Mar 29, 2023
The Daily Chase: Federal budget allocates $43B to new investments; Lululemon tops Q4 expectations
Experts panel's reaction to the 2023 federal budget
Looks like a path back to a balanced budget is off the table for the time being. The federal government unveiled its latest spending plans yesterday, adding about $43-billion in net new costs over a six-year forecast horizon, taking a path back to the black out of play for now. The more aggressive spending plans aim to kick-start a green energy transition that the feds hope will eventually generate new growth and offset some of the concerns American subsidies will suck investment dollars south of the border. Now, all this new spending does come as the economic outlook becomes cloudier – the feds project revenue will be about $34-billion less than the earlier forecast back in November. There’s also the matter of Ottawa’s so-called “fiscal anchor” – the feds have been adamant in the past that a declining debt-to-GDP ratio showed it was on the right path, but they’re getting away from it for the time being, with that key metric expected to increase to 43.5 per cent in the coming year (up from 42.4 per cent) before declining very slowly over the course of the forecast horizon.
LULULEMON TOPS Q4 EXPECTATIONS, SHARES SOAR
Shares of Lululemon are surging in the premarket (up 16 per cent at last check) after the company topped fourth quarter profit and revenue expectations and delivered a somewhat rosy outlook for the year ahead. The athletic-wear company sees net revenue coming in as high as US$9.4 billion this coming year, easily topping street expectations for US$9.1 billion. As for the quarter itself – global sales were up 30 per cent in Q4, and those pesky inventory buildups we’ve seen across the retail landscape seem to be easing. While inventories were up 50 per cent year-over-year in the fourth quarter, hitting US$1.4 billion, that was lower than the figure a quarter prior, when inventories totalled US$1.85 billion.
DOLLARAMA POSTS Q4 BEAT, RAISES DIVIDEND
We’ve got a top and bottom line beat out of Dollarama in the fourth quarter, with sales at stores open for at least a year up 15.9 per cent year-over-year – a marked acceleration from the 5.7 per cent same-store sales growth in the same quarter a year ago. It’s a foot traffic story, by and large – the number of transactions were up 14.1 per cent in the quarter, while average transaction size rose at a tepid 1.6 per cent pace. The company says part of the equation is stronger demand for consumables (ie, food, household staples like soap, that kind of thing), which sort of fits with what we’re seeing in terms of consumer behaviour these days, as Canadians facing the squeeze from higher inflation look for lower-cost options to keep the household running. That said, while the company expects continued strong demand for those affordable household products through the first half of the year, it does expect the trend to moderate as we enter the second half. As for that dividend, Dollarama is boosting its quarterly payout by 28 per cent to $0.0708 per share, up from the current $0.0553.
OTHER NOTABLE STORIES
- UBS is turning to an old hand to help the company navigate the integration of Credit Suisse, announcing former CEO Sergio Ermotti is returning to the role he held for nine years after the company’s Annual General Meeting next week. Ermotti replaces current CEO Ralph Hamers, who has held the post for a little over two years.
- Shares of Micron Technology are gaining in the premarket – up two per cent and change – after the chipmaker issued a better-than-expected outlook for the coming quarter, a sign the industry-wide slump may be easing.
- Macy’s CEO Jeff Gennette has announced he is retiring from the role next February after about seven years on the job.
- Notable data: U.S. Pending Home Sales
- Notable earnings: Dollarama, Paychex, Constellation Software
- U.S. House Financial Services Committee hearing on Federal Regulators’ response to recent bank failures (1000)