The Daily Chase: Canadian Tire, Cineplex deliver earnings; U.S. inflation accelerates

Here are five things you need to know for Aug. 10, 2023.

House of Mouse: Shares of Disney are modestly higher, but we will see if they can hold the gains. The company delivered a mixed set of results that saw profit beat expectations but revenue and Disney + subscribers miss forecasts. The old/new CEO Bob Iger has been back at it again and is laser focused on cutting costs and losses in the streaming business. Losses in direct-to-consumer were less than forecast (only -$500M vs the -$780M expected) and the company said it will get better by next year. How? By charging more! Prices are going up by nearly 30 per cent for users in the U.S. and in Canada users will get an ad-supported model starting at $7.99/month in November. If you don’t go for that option, your prices will be going up in December. Will consumers eat it? Ask any parent if avoiding a tantrum is worth an extra $3/month. Disney already knows the answer.

A ludicrously capacious deal: Two luxury design houses with terrible names are leaning on each other. Tapestry (Coach, Stuart Weitzman) is buying Capri Holdings (Michael Kors, Jimmy Choo, and Versace) for a 65 per cent premium. At $57 per share the offer certainly is a nice premium to yesterday’s close but a far cry from the nearly $100 per share Capri traded at in the heyday of 2014. Of course, both companies have struggled to take on the behemoth that is LVMH and this gives them a better chance. 

Canadian Tire warns: Canadian Tire managed to beat earnings expectations but it came with weaker than expected revenue and a withdrawal of the retailer’s financial forecasts. Sales in all of Canadian Tire’s banners except Marks fell from last year. The company is also abandoning its financial goals made in March 2022. They blame current macro environment and consumer demand differing significantly from when they laid out in their goals. Inflation and higher interest rates have affected its ability to drive sales growth. Despite what sounds like a dire warning, RBC’s Irene Nattel calls this a non-event, saying “The Street had broadly discounted those as unachievable.” We will see if that’s true when the market opens.