Perhaps surprisingly Canadian consumers are still shopping. In January retail sales in Canada jumped 1.5%; this came after a revised 0.8% advance for December, 2007. This apparently reflected higher spending on cars, clothing, and furniture. The market is interpreting this as unexpected good news for Canadian retail stocks. Take a look at their performance in the last few days.
5 day returns:
Canadian Tire (CTC.A) = + 5%
Shoppers Drug Mart (SC) = + 6%
Reitmans Canada (Ret.A) = + 12.5%
The Brick Inc. Fd. (BRK.UN) = + 8%
The Forzani Group (FGL) = + 4%
XIC (ETF for Canadian large caps) = + 0.7%
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3 comments:
Top Pick, Average Risk, Price Target: $66.00
Earlier today Shoppers Drug Mart announced that it will be testing a smaller-sized store focused on health and beauty. The store will be 5,000 square feet and will feature a full dispensing Rx counter along with an extensive selection of prestige cosmetics, fragrances and dermatological products. The first of these stores will open in July of 2008. RBC CM expects negligible impact from this initiative through its forecast period, as SC is unlikely to have more than 10 of the new concept stores open by late 2009. SC is trading below its own historical valuation band, and at the bottom of the range of its relative valuation. RBC CM believes that in the current uncertain environment, a company like SC with double-digit earnings growth, good earnings visibility, a clean balance sheet and rising dividend, arguably deserves such a valuation.
-- RBC
I am waiting for SC to miss earnings bad so that i can scoop them up. This will happen, a la WAG; it is only a matter of time.
I can't pay a P/E above 18 or so. I will get excited if the P/E drops down to around 17.
Similarly, as with spending, Americans are still into borrowing/lending at alarming rates. I apologize for not having the real stats around though.
**Homebuyers are still using up to 90% borrowed money to buy homes. And up to 40% of other consumption is on credit. Unbelievable!
Read from the Globe and Mail in the john this morning
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