The mass retailer company reported a solid earnings beat on the back of increased grocery and essential item sales. This new revenue was more than enough to offset the lowered sales of electronics and other discretionary items. Investors are still not in the mood to see the bright side these days, and only rewarded the share price with a 1% raise despite the significant earnings beat.
Target had a similarly upbeat earnings report, as it noted a 25% reduction in discretionary merchandise inventory. Target shares were up 3% on Wednesday.
On the other hand, Home Depot was down 2% on Tuesday, having missed revenue expectations. The big orange retailer reported that customers were buying fewer big-ticket items, like patio sets and grills. Overall, Home Depot’s revenues are still up $47 billion per year from 2020, due to the COVID-inspired renovation boom.
In a trend worth keeping an eye on, both Home Depot and Target reported a large increase in retail theft over the last year. One has to wonder if quickly increasing prices are behind the increase in shoplifting.
Insurance equals stability, it seems
While Canadian banks get a lot of attention from Canadian investors, our domestic insurance companies also have a strong presence on the Toronto Stock Exchange. Due to new accounting standards this year, revenue numbers were not yet available but quarterly earnings results were mostly in line with expectations. (All figures in Canadian currency in this section.)
Canadian insurance earnings highlights
Overall, the Canadian insurance stalwarts continue to generally meet expectations and reliably generate profits. No lasting downward or upward momentum was created this quarter, as analysts at the market at large appear satisfied that they have a solid reading on the companies.
To give an idea how the insurance companies as a whole have been doing, the CI U.S. & Canada Lifeco Covered Call ETF (FLI) is down 8.33% YTD, while the iShares Equal Weight Banc & Lifeco ETF (CEW) is up 4.89% year to date (YTD). CEW is an all-Canadian offering, whereas FLI is more geographically diversified, but solely focused on the insurance sector.
The Canadian insurance industry is facing some recent headwinds due to changes in the tax code around the rate of tax applied to dividends that insurers receive from their investments in other Canadian companies. Pre-2023, insurers could take your premiums, invest that money into Canadian companies, then receive dividends without paying additional tax on them. This lack of tax obligation should not be characterized as a loophole, and is instead broad consistently with the widespread accounting concept of corporate tax integration. As of this year, the Canadian government stated that those dividends will be treated as business income, and consequently will be taxable.