A survey of North American equities heading in both directions
On the rise
Shares of clothing retailer Roots Corp. (ROOT-T) soared 10.8 per cent after it reported a third-quarter profit of $2.4-million, up from a profit of $519,000 in the same quarter last year.
The company says the result amounted to six cents per diluted share for the quarter ended Nov. 2, compared with a penny per diluted share a year earlier.
Sales for the quarter totalled $66.9-million, up from $63.5-million a year ago.
The increase came as direct-to-consumer sales rose to $54.2-million compared with $52.2-million in the same quarter last year, while comparable sales grew 5.8 per cent.
Roots says the growth was driven by strong performance of its active and core fleece collections.
Partner and other sales amounted to $12.7-million, up from $11.3-million.
Chief financial officer Leon Wu says holiday shopping is in full swing but it’s too early to tell whether the company’s busiest sales period will be impacted by the shorter span between Black Friday and Christmas Eve.
“We’re still early in the quarter,” Mr. Wu said, when asked by an analyst Wednesday whether the five fewer days in the typical holiday shopping were weighing on the apparel retailer.
“So far we’re seeing the positive momentum ... but it’s something that we will continue to monitor as we go into the holiday period.”
As the clock ticks down to Christmas, all eyes are on retailers like Roots because their insights offer a window into consumer sentiment and spending.
This year, shoppers are closely watching their spending, even though inflation, interest and mortgage rates have eased.
The company is also navigating a forthcoming GST break set to last two months which will offer tax relief on children’s clothes, some toys and even Christmas trees, as well as a Canada Post strike, which has halted mail service and the delivery of some orders destined to be gifts.
Roots isn’t very impacted by the postal strike. Chief executive Meghan Roach told The Canadian Press last month that the company switched a few years ago to using FedEx for the majority of its shipments.
On the same call as Mr. Wu on Wednesday, she added that despite all the quirks of the holiday season, she is “seeing the consumer out there and shopping with us during the holiday season.”
Apple (AAPL-Q) is developing its first server chip specially designed for artificial intelligence, the Information reported on Wednesday, citing three people with direct knowledge of the matter.
The iPhone maker is working with Broadcom (AVGO-Q) on the chip’s networking technology, which is crucial for AI processing, the report said.
Apple and Broadcom did not immediately respond to Reuters’ requests for comment.
Following the report, shares of Broadcom were up 6.6 per cent in Wednesday trading.
Last year, Apple had signed a multi-billion-dollar deal with the chipmaker to develop 5G radio frequency components.
Albertsons (ACI-N) on Wednesday in the wake of terminating its US$25-billion merger agreement with Kroger (KR-N) after courts blocked the deal and sued its rival, alleging a breach of contract that led to the deal’s demise.
The company’s shares moved in opposite directions on Wednesday with Kroger shares rising in midday trading.
The formal termination ends a two-year long effort by the chains to combine that regulators argued would lead to higher prices for shoppers. Albertsons said it was suing due to Kroger’s failure to take “any and all actions” to get the deal approved.
Albertsons is seeking billions of dollars in damages along with the US$600-million termination fee. Kroger did not immediately respond to a request for comment on the lawsuit.
“Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement,” Albertsons CEO Vivek Sankaran said.
Two different courts blocked the deal on Tuesday, siding with the Federal Trade Commission, which moved to stop the deal, and argued in a trial that the merger would eliminate competition between the traditional grocery chains, causing higher prices and reducing leverage for unionized workers.
The deal became a symbol of surging grocery costs. U.S. food prices have risen by 25 per cent over the last four years, and while food inflation is showing signs of cooling in 2024, grocery bills remain a concern for shoppers.
The FTC sued along with attorneys general from eight states and the District of Columbia. Colorado, like Washington, sued on its own to block the deal.
GameStop (GME-N) reported a third-quarter profit on Tuesday as the videogame retailer ramps up its cost-saving efforts, including shutting stores and selling higher-margin goods.
CEO Ryan Cohen told investors in June the company would operate with “a smaller network and more value-added” items as a part of its attempt to boost sales and profitability.
This helped GameStop report a net income of US$17.4-million in the third quarter, compared with a net loss of US$3.1-million a year ago.
Its shares were up 7.6 per cent in Wednesday trading.
The company has been grappling with a slower turnaround of its main business as it struggles to ramp up sales of videogame hardware and collectibles, while facing stiff competition from online retail giants such as Amazon and eBay .
It is also burdened by an uncertain macroeconomic environment, as consumers cut back on discretionary spending owing to stubborn inflation and a slow recovery in the gaming market.
Wedbush Securities analyst Michael Pachter said he does not see any signs the company’s “core business is salvageable.”
“There is no turnaround, just stock sales to willingly foolish investors,” Pachter said.
Its shares have rallied more than 50 per cent this year after stock influencer Keith Gill, also known as “Roaring Kitty,” reemerged earlier in 2024, sparking excitement among his followers.
The company has taken advantage of the jump in its stock price by raising around US$3-billion earlier this year through share sales.
Mr. Gill was a key figure in the meme-stock frenzy of 2021, in which GameStop stock surged 1,600 per cent at one point in January that year, crushing hedge funds that had bet against the videogame retailer.
GameStop’s third-quarter revenue fell 20 per cent to US$860-million, compared with US$1.08-billion a year ago.
Cash and cash equivalents at the end of the third quarter were US$4.58-billion, compared with US$4.19-billion in the preceding three-month period.
Candel Therapeutics Inc.’s (CADL-Q) experimental immunotherapy to treat a type of prostate cancer met the main goal of a late-stage trial, helping the company’s shares more than double in value in premarket trading.
The immunotherapy, CAN-2409, in combination with radiation therapy, significantly improved the time patients lived without any signs or symptoms of the cancer, compared to radiation alone, the company said on Wednesday.
More than 100,000 men are diagnosed with prostate cancer every year in the U.S., the company said. According to American Cancer Society, it is the second-leading cause of cancer death in American men.
The currently available treatments for the disease include Johnson & Johnson’s Zytiga and Novartis’ Pluvicto.
Candel said it plans to hold regulatory discussions with the U.S. Food and Drug Administration and present full data from the study at upcoming medical meetings.
The company enrolled 745 patients in the trial testing the therapy as a treatment for intermediate-to-high-risk localized prostate cancer.
The most common treatment-related side effects, including fever and chills, were mild to moderate, it said.
However, a separate mid-stage study testing CAN-2409 as a monotherapy in patients with low-to-intermediate risk localized prostate cancer did not significantly improve the time to radical treatment, the company said.
H.C. Wainwright analyst Vernon Bernardino estimates peak annual sales of US$818-million for the therapy in prostate cancer alone by 2033.
On the decline
Parex Resources Inc. (PXT-T) dropped 7.6 per cent after announcing five agreements with Colombia’s majority state-owned energy company Ecopetrol on Wednesday to strengthen the development of oil and gas production in the Andean country.
The initial four agreements, concerning projects planned for Colombia’s Putumayo and Narino provinces, will see investment of some $350-million, where the companies hope to add incremental volumes of crude to existing projects as well as prospective resources in the surrounding areas.
“Here we’re betting on a potential of about 100 million barrels of oil equivalent,” Ecopetrol’s Chief Executive, Ricardo Roa, told journalists at an energy conference in Cartagena, organized by Colombia’s national hydrocarbons agency (ANH).
In Cundinamarca province, a fifth deal slated to start next year will see $60-million invested in developing an exploratory well, aimed at eventually producing gas and light crude, Ecopetrol said.
“There we’re looking at an in situ potential of about 1 billion barrels of oil equivalent, with a technical volume close to 330 million equivalent barrels,” Mr. Roa said.
The government of leftist President Gustavo Petro has made weaning Colombia off of its reliance on fossil fuels, particularly oil and coal, in favor of greener energy alternatives a priority.
Exxon Mobil (XOM-N) dipped 0.7 per cent on Wednesday after it said its annual project spending will rise to between US$28-billion and US$33-billion between 2026 and 2030 as it looks to boost its oil and gas output by 18 per cent.
This follows its acquisition of U.S. shale producer Pioneer Natural Resources.
The top U.S. oil producer laid out a five-year plan to increase earnings by US$20-billion and cash flow by US$30-billion to fund its expansion plans for oil and liquefied natural gas (LNG) production and drive shareholder returns.
The new targets come as Exxon is riding high. Its Guyana operations are generating huge profits and U.S. shale business is on track to double oil production this year through its acquisition of Pioneer. In LNG, it is a mixed bag with setbacks in its U.S. and Mozambique projects.
CEO Darren Woods said the increased project spending is expected “to generate returns of more than 30 per cent over the life of the investments.”
Exxon aims to more than triple its production in the Permian, the top U.S. shale field, to 2.3 million barrels per day (bpd) by 2030 and pump 1.3 million bpd from its lucrative Guyana operations.
Overall oil and gas output should hit 5.4 million bpd, up about 18 per cent from roughly 4.58 million bpd currently.
The company’s shares were down with many of the projects and targets already known. Exxon said it will add two projects in Guyana by 2030, in line with a previous statement of 7 to 10 total, while its LNG target remains 40 million metric tons per annum.
The new targets aim to assure shareholders that returns can be sustained through oil market price swings. Global benchmark Brent crude is expected to drop to about US$75 per barrel next year from US$81 this year, squeezing oil company profits.
But Exxon’s 12.7-per-cent year-to-date share gain is well above the sector’s about 8.4-per-cent appreciation as measured by energy mutual fund XLE.
Its share-price increase contrasts with from double-digit percentage declines in shares in ConocoPhillips (COP-N) and Occidental Petroleum (OXY-N) this year.
General Motors (GM-N) said late Tuesday it will stop funding and exit robotaxi development at its majority-owned Cruise business, a blow to the automaker that had made the advanced technology unit a top priority.
GM said it would no longer fund work on the robotaxis “given the considerable time and resources that would be needed to scale the business, along with an increasingly competitive robotaxi market.” The automaker has invested more than US$10-billion in Cruise.
GM shares slid 1.3 per cent in trading on Wednesday.
In 2023, GM CEO Mary Barra said the Cruise business could generate US$50-billion in annual revenue by 2030.
“This is the latest in the series of decisions that GM has announced which underscore our focus on having the right technology for the future of our company and the industry and reflects our commitment to execute with speed and efficiency,” she said on Tuesday.
Ms. Barra declined to say how many Cruise employees could be moved over to GM.
Some of GM’s competitors have already stopped funding autonomous driving businesses, citing the costs and difficulties involved in developing such sophisticated technology.
In October 2022, Ford Motor shifted spending away from its Argo AI operation, winding down the venture that was also funded by Volkswagen. Ford is still working on advanced driver assistance systems in-house different from the fully autonomous ones being developed at Argo AI.
Last month, Cruise admitted to submitting a false report to influence a federal investigation and agreed to pay a US$500,000 criminal fine as part of a deferred prosecution agreement. The Justice Department said Cruise failed to disclose key details of an October 2023 crash to federal regulators in which one of its robotaxis in San Francisco struck and seriously injured a pedestrian.
Macy’s (M-N) on Wednesday cut its annual profit forecast, sending shares down as weak demand at its nameplate stores and heavy discounts cloud its expectations for the crucial holiday shopping season.
The department store chain had last month delayed its quarterly results after it found a single employee made wrong entries to hide about US$151-million of delivery expenses between the fourth quarter of 2021 through third quarter of 2024.
The company, whose shares have lost nearly 17 per cent of their value this year, is looking to revive sales by closing underperforming stores and relying on its luxury outlets Bloomingdale’s and Bluemercury.
“Macy’s is still facing challenges while operating in a competitive promotional space against an uncertain macro-operating environment with traffic challenges to the category,” said Dana Telsey, analyst at Telsey Advisory Group.
The company has been the target of two activist investor actions this year, the latest from Barington Capital and Thor Equities, as department stores struggle to catch up with more consumers shifting online.
The investor group has asked Macy’s to explore options for Bloomingdale’s and Bluemercury, and create a separate unit for its real estate business.
Its real estate assets, including flagship Herald Square outlet, are worth about US$5-billion to US$9-billion, according to Barington and Thor Equities. In comparison, its market capitalization was US$4.6-billion.
In July, Macy’s ended talks with Arkhouse Management and Brigade Capital over a US$6.9-billion takeover bid, saying they did not offer “compelling value.”
It expects annual adjusted profit per share of US$2.25 to US$2.50 compared with prior expectation of US$2.34 to US$2.69, which was adjusted to account for a full-year estimated delivery expense impact of US$79-million.
Hershey (HSY-N) declined after its main controlling owner rejected Mondelez International’s (MDLZ-Q) preliminary takeover offer, terming it as too low, Bloomberg News reported on Wednesday, citing people familiar with the matter..
Bloomberg reported earlier this week that Mondelez was exploring the acquisition of chocolate maker Hershey, in what could have created one of the world’s largest confectioners.
The Hershey Trust Company’s approval is key in any takeover deal, given its voting control of the chocolate maker.
Earlier in the day, Mondelez said it would focus on “bolt-on” deals similar to the recent acquisitions of Chipita, Clif and Ricolino. It also announced a share buyback program of up to US$9-billion.
Mondelez’s deals with Chipita, Clif and Ricolino in 2022 were all under US$3-billion. In contrast, Hershey has a market capitalization of about US$38-billion, according to LSEG data.
With files from staff and wires