The Canadian Investor - Will Slowing Inflation Lead to Interest Rate Cuts?

Episode Date: May 23, 2024

In this episode of the Canadian Investor Podcast, we delve into the latest inflation data from Canada and the U.S and what it means for investors. Additionally, we provide a detailed look at the earnings outcomes for major companies including Lightspeed Commerce, Canada Goose, and Walmart, and discuss the implications of these reports on market expectations and consumer behavior. We also touch on Shopify's financial performance and the evolving odds of the SEC approving a spot Ethereum ETF. Join us as we unpack these developments and their potential effects on investors and the broader economic environment. Ticker of stocks discussed: GOOS.TO, WMT, LSPD.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor 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.

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Dan, you must be feeling pretty awesome. Your Oilers won last night. It wasn't easy, but they ended up making it through to the next round, beating the Vancouver Canucks. And for the Canucks fan you know sorry but uh join the club the montreal canadians have been out for quite some time now yeah the oilers are the only canadian team left i think in the last 10 minutes there i probably aged a year i was like oh this game like vancouver's barely touched the puck this This game's over. Then one's in, then two's in.

And I'm like, oh my God, I might have to turn this thing off and go have a walk or something. But yeah, they pulled it off. They always make it interesting. It seems like Edmonton specifically always makes it interesting. But we'll see what happens against Dallas. Yeah, I mean, what happens when you don't have that much stability in that, right? So it's always a bit of a wild card with Edmonton. Definitely a wild card.

But yeah, they pulled it off. Well, congratulations to all Edmonton fans here. And obviously, Canada's hopes to bring the Stanley Cup back is resting on the Oilers. So we'll have to see if it comes true in, I guess, in a couple of weeks from now. But we'll get started. A lot of information, well, a lot of news and earnings to talk about. You'll start us off with Canadian CPI, which actually just came out this morning before we recorded. Yeah, the CPI report actually came in pretty good. I mean, the CPI came in at 2.7%, which is down from the 2.9% gain witnessed in March. 2.7% was generally right in line with what was expected, maybe a little bit lower.

So food inflation was down quite a bit. It came in at 1.4% on the month. So this is down from the 1.9% gain in March. But the one thing that is particularly still strong is restaurant pricing. So food eaten at restaurants, that growth came in at 4.3%. It's down from the 5.1% that we saw in March, but I mean, that's still way too high. Restaurants are going through some pretty harsh times.

I mean, we even, I don't know if you saw this, but Red Lobster just filed for bankruptcy. They're going bankrupt. Really? Okay. Yeah. Yeah. I haven't ate there in probably, oh God, it's got to be 20 years. I never really liked it that much.

But yeah, they just released bankruptcy either yesterday or this morning. Okay. Red Lobster. Yeah. like either yesterday or this morning it's uh okay it's red lobster yeah i mean i i must have been like pre definitely pre-pandemic for me you know i liked it i just um it was just not that cheap for a seafood place it's kind of like there's oftentimes other options i find around the city in ottawa that are as good and similar pricing. And when I have the option between going to a chain or more local place, I'll typically choose a more local place. Yeah. And it's like, I even remember back, like the last time I would eat there, I was probably

in junior high. And I remember my parents talking about how expensive it was. So I can't even imagine with all this going on, like with restaurant pricing growth and all that, how expensive it was. But yeah, they went belly up this morning. So the one interesting thing is rent increases, especially in Alberta. So like our real estate market is just like absolutely bonkers here right now. Rental prices are up 16.2% year over year. So this is double the national average. And they pretty much say it's because of interprovincial migration. So people are clearly moving from higher cost cities. I don't exactly know where, but I would imagine, you know, places in Ontario, BC, and they're moving to Alberta, which is causing a huge surge in demand in terms of

just real estate and rent. Real estate prices are like they're growing at some of the fastest rates we've seen in a while here. But just overall, inflation slowed in every province outside of Ontario, BC and New Brunswick. And even then the upticks weren't really all that much. Core CPI, which would remove volatility of gas and food prices that came in at 2.6%, which is down from 2.9% in March. And I mean, if we look to the underlying data, it's pretty clear what is fueling inflation right now. And it's kind of been this story for probably a year now, shelter costs remain elevated, which should be eased to a certain extent with rate cuts. But I think the one

key issue here is that I don't think they're going to be able to slow it down all that much unless it's a material cut, because even if they cut even 100 basis points, you're probably resulting in a bump in mortgages, a bump in rent costs. So the market is now pricing in a 55% chance of a cut in June. This is up from 39% earlier. But I mean, these forecasts are so strange. I remember when they recorded CPI last, I remember it was at like 70% or something that they were going to cut in June. So it must have fallen from 70% down to 39% and now back up to 55%. The Canadian dollar obviously facing some pressure after this announcement. I mean,

simplest explanation possible when Canadian policy rates are lower than say the United States creates less demand for the Canadian dollar as rates are more attractive in other countries. When we look to just individual segments, again, shelter up 6.4% year over year. Household stuff like furnishings, equipment are down 2.1%. Clothing and footwear down 2.6%. Transportation up 3%, obviously, with fuel still remaining high. Recreation, education, things like that, down to 1%. I did see, because they report this on the news every morning, and a lot of the interviews that they did,

people were saying like, oh, I don't really notice anything in terms of prices, prices coming down. I think that's a misconception of a lot of people. Slowing inflation doesn't mean deflation. Prices are never going to come down. I mean, they could, but the object here to slow the rate of the

increases. Exactly. The rate of the increase is slowing down, but prices are still increasing. And you have to keep in mind, it has a compounding effect too, right? So they've increased a lot over the last four years. And then even if the pace of inflation is slowing because it's on a higher dollar value, it may still feel like prices are, you know, increasing and maybe not even, you know, income not keeping up with those increasing prices. But yeah, you're completely right. A lot of people, I think, are expecting deflation when slowing inflation just means that it's not increasing as fast, but they're still elevated. Yeah. Like if you, if you're kind of looking for prices to come back down to what they were, I mean, there's almost zero chance of that happening. I mean, they're elevated.

They're probably here to stay. Now the objective is to just get it back to that 2% target. I mean, this is a pretty, this is pretty good fodder for the Bank of Canada to at least consider cutting in June. I mean, it's pretty tough for Canadians right now, but I mean, food's slowing down in a big way, which is good because that's something that hits pretty much absolutely everybody. Shelters still way too high, but you could see some relief in terms of that when rate cuts happen. But overall, I mean, this does give them a bit more incentive to cut in June. We'll see if they do. Yeah. Well, yeah. And the one that seems to be sticky is this one here for the joint TCI

listeners that I'm highlighting. So services slowed down on a month-to-month basis to 0.2%. So that's definitely good. But year over year, still 4.2%. And that's proven to be pretty sticky. And that's definitely a number I'm sure they're keeping an eye on. And, you know, I think you explained it well. Aside from that, I think it'll be interesting to see what the Bank of Canada decides to do. From my perspective, I mean, it does give them a little more leeway if they want to put in a cut or two, just because the reasoning behind cutting is that you have to be careful if you cut too much because it could lower the Canadian dollar because, you know, foreign dollars can go to the US and get a higher yield on those government bonds, for example.

So if it does lower the Canadian dollar at the very least, since inflation seems to be coming down, and I'm saying like seems with a big asterisk because it's only been a couple months now, it may give them a little more flexibility there. But then we saw the 90,000 job report, whether that's revised or not in the future, I would say it's probably going to be revised. And if I had to bet, probably revised down. But again, that does kind of put some weight on the other side of the equation where maybe they decide not to cut because those job numbers are strong. So it'll be interesting.

There's a lot of conflicting data. They definitely have a bit more leeway if they want to do it, but it really, do they want to pounce on it now or wait a bit, you know, down the line? We'll have to see. Yeah. That's another thing too. Like they're not just going to see one or two reports and like, they probably need to see a natural, like a consistent progression downwards. A lot of people see these like a single report and they're like oh they should be cutting rates i mean we've seen it you know the next month it can blow above expectations so they need to see pretty much a steady decrease which i mean it has been happening for the most part here here in canada i mean we seem to be in a lot better

shape than the u.s on that front because i believe believe you'll go over US next, which is reporting a bit higher numbers. But that's pretty much all I have to say on the Canadian end of things. Yeah. And the last thing I'll add here is the main downward contributors. So in terms of actual declining inflation. So these are things that, you know, they're the biggest changes, but at the same time, they're not really things that will impact most people. At least people who are struggling. The only one would be fresh vegetables, which are down 3.6% on a month over month basis. So that's versus March, but travel tours are down 7.5%. How is that a big plus for most people? I don't think it really is. Air transportation down 5.7%.

I'm sure that helps some people that may have to travel for different reasons. But again, a lot of this may be discretionary for a lot of people. The purchase of digital media down 13%. Again, it's nice, but does it really matter all that much? And furniture down one percent again nice but i think people will probably keep their couch or whatever it is piece of furniture a little longer so i thought it was interesting because you know a lot of the main downward contributors are probably not things that matter to most people at least not those who are struggling

with making payments on a month-to-month basis. Yeah, you'll see in the contributors, the increases is pretty much outside of women's clothing is pretty much things that impact everybody. And then the downward ones are things that impact very few people overall. So it's still a pretty tough environment. Yeah, definitely. still pretty tough environment. Yeah, definitely. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees.

They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking

for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering

these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. So now we'll move on to this US CPI one. So the headline CPI came in lower than expected at 3.4%, but marginally lower. It was pretty close to target. The monthly increase was 0.3%. So if you put that on a year basis, it's 3.6%. Food prices were flat month to month and up 2.2% year over year. Energy rose 2.6% year over year, but was up 1.1% month over month. Now, something to keep an eye on because that could fuel inflation if it keeps going up. Natural gas is one to really zone in on, you know, both in Canada, but also in the US, because prices are very low right now, but they have been rising.

And if we're seeing more and more power consumption, natural gas is definitely a logical choice there and also nuclear energy. And according to the US Energy Administration, and also nuclear energy. And according to the U.S. Energy Administration, natural gas is used to generate 43% of the electricity in the U.S. So that's a key point here because an increase in natural gas prices will clearly have an upward impact on inflation. And I wouldn't be surprised if that increases because of the electricity demand, like I've mentioned mentioned that we will probably see in the coming months and years. Electricity costs rose 5.1% year over year but were actually down 0.1% month over month. New vehicles were down 0.4% year over year while used cars and trucks were down 6.9% year over year. Services less energy remained sticky a bit like Canada at 5.3% year over year and 0.4 month over month

and core CPI which is all items less food and energy was up 0.3% on a month over month basis which would bring the annualized rate to 3.6%. The main takeaways for me is you know it's still higher than the Fed's target at 3.4% again which kind of places the Bank of Canada in a bit of a conundrum here, because now you've had presidents of various federal reserves in the US kind of coming out and being more hawkish, meaning that rates will slightly stay higher for longer. They want to see some sustained proof that inflation is slowing down. Prices are still increasing and headlines saying that inflation is cooling just means that the rate of inflation is slowing. But like you mentioned, prices still are increasing and individual inflation prints can be volatile.

And I think that's really important to reinforce. And the Fed, again, won't be likely to cut until inflation is going back closer to their 2% target unless they decide to actually do a 180 and maybe they tolerate 3% inflation. Who knows? But they've been pretty steadfast on saying that 2% is the target. Yeah, they could just move the goalposts, I guess, and make 3% the new target if they can't get it down there. But I imagine for now, they're going to keep trying to get it down to 2%. The one interesting thing is the used auto prices, like prices of used vehicles. So I own Boyd, like they're an auto body and glass company, and they reported their earnings, I think was like last week and like during the pandemic they saw like insane demand like they couldn't keep up to it because most of their revenue is through insurers like vehicle collisions yeah and because

of the like skyrocketing price of used auto vehicle used automobiles like there's no insurance write-offs right so they tend to repair a ton and now they're kind of seeing like it go a full 180 so now that used used vehicle prices are falling they're noticing that insurers are just writing a check and writing vehicles off instead of getting the repair just because prices are starting to normalize so i mean it's crazy just like how much that used vehicle market was just going bonkers during the pandemic. I think mostly a supply thing. Oh, yeah.

I would imagine this will continue to fall. Well, people couldn't get their hands on a new car, right? So they would go to the used market because they need a car. We were fortunate. We bought our car right before the craziness and our second car right after the craziness. So we bought the second one in September, the first one in like early 2021, just before the prices started going up. And the one we bought them, I would look from time to time later in 2021, 2022, even early 2023. And our car actually gained value.

Appreciating asset. Yeah, appreciate it. Exactly. So, you know, who says a car is not an investment? Yeah, exactly. I remember when they were like flipping Teslas, people are buying Teslas and flipping them and profiting. Yeah. I mean, that one stood out to me 7% year over year. I would expect that to continue to decline because used prices are still nuts. No, definitely. Well, we'll move on because we have quite a few things to touch on. You want to get started with earnings, with Lightspeed Commerce earnings? Yeah. So Lightspeed had a pretty

strong rebound quarter. The stock ended up increasing around 22% after the earnings were released. But it's pretty important to consider the fact it dropped by 11% leading into the earnings. And I think most of this was because of Shopify. I think Shopify reported and there was a big sell-off in regards to Lightspeed and just other payment processors. But they reported year-over-year revenue up 25%. Transaction-based revenue grew by 40% and subscription-based revenue by 7%. So subscription revenue is seeing a pretty big slowdown. It's been a big driver of growth for the company. Their subscriptions revenue would primarily be from stuff like their point of sale systems for retail stores,

restaurants, things like that. So one of the company's primary strategies over the last year or so here has been to acquire more high-end clients with larger revenue streams. So obviously, the higher the revenue, the less likely the company will churn in terms of subscription services. A small business, obviously, that's earning $100,000 and is struggling, they might churn their point of sale system, Whereas a company making $500,000, a million dollars a year in transaction volume, it's highly unlikely to happen. And plus the added revenue obviously earns more for Lightspeed. On the year of the companies, customers that have gross transaction volume of more than 500,000 grew by 5%. And the customers with more than

1 million a year in gross transaction volume increased by 6%. I do own Lightspeed, but this is kind of a data point that they've started reporting that does bother me a bit because the data is nice to know, but the real number that I believe investors would want to know and one that they don't report is the customer growth or the lack thereof of their smaller clients. Because you can be adding a ton of larger clients, but if you're churning a ton of smaller clients, I mean, it might offset it. They only report the increases. What's that? They have a lot of small clients too. Like, that's one thing I've noticed ever since, you know, I've taken a bit more of an interest in

light speed and I've noticed going to small shops, like a lot of them have the light speed point of sale exactly so that's something i've noticed myself thankfully most of the shots i've been to they seem to be doing well but again you're completely right i mean i feel like the backbone of their business is on those smaller businesses yep and i mean I mean, this is speculation by me, but I would imagine if the numbers were good, they would report them. You know what I mean? They're reporting larger, solid growth with larger clients,

but they just don't report the smaller clients. I believe if they were still growing in that regard, they would probably report it. So who knows how that end of the business is doing. On a full year basis, the company posted revenue growth at 24%, transaction volume growth of 37%, and subscription growth of 8%. And they plan to hit profitability on an adjusted EBITDA basis in fiscal 2024. They did that around 1.3 million, but this adjusted EBITDA figure factors in stock-based compensation, which accounted for

a huge chunk of it. So the company posted a net loss of 163 million on the year and stock-based comps made up 73 million of that. So it's a pretty big chunk, way too high in my opinion, but it has been going down. That said, in fiscal 2023, the company posted a net loss of $1 billion. And in 2024, they lost 163 million. So the path to profitability, it's still getting a bit better, but I'm not sure I'd put much of a reliance on adjusted EBITDA, especially with stock-based comps in there making up so much of it too. It's kind of an easy way for companies like this to report better than underlying numbers. I mean, they issued guidance in which they expect to grow at a 20% clip or more next year and adjusted EBITDA to hit $40 million, which would be pretty close to a 35-fold increase from fiscal 2024.

And they appointed Dax De Silva, again, the founder of Lightspeed, back to being the permanent CEO. He was there. Then he left. Then the other CEO, I can't remember his name, pretty much botched it in a very short amount of time. And they got rid of him and brought Dax back on. But overall... It's funny because I thought the other CEO was brought on to kind of put some restraint on the spending and have a more operational person than Dax, who is more of a kind of growth and more of a, you know, bigger picture

kind of guy. Yeah. And he, the other CEO made a release on how they were going to continue to try and like grow through acquisition and spend money and the stock i remember it absolutely bombed and then like he kind of got he didn't go public too much after that and then they kind of weeded him out and brought brought dax back in so i mean at this point i think it's more of a like a pr type thing i mean the stock price has taken a beating from all-time highs i believe it was like like $150-some at one point, and now it's probably trading in the low 20s. Yeah, even sub $20.

So we'll see if he turns things around. Competition is really fierce. They should be able to hold their own. As you mentioned, their payment processing systems are very popular. A ton of retail companies use them. Golf courses, they got tea time bookings i mean all that type of stuff once like the fact that they're still growing at a 20 clip right now it's still pretty impressive i think when the macro environment picks up a bit i think

they'll be able to grow that even further but it was a pretty solid quarter after you know a relatively weak one the quarter prior yeah the the coe replaced was jp chauvet yeah that's the guy yeah so uh no i mean it'll be interesting i totally agree with you i think for me it's when i'm more interested looking at the the big thing that i don't love about the company is just the competition space yeah so they could very well become profitable hold hold their own, but I just don't know how much it can grow when there's so much competition, right? You think about Toast, you think about Square, there's all different kind of platforms. I think Microsoft, I think I may have one too, I can't remember. But there's different ones that are competing in essentially the same market as

them, right? So it's more that kind of, I have a bit more trouble with, yeah. Yeah. I mean, Nuve would have been another one, which is gone now. Yeah, that's right. The one interesting thing is, so Nuve got acquired for about 4.5X enterprise value to revenue, and Lightspeed is trading at 1.39 enterprise value to revenue. So Nuve sold for about three times the price of what Lightspeed is trading at right now. I mean, Nuve was profitable. They were in a bit of a different structure, but there's still a pretty wide gap there I found pretty interesting. I mean, I wouldn't be surprised at private equity. If they do become profitable or they're

very close to it, they may come circling and try to get them private. I would not be surprised if that happens. But no, I think that's a good breakdown. Anything else to add for Lightspeed? Nope. You can go on to Canada Goose. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help

if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com.

So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians. And we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities.

So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Canada Goose Q4 2024. So it was actually not bad or at least better than expected. So revenues were $358 million. That's an increase of 22% compared to the previous year.

And what was really impressive is that it was 8% higher than the top end of their guidance last quarter. So definitely they exceeded expectations there. They mentioned during the call that it remains a challenging consumer environment and that the warm winter impacted sales, which is fair, at least in my and around Ottawa in the east of Canada was definitely warmer than usual. DTC revenues were up 19 percent. So direct to consumers revenue to two hundred million. On the call they did say that DTC sales were strong in Asia Pacific and wholesale revenues were down 9% to 41 million. Difference between the two wholesale is just what they're selling to like retailers so for example you know wholesale would fall into if you went to Nordstrom before they exited canada they had tons

of canada goose so that would be an example here now gross profit margins were up 20 basis point versus last year to 65.1 operating profit margins were also up to 45 basis point to 6.45 so definitely encouraging on both fronts here they had net income of 7.6 million versus a loss of 10 million last year they generated 74 million in free castle versus 15.3 million free castle negative last year they opened three new stores during the quarter including in honolulu nanjing and in melbourne to bring the total new store count for fiscal 2024 to 17 so that one was interesting did you expect to uh see a canada goose in hawaii and yeah i don't know i guess australia that's kind of now i mean maybe there's yeah i know they

they do sell other kind of items, but that was definitely a bit of a head scratcher, but I'll just give them the benefit of the doubt that there is, Dan. I didn't realize, but they also launched a new resale platform in 2024 called Generations. Did you know that? No, when I was reading this this morning i just figured it out like it so you can just put your used used items on there it's kind of like yeah exactly assignment

probably yeah exactly well it sounds like so i'll show people on joint tci what it looks for so essentially you can trade in your um your canada goose items it's very specific to certain categories so if you look you'll see it's mainly coats like there are certain things they just won't trade in so what you do is you send them the item and they assign like a value to it and then they send you a gift card back so it essentially yeah it's i mean it's pre it's a predeterm amount. So then they'll sell it on their platform. And I think it's pretty smart because the gift card is probably just, you know, probably a couple hundred dollars just based on what I've seen in terms of the items selling. So they're forcing you to most likely buy some more items from them and spend more because clearly 200 bucks for Canada Goose, if you buy it new, won't go very

far. So I thought it was, I mean, probably a good call for them to do that. And I would never have considered Canada goose myself just because of the price. But I know people who have it and they say it's really good quality. And you look at some of the pricing and it's much more reasonable. Obviously, it's used, but you can get like some really nice parkas for three to $500 versus, you know, thousand to $2,000 if it's new. Yeah. This is pretty much would be used by just people who kind of want to trade

in and get a new one, I guess. I mean, yeah, exactly. Get rid of your old jacket and get two, $300 off your new one. But I mean,

I think jackets don't, they go for, they gotta be 12 or $1,200. Aren't they yeah i mean they're yeah they are expensive very expensive and i mean some of the items so list of eligible items so there's you know let's just say an eligible item so there's hats gloves mittens scarves face mask hood trims home accessories and shoes so a lot of items are just not eligible, but the big parka vests and coats seem to be. So definitely interesting. I mean, gotta give them props. I think especially where people are pinching a bit more, I think it's another source of revenue for

them. And in terms of guidance, they expect revenue to grow in the low single digits for fiscal year 2025. Wasn't Canada Goose the company that last quarter gave the massive range of guidance? I don't know if they had a massive range. It was a decent range, but I think it just came in lower than expected. I can't remember. But yeah, I mean, they did pretty good. So at least they exceeded that guidance.

Yeah, I seem to remember they made, let me see here. I'm trying to look here. Yeah, they did. They made a huge, so they had a huge deviance in guidance. So they projected guiding to earnings from 60 cents to $1.40. That was their guidance. And then their revenue guidance was $1.1 billion to $1.4, which is a huge range too.

And then here they top it by 8%. It kind of seems like they don't really know what's going to happen here. I mean, I kind of give them the benefit of the doubt, mostly because it's weather dependent on one hand, which, again, makes the opening of Honolulu a little bit of a head scratcher. But I digress. And on the other hand, there is a big macroeconomic impact. Right. This you talk, you said it right.

Like you're talking about like spending upwards of a thousand dollars for one of these codes. If you're clearly struggling, that's a purchase you're gonna push off. So I think it's probably because of those two that are so hard to predict that they have, they don't really have a choice to, yeah, exactly, give a big range. That would be my view of it. But no, overall, I think obviously a good one.

It'll be interesting to follow. We'll go on to another retailer here. So Walmart, you wanna go over what they said. I think it'll be really interesting a good one. It'll be interesting to follow. We'll go on to another retailer here. So Walmart, you want to go over what they said. I think it'll be really interesting, this one. Yeah, they had a pretty interesting quarter. I mean, they topped headline numbers, both top and bottom lines.

Revenue is up around 6% year over year. Same store sales growth in the United States was 3.8%. Sam's Club, which is kind of like their Costco-type wholesaler, they don't have them. You don't have them here, do you? I don't think we have them in Canada at all. No, but I've been to them because I have family in this state. So I remember the first time going, I actually thought it was a Costco, just being differently.

Yeah, they're like identical kind of structure. They've been around for quite a while, but they haven't brought them to Canada for some reason. Maybe just because of Costco has such a stranglehold here. I'm not sure. But they reported a 3.8% increase in foot traffic to stores and its average ticket price remains stable. When we think about companies we've went over before, like Home Depot and Starbucks, they're both reporting declines in average ticket price just due to the discretionary nature of the purchases, like coffees, you know, renovation projects, things like that. We can see Walmart kind of being a bit of a staple store is resulting in that somewhat

being maintained. E-commerce growth is still surging as well after some pretty crazy numbers in 2021 and 2022. It kind of flatlined because just the year-over-year comparables would be so difficult for them to keep up. It's now back to 20% growth on a year-over-year basis. I mean, more and more people are finding value in simply ordering online, picking up instead of doing the shopping themselves. And their third-party marketplace is driving a lot of this growth too. It isn't all just online ordering and pickup. Marketplace sellers on their third-party platform increased by 36% on the quarter, amplified by 50% plus growth in Mexico.

And their advertising segment saw 20% growth as well. I mean, it seems like every major company nowadays is getting into advertising or at least ramping up on in their advertising departments i i didn't get enough time to like look into what walmart is actually doing in terms of advertising like i don't know if you can advertise on their website or yeah it's probably their like platform when you shop online a bit like amazon yeah that would be my guess you know how there's like sponsored results that would be yeah same structure you can especially with a third-party marketplace you can take sponsored posts, all that type of

stuff and collect revenue that way. But they officially closed down their US healthcare services clinics. So they mentioned that they just don't see an acceptable path to profitability. So they just kind of got rid of them. Um, on the conference call, they said, the company said that wallets are still stretched. They're noticing less spending on non-essentials like electronics and more of an increase in food related products and other essentials as consumers look to save money swapping from higher price stores to Walmart. So the company said that it has had to significantly increase its rollbacks, which are pretty much just items that Walmart puts on sale.

I imagine everybody knows this. They didn't say outright it's resulting in weaker margins, but you would kind of think it would. However, the faster growing and higher margin businesses like advertising and their third party marketplace are kind of making up for it. Walmart sells everything, but they are a company that relies heavily on food. It makes up around 60 to 65% of their total sales. And it's just an insanely competitive market over the next while. Consumers, they're going to chase deals at this point. They're going to swap stores, whereas maybe pre-pandemic or during COVID, when money was a bit more readily available, they really wouldn't have cared.

But now, I mean, they're going to chase those deals. And as a result, they're having to roll back more items, probably not make as much money on the food, things like that to just get people in the stores. The one interesting element that I found is the company reported lower income household spending has remained relatively stable, but higher income households, which if I'm reading correctly, the company defines as household incomes of $100,000 or more are starting to spend more at Walmart. I mean, on a headline basis, I found this kind of confusing because when you think about $100,000 household income, you don't exactly think of high income. I mean, I think the median... Higher. Yeah, higher than average. But immediately when I first read this, high income to me,

I mean, the median household income in the United States is around 80,000. So 100,000 high income. I mean, I figured their benchmark for high income households will be a lot higher than this. But I mean, it's an indicator that more people are moving from higher priced grocery places or just even higher priced places for even discretionary goods to Walmart. And I mean, high interest rates are definitely impacting all households. And as a result, I mean, they're doing quite well. Now believes it will hit the high end of its guidance or even exceed it. So they called for three to 4% revenue growth and a slight decline in earnings per share. They only spoke, I believe, on revenue guidance. They said they should be able to top this. They'll either hit that 4% mark or top it. And overall, it was a pretty strong quarter from Walmart.

Yeah. And so, yeah, definitely. I mean, I read that as well in terms of higher income owners switching over to Walmart. And to me, that's logical. I've done that for certain parts of my life where we would go, you know, less often to Costco in the past year, year and a half. We just go more often. We had the membership before as well, but we just know we save a whole lot of money. It's a bit, it's not as convenient because Costco is about like a 15, 20 minute drive, but it's definitely is worthwhile. We're saving quite a bit of money. So I can just see people doing the same thing with Walmart. And one thing I found interesting is their membership and other income, which has been increasing at a nice pace. I think it's being led by there. They have something called a delivery pass, which is about like $9 a month, and you save on fees when you get it delivered. So I think it's definitely a lot of people, there's a good uptick here. And our joint TCI listeners can actually see that increase over time. And you can really see starting in 2022 really see a pickup in the revenues related to that so i have to assume a lot of people are subscribing to that because

they're using the delivery services more so you pay a monthly subscription and they'll they'll deliver you food is that how it goes yeah exactly well yeah i mean you can still get it delivered but then you have a delivery fee that's kind of paid so similar to i guess amazon prime yeah so same kind of yeah same kind of idea for that i know uh canadian company good food tried to do that and failed oh yeah miserably they tried to do the same thing like grocery delivery for a monthly subscription and it didn't work out well. I mean, Walmart obviously has the logistics end of things to make it work a lot better than a smaller company like Goodfood. But first thing that came to mind was when they tried to do that and it just didn't work out that well.

Yeah, I would imagine definitely Walmart makes a whole lot of sense, right? There's stores everywhere. So it was much easier for them to kind of pick up the logistics game and less investments than other companies would need to make. Granted, they've made a lot of investment in that space. But I think that's a good overview. Interesting to see kind of the shift in consumer where, you know, we're seeing signs more and more, despite headlines saying that the U.S. economy is, you know, doing really well, when you start looking at earnings, you start kind of seeing a bit of a different picture, which I always find fascinating when you see those headline numbers. And then you,

you know, we look at companies a whole lot and companies are not small companies only like large companies are saying something different. Just kind of, I think it's just a good reminder to not always just look at the, not just look at the headline and actually trying to dig into the numbers a bit more because those headlines can be misleading. Yeah. I mean, the one thing in terms of Walmart with a high income households, I mean, that headline was very misleading to me because I figured like high income, you know, like say a quarter million household income when in reality it's just, you know, more middle class people pretty much are shopping at places like Walmart. Yeah. Higher middle class. Higher middle. Yeah. But

yeah, but that's not as good a headlines. Yeah, exactly. I mean, one thing I'm going to be interested in is I believe Costco reports either Thursday or Friday. So we'll probably definitely go over that next week because that's going to be a very interesting quarter because they've been reporting just consistent streams of traffic into the stores. A lot of people are shifting there. I wouldn't expect that to slow down anytime soon. Tune in next week for Costco and Nvidia. There you go. Oh, yeah, Nvidia too. Yeah, that'll be a good one.

It's tomorrow, so that'll be, oh my God, I feel like the market is just hanging on that one. But yeah, so we'll kind of continue here with more of the retail side. Shopify reported a couple of weeks ago. So gross merchandise volume increased 23% to $61 billion. And that's just the total volume of merchandise sold on their platform. Revenues increased 23% to $1.9 billion. However, if you zero out the loss revenue from the logistic business they sold, it would be an

increase of 29%. And for Contex, they sold that business in June of last year. So starting in Q3, adjustment will no longer be required to compare that on an Apple to Apple basis. Merchant Solutions increased 20% to $1.4 billion. This is revenues that would be typically tied to revenue generated from payment processing fees and other merchant related services. Subscription Solutions revenue increased 34% to $511 million. This segment includes revenues from Shopify's subscription plans, which provides users with access to its e-commerce platform and the tools necessary to run an online store. Gross margins were up 390 basis points to 51.4% and free cash flow was up 170%. Now, if you own this stock, you might be wondering why this stock is down so much since the earnings release.

Well, you probably guessed it. It was guidance. So revenue growth will be slower than what the market was expecting. Their guidance said that the growth will be in the high teens to low to mid 20s and to low mid 20s when adjusting for the logistics business. Gross margins will decrease a 50 basis point in the first quarter. Low to mid single digit increase in operating expenses versus Q1. So not great to see that increase in expenses. Stock base compensation of 120 million, is 14 higher than q1 and the

highest it has it would be since q2 of last year and then obviously the valuation so it was trading around 30 times price to sell before the earnings release and now it's around 9 10 times and at the end of the day when you have high multiples and guidance comes in lower than expectations, market will react accordingly. So those are kind of the reasons why Shopify took a bit of a hit after the earnings release. Yeah. Like on a company that's this expensive and typically grows like at a, I think at like a 25, 30% pace when they come out and just kind of lower their guidance, obviously the market's going to react because they're, I mean, they're forward looking there. They don't really care all

that much on the quarter they do, but like their, their outlook moving forward is going to be the, the more important metric. I mean, Shopify is still doing very well. It's not one that I probably would have looked at when it was at, you know, 13x sales, but we'll see where it goes from here. I mean, they're still way below pandemic peaks. That was a pretty crazy time for Shopify. I think at one point they were trading at 40x, 40x sales, but that was. We'll see. We'll see with the GME craziness.

Maybe we're kind of restarting a bit of euphoria in the markets. We'll have to see. So maybe things will pick up. Who knows? And I think that's one of the things that the whole GME thing kind of shows is, unfortunately, it's probably more of symptoms of the market where a lot of people are gambling on stocks versus investing. stocks versus investing and they feel like it's the only way they can actually make money going forward is trying to hit it big hit a two three four five x in a short amount of time you know i'd like not to think that's the case but the more you kind of you know see see people chat and people that are getting into um the stock market I do get the sense that a lot of people, that's

what they want to do. And I did an interview a couple of weeks ago, the Wolf of Yonge Street, people can look it up on YouTube. He'll probably like the, you know, the free promotion here. But one of the questions he had was like, yeah, like, can you really get rich from investing, especially if you don't have a lot of money to invest? And I mean, I think I believe that you can do very well in the stock market over long periods of time if you pick good companies or you kind of you invest in low cost index fund if you're consistent. But I mean, the reality is a lot of people probably don't have much money to spare to actually invest.

And if that's the case, then you may end up just deciding to take whatever little amount of money that you saved up, whether it's a thousand or two and say, you know what, I might as well gamble on this company because, you know, it's the only chance that I have to get it to a hundred thousand or 200,000. But, you know, most of the time is that that ends up going to zero or you end up losing a lot of your money. Yeah. They, uh, I think a lot of what, you know, a lot of beginner investors see like these big accounts, especially, I mean, in the, in the dividend space, it's even more prominent. You got guys who are posting or guys or ladies who are posting about,

you know, making a hundred thousand dollars a year in dividends. And I think one thing that's not brought up enough is they probably had a high rate of savings. You know what I mean? Your savings rate is probably the biggest key when it comes to your portfolio. I mean, obviously, if you got $500 a week to put into an investment account versus somebody who's just got 50, the results are going to be much different. But in terms of the GME thing, the one thing that I found, I did some numbers. And if you bought it at peaks and sold it when it's drawn down 60% now, if you learned your lesson from that and you took whatever you had left and just put it into an index fund, it would take you at average market returns 11 years to get your initial capital back. So you've lost in one week.

In one week, you would have lost enough where it's going to take you over a decade to recover from that. enough where it's going to take you over a decade to recover from that which is uh i mean if you already don't save enough that's huge that's a huge impact to your portfolio yeah exactly and i think that's where um you know we talked about dumb money the movie and there was also another one so we were talking about two different things last week when we talked about uh you know something to watch so there's the Money, which is an actual movie. So you were right. And there's also, I'm trying to look it up here. So Eat the Ridge, the GameStop saga, which is an actual documentary on Netflix.

So I had seen that one. And then I did watch Dumb Money because, you know, I felt like I had to watch it after all. Yeah, I did watch it. It was you know I felt like I had to watch it after all yeah I did watch it was good it's good um good movie the other ones more of a is definitely a documentary so interesting for people and especially the documentary one they go over people that made that crushed it really made a killing betting on GME and a lot lot of them, you know, they made, they put most of their life savings and, you know, they, I guess, got lucky, lack of better words. But there's also some stories and one in particular, a guy who had to sell his home because he bet everything on it and he just didn't have any more money to pay his bills. So I think that's important to remember

is of all the stories that you hear that make the news of people 100Xing their money, there's some that lose everything. And actually probably a lot more that lose everything because they get in at the wrong time. I would say for every one that makes money, there's probably nine people who lost money. That's probably fair fair but yeah when we

live when we looked this up last week and you said it was a documentary i kind of looked i'm like oh it's got like pete davidson and seth rogan in it i don't think this is a documentary but yeah i haven't seen either i'm gonna have to watch them and then the last thing i wanted to chat about today so some big news on the crypto front if you you're just into Bitcoin, you may want to put your earmuffs on because this is not about Bitcoin. I'll mostly talk about that when I talk about crypto because I'm not into the whole crypto space. I know I have a lot stronger conviction in Bitcoin, although I do have some Ethereum that I bought years ago. And mainly for tax reasons, I haven't sold it but there's been some big news on the Ethereum front so change in odds that there might be a spot

Ethereum ETF so there was a big shift in sentiment yesterday with the possibility of the SEC approving the spot Ethereum ETF for those not familiar Ethereum, it's the second largest cryptocurrency by market cap. It's the largest programmable blockchain for smart contracts. And Eric Balchunas, a senior ETF analyst at Bloomberg, increased the odds of the SEC approving the spot ETF from 25% to 75% yesterday. So quite the change in odds. One of the things that he tweeted was that it's increasingly becoming a political issue in the US. And it seems like there has been a shift from politicians, especially Democrats who had been pushing back against any type of crypto regulation. And I think the reasoning that I've read was that regulation means legitimate,

legitimatizing the industry, which they don't want to do. However, Trump in recent weeks has been more supportive of the cryptocurrency space. It seems now like Democrats are afraid that their anti-crypto stance could cost them votes in the upcoming U S election. And now they're, I think starting to push some pressure on the SEC to reverse course.

So obviously, we don't get into politics a lot, but it's kind of fascinating that literally this guy that's an expert on SEC to approve or deny the spot Ethereum ETF application from VanEck, it's the first one coming up, is this Thursday on May 23rd. So when you're hearing this, this will be the deadline. So you'll probably have some more clarity on whether it was approved or not. And there's other applications that are coming up on Friday and then later in the upcoming weeks. So I have a feeling that if they do approve it, it'll be something similar to the spot Bitcoin ETF where they'll approve a bunch at the same time. And on the news, Ethereum went up 22%.

It's been up 22% since yesterday. So kind of massive jump. You know, I'd be careful for people who are interested in this. Just make sure you read on it, you understand it. You know, Ethereum can be pretty complex and obviously could also be a sell the news event. So yes, it's gone up, but it's possible that the gains have already been made that had to be made. So I think just for people, obviously, this is not investment advice. Make sure you do your due diligence. But it's some pretty big news and just shows a bit of a shift in sentiment in the US, at least from politicians who think like crypto in general

may become an issue that could give them or cause them votes coming to the election. Yeah, it's pretty crazy that we're at this point where it's being like, it's prominent politically. I mean, I know I don't know a lot about Bitcoin. I know even less about Ethereum. I mean, the one thing I was wondering is VanEck. Like I was wondering if they had a Bitcoin fund like they're kind of like a lesser known fund manager. And yeah, I looked it up and it's it's ticker is HODL. HODL. Yes. Like what a ticker is h-o-d-l hodl yes like what are some of these tickers that yeah they're really good yeah so for those not familiar hodl is kind of it's hold on for dear life and it's like very commonly used in the bitcoin space especially when it's massively down yeah people will tend to uh want uh you know promote that quite a bit more But it's interesting because Bitcoin is up on the news too,

but all of crypto is up, but definitely Ethereum has seen the biggest move. So something to keep an eye on. But anything else you wanted to add? I think we had a pretty jam-packed episode with some news coming in last minute too. No, yeah, that's about it. Okay, well, thanks for everyone for listening we

appreciate your support again if you have the chance give us a review on whichever platform you're listening to it helps us uh helps us grow helps people find us um you can find me at fiat underscore iceberg on twitter and dan on stock trades underscore ca. I get it. Sorry, I had a bit of a brain cramp there. But yeah, thanks for listening and we'll see you again next week. Yep, see you everybody. The Canadian Investor Podcast should not be construed as investment

or financial advice. The hosts 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.