The Canadian Investor - Oracle’s AI Boom, Lululemon’s Disastrous Quarter, and a Canadian Mining Megamerger

Episode Date: September 11, 2025

In this episode, we cover some of the biggest stories shaping markets this week. Oracle shocked investors with blowout guidance which led the stock to be up 40% and close to joining the trillion dollar market cap club. We also look at weak job numbers coming out for Canada and the US and what it means for investors. In the mining space, we discuss the proposed merger between Teck Resources and Anglo American. We finish the episode by talking about Lululemon’s rough quarter and weak guidance and how BRP may finally be turning things around. Tickers of stocks discussed: ORCL, META, NVDA, AMD, TECK, LULU, DOO.TO Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Welcome to the Canadian Investor Podcast. I'm Simone Benin. I'm here with Dan Kent. We are back for some news and earnings and a lot of news making the rounds. Definitely what happened yesterday about with Oracle and their blowout guidance. We will be talking about that. We'll be talking about some job numbers in the U.S. and Canada that came in much weaker than expected. And then we'll go over some acquisition and merger news,

some Canadian news there, and also some earnings from Lou Lemon and BRP. So pretty jam-packed. Then how are you doing before we get started? Oh, pretty good. I mean, yeah, it's going to be a pretty interesting episode. This Oracle thing kind of shocked me yesterday. Like I believe like yesterday it went, it was up 19% on clothes, but now it's sitting like 40 plus percent.

So it seems like there's a lot of people, a lot of people buying it this morning. It's, you know, yet to be known if it's a good thing over the long term. I mean, the job numbers in Canada and the U.S., I think kind of, I wouldn't say guarantee, but pretty much all the guarantees, we get, we get some cuts pretty soon in bold. Canada and the United States. I know Canada's kind of held steady here for the last year or so, but yeah, it's not looking good on that front. No, exactly. But the AI story remains strong. So right now, I think AI is basically powering the markets. I don't know if there's any other way to do it. Oracle, like we just previewed, had a blowout, I mean, I wouldn't say blowout

quarter because the results were just okay. I think they came in lower than expectations. But the guidance was really what surprised the markets and we'll try to to break this down for people listening just so it makes a bit more sense because there's a lot of terms there's a lot of technical terms that are involved a lot of stuff related to AI so we did we definitely did some research and we'll try to keep it as simple as possible so it's easy to understand now what really like I said blew the market was the guidance and it is something else so their remaining performance obligation RPO, which is just a word that they use for backlog. So if you see some of the news regarding Oracle and they use that RPO acronym, that's what it means. Just think of it as backlog, which is they said it was up a 230%. So when they released earning was up 230% versus just last quarter, not year over year. And then when you start looking at year over year, it was up 359%, which is just massive. they had a backlog of $138 billion last quarter, not year over year.

Or year over year, I think it was closer to 90, in the 90 billion. And now it's $455 billion. And for the joint DCI subscribers, you'll see it on the traffic. It's just, it's just it. The chart is crazy. If you want to visualize it, it's basically you have a kind of slowly growing up into the right chart. and then it just completely jumps. It's like, yeah, it just goes on rocket fuel.

So it's even more noticeable if you start looking at it on a quarterly basis. It's just very impresses. And that's the main reason why the stock was up because no one was really expecting that. I listened to a big chunk of the call, and especially some of the questions, and you add the analysts that were just lost for words in terms of the guidance for revenue.

And if you've listened to enough conference calls, it's very rare that you have analysts being lost for words, especially on the upside like that. So it was very interesting to hear. And they said on the call that large contracts were signed with the, and I quote here, the who's who of AI. And they mentioned some specific names here like OpenAI, XAI, Meta, NVIDIA, and AMD. So you have these companies that are signing multi-billion contracts. they believe their backlog will actually exceed half a trillion dollars. They didn't say a specific timeline on that, but they did mention that on the call, which is just massive.

And before, Dan, I'll let you chime in here. There's a couple of things. So a lot of people may think, okay, like the backlog, what does that mean? Is that guaranteed revenues and whatnot? So that was one of the first thing that came to mind. Like, is this stuff guaranteed or not? And I did some research, and for the most part, they're pretty secure contracts. There tends to be some spend minimums and some usage minimums associated with that.

So I think it's reasonable that they're using this to forecast revenues going forward. And they did provide some longer-term guidance, and that was the other reason why the stock was up, is based on that backlog. They now expect that the Oracle Cloud Infrastructure business, which is not the whole business. It's just part of the business. It will grow 77% to $18 billion in fiscal year 2026. So they just reported Q1 of 2026. They're a bit off here.

2027, $32,000, $228,73, $2,914, and 2013, 2013-130, $203044. So it's just massive. One of the issues involved is the execution here, because these are commitments, yes, but Oracle can't deliver it on it right now. So they have some massive capital expenditures that they will have to do. And we'll talk a bit more about that. But they also have to execute to make sure that they fulfilled those commitments. So what do you have to say to that then?

And we'll kind of go back and forth here. I just wanted to give people a bit of a background because it's not every day that you see a very large cap company, borderline mega cap company, go up 40% and what a couple hundred billion in market cap well yeah i mean if they go up any more they're going to be the next trillion dollar company what are they at right now 9 9 something so yeah it wouldn't take a lot to uh send them over a trillion and that was kind of like the first thing that i looked at yesterday was because a lot of people were asking me about this and i kind of thought like when you think of backlog it's it's just commitments it's not revenue so i kind

have thought, you know, like say two or three years from now, a lot of this AI spending isn't really working out as profitable as a lot of these companies that imagine. So they kind of scale back spending. But then again, like you had mentioned, you kind of dug into this. And obviously not all of this is guaranteed revenue, but, you know, most of it is, especially if there's like minimum spends and kind of break up clauses and stuff in regards to this. But they are spending literally every penny they have back into KPEX. Like I think before, even like a year ago Oracle was generating like $14, $15 billion in free cash flow a year. So 12.2 in February of 2024.

And now they're actually free cash flow negative. They had free cash flow outflows effectively of $400 million. So they are spending to develop infrastructure to probably satisfy the massive, massive surge here. Yeah, it was like the quarter itself was not really all that good. Like from a results basis, like they missed estimates on top end. bottom lines like in terms of sales and profitability but i mean it like there's no question the stock is going to go up when you book well what like a what three x quarter over quarter increase in your yeah in your backlog like it's not surprising at all especially considering like how

bullish people are on on i but as you mentioned like this big you know rPO increase does not necessarily guarantee profitability the one thing they did mention is because a lot of people i think we're kind of questioning the capital expenditures they did say like they're going into revenue generating assets pretty much right away so this isn't necessarily like money spent right now that's going to generate revenue in say three or four years like this is money spent that's going to generate revenue almost I don't want to say immediately but in the short term so that's a bit easier to easier to stomach but it's there think of it for people want to yeah a lot of it will be spent for example on Nvidia GPUs yeah that will be a lot of

lot of it because that's going to be what will be generating a whole lot of revenue. So keep that in mind. And they're saying that they will be spending in terms of capital expenditure $35 billion this fiscal year alone. So we'll have to see. I can't recall them making any prediction for years down the line, but it just goes to show they did not make any profitability forecast down the line in 27, 28, 29, 2030, like I mentioned. And I think that's really important. is the market is really excited about this, but more on a sales basis. It does not guarantee that this will translate in higher profits. Most assume that it will, but the market has history of getting into trouble thinking that sales will automatically go into profitability. We can just

go back to 2020, 2021 or even in the late 1990s, early 2000s. Yeah, and you have a situation where like they're going to spend $35 billion. I think a lot of people might compare this to like, you know, a Microsoft or an alphabet that's kind of spending these amounts. But the only difference there is, you know, a company like Alphabet and Microsoft, they generate a lot more profit. Like those KPEX, you know, the KPEX spent by those big tech companies isn't exactly pushing them into losses. Whereas Oracle, like thus far, I mean, they're operating at a loss. Obviously, if they do mention that, you know, it's going to start turning revenue almost immediately, like that does make it. a little bit better. It could kind of improve free cash flow, but they're definitely going

all in here. And I mean, I wouldn't necessarily blame them. I mean, again, look at the backlog. Like, they kind of have to, you know, spend a ton of money in order to satisfy those RPO's. But, yeah, 40% jump. I wouldn't have bet that Oracle would have been the next, you know, trillion dollar company if we get there. That wouldn't have been on the radar. That's for sure. No. No, I mean, it's definitely, it has a big legacy business too. At my previous job, we used some people may be familiar with PeopleSoft. So that's one of the Oracle offerings over there. But yeah, I'm showing as well here for Joint TCI.

So they can see that, yes, profitability is, you know, it's good. It's not that bad, especially if you're looking at net income. But then you start looking at free cash flow and you can clearly see that, yes, there are spending a lot. And that's why free cash has turned negative in the last 12 months. We'll have, again, we'll just have to see how that translate into profitability. going forward. And for those wondering, so why are these big names spending, like signing those contracts with Oracle? So OpenAI, XAI, Meta, Nvidia, AMD, you name it here. Those are some,

and they said and more. So I guess you can just plug in the whichever big tech name or hyperscaler that you want. Well, what really is driving is there are solutions for AI training workload. So what this means to keep it simple is that Oracle essentially provides the engine to enable machine learning on a really massive scale. It's a really attractive proposition for companies who want to do it in private clusters. It's also something that's very attractive for hyperscalers because it helps complement what they do in-house, but also gives them some additional computing capacity because they also can't keep up with demand.

So it is something, so I just wanted to provide some extra context here because a lot of people may be wondering, like, why would Microsoft, why would a Open AI or Meta actually sign these contracts? And that would be the reason why. Yeah. Well explained. I don't have anything more to add on Oracle. I don't know the company a ton, but I mean, obviously, when it jumps 40% in a day, you're going to get a lot of questions on it. Yeah, exactly. And for me right now, and we'll do an episode next week. We have an episode plan. We'll talk about AI, kind of different investments in AI. We'll probably look at us some ETF, some companies. as well. A few other things, we're still kind of doing our notes on that. So stay tuned next week. I know we've had a lot of feedback. People want us to talk a bit more about AI investment. So we heard you. We'll be talking about those. I will preface it with, for me, all the things we're seeing more and more. And this just continues on that trend is, it makes me more and more worried that we are in an AI bubble. Because as we'll be talking about the week job numbers and clearly the economy is slowing the U.S. and

Canada and the hype around AI is really what seems to be keeping markets up high. And markets more and more just get really excited, it seems, about anything AI. And just like this here, yes, it's very exciting from a cell projection perspective. But again, profitability is not guaranteed. And it's almost as if the markets are just forgetting about profitability. And whenever that happens, it's not been very good in the past when the markets gets really excited and kind of forgets about the profitability portion of things. Yeah, I mean, a lot of it right now is kind of about the AI story, I guess you can say, which I mean, I'm not saying that the story can't come true, but it can also be, you know, a lot less prosperous than, you know, a lot of people

imagine. I mean, obviously we're talking about guiding out to what five years in the future. So yeah, it's, it's not guaranteed. I mean, obviously there's a lot of, there's a lot of reasons to be bullish in AI, but at what point does it become too bullish? Obviously, we have, like you said, we're going to go over it right now. We have, you would argue, like, two pretty terrible economies right now, and the market just doesn't seem to care whatsoever. Yeah, exactly. So AI is definitely pulling things up. I think the SNP and NASAC probably, I know the SMP, I think, just hit halftime highs again. So, I mean, the thing is, the one thing is funny, we say this, but the TSX is like the best performing index over the last year or so for other reasons yeah so there's not really all that

much AI exposure on the TSX and it's crushing it over the last year yeah TSX I think it's more being led by financials and materials mining stocks yeah materials want to buy a stock but don't want to shell out hundreds or even thousands for a single share with quest trade's new fractional shares you can invest any dollar amount and build a diversified portfolio instantly No delays, no trade fees, no excuses. Want to put $10 into a stock trading at $100? No problem. Questrade has you covered.

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The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there.

I encourage you go on there and follow me, search me up, some of the YouTubers and influencers and podcasters that you might know. I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store, and I'll see you there. Anyways, we'll move on here. I think it's important to talk about some of the job numbers that came out because Canada had really terrible job numbers. The Canadian economy shed 65,000, well, a bit more than 65,000 jobs in August. That was following a negative print of 40,000 in July. And then you add in the fact that GDP declined 0.4% in Q2, and things don't look all that great for the Canadian economy right now. And I think it's starting to be more and more likely that we're in a recession. especially if you start seeing those numbers. Obviously, it's to the academic definitions, two consecutive quarters of GDP decline,

but just seeing the job numbers, typically once the job numbers start rolling over, the economy will roll over because why, it's pretty logical when you think about it. If people are losing their job, they clearly have less money to spend on things. They're cutting back. They're spending less, so it affects other businesses, and then you have that kind of vicious cycle that starts happening.

and goes into a downturn. For the U.S., it's a little bit different. I would say probably a little better, but we're starting to see a lot of cracks, and especially when it comes to the revisions for jobs. So the U.S. also had a really weak job numbers with job growth coming in at 22K for August, below the 75,000 job expectation.

I think the Trump administration was saying that it would be revised up or something like that. It's kind of funny, but what we've been seeing is the other way around is revisions actually going downwards. To make matters worse, they revised the June job numbers to $13,000, 13K job loss. So that makes it the first month since the pandemic that the U.S. had a negative job number. And if you exclude the exceptional circumstances of the pandemic, the last time before that happened was during the great financial crisis.

So clearly not a good sign. It's not only the official government data that came. in SOV but also the private sector data from ADP that was not great and that's important because the ADP data tends to be more accurate because they rely on for those not familiar with ADP it's this massive payroll firm and they will have they'll do payroll for large enterprises like once you're you're too big to use quickbooks for example ADP is a very good alternative in terms of yeah doing that payroll. And yesterday, what came in on top of that is the U.S. revised job numbers down up to March of this year. So I can't remember what the time frame was, but basically they revised to say

that the U.S. actually created 900,000, a bit more, 900,000 jobs less than originally thought during those months. So that's not good when you start getting these massive downward revisions. And if I remember correctly, last summer, we also have last summer, last summer, last fall, there was also a big job, negative job revision in the US. So a lot of these numbers are not looking good. And in terms of investors, what does that mean? Well, first of all, I think you have to start being careful for cyclical stocks, especially stocks that are looking at consumer spending. stocks like we'll be talking about Lou Lemon, a stock I own, which could be definitely a stock that would be impacted because that's somewhere people could easily cut. But also, The odds of a rate cut, I've increased for Canada, depending on where you look. They're now around 90% for the U.S. market. I did my notes a few days ago, but I'm going to look at the probabilities here and just share my screen for the CME Fed Watch tool.

It's a free tool, so feel free to look it up on your own if you're interested. So now if we're looking till the end of the year, so the upcoming meeting in a week, it's a 90% probability of, well, 100% probability. ability of a rate cut. It's 90% that they'll cut 25 basis point, 10% that'll cut 50. And then if you look further down the year into December, so it's a, I would say, two-thirds, 65, 66% chance that they'll cut by 75 basis point by them. So the market is definitely starting to price in some cuts for the Fed because of these softer numbers that are coming in. And I mean, it's really important that you just keep that in mind. I know a lot of people just disregard macro. And I think

that's not something that's wise to do, especially if you invest in companies that are a bit more cyclical and can definitely be impacted by people spending less because they're losing their job and those employment's numbers are going down. I think it's important to keep that in mind. Yeah. So those like near, I think it was like 900,000 jobs. Those were actually the year. prior to March 2025. So you're actually talking about 2024 data. So yeah. So probably the year

up to March. March 2025. Yeah, the 12 months. Yeah, okay. Which kind of like gives you probably the indication that they probably should have started cutting earlier. Because like I know they blamed a lot of. Are you going to say too late Powell? Yeah. Yeah. Well, I mean

by the looks of it, like this was the largest downward revision, I think, in history. So that, yeah, like the 911,000 from initial estimates, I was reading that there's never been that large of a downgrade. And it kind of, like, I know a lot of people are kind of blaming tariffs for possibly the slowdown. But if you're looking at like March 2024 to March 2025, there was no tariffs in place. And they revised jobs downward by, you know, 911,000. So, yeah, I think. Well, Trump is blaming the Biden.

administration when you uh i think when we were chatting yesterday i'm like just watch them they'll blame all of it on the biden administration and clearly that's uh within a few hours yeah that's what it were saying it's going to be very easy too now i mean yeah like if if it's was that soft like a year ago like clearly they should have been cutting earlier and i think you might right now you might as you'd seen like 90% chance of a cut 10% 50 basis points maybe it starts to tick up like if you see them like cutting in rapid succession it's usually a sign you know instead of gradually easing it down that they might have been might have been a bit too late but yeah didn't like trump fired that lady or whatever because he didn't like the the job support and then they revised it even worse didn't they

like this uh yeah i'm not sure yeah i'm not exactly sure like he did fire the head of the BLS but i'm not sure whether um hold the inner workings and i thought they were supposed to just delay the release. I think they were going to go on a quarterly basis. I'm not exactly sure what's happening over there and how they're going to be doing the data so far going forward. I mean, to Trump's defense, and I don't love going to Trump's defense,

but that is something because, like, people will know, I am very interested in macro generally. And for years, a lot of experts in the space were saying that the models they were using for job numbers were just not really that relevant anymore because it's mostly done on surveys so these broad surveys that they do

the birth debt model is the one that they use and they're just not as relevant especially not as much since the pandemic. So there has been a lot of criticism so it's not just Trump but the whole Trump thing, the reason why it raised a lot

of eyebrows it's like okay you didn't like the job numbers so now he's firing the person so that's how a lot of people interpreted it, but if you go back several years, a lot of experts were criticizing the methodologies used for these surveys. I just wanted to play devil's advocate a little bit there. Well, it kind of looks like it's reasonable because, yeah, it ended up being much, much worse than imagined. But again, as we talked about earlier, the market doesn't seem to care all that much at all. No, exactly. So it's just, I think it wasn't, we wanted to do these two

segments, one after the other, just to show the divergence here that you're seeing the markets where anything AI, any kind of good news, even if it's mostly on the surface for AI, is just creating some market euphoria. Where at, on the other side, it's like the bad news is just almost being brushed off. But the problem is the bad news affects probably 90% of the rest of the stock market, 95% of the rest of the stock market a whole lot more. So long term, it may create, yeah, there's just a lot of risk involved because of that with the economy, clearly showing signs of slowing down. Want to buy a stock, but don't want to shell out hundreds or even thousands for a single share?

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Use code TCI and you get $50 to get you started. Do you keep hearing about these all-on-one ETFs lately? Well, I have some exciting news. BMO ETFs just cut the fees on their flagship all-in-one ETFs to 0.15%, making them one of the lowest cost options in Canada. That's right, more value, same smart diversification, all in a single ETF. Whether you're just starting out or simplifying your portfolio, BMO all-in-one ETFs make it easy to invest with confidence. Just Zed it and forget it. Considering ETFs like

ZEQT, BMO's All Equity ETF, or ZGRO, BMO's growth ETF. Calling all DIY, do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked.

And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning duolingo style education lessons that are completely free. You can search up Blossom social in the app. store and join the community today. I'm on there. I encourage you go on there and follow me, search me up, some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. That's enough on that. We'll talk about, go back to a bit more Canadian news here. So

do you want to go over with tech and Anglo-American merger was announced. yesterday and also maybe give your take on the likelihood of this happening. I know the federal government will be reviewing it. Yeah, I think they say that it will probably go through. I don't know this will probably be a bit of a quicker segment because I don't really know too much on, I know a bit about tech, but not much on Anglo-American, but it was a pretty big merger. I was the second largest since the financial crisis and the new company will be called Anglo-Tech. And it won't necessarily be like a pure play copper producer, but the bulk of production will be copper. It'll be north of 70%. So what will happen is Anglo shareholders will own 62.4% of

the shares while tech shareholders will own 37.6. And Anglo is dishing out a special dividend to its shareholders of 4.5 billion if the deal closes. And it is expected to close in the next year to 18 months, obviously regulatory approvals. But from what I was reading. And again, I don't understand or kind of look into this space all that much. It looks like it's going to go through. And it looks like the main strategic point of this acquisition is to combine the company's assets. I believe the two of them have like mines that are operating in Peru that are like neighbors effectively to each other. So what they want to do is kind of join these together. Scale operations become more efficient in that

regard and they said they'll be able to increase copper output by 175 kilotons a year on a couple of their biggest assets in the country because they're so close together. And they had mentioned that these synergies just wouldn't really be possible if the mines were operated separately. And they expect it can create an additional $1.4 billion a year in EBITA over the next two decades from the integration of these mines. Looks like they'll keep the company headquartered in Vancouver and it will remain on the TSX, but the primary listing will remain on the London Stock Exchange. And the one interesting thing here is it was an at the market merger, which effectively means there's no premium in place on tech shares. You know, they just get a chunk of the

newly merged company. And, you know, Anglo in this regard avoids a lot of, you know, debt and dilution. The market definitely likes the deal. I think, well, at least yesterday, I don't know how they're doing today, but it's sent both companies up by double digits. And I mean, this just kind of seems like a big macro bet on the rising price of copper, the increased demand of copper. It doesn't really seem like all that bad of a play considering, I mean, again, on the AI front, you got data center demand, EV infrastructure, I mean, all that type of stuff. Copper is copper is a big play right now. Yeah, exactly. I think copper, it's an interesting play, especially as we're talking about the AI and building out the electrical infrastructure. Copper

will play a big role. You were talking to me about your previous life. You were an electrician and copper plays a big role in just anything that has to do with electricity. And the price of copper now, especially if you start comparing it to the price of gold, is at very low levels historically. That's usually a sign that the economy will be slowing down. However, it could be a very interesting play for those betting on copper for that infrastructure build out over the next 10, 15, 20 years, companies like this will probably do quite well, especially if you can get these companies at a reasonable price. And then you ride the wave. If it does happen, obviously nothing's guaranteed. But you ride the wave by the electrification and the build out of the power grid and all this

extra power that will need to empower not just AI, but just our power needs that increase over the years. It just increases even if you forget AI. It could be a decent playover here. Yeah. And I mean that the story in regards to the to the copper. Yeah. I hadn't done much like residential work for a very long time, but I went to buy some to do my basement and the price like more than tripled since I like that probably would have been back in 2013. So obviously copper has gone up quite a bit. I mean, if we look back to 2016, though, it was only $1.50 a pound, and now it's 4.50. And I think it was even cheaper back then. And I mean, it's kind of hard not to be bullish on it long term with, you know, the amount it's going to have to be utilized.

It's used effectively everywhere in, you know, electrification. I know, you know, there's some situations where they will use aluminum, but that's relatively rare. It's mostly going to be copper. A lot of copper driving this. I can't see any slowdown in demand for it either. Yeah, you definitely don't want aluminum wiring in your house. No. It's a fire hazard, right? Yeah, they do services and stuff in aluminum, but yeah, like if you, if you have

aluminum in your house, it's mostly, I mean, if you ever renovated, you got to change it out because it's, it's really soft, it breaks easily. And yeah, it's, it's a massive fire hazard. But in like, you know, a lot of larger distributions, they still use aluminum just because it's not, you know, a residential application and it's not like a tiny little wire. Yeah. No, it's good. So anything else to add or we'll move on here to a completely different kind of business. Yeah. Nope. Go ahead. Okay. So the next one on the slate here is a little Canadian company may have heard about it, Lou Lemon.

So Lulu Lemon, not looking all that good, but I'll be honest. And I do own it. It's a value place. I owned it earlier this year. I had it sold it before the tariffs stuff started coming. ended up, I think, making a little bit of money on it. And then as things got worse and worse in the past month or so, I just figured, you know what? I feel like it's just overdone. It's trading too cheaply. So I started a very small position, less than 1% of my portfolio. I figured I'd wait until the earnings call, see how things goes,

and clearly things did not go very well. So I haven't decided whether I'll keep it or not. It's a small position to my portfolio. and for the joint DCI viewers, if you've seen my return so far this year, that's fine. I don't look at things just at one name specifically. I know you're the same. Look at things in the aggregate. And I'm very happy with my returns, but it just goes to show that sometimes you make an investment

or you take a shot at something and doesn't work out exactly as planned. So I'll have to decide whether I want to keep it or not. I'll still do a little bit more of digging, but I definitely airing on the. the side of just selling it because there's a whole lot of uncertainty happening. So let's break that down. Revenues increased 7%, which was less than they expected. America's was up 1%. International revenue was up 22%. Comparable sales increase 1%, which clearly is not great. The Americas and Americas are just Canada and the US. Comparable sales for the Americas decrease 4%. International increased 15%. And one of the big soft points here and I think it's important to show here is just the US. The US has been

super soft for them. If you're looking at the sales here, you're seeing some basically flat sales, even declining obviously a little bit when you just compare to comparable store sales. So not great here for Lou Lemon because the US is just their largest market by far. So when you have your largest market that's struggling, it's not good. So EPS was higher than expected for the quarter. That was pretty much all the good news they provided, if I'm being honest here as a shareholder. They reduced their revenue guidance for the rest of the year. That's clearly what the market did not like because the stock was down 19%. So my turnaround play, not looking all that good. Their business, their US business is the big problem right now. So that's a big issue because the

U.S. is more than half of their revenue, like I said. And on the call, they attributed most of the reduction in guidance to the tariffs and the removal of the de minimis exemption. The exemption allowed goods under $800 in the U.S. to enter with little or no tariffs. And that was a big issue for the Trump administration. So they did remove that. The other issue they pointed at specifically for the weak U.S. sale was that their overall product offering was just not resonating with the U.S. consumer as well as they had hope. And that is my biggest issue here because that's something they identified last year. So if people remember, they actually, their chief product officer, or I can't remember

the exact title that they have, their global creative director, I think is what they call it. That person left the organization. It wasn't clear whether they got fired or left as resigned, if I remember correctly. but that doesn't matter. And what they were saying is that clearly they needed to revamp their product offering and that they would start seeing the fruits of that labor in Q1 and Q2 of this year. And that's where I find it alarming because now they're saying that, yeah, it's still an issue right now. And it should have, yeah, go ahead.

Well, when you get, when you're talking about how your product isn't resonating with consumers, Obviously, yeah, I was going to say, I thought it was even more than a year ago they started talking about this. And then you're, you know, it was more. It was like me. I think, uh, me, I think it was when like they released Q1 last year. Yeah. So I mean, if you're talking about how your product isn't resonating a year ago and then you get a year later and it's still not resonating, like people are going to start getting really scared. Because these companies like, like fashion is is very, very difficult.

I mean, if you, if you are putting out these products that people aren't buying, they'll just. kind of go elsewhere. And I mean, we can see it with, again, I bring it up with Eritzia. I mean, you see Lulu Lemon is growing same store sales by like, what, one percent in the U.S. whereas Yeah, it's flat. Yeah, it's flat, whereas a company like Eritzia is growing at nearly 20 percent comparable sales growth. So there's like, I mean, these companies are just very hard to predict. And yeah, if you get product lines that people don't want, your inventory stacks up, you then have to start marking that inventory down to get rid of it, then you're, you know, your margins take it. It's like a cascading kind of situation where you kind of got to move product

out that didn't resonate well. And then you got to develop more product. And if that doesn't, you know, resonate well either like we're seeing now, it's just, it's a continual issue, which is kind of why the stock is taking, taking such a hit over the last, you know, 12 to 18 months. Yeah. And they said they let some products line run too long. And on the call, they also said that, look, consumers are spending less and they're being more. selective with what they spend their money on. And that's a big issue. And it kind of goes back to those job numbers that we were talking about is the more you have the consumer being strapped, the real economy, the more they'll think about where they're spending the money. And clearly

Lou Lemon is not the cheapest clothes. I like their clothes personally because yes, they're not the cheapest, but they also last much longer than clothes that I would buy half the price. So for me, I like how they fit. I find them very comfortable. But, they also they also last for a long time so that's why i will usually buy them i'll be honest i usually buy them on sale and oftentimes with gift cards that i receive so that's something that i just wanted to mention here but it is definitely a problem and they'll have to start getting that right and it's very disappointing because they said they would have that right and clearly you can't shift your assortment overnight like that's why it made sense for me okay like early next

year, which is this year, okay, they'll have that sorted out a bit more. That made sense because it does take time. You have to create these news offering these new products. You have to make sure they're actually produced or shipped. It's going to take several quarters, but now it's not happening. And another thing that was alarming is China was another sign of weakness with revenue coming in lower than their expectation as well. So that's not great because the international side was really what was pulling the business up, it still is, but it is slowing down. And for the full year, they expect gross margins to decrease by 300 basis points and operating margins to decrease by 390 basis points. So that is another issue because now the profitability is being impacted.

And they said that tariffs will take a big chunk out of their profits as well. And they believe it'll cost them approximately $240 million this year alone. So we'll have to see. But pretty terrible quarter for Lou Lemon. I don't know what else to say. Maybe an interesting play for people that are looking for value and believe the company can turn things around. I mean, especially at the valuation now, it's trading very cheaply.

But it's my confidence in the leadership, and that's something we've talked about before, has definitely been affected. Because I have a big issue when a leadership team tells me something and then they don't deliver. Clearly, the tariff thing, sure, you can get a pass, Like, no one knew about Liberation Day and all that stuff. Sure, but the product assortment, you know, you can't blame that on Trump.

You can't blame that on tariffs. That is solely Lul Lemon. And unfortunately, I feel like management just promised something and did not deliver on it. Yeah, I mean, that's the one thing about, like, I guess you could say turnaround plays is they will continue to kind of feed you with the idea that it will turn around. I mean, we're seeing it with Lulu Lemon. What's another company? I think of something like Starbucks has been, you know, new CEO comes in. They're always telling you, you know, we're going to turn things around.

We're going to turn things around. But eventually, I mean, you need to start to see some results. Because, I mean, they'll feed you with that. Eventually things have to turn around. They will feed you with that idea that, you know, this is, you know, they're turning things around, things like that. I mean, Nike is another one. That's prime example. again like eventually you're going to have to see some results or the market will definitely punish you and it definitely did with with lulu lemon this quarter yeah no exactly so one thing i wanted to mention for people listening to the podcast are pretty new but people have been listening for a while like we will be straight up honest if we you know we were bullish on a company we started a position we made a bad call like i'm more than happy to say my mistakes i know a lot of podcasts out there will just talk

about their good moves but no no we're definitely happy to you know talk about our good and bad moves if anything i'm more likely to talk about my bad ones i don't like to to rub it in people's faces when i have a good moves is just my personality so or take a vic not rub it in people's faces but take a victory lap so i just wanted to mention just a quick note here so i'll be happy to say it when i make a mistake and it's looking like a mistake here but a small one to say the least now we'll move on to BRP and close that out because it was definitely a jam-packed episode. So do you want to go over how the quarter was? And for those not familiar with BRP, so they, they're the makers of like skis-dos, see-dos, stuff like that. Yeah. So they trade under the ticker D-O-O and that's kind of like

the spin of, you know, ski-do, see-do, things like that. So that's why they have that ticker despite BRP. And the other thing is, I've had come across a lot of people who think this is associated with Bombardier. It's not. Like this is a, they spun this. off like 20 years ago. Yeah, it has nothing to do with Bombardier. It's got the same name, but that's just because they spun it off from Bombardier. Yeah, it was, you know, back in the early 2000s. So they had a pretty big quarter, but it wasn't necessarily a big quarter in terms of growth,

but they kind of blew expectations out of the water. They actually reported double the expected earnings per share, you know, relative to what analysts it had expected. So obviously when anything happens like that, it's going to cause pretty big move in, share price. I think this one is up. I don't know what it's trading at this morning, but it's up more than 100% off April, April lows, I believe, maybe May lows. So it's had quite... It's down 1% today. They need more ER. Yeah. Yeah. So analysts hadn't really been particularly bullish on this one. I mean, they've been brutal on this company. So I don't really, it doesn't really surprise me that, you know, if there was a good quarter, it was going to come in

well ahead. But after this run up, I had actually gotten, I want to mention this to you, I had gotten a few comments and emails that they had listened to the episode we did where we kind of did, we talked about cyclicals and out like the PE was like the inverse. You know, often when PEs get high with cyclicals, it actually means they're, you know, obviously it's not a set in stone guarantee. But when the P.E. gets higher, it's actually kind of an indication that they're cheaper. And when the P.E. gets lower, it's kind of an indication that they're expensive. And And I did get quite a bit of messages on some people. They ended up buying BRP based off that episode because of that P.E kind of situation.

So yeah, that was nice to see. Revenue increase 4.3%. Earnings declined by 10%. Free cash flow increased by 54%. And overall Power Sports, retail sales fell by 11%. So the results are not all that good right now. But the market is forward looking, even more so with companies like this. And I think the reason we've seen a huge jump in price recently is, is,

is due to some improvements in headwinds that have kind of been holding it back. And I think one of the main things holding it back was inventories. It's the same situation I mentioned with Lulu Lemon. I mean, if you have stacking inventories, if you want to create new product, you've got to move that inventory out. And if you want to move that inventory out, you know, if you're selling year old snowmobiles, you know, you got to mark them down. Because obviously people are not going to buy a year old model for the same price as a new one. So that ultimately ends up hitting margins. Unless you're in the pandemic, then you can mark them up.

Oh, yeah, then you can mark them up. Same with Tesla's. I remember that whole, oh, my God, that was crazy. But your inventories are falling. So they've fallen by, I believe it's 20% year over year. So what the company had mentioned is this now allows them to roll out new products in the second half of the year, which dealers will actually take. Whereas before, they're not going to take product because they can't even sell the product they have. So this is going to help the company.

And I think this was one of the main reasons that they went up so much post earnings is, you know, this is a lot. The inventory was a lot, a lot of the issue. And the company expects a back half of the year, particularly the fourth quarter to provide, you know, meaningful improvements to results. So they kind of mentioned like next quarter won't be all that good. But the fourth quarter should be very strong. So much so that they actually ended up reinstating guidance. So we kind of cover BRP every quarter. And if you'll remember, like, they just.

just kept downgrading guidance like I think they had a streak of like five six or five or six quarters okay fine yeah it was like a ridiculous streak yeah and so they eventually just pulled it they said okay like they effectively said we have absolutely no idea what's going to happen so we're just going to pull the guidance after revising it downwards for yeah it was like a year and a half so they reinstated that guidance which is kind of a big sign that they you know they expect at least somewhat predictable results in the future they expect revenues to come in at 8.3 billion on the high end, which that would be about a high single digit growth. And they expect earnings per share to come in at $4.25 to $4.75. This is actually factoring in a 90 million

hit due to tariffs. So if they can hit that guidance in the back half of the year, that would be around, yeah, again, 8 to 12% revenue growth, EBITA growth of 22 to 31%. And the earnings growth is a big thing here. It would be 28% on the low end and 51% on the high end. And I think, you know, the continuation of declining rates in Canada and the U.S. should kind of open the door to to hire discretionary spending. I mean, these vehicles will be cheaper to finance. And it'll, it'll be interesting to see if we see some, you know, continued momentum on this side. I was actually looking up a report. People need money to spend on it. Yes. That's the, that's a big caveat. The interesting element here is, like, these vehicles primarily are used by younger generations.

Like, that's the vast majority of people. I was reading a report on this. Like, the younger generations are are buying these vehicles and the younger generations are are much more spend happy it was a very interesting report like in regards to young people are more so looking to spend rather than save and they want to spend on experiences things like that so they get these vehicles they go use them around that use them they have fun things like that so they kind of expect the younger generation to kind of you know they might not have the money like outright to buy one of these things but you go in you finance it at an appropriate rate and they really don't care because they're taking the unit out they're ripping it around in the winter

they're ripping around on the water i mean they're not really concerned about the financial impact of things so i kind of i thought that was a very interesting report and i would i would actually say it's probably true so i mean it seems like it's you know they're far from out of the woods but this was definitely a pretty notable quarter they've had a few good quarters now and you know obviously the market is kind of trying to get ahead of it because it's, you know, up 100% over the last four months. Yeah, and one thing I wanted to share here. So that's an interesting point. I mean, my counteraggument would be that unemployment will, for younger people has been rising. So it's probably, it's hard to get financing if you don't have a job. But I wanted to show this instead. So people wondering for cyclicals. So I was thinking, I was listening to another podcast. I can remember. I think, I think, It was thoughtful money. They had a guest on there, but he had an interesting point.

So you know how we talked about sometimes it's for cyclical company. It's not as obvious. You have to almost look at a high P. Because the stock has been down so much that now, like, the price to earnings ratio actually looks a bit higher. But if you look at it from a price to sales, usually when you want to buy those companies, when the price to sell dips way, way low. So that's another way that you can.

look at it, is if you look at the price to sell here, BRP went down to 0.42 in April. Now it's at 0.85. And same thing early on in the onset of the pandemic when everyone thought it'd be doom and gloom and everyone would be losing their job. It dropped at 0.3 and then peaked at around 1.6. So actually, it's a, the price to sell could be also a very good indicator for these cyclical companies. So when you're looking at a lower price to sell, that's why it may make a bit more sense. Again, a bit counterintuitive, but another metric for people to keep an eye out if they're looking at these cyclicals. Yeah, and it probably becomes less confusing than the price to earnings, I guess I would say. Exactly. That's the reason why I wanted to mention that because then

it makes it just easier to wrap your head around it for investors. Yeah, I guess I'll try to explain it quickly again in like a few seconds here but the price to earnings for cyclicals like when the price to earnings is low it's mostly because the market is selling off the stock during a peak when earnings are high so you could have you know BRP is trading at $100 it earns $10 a share but the market thinks those earnings are going to fall like we might be at a bit of a cyclical top so that stock will continue to fall and the PE will look crazy cheap because it's on a trailing 12-month basis, right? So if it falls to, you know, $80, I might be trading at 8x earnings, but in reality, the market expects earnings to decline in the future, whereas

if you have a high P.E, the stock is kind of low, but the market is expecting earnings to increase in the future. So it's, I mean, obviously these are cyclical. The market is going to sell them off when they believe earnings have peaked, and they're going to buy them up when they believe earnings have bought them. So that's why it's kind of that inverse, just to kind of explain it quickly again. Again, it's not a guarantee whatsoever. But if you're looking at a lot of these cyclical stocks when the price to earnings ratio is very, very low, that is because the market believes that we've kind of peaked and there could be an earnings decline. And that is like, I think BRP during the peak of the pandemic was trading at something like six or seven X earnings. So on the

surface, you would think, oh my God, this company is dirt cheap. When in reality, that was just kind of the market pricing in earnings declines moving forward yeah yeah exactly so that's a good way to put it and a good spot to wrap it up here so it was a fun episode a lot of news to talk about so we wanted to talk about a firm and the other one that you had dollar tree yeah and dollar tree but we'll have to bring those next week so a lot of news came out with oracle we just had to talk about it i think people will understand that so we'll have those two names next week that's fine because things are slowing down a little bit on the earnings front. And then for those interested in following us, for the full videos,

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Like we said, we will be next week talking about some, we'll do it in an AI episode, we're still kind of spitballing, brainstorming exactly what we'll talk about, but probably some AI plays ranging from companies and ETFs, different ways to play AI. So I think it'll be a fun one. Yeah, there's definitely a lot of stuff to talk about. I'm sure we'll be able to find a lot to make a pretty interesting episode. But yeah, thanks for listening, everybody. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast.

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