Amazon Shares Pop on Earnings Beat, Cloud Growth
Amazon reported better-than-expected earnings and revenue for the third quarter, driven by growth in its cloud computing and advertising businesses. Amazon Web Services (AWS) revenue was a hair below consensus estimates but it’s growing faster than the same period last year. Sales grew 19% during the quarter compared to a year ago when sales accelerated by 12%. AWS is still growing at a slower rate than its top challengers, with revenue from Azure and other cloud services at Microsoft coming in at 33% and Alphabet’s Google Cloud revenue increasing nearly 35%.
Amazon’s capital expenditures surged 81% year-over-year from $12.48 billion to $22.62 billion as it continues to invest in data centers and equipment like Nvidia GPUs to power its artificial intelligence products. Amazon has launched several AI products in its cloud and e-commerce businesses, and it’s also expected to announce a new version of its Alexa voice assistant powered by generative AI. Amazon CEO Andy Jassy said the company plans to spend about $75 billion on capex in 2024 and that he suspects the company will spend more in 2025.
Advertising was another bright spot in the report, with sales in the unit expanding 19% year over year to $14.3 billion during the quarter, outpacing growth in Amazon’s core retail business.
On the retail side, Amazon’s CFO Brian Olsavsky said that “Prime remains a core contributor” to growth this year. Paid membership growth in the US and internationally continued to rise in the third quarter, he said, helped by Prime Day events in July.
Among online ad companies, Amazon showed the strongest growth, although its ad business still remains a fraction the size of juggernauts Meta and Google. Operating income during the third quarter grew 56% year over year to $17.4 billion, showing that Amazon’s focus on efficiency and continued cost-cutting continues to lift the bottom line.
Source: CNBC
Source: Business Insider
Source: Amazon
Canadian Tire sees customers make fewer trips to stores to buy fewer items in Q3
Canadian Tire Corp. Ltd. executives are seeing signs that consumers may ease up on their cautious shopping habits due to inflation, but their outlook on the economy is still far from rosy. Chief financial officer Gregory Craig said that the impact of interest rate cuts has not translated into significantly different spending behaviour. Canadians are still generally making fewer trips and putting fewer items in their baskets than a few years ago, with more of their spend going to essentials.
Chairman Greg Hicks observed that the cost of living and rising unemployment are straining consumers so much that the confidence with which they’re spending their money is the lowest he’s seen in a long time. He sees a recent succession of interest rate cuts as “a potential catalyst” to get Canadians to open their wallets again. The cuts have already narrowed the gap between essential and discretionary spending and could be interpreted as “a gradual unlock of consumer restraint.”
However, Canadian Tire still managed to record a profit in its third quarter and announced that it would now pay a quarterly dividend of $1.775 per share, up from $1.75 per share. The Toronto-based company achieved a net income attributable to shareholders of $200.6 million, or $3.59 per diluted share in the period ended Sept. 28.
On a normalized basis, Canadian Tire earned $3.59 per diluted share for the period ending Sept. 28 compared with a normalized profit of $2.96 per diluted share a year earlier. Revenue for the quarter totalled $4.19 billion, down from $4.25 billion in the same quarter last year. Consolidated comparable sales were down 1.5 per cent compared with a year earlier. Both holiday and winter shopping are facing challenges this year because weather has been warmer in many corners of the country and the span between holidays and winter is longer.
Source: BNN Bloomberg
Source: CTV News
Source: Canadian Tire
Home Depot Expects Smaller Drop In Annual Sales as Hurricane Rebuild Boosts Quarter
Home Depot, the top US home improvement chain, has forecast a smaller drop in annual same-store sales due to resilient demand from professional contractors and a lift from hurricane-related spending in the current quarter. The company also posted better-than-anticipated third-quarter results, a stark contrast from the company’s performance in the first half when it struggled with cautious consumer spending. In an interview with CNBC, Chief Financial Officer Richard McPhail said consumers are still deferring purchases as they wait for lower mortgage rates and borrowing costs and express caution about the economy.
The third quarter saw a $200 million bump in hurricane-related sales as comparable sales turned positive in October. Major storms pulled forward a lot of materials spending and will lead to more contractor work, as per Brian Mulberry, client portfolio manager at Zacks Investment Management. Home Depot has battled choppy demand over the past two years, as sticky inflation and higher borrowing costs prompted customers to pause large-scale home remodels and focus on repair and maintenance activities around their existing homes.
The U.S. Federal Reserve’s rate cuts are expected to reduce borrowing costs for homeowners looking to renovate their properties to put them up for sale, benefiting home improvement retailers. However, executives were cautious about any immediate benefit from the rate cuts, citing a need for more stabilization to prompt Americans to start remodelling projects.
Home Depot has doubled down on its investments to appeal to the “pro” customer, including its $18.25 billion deal for SRS in March. The company posted a 1.3% decline in comparable sales, the smallest decline since the fourth quarter of 2022, compared with analysts’ average estimate of a 3.25% drop. Comparable sales is expected to fall 2.5% for fiscal year 2024.
Source: Reuters
Source: Globe and Mail
Source: CNBC
Source: Home Depot
Loblaw Reports Sales, Profit Growth in Third Quarter on Strength in Discount Segment
Loblaw Cos. Ltd. has been benefiting from inflation-weary shoppers turning to its No Frills and Maxi discount stores to save on groceries. However, customers have been pulling back at the company’s Shoppers Drug Mart stores, where prices are not as competitive. Starting this weekend, Loblaw will begin attempting to address this by reducing prices on more than 400 food items sold at the drug stores by roughly 10% to 15%. The shift to value and discount has a slight impact on the food sales in the company’s Shoppers Drug Mart stores.
Same-store sales at the front of the stores fell by 0.5%, offset by a 6.3% increase in pharmacy and healthcare services. This drove total same-store sales growth of 2.9% in Loblaw’s drug stores in the quarter ending Oct. 5. Sales at the company’s grocery stores also grew, thanks to higher customer traffic at No Frills and Maxi, as well as at the Real Canadian Superstore chain. Canada’s largest grocer reported its adjusted profits grew by 6.7% in the third quarter.
The rate at which food prices are rising has been slowing since reaching double-digit highs early last year. However, after cumulative price increases of the past few years, shoppers are still left with much higher grocery bills overall. This has led to a sustained shift in shopping behaviours, with even those who continue to shop at Loblaw’s conventional grocery stores buying more house-brand products, particularly from the discount No Name line.
Loblaw, a Canadian grocery retailer, is set to report its largest increase in tonnage in a decade this fiscal year. The company has expanded its discount locations and opened 25 new stores in the quarter, while also testing two new No Name stores that lower prices by lowering operating costs. Loblaw’s chief executive officer said that the company is planning to introduce more than 50 new stores in 2025, beating this year’s expansion target, as inflation-weary consumers continue to shop around for discounts and deals.
Loblaw’s internal food inflation was higher than Statistics Canada’s Consumer Price Index, which was up 2.3%. Same-store sales at the company’s grocery stores grew by 0.5% in the quarter, as customers visited stores more often but bought fewer items during each trip. E-commerce sales were up 18.5%.
However, Loblaw missed analysts’ estimates for quarterly revenue, as demand has slowed for non-essential products such as household items. The company’s revenue grew 1.5% in the third quarter, to $18.5 billion, falling below analysts’ expectations of $18.6 billion. Loblaw reported net earnings available to common shareholders of $777-million or $2.53 per share, compared to $621-million or $1.95 per share in the previous year.
A previous charge related to a commodity tax matter at President’s Choice Bank was reversed during the quarter, positively affecting the company’s net earnings by $125-million, offset by the amortization of assets related to Shoppers Drug Mart and the Lifemark chain of clinics. Adjusted net earnings available to common shareholders were $767-million or $2.50 per share in the third quarter, compared to $719-million or $2.26 per share in the prior year.
Source: Globe and Mail
Source: The Star
Source: Loblaw
Lowe’s Same-Store Sales Forecast Boosted by Storm Recovery; Muted DIY Spending Weighs
“Our results this quarter were modestly better-than-expected, even excluding storm-related activity, driven by high-single-digit positive comps in Pro, strong online sales and smaller-ticket outdoor DIY projects,” said Marvin R. Ellison, Lowe’s chairman, president and CEO. With a disciplined focus on its leading capital allocation program, the company continues to generate long-term shareholder value. During the quarter, the company repurchased approximately 2.9 million shares for $758 million, and it paid $654 million in dividends.
Lowe’s forecasted a slower-than-expected drop in annual comparable sales, citing a boost to its current-quarter sales from hurricane-related demand. The home improvement retailer also beat third-quarter comparable sales and profit estimates, similar to Home Depot’s +0.17% increase results.
Hurricanes Helene and Milton devastated parts of the United States, causing extensive damage to homes, bridges, power infrastructure, and crops. These events drove customers to buy more water cans, generators, chainsaws, and cleaning supplies. Lowe’s results this quarter were modestly better than expected, driven by growth in the company’s professional category, strong online sales, and smaller-ticket outdoor DIY projects.
Lowe’s trimmed its annual adjusted margin forecast to a range of 12.3% to 12.4%, from a previous range of 12.4% to 12.5%. The company, which generates roughly 75% of sales from the do-it-yourself category, has seen demand weaken for projects such as flooring, kitchen, and bath remodelling, which typically require refinancing. Quarterly gross margins were light at 33.7%, likely driven by a low-margin product mix of storm sales.
Source: Globe and Mail
Source: Lowes
Walmart Hikes Its Outlook Again as Shoppers Spend More Outside the Grocery Aisles
Walmart has raised its forecast for net sales growth between 4.8% and 5.1% for the full year, compared to its previous forecast of between 3.75% and 4.75% sales growth. The updated outlook came as Walmart posted third-quarter earnings and revenue that beat expectations.
Chief Financial Officer John David Rainey said sales of general merchandise grew year over year for the second quarter in a row after declines for 11 straight quarters. However, consumers are waiting to make purchases until they see a compelling deal, especially as they pay more for food.
Walmart’s earnings per share and revenue rose from $160.80 billion to $169.59 billion in the three-month period ending October 31, compared with Wall Street’s estimates. Comparable sales, an industry metric, jumped 5.3% for Walmart and 7% at Sam’s Club, excluding fuel. Customers visited Walmart’s stores and website in the U.S. more and tended to spend more when they did compared with the year-ago quarter.
Walmart U.S. transactions rose 3.1%, and average ticket increased by 2.1% year over year. E-commerce sales rose 22% in the U.S., with gains coming from curb-side pickup and home delivery, along with growth in Walmart’s advertising and third-party marketplace businesses. Walmart shoppers have also been willing to pay more to get their purchases faster, with 30% of customer orders in the U.S. coming with an extra fee to get delivery within a shorter time frame.
Walmart’s e-commerce business is approaching profitability due to the use of delivery costs and incremental fees customers are willing to pay for convenience. The company, the nation’s largest retailer, is dealing with mixed factors this holiday season, including moderate inflation, President-elect Donald Trump’s proposal for tariffs on imports from China, shorter holiday seasons, and unseasonably warm weather in parts of the US.
Tariffs could force Walmart to increase prices, but it is too soon to say which merchandise may get more expensive. About two-thirds of the items sold by Walmart are made, grown, or assembled in the U.S., reducing the tariff risk for those goods. Walmart has been working with suppliers and its own private-brand assortment to try to bring down prices.
Holiday spending is expected to increase this year, but at a modest rate. The National Retail Federation expects holiday spending in November and December to increase 2.5% to 3.5% compared to 2023, to a range between $979.5 billion and $989 billion. This is lower than the 3.9% year-over-year jump from the 2022 to 2023 holiday season, when spending totalled $955.6 billion.
Some general merchandise gains indicate that consumers are feeling relief from inflation, while others have to do with Walmart’s strategy, as the company has deepened its assortment of toys and home goods through its third-party marketplace. Walmart shares are up nearly 65% this year, more than the S&P 500’s approximately 24% gains during the same period.
