These are stories Report on Business is following Wednesday, Feb. 25, 2015.
Follow Michael Babad and The Globe's Business Briefing on Twitter.
Target takes big hit
Target Corp. is having its "Blame Canada" moment today, posting a $2.6-billion quarterly loss on its short-lived, ill-fated venture north of the border.
The U.S. retailer, which is quitting Canada after just about two years, plunged to that loss of $4.14 a share from a profit of $520-million, or 81 cents, a year earlier.
The hit was expected, of course, but today's fourth-quarter results lays it out, rather starkly, by the numbers.
Target took a pretax hit of $5.1-billion on its Canadian stores, for a loss of $5.59 a share.
Some of the assets and liabilities are based on estimates, Target said, involving, among other things, "estimated losses related to claims that may be asserted against Target Corp., primarily under guarantees of certain leases."
That means there could be changes down the road. And significant ones, at that.
"Given the early stage of its exit, these estimates involve significant judgment and are based on currently available information, an assessment of the validity of certain claims, and estimated payments by the Canada subsidiaries," it said.
"The company believes that it is reasonably possible that future adjustments to these amounts could be material to its results of operations in future periods."
When you strip out the one-time issues, adjusted profit rose to $1.50 from $1.31, leading chief executive officer Brian Cornell to laud the quarter.
"We're seeing early momentum in our efforts to transform Target, and our team is entering the new fiscal year with a singular focus on continuing to differentiate our merchandise assortment and shopping experience while controlling costs by reducing complexity and simplifying the way we work," he said.
(One wonders whether Canada was complex.)
Target's fourth-quarter sales rose 4.1 per cent to $21.8-billion as same-store sales, a key measure in retailing, rose 3.8 per cent. The rise in sales was the fastest in almost three years.
Chief financial officer John Mulligan said today that the company is aiming to trim costs and in turn boost needed investment.
"There is a lot of investment to be done," he said.
"We feel that we can pay for those investments with cost take-outs."
The retailer also forecast adjusted earnings per share of 95 cents to $1.05 in the first quarter.
Target, of course, is also rebounding from that huge data controversy.
"We believe the company is making progress in recovering interest from consumers following the company's 2013 data breach," said Efraim Levy of S&P Capital IQ.
HBC in real estate ventures
Others aren't so troubled by the Canadian scene.
As The Globe and Mail's Marina Strauss reports, Hudson's Bay Co. announced today it's joining with two real estate firms, Canada's RioCan Real Estate Investment Trust and Simon Property Group Inc. of the U.S., to create new ventures worth more than $4-billion.
It may be the first step to taking its Canadian and U.S. real estate properties public, and drove HBC stock up sharply today.
The two real estate companies have committed property and cash contributions of more than $670-million to the joint ventures, while Hudson's Bay's property contribution is valued at more than $3.8-billion, based on a blended capitalization rate of about 5.67 per cent, said executive chairman Richard Baker.
Shades of 1999
Remember "irrational exuberance" and the heady 1990s?
Well, the Nasdaq composite is almost back to the heights it scaled before the infamous burst of the dot-com bubble.
The tech-dependent index closed yesterday at 4,968.12, up just a shade but still its 10th consecutive session of gains and closing in on the record 5,048.62 set so long ago, though it slipped marginally today.
Of course, it's not the same now as it was in early March, 2000, when the bubble popped, analysts say.
First, it comes amid record levels in many markets, and it's largely driven by five specific players, notably Apple Inc., Amazon.com Inc., Netflix Inc., Biogen Idec Inc. and Gilead Sciences Inc., said analyst Jasper Lawler of CMC Markets in London.
"A lot rests on their shoulders," Mr. Lawler said, noting that many other tech stocks have not performed particularly well.
"So the breadth, I guess you'd call it, has been pretty narrow," he added. "But in a way, why buy the Nasdaq when you can just buy those five."
And, of course, should something like a big earnings miss hit one or more of those companies, there goes the index.
Having said that, Mr. Lawler does expect the index to reclaim its high.
Fourteen years ago, just about anything billed as "dot-com" could bask in the glow. Now, companies like Apple, Amazon and Netflix speak volumes about our society today.
- Follow our Inside the Market blog (for subscribers)
- Nasdaq nears all-time high, but this time, it's no bubble
- Shane Dingman: Pebble goes back to Kickstarter, raises $1-million in less than an hour
RBC profit up
Royal Bank of Canada delivered record-high earnings in the first quarter, easing concerns that Canadian banks are struggling to deliver rising profits in a difficult environment of low interest rates and slowing economic activity, The Globe and Mail's David Berman writes.
RBC posted a profit of $2.46-billion, up 17 per cent from a year earlier, and hiked its quarterly dividend by 2 cents a share, or 3 per cent, to 77 cents.
On a per-share basis, RBC's earnings rose to $1.65, up from $1.38 last year and well above analysts' estimates of $1.55 a share.
- David Berman: RBC hikes dividend as profit surges 17 per cent
- David Berman: National Bank profit edges higher in first quarter
Magna hikes dividend
Magna International Inc. is hiking its dividend and splitting its stock two-for-one after posting fourth-quarter results that topped the estimates of analysts.
The dividend will rise to a record 44 cents (U.S.) a share from 38 cents before the stock split, which will take effect next month, The Globe and Mail's Greg Keenan reports.
The moves come after Magna reported a profit of $2.44 a share in the fourth quarter, up from $2.03 a year ago and ahead of analysts' expectations of $2.24. Profit rose 11 per cent to $509-million from $458-million.
Magna also trimmed its 2015 outlook from a forecast made last month in Detroit.
It now expects sales to range between $33.1-billion and $34.8-billion, compared with the previous forecast of a range of $34.4-billion to $36.1-billion.
Encana cuts budget
That's just about where the really good news ends. Now we move to Canada's oil patch.
Encana Corp. today, like others, cut its 2015 spending plans amid the oil slump, though it posted what it called "strong results from a transformative 2014."
Encana posted a big drop in fourth-quarter operating profit, to $35-million, or 5 cents a share, from $226-million, or 31 cents a year earlier.
Its net profit fell to $198-million from $251-million.
It also slashed some $700-million from its 2015 budget.
"The transformation of Encana occurred at a pace that exceeded even our own expectations and our accomplishments in 2014 shouldn't be overshadowed by today's low commodity price environment," said chief executive officer Doug Suttles.
"We resized the company, focused our capital investment on our most strategic assets and enhanced operational performance," he said in a statement.
Streetwise (for subscribers)
ROB Insight (for subscribers)
Business ticker