

[00:23:06] become profitable hold their own but I just don't know how much they can grow when there's

[00:23:13] so much competition right you think about toasts you think about square there's all

[00:23:17] different kind of platforms I think Microsoft I think I may have one too I can't remember

[00:23:23] but there's different ones that are competing in essentially the same market as them right so

[00:23:29] it's more that at that kind of I have a bit more trouble with yeah yeah I mean Nuve would

[00:23:35] have been another one which is gone now but that's right yeah the one interesting thing

[00:23:39] is so Nuve got acquired for about 4.5 x enterprise value to revenue and Lightspeed

[00:23:45] is trading at 1.39 enterprise value revenue so Nuve sold for about three times the price

[00:23:53] of what Lightspeed is trading at right now I mean Nuve was profitable like they were in a bit of a

[00:23:58] different structure but there's still like there's a pretty wide gap there I found I found pretty

[00:24:03] interesting I mean I wouldn't be surprised at private equity if they do become profitable or

[00:24:08] they're very close to it they may come circling yeah and you know try to get them private I

[00:24:13] would not be surprised if that happens but no I think that's a good breakdown anything else to

[00:24:18] add for Lightspeed nope you can go on to Canada Goose Canada Goose Q4 2024 so it was actually

[00:24:28] not bad or at least better than expected so revenues were 358 million that's an increase of

[00:24:34] 22 percent compared to the previous year and what was really impressive is that it was 8 percent

[00:24:40] higher than the top end of their guidance last quarter so definitely they exceeded expectations

[00:24:45] there they mentioned during the call that it remains a challenging consumer environment

[00:24:50] and that the warm winter impacted sales which is fair at least in my and around Ottawa in the

[00:24:58] east of Canada was definitely warmer than usual DTC revenues were up 19 percent so direct

[00:25:05] to consumers revenue to 272 million on the call they did say that DTC sales were strong

[00:25:13] in Asia Pacific and wholesale revenues were down 9 percent to 41 million difference between

[00:25:19] the two wholesale is just what they're selling to like retailers so for example

[00:25:24] you know wholesale would fall into if you went to Nordstrom before they exited Canada they had

[00:25:29] tons of Canada Goose so that would be an example here now gross profit margins were up

[00:25:35] 20 basis point versus last year to 65.1 percent operating profit margins were also up to 45

[00:25:43] basis point to 6.45 percent so definitely encouraging on both fronts here they had net

[00:25:50] income of 7.6 million versus a loss of 10 million last year they generated 74 million

[00:25:56] in free casserole versus 15.3 million free casserole negative last year they opened three

[00:26:02] new stores during the quarter including in Honolulu Nanjing and in Melbourne to bring

[00:26:08] the total new store count for fiscal 2024 to 17 so that one was interesting did you expect

[00:26:16] to see a Canada Goose in Hawaii and I guess Australia that's kind of

[00:26:23] now maybe there's yeah I know they they do sell other kind of items but that was definitely

[00:26:31] a bit of a head scratcher but I'll just give them the benefit of the doubt that

[00:26:35] there is I didn't realize but they also launch a new resell platform in 2024 called

[00:26:42] generations did you did you know that no when I was reading this this morning I just figured

[00:26:49] it out like it so you can just put your used used items on there it's kind of like yeah

[00:26:55] exactly consignment probably yeah exactly well it sounds like so I'll show people on

[00:27:00] Joint TCI what it looks for so essentially you can trade in your Canada Goose items

[00:27:06] it's very specific to certain categories so if you look you'll see it's mainly coats

[00:27:11] like there are certain things they just won't trade in so what you do is you send them the

[00:27:16] item and they assign like a value to it and then they send you a gift card back

[00:27:21] so essentially yeah it's I mean it's pre it's a predetermined amount so then they'll sell it on

[00:27:29] their platform and I think it's pretty smart because the gift card is probably just you know

[00:27:33] probably a couple hundred dollars just based on what I've seen in terms of the item selling

[00:27:38] so they're forcing you to most likely buy some more items from them and spend more

[00:27:44] because clearly 200 bucks for Canada Goose if you buy it new won't go very far so I thought

[00:27:50] it was I mean probably a good call for them to do that and I would never have considered Canada

[00:27:56] Goose myself just because of the price but I know people laugh at and they say it's really

[00:28:01] good quality and you look at some of the pricing and it's much more reasonable obviously

[00:28:06] it's used but you can get like some really nice parkas for three to five hundred dollars

[00:28:11] versus you know thousand to two thousand dollars if it's new yeah this is pretty much

[00:28:17] be used by just people who kind of want to trade in and get a new one I guess

[00:28:20] I mean yeah exactly get rid of your old jacket and get two three hundred dollars off your new

[00:28:25] one but I mean I think jackets don't they go for they got to be twelve or twelve hundred

[00:28:30] dollars aren't they yeah I mean they are expensive very expensive and I mean some

[00:28:36] of the items so lists of eligible items so there's you know let's just say an

[00:28:40] eligible item so there's hats gloves mitten scarves face mask hood trims home accessories

[00:28:46] and shoes so a lot of items are just not eligible but the the big parka vast and coats

[00:28:51] seem to be so definitely definitely interesting I mean gotta give them props like I think

[00:28:58] especially where people are pinching a bit more I think it's another source of revenue for them

[00:29:03] and in terms of guidance they expect revenue to grow in the low single digits for fiscal

[00:29:08] year 2025 yeah kind of wasn't Canada Goose the company that last quarter gave like the massive

[00:29:14] range of guidance I don't know if they had a it was a decent range but I think it just came

[00:29:20] in lower than expected I can't remember but yeah I mean they they did pretty good so at least

[00:29:28] they exceeded that that guidance yeah I seem to remember uh yeah they made let me see here

[00:29:36] I'm trying to look here yeah they did they made a the huge so they had a huge deviance in guidance

[00:29:41] so they they projected guiding to earnings from 60 cents to a dollar 40 that was their guidance

[00:29:49] and then their revenue guidance was 1.1 billion to 1.4 which is a huge range too and then here

[00:29:55] they they top it by eight percent like it kind of seems like they don't really know what's

[00:30:01] gonna happen there like I mean I kind of give them the benefit of the doubt mostly because

[00:30:08] it's weather dependent on one hand which again makes the opening of

[00:30:12] Honolulu a little bit of a head scratcher but I digress and on the other hand there is a big

[00:30:18] macroeconomic impact right this you talk you said it right like you're talking about like

[00:30:23] spending upwards of a thousand dollars for one of these codes if you're clearly struggling

[00:30:28] that's a purchase you're going to push off so I think it's probably because of those two that

[00:30:33] are so hard to predict that they have so they don't really have a choice to yeah exactly give

[00:30:38] a big range that would be my you know my view of it but um no overall I think obviously a good

[00:30:44] one it'll be interesting to follow we'll go on to another retailer here so Walmart you want

[00:30:49] to go over um what they said I think it'll be really interesting this one yeah they had uh

[00:30:55] they had a pretty interesting quarter I mean they topped headline numbers both top and bottom lines

[00:30:59] revenue is up around six percent year over year same store sales growth in the United States was

[00:31:05] 3.8 percent Sam's Club which is kind of like their Costco type wholesaler they they don't

[00:31:11] have them you don't have them here do you I don't think we have them in Canada at all no

[00:31:14] but I've been to them because I have family in this state so I know I I remember the first

[00:31:19] time going I actually thought it was a Costco just differently yeah they're like identical

[00:31:24] kind of structure they've been around for quite a while but uh they haven't brought them to Canada

[00:31:29] for some reason maybe just because of Costco has such a stranglehold here I'm I'm not sure but

[00:31:34] they reported a 3.8 percent increase in foot traffic to stores and its average ticket price

[00:31:40] remains stable when we think about companies we've went over before like Home Depot and

[00:31:44] Starbucks are both reporting declines in average ticket price just due to the discretionary

[00:31:48] nature of the purchases like coffee's you know renovation projects things like that we can see

[00:31:54] Walmart kind of being a bit of a staple store is resulting in that somewhat being maintained

[00:32:01] e-commerce growth is still surging as well after some pretty crazy numbers in 2021 and 2022

[00:32:07] it kind of flatlined because just the year-over-year comparables would be so

[00:32:11] difficult for them to keep up uh it's now back to 20 growth on a year-over-year basis

[00:32:17] I mean more and more people are finding value and simply ordering online picking up instead of doing

[00:32:21] the shopping themselves and their third-party marketplace is driving a lot of this growth

[00:32:27] too it isn't all just uh online ordering and pick up uh marketplace sellers on their

[00:32:32] third-party platform increased by 36 percent on the quarter amplified by 50 percent plus

[00:32:37] growth in Mexico and their advertising segment saw 20 growth as well I mean it seems like

[00:32:43] every major company nowadays is getting into advertising or at least ramping up

[00:32:48] on in their advertising departments I didn't get enough time to like look into what

[00:32:53] Walmart is actually doing in terms of advertising like I don't know if you can advertise on their

[00:32:57] website or yeah it's probably their like platform when you shop online a bit like Amazon yeah that

[00:33:03] would be my guess you know how there's like sponsored results that would be yeah same

[00:33:07] structure you can especially with a third-party marketplace you can take sponsored posts all

[00:33:11] that type of stuff and collect revenue that way but they officially closed down their US

[00:33:15] healthcare services clinics so they mentioned that they just don't see an acceptable path to

[00:33:21] profitability so they just kind of got rid of them um on the conference call they said the

[00:33:27] company said that wallets are still stretched they're noticing less spending on non-essentials

[00:33:32] like electronics and more of an increase in food related products and other essentials

[00:33:37] as consumers look to save money swapping from higher price stores to Walmart so the company

[00:33:42] said that it has had to significantly increase its rollbacks which are are pretty much just

[00:33:47] items that Walmart puts on sale I imagine everybody knows this they didn't say outright

[00:33:52] it's resulting in weaker margins but you would kind of think it would however the faster

[00:33:59] growing and higher margin businesses like advertising and their third-party marketplace

[00:34:03] are kind of making up for it Walmart sells everything but they are a company that relies

[00:34:08] heavily on food it makes up around 60 to 65 percent of their total sales and it's it's

[00:34:14] just an insanely competitive market over the next while consumers you know they're going to

[00:34:18] chase deals at this point they're going to swap stores or as maybe you know pre-pandemic

[00:34:23] or during covid they you know when money was a bit more readily available they really

[00:34:27] wouldn't have cared but now I mean they're going to chase those deals and as a result

[00:34:32] they're having to you know roll back more items probably not make as much money on the food

[00:34:37] things like that to just get people in the stores the one interesting element that I found

[00:34:42] is the company reported lower income household spending has remained relatively stable

[00:34:48] but higher income households which if I'm reading correctly the company defines as

[00:34:52] household incomes of a hundred thousand dollars or more are starting to spend more at Walmart

[00:34:57] I mean on a headline basis I found this kind of confusing because when you think of a

[00:35:01] hundred thousand dollar household income you don't exactly think of high income

[00:35:05] I mean I think the median higher yeah higher than average but like immediately when I first

[00:35:11] read this like high income to me I mean the median household income in the United States is

[00:35:17] around 80,000 so like 100,000 high income I mean I figured their benchmark for high income

[00:35:23] households will be a lot higher than this but I mean it's an indicator that more people

[00:35:28] are moving from you know higher price grocery places or just even higher price places for

[00:35:34] even discretionary goods to Walmart and I mean high interest rates are definitely impacting

[00:35:39] all households and as a result I mean they're doing quite well now believes it will hit the

[00:35:44] high end of its guidance or even exceed it so they call for three to four percent revenue

[00:35:49] growth and a slight decline in earnings per share they only spoke I believe on revenue

[00:35:55] guidance they said they should be able to top this they'll either hit that four percent mark

[00:35:59] or top it and overall it was just it was a pretty strong quarter from Walmart yeah and so

[00:36:04] yeah definitely I mean the I read that as well in terms of higher income owners switching

[00:36:10] over to Walmart and to me that's logical I've done that for certain parts of my life where

[00:36:15] we would go you know less often to Costco in the past year year and a half we just go more often

[00:36:20] we had the membership before as well but we just know we save a whole lot of money it's a bit

[00:36:26] it's not as convenient because Costco is about like a 15-20 minute drive but it's definitely

[00:36:32] is worthwhile we're saving quite a bit of money so I can just see people

[00:36:36] doing the same thing with Walmart and one thing I found interesting is their membership

[00:36:42] and other income which has been increasing at a nice pace I think it's being led by

[00:36:49] there they have something called a delivery pass which is about like nine dollars a month and you

[00:36:55] save on fees when you get it delivered so I think it's definitely a lot of people there's

[00:37:00] a good uptick here and our joint TCI listeners can actually see that increase over time and

[00:37:05] you can really see starting in 2022 really see a pickup in the revenues related to that so

[00:37:11] I have to assume a lot of people are subscribing to that because they're using the delivery

[00:37:16] services more so you pay a monthly subscription and they'll they'll deliver you food is that

[00:37:23] how it goes yeah exactly well yeah I mean you can still get it delivered but then you have a

[00:37:28] delivery feed that's kind of paid so similar to I guess Amazon Prime yeah so same kind of

[00:37:33] yeah same kind of idea for that I know Canadian company Good Food tried to do that

[00:37:41] and failed oh yeah miserably they tried to do the same thing like grocery delivery for

[00:37:46] a monthly subscription and it yeah it didn't work out well I mean Walmart obviously has the

[00:37:52] logistics end of things to make it work a lot better than a smaller company like Good Food

[00:37:56] but first thing that came to mind was when they tried to do that and it just didn't work

[00:38:00] out that well yeah I would imagine definitely Walmart makes a whole lot of sense right there's

[00:38:05] stores everywhere so it was much easier for them to kind of pick up the logistics game and

[00:38:09] less investments than other companies would need to make granted they've made a lot of

[00:38:14] investment in that space but I think that's a good overview interesting to see kind of

[00:38:19] the shift in consumer where you know we're seeing signs more and more despite headlines

[00:38:25] saying that the US economy is you know doing really well when you start looking at earnings

[00:38:33] you start kind of seeing a bit of a different picture which I always find fascinating when

[00:38:38] you see those headline numbers and then you you know we look at companies a whole lot and

[00:38:42] companies are not small companies only like large companies are saying something different

[00:38:48] just kind of I think it's just a good reminder to not always just look at the not just look

[00:38:55] at the headline and actually trying to dig into the numbers a bit more because those headlines can

[00:39:01] be misleading yeah I mean the one thing in terms of Walmart with the high income households

[00:39:06] like I mean that headline was very misleading to me because I figured like high income you

[00:39:10] know like say a quarter million household income when in reality it's just you know

[00:39:15] more middle class people pretty much are shopping at places like Walmart yeah higher middle class

[00:39:21] probably higher middle yeah but yeah but that's not as good a headline yeah exactly I mean

[00:39:27] one thing I'm going to be interested in is I believe Costco reports either Thursday or Friday

[00:39:33] so we'll probably definitely go over that next week because that's going to be

[00:39:36] a very interesting quarter because they've been reporting just consistent

[00:39:40] streams of traffic into the stores a lot of people are shifting there I

[00:39:44] wouldn't expect that to slow down anytime soon tune in next week for Costco and Nvidia

[00:39:49] there oh yeah Nvidia too yeah that'll be good tomorrow so that'll be my god I feel like

[00:39:55] the market is just hanging on that one but yeah so we'll kind of continue here with more of

[00:40:00] the retail side Shopify report a couple weeks ago so gross merchandise volume increased 23%

[00:40:08] to 61 billion and that's just the total volume of merchandise sold on their platform revenues

[00:40:15] increased 23% to 1.9 billion however if you zero out the loss revenue from the logistic

[00:40:21] business they sold it would be an increase of 29% and for context they sold that business

[00:40:26] in June of last year so starting in Q3 adjustment will no longer be required to compare that on

[00:40:33] an apple-to-apple basis merchant solutions increased 20% to 1.4 billion this is revenues

[00:40:40] that would be typically tied to revenue generated from payment processing fees and other merchant

[00:40:45] related services subscription solutions revenue increased 34% to 511 million this segment

[00:40:53] includes revenues from Shopify subscription plans which provides users with access to

[00:40:58] e-commerce platform and the tools necessary to run an online store and gross margins were up 390

[00:41:05] basis points to 51.4% and free castle was up 170% now if you own this stock you might be

[00:41:13] wondering why the stock is down so much since the earnings release well you probably guessed

[00:41:18] it it was guidance so revenue growth will be slower than what the market was expecting

[00:41:23] their guidance said that the growth will be in the high teens to low to mid 20s and adjust

[00:41:29] to low mid 20s when adjusting for the logistics business gross margins will decrease a 50 basis

[00:41:36] point in the first quarter low to mid single digit increase in operating expenses versus q1

[00:41:42] so not great to see that increase in expenses stock based compensation of 120 million which is

[00:41:48] 14% higher than q1 and the highest it has it would be since q2 of last year and then obviously

[00:41:55] the valuation so was trading around 30 times price to sell before the earnings release

[00:42:00] and now it's around nine ten times and at the end of the day when you have high multiples

[00:42:05] and guidance comes in lower than expectations market will react accordingly so those are kind

[00:42:12] of the reasons why you know shopify took a bit of a hit after the earnings release

[00:42:17] yeah like on a company that's this expensive and typically grows like at a i think at like a 25

[00:42:24] 30 pace when they come out and just kind of lower their guidance obviously the market's going

[00:42:28] to react because they're i mean they're forward looking they're they don't really

[00:42:33] care all that much on the quarter they do but like their their outlook moving forward is

[00:42:37] going to be the the more important metric i mean shopify is still doing very well it's not one

[00:42:44] that i probably would have looked at when it was at you know 13x sales but we'll see where

[00:42:49] it goes from here i mean they're still way below pandemic peaks that was a pretty crazy

[00:42:54] time for shopify i think at one point they were trading at 40x 40x sales but that was yeah

[00:43:00] yeah we'll see we'll see with the gme craziness maybe we're kind of restarting a bit of

[00:43:07] euphoria and markets we'll have to see so maybe things will pick up who knows and i think that's

[00:43:12] one of the things that the whole gme thing kind of shows is unfortunately it's probably more

[00:43:19] of symptoms of the market where a lot of people are gambling on stocks versus investing

[00:43:25] and they feel like it's the only way they can actually make money going forward is trying to

[00:43:31] hit a big hit a two three four five x in a short amount of time you know i'd like not to think

[00:43:36] that's the case but the more you kind of you know see see people chat and people that are

[00:43:44] getting into um the stock market i do get the sense that a lot of people that's what they

[00:43:50] want to do and i did an interview a couple weeks ago the wolf of young street people can look it

[00:43:56] up on youtube he'll probably like the you know the the free promotion here but one of the

[00:44:01] questions he had was like yeah like can you really get risk from investing especially if

[00:44:06] you don't have a lot of money to invest and i mean i think i believe that you can do very

[00:44:12] well in the stock market over long periods of time if you pick good companies or you kind of

[00:44:17] you invest in low cost index fund if you're consistent but i mean the reality is a lot of

[00:44:23] people probably don't have much money to spare to actually invest and if that's the case then

[00:44:29] you may end up just deciding to take whatever little amount of money that you saved up with

[00:44:34] or it's a thousand or two and say you know what i might as well gamble on this company

[00:44:39] because you know it's the only chance that i have to get it to a hundred thousand or

[00:44:44] two hundred thousand but you know most of the time is that that ends up going to zero or you

[00:44:49] end up losing a lot of your money yeah they uh i think a lot of what you know a lot of beginner

[00:44:54] investors see like these big accounts especially i mean in the in the dividend space it's even

[00:44:59] more prominent you got guys who are posting or guys or ladies who are posting about you know

[00:45:05] making a hundred thousand dollars a year in dividends and i think one thing that's

[00:45:10] not brought up enough is they probably had a high rate of savings you know what i mean like

[00:45:15] your savings rate is probably the biggest key when it comes to your portfolio i mean obviously

[00:45:23] if you got five hundred dollars a week to put into an investment account versus somebody who's

[00:45:27] just got 50 the results are going to be much different but in terms of the gme thing the

[00:45:34] one thing that i found i did some numbers and if you bought it at peaks and sold it when it's

[00:45:41] drawn down you know 60 now if you kind of learned your lesson from that and you took

[00:45:47] whatever you had left and just put it into an index fund it would take you at average market

[00:45:52] returns 11 years to get your initial capital back so you've lost in one week in one week

[00:46:01] you would have lost enough where it's going to take you over a decade to recover from that

[00:46:08] which is uh i mean if you already don't save enough that's huge that's a huge impact to your

[00:46:13] portfolio yeah exactly and i think that's where um you know we talked about dumb money the movie

[00:46:19] and there was also another one so we were talking about two different things last yes when

[00:46:23] we talked about uh you know something to watch so there's the dumb money which is an actual

[00:46:29] movie so you were right and there's also i'm trying to look it up here so eat the rich

[00:46:36] eat the ridge the game stop saga which is an actual documentary on netflix

[00:46:41] so i had seen that one and then i did watch dumb money because uh you know i felt like i

[00:46:47] had to watch it after all yeah i did watch it was good it's good um good movie the other

[00:46:52] one's more of a is definitely a documentary so interesting for people and especially the

[00:46:57] documentary one they go over people that made uh that crushed it really made a killing betting

[00:47:04] on gme and a lot of them you know they made they put most of their life savings and you know

[00:47:12] they i guess got lucky lack of better words but there's also some stories and one in

[00:47:17] particular a guy who had to sell his home because he bet everything on it and he just

[00:47:23] didn't have any more money to pay his bills so i think that's important to remember is of all

[00:47:29] the stories that you hear that make the news of people 100xing their money there's some that

[00:47:35] lose everything and actually probably a lot more that lose everything because they get

[00:47:40] in at the wrong time i would say for every one that makes money there's probably nine people

[00:47:47] who lost money that's probably a fair but yeah when we live when we looked this up last week

[00:47:51] and you said it was a documentary i kind of looked at i'm like oh it's got like pete davidson

[00:47:55] and seth rogan in it i don't think this is a documentary but yeah i haven't seen either i'm

[00:47:59] gonna have to watch them and then the last thing i wanted to chat about today so some big

[00:48:04] news on the crypto front if you're uh if you're just into bitcoin you may want to put

[00:48:10] your earmuffs on because uh this is not about bitcoin i'll mostly talk about that when i talk

[00:48:16] about like crypto because i'm not into the whole crypto space i'm i know i have a lot

[00:48:21] stronger conviction in bitcoin although i do have some ethereum that i bought years ago

[00:48:26] and mainly for tax reasons i haven't sold it but there's been some big news on the ethereum

[00:48:31] front so change in odds that there might be a spot ethereum etf so there was a big shift

[00:48:38] in sentiment yesterday with the possibility of the scc approving the spot ethereum etf for

[00:48:44] those not familiar with ethereum it's the second largest cryptocurrency by market cap

[00:48:49] it's the largest programmable blockchain for smart contracts and eric balchunas a senior

[00:48:55] etf analyst on at bloomberg increased the odds of the scc approving the spot etf from

[00:49:01] 25 to 75 percent yesterday so quite the change in odds one of the things that he tweeted was

[00:49:10] it's increasingly becoming a political issue in the u.s and it seems like there has been a shift

[00:49:16] from politicians especially democrats who had been pushing back against any type of crypto

[00:49:22] regulation and i think the reasoning that i've read was that regulation means legitimate

[00:49:27] legitimizing the industry which they don't want to do however trump in recent weeks has

[00:49:33] been more supportive of the cryptocurrency space it seems now like democrats are afraid

[00:49:38] that their anti-crypto stance could cost them votes in the upcoming u.s election and now they're

[00:49:44] i think starting to push some pressure on the scc to reverse course so obviously we don't get

[00:49:51] into politics a lot but it's kind of fascinating that literally this guy that's an expert on etf

[00:49:57] is saying that the center the shift in sentiment from politicians is the one of

[00:50:02] the big reasons and the reason why it's kind of coming up very quickly is that the deadlines

[00:50:08] for the scc to approve or deny the spot ethereum etf application from vanek it's the first one

[00:50:15] coming up is this thursday on may 23rd so when you're hearing this this will be the deadline

[00:50:21] so you'll probably have some more clarity on whether it was approved or not and there's other

[00:50:26] applications that are coming up on friday and then later in the upcoming week so i have a

[00:50:31] feeling that if they do approve it it'll be something similar to the spot bitcoin etf where

[00:50:37] they'll approve a bunch at the same time and on the news ethereum went up 22 it's been up 22

[00:50:44] since yesterday so kind of massive jump you know i'd be careful for people who are interested

[00:50:50] in this just make sure you read on it you understand it you know ethereum can be pretty

[00:50:54] complex and obviously it could also be a sell the news event so yes it's gone up but it's

[00:51:01] possible that the gains have already been made that had to be made so i think just for people

[00:51:06] obviously this is not investment advice make sure you do your due diligence but it's some

[00:51:11] pretty big news and just shows a bit of a shift in sentiment in the u.s at least from

[00:51:16] politicians who think like crypto in general may become an issue that could give them or

[00:51:23] cause them votes coming to the election yeah it's pretty crazy that we're at this point

[00:51:27] where it's being like it's so prominent politically i mean i know i don't know a

[00:51:31] lot about bitcoin i know even less about ethereum i mean the one thing i was wondering

[00:51:37] is vanek like i was wondering if they had a bitcoin fund like it they're kind of like a

[00:51:41] lesser known they do fun management yeah i looked it up and it's its ticker is h o d l

[00:51:46] yeah hodl yes like what are some of these stickers that yeah they're really good

[00:51:53] so for those not familiar hodl is kind of it's hold on for dear life and it's like very

[00:51:58] commonly used in the bitcoin space especially when it's massively down people will tend to

[00:52:05] want to you know promote that quite a bit more but it's interesting because bitcoin is

[00:52:09] up on the news too but all of crypto is up but definitely ethereum has seen the biggest

[00:52:14] move so something to to keep an eye on but anything else you wanted to add i think we had

[00:52:20] a pretty jam-packed episode with some some news coming in last minute too no yeah that's that's

[00:52:25] about it okay well thanks for everyone for listening we appreciate your support again if

[00:52:31] you have the chance give us a review on whichever platform you're listening to it helps

[00:52:35] us helps us grow helps people find us you can find me at fiat underscore iceberg on twitter

[00:52:42] and then on stock trades underscore ca yep i get it sorry i had a bit of a brain cram there

[00:52:50] but um yeah thanks for listening and we'll see you again next week yeah see everybody

[00:52:55] the canadian investor podcast should not be construed as investment or financial advice

[00:53:01] the host and guest featured may own securities or assets discussed on this podcast always do

[00:53:07] your own due diligence or consult with a financial professional before making any financial

[00:53:13] or investment decisions