The Canadian Investor - What the BoC’s Rate Cut Says About the Canadian Economy

Episode Date: September 18, 2025

In this episode of the Canadian Investor Podcast, we break down Canada’s latest inflation read and the Bank of Canada’s rate cut, framing what “sticky core” means for investors. We then turn to earnings and look at Adobe’s AI narrative vs. a maturing growth profile, Affirm’s BNPL momentum alongside credit risk, and Dollar Tree’s value push contrasted with Dollarama’s margin machine.  Tickers of stocks discussed: ADBE, AFRM, DLTR, GSY.TO Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Welcome back to the Canadian Investor Podcast. I'm here with Dan. Can't we are back for some news and earnings here. So pretty slow on the earnings from, but thankfully we got some macro news that is helping us out and giving us some more to talk about this week. Yeah, definitely. I mean, inflation, I thought it was a decent print. You seem to think a little bit different. I'm sure we'll discuss that. But obviously, the Bank of Canada did too as they followed through with a rate cut. I mean, the difficulty here is the economy is so weak that even if inflation came in higher. I think they still would have cut anyway. They're in a pretty tough, tough position right now. Which is funny because officially their mandate is not like the Fed, right? Officially their

mandate is price stability. But it's funny how they tend to forget that a little bit. And I'll mention with a bit more of detail why I think it wasn't that great. I think in their interest rate announcement, which breaking news, it just happened like literally 30 minutes ago at 9.45 a.m. So we're recording this just a bit after 10. So we will be talking about that. But I think they stretched it a little bit, to be honest. Obviously, the economy is slowing down. That's totally fair.

But when your mandate is price stability, not quite sure I fully agree with that, especially given that a lot of the lower inflation print is because of low energy prices. And when you start looking at core inflation, it's quite sticky to say the least. Yeah, what was that? I think it was 2.5%. So I don't know if maybe the target is being more so moved towards that two and a half, three percent mark versus, you know. Oh, it's actually higher than that. So I'll just share my screen here for joining TCI. Yeah, subscribers. So you'll see that it's actually higher than that. So if you look at the core inflation. So we'll start with CPI data. So the core inflation for those not familiar, it's just the metrics that the Bank of Canada tends to focus a bit more. There's CPI.

CPI common, CPI medium, CPI trim, CPI common. I'll be honest, always kind of been a little bit of confused with that one. And I've learned, I've listened to a lot of people that are smart about this stuff and most of them are also about it. So it's not just me. That's good to hear the CPI medium. Just think about it that if you have a whole bunch of different categories and item, you just pick the middle one, not the average, the middle value and what that value is. So there's as, many items or basket items that are below that and as many above in terms of the inflation rate. So that one came in at 3.1%. It's been very sticky. Actually, it's been back in March, it was 2.8. And then it's been essentially at 3 or 3.1 ever since. And then if you look at CPI trim, that one removes the most volatile items, including typically food and energy. And that one is at three. And granted, it was 3.1 in July, but three is still not great. And that is the reason why I think it's actually not that great of a print if you look at that because you can just use the energy component and say, okay, the headline inflation came in at 1.9%. But if you start

looking at energy, I mean, energy is playing a big part of keeping that low right now. Energy being down, I believe it was down 8.3% and yeah, gasoline down 12.7%. So it just goes to show that yes, there's some, it's definitely a mixed report in my opinion and the fact that they decided to cut rates and disregarding almost or saying that it's looking not too bad for the core is a bit worrying because they're probably thinking that the economy is way worse than they originally thought. And if they were actually price stability, I think they would probably have waited a bit longer to decide to cut. But that's my two cents here.

Yeah, I mean, what is what is unemployment at? It's at least it's ticked over 7% I think. Yeah. Job losses. I mean, yeah, what 1.6% decline annualized decline in the economy. So I don't know. This would be a very tough job to navigate right now. I mean, obviously, as you mentioned, like, energy is going to be definitely the most volatile.

There's not a lot of, I guess, short-term bullishness on energy. I mean, if the economy gets that week, I can't imagine we see oil, you know, going up recently. But as we had talked about this before we started recording, like over the next, you know, three, four, five years, maybe a bit more bullish. But I don't know. I kind of think they had to cut. I don't think they could have held steady just because of how poor the economy is. It's going to be interesting because I have a mortgage renewal coming up in the next few months, whether or not this kind of pulls down bond yields, it's going to be interesting.

Yeah, I mean, you know, and variable may make sense if you're looking to kind of take a bit more of a risky approach over the next couple years, you will have to see. But just a few more points here on CPI, food prices were up 3.4% year over a year, but flat compared to July. Meat prices were actually up 7.2% following a 4.7 increase in July. So if, If you're a vegetarian, congratulations. You probably had been filled the increase all that much. That makes me want to switch over just for a financial reason at times. Friends, fresh fruit saw a decline of 1.1% after a 3.9% increase in July.

And obviously, the 3.9 increase in July was year over a year. The biggest reason, again, it's energy that it was down. Now, services, which have been still pretty sticky, they were up 2.8% year over year. and shelter remain pretty elevated at 2.6%. Although you can definitely make the case, especially if you start looking at rents in real time. And I know Dan Foch from the Canadian real estate investor podcast is pretty vocal on that. And I think the guys from the Looney hours, Steve Sureska as well, has been pretty vocal,

where you're really seeing rents decline in a lot of metro areas across Canada. So whether that number is actually a little bit inflated, I'm not sure, but you can definitely make the case. And of course, rent is not the only thing. There's, like, owner's equivalent rent and all these other things that come into it. But I wanted to mention that. And a quick note, I wanted to mention, which, for those not familiar, when you get on the CPI side, you'll actually get, like, a full kind of overview of, you know,

the biggest movers. They give you, like, a little bit of summary. And they had a section here. I'll try to show it. Travel tours push down the cost of travel services. Like, really? Like, who cares really? Like, this is just to me an example of the CPI basket not reflecting what your personal consumption is.

Because if you're a Canadian that's struggling to make ends meet, what do you care that travel tours have gone down? You do not care whatsoever because all your money is probably going to food and lodging. And, I mean, I think we're in a good situation financially. I think you are as well. And, I mean, I couldn't care less that travel tours pushed down this, like, essentially, I mean, unless you're into travel industry, like, it doesn't really matter. And I think this is one of the biggest issues with the official CPI metric is they try to incorporate all these things and you have this headline number. But the reality is that it probably really doesn't reflect your own personal consumption. And sometimes I would hope that they would make almost like three basket.

Like one for low-income Canadians, what kind of inflation they're seeing. One for maybe middle-income Canadians and one for a higher-income Canadians. Because then the higher income, they'll have more discretionary spending that would be incorporated with that. I know it would be a lot of work, but I think that would actually reflect much better the reality for people than just this one. number and telling us that travel tours push down the cost of travel services. Yeah, I don't know, I don't know how you have like on your headline page. Like you have all sorts of things that you can talk about that impact like the vast majority. Because there's nothing on this main page that talks about rent or mortgages or nothing.

Like on the made headline page, but they talk about travel tours. So yeah, it's it's kind of strange because they love saying that cell phone prices are down. Yeah. Or, uh, you know, going down. So that is one thing. Again, sometimes I think a little bit that there's a bit of a political angle to all of this because if you think about the last 10, 15 years, the federal government has been very kind of out in the open saying that Canadians were paying too much for their cell phone services. So maybe that's a way for them to show that.

But anyways, we have a decent amount to talk about. So I won't go too long here. We'll go to the Bank of Canada announcements. So like we talked earlier, so the Bank of Canada lowered its overnight policy rate from 2.75% to 2.5%. It's important to know that this is a variable rate. I didn't check the Canada five year to see how it reacted to the announcement. Probably not all that much because it was likely baked in, I would think. Yeah, I'm trying to look it up.

It's flat. Yeah, it hasn't moved much. Probably. Yeah, I would think it was probably baked in. And of course, the press conference I think is about to start any time now. So we haven't had the chance to look at that. But they always release kind of a statement just to explain what happens. So they said the cut reflects a weaker economy and reduce upside risk to inflation. Global growth is slowing after showing some resilience in the face of U.S. tariffs. In the U.S., business investment is wrong, but consumer spending and job growth are both slowing. That's a bit of an understatement with the kind of numbers we saw in the big revisions, but, of course, they don't want to throw them under the bus either. In Canada, GDP fell 1.5% in Q2, something we talked about, mainly to tariffs and train uncertainty. And they said that exports fell 27%. That's because businesses actually front-loaded a lot of shipments before tariffs would take effect. The business investment side also declined in Canada while consumption and housing.

grew at a healthy pace. That's, yeah, that one is a bit of a head scratcher. Maybe the lagging data they're looking at, but I think we're probably going to see more and more people cutting back, especially if you're seeing unemployment rise. Employment has weakened in recent months, especially in trade sensitive sectors. Core inflation, war around 3%, but upward momentum as ease. That can quickly change. I would say, yeah, it's, it's kind of,

stable at 3%, which, let's be honest, that's pretty much at the top end of the target and verging on being over their target. They said underlying inflation is estimated at 2.5%. What the hell that means? I'm not quite sure. Federal removal of retaliatory tariffs should reduce future price pressures. The recuts are intended to balance their risk between a weaker economy and making sure inflation is still under control, which again, their main concern should be price stability, something that we've talked about in the past where it may be the official mandate, but let's be honest, like the economy is definitely, it may be the official, but in reality, it's economy and inflation. It's not inflation. People may, can debate me all day one, but I think we can see it

in this announcement where if you start looking at core inflation like we just talked about, it's hard to make an argument to not wait. If that's the only thing you're looking at, it's really hard to make an argument that they should not have waited at least an extra meeting to make that cut. But once you start factoring all this other stuff that they're talking about, then of course, the cut is probably warranted. Yeah, I mean, if their objective is stability, they've definitely had stability. It's just kind of on the higher end of, you know, what they've historically targeted that stability at. But yeah, it's stable, but it's like, you know, high. Yeah, exactly.

So, I mean, to wrap it up, like, longer term, I think it's going to be very hard for central banks, Bank of Canada included. Like, if you're thinking two, three, like probably three, four, five plus years down the line, I wouldn't be surprised that inflation remains really sticky or even higher. And, you know, surprisingly at some point, they come up with a new target inflation rate. And instead of being 2%, now it's 3 or 4%. It may not sound like a lot, but it does pretty quickly diminish the, purchasing power that you would have and kind of reinforces the reason why you invest because if you just keep your money in cash and of course it's good to have some cash and you try to find places like EQBank that will give you a decent interest at least compared to competitors

by the end of the day if you keep too much cash you're just going to get eaten alive and you need to invest in assets long term to be able to keep that purchasing power it's so tricky because You don't want too much in cash because then you get eaten by inflation, but you also want to have some because if you have some short-term expenses, because if you put too much in assets, then a big correction and you need that cash, then you're kind of screwed. So it's always, it's really that delicate balance for investors. And if you're thinking it's not easy, it is not easy. Like even professional, really top professional money managers, like they struggle with that too. I mean, even if you, if you do get to that three to four percent inflation target, like the people, it really hits hard are the lower income people who just don't have the money to invest in assets. Like they're pretty much living day to day with prices increasing three to four percent a year and they're really not, you know, purchasing power like they're just trying to survive. So three to four percent inflation for for that segment of the economy is just, it's killer over the long term. Yeah, exactly. We've talked about it before, so I think that's, you know, that's a good way to end it here.

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So go ahead, Blossom Social in the App Store, and I'll see you there. So let's move on. We do have some earnings, some that more recent, some that we've been meaning to do in the last couple weeks. And now is a good time because it is slowing down on the earnings front. So let's talk about Adobe. When was their earnings release? I think it was like last week or? Yeah, it was last week.

Yeah. And this is pretty popular stock just because it's down so much off of, well, I guess you could say 2021 highs, but then also like 2024 highs. just kind of with AI coming out and a lot of potential disruption, I want to say, for a company like Adobe, like it's really not showing all of that right now, but it's showing that it's slowing down a bit, which is kind of why I think it's facing some pressure. But it did post a pretty good quarter revenue increase by 11% earnings per share by 14%. So digital media revenue, which would kind of be things like,

I mean, probably what a lot of people associate with Adobe, like Photoshop, Premier Pro, etc that increased by 13% while digital experiences which would kind of be more along the lines of products used to you know help market or improve a platform like let's say web data like analytical data you know split testing data or marketing to segment particular customers apart so that increased by 9% and I don't know they report they report their AI segments a little bit you know weird I'm sure people who follow this company a lot would know why they do this, but they do AI influenced annual recurring revenue. So that now exceeds $5 billion, which is up from $3.5 billion last year.

And what I take from this is it effectively tracks their annual recurring revenue on all tools that utilize AI. So I mean, this kind of just kind of looks like a headline number. So I believe like what they would put in that basket. I don't know if you know about this, but like say Premiere Pro, which would be a, platform that, you know, existed for a long time that did not necessarily utilize AI, but now they've added AI functionality into there. So they kind of tack that into their annual recurring revenue. And the reason I say this is they have a separate segment, which is called AI first, which is solely AI products and not kind of, you know, add on to their main systems. That only sits

at around 250 million. So I mean, again, I don't, I don't really know this could be, could be different. I'm sure a lot of people on this podcast follow Adobe. I could be completely wrong here, but it's, it kind of seems like a way to kind of, you know, pump up that AI number. I don't know. That would be my, my impression. Yeah, like companies are not stupid when there's a lot of hype about something. They, they try to leverage it. Like, it's to their advantage to make the stock fries go up, right? So, um, yeah. Which I mean, like, it, it does make sense in a way, because if you're adding AI, functionality to say Premiere Pro, and it's creating, you know, stickier customer base because of

that. I mean, I could definitely see the logic there. I mean, I use Premiere Pro. I have not used a single AI application that they have. We use like an add-on for something like that. But yeah, anyway, their Firefly, which is kind of their standalone AI application, is growing pretty fast. So there is some progress there for sure. I think a lot of criticism over the last while has been kind of monetization of that digital media annual recurring revenue is still growing at a pretty healthy clip but i think uh i think the difficulty here is that it is slowing so i don't know if you can pull up that yeah there this is kind of the combined arr and i know like you can look it's grown what is the compound annual growth rate i mean obviously if we go back to

for that digital media yeah if you're looking we can put go to 2020 probably or like I'd say 2019. Yeah. So you can see it was, it was growing at about a 15% annual clip. And if you fast forward, I know to like 2023, 2024, it has slowed down to only around, I think it's around 11% or something like that. Yeah, that's 2022. So yeah, I think the situation here is it's slowing.

Like we have a near 15% compound annual return and now it's down to 15 or 11.5%. So I think there is a slowdown here in related. to that. And the company mentioned that AI usage is tied to higher retention rates at the enterprise level, but they did mention that it's still a bit unknown as to whether or not they'll be able to scale it to smaller clients. And I mean, I can think of, you know, a company like myself. I mean, we use Premiere Pro. As I mentioned, I haven't used a single AI function on the platform. I mean, a lot of them do look pretty cool. But I mean, if costs went up or something because of these tools, I think, you know, we would probably look elsewhere. I mean, I know you

you've utilized other platforms. Yeah, I use the Descript. Yeah. So it's faster. It's cheaper. So I think this is a lot of the issues with Adobe right now is, I mean, no matter how many AI functionalities you add to your tools, this space is kind of ripe for disruption. I mean, we've seen a ton of tools pop up over the last while that again, I mean,

if we were able to handle the learning curve of heading to a platform like Descript, it's It's cheaper. It's faster. But we just, I don't know, we just don't have time to do that. Maybe eventually we will, but. It's okay. I'll train you guys. Yeah. It's all good.

It's not that hard. To be honest, like, if you're starting from scratch or you don't have much experience with video. And obviously they have other platforms, not just the video platform, Premier Pro, but something like this script, anyone's starting is, you know, if you're starting, for sure, you're going to go to this script. Like, the learning curve is way, way. way easier and like compared to something like Adobe Premier Pro if you have some experience and clearly Adobe or if you're a professional there's going to be more tools but the way I kind of see it is that you probably get 80 to 90% of the stuff that you can do in Adobe in a much easier way to do it in the script so if you really want that yeah and a lower cost I think it's

depending it's similar it really depends on what you use it for but just the fact that it's much easier to do and it's not quite as powerful but pretty close for a lot of content creators to me it just makes a whole lot of sense like they will have a lot of trouble attracting new people that are just starting to do some video editing onto Adobe Premiere pro when they can have access to a platform like Descript yeah and I think that's and they even mention that like on the enterprise level like the large scale level it's not they're seeing higher retention rates but that's probably because a lot of these organizations like have and i mean i'm using premier pro but obviously they have numerous amounts of subscriptions but i mean if you're

if you are a large scale company that you know is trained on premier pro has been using premier pro for a decade i mean are you really going to get rid of that and head to a platform like discrip probably not but like a small content creator or something like that like you you can definitely see the value there. I mean, a big, a big corporation isn't going to be interested in trimming a few bucks a month on a, on a subscription, whereas somebody smaller could. But I think that is the main issue here. It's not necessarily showing numbers that, you know, kind of state it's happening at a rapid pace, but growth is slowing. Full year guidance. So they mentioned that revenue will come in at around $23.7 billion, while earnings should come in at around $20.85. So this works,

works out to be around 13% growth and earnings. And I know a lot of people look at Adobe stock price as kind of a bit of a bargain just because of how much it's fallen from 2020 and what would it be, you know, late 20, early 20, late 2023 levels. But I just think it's kind of because growth has fallen that much as well. Like it was a company that was growing at a much faster pace three, four years ago than it is today. And I mean, 13% earnings growth is still, you know, very few companies can grow earnings at a 13% pace annually. But I kind of just think it was the market maybe kind of revaluing this one at a lower valuation just because a lower growth rate. Like it's, you know, it has a five year median price to earnings of 45x and now it's trading

at 22x. But there's also, you know, situation five years ago is growing much faster. So I kind of think it's, I would say it's probably maybe a bit undervalier, but it's not like if you're looking at the past prices where it was like $600 some dollars a share, the growth is definitely slowed and there is, you know, potential disruptions I was talking about, talked about, you know, previously. But the one thing is, though, the company definitely views its shares as cheap because it's pretty much spending every single dollar it makes on share buyback. So over the last year, the company generated about $9.6 billion in free cash flow and bought back nearly $12 billion worth of shares. So I mean, they're very confident. The market is definitely

not. It'll be interesting to see, you know, in half a decade how how this strategy works of effectively putting everything into your own stock, but they're definitely doing that. But it was a pretty good quarter. I think it was one of its better quarters over the last while. Yeah. Yeah, exactly. Like, it could be a decent value play. And in terms of drawdowns, like in the last three years, it's close to 50% drawdown. So actually, 43%. If you go back from the highs during the pandemic, then it's pretty close to 50% drawdown. So clearly it's not rising as most tech companies or AI tech-ish plays are rising. So we'll have to see. But yeah, I think there's definitely some issues there. We'll have to see maybe they come out with kind of more

user-friendly. I know I think they have added some text-based editing for like something like Adobe Premiere Pro. And we focus a lot on that one because video is a big part of this. right? And I think that's the reason for that. And people not familiar with the script just to get an idea is you upload a video where you recorded and then it will take a few minutes to basically do a full transcript and you edit the video by deleting, removing, or adding stuff to the transcript. So if you want to delete five seconds of the video, then you delete the text that you want associated with that five seconds. It's very intuitive. There are a bunch of the other things you can do as well, but it's much easier to learn. I think Adobe has added some, some of that functionality, but I think they probably would almost need to get a brand new product that's aimed at directly competing for newer non-professional users. I think that would probably benefit them, but we'll have to see. Yeah, I mean, video is the way, I would say, moving forward. I mean, so much content these days is video.

a lot less is written. So it's definitely, yeah, it's good company, but I think one that's, you know, a bit prone to a bit of disruption and we're seeing a bit of a slowdown in terms of overall growth. Not like, I mean, obviously the company has very high margins, strong cash flow,

but I think it was just kind of the market, kind of revaluing it to, you know, the pace it's growing at right now. Yeah, exactly. Do you keep hearing about these all-in-one ETFs lately? Well, I have some exciting news. news, BMO ETFs just cut the fees on their flagship all-in-one ETFs to 0.15%, making them one of the lowest cost options in Canada. That's right, more value, same smart diversification,

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with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning duolingo style education lessons that

are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me. search me up, some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. So, well, now let's move on to Affirm Holdings. Yeah. So one, we haven't, I've been meaning to talk about for a little bit and it's definitely a very interesting company, think to look at just to see the state of the consumer in the US. Well, not US, but they have

business, you know, I don't know around the world, but in a lot of countries. And for those not familiar with the firm, it's basically a buy now, pay later company. So one of those gray areas credit offering companies, lack of better words, I see them a little bit more as kind of a subprime lender, although they will probably push back and say that their algorithm and all their AI stuff. makes them their underwriting and the fact that they, you know, they'll give out these types of loans. They have a good way of doing it. But nonetheless, I think it's worth keeping an eye on. So they reported a few weeks ago, I think it was mid-August. So revenues were up 33%. They had 69 million in net income, which was a big improvement over the 45 million loss they had in the cent quarter last

year. They saw 43% growth in GMV, which is gross merchandise volume compared to last year. It went from 7.2 to 10.4 billion. One of the really interesting things here is the average order value, which has been declining over time. So it peaked at over 672 in Q4 of 2020, and the most recent quarter was 293. So that to me is probably obviously a combination of less peloton's being sold because clearly the average order will be. No, but it's true. Like they have, they actually have a lot of metrics that are ex peloton. So you're laughing. Really? So obviously it was a big hall of their business was people financing treadmills and stuff like that. Yeah. Yeah, exactly. So that, I know, I know you're laughing a little bit, but it's actually something that they, they, they

do quite a bit. So the type of purchase, of course, people are using a firm as well on smaller and smaller purchases. And the type of purchases that would have never been financed in the past, which whether that's a good thing or not, maybe as an affirmed shareholder, people might think it's a good thing from a macro perspective. It's an economy perspective. It's a little bit alarming. I'll just be honest, the fact that people, especially as inflation and the cost of living and everything costs more. The fact that the average value is going down and down just means that people are financing more and more small things. The one thing I'd be interesting, well, the one thing I'd be interesting to know is this like people financing, well, obviously it would

be people financing smaller items. But is it them like bringing a lot more companies on board that sell cheaper items? Yes and no. So it's kind of a combination of things. So they, The Affirm card actually grew at a pretty high pace. So the Affirm card active consumer surpassed $2.3 million for a 97% increase year over year. And the reason I'm kind of answering your question that way is the Affirm card allows consumer to link it to their bank account and use it as a debit card for purchases. But users can also decide to purchase something with the Affirm card on credit as well. So it's kind of this hybrid. So they're seeing double-digit GMV growth in all categories, and they're seeing a lot of growth there.

But there's also, they had a growth in new merchants as well. So active merchants grew 24%. And if you're really, to be honest, if you're selling items online, it would be stupid to not have some kind of buy now, pay later option from a business, from a pure business standpoint. But yes, it's a combination of more merchant offering it, but also people, being able to use their affirm card to pay on some of the products offered by a firm, regardless if the in-person, for example, merchant offers that or not. Yeah, so you would be able to tap this card and it would just go to a buy now, pay later? Or does it, it has to be eligible, I would imagine.

Yeah, I think the way it works is you essentially have to like decide whether like you use it as a, yeah, I think you have an option or something. I've never used it myself. That would be my best guess. But they have now surpassed 23 million active consumers, which is 23% year-over-year growth. The transaction per active consumer increased 20% and is now approaching six transaction per quarter. 95% of transaction were repeat customers. And I've mentioned this before.

And maybe I need to find some more recent studies. I think this one was 2023. but the Federal Reserve of New York study I had read about Buy Now Pay Later and the biggest barrier to users using the Buy Now Pay Later products was using it once and clearly their data actually shows that as well. So that study kind of outlines with what a firm is saying. And again, I guess it's a good thing if you're a shareholder, but it's pretty alarming when you start looking at the economy as a whole that more and more people are using. at these products and they've increased their funding capacity significantly in the past year went from 16 to 26 billion and they're only using about 58% of that which is the lowest it's been in two years so they say there's definitely some more room here for them to be able

to grow the business the delinquencies rates are essentially at the highest they've been over the last seven years with the exception of last year which was slightly higher now they're still quite low not to be alarming here so i think they're in the 2% range depending when you're looking 30, 60, or 90 days. So it's still pretty low when you compare to some credit card issuers that are probably, you know, closer in the 3, 4, 5, 6, 7, 8%, depending on the type of consumer they have with their credit cards. So for fiscal year 2026, they are guiding for an increase of 25% in GMV. So continued strong adoption. And I would think, especially in the U.S., where you're seeing more and more people that have to resume the student loan payments and we're used to not having to pay that, to not have that in their budget for three, four, five years pretty much since the pandemic started.

There's going to be some people struggling because now they have that extra payment to make every month. And my understanding too is you can't go into bankruptcy and get rid of those loans in the U.S. It kind of follows you. So it's going to be interesting how that impacts, I guess, positively and a firm or by now pay later company or like a company like a firm going forward in terms of GMV. But it could also start impacting the delinquency rate. So these are the two things. And I know we've talked about go easy a whole lot and go easy, ticker gsy.com for those who are interested. so it's a subprime lender in Canada.

And I've been pretty bearish on them just because, not because I don't think they're not managing things well from what I've seen. They are managing the risk relatively well, but I think investors are a bit too optimistic in terms of the growth in profits, but forgetting that, yes, short-term profits can go, but if these loans start being delinquent

in a higher proportion of them, and it starts going higher than anticipated and higher than the provisions they've set aside, these kind of companies can get in real trouble. I don't think GoEasy would be any kind of, you know, would go out of business or anything like that because they've planned well, but you could see their profits significantly decreased because of it.

So it's why I've been pretty bearish, especially now as you're seeing the economy kind of rolling over in a lot of countries, including Canada, the U.S. Yeah, I mean, for a company like a firm, I can definitely, I can't see it slowing down. in terms of popularity, like in terms of use, because as you had mentioned, like for a business, it makes very little sense not to utilize something like this because you get paid and then a firm effectively takes the liability. Do they not? So I mean, if you're going to, it just

does, if you're looking to increase sales, I mean, as a business, if you get paid outright, you don't really care if they're using a company like a firm or not. So it's a no brainer to add it to your platform. But. Well, there are fees, right? So it's not a firm will charge a merchant. Exactly. So there is like that would be the reason why they wouldn't one, but it's better than no sales. Yeah, exactly. Yeah.

Yeah, that's the way. Yeah, I mean, this company took a pretty big dive back in 2021, I believe it was. It went from 163 bucks all the way down to 14. So there's definitely some volatility there in terms of price. Obviously, I don't know how delinquency rates were at the end of 2020. or just overall slowing of growth. But they've done quite well over the last bit here. I listened to a finance podcast, like one in the States.

Actually, I think it was Animal Spirits, and they like finally admitted, I believe it was that they were wrong on this one. Like they were kind of talking, same situation. And it just continues, continues to do well. Yeah. And I mean, look, if you're looking at a firm holding, so this is the returns over let's do let's do year to date, right? It's up 42%. In the past year, it's up 102%. So it's been a phenomenal company in terms of, well, phenomenal stock in terms of returns, but again, you get into this

situation that you're a bit of a head scratcher where you start seeing these unemployment numbers, these massive revisions in the U.S. and that rolling over, I mean, people need employment. to pay back these loans and whether it's installments or actual loans that they're providing. So I mean, I'm, it's just this kind of cognitive dissonance like this euphoria in the markets right now that they're just kind of looking short term and not looking at the clouds that are appearing in the horizon. Those gray clouds that are coming, it's almost like disregarding. And the fact that the really bad employment numbers are not really affecting the returns or the price of an firm is, I don't know. It just worries me where the markets are at.

It's not just AI. It's other stuff. Well, this is definitely a company that is going to do better in an economy that is weaker. But then if it rolls over, obviously. But not too weak. Yeah, not too weak. There's like a fine line here. I mean, obviously in a very good economy, people probably, well, maybe they still will, I can't say, but people probably would not utilize a platform like this as much. But, you know, if the economy is weak enough that they need to start utilizing this, then that's where you see growth. But then if it, yeah, if it rolls over enough to the point where delinquencies start to rise, that's when, when things tend to get a bit ugly for these types of companies. I mean, I personally would never touch a company like.

this, I just wouldn't own it. I mean, obviously, a lot of people own it. And, and that's all right for you if the, if the risk is appropriate. But I mean, these types of companies generally tend to scare me. And I think it's a little bit different. Like, I think a Go Easy is a little bit different. They got a lot of secured, like, you know, heat locks, things like that, secure loans, stuff like that. But a company like this is, is a lot different. I would view as a lot higher risk. Yeah, it's, it's unsecured loans for the most part. So, yeah, yeah, it's not. And If you're not familiar with secure and unsecured, secure it is usually tied to an asset.

So whichever, whoever the lender is, they can all, the recourse is that they can always seize the asset and then recoup some of the loan, if not all in some cases. There are some costs associated with that, of course. And then unsecured is just,

typically it's just your credit worthiness. That is the reason why they're lending money. But I think that's probably enough for a firm here. Let's finish here with, dollar tree and we'll wrap it up for this episode. Yeah, so quick one on dollar tree. And I kind of just wanted to go over this. They reported, it was probably two or three weeks ago now, but I know we do talk a bit about dollarama. We did that episode actually that compared dollarama to dollar tree just because they've kind of deviated in terms of performance over the last while.

And it does look like a pretty good quarter at first glance, but the stock did kind of dive post earnings. Revenue increased 12.3%. Same store sales grew 6.5%. So this is actually a faster pace than Dollarama. I think Dollar Ramma was growing at the low 4% range, maybe high 3% range. Average ticket price increased 3.4% and they had foot traffic increase by 3%. Gross margins increased 20 basis points, but operating margins declined by the same amount. The main difference here, like this is the biggest contrast of these two businesses. is dollar trees operating margins came in at 5.2% and dollar emma runs at like 25%. So the like the difference is just crazy.

And the crazy stat to me is that the company reported 2.4 million new customers on the quarter and they estimate that two thirds of them are from households that earn over 100,000 US dollars in combined income. So I mean, you know, these are often thought of as like stores where lower income consumers go to. But I mean, there is definitely still a shift here. Some more signs that the economy is doing well. Yeah. I'm being a little sarcastic for those familiar here. Yeah, especially because they're associated with, you know, bargain shoppers. And when you have, I mean, I guess in the grand scheme of things, $100,000 in household income is not really that much, but it would

definitely still be like middle class, I guess you would say. But yeah, that was definitely interesting. I mean, there's a lot of consumers regardless of income. I'm turning to value products. And they ended up bumping their 2025 guidance. So revenue should now come in at 19.3 billion earnings in the mid-5-dollar range and gross margins should expand by 50 basis points. And what I don't really understand of why I kind of think the stock dropped post-earnings is they mentioned that next quarter's earnings will be relatively flat.

So this was kind of well below what street expectations were. And the company realized a 20 cent benefit to earnings for share this quarter kind of because of the timing of orders due to tariffs. So what it looks like to me is they bumped guidance based on this earnings beat, which was kind of nothing short of a timing thing and then kind of guided to a weaker back half of the year. So it's really confusing me. They're bumping guidance based on a uptick on a one-time benefit to earnings. So I think that's why, because I think the stock fell like 12 or 13% post earnings, which is... When did they... It would have reported probably early September.

Yeah, it would have been early September. Yeah, yeah. So the drawdowns here, if we look at the past month, yeah, about 14% drawdown. And, yeah, you can see. So I would assume they reported probably, yeah, on the second or third. Yeah. So, I mean, I think it was just the confusing situation. I mean, you bump guidance, then you guide to a weaker back half.

so you're just bumping guidance because you benefited this quarter from something you won't benefit from later. So I think that's kind of why it ended up taking a hit. And the company actually partnered with Uber Eats at the end of August. And I find this hilarious because, you know, most of the people who are going to these stores are trying to do so to save money. So I just don't see why you would ever, you know, you're trying to budget shop, but you're going to use. Maybe you're using a firm or something. I don't know if a firm has a deal with Uber, but maybe you're buying. now pay later and then using Uber to go and grab some stuff at Dollarama.

Yeah, I mean, if you're buy now pay later on dollar store items, yeah, I don't know. It's, I mean, it just doesn't make sense to me. The only thing I could see is the younger generation, I know a lot of them don't drive vehicles. So maybe they're using something like this because they can't actually get to the store. But it doesn't make any sense to me that you're going budget shopping at Dollar Tree, but you're going to pay somebody, what, six, seven bucks to deliver it plus tip. So, I mean, the one thing is they did mention that this partnership is to try and target more of the younger generation. So maybe it is the people who don't drive.

I don't know. Yeah. I mean, activity. Well, you're saving on a car potentially. So that's some savings there. But a little, I guess to wrap it up, because you mentioned Uber Eats, a little a hack that people may want to use if they have a Costco membership. So it can be used for Uber, Uber Eats. And a lot of gift cards.

So Costco actually sells gift cards at a discount. So what we've been doing, because once a month, I mean, obviously with a kid, you'll know soon enough what I'm talking about. But with a young child, you know, you get through your day, like all this stuff. You never feel like you have time for yourself because you're, you know, you pick him up for daycare from school. You have to make dinner. And then you entertain them, put them to sleep by the time you have like a few minutes. It's probably 8, 8.30. and we like to have Uber Eats about once a month

So what we do is actually we go to Costco We'll buy a $100 gift card But they sell them for 80 Yeah So a little hack for people looking to save some money But still enjoy you know Once in a while for example like Uber It's like my wife and I do because you know

The one time we use it in the month We actually don't have to cook And that's a way to do it Even for other things like if you're traveling I think Air Canada and possibly WestJat, you can get some maybe not as big of a discount, but I think for 450 you'll get a $500 gift card. And there's a bunch of other stuff. They have like local things too.

So I do encourage people if they're looking to save some money, but still, you know, they'll need to, you know, there's certain things they still want to spend on. It's a way to save some money and still enjoy those things. Yeah, we go to the movies quite a bit. And that's the one we use as a Cineplex one because the Costco is. right beside the Cineplex where we're at. So like 32 bucks, 32 bucks you get tickets to drinks and popcorn. Like if you were to actually go buy that at the theater, it'd be like 55, 60 bucks.

Yeah, that's pretty good deal. So anyways, little, little tip for people to save money. Savings hack, exactly. Or like prominent politicians said, just cancel your Netflix or your Disney Plus subscription. Sorry, it was just too easy there to kind of bring that. back. But thank you everyone for listening. If you have a moment, you haven't done so, please make sure you give us a five-star review on Spotify, Apple Podcasts, or whichever platform, helps people discover us. We have increased the price for our joint TCI, so our Patreon platform.

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It does support us as well, especially if you subscribe and give us a review. So I just wanted to say that at the end. So that way people could have just stopped listening if they wanted to. That's completely fine. We'll be back with another episode on Monday. Monday will be a special episode. We've talked about it a little bit. So I'll make sure you join.

It will be a full AI episode. So we're going to be talking about how to invest in AI all the different ways. Some that are not super obvious will be providing some names, of course, not a deep dive into names, just some place for people to lick into themselves, some ETFs. I think it's going to be so long that we're going to have to do a two-parter. Yeah, I think it's to that point. Like we started it then. I don't know how much time you put, but I probably put like a seven, eight hours at this point.

Yeah, it's, uh, yeah, we kind of brought up that episode and then, It touches so many spaces that we're like, oh, we're going to have to split this into two, I think. Yeah, it should be a very good episode. Episodes, exactly. So thanks again. It went on a little bit along at the end, but I think this is a good point to wrap it up. So thanks for listening and watching if you're on Patreon. And we'll be back next Monday for the first part of that AI episode.

The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.