The Canadian Investor - Sales Drop at Canadian Tire and Home Depot

Episode Date: November 16, 2023

In this episode, we start by talking about the US CPI print that came in lower than expected and the market rallying on the news. We then discuss the earnings of Canadian Tire, Home Depot, Canopy Growth and Cineplex.  Symbols of stocks discussed: CTC-A.TO, HD, WEED.TO, CGX.TO Check out our portfolio by going to Jointci.com Our Website 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  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Braden Dennis and Simon Belanger. Welcome back to the Canadian Investor Podcast. I'm here with Dan again for our news and earnings on Thursdays. Dan, how's it going? I know you sound much better as people will see. We just got you a new mic. Yeah, pretty good. That's what I was going to say. I probably sound a lot cleaner than my old dusty microphone. But yeah, it's a pretty good start to the week, especially with the inflation

print this morning. Yeah, exactly. A lot of news and earnings were kind of much better than the first episode we did together. And props to you. I'm going to take a little jab at Brayden. You did much better setting up the mic on your own than he did. He had almost everything set up for Brayden. I had to like walk him through step by step and people might think it's like, oh, is it like just plugging a USB? No, it's actually like there's several wires, several boxes. They're very good quality mics, but if you've never used them before, it's not the most intuitive to figure out how to set it up. Definitely not. Yeah, there's boxes, cables.

I had trouble with length of cables in some cases, but got her done. Yeah, there you go. So, you know, we'll get started now. We'll definitely a lot of stuff to talk about. You alluded to it. It just came out this morning. So US CPI came in lower than expected at 3.2% over a year. So that's a headline number. Obviously, the markets liked it because I'll break down the numbers. But what's

your first reaction? Because the markets are ripping right now. I think the S&P 500 is up close to 1.8%. Same thing for the Dow, the TSXX as well. So clearly the market is liking that lower than expected inflation print. Yeah, it was pretty good. I mean, it's still pretty high, but when we look at expectations, I think it was 3.3 percent and it came in at 3.2 percent. This is like a very small beat for the markets to just rip up. I think the NASDAQ is two and a half percent or something as we're talking right now. It's pretty close unless it's dipped off a bit, but still shelter costs is a pretty big issue. For the most part, the vast majority of segments actually either saw absolutely no inflation or

they actually saw a little bit of deflation. Things like used vehicles, airline tickets, little bit of deflation. Things like used vehicles, airline tickets, new vehicles, a lot of motor vehicle related stuff saw deflation on the quarter in relation to year over year from last year. But food and shelter remain pretty big issues. Yeah, exactly. And I think that's important to mention because and also maybe a refresher for people. So when you have deflation, deflation is actually a decline in prices. Disinflation, which would be more the headline number, is that overall prices are not increasing as quickly as they were. So going from a 4% inflation print, for example, to 3.2 would be disinflation. So it's still increasing, but not as a much of a rapid pace. And I think it's just important to remind people because I think a lot of people

kind of confuse that, especially our politicians, it seems at times they seem I don't know if they fully understand the concept or they're kind of clueless or just are misleading purposely i'm not quite sure but as you were saying i think you know the highlight here definitely is you know energy prices that declined it would definitely what was leading the overall decline here because they were down 4.5 percent year over year as you mentioned used cars down 7.1 percent year over year. Food was only up 3.3% year over year, but it doesn't, it's not that good when you actually look at it from September to October on a month over month basis. So I actually was looking at the report and they said meat, fish, eggs, all rose between 0.7% and 1.3% month over month. So these are pretty significant increases. And obviously they impact the people that have the least the most because a bigger portion of their budget is actually allocated to food.

The same goes with shelter, as you were saying. Core CPI was also the good news here. It came in at 4%. Core CPI excludes energy and food. It was up 0.2% versus September on a month-over-month basis, but it still would bring it at an annualized rate of 2.4%. Clearly, that can change on a month-over-month basis. And compared to 4.1% in September,

that was the print for Core CPI on a year-over-year basis. It's still, like you said, it's a small beat, but it's still definitely better, and that was the print for core CPI on a year over year basis. It's still, like you said, it's a small beat, but it's still definitely better. And that's the metric, the core CPI, that's the metric the Fed actually keeps a close eye on when they make their decisions. Obviously, they look at a whole bunch of data, but that's one of the primary ones. Yeah. And I think the reaction in terms of the markets is mostly as a result of maybe that the hikes are over and maybe we just go into a pause. Because I mean, I think that is the main thing that's fueling a rise because it's quite like, I think that inflation is a little bit

different for everybody. Some people might not be feeling this as much, say if you have a low rate mortgage, especially in the United States, where you can keep that rate, like you're probably not feeling it the same as somebody who's renting and is seeing their rent, you know, skyrocket. You know, there's a whole bunch of different scenarios where, you know, you might be thinking, you know, inflation came in lower here, but you're, you know, have all these food related, you know, inflation food-related inflation, rent-related inflation, you're still feeling it. Whereas other people who have those low rates, they might not be feeling it. They might not have a family of three, four children. They might not see that impact in terms of food costs.

So I think it's just like, it's so personalized in terms of inflation as to what you feel and what you don't feel. So it'll be interesting moving forward to see what they do. But these are definitely positive numbers. Yeah, exactly. And I think it'll be interesting, too, in terms of the retail data, I believe, is coming out tomorrow. So we won't have that today. But it'll be interesting because now it'll be October is the first month where student

loan payments actually restarted in the U.S. for the federal program. So interest started accruing in September, but the payments restarted in October. So it'll be the first month where, you know, I can't recall the exact numbers, but there's tens of millions of Americans that have these loans. And I believe the average payment was around like five, six hundred dollars a month. So that can make a pretty significant impact. So it'll be interesting to see what the data kind of tells us in terms of consumer consumptions in the U.S. because obviously we're Canadian investor podcast, but the U.S. has a outsized impact on Canada, especially Canada, compared to even other countries. So I think it's really important to keep an eye on that.

And to what you were saying in terms of rates and the markets, I had a look at, I always kind of giggle looking at this. So the CME's FedWatch tool, which people can just Google and see it. So yesterday it was an 85.5% chance that the current rate at the next Fed meeting would be held and 14.5% that they would increase 25 basis point. Well, today that changed to 94.8% after the CPI print that they will hold it and only 5.2% that they will increase rates. That's a pretty big swing in one day. So I think it goes, it just goes to show what you're saying is the markets, I think, are almost thinking that the Fed has done hiking now. I haven't gone out further out because the Fed watch show is actually pretty cool. You can go

like a year out to see the probabilities. I'm assuming there's still a probability, a certain like amount of chance that the market is giving for increases. But I'm going to go on a limb and say that throughout the year i think those probabilities most likely decrease just with this print yeah especially if we continued to go lower i mean it was i think after the print like even 95 chance of staying the same kind of seems a little low like after you've seen cpi today like, I would have guessed that there was next to no chance that they would bump. But who knows? Either way.

Yeah, I mean, sometimes maybe they'll just kind of do it for the sake of doing it, just to tell the market, like, who's the boss, right? Yeah. They don't, you know, sometimes I feel like Powell, I mean, with some of the press conferences he's had at times, it's just like he's been pretty direct and harsh to kind of rainbag the market in. So we'll see. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense.

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That is airbnb.ca forward slash host. We'll move on to our first earnings here. One that I was looking forward to, again, kind of looking at the more of the macro picture, Canadian Tire. And before I go into the earnings, did you hear about the cuts that they announced in terms of their workforce? No, I hadn't. I was actually reading this this morning and it was new to me. I mean, I would imagine that they would be trimming back right now just with the reduction in activity. Yeah, exactly. So they said they would be reducing 3% of their full-time employee equivalents. That's short for FTE. And they would also be eliminating the majority of their vacant roles right now. So that's a pretty significant downsize here. I'll pay especially some attention to the financial arm or financial segment of Canadian Tire because it can definitely give us some good insights on what's happening with the Canadian

economy. So retail sales were down 2% while comparable sales were down 1.6% year over year. SportCheck got hit especially hard with a 7.4% decline in comparable sales because of softening in discretionary spending. They also mentioned on the call that SportCheck has a big presence in Ontario and Ontario and BC were actually the two of the softest provinces in terms of sales. I would assume that in part is because of the higher housing costs for those two provinces. And for the Canadian tire brand, comparable sales were down 0.6%, but essentials categories were up 4% led by automotive. So it shows it's a bit of a continuation that they were seeing in Q2 towards the end of the quarter that people are starting

to shift their spending. And overall, they are seeing a shift in consumer spend from non-essential to essential. And one of the bright spots here was Helly Hansen, which was up 28.2% in terms of comparable sales. But that is their smallest retail segment. So yes, it's a bright spot. But again, it's not enough to really move the needle. It's less than 10%, if I remember correctly. They had a loss of $28 million versus net income of $225 million last year. And consumer demand, like I mentioned before, was especially soft for Ontario and BC. Now, where it gets a bit interesting is the financial segment, like I was referencing to. So net credit card write-off rates was up 140 basis point year over year and past due credit card receivables were up 50 basis point.

So that means the net write-off rate went up 4.5% to 5.9% on a year over year and the past due credit card receivable went up 2.8% to 3.3%. So that's some pretty big increases. And both of them were actually up 30 basis point just compared to Q2 of this year on a sequential basis. So that is definitely things that are not trending in the right direction. And on top of that, average balances were up 3.7% on credit cards. Credit card sales, which is the amount of purchases done by credit cards, was down 2%. So people overall are spending less, but the balances are higher. So clearly they're not paying off all of their credit card. And there are now 2.3 million credit cards from Canadian Tire with balances. That's up 2.6% year over year. What are your

thoughts on that? I know it's a lot of info, but kind of general overview of what Canadian Tire announced in terms of results. Yeah, I mean, the results overall are not that surprising from like an operation standpoint. We've seen a lot of retailers like Costco, same kind of thing. People are shifting from discretionary items to just staple items. We'll see it in another company. We go over Home Depot. In terms of the credit card situation, it just kind of seems like people are going away from discretionary items, still buying essentials, but they're putting those essentials on the cards maybe because it's a higher balance. So I mean, that could be an issue over the long haul. And I mean, the charge off rate,

again, I was mentioning, it seems high to me, but I couldn't really find any comparables across any of the major banks. It seems pretty big, a near 6% charge off rate and the pass due at 3.3. I guess it would depend on what their definition of past due would be. I know a lot of the banks go 90 days past due. They don't necessarily book a customer that's immediately past due. But I don't know, this is a pretty good indicator that a lot of Canadians are starting to pinch pennies, really spending less. And, you know, on what they have to spend, they're kind of in a situation where they might not have enough money to cover all that. So cards at the store, overall balances are going up.

Yeah, no, exactly. And I think, honestly, I think we're in a recession. That's what I think. I mean, I could be wrong. Maybe in six months. That's what I think. I mean, I could be wrong. Maybe in six months. I think so too, yeah.

Yeah, I think we are in it right now and we'll know about it probably in early 2020 for maybe Q2. We'll kind of know that right now we're in a recession. I mean, it's always, the official numbers are always backwards looking, but there's just so, the data is starting to add up, right?

It's just like, it's impossible to not, it's not just like here and there. I mean, it's pretty much all the retailers that are seeing that. And obviously Canadian Tire with its presence in Canada, I think that's a really good barometer for the Canadian economy. Yeah. And I think on a whole, I think Canadian Tire is going to have a lot more discretionary items than staple items, I would say. I don't know. They do have some, I guess. I mean, I don't go into Canadian Tire too often, but it seems to me like they have much more discretionary items versus just staples that people need. So I think the results aren't

that surprising, really, just because it's so obvious that people are cutting down spending. Yeah. Unless your car breaks and you got to get it repaired. That is. And I think, didn't they report like strong auto? Yeah. Yeah. 4% up for automotive sales. So yeah, that kind of aligns with what you're saying.

But overall, I mean, obviously, that's something to just keep an eye on, especially the financial segment for anyone who owns it or anyone kind of curious or looking to potentially start a position make sure you keep an eye on that because it's definitely not trending their night right direction but we'll move on for another canadian company cineplex here so dan we had some fun texting what was it yesterday or the day before i don't know the days are kind of blurring together i think it was yes yesterday on the ebita all what's it the ebita all yeah adjusted ebita all al or yeah so yeah do you want to give us an overview of what cineplex reported uh so it was a pretty strong quarter and it was due like it was due to the two movies,

like the, uh, Barbie and Oppenheimer blockbuster movies. But despite- Have you seen those? Not Barbie, but I've seen Oppenheimer. No, no Barbie. Yeah, I've heard, like, I haven't seen either. I mean, we're kind of waited until we can just rent it or on one of the platforms or if it's added to one of the streaming services.

But I heard like from guys that the barbie one is actually not bad that's what i've heard too but we didn't we didn't go see it we were we were going to like i really wanted to see oppenheimer and my wife really wanted to see barbie so we've seen oppenheimer and she pretty much fell she pretty much fell asleep okay okay whereas i love the movie did you flip a coin how did that get we did i'm not even kidding we did okay we did but then i i don't know something came up and we never actually ended up going to barbie which i don't know i'm i'm sure we'll watch it eventually i do i do over so okay okay but yeah the the record revenue but that overall, they're seeing costs rise faster than revenue. So

box office revenues were up 39% through the first nine months of the year, but film costs, first nine months compared to the first nine months of last year, but film costs were up 47%. Food revenues were up 33% over the first nine months but food costs were up 35%. The company saw a 18% increase in what it deems other costs which is kind of like, I found this pretty funny too. So they have the vast majority of their costs

are bunched into other costs and then they kind of have just an asterisk saying, see note A on other costs. So then you go down to note A and about 10% of those costs are theater expenses. 10% are general and admin, and then 80% are just other expenses. So it has other costs. Then you go down and 80% of those other costs where they're supposed to clarify what they are. They just say, yeah, they're other expenses. So it doesn't really tell you much as to what else is kind of eating into profits for the company. But I think it's strong cashflow generation,

but the main concern is just, is it going to be sustainable? I mean, you're seeing a 36% year over year increase in revenues, but nearly 40% increase in operating costs, which really means, I mean, the company's offsetting these high revenues just with operating costs. And it's all... Theater attendance was up 41% on a year-over-year basis, which kind of proves that it was these two movies that were driving the bulk of the increase. So in terms of total traffic, this quarter alone made up 42% of their attendance all year. So on a per customer basis, box office and food growth are really not budging. They're

up like, I think food, I guess, I think spend per customer. What I mean? Like the food spend per customer is only up 1% and the box office per customer spend is only up 5%, which pretty much says it's just all volume that's driving this. And I mean, unless obviously, there's always going to be more blockbusters coming out, but it's hard to imagine that this can be sustainable considering these were like the two biggest movies in a very long time. Yeah. And there's probably a reversion to the means a little bit after COVID too. I would think a lot of, obviously theater were impacted pretty, pretty severely with the lockdowns. And one thing I found interesting when I was looking at the

release is they were comparing it to 2019 level and saying like, oh, it's a hunt. Like it's actually like 6% higher than 2019. I think overall, if I remember correctly, for the revenues. But then when you look at inflation, and I'm just taking the official inflation numbers. So there's actually a little inflation calculator on the Bank of Canada's website. And they have it in that time frame that inflation was about 16%. I'm just rounding up here so even adjusted to inflation the revenues are still not back to 2019 levels so i think yeah i get it it's a nice kind of rebound versus what happened during covid but at the same time they're still let's be honest

they're not back to 2019 levels like at the end of the day it's just it's lower like if you factor in for inflation so i found that a little bit amusing obviously you know they tried to show stuff that looks good and that adjusted ebita al which you know we finally figure it out it was i mean because they're using an adjustment to remove depreciation and amortization and IFRS regulation is that lease expenses actually go into amortization so they actually add them back in because they remove the depreciation and amortization with their adjustment so it's this like super complicated thing and we were talking about I'm not quite sure if it provides any additional value. Maybe they could just use EBITDA as a metric and that's it, instead of trying to use an adjustment and then adjusting further after that.

Yeah, the one thing that really confused me, but when you think of EBITDA, you think of earnings before everything, and then they throw in after something. So it's just like, I think like what they're getting at, I guess it's pretty simple. I think like what they're getting at, I guess it's pretty simple. I think like all of its buildings are leased. So I think they just want to give investors an idea of, you know, how they're operating after all these lease payments are factored in. I can't remember the REIT that owns all the Cineplex leases.

I don't know. Smart centers maybe? i can't remember but there is there is a there is a wreath here in canada that owns the bulk of cineplex leases but yeah i don't know they they make they make a lot of their profits off food and food inflation has been absolutely nuts and i i just don't think you know if they kept pace with inflation in terms of like movie theater costs like like nobody would go. Like a bag of popcorn would be $12. Or you'd sneaking with some chips in your coat or something.

Yeah, exactly. Like people, they just, I don't think they could keep up with the pace of food inflation, which is why you're seeing like these record revenues, but like profits are lower because like everything else is rising. And then you have that, the cost of film too, especially with that strike. And yeah, I don't know. Yeah. Well, and you add that in as well. Like we're talking about Canadian tire and essentials and non-essentials and you know, one easy thing you can cut is going to the theater and watching

the movie at home. Like you can still see the movie, you wait a little more, you rent it, you pay for, you know, $7.99, whatever it is for the whole family. You make your popcorn at home. You just save probably $50, $60 compared to going to the theater. And to me, that's going to be an easy expenses for a lot of people, a of families parents to cut and just say look we'll still see it but we'll see it at home where we can you know save some money yeah i think so too i think like you need a really big attraction right now to get people to go to the theaters which is were those two movies and who knows they might come out with another movie in a year or two here that boosts it again but i don't see it as being sustainable no i totally agree so now we'll move on to something else that

might not be sustainable canopy growth q2 2024 you like that a little transition so q2 2024 so i was just curious about the result because of the whole disaster of BioSteel to be honest. So for those wondering, BioSteel filed for bankruptcy towards the end of the quarter that they just reported was actually in the last two weeks. There was only two weeks left actually when they filed for bankruptcy. And Canopy owns 72% of BioSteel when they decided they would no longer be pouring money into that business and let them file for bankruptcy. You know, we did. I talked about it when it happened. And honestly, that was a good move because looking at the bankruptcy filing, like they were lighting money on fire

with these NHL deals. It was. Yeah. Have you seen it? Like it was ridiculous they were literally lighting money on fire so i listened to the podcast episode and i can't i can't even remember the numbers but they had to like revise revenue downwards like yeah by an astronomical amount like i don't even know what they were counting as revenue i mean yeah it sounded like the management was not aware what the bio steel arm was doing, senior management, and they were overcounting revenue. That's basically what happened. And then from that point on, when they restated, it started basically becoming very clear that it was just not sustainable. And it's funny because a year before that, it was like the bright spot of Canopy. And then it kind of shed light on how much of a disaster it was.

And basically, they were paying people to use their product. That's basically what it was. Yeah. Yeah. I love BioSteel. I actually drink them all the time. Hopefully, I would imagine somebody scoops it up. I mean, I can't imagine.

They'll still be produced, I would say. Yeah. I love them. I mean, I can't imagine. They'll still be produced, I would say. Yeah. I love them. I drink them all the time. But yeah, Canopy is, I mean, it's a disaster, really. There's nothing much else to say. It is a complete disaster. Yeah.

I was looking at shares outstanding. So at the end of March in 2014, Canopy Growth had 7 million shares outstanding. And if you fast forward to last quarter, 829 million shares outstanding. That is one of- That's some solid, solid growth right there. That is one of the craziest share charts I've ever looked at. Yeah, that's crazy. I'm showing it for people. And it's

I mean, if only this was revenues, they'd be doing quite well. But it's essentially, yeah, it's been increasing steadily. I have it since 2014. I guess they must they were a private company back then. But even if you go back to 2017, I mean, share count is growing at a compound annual growth rate of 28%, which is crazy. And then obviously with the amount of, it's not like revenues have been growing. It's not like profits have been growing to kind of offset this. So it's been, like you said, it's been like a total disaster. Yeah, and I did, I own Canopy for, it was a very holding for me back back in the days of the pre legalization. And it was absolutely crazy that the popularity of these cannabis stocks, but they just none of them. I don't know if there's been a single one that's actually done anything. I mean, maybe I don't pay attention to the industry very much anymore, but I don't think so. I think they've all been pretty like some are still doing okay operation wise the last time I checked, but they haven't done all that well. I mean,

my view is that five, 10 years down the line, you'll just see one or two big players, possibly North America of the US legalizes on the federal level. You'll see one or two big players, a bit like you see with the beer industry that have economies of scale, and can really, you know, squeak out small margins, but be really profitable business because they have the operations. There was just, you know, when they went, we've talked about it quite a few times. But when you know, it got legalized in Canada, it was just hilarious hearing the total addressable market. You'd hear like 5 billion, 10 billion, 15 billion, whatever it is, but what are you basing that on? There is a black market. You're not getting any good data. You're just making these

kind of estimates of what the black market is, and you're assuming that 100% of people are actually going to shift over to the legal market when it becomes legal, which both were incorrect. Yeah. I mean, even back then, if you even account for that crazy total addressable market, like the valuations of the companies were like three times, like combined, they were like three times the size of that ridiculous addressable market. So yeah, it was crazy times. And like now, like now like canopy's what 76 cents a share i mean there's so much dilution there it's like imagine how crazy it would have been if they legalized it in like 2021 oh yeah it would have been absolutely bonkers everybody everybody in lockdown trading weed stocks yeah no exactly so I'll still go over the

financials here, the results really quickly. So net revenue was down 21% to 70 million. All segments revenues were down double digits with the exception of two segments. The Canadian medicinal cannabis was up 6% and this works was up 3%. So I actually never, I didn't realize what company this was. I seen them before, but never actually looked into them. So Disworks was a British skincare company that Canopy bought in 2019 for 74 million Canadian. I don't remember the exact amount in British pounds, but I'm sure people are okay with this since it is the Canadian investor. And that represents actually 10% of their revenues. So it's kind of funny that they got into these various ventures and that was one of them.

Now cash and cash equivalents were down 64% to 240 million. I'm assuming here this will stabilize a little bit because they no longer have bio steel that was just burning cash for them but definitely something to keep an eye on for those who own canopy or are considering it and they had a net loss of 324 million which was slightly worse than last year but again given that most of it was still with BioSteel for the quarter, I think, you know, you kind of give them a little bit of benefit of the doubt here and see what they come out with next quarter when BioSteel is completely off the books. Hopefully, I think they're looking to be profitable from an adjusted metric. I can't remember exactly which one in a couple quarters

from now. So it'll be interesting to see if they actually become or at least you know minimize the cash bleed going forward yeah it's like you would imagine a lot of it is from bio steel but they have negative trailing 12 month free cash flow of negative 520 million so like it's a good business model yeah interest interest interest coverage ratios of negative 10 which yeah it's it's bad see how like what year are you supposed to make money when you have a business is that how it works 700 million in debt market cap of 350 million burning 520 million dollars a year yeah yeah but like said, I think that that brand actually has some value. So it'll be interesting what happens in bankruptcy court, because I do think there is

some value there. But I wouldn't be surprised that there is a company or individuals that buy it. And then it just it's a private company still, you know, probably I would assume scale back on a lot of these sponsorship deals maybe have some smaller ones that are more you know maybe lesser known athletes a little bit but you can get better value that are still somewhat known and yeah we'll see if it what happens i'm not sure when it's supposed to be resolved though this bankruptcy yeah it might take a while i mean it was the the original owners of bio steel must have done pretty who was mean it was the the original owners of biosteel must have done pretty who was it it was mike camilleri i think started biosteel yeah yeah mike camilleri and another guy did they sell it directly to canopy i believe they did and they

kept a small stake in it if i remember correctly yeah yeah but i i think they'll be okay. I think they'll be okay. Yeah, they'll be fine. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is

questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca

forward slash host. We'll move on kind of again to some earnings, but a little bit more on the macro side again. So do you want to tell us what Home Depot reported? Yeah. So Home Depot reported pretty strong earnings relative to what they were expected to post. Pretty soft quarters. It's been soft quarters for Home Depot for quite a while now. Comparable sales dipped 3.1%, which was ahead of expectations for 3.6%. It's seeing relatively stable ticket value, but lower overall volumes. This is probably just due to people delaying big ticket items, large scale renovations, rising inflation, and pretty substantial mortgage rates in the United States for those who have bought a home recently are probably feeling the pinch. I mean, if you think of a situation for Home Depot in say 2020, 2021, and even the start of 2022, somebody could

buy a home that they would want to renovate. They're getting probably a 2%, 2.5% mortgage rate. So they can go do that. It creates a lot more incentive to go to a company like Home Depot to renovate. But now, I mean, if you're doing that, you're paying 7%. So I mean, you probably kind of defer those big renovations. Guidance was pretty tempered. So it only has one quarter to go in 2023. So this is probably what's going to come in. They're probably going to be able to ballpark this relatively close to their actual results. So they say sales will dip three to 4% operating margins in the 14.2% range, which is back to pre-pandemic numbers, but they've pretty much shown they can consistently grow operating margins over

the past 20 years. I mean, even 20 years ago, I think they had single digit operating margins and they just, they steadily grow them over time, but you do see these cyclical dips in their margins. So, I mean, in a time like this, it's really not that surprising. And in terms of earnings, a nine to 11% drop in earnings. But again, I mean, the guidance really isn't that surprising. It's been speaking about this. Like I'm pretty sure Home Depot was warning people in like investors in like the latter half of 2022, they, they pretty much said like, it's, it's not going to be the best year for us next year. So, I mean, this Home Depot is one of my large holdings and I still do like the company moving

forward just based on, you know, the average age of an American home, you know, particularly for people who can lock in a low rate mortgage forever in the United States. I mean, if you're sitting there with a 2% mortgage and, you know, your house needs a little bit of work, but, you know, you're going gonna have to sell that house and pay seven percent somewhere else i mean it increases the motivation to to renovate over to sell and buy so i think in the long term they'll be pretty they'll be pretty fine yeah exactly that's what we were talking about i think they'll they'll be doing good because of that because i like obviously their biggest market is by far the U.S. compared to Canada and for a lot of people maybe they would have liked to get a bigger home but you can't

port your mortgage in the U.S. like you can for a lot of mortgages in Canada so you're kind of stuck you know if you want to keep that two three percent whatever the rate is with the house you have so it like you just, it may become more attractive to simply put $100,000, $150,000 and do an addition, whatever the cost is. But you'll probably start looking at those options, especially if rates stay relatively high compared to recent years. So no, I do agree with that. And for sales, I think you have to take the sales with a grain of salt a little bit with them just because, you know, the amount of the sales are definitely impacted by the the cost of the materials. Because we, you know, obviously, if wood lumber goes way, way up in cost for them to buy it and then sell it to you, clearly, you know, they're gonna they're gonna have higher sales because their purchase cost is higher so obviously they're selling higher to the consumer so with all things being equal obviously sales will increase and then the opposite is true if the cost of material goes

way down they'll decrease their prices so it may have so it may put some pressure on sales there yeah because i think lumber is what lumber has got to be down like 70, 80% from highs. So, I mean, there are, yeah, they're booking that revenue. And then, so the sales, like you said, the 3.6% decline in sales is actually not even that bad when you, when you consider this. I mean, I remember, uh, I built a fence in a new house in 2017 and it cost me about 1400 bucks for the whole fence. There was probably like a hundred feet of fence. And during the pandemic I built a 20 foot dog run and it cost me more than the

entire fence, but we had to get this done. I remember lumber was just through the roof. It was like $10 for a fence board, but home Depot is not profiting any additional money off those, but they're still generating that revenue. But yeah, I don't think... I mean, it's a cyclical stock. It's a cyclical company. When the economy's poor, people aren't going to be... The last thing a lot of people are thinking about right now is renovating their home.

And they do have exposure to new home builds as well which should should continue on pretty strong but i mean i guess it depends on their pro segment yeah yeah well especially in the u.s right i think buffett famously took a position in some u.s home builders a few months ago because of the reason we were just talking about people there's not that much inventory because people don't really want to sell their homes unless they have to because they don't want to give up that three percent or two percent mortgage whatever it is so for new home buyers really one of the pre like the main option for them is just to buy a new home and that obviously is done with the builders. It also comes with some downsides for people.

Obviously, it's going to be more in the suburbs as a general rule. But again, their pro segment should be held by that. Yeah, it's such a different environment there than it is here, like just in terms of mortgages, like with ours being, you know, for the most part, three or five year fixed terms, and then just everything changes for them. Like, there's huge incentive if you have a pandemic mortgage to just stay in that home. Whereas again, like in Canada, they're coming due now, especially the three year rates, and you know, people are going to see massive jumps in their mortgage payments, and it changes the environment for sure. Yeah, and it's probably, you know,

we're not macro specialists or anything like that, but I think it's definitely one of the factors why the U.S. has been more resilient than other countries because pretty much the U.S. is the only one that has the 30-year mortgages. If you look at Canada, Australia, the U.K., it's all shorter terms fixed mortgage. And people, you know, there's more mortgages that are rolling over. People have to refinance from low to higher rates. So you see the impact happening much more. It's being felt a lot more for regular people who own homes, but also investors, right?

People who have investment properties. A lot of those come with mortgages, whether they're variable or even fixed rates, at some point, they're going to have to renew them. And if you're an investor, you want to be able to get some cash flow from your properties. So at some point, something's got to give, right? Either you try to increase your rents, or you put the property up for sale. I know Dan from our Canadian Real Estate Investor Podcast, he's not shy mentioning that sometimes you'll get calls from people that got some investment properties, probably wasn't the best decision at the time, and now they're really feeling it, whether it was

variable rates and they've been able to make due until now, or some fixed rates that are coming up and now you have landlords that are not quite sure what to do because they're having to put more and more money in these properties just to stay afloat? Yeah, I had a rental property and I sold it right. I had a variable rate mortgage and I sold it right before they started to go up in 2022. Not that I knew that rates were going to go up, but I just, I was kind of, I had rented it for, you know, seven, seven or eight years. And it was just kind of- How dare you not listen to Tiff? Yeah. It was like, it probably wouldn't have impacted. Well, it would have impacted. I definitely would have been cashflow negative. Like I was barely cashflow positive on the thing

anyways, because it was just like a smaller condo and it was just, it was so hard to charge a lot of rent on it. But I, I think I would have been, if I would have hung onto it until now, I probably would have been burning 500, $600 a month. Cause yeah, it was a tough, it was a tough place to rent and nobody ever really lasted that long cause it was so tiny. So everybody was always trying to upgrade move elsewhere but yeah i mean in terms of in terms of home depot like they got about 2400 stores and like 2100 of them or 2050 of them in the united

states so i mean i think again the average home with the united states i, there's a lot of possible tailwinds, obviously not right now, but eventually for just overall renovations, house builds, things like that for Home Depot. So yeah. No, no, I really, I think good overview there. I think that'll be it for today. We had one last name, but the episode went on a bit longer. That's okay. Just means we're having some fun discussions here. You know, a couple of things before we let you go, if you haven't done so already, make sure you leave us a review on Spotify. Well, Spotify is just like a star. So, you know, give us a five star rating there. Or if you go on Apple podcast, take a few minutes, give us a review, give us a star rating. Really appreciate it. It helps people find us. And, you know, we always encourage people

to share the show with a friend, family member. That's how it grows. Kind of word to mouth is a great way to get the show to grow. And then Dan, you can find him on stocktrades.ca. Lots of really good information, research info on different companies, ETFs and on Twitter. His handle is in the show notes. So feel free to have a look there. I always forget. But anything that I missed, Dan, for you? Nope. That is all for me.

Okay, perfect. Well, thank you for listening to the show today. We'll see you next time. And yeah, actually, one last thing I forgot to ask you, Dan, what earnings are you looking for this week? I actually haven't had the chance to look at much other than the Canadian grocers for sure is going to be pretty. Oh, yeah, that's a they report political hot potato. I think when I think Wednesday they report, it's definitely going to be pretty because they are under the hot seat for sure.

Yeah. Loblaws is November 15th on the open. I think Metro is the same too. Oh, wow. Okay. Yeah. So, you're going to see like if you follow, you know, follow every Canadian politician and then when they come out with earnings, just have a look at what each says. Yeah, exactly.

You know every single one of them will be tweeting something about Canadian grocers when the earnings come out. Yeah. Yeah. I had Well Health because we were going to go over Teladoc, I think it was. So that was pretty interesting because Well Health reported this morning. I haven't had, that's a company that I own. I haven't had a chance to look at the quarter yet, but they're a pretty interesting play

on just digital health. So I'm going to dig into that one after we're done here. Okay. No, that's good. So people, a little preview of what we'll be talking about next Thursday. So Thursday next week. So stay tuned. And we'll see you soon. Thanks for tuning in. Yeah, thanks for listening, everyone. The Canadian investor podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your

own research and due diligence before making investment or financial decisions.