The Canadian Investor - What Canadian Tire’s Earnings Reveal About the Canadian Consumer

Episode Date: May 22, 2025

In this episode, we break down Canada’s April CPI print, which came in below 2% largely due to the removal of the consumer carbon tax. We explain why this drop is likely temporary and what core inflation measures are still signaling to the Bank of Canada. We also discuss Moody’s long-anticipated downgrade of U.S. government debt, how it compares to past downgrades, and what surging bond yields mean for investors on both sides of the border. In company news, Dan shares his take on Boyd Group’s latest results, including why he’s still holding despite near-term headwinds. We also cover Canadian Tire’s earnings, consumer credit data, and what it tells us about the average Canadian household. Finally, we look at South Bow’s first-quarter results post-spinout from TC Energy and assess the sustainability of its high dividend yield. Tickers of stocks discussed: CTC-A.TO, BYD.TO, SOBO.TO  Get your Calgary Meetup Tickets here! 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  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.

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 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 or February. 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

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Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own safety goals, don't be surprised when there's a cycle. If there's uncertainty in the markets,

there's going to 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'm back with Dan Kent. We are back for a news and earnings episode Earnings are definitely slowing down Dan, but we still have a decent amount on the slate But before we get started, we've been talking about the events We'll be having this summer So the first one we'll be having is for our Western folks in Calgary,

in your hometown. It'll be on July 8th. The sign up will be in the show notes for anyone interested. There is a $30 early bird that will be available for a few weeks and then the regular price will be $40 afterwards. If I remember correctly, it's until June 1st. So you can get your tickets there the reason why we're charging Something's just making sure we're as close as possible to breaking even for the event and I'll be there then I'll be there Dan and Nick Hale from the real estate podcast will be there and even Braden will make his way to Calgary as well and be there So it should be fun. It's right during the stampede.

Never been myself, so at least it's something I'll get to check off my bucket list. So I'm pretty excited about it, yeah. It's, yeah, something that a lot of locals kind of get tired of after a while, but as a first time, you definitely gotta, I mean, I don't go there very often anymore, but I used to all the time.

It's definitely fun. It's expensive, but fun. Yeah. Almost feels like Canada Day in Ottawa, where a lot of people are interested to do it, which is fine. There's usually on Parliament Hill some shows and you see the snowbirds. You see, it's fun for the kids. There's tons of activities, but once you've done it a few times, you're

like, okay, it's fine, but it's also a bit of a bleep show to get downtown during that time. So a lot of people in Ottawa tend to stay away from downtown, even though for a lot of people, it's something that would be pretty fun, right? The Capitol during Canada Day. Definitely the exact same situation. I try to avoid it at all costs, but I won't be this time. I'll be there and it should be fun.

Yeah, exactly. We will probably have a few beverages. So that should be fun. So yeah, so we'll start off with a little bit of macro just because there's been some really interesting figures coming up. The first one is the Canadian CPI for April 2025. Pretty not super surprising I think. For the most part it was expected came in pretty low mainly because of the consumer carbon tax that affected it. So the headline CPI was 1.7% when looking at the over-year change They did mention, like the Bank of Canada had mentioned as well, they had published something in April that they expected that the removal

of the tax would lower prices temporarily by approximately 0.7%. And that's what we're seeing here. And then we will see that also reflected in the data from essentially this month's data that just came out up until March of 2026 because it will have kind of full year effect and then the kind of base effects will have adjusted and that's when things will basically level out. So it is normal here when you're looking at the the overall CPI

it's pretty obvious I mean you have anything energy related that's significantly down for example gasoline is down 18% you over a year, but everything else is mostly up There's a few small exceptions here and there and what's really interesting and you see that People might think oh the Bank of Canada inflation is back into control until you start looking here at the core measures the core measures. The core measures are definitely, lack a better word, signs of concerns, I would say, a little bit for the Bank of Canada because you're looking at the three core measures that the

Bank of Canada looks at and it's the highest level it's been in quite some time. I mean, it's the highest level in six months. I haven't gone back to see when it was as high as this, but right now you have the CPN medium which is looking at just the the middle band of all the increases. That is up to 3.2%. It was 2.8% the previous month and has been slowly trended up over the last six months. And then the same thing for CPI trim, which removes the most volatile parts of the CPI basket. So obviously energy would be part of that and food as well. That one is 3.1% and again, same kind of trend in November,

back in November was 2.7 and it's mostly gone up ever since. So the trend is going up. So yes, the headline numbers are looking pretty good good but then when you start digging in a little bit you're starting to see okay it may just be a temporary thing like they mentioned for the consumer carbon tax and we may still have a bit of an inflation problem I'm not sure which way to think I guess we'll have to see but the core metrics definitely don't look all that great. Yeah food is is ticking back up again it was almost 4% this month I wonder if that's terror related or I don't know I didn't think a lot a ton of items were impacted but yeah close to 4% shelters calming down a

bit but yeah I mean the headline numbers and these core numbers are definitely they paint a different picture and I know, I think they were like betting 65% chance of a rate cut and after this print it fell all the way down to like 30% or something. I don't know when the next meeting is. It's got to be relatively soon. I would imagine. Yeah. I'm not sure.

I think, yeah, like I remember last year was June. Yeah. For whatever, I think it was early June. Yeah, it must be soon. I think you're right. But it's just interesting to look at because you have probably a lot of people thinking, oh, it's great. It's 1.7%. But then you're also probably still not really fully seeing the impacts of tariffs either. So that is something else that could definitely raise the risks of inflation. So it'll be very interesting to see how it trends, but probably not what a lot of people

were hoping for, at least not on the core front. Yeah. And I mean, when you look to the two main things that almost all people are hit by, food and shelter, they're still 3.8% for food and 3.4% for shelter. And I mean, shelter's gone down quite a bit bit that was getting crazy over the last few years but yeah I mean it's still pretty high for the for the areas that that tend to hit people the most. Yeah it's still notoriously lagging I listen to quite a few people are into the real estate space and a lot of them are saying that if you're sorry if you look at a bit more like kind of. are saying that if you look at a bit more real-time data, there is some downward pressure on rent. So we'll have to see.

But enough about CPI. The big news, I guess, that brought markets down at least early in the day on Monday was the news that Moody's, the rating agency, was downgrading the US debt. So it's not surprising at all because Moody's was the last major credit agency to actually downgrade the US debt from the highest rating, which their rating is triple A to double A1. It follows similar moves that were done by S&P and Fitch in 2011 and 2023 respectively. I guess it's almost like they felt left out of the party a little bit and they wanted to show exactly that,

they're on board with the other rating agencies here. But a lot of people might say, okay, like what does it matter? I invest in stocks and that's the thing. It will have a pretty big impact on companies that you might be invested in and before I get to that Moody said that the downgrade reflects the increase over more than a decade in government debt and interest payments ratios to levels that are significantly higher than similarly rated sovereigns or countries that's a synonym here we do not believe that Similarly rated sovereigns or countries, that's a synonym here. We do not believe that material multi-year reductions in mandatory spending and deficits

will result from current fiscal proposal under consideration. Basically they think Doge will not have an impact on this. That's what essentially they're saying without saying it out loud. This is exactly what they were saying. And if we remember originally Doge was saying they would save two billion dollars and that's gone down to about a hundred and fifty billion. And yes, it's not nothing, but if you look at the sheer size of the US deficit and also the interest they're paying on it, it's immaterial. Essentially, unless they want to cut

what is the big expenditures in the US like military like Medicare like Social Security they're not going to make a dent in that and from what I've seen from Trump and the Republicans it's unlikely that they would even consider that. Yeah the whole doge like started out high and then it kept coming lower and lower and lower and lower. Yeah, but yeah that's likely not gonna all have all that big of an effect. The one thing is like the market kind of shrugged this off relatively quickly. Like it's, I mean, it's crazy the amount of stuff that is going on right now and you know, the NASDAQ is...

It feels like, it does feel like the market is a bit complacent. It does feel like it. And what I'll show here, it's the US 30 year bond yield, which is at pretty much the highest level it's seen in more than six months. If you're looking instead at the 10 year, which tends to be used as a benchmark, same kind of thing. It's about the highest level or pretty close to the highest level. It wasn't six months, definitely the highest level in the last three months.

And then you're looking at the Canada five-year bond, same kind of thing, highest level in the last three months and pretty high up there in the last six months as well because Canada, even though they were not directly impacted by that, the reality is if US yields go up, it will be dragging pretty much all the other countries along with them. And the reason why I wanted to chat about it is because look, this is important if you invest in businesses that have debt, and especially businesses that have a lot of debt, and especially businesses that took on a lot of low interest debt during the pandemic and will be refinancing in the next 12 to 18 months. If the yields

remain that high on government debt which will impact corporate debt as well, I mean these companies, some companies could end up being in big trouble if they haven't managed your balance sheet properly, because they're going to have to refinance debt that they took out at very low rates at much higher rates. And that's really important. And the reason why I wanted to talk about this is just because you need to know how the debt is structured if the company you own has debt. You have to understand how it's structured and what kind of impacts it could have.

And we talked about allied property rates not too long ago. And that's a prime example to show that yes, when a company, yes, it's a REIT, it's a real estate investment trust, but when the debt gets quite high, things can start going, you know, trending pretty badly pretty quickly. Bell is another example. B.C. that we've talked about that just cut their dividend. I mean, you can easily

make a case that if they manage their debt better over the last three, four years, they either wouldn't have had to cut the dividend or wouldn't have had to cut it by as much. So you can or they could have cut it earlier. And essentially, the dividend or wouldn't have had to cut it by as much. Or they could have cut it earlier and essentially the dividend would be at higher levels now because they would have been able to reduce the debt, been able to refinance, but now they're realizing that they're going to have to refinance debt at higher rates. And I remember when I started harping on BCE, that was always one of the arguments of the bulls is like, oh, well, they'll be refinancing their debt at lower rates Because the Bank of Canada is cutting. Well doesn't always work like that. Yeah

Well, and then they downgraded their credit rating as well, which ultimately makes refinancing a bit trickier as well I mean most of these like for most of the actually I would say for all of these companies like they do have debt structure tables inside of their, usually on a quarterly basis or like an annual meeting or something, they'll have typically a debt structure and the refinancing structure as well. So this stuff isn't necessarily that hard to get a hold of either.

And it's pretty important to keep a close eye on. Yeah, usually you'll see like a note. So if you see like long-term debt, you'll oftentimes on the balance sheet, you'll see kind of a little note next to the long-term debt. So just keep reading the either like the annual statement will usually have it.

So just keep reading down and find that note. And then they'll usually give you a lot of information on the debt. And just like you mentioned how it's structured. Yeah, it'll be in like the appendix or something. They'll like kind of have a note there that you can kind of just control F and search it and find it and it's or whatever it is on a Macintosh. I have no idea but yeah, it's very important to understand these debt structures and obviously again, as you mentioned like policy rates don't really they do impact it to a certain degree but not all that much

these bond yields are more important because they're kind of the you know barometer for lending money exactly so it is it it's still pretty significant here I don't think the credit downgrade is significant itself because I don't think you know what they're saying, everyone already knew. Like if you didn't know that the US was in a precarious fiscal position, I mean, you've been living under a rock. So they kind of said the obvious, but I guess the fact that they did it just maybe reminded a lot of investors, whether it's domestic or international investors and US government

debt that, you know what maybe we have to be a bit more bearish on that debt. So anyways I thought it was important to talk about that. 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. Between meetings in Toronto and conferences in Vancouver, I'm not home as much as I'd like. So I've been thinking while I'm off enjoying someone else's Airbnb, why have I not put my own place up on Airbnb to earn a little extra income and help me pay for the trip? With Airbnb's local co-host network, I can find someone to handle everything. Bookings, guest support, even the cleaning. It's a simple way to make extra money while I'm traveling, without the hassle of hosting it all myself. If your place often sits empty while you travel, it might be time to let it work for

you. Find a co-host at airbnb.ca forward slash host. It's the small things that make us Canadian. At BMO ETFs, all of our tickers start with Z. That's right, Z not Z. From ZSP to ZEB, we know how to build solutions for the Canadian investor. So the next time you invest in ETFs, consider AZ instead. Visit bmoetfs.com for more. Now we'll, we will move on to some company earnings. So you'll go over Boyd group services.

We have a few charts to show as well while you'll, you'll be going over that. Yeah. So for those who don't know Boyd, it's an auto body and glass company. I mean, I'm sure if you've a lot of the insurers, like major insurers, I'm sure if you've ever had insurance work done in here in Canada, there's a good chance that somebody like Boyd has done it. It is a Canadian listed stock, but as you'll show from the chart here,

it's pretty much a US pure play. I mean, it's like 90, 91% of its operations are in the United States. So it operates in Canada under Boyd and then in the United States, it operates under Gerber, Autobody and Glass. And I think they bought Gerber like a very long time ago. It would have been like 20 plus years ago.

So they are the largest auto body company in North America, but they only have a single digit market share on actual auto body activity in North America. So it's a very fragmented market. And effectively, what they look to do is acquire mom and pop mechanical shops at discounted rates. Then they kind of slap their brand on it to get more customers in and put a bit more operational efficiencies in to boost margins. So they get these mechanical shops, these unbranded smaller mechanical shops for discounts

and kind of turn them around. And it has been a business model that has worked very, very well up until recently because the company has a few headwinds that I'll mention a bit later. And this is one I do own and one I've kind of been buying over the last few years here just in the event of a turnaround, I think will happen. But when we look to the results, so year over year revenue is down 1% while same store sales declined by 1.2%. And if we look to same store sales, we can see that there was a monumental increase in 2021, 2022. And for the most part, this was in part due to just a decline in overall activity in 2020 when everybody was locked down.

Obviously, this company relies heavily on people getting in accidents, really. I mean, that's the reality of it because the bulk of their revenue comes from insurance companies. So insurance claims when you get into an accident, things like that. So it had huge same store sales growth

through 2021 and 2022. And partially that is because of used automobile prices too. So this forced more insurers to repair vehicles versus write them off. Like if you get in an accident and the cost of repair is more than the vehicle, they'll just salvage the vehicle, give you a payout, things like that. Ultimately, Boyd doesn't make any money actually when that happens. They need repairs in order to to drive activity and right now they're seeing a bit of a slowdown in that but the

interesting thing here is gross margins actually expanded by 1.4 percent to sit at 46.2 percent I mean when you consider the decline in sales and just the overall difficulties it's going through right now the fact they increase margins margins is a pretty interesting situation. And the other thing that's important to note is although same store sales have declined 1.2%, industry data kind of shows that same store sales across the industry are dipping by 9 to 10%. So what I take from this is Boyd is just grabbing more market share in an industry that is facing a little bit of heat. And they added 58 locations on the year thus far.

And it does expect to add anywhere from 80 to 100 in 2025. So you can tell there the acquisition based strategy of the company. I mean, they do build new locations, but they also acquire a lot of old ones. And in regards to tariffs, they view tariffs as a neutral at worst situation. They actually believe it will benefit them and it does make sense. I mean, this is an auto body company that relies heavily on insurance companies. So when the price of used vehicles increased during the pandemic,

like I had mentioned, insurers had a lot more repairable claims. And now, you know, we're seeing used automobile prices fall quite a bit, I think. More vehicles are being written off versus repaired, which is ultimately the headwind that they're running into right now. And in addition to this, because of... Do you think that's going to switch? That's going to in addition to this, because of- You think that's gonna switch? That's gonna flip a little bit because if we're seeing tariffs going on,

yeah, and making new cars more expensive. Yeah. So if you get tariffs raising new automobile prices, ultimately people are gonna head to that used market. The more demand for used automobiles, ultimately they hire repairable claims they could get. And I do think like the pandemic probably brought in a bunch of growth, pulled in a bunch of growth,

and eventually this will normalize, it's just going through a bit of difficulty right now. But the other interesting thing here is from a consumer perspective, many people, obviously the price of insurance is getting pretty crazy. So what people are doing is because you have to have insurance, they're raising their deductibles. So they're jacking their deductibles as high as it will go in order to get premiums down. And as a result,

it's not worth it to repair. If you have a repair on a $250 deductible, that's a big difference between having a repair on a $1,000 or $1,500 deductible. You're just not going to do a lot of those repairs because they mentioned that liability claims are only down 2% or 3%. So people are still getting in accidents. It's just there's fewer repairs happening and it's that kind of that double combo of consumers just not repairing things and insurers writing off more vehicles. And yeah, as we mentioned, I mean, tariffs, if they do push new vehicle prices

higher, that should push used vehicles higher and ultimately make for more repairable claims. They're definitely playing the long game here, I would say. Like they're continuing to make acquisitions in a pretty tough environment, which should benefit them over the long term. I mean, there's going to be no doubt there's going to be pressure over the short term. I mean, I hold this long term hold for me overall. I mean, the companies reiterate that their guidance, so $5 billion in revenue and $700 million in EBITDA by 2029.

So this would be a mid-teens growth rate, compound annual growth rate on EBITDA. And I can't imagine if they don't end up hitting those targets. They wouldn't put up some, some pretty strong returns, but it's a pretty interesting company to kind of get a gauge on, you know, the, the, the automobile market overall. I mean, 2021, 2022 was crazy. And then we seen used automobiles kind of plummet in price. And it's going to be interesting to see what they do moving

forward with potential tariffs. My main takeaway from this is that they are the biggest under the radar benefactor from the rise of smartphones and distracted driving. Yeah. Oh yeah. Yeah. I mean, ultimately that is the core thing here. More accidents, more money.

Yeah. It'd be interesting to see like if there's like a study that shows a correlation between accidents and the rise of smartphones. I'm sure there'd be a strong correlation. Yeah. But no, it's an interesting play. I'm always fascinated hearing you talk about it because it's a bit under the radar name, but definitely an interesting one. Well, yeah. And like before the pandemic, I mean, this was, I mean, it traded at, you look back to 2000, it was $2 a share and then leading up to the pandemic, $250 a share.

So I mean, it's been a very good compounder that's going through a lot of difficulties right now. I mean, I know it had some massive labor issues and back during COVID, like the supply chains, like they could not get parts. It was just a mess. Like there was so much demand, they literally did not have enough staffing to satisfy the demand. And then in addition to that, I mean, we all know what the supply chains were like back during COVID. They couldn't get parts. It was kind of a gong show. So it's gone through a bit of difficulties, but one I'm gonna continue to hold and probably continue buying. Okay, no, that's good. So let's move on here to Canadian Tire. They reported a few weeks ago, but as we mentioned earnings are slowing down a little bit. So we'll probably be bringing up some names that we just didn't have time to cover when earnings were, when every company

was basically reporting because we just have a limited amount of time during our episodes. So the first one here while Canadian Tire like I said comparable sales were up 4.7%. Retail revenue was up 4% specifically so Canadian Tire was up 2.7%. Retail revenue was up 4% specifically, so Canadian Tire was up 2.9%. Sport Check up 6.3% and Mark's up 3.4%. So definitely an improvement. Canadian Tire, for those who were not aware, had been struggling for almost a couple years now for sales that were either down or flat. now for sales that were either down or flat. So yes it is from a smaller base than compared to a couple years ago but still some encouraging numbers. Net income was down 40% in large part because of costs relating to their true North transformation that they announced in March. The new strategy is

the reason also why Canadian Tire also agreed to sell Helly Hansen to Contour Brands for $1.28 billion back in February. The transaction is expected to close in the second quarter of 2025. Were you aware of that Dan? No, I was kind of looking up the price. I was looking up the price that they paid for Helly Hansen. They bought it for $9.85. They paid a bit less than, yeah, yeah, exactly. A bit less than $1 billion. I did the same back in 2018. So, yeah, so not too bad from them. I'm sure they reap some profits out of it too. If you just say, if you forget about the purchase and the sell price, I'm sure it contributed to their earnings. So not a bad thing.

And if you've been listening through the podcast or the podcast for a while, you also know that Canadian Tire, one thing that I'm always fascinated about is the credit card business. So their financial arm, because that's where you really see where there could be a little bit of trouble for

the Canadian consumer. Of course, it's also the reason why when you go to Canadian Tire, they try to get you to sign up for Credit Card a whole lot of the time. I am very good at not engaging at all and shutting them down. I don't know about you, but I'm pretty good at that. I don't go to Canadian Tire all that much. When I have gone in there, I haven't been bummed. I think like one time and maybe they were gonna like

throw in a free towel or something if I grabbed a credit card, but. Oh really? Yeah, that's a hell of a deal right there. It's a hell of a deal, yes. But it's still interesting to look at it because I think the credit card, especially when you start looking at the balances

and also what's being written off. It's a good indication of how the consumer is doing because they will use that credit card. It's a MasterCard branded credit card so they can use it wherever. It's not just for Canadian Tire. Of course you'll get rewards I think in the form of triangle points, triangle rewards, but I think it still gives a good indication. And when I posted about this and the write-off rates being quite high, a lot of people, I got someone who said, oh, they're much higher than in the US. Well, you have to be careful with credit card write-off rates because it really depends

the type of consumer that the issuer is targeting. And the issuer, I'm not talking about MasterCard or Visa, I'm really talking about the financial institution. So whether it's a TD Bank, Royal Bank, whatever it is, bank or Canadian Tire in this case, they will likely have a different mix of consumers. So it's possible that a Royal Bank will have a much lower write-off rate than a Canadian Tire. And you see that in the US, right? JP Morgan will likely have a much lower write-off rate than a Canadian Tire and you see that in the US, right? JP Morgan will likely have a much lower write-off rate than another large bank or a smaller US bank. So you have to keep that in mind, but still you're comparing them with themselves here and it's not looking great. So the number for write-off rate was 4% back in Q1 of 2022,

right before the Bank of Canada started the hiking rate. So just to give context here, and it's now standing at 7.1%. So not quite a double, but that's a pretty significant increase. Yeah. Yeah, I was trying to find like Royal Bank's write-off rate, but I can't actually. Just in their simple report, I couldn't find it but yeah I would imagine it's lower than I would actually I would guarantee that it's lower than 7.1% especially like the the escalation here I mean the one thing is is we've seen a lot of the banks scale back actually I don't know if they're scaling back on credit card lending all that no I don't I don't think so I remember was it CIBC, they were actually like,

if I could be wrong, I think it was either Scotiabank or CIBC and they were actually like focusing more on the credit card business. Yeah, I mean the interest rates are so high. It's, yeah, I was gonna say a lot of these lenders are scaling back like we saw with GoEasy and the big banks but I don't know if they're scaling back all that much on credit cards. But yeah, 7.1% write off rate is not, it's not the best, especially as it continued. Like I'm, we've covered Canadian

Tire pretty much since I started on the podcast and this is pretty much ticked up every quarter that we've covered it. Yeah. And it's not just the written off rate. So, the written off rate for those who are just wondering, essentially, you look at what's being written off net of what's being recovered. So, that's the write off rate. So, that is the amount of money that they, you know, like in the aggregate, their credit card holders have and that's a percentage that would be written off and the past due credit card receivable rate went from 2.4% to 3.7% during that same time frame and that measure looks at the amount that are 30

plus days past due compared to the total credit card receivable and what this means is there's a larger proportion of those credit card balances that are laid on payment. So it's not something you want to see either. The increases in delinquencies were offset by higher revenues for their financial arm. They did not have to add any additional provisions for credit losses on the call. They said they were not concerned with the numbers so far, but they're keeping a close eye on it, specifically when it comes to unemployment. And they said they do have plans in place should things get worse

So I think they kind of expected it to be this high so they weren't concerned about it They also had a few other interesting comments on the call They said the current retail environment remains uncertain But the consumer as remained resilient across income spectrum and areas of the country most impacted by tariffs, which was a little bit surprising here. They have seen a slight shift in consumer spend towards Canadian made items, so not surprising as well. They also have not seen too much impact yet from tariffs and have put some plans in place to mitigate the impact, like alternate sourcing

and renegotiating with suppliers. They said essential items growth was very strong at 8% while non-essentials was slightly up. So you're still seeing people really focusing on what they need, not what they want. And overall, I'd say they were cautiously optimistic on the call, but they are keeping a close eye, like I said, on tariffs and unemployment. Yeah, it was kind of similar results. I didn't add it to the notes, but for Home Depot, a lot of the same thing, like staple

items are kind of continuing to stay steady where discretionary stuff people are holding off a lot. They bought Hudson Bay as well. Yeah, they did buy it. it was not too long ago. They bought the brand. Yeah, I don't know what they plan to do with it. But I'm not sure. I think they the agreement came after the earnings release. So I think so they didn't mention anything on the call. So I'm pretty sure it came after I think that came came out maybe last week. That was May 15. Yes so not very long ago.

Yeah, yeah, so the call was a week before that. So that makes sense. Yeah, the Hudson Bay brand, they bought that. It'll be interesting what they do with it. I'm not quite sure. I'm sure they'll provide more information on their next call on what they plan on doing with the Hudson Bay's brand.

Yeah, I think they just bought the brand. I've noticed here the article says they bought the intellectual property which includes the HBC stripes and other brand labels to Canadian Tire for 30 million and then it says as part of its effort to pay back one billion dollars to its creditors. So that's a pretty small chunk but yeah. Not surprising the Hudson Bay on because it's it always felt to me like a slightly nicer Sears Yeah And then Sears went out of business and then it was almost like the next one to go

Eventually would be like the Bay like it just it just felt the same than it was when I would go shopping with my parents When I was like 10 years old like it felt like it hadn't changed at all So at that point right like you you're probably not hitting the mark all that well I'm surprised that made it as long as it did. I mean, it's so expensive in there. I don't think yeah One good contrast and I don't know because they're private company, but I think there is one in Calgary like Simon's All the store. No Yeah, so it's I think it it's a Quebecgary like Simon's. Oh, I don't know. Yeah, so I think it's a Quebec based company.

It's also a kind of one of those big stores. What do you call them again? Those- Department stores? Department stores. Yeah, it's kind of a department store, although more focused on clothing, I would say, but they have an in-house brand that's like pretty good value

and their stores are much nicer and you can tell that they've invested in the store and the experience. I don't know how well they're doing maybe they're not doing all that great because obviously it's private but that to me is the contrast and it's a good example of what the base should have done and they did not do. I'm sure there's gonna be a lot of listeners that are familiar with Simon's. It's they have a big store in Montreal and I don't know if they have one in Toronto either. They

have one in Ottawa here at Rideau Center. So that is a good example of probably a better way to do it if I had to say. But having said that I think we talked enough about Canadian Tire. Any final words before you go to the last name on the slate here? No, let's get into it. As an investor, I'm always looking to reduce my fees, which is why I'm excited that Quest Trade now offers $0 commissions on stocks and ETFs. But Quest Trade isn't just about commission-free trading. You can also get USD accounts, so I avoid forced currency conversion fees

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From ZSP to ZEB, we know how to build solutions for the Canadian investor. So the next time you invest in ETFs, consider AZ instead. Visit BMOETFets.com for more. It's SouthPo. Yeah. So SouthPo is that spin-off that TC Energy did. I believe it was last year, or it might've been in late 2023. I'm not a hundred percent sure, but it does own some smaller networks, but the bulk of the exposure, if own Southpaw is going to be to the Keystone Which effectively transports crude from Canada to to US refineries They reported some pretty soft earnings on Friday and it did end up taking a bit of a dip

It was doing quite well post spin-off, especially when you consider the fact that this is post-spinoff especially when you consider the fact that this is pretty much a dividend play just judging by the overall growth and the overall dividend that they do pay out but revenue fell by 8.5% EBITDA by 10.1% and distributable cash flow fell by 14.7% the company pays out around 416 million US dollars a year in dividends. I'm just going off the 50 cent US dollar distribution at issues every quarter. I mean these numbers might fluctuate a bit here and distributable cash flow came in at 151 million US dollars on the quarter. So I mean you run that out you're looking at around 600 million over the course of the year. So despite the soft results, it does seem like the distribution is is pretty well covered. But again, like I don't really know and I didn't dig into how they define their distributable cash flows. Obviously, this is not an actual accounting number.

They I'm pretty sure every pipeline does this a little bit differently, calculates it a little bit differently. Enbridge, TC Energy, Kiara, Gibson, things like that. They'll all have... They're generally the same, but they do have a little bit of intricacies between these calculations. So it's pretty important that you actually check that, but it seems like it's well covered. Their net debt was reduced by 2%, but because EBITDA fell by over 10%, its leverage ratio actually did increase year over year to sit at 4.6x.

So this is a 9.5% bump year over year. And this is a pretty high leverage ratio, but I mean, it's pretty typical with pipelines. Very capital intensive industry. They usually carry a lot of debt on the balance sheet. Just to give you an idea of another company, Capital Intensive Company, would be Bell. They had, I believe, a 3.7x leverage ratio, which would just be their EBITDA relative to their debt. And they did state that the results were primarily due to lower demand from uncommitted pipeline capacity and overall tariff uncertainty. So the Keystone system operating factor came in at 98%. So the system operating factor takes the, I

believe it takes the potential operating hours of the pipeline and it divides it by the scheduled hours. So a 98% ratio pretty much says that, you know, when this pipeline could transport oil, it was outside of a very small percentage of the time. time and you know I'm not sure if they factor in things like maintenance or shutdowns into that but I would imagine that that could be why you see that two percent so it's it's going at effectively full capacity and at this point 94 percent of the pipeline's capacity is committed and under long term contracts so this does you know make it so that only 6% is exposed to overall spot volumes like commodity pricing,

volatility, things like that. And they tighten up their guidance a bit with EBITDA expected to come in at around a billion dollars. So the thing they did modify, they have an upside and a downside scenario. So on the upside, it expects a 2% decline in EBITDA. Previously this was 3%. Sorry, that would, yeah on the downside it expects a 2% decline in EBITDA. Previously this was 3% and on the upside they kind of trimmed it back a bit. They said they could go 3% over and above this guidance. They now expect 1%. I mean I would imagine that's just the difficulty

of the oil and gas environment right now pricing-wise. And I mean, the committed capacity definitely helps a company like this. And in general, it kind of helps pipelines smooth out the commodity volatility. And I mean, the company is yielding north of 8% with a distributable cash flow ratio in the 66% range payout ratio.

So I mean, this seems pretty attractive from an income perspective. I would imagine this is a company that's probably going to provide that 8% dividend and not much more than that. I haven't really followed it much post-spin out and I am far from an expert on oil and gas companies or pipelines, but it seems like it's in a pretty reasonable position despite a pretty rough oil and gas market. Yeah Yeah, and what I was showing here was I mean, it's not Distributable DCF but it's free cash flow. So you know a more common metric and even based on free cash flow which oftentimes

Dividend is not covered by free cash flow for these kind of companies. It's covered by their DCF So it is covered in this situation where in the last 12 months, they generated about 400 million free cash flow and paid out 225 million in common and preferred dividend. I just picked both. I'm not sure if they have both, but I always pick both to make sure I factor that in. So it seems to be like they, they have a pretty sustainable dividend, especially when you consider the business, a lot of it is not impacted too much

by the price of the commodities. Yeah, I mean, it's a pretty interesting spin out. I don't really think it would be one that I would own, but I could see the attractiveness for people who want to own this company for the 8% dividend on a pipeline, the bulk of its operations being the Keystone on a pipeline that's 94% committed. They're going to have that, I believe even if oil doesn't flow, they're still getting paid for that space. So that's one of the reliability in terms of pipelines.

But yeah, they spun it out, I think, to isolate out that segment of the business. And I think they more so TC, more so focuses on natural gas, things like that. But I might be wrong on that again. Like, again, I'm not really an expert on pipelines whatsoever. But this has been one that I've followed a bit because I get a lot of questions on it. It seems like it's in a pretty reasonable position. I just I don't know, this is just my prediction. I don't think it's ever going to provide much more than that 8%, but I mean, that's a fairly solid return anyway, just from that dividend.

Yeah. And it's not like they probably did not want to, or maybe wanted to just separate the whole Keystone thing, because obviously it's been a pretty contentious, I think it's the expansion, right? It's been a pretty contentious project. The XL. Yeah, the XL, that's right. So, I was looking for the letters. So, Keystone XL, maybe they just wanted to say, you know what, like, we'll get that separated and, you know, from the main company that could have been part of the thought process too. Yeah, and I think the XL is pretty much done. It's done, but I think Trump said that he'd want to revisit that.

So we'll see, I guess. These are large projects too, so when you have a government that's elected for four years, I don't know. It's kind of hard to approve these projects, get it underway before the next government if there's a change of government, and then you never know what they're gonna do, right? So, it makes it a bit difficult, yeah. From TC's perspective, if you look at even,

not talking about the Keystone, but even if you look at it, everybody says a candidate needs more pipelines. I mean, I don't know a company that would ever wanna take something like that on mostly because you just never know. Like this keystone, even if they wanted to revive it, I don't even think TC energy would want to touch it. I don't know.

There's so much uncertainty. Why would you want to invest billions when the regulatory environment could change on a dime? And I think that's been an issue with a lot of the contentious investments that we've seen over the last decade is depending on who is in power. It's not just in Canada, right? Like you can look at Europe too, you can look at the US. One administration might be more in favor of this, one other administration might not be. Like we saw in Canada, right? The Trudeau government was handing might not be like we saw in Canada, right? The Trudeau government was handing cash hand over FIS or grants or tax break to like anything

EV related, even if the companies had very little to no track record. And then, you know, if we get a different government after this minority government, maybe there's less of a push there, maybe the Carney government is going to be very different there. But it just goes to show that that's an example. And then you can use oil and pipelines as the other example, the other side around where one government will be more friendly versus another,

but it just makes it very difficult for these businesses to commit to long-term projects when they're like, okay, it's okay now, but we don't know what's gonna happen if you lose power. Yeah, and I mean, we even had that, what was it, Honda, who was supposed to build that big facility in Ontario, and they just, they delayed it, so I mean.

Yeah, pretty much, yeah. This was probably a low point for the Alberta government, but they dumped a bunch of money into the Keystone too. I think like billions, and then it just got cancelled. Yeah. Yeah. Yeah. I don't know. I'm not aware of that but I'll take your word for it. So, before we finish because we are done with our segments, have you seen what's been happening, Dan? No. Tell me. I think you'll be happy because you do have some exposure. But Bitcoin just hit a new all-time high. Yeah.

So for those who hope that. Oh, it's a new all-time high. Yeah, and USD. Yeah, it hit, I think it just exceeded it by a few hundred dollars. But yeah, so a lot of people are looking at 110k now as a possible one. But I think it was just right around 109 so we'll see I

mean it's hard to say what exactly is driving that right now long term I think it's at the end of the day it's just governments that will just be spending fiscal spending and then they'll force central banks to start monetizing the the the deficit I think it's as simple as that monetizing, I mean the deficit, but also obviously the debt, if there's not enough demand for that. And if they start doing that, then you're expanding the money supply.

So I think it's gonna be good long-term for assets, a short-term and it may be bumpy still. And at the end of the day, Bitcoin is largely not unaffected, but they don't have earnings, right? So they're not affected by like a business would be by the threat of tariffs, for example. And I think as you're seeing more and more polarization, more and more multipolar world when it comes to the superpowers, the US, China, and then possibly Europe as

another one. I think there's gonna be more and more demand for kind of a neutral asset like a Bitcoin or gold. That's just my opinion long term. I could be very wrong but if you look at the trajectory of fiat money over the years debasement is inevitable. I mean just look at our Canadian dollar, look at the US dollar. I mean we're not that old so you can think back at when we were kids the stuff that we could get for a dollar or two nowadays is probably five bucks right? So it is when you look at long enough periods of time I don't know what the exact number is but if you go back like 50, 60, 70 years you're probably looking at a dollar whether it's Canadian or us dollar

That's worth probably around 95 to 98 percent less than it was back then. I can't hear then so I think it's It's a good spot to actually finish the episode because Dan is talking away. I can't hear anything I see his screen flashing, but I think we'll call it at that. He'll probably give his thoughts on the next episode once the technical issues are done. But we appreciate the support for everyone. I really appreciate it if you haven't done it. If you can give us a review on Apple Podcasts, Spotify. It's always very appreciated. It helps other people find us. And we will see you again next Monday.