The Canadian Investor - Two Stocks Benefiting from the Shift to Essential Spending

Episode Date: June 12, 2025

In this episode, Simon and Dan break down the latest earnings from four major consumer-facing companies. Dollarama and Costco delivered another strong quarter while Lululemon’s stock took a big hit following revised guidance. BRP surprised to the upside despite a tough year-over-year comparison, with snowmobiles carrying the quarter and dealers slowly working through inventory.  Tickers of stocks discussed: DOO.TO, LULU, COST, DOL.TO  Questrade’s new securities lending program Get your TSX Meetup tickets here! Get your Calgary Meetup Tickets here! 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 Finchat.io 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.

Are you buying Canadian? Well, why not invest Canadian? At BMO ETFs, we're committed to helping you build a brighter financial future, because it's our future too. This is our home, and as Canadians ourselves, we know what you need to grow wealth right here in Canada. Visit BMOETFs.com for more. Canada. Visit BMOET be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome to the Canadian Investor Podcast. I am back with Dan Kent. My name is Simon Belanger for some new listeners here

We are back for a news and earnings episode. It'll be a fun one pretty good slate I'll say considering that the earnings season is Dying down a little bit. There are some names that we hadn't talked about in in a couple weeks We just didn't have the chance so it'll be fun. So we're gonna go over dollar Rama lululemon BRP and Costco so it'll be fun. Yeah, it's definitely slowing down a little bit right now Yeah, there's really not much going on right now I had a few on the list that I ended up removing because I really didn't think anybody would be all that interested but dollar

Emma's is definitely one that I'm sure a lot of people are interested in as well as Costco I mean, they're two defensive stocks that are kind of killing it right now Yeah, yeah exactly and before we get started just some housekeeping items. So just a reminder There's still some tickets left for the July 8th event in Calgary So anyone out West or in Alberta, it'd be great to see you So we already have these decent amount of people that are coming but there's still some tickets left. July 24th for the Toronto Stock Exchange closing bell. I think there's a few tickets left, not that many left there. So for those interested in the GTA,

make sure you go and sign up for the tickets. And then for our joint TCI subscribers, well they are aware of it, but we've added a new premium feed for the podcast. So they'll be able to get the podcast if you're a joint TCI subscribers. You'll be able to get it without any ads so you can add it to your podcast player. So any episode starting this Monday or last Monday's episode you'll be able to have it. So this one that you're listening if you're a subscriber you'll be able to add it to your favorite podcast player with the only exception of Spotify. It doesn't support it with Patreon but any

other player Apple Podcasts, Supercast, any of the other apps you'll be able to add it there. No ads whatsoever. So a nice little perk for people who join us on JoinTCI. We're putting some new features. We will be increasing the price most likely on August 1st or September 1st. Haven't decided exactly then. So if you want to grandfather yourself in the current price, make sure you subscribe before we do the price increase. Any current subscribers won't see the price increase. So just a few little perks that we're adding to make sure people are getting some good value there.

But enough of the housekeeping, so let's get started with Dollarama earnings. I think they had a pretty good earnings report, right? Yeah, I think they're up 11 or 12%. Yeah, 11% this morning up 11 or 12 percent. Yeah 11 percent this morning on another Really good quarter. They're putting together. I mean we're talking like two or three years now of Very good quarters. They had revenue increased by 8% Earnings by 27% and earnings also came in well ahead of expectations I think they were expected to earn like 83 cents a share and they came in well ahead of expectations. I think they were expected to earn like 83 cents a share and

they came in at 97. I think a bit of that was due to the sale. Some one time gains on investments, but I believe even after that earnings would have come in like well ahead of expectations. The increased comparable sales by 4.9%. So this is a decline from the 5.6% of reported last year. However, you know, the slowing number isn't really all that much of a concern. I actually think it's still pretty bullish. I mean, the fact that the company could continue to grow, you know, comparable sales at at 5% considering the pace it's been at over the last while. And you have a chart here of, you know, their comparable sales to their total revenues. And I mean, back in 2023, when we saw that big shift in terms of, you know, the consumer

maybe going to those discount stores in an effort to, you know, save money, we're seeing, you know, back in April of 2023, 17% comparable sales growth. So it's really hard. Usually when you see a big surge like this, there's kind of like a leveling out and the company will kind of struggle to grow over and above those previous comparable sales numbers, but it's still kind of been able to do it over the last while. And it kind of seems like it's even ticking back upwards over the last over the last few quarters. They're ahead of their pace in terms of new store openings. They opened 22 stores on the quarter, but they only expect 70 to 80 on the year. So it's possible that we see stores kind of slow new store opening slow in the back half of the year, or they're just going to come in over and above their guidance. I mean, even the chart here, you see they had around 1,270 stores back in 2019 and they've jumped up to 1,638 as of their-

It's crazy, huh? Yeah. Like they, it's crazy the growth that this company is going through over the last while. And again, a lot of it has been that, well, I mean, inflation, I would say, was the biggest tailwind for this company possible. I mean, because people just, they can't afford stuff at other retail stores. So they had to dollarama because it's just, it's cheaper. It's, it's much cheaper. Does this include the stores that they have in Latin America or?

It would. Yeah, I'm pretty sure it would. Yeah. I know that's a pretty decent growth vector for them. Yeah. Yeah. Cause they have, yeah, there's 60%. I think they were 50% and then they bought another 10% chunk So there's 60% in in dollar city. I would imagine this would include the stores, but it might not just because I mean that's kind of like separate entity there so Investments made into the company's distribution network are also paying off because I mean margins continue to expand pretty much everywhere Gross margins increased by 1.1 percent year- year EBITDA margins increased by nearly 3%.

I had mentioned that the one time gain on investments that that kind of impacted earnings and EBITDA that put that positively impacted their margins by 70 basis points but I mean a 2.3% bump is still pretty solid. The company's majority stake it took at Dollar City as I had mentioned looks to be paying off as well. Its earnings nearly doubled year over year. Dollar City itself saw a 12.6% boost in sales and I mean again the penny pinching you know by many consumers is kind of it's clearly coming to a frontier and it's even continuing. As I mentioned, I would have figured

things would have slowed down. There's only so many tailwinds you can absorb, but it seems to be continuing and they do expect a slowing of comparable sales. So they said on the year they expected to come in at three to 4%. So that would be a decent decline from what we've seen over the last two, three quarters,

but gross margins will continue to expand. And the one thing here is general expenses as a percentage of revenue, they'll come in at 14.2 to 14.7%. So last quarter, like this quarter currently, they came in at 15.3%. So I mean, they expect a pretty notable improvement there, which should ultimately drive more profitability.

The company's leverage ratio has declined from 2.16 to 2.03. This would be their debt to adjusted EBITDA. It hasn't really paid down all that much debt, but its cash on hand has nearly doubled. So that's kind of what has reduced the ratio, because they would take their net debt and compare it to their EBITDA, which would be the debt minus, you know, whatever cash and cash equivalents it has on the

balance sheet. And the one thing that's crazy here is the company is now trading at 36 x trailing 12 month free cash flow. So to give you an idea, the company is typically traded around 27 x over the last decade. So you're talking 33% premium to typical valuations and it's now trading at 34x expected earnings. And I mean it just seems very expensive. But again, I said this back in 2023 when it was trading at 35x free cash flow and it's gone up by 112% since. So yeah, they're just seeing some gigantic tailwinds here

in terms of, you know, consumer scaling back spending plus just increasing overall efficiency. I mean, margins boosting. It has like, it's operating margins are so far ahead of any like US based dollar store. It's crazy. Like if I look it up here, Dollarama 24% operating margins. And if we look to Dollar Tree, I believe it is they are at they're at 9.7%.

So you're looking at almost triple the operating margins, which is, I mean, this company is just very good at being very efficient and it just, it just continues. I didn't get a chance to look at the call because they hadn't posted it yet, but so I was going to pull some comments in there, but I mean, overall it was, I mean, it was a great quarter. Nothing else to say really. Yeah. I mean, it's, you wonder if the margins will start looking even better, especially with tariffs, right?

Because at the end of the day, the US has way more tariffs on against other countries than Canada has currently. So it'll be interesting because if you're looking at a dollar store, I don't think you have that much pricing power. At some point, you'll have to probably eat it in the margins, right? If you're kind of thinking about your clientele so that's that'll be interesting to follow but obviously dollarama probably won't be impacted as much because I guess a lot of the goods that are coming from overseas and Canada definitely has a lot less

tariffs in place compared to the US. Yeah like you'll probably see a lot of pressures on the companies south of the border unless, you know, unless there's a resolution there but Dollarama largely shouldn't be impacted with that even in their Latin American side of things so yeah it's, I mean it's still a very affordable store. I remember like back in the day people were kinda complaining about how prices were going up at Dollarama

I don't think too many people complain anymore. I remember like when stuff started costing more than a couple bucks people Yeah, people are used to it now. Yeah people are used to it now I mean the quality is not there like I've I don't shop there very much But when I have bought, you know a couple things there and the quality isn't exactly the best but it's also like Yeah quarter the price which I mean people I think right now with you know, a couple things there and the quality isn't exactly the best, but it's also like, yeah, quarter the price, which I mean, people, I think right now with, you know, how expensive it is to just live period, I just don't think people care. No, exactly. And I always remember, and it kind of shows sometimes the disconnect between different income levels. So my where I used to live, we moved earlier this year year and there was a new dollarama that opened

and we were like walking distance from like a main street where you could go and walk and there's local shops and stuff and I remember there was like a Facebook post during that I think they opened it during the pandemic the dollarama there and a bunch of people were like, oh, support local, don't buy the dollarama. And look, I can understand you wanna support local and that's fine if you can afford to do so, but a lot of people just, they just can't afford it. And Costco is a good alternative if you have the means to pay for the membership, transportation too,

cause a lot of people just don't have a car and are able to drive to a Costco and that you're willing to buy in bulk. Whereas you know, Dollarama just offers some smaller quantities at affordable prices for a lot of people are just trying to make ends meet. It makes a whole lot of sense. So I just, I'll always remember that the the disconnect which I understood that you want to support local shops and buy a local but if you can't afford it like you're obviously gonna go to Dollarama yeah I mean it's a luxury to shop local when you have the money to do so but I

mean if times are tight you're you're gonna go to a place like Dollarama and that's another thing they're very good at is putting stores in towns that a lot of large retailers just ignore. Like there's a lot of Dollaramas in like very small towns here in Alberta and they still do very well. Well, yeah, usually the footprint is much smaller too, right, so it makes a whole lot of sense. I mean, it's probably one I regret not buying.

Oh yeah, severe. Just because, yeah, at the onset of the pandemic, I thought their costs would raise and they'd struggle with margins, and at some point people would just not be willing to pay higher prices at Dollarama, but then I guess in hindsight, 2020, definitely realized that yes,

they've increased the cost of quite a bit of their goods, but if you're still cheaper than all the other alternatives, people still go there, right? So that's something I realized. Yeah, that was one of the main issues I kind of thought too, because I remember during COVID, they were having a lot of trouble keeping employees, and they were having to lay out so much cash

for COVID preventative type things, and they were having to like lay out so much cash for, you know, like COVID preventative type things. And they were going through a bit of difficulties, but yeah, they've recovered in a huge way. I think it's like almost forexed from 2020, like 50 bucks a share to pretty close to 200 now. Yeah. Yeah. And I guess too, my other concern was always evaluation, but at some point, I don't know, maybe was always evaluation by at some point. I don't know maybe just bite the bullet and buy it but no that's a good overview. In this kind of market, I like having some cash on the sidelines.

It gives me the flexibility to jump on opportunities when the right stock goes on sale. But just because the cash is waiting, it doesn't mean it shouldn't be working for me. That's why I use EQBank. They offer some of the best interest rate among Canadian banks, so my money's still earning while I wait. You can even get a boosted rate by setting up direct deposit for your payroll and depositing $2,000 or more per month into your EQBank account. Your cash stays liquid and ready to go when it's time to invest.

And if you're not in a rush to access your funds, EQBank's Notas Savings Accounts and GICs are great ways to grow your returns even more. It's a smarter way to park your cash. Visit EQBank.ca to learn more and keep your money earning even while you wait. As an investor, I'm always looking to reduce my fees, which is why I'm excited that Questrade now offers zero dollar commissions on stocks and ETFs. But Questrade isn't just about commission free trading. You can also get USD accounts,

so I avoid forced currency conversion fees when trading US stocks. Plus, get access to their advanced edge trading platform available on desktop, web, and mobile. I've been using Questrade for many years, and so has Simon. And their platform makes trading seamless, whether you're managing a long-term portfolio or making active trades.

Don't miss out. Start trading commission-free stocks and ETFs today. Visit questrade.com to learn more. Summer always gets extra busy. Weekends at the lake, trips out to Canada's East Coast, vacations with the family, chasing a bit of sunshine somewhere new. Every time I'm away, and probably you as well, your place just sits at home empty. And since I'm already staying at a great Airbnb, why not have my own place generating a little income on the side while I'm gone?

I've always thought it's a great idea, but it made me nervous to think about the work required. It's easier now with Airbnb's co-host network. I can find a local trusted co-host to handle all of it. Guest check-ins, support, even cleaning, no stress, no extra work. If your place is often empty in the summer, maybe it's time to let it make some income for you. Find a co-host at airbnb.ca forward slash host. We'll move on to a bit more of a premium offering here. So Lululemon for those following it,

you'll notice that they had a pretty big drop. I think the stock was down like 20% or so. I think it finished like 17% down 17. So a pretty big hit to the stock. And the reason is the results themselves were not like that bad. I mean, they weren't great, but they were like pretty OK. There were sections that were good. I'll mention that.

But it was definitely the guidance that hit the market. And they kept their revenue guidance for the full year unchanged at seven to eight percent. So that's good. They expect China to grow from, so that's good. They expect China to grow from between 25 and 30 percent. They also expect the rest of the world to increase about 20 percent, but that's where most of the growth is, although Canada is not doing too bad. The earnings guidance though is really what I think hit the stock because essentially they reduce the earnings guidance which means that clearly they're gonna be taking a hit on the

margin and the CEO had a very interesting quote on the call and I think it's very telling of the current state of the consumer in the US so I quote my sense is that the US consumers remain cautious right now and they are being very intentional about their buying decisions. So not not great when you're a company like Lululemon that's a bit more of a premium product. They also said that on the call Lululemon is well positioned to weather the tariffs because they are a highly profitable business with strong margin. Hard to disagree. Lululemon has some of

the best margins in the the industry but they also added they'll continue to be prudent on expenses, look to mitigate increases wherever possible with suppliers and look at having some targeted price increases in their assortment. They're trying to manage short-term headwinds, but also focusing on the longer term growth which clearly is not easy for them to do here. They said on the call that they are making progress on the assortment and that they are seeing good responses from the consumer. They mentioned that they gained market share in both men's and women's athletic wear in the US but in terms of actual result this is where I think it's really hurting them. The US is

basically stagnating so the US for those on joint TCI you'll see the quarterly sales here. If you're looking at this year compared to last year I mean it's up maybe 1% it's basically flat year over year which is not something you want to see with your largest market. So even though they're growing pretty nicely on the international front with 90% growth there, it's really just 3% for the Americas and the Americans includes the US and Canada. And honestly, Canada is driving that growth. So it's not usually what you want to hear when you have a segment that includes the US and Canada and Canada is driving that growth. So it's not usually what you want to hear when you have a segment that includes the US and Canada and Canada is driving that growth.

It means that it's struggling on the US side and it's really not that great also when you start looking at comparable sales. So it's down 2% for the Americas and it increased 6% internationally so having more trouble on the comparable sales as well. On the good side here they added three new stores during the quarter bringing their store count to 770. They are opening some stores in some new locations internationally as well and EPS was up 2% to $2.60. So, I mean, it's, I guess, an okay recorder if you kind of forget about the guidance, but still not great for Lululemon.

And I think the biggest issue here is, I wouldn't be surprised if they downgrade the guidance later this year as well, especially if you see the US consumer starting to cut back on premium clothing like this or just clothing in general. Obviously Lululemon is going to be pretty impacted for that. So I think that's probably what scared investors is that I don't think it's a zero probability that they may actually reduce the guidance further down the year. They may not, but I think it's definitely a possibility. Yeah, I think it's kind of a situation of like,

where does it end, I guess. Probably going to be, you know, a lot of people are going to be scared that this might not be, you know, the first, well, it's the first reduction, but it might not be the last. The one interesting thing is like, you see, well, Aritzia hasn't reported yet, but I mean, they're seeing like none of this, especially in like the US side. I mean, it's a different company, but I mean, I guess it's like a mid tier fashion line type thing. And I mean, Aritzia is reporting like 30% plus year over year growth. And it's actually, it's way more than that in terms of like US revenue whereas you know Canada's kind of slowing so I mean retailers are very very difficult I mean just to own overall I mean that the market tends to sell them off on like the first fear of any sort of you know

headwinds or potential brand fallout. The one thing I guess I'll say about Aritzia is they're a lot smaller. They have a lot more runway for expansion. Lululemon's more on the mature side. They're not growing as fast in terms of store counts or anything, but yes, it's a pretty tough market for this. We just went over Dollarama. Obviously what the CEO said resonates perfectly with what's just went over Dollarama. Obviously, what the

CEO said kind of resonates perfectly with what's going on with Dollarama and probably what you'll go over with Costco as well. Yeah and one thing to keep in mind too, it's not specific to Lululemon and fashion in general, but if we do enter some uncertain economic times, maybe we enter into recession the next year or two, whether it's Canada, in Canada or in the US or both countries at some point or even internationally. Some business may actually benefit

even though their industry might not. So if you, let me explain a bit more and sometimes people will forget about that is, if you have a specific industry, let's take retailers for example, we're talking about that. So let's take in Canada. The Bay just went bankrupt, right? So who's gonna pick up those sales?

The ones that are actually surviving will be picking up some of the sales. So even if retailers in general in that category are actually seeing sales slow in the aggregate, some specific retailers might actually see some growth as a result of some companies just folding up, closing their doors, going bankrupt. So that's something to always keep in mind is even though the environment might not be

that great is that the really good companies may actually benefit because some competitors go out of business. And that's something I heard maybe a couple weeks ago, I was listening to another podcast, I'd love to give them the credit I completely forgot. But it's something to keep in mind, because sometimes we'll just focus on the industry. And I'm definitely very guilty of that. But then if you focus on the companies and say, you know what, yes, it may be a couple, you know, a few years that will be tougher for macro economic environment, but they'll actually gain business from other businesses just going under and they might

actually perform well despite a pretty bad macroeconomic backdrop. Yeah, I think the situation, this is a completely different industry, but a company I own with Boyd, like Automobody. I mean, you look at its recent quarter and same store sales fell by 2.8%. But when you look industry wide, they're down 9 to 10%. So I mean, like in this situation, I mean, you would think that ultimately that would like, what that would tell you is, you know, a company like Boyd is gaining market share in a pretty tough environment. And when things do turn around, you know, there's probably more tailwinds there.

It can be exactly the same with a retailer. I mean, yeah. And it enables them to either, yeah, just gain market share, like you said, but even gobble up some competitors that are- And that's what they do, yeah. Exactly, that are in a tough spot that may not be going bankrupt

But they're seeing that if they don't do some kind of a deal with them They will be going bankrupt so they're not in a position of strength. Yep. Okay, so let's move on to the next one here so another one that's I Know a lot of people listening to the podcast own this company BRP Inc Obviously, I own it as well. Okay, you own it as well so I know it's a kind of company that's pretty cyclical and Haven't looked at it too recently. So I'll be listening to what you're saying But I know it's been a rough year and a half or so for them. Yeah, it's kind of funny

We have two companies that are kind of defensive doing very well and then two cyclical companies that are that are not doing very well. It was a rough quarter but it wasn't you know as as rough as expected it it did have a big boost in share price. I mean this was a few weeks ago I can't remember what it was but it did go up by double digits post post earnings because it did top expectations by more than 30 percent in terms of earnings and then revenue came in around 6% higher than expected company sales declined by 8% earnings per share. This is on a year over year basis declined by 70%. The company earned around 72 cents Canadian per share to give you some context of this. The company was posting quarterly earnings north of $3 a share back in 2023. So I mean, to me, the pandemic type environment, especially with the low rates and stuff,

it just kind of seems to have pulled multiple years worth of growth kind of forward for BRP, especially when we look to like that, you know, that lockdown environment. I mean, it's one thing that you could do and you could get, yeah, you could get, like, I know, I know like personally, well, I mean, it's not very many people, but I know three or four people who would never, ever went

snowmobiling prior and they all bought units during the pandemic and they go every year now. But I mean, now it's, it's a little bit different, just because, you know, rates are higher. The units are way more expensive. It's just, it's kind of getting hit. It's a high quality company that's just getting hit and there's really nothing it can do about it. One of the main things holding this company up right now is dealership inventory. So orders are stalling

because dealers just aren't really moving much product. And you know, what has resulted as a large decline in gross margins, you know, due to markdowns, we saw a very similar situation with Aritzia when they had a lot of inventory buildup. This would have been a few years ago now. When you get that large stockpile of inventory, the way you move it is you mark things down, especially when you have older units, you got to mark them down a lot and ultimately that's going to impact your margins. It should normalize eventually once you move all that inventory out. But the one thing about retailers in general, and one thing for people looking at them,

I mean, you do need to keep an eye on inventory levels because once inventory gets stagnant and you can't move it, it can really hurt your margins. And we've seen it over the last while for a lot of these companies. Its overall dealer inventory is down 21% year over year and it does expect the overall inventory situation to be figured out over the next few quarters here. And it looks like the bulk of the strong results came from the increase in demand for snowmobiles

in Canada. While pretty much every one of its segments was declining by double digits outside of its ATVs, snowmobiles actually grew by 80% year over year. Those numbers are probably a little bit bloated because I remember last year they had mentioned that snowmobile struggled because of a pretty soft, like winter. It wasn't really all that bad. Whereas this one, there's a lot of snow near the end of it and they don't know about Calgary, but in Ottawa it was like the never ending winter. So yeah, yeah. So it was a lot different than we seen, you know, the year prior, which is probably why you see that 80% spike.

It's probably not going to continue. So the company's free cash flow increased by 34%. The vast majority of this is just due to the fact the company is not spending any money right now. It's scaled back capital expenditures substantially likely to preserve liquidity shore up the balance sheet in case the environment doesn't really improve that quickly. The company expects tariffs to hit it for around $60-70 million in fiscal 2026, which would be the calendar year of 2025. I can't remember what exact quarter this company is in,

but it's one of those companies that kind of operates a fiscal year ahead. And the main exposure in this regard is in its parts and accessories segment, especially the parts that are sourced from China. So the company is looking to get away from sourcing parts from China just in an effort to mitigate this, but this probably isn't something that's going to happen right away. And they kind of seemed upbeat about the second half of 2025. And, you know, it's targeting double digit sales growth in the second half of the year and significant improvements to EBITDA.

However, they didn't issue any sort of of formal guidance. I mean, if you'll remember, they issued guidance and then they downgraded it. It was I'm pretty sure it was like four straight quarters. And then they effectively whenevered it. It was, I'm pretty sure it was like four straight quarters and then they effectively just eliminated it. Whenever they could downgrade it because obviously when you're issuing guidance for the first time at the end of Q4 of the previous year, you can't really downgrade, you just issue it.

But yeah, they had like, even over like a year, they had multiple quarters in a row. I remember thinking like, my God, why are they even providing guidance at this point? So I I mean I think after the situation of issuing guidance and then downgrading it for four straight quarters I mean I think they're gonna be really patient until they reissue any sort of guidance I mean I'm a bit more on the pessimistic side despite being a shareholder in terms of like their upbeat about you know the second half I do believe this

is probably the the best recreational vehicle producer on the planet put I mean the way the economy is trending I just can't imagine people rushing out to buy Vehicles at this point plus, you know, I'll probably get some good deals like for used ones, right or older models Like I mean for those who actually have money to spend on this right now I mean, why would you actually have money to spend on this right now, I mean, why would you not look at some used alternative? Like it's not like in the pandemic where you could sell a used, you know, for a profit

or whatever for profit. Like it's not like that anymore. Things have shifted. So yeah, I do wonder if just more people are starting to turn to just, you know, models that are a year or two old, whether they're new and discounted or just used I mean that would make a whole lot of sense right? Yes like I said especially when you get those inventory problems I mean they're going to mark things down you're going to get a good you know a good deal maybe you buy a year or two old model like you said but I mean they're still high quality pieces of machinery so I mean on the

flip side you know for for people who do believe in the company, I mean, often the best time to buy these cyclical stocks is when the environment is like this. I mean, it's not good for them right now, but you would imagine if, you know, rates start to come down in the US, I mean, the economy starts to pick back up again, there's going to be a bit more discretionary. Yeah, who knows? Now you got Trump and JD Vance just like being very vocal about Powell to lower the rates. Again? Yeah, yeah. I think I saw that posted this morning.

They're saying he should because the inflation metric came in a bit, I guess, below expectations. So they're saying like they're going at it and just saying Trump is saying that he should lower the interest rate by a hundred basis point because it would help paying the debt. A hundred basis points. Yeah, a hundred basis point, which is kind of funny because I don't know whether Trump fully understands that a lot of the US that's actually finance on the long end and Powell does not have any influence on that, but that's beside the point they are just going at it and and basically telling him that he should lower rates which is funny because if I'm Trump why wouldn't you just like shut up let Powell do what he wants and

then if he doesn't lower rates you can just blame a recession on Powell not lowering the rates in time but anyways that's I mean it's a win-win then exactly it's a win-win then exactly it's a win-win he gets him to lower them and if he doesn't he can blame it on that but yeah yeah 100 basis point drop uh would would probably help a company like brp that's for sure because first off these vehicles are not cheap which again is why when we saw you know I can't even imagine you probably finance one of these for zero percent during the pandemic I I can't say I I don't buy these vehicles at all.

I don't know what the financing rates are on them, but I can't imagine it's cheap right now, but. I don't know, I'm looking it up. Loan offers for BRPs, so it's loading. Maybe I'll start off talking by Costco. Yeah, I'll look it up and you can talk about Costco. Exactly, it'd be a fun episode though, maybe when it's a bit, I guess right now, a bit more dead for earnings. Just looking at certain

industries that were really booming during the pandemic but now are struggling. I think obviously this is one of them. I think luxury, I know LVMH has been struggling a little bit. That'd be another one. I know Biking, so there's a bunch of mountain bike companies. I'm pretty well, I follow that pretty closely. I know there's a bunch of them that went bankrupt, including Rocky Mountain, which is a pretty iconic brand in Canada. So it's just these companies that were just basically printing money during the pandemic.

And now they just couldn't really, I guess, pivot when demand fell off of cliff. And I guess BRP is probably well positioned for that, but I guess there's a lot of companies that just didn't survive. Yeah. I mean, you had that, especially when like we were in lockdown mode. I mean, there was very few things that you could do I mean even like little Off-topic in this regard, but I mean one thing was like golf I've golfed for quite a while and like the the amount of people that started golfing during covid because

It was one of the sports that you could play when you were fully locked down It just it's absolutely crazy how popular it is now. And same thing recreational vehicles. I mean it's one thing that you could do. Yeah it's mountain biking things like that. All those sorts of outdoor sports just exploded. Exactly. So I'm on this site now and I guess you have to like fill in an application but I like I guess it's starting at 8.55% for some of the ATVs depending on the type of vehicle you're getting so it's not it's not cheap it's not cheap to own one of these yeah. Oh 355 bucks a month so 355 times 72 25 grand for a yeah oh yeah that's a lot of money yeah that like I can't imagine a lot of people are running out to pay eight and a half percent on a

recreational vehicle right now which is no exactly that's probably a lot of the struggles which makes me think that yeah a lot of people are probably looking for discount if they're buying them or buying them used in good condition. So I was just curious, but that's a good overview. In this kind of market, I like having some cash on the sidelines. It gives me the flexibility to jump on opportunities when the right stock goes on sale. But just because the cash is waiting, it doesn't mean it shouldn't be working for me. That's why I use EQ Bank. They offer some of the best interest rate among Canadian banks, so my money's still

earning while I wait. You can even get a boosted rate by setting up direct deposit for your payroll and depositing $2,000 or more per month into your EQ Bank account. Your cash stays liquid and ready to go when it's time to invest. And if you're not in a rush to access your funds, EQBank's Notas Savings Accounts and GICs are great ways to grow your returns even more. It's a smarter way to park your cash. Visit EQBank.ca to learn more and keep your money earning even while you wait. As an investor, I'm always looking to reduce my fees, which is why I'm excited that Questrade now offers $0 commissions on stocks and ETFs.

But Questrade isn't just about commission free trading. You can also get USD accounts so I avoid forced currency conversion fees when trading US stocks. Plus get access to their advanced edge trading platform available on desktop, web, and mobile. I've been using Questrade for many years and so has Simon. And their platform makes trading seamless whether you're managing a long-term portfolio or making active trades. Don't miss out. Start trading commission free stocks and ETFs today. Visit questrade.com to learn more. Summer always gets extra busy. Weekends at the lake, trips out to Canada's East Coast, vacations with the family, chasing a bit of sunshine somewhere new.

Every time I'm away, and probably you as well, your place just sits at home empty. And since I'm already staying at a great Airbnb, why not have my own place generating a little income on the side while I'm gone? I've always thought it's a great idea but it made me nervous to think about the work required. It's easier now with Airbnb's co-host network. I can find a local trusted co-host to handle all of it. Guest check-ins, support, even cleaning, no stress, no extra work.

If your place is often empty in the summer, maybe it's time to let it make some income for you. Find a co-host at airbnb.ca forward slash host. We'll finish up with Costco here. So are you wearing your Kirkland shirt or no? No, not today. It's Edmunds and Oildlers? Okay.

Not today. Not today. No Oilders today either. No Oilders today. Okay. You're still grieving from that line. Yeah. Yeah.

So Costco, very, I mean, very good results from Costco. I mean, they just keep delivering here. They, their sales were up 5.7%. Canada was up 2.9%, while the US was up 6.6%. Membership fee revenue, which is something to really keep in mind here. That was pretty high, and I'm just showing here for a joint TCI viewers here.

So the membership revenues were up 10% and you can see it for those who are just listing, it's literally like just, it just goes up steady. Up and to the right. Yeah. Yeah. Up and to the right. I'm going to assume a lot of people renew in the fall, late summer and the fall because it's always much higher and then it's just up and to the right. But the tendency is the same, late summer and the fall, because it's always much higher and then it's just up into the right,

but the tendency is the same, right? It's just constantly up into the right. Not like a crazy amount, but over since 2019, November of 2019, that's a compound annual growth rate of more than 8%. So pretty, pretty impressive. Just that model, it's just a very good model because they can have razor thin margin,

but this is almost, it almost is pure profit. Pure profit. Yeah, membership. And they have, it's like what, 92% probably renewals? Yeah, it's always in the 90s exactly. I mean, we were both members, I have the executive membership. Is that one the one you have too?

Yeah. Yeah, so if you go enough, obviously, the executive membership. Is that one, the one you have too? Yeah. Yeah, so if you go enough, obviously, the executive membership pays for itself because you get 2% cash back, which you also get if you order gold online, by the way. So for those interested, it does apply to the membership. So you can get some pretty sweet cash back if you buy a little bit of gold from Costco.

Yeah, you'll pay your membership off quickly buying gold from Costco. Yeah exactly and so on the results side net income was up 13% during the quarter they opened nine new warehouses, seven of which were net new location and the other two were relocations. In the upcoming quarter they will be opening their 110th location in Canada which I think I mentioned the last earnings episode we did but Canada is their second largest country in terms of warehouses I believe it or not so the US has 624 Canada 109 soon to be 110 Mexico 41 Japan 37 the UK 29 and the rest is spread out between South Korea Australia Taiwan China Spain France Iceland New Zealand

and Sweden so there's definitely a lot of Opportunities for Costco to grow. I mean they're not in that many countries and you can tell that People are finding value in Costco. I mean I certainly am I go probably every two to three weeks. There's just certain things that we need that we just buy in bulk and we just save a whole lot of money at Costco. Yeah. I mean, they have the cost. You do have to buy more, which a lot of people, if you're not like smart with it, you know, especially like me and my wife, there's only, there's

only two of us. So I mean, a lot of the stuff can go to waste, but I mean, if you're smart with it, it's so much cheaper buying larger quantities and kind of trying to preserve it. And I mean, it's the situation for a lot of people right now. Like they're finding huge value in Costco. Yeah, exactly.

And I mean, for us, especially when my daughter was younger, like having a newborn or baby, like just diapers and wipes and stuff like that, you save a whole lot of money. Kirkland items, sales outpace sale of other items in their store as consumers were looking for more value during challenging economic times.

Kirkland is their store brand for those not familiar. They're moving more sources for their Kirkland brand in countries that are sold that actually, you know, are sold to mitigate the impact of tariffs. So what they're doing is essentially trying to move some of the sourcing to mitigate tariffs and some of the items that would have been sold to the US that are now impacted by tariffs are actually rerouting them to other countries that would not have tariffs. So they're being strategic when it comes to that. And they highlighted the new affirm partnership

for Costco online. It's something I had mentioned when I did the affirm earnings that they do have a new Costco membership. They said on the call that it would allow more members to buy larger ticket items like furniture I mean it does make sense for something for Costco But again, I mean if you're listening to this and you use the buy now pay later, just be careful, right? I think it can't make sense for larger items where even if you can just

Pay an installment and make a little bit of money on your cash You actually already have it in cash, but you make a little bit of money on your cash you actually already have it in cash but you make a little bit of money for example you have it at EQ Bank you make some interest on it and then you just pay off the for installment without any interest that can make sense it's just it can get a bit dangerous when you're starting to put like small items on those buy now pay later's offers or services. Well, didn't they mention when we went over a firm, didn't they mention that a quite a big chunk is going to

people like buying groceries and stuff like that? I seem to remember seeing that. Yeah, I think they've seen an increase. I don't remember that specifically, but I know there's more and more obviously, I think you can have it with Uber now. I'm not sure if it's a firm or not but there are those possibilities I think personally it's very dangerous I mean I've said it time and time again so I don't want to

repeat myself but it's just an easy way for people to get into more debt and I think a lot of them who use these services not all of them the New York Fed did do a study that I went over last year, but a lot of them, there are less affluent households that use those services and oftentimes it's to, yes, buy necessities. So it's just, I mean, you can understand at some point, but it's, you can get pretty quickly in a vicious cycle as well. Yeah, I mean, if you can use them responsibly They're very good. But if you if you abuse them, you can not definitely get into a bit of trouble

But yeah, I mean, I'm not surprised that Costco would do something like this. I mean it makes sense I do they do sell a lot of Big ticket items. I mean that and I can't imagine it's doing very well. Well, actually it isn't doing very well I know they mentioned that their discretionary items aren't selling as good. That's right, yeah. So I mean, if you can split them into four equal payments, maybe they see a boost there,

whether or not it's good for the consumer. I mean, I'm sure Costco doesn't really care too much about that. They just kind of want to see a boost to those types of sales and this should probably do it. I guess from their perspective too, right? Like we've said it and we've said it time and time again like Costco They really their membership fee revenue is the bill. Yeah biggest driver for profit. So at the end of the day

I think they just want to make sure they offer Things that their consumer wants so if they want to have buy now pay later, and that creates a more sticky customer because they want to have that and therefore they're keeping their membership, that's probably what makes the most sense in terms of actually what's being sold. And I think that's probably more an afterthought for them. It's probably more of a way to try and keep that membership pace. That would be my assumption. I could be wrong, but yeah. Well, the membership is the bulk of the profit. I think the company doesn't really have

all that high operating margins. They're like three or 4%. And I believe they have, I think it's like 7 billion in free cash flow and the membership is what? Well, what was it? 12, 1.25 billion on a quarterly basis. So, I mean. Yeah, something like that. One point, yeah.

So let's say, I guess with that one quarter that's really high. So we can say like 1.3 on a quarterly basis roughly. Yeah. It's a vast majority. The vast majority is, uh, I mean, the business model is getting people to renew coming back in the stores. Cause that, that membership fee is, uh, it's yeah, pretty much pure profit. Yeah, exactly. So that pretty much wraps it up.

Anything you wanted to add before we wrap this up? Kind of a slower news day when it comes to earnings? No, that's it. Okay, well, we appreciate all the support we get. Thank you everyone for listening. For those who are interested interested you can look us up at JointTCI.com. If like I said you'd like we post the full videos there and there is now our premium feed for podcast episodes. So we'll be uploading every podcast episode

ad free there for members. We put our portfolio. There's also a template that you can use for tracking your own portfolio and I recently did a little tutorial on how to use it and I also post my parents a retirement portfolio which is a slightly different approach than people are probably used to seeing in terms of the type of investments but it has performed very well even when the markets were down and we were seeing those big drawdowns. It was surprisingly resilient despite that and despite having some, not a huge allocation, but a decent allocation to Bitcoin as well. So if you're kind of intrigued by all means go ahead and subscribe. If not, that's fine as well. We do appreciate the support and that's about it. So thanks everyone for listening

and we will be back next week.