Why Retail Stocks Tumbled Despite Strong Earnings

Reitmans reports Q1 net loss narrows to $6.3M from $10M a year earlier

Reitmans Ltd. posted a reduced net loss of $6.3 million for the first quarter, compared with a $10 million loss in the same quarter last year. On a per-share basis, the diluted loss was 13 cents, an improvement from 20 cents a year earlier.

The Montreal-based retailer reported net revenue of $160.1 million for the period ended May 2, up modestly from $158.9 million a year earlier. The company also noted it finished the quarter with seven fewer stores than it had a year ago.

Selling, general and administrative expenses fell to $96.9 million from $99.1 million in the prior-year period, contributing to the narrower loss.

CEO Andrea Limbardi pointed to difficult economic conditions facing many Canadians. “The challenging economic environment is affecting everyday shoppers,” she said, adding that feedback from customers reflects that strain.

Gildan shares plunge up to 25% after short-seller accuses company of inflating growth

Shares of Gildan Activewear Inc. tumbled as much as 25% following a short-seller report that accused the company of masking negative organic growth through aggressive channel allocation. The Montreal-based apparel maker’s stock fell steadily during the trading session and finished the day down nearly 19% at $70.39.

Jehoshaphat Research alleged that Gildan used a form of channel stuffing—shipping excess inventory to distributors or retailers to artificially boost reported sales. The firm suggested this practice obscured the company’s underlying performance.

Gildan responded to investors with a brief statement saying it believes its disclosures are accurate and complete, and that it would not comment further on the allegations. The company did not directly address the specific claims in the short-seller report.

Groupe Dynamite shares fall 36% despite strong Q1 profit and revenue growth

Groupe Dynamite’s stock plunged nearly 36% on Tuesday even though the retailer reported sharply higher profit and revenue for the quarter. The Montreal apparel group closed the day down $26.70 at $47.74 after investor concerns over a reduced pace of new store openings and some analysts’ expectations.

CEO Andrew Lutfy acknowledged a less enthusiastic tone from investors during the company’s analyst call but emphasized that results remain strong. “We’re delivering on guidance and, in fact, raising it,” he said, while explaining changes to the company’s expansion plan.

The company raised its expected adjusted EBITDA margin to a range of 38.25–39.50% from a prior outlook of 37.75–39.25%. At the same time, it trimmed its net new store openings to eight to ten for the year, down from a prior estimate of 10 to 12, and announced two additional store closures.

Lutfy noted the two closed stores were profitable but not meeting the company’s performance thresholds. Those closures bring the total for the year to 16, a figure he described as “on the high side” that he expects will decline in future years.

Analysts described the quarter as a strong start to the year despite the lowered store-opening target. Desjardins analyst Chris Li called the results a “strong start,” while RBC’s Irene Nattel said the financials were solid but that market expectations may have been higher.

Groupe Dynamite reported a net profit of $51.7 million, or 45 cents per diluted share, up from $27.3 million or 24 cents a year earlier. On an adjusted basis, earnings were 50 cents per diluted share, versus 25 cents the prior year. Revenue rose to $310.6 million from $226.7 million, driven by strong demand for dresses and tops at Dynamite and fleece, activewear and casual items at Garage.

Stacie Beaver, president and COO, said denim remains the softest category but overall customer spending and loyalty remain resilient. “Customers are returning more often and spending more, increasing lifetime value,” she said. Management added that they have been able to keep markdown rates low without deterring shoppers.

Empire raises dividend as Q4 profit and revenue climb year over year

Empire Co. Ltd., the parent company of Sobeys and Safeway, increased its quarterly dividend after reporting higher profit and sales in its fourth quarter. The company raised the dividend to 24.25 cents per share from 22 cents.

Empire earned $212 million, or 94 cents per share, for the quarter ended May 2, up from $173 million, or 74 cents per share, a year earlier.

Consolidated sales rose to $7.81 billion from $7.64 billion. Same-store sales climbed 1.7%, while same-store food sales increased by 1.5%, reflecting steady consumer demand in its grocery operations.

Read more news:

• Stock news: Robinhood enters Canada as Shopify ramps up share repurchases
• Canadians seek EV rentals to escape high fuel costs
• World Cup tickets cost a fortune but you still have options
• What happens when your landlord misses mortgage payments?