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Similarly, Adobe shares were down slightly after a positive earnings report, but with the stock up 64% so far year-to-date, we think most investors will take the news in stride.
CEO Shantanu Narayen stated, “For a long time now we’ve been talking about ‘Will this customer confidence continue?,’ and I think we’ve all been pleasantly surprised by how much it’s sustained.”
Due to an unwritten rule that every CEO must now mention AI several times at every opportunity, Narayen went on to add, “We are unleashing a new era of AI-enhanced creativity around the world with innovations across our product portfolio.”
Canadian consumers prefer value over luxury
Given the stretched budgets of Canadian customers, the juxtaposition of Dollarama’s and Roots’ earnings numbers for the quarter was as predictable as it was stark.
Canadian earnings highlights
- Dollarama (DOL/TSX): Earnings per share came in at $0.86 (versus $0.77 predicted), on revenues of $1.46 billion (versus $1.40 billion predicted). Share prices were up 8% in after-hours trading on Wednesday.
- Roots (ROOT/TSX): Earnings per share came in at a loss of -$0.12 (versus -$0.10 predicted), on revenues of $49.40 million (versus $47.16 million predicted). Share prices were essentially flat after earnings were announced on Tuesday.
It’s not a surprise that Dollarama continues to show increased customer traffic as Canadians search for budget solutions. Dollarama president and CEO Neil Rossy stated, “Once again this quarter, we delivered excellent operational and financial results, including notable growth in comparable store sales, EBITDA and earnings per share. Our performance year to date for this fiscal year reflects our differentiated ability to provide compelling value across our broad product mix and a consistent shopping experience.” (For those without accounting backgrounds, EBITDA stands for earnings before interest, taxes, depreciation, amortization. The number is usually referenced as a quick measurement of the operational profits of a company.)
Rossy went on to add that Dollarama aims to open between 60 and 70 new stores in Canada over the next year.
By contrast, BNN Bloomberg reporter and anchor Amber Kanwar summed up Roots’ earnings announcement by saying, “The stock has been remarkable in how unremarkable it has been. It has basically clung to $3 per share for the past 2.5 years.”
While Roots did manage to reduce its inventory bloat, the cost resulted in higher promotional spending. Trying to put a positive spin on significant losses for the quarter, Roots CEO Meghan Roach stated, “I think we’re really in a good place from a liquidity perspective, we’ve got really healthy debt levels, we’ve got really low net debt.”
From a liquidity perspective, Roots might be in a somewhat good place. From a profit perspective… not so much.