A Lululemon store in Toronto last Wednesday. The athleisure retailer is languishing at a seven-year low ahead of earnings this week.Sammy Kogan/The Globe and Mail
It’s June, and for parents that means one thing: schools act like they’ve discovered a warehouse full of activities that they forgot to schedule all year and need to clear the shelves before summer.
Field trips. Wacky Hair Day. Wear-a-Random-Colour T-Shirt Day (cerulean, apparently). Recitals. Conveniently scheduled for the middle of the day.
It’s like getting ready for a marathon by juggling flaming batons.
In this economy? Canada is expected to churn out 10,000 new jobs for the month of April. The numbers come out on Friday. That would be better than the 17,700 drop in the previous month but hardly cause for celebration. Especially since we now know that Canada was in a technical recession for the past two quarters (back-to-back quarters of contracting growth). In retrospect, that makes sense because job growth has been anemic and unemployment is elevated at 6.9 per cent. The head scratcher is that the market is still pricing in a bias toward rate hikes.
“The Bank of Canada would need to have its head examined to be contemplating rate hikes, which have been priced into the Canadian money market these past two months. Nutso,” wrote David Rosenberg of Rosenberg Research & Associates after last week’s soft GDP print. He argues that weak job growth coupled with weakness in areas like retail while inflation remains subdued means that the next move by the Bank of Canada should be a rate cut, not a hike.
Meanwhile, in America We’ll also get a data dump out of the U.S. that will include a read on the manufacturing and services sector culminating in jobs data on Friday. Pay attention to the inflation components of the manufacturing and services data released by the ISM. Both readings were at the highest level since 2022 as the war in Iran drives up prices and roils global supply chains. Meanwhile, economists are expecting a slowdown in hiring in the U.S. with 65,000 jobs created compared with the 115,000 jobs created in March.
“For the [Federal Open Market Committee], another decent month of job gains, nothing bad happening, and decent internals, reinforces the resilience theme,” wrote Jonathan Pringle of UBS. “That in turn should fuel the hawkish narrative and embolden the hawks among the FOMC participants to make their case that the risks that need to be addressed are the upside risks to inflation rather than worry about downside risks to the labor market.”
Downward facing dog: Lululemon LULU-Q is languishing at a seven-year low ahead of earnings this week. To recap the drama: Activist investor Elliott Management took a $1-billion stake, long-time CEO Calvin McDonald announced his departure, top shareholder and founder Chip Wilson started a campaign to shake up the board while lambasting current management for failures, then the company announced a former Nike executive would take the CEO job in September.
Against this backdrop, Lululemon shares continued to lose ground as sales growth has stalled. Needless to say, a lot of baggage when the retailer reports Thursday afternoon.
“The market is waiting to see if LULU can reinvigorate demand with product newness,” wrote Rick Patel of Raymond James. The company’s recent product launches have stumbled. Lulumon had to temporarily pause online orders of their new “Get Low” pants because of customer complaints. “With a new CEO joining in September, LULU is in transition mode with a strategy subject to change.” Valuation may seem undemanding, Patel added, trading at just 9x earnings, but it’s “too early to call a turnaround.”
Tech dribbles: Cybersecurity stocks have taken off like a shot and this week we’ll see if that was deserved when Palo Alto PANW-Q and Crowdstrike CRWD-Q report results. Both stocks are trading at records. For a while there they got caught up in the SaaS-pocalypse but the market has decided they are AI winners.
“Our recent checks in the field reinforced our view that AI will be the biggest growth catalyst for the cyber industry in the past 20 years rather than its demise, with 8 of every 10 customers we have spoken with believing the incumbent cybersecurity vendors with the right products and AI strategic roadmap will be the winners,” wrote Dan Ives of Wedbush, who rates both stocks top picks.
Palo Alto Networks reports Tuesday after the bell and Crowdstrike is out Wednesday.
Cheesy: Saputo SAP-T shares have been choppy in the past two months, but there is no denying the stunning recovery from the 2025 lows with the stock up 85 per cent since then. This quarter could be a messy one because they have divested their Argentine operations and saw price volatility in the dairy markets. And because the stock has done so well, share based compensation could also affect profitability.
“Given that Saputo has largely extracted benefits from its long-standing capital initiatives, we believe the story will shift to a focus on accelerating organic growth,” said Vishal Shreedhar of National Bank, who downgraded the stock in April. Saputo reports Thursday after the bell.
In the Money with Amber Kanwar is Canada’s top investing podcast. New episodes out Tuesday and Thursday. Subscribe at www.inthemoneypod.com