Reitmans (Canada) Limited and the Canadian loonie
moneyrelations :: Oct.24.2007
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Domestic retail sales data for the month of August was released yesterday and it beat expectations. As a result, the loonie hit a 33-year high touching $1.0337 US.
This is interesting news for me because I own shares of Reitmans (Canada) Limited (TSX: RET.A) but the share price keeps on falling. Last week, it even reached a 52-week low of $17.35. I don’t get it. This is historically a good Canadian company with strong cash flows and steady dividends. Yes, it had a disappointing Q2 report with regards to the baby boomer Cassis chain but that’s being overhauled. Of the 935 stores under its Reitmans umbrella, only 12 are Cassis. Are you telling me that it had that much of an impact? It’s probably a case of hit and miss with the fashion trends so I don’t think the stock price should be punished that severely. Reitmans also had a slow start with Q3 due to the credit crunch but I think that has been turned around with the strong Canadian dollar. Reitmans buys its materials overseas in American dollars which will surely help lower the manufacturing costs. And despite the urgings of Finance Minster Jim Flaherty for retailers to lower prices to reflect the new purchasing power of the loonie, it seems some aren’t listening. From the Globe and Mail’s article, Retailers to play Scrooge despite soaring loonie:
Reitmans, which has posted some record margins over the past few years, has kept its prices stable or even lowered some of them over that period, Mr. Reitman said. But consumers can’t count on lower prices for their holiday shopping.
Lululemon Athletica has profited from the stronger loonie, but also won’t be dropping prices in the coming months, Mr. Meers said. “We do not price based on currency strength or weakness - we price based on quality/value.
Well, we know where Reitmans stands for the holidays. In other news, Reitmans announced launching ecommerce capability later this year starting with its stores targeting plus-sized women which I think makes sense. Heavier ladies might prefer shopping from home rather than at a brick and mortar place.
So yes, Reitmans has had a couple of disappointing quarters recently but I’m in this for the long haul. I’ve added to my position in Reitmans.
In the news, Investing ::
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thanks for the blog welcome! i’ve been reading your blog for a while and like reading about your thoughts on stocks.
You’d probably make some money shorting my “recommendations”
Once again, welcome, and thanks for stopping by
hmmm… your post has a … is that a Warren Buffet quality to it? Not worrying about pricing ups and downs but holding steady based on fundamental analysis?
Hi Nancy,
It has a idiot-proof quality to it although I admit that I do write a lot about the old geezer and more posts are coming down the pipe about him. Honestly, I am just tired of questioning myself: should I sell, should I hold? Let’s take half my choices away and concentrate on building a solid foundation.