The biggest share of the major food and pharmaceutical distribution company in Quebec is owned by creditors not its shareholders, an analysis of the recent financial report reveals.

Despite increase in revenue experienced during since last year, the company continues to see its equity reducing compared to its liabilities. At the end the first quarter of 2016, Metro’s liabilities (what the company owes to external actors) stand at $3,008.3 million compared to $ 2,616.0 million in equity (what belongs to the company and its shareholders).

Metro’s Equity is decreasing at the rate of 1.6 percent

(To read the entire document, please click on the embedded image below)

Source:Metro Inc.

To date, Metro’s liability represents 53.5 percent of its total assets. At the end of last year it represented 50.7 percent while in 2014 it was at 49.2 percent. To put it simply, this means that the biggest share of Metro is now owned by its creditors instead of shareholders.

The increase in liabilities is attributed to increase of bank loans that the company has to pay until 2027 and increasing unpaid taxes; according to the financial statement contained in the company’s most recent financial report.

Even though major corporations tend to have a share of liabilities, it’s not safe to have a negative capital structure (difference between what belongs to shareholders and what it owes to external people) because if business goes slow the probability of bankruptcy increases; according to Ildebrando Lucas, a business professor at Algonquin College.

Even though Metro has been able to make profit out of loans, Lucas warns that there isn’t always a grantee that a company will continue to make money especially when it has to pay a lot of interests on long term loans and market conditions may change.

“In Canada things are tight [referring to the economy] and people may not buy as much as they used to. If such thing happens it affects severely companies with significant higher share of debts than equity”, Lucas says.

Metro’s liabilities are increasing at a higher rate.

Source: Metro

Most of the bank loans were used in investing in new businesses and modernizing existing stores. When he was presenting the results of the first quarter of 2016, the CEO of Metro, Eric La Fleche, announced that Metro opened two new stores, 10 more were modeled and one store was closed.

“For the fiscal year 2016 we intend to invest $300 million in our network for ten new stores and 30 major renovations”, Metro CEO announced.

Metro also is focusing on expending its business by investing in other companies. According to the 2015 annual report, Metro acquired 75 percent of the net asset of Premiere Moisson, a premium bakery in Quebec. It also acquired 100 percent of the net assets including real estate of two food stores in Ontario. Both acquisitions were calculated at $101.6 million.

Increase of loans increased revenues

The increase in revenue observed since last year is attributed to the company’s financing from bank loans.

In the last quarter of 2015 and the first quarter of 2016, Metro made $131.7 million and $139.8 million respectively. This represents an increase of 6.2 percent. In the same period, bank loans increased from $ 1146.0 million to $1405.9 million. Metro’s total debt increased by 10.2 percent from $ 2,729.9 million to $3,008.3 million respectively.

“Major corporations tend to have a big share of liabilities because they are always growing their businesses. In reality it’s good to bring debt into the company as far as the shareholders are concerned because it increases their share price”, Lucas explains.

From the beginning of this year, Metro’s share price has gone up by 6 percent but the company still has an average rating of “Hold”, according to different equities research analysts.

The rating of “Hold” means that if you own a security you still shouldn’t sell, but you also should not buy the security if you don’t own it already (or do not buy more of it if you do). As of January 29, an average price target of Metro share was C$41.42.

Metro Inc. stock price


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Spencer Van Dyk

General merchandise revenue is creeping up to book sales, and online sales are increasing, as Chapters-Indigo is finally reaping the rewards of a diversification plan put in place years ago.

Although 65 per cent of the company’s revenue still comes from books, that number is decreasing. It is 2.6 per cent less than the same time last year. Meanwhile, general merchandise, like stationary, lifestyle items and home décor products, increased by 3.4 per cent from this time last year.

The plan to brand Chapters-Indigo as a lifestyle store was necessary for its survival, according to Alan Middleton, a professor of marketing at York University.

“People will probably go online for it and do a search, but there is still the pleasure, especially at certain times a year, of visiting a bricks and mortar store,” he said. “It’s what we call in marketing ‘shift to experience marketing.’ How do we make the experience of visiting a bricks and mortar place pleasurable?”

Middleton said that if the store can entice people to shop there in person by focusing on the shopping experience, the company can sell more products by encouraging impulse purchases.

The company’s chief executive office, Heather Reisman, agreed.

“I just think it’s that physical books are sustaining their position with the market, and we continue to invest in the experience for people,” she said in a call with the company’s investors.

But Chapters-Indigo is not relying solely on experience marketing; it invested in online shopping. What the company sells online now generates 11.7 per cent of its revenue, compared to 8.6 per cent in 2011.

“Online sales continued to experience growth in books and double-digit increases in general merchandise,” reads the company’s financial report.

But maintaining an online store is expensive, Middleton said.

“As soon as you move aggressively into online, you’ve got to have money to keep the technology up to date,” he said. “The need for constant investment and development of both the technology itself, but also the service related to that technology, that probably needs investment.”

What the company calls intangible assets, for example software, cost $2.4-million this quarter alone, up 33 per cent from the same time last year.

The push for online and the emphasis on the shopping experience are in response to struggles Chapters-Indigo faced a few years ago. In 2011, book sales were way down, and e-readers were sustaining the company. Between 2011 and 2012, the operating expenses related to e-readers more than doubled. According to Reisman, the company needed to adapt, so it would not have to rely on that revenue.

“Number one, all of this data shows that e-reading has levelled off and has sustained a level-off position,” Reisman said in the 2015 investor call. “In Canada, it’s actually dropped a couple of percent.”

E-reading is not going away, she continued, and Chapters-Indigo continues to participate in that market, but sales of those products are no longer enough to sustain the company. There are now more hybrid readers, people who read both physical books and electronic ones, and the challenge is to market to everyone.

According to Middleton, if the company can continue to provide services online, while drawing customers into the store for the shopping experience, it may be able to get back the losses they suffered in 2011 and 2012. Bookstores everywhere are struggling, he said, so successful ones need to understand human shopping behaviour. Being available online and marketing itself as a lifestyle company can and has increased revenue in every department, including books.

Indigo Books and Music Inc. by spencervandyk on TradingView.com

Indigo Books and Music Inc. by spencervandyk on TradingView.com

Indigo Books & Music is no longer your mother and father’s bookstore.

The willingness to branch outside of selling books has the retailer seeing positive results as it heads into the third quarter of its financial year in early February.

The company’s second quarter financial report released on November 3, 2015 revealed their revenue from general merchandise grow to $62.4 million in September 2015 from $50.9 million in the previous year.

General merchandise saw the biggest revenue increase for Indigo, which includes items such as household furnishings, stationary, toys, music, DVD’s, and electronic devices.

A portion of Indigo’s financial statement annotated in DocumentCloud

Source: Indigo Books & Music

Emily Deveaux, the executive director of the School of Retailing at the University of Alberta says that Indigo has had a “very specific strategy to diversify” over the past year to turn itself into a “cultural department store.” Where customers can purchase more than just books.

In their second quarter investor call transcript, CEO Heather Reisman stated that “We’re really happy with the positive impact of the investments we’ve made, and we feel that Indigo has positioned itself extremely well to continue on this trend.”

So far their strategy seems to be panning out for the bookstore giant.

According to Bruce Winder, who is a retail consultant and co-founder of Retail Advisors Network in Toronto, Indigo realized that their world changed because of Amazon, and at one point were “in the headlights of Amazon.”

For Winder, Indigo recognized that they were not going to win the price war with Amazon, and as a result they expanded to other areas with more exclusive items with better margins. He uses Indigo’s expansion into children’s learning toys as an example of exclusive items.

Emily Deveaux cites Indigo’s partnership with the American Girl doll line, as one of the ways the company has been able to increase revenue. With these kinds of products now available at Indigo she says, “you can see shopper continuously returning to the store.”

This is because “they’re going after a specific customer,” says Deveaux, in particular families with young children.

Indigo is seeing this increase in revenue with a big help from general merchandise, but print still remains at the heart of Indigo’s revenue. Revenue from print may have dropped by 2.5 per cent from Indigo’s overall revenue stream, but it still increased to $134 million in September 2015 from $127.9 million in September 2014.

A portion of Indigo’s financial statement annotated in DocumentCloud

Source: Indigo Books & Music

“I think people still genuinely like having a hard copy of the book,” says Deveaux. She believes there’s a certain psychology involved when someone finishes a hard copy book.

During their second financial quarter the company saw an 8.7 per cent increase of revenue in their large bookstores, and 9.5 per cent increase from their smaller bookstores and a 14.2 per cent increase online.

A portion of Indigo’s financial statement annotated in DocumentCloud

Source: Indigo Books & Music

“The lines are blurred in retail,” says Paul McElhone, the Dean of the Mihalcheon School of Management at Concordia University of Edmonton. As a result, Indigo’s customer needs are changing in terms of what products they want to buy as well as how they are able to buy them.

The layout of the stores plays a major factor in how the company has been able to increase revenue. According to McElhone, the stores tend to put the gifts and specialty items at the front of the store before the bookshelves so customers can cross-shop. Where someone can walk into the store looking for a book and come out with someone else like a candle or a toy.

Indigo’s stores have become a place for “experimentation as much as a place to buy something,” says Winder.

When a company diversifies, it can be more harmful than good if done incorrectly. But Indigo seems to be on the right page to succeed going forward.

Indigo Stock Price

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https://www.documentcloud.org/documents/2698851-Indigo-FY16-Q2-Report.html

Cineplex Inc. saw record profits in their last quarter thanks to an increase in theatre attendance and a boost in concession sales.

According to the Cineplex’s most recent financial report, the company recorded a 34.7 per cent profit during their latest quarter in 2015 – a record level when compared to previous third quarter results.

While a record level of audience members contributed to a rise in box office revenues, Cineplex notes in the management section of their quarterly report that food sales were also a contributing factor to the higher profit margins.

A portion of Cineplex Inc.’s third quarter financial report annotated in DocumentCloud:

(Click inside the annotation to see the entire document and other annotations)

Source: Cineplex

According to Sarah Van Lange, the communications director for Cineplex, the company’s recent expansion of food options for customers has increased the company’s concession revenues per patron, or CPP for short.

In the third quarter, Cineplex’s CPP jumped from $5.11 per patron to $5.43 per patron – an increase of 6.3 per cent. The increase in the CPP means means that consumers are spending more money on food and beverages than they have in the past.

According to Kin Lo, a finance professor at the University of British Columbia, this type of revenue is especially valued by Cineplex because the costs associated with concessions are relatively low.

Lo says focusing on food revenues is a smart strategy for Cineplex to employ in order to sustain their business in the long run.

“Cineplex’s food revenue has gone up quite a bit in the last quarter, and even more so if you look over a longer period of time,” says Lo. “The major strategy that Cineplex seems to be employing is maximizing the amount of money that people are spending on things like food since these items make quite a high margin.”

A portion of Cineplex Inc.’s third quarter financial report annotated in DocumentCloud:

(Click inside the annotation to see the entire document and other annotations)

Source: Cineplex

While traditional concession snacks such as popcorn, pretzels and soft drinks continue to be the largest contributor to food sales, Cineplex’s introduction of the “VIP experience” has also allowed the company to increase the number of opportunities for consumers to spend money while in the theatre.

The VIP experience allows patrons to purchase entire meals and alcoholic beverages in addition to traditional concession foods such as popcorn and soft drinks. Access to VIP auditoriums enhances the movie-going experience for patrons, but more importantly for Cineplex, it encourages their customers to spend much more on food than they typically would if they were sitting in a regular auditorium.

Van Lange notes that VIP auditoriums have had a “significant influence” on their food sales since the program was introduced a couple of years back and says that the VIP option has been very popular with moviegoers looking for an experience they can’t find at home.

“We’re always looking for ways to expand and improve our food offerings for guests,” said Van Lange. “But we still rely on traditional concessions as our primary source of revenue.”

A portion of Cineplex Inc.’s third quarter financial report annotated in DocumentCloud:

(Click inside the annotation to see the entire document and other annotations)

Source: Cineplex

Cineplex currently controls 79 per cent of the box office market in Canada – a significant majority in comparison to their local competitors. But according to Lo, Cineplex may struggle to keep their customer base over time as online streaming options become more popular.

“Increasingly, there are new substitutes for the movie experience such as Netflix or illegal streaming,” says Lo. “It’s a good strategy for Cineplex to keep their movie ticket prices as low as they can to attract customers, and then hopefully they can get them to spend money once they are through the door.”

Looking forward to Cineplex’s fourth quarter, there are many opportunities for the company to maximize food profits. The release of Star Wars: The Force Awakens for example has lead to record box office sales across Canada and likely will have a positive impact on food sales.

“I think Cineplex still has some way to go in order to try and capture more of the customer’s wallet,” says Lo. “Of course, not everyone who walks into the theatre is going to buy food, but I don’t think five dollars per patron is anywhere near what Cineplex could potentially make.”

Cineplex’s stock prices

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Resolute Forest Products lost 6 million dollar US in net income from a drop in newsprint production over the third quarter of 2015.

The decrease of printed newspapers is not good news for forestry companies as consumption of newsprint shows no sign of improvement, and force the company to reshape its structure.
Those difficulties in the newsprint sector affected the profit of the Thunder Bay-based company, who is losing money for an eighth consecutive quarter. At the same period, last year it was a 116 million lost. Unfortunately, the company didn’t want to comment on their numbers.

For Ian Lee, a business professor at Carleton University, the forecast for forestry companies dealing in the paper sector is not bright. “The future is not good because of the digital world emerging. With the digital economy, we use far less paper. There are less need for pulp and paper,” he said.

In order to assure the wealth of the company, Resolute FP has to reorient their offer and stop relying on paper. To turn things around, the reorganization is accomplished through the expansion of the pulp market, but also by getting bigger with the production of lumber with a production capacity of 2.8 million board feet. Investments in sawmills had been made in Quebec as well as in the Thunder Bay and Ignace, Ont. facilities recently, to upgrade and expand them. Also a new sawmill in Atikokan, Ont, had been opened last year. In a difficult economic time, the company believes the lumber market represents the future. Also, the company will open a new pulp facility in Calhoun, TN, an investment of 190 million dollars.

Unfortunately, you can’t create demand when there is none, as mention by Professor Lee. But refocusing the industry on lumber wood, to build houses is a good idea. “There were 200,000 houses built last year in Canada. There is a demand for that,” said Lee.
To continue the diversification process, and change their production, by still being present in the paper market, Resolute FP announced the acquisition of Florida-based company Atlas Paper, last November. They will now majorly produce tissues paper, assuring the future of the corporation, “Tissues will become a significant global area for the company. We believe that represent the healthy prosperity for us,” said Kursman. This acquisition positioned Resolute FP as a leader in this multi-billion-dollar tissue market in North America.

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The newspapers are now merging electronically, and this hurts paper providers. Resolute FP lost about 25% of their sales, over a year, from 346 million dollars to 258 million. They also lost in the average transaction price as the value dropped by 100 million in a year.

Seth Kursman, the spokesperson for Resolute Forest Products, said the company is aware that newsprint represents a market in decline but assured they still could rely on it as it represents a significant market on the planet with 22 million tons of paper produced worldwide each year.

Moreover, they are confident that they could continue to be successful to be a low-cost producer, and still be competitive despite more financial compression to come. He doesn’t see newspapers disappearing in the next few years and believe “that doesn’t mean that in the future you can’t make money and then use that money to support your overall diversification strategy.” It will give them time to totally transform their productions.
Resolute FP is the largest producer of newsprint in the world exporting in more than 80 countries.

Corus Entertainment’s first quarterly report of 2016, announced on January 13th, reported an income of almost 20 per cent less than that of the same quarter in 2015. It was the second year in a row that the first quarter showed losses. Corus owns multiple television networks in Canada, with brands like YTV and HBO Canada chief among its assets. The company also owns 39 Canadian radio stations.

It was the same day that the company announced that it was purchasing Shaw Media, a division of Shaw, another entertainment corporation, for $2.65 billion. As media companies struggle to adapt to the changing industry landscape, Corus is no exception, even as it’s purchasing of Shaw would seem to indicate otherwise.

In the report, the company trumpeted the deal with Shaw while acknowledging that revenues were up one per cent compared to the first quarterly of 2015. The actual financial gain made by Corus’s shareholders, however, fell 13 cents per share.

Corus Entertainment Fiscal 2016 Results

Link: https://www.documentcloud.org/documents/2701293-Corus2016.html#document/p1/a274345

Source: Corus Entertainment

Jordan Whelan, president of Toronto-based Big Smoke Media, a media buying company, attributes Corus’s fall to the change in the way people consume entertainment. “I have noticed that a lot of the ad offerings of these media companies are stale and archaic. Many of these companies are getting eclipsed by the web and failed to evolve fast enough,” writes Whelan in an email. “Why would a major corporation continue to buy commercials, which can be skipped over by those who record shows?”

Whelan’s statement rings true, as Corus lost almost five per cent in advertising revenue compared to the same quarter in 2015. The other main source of revenue for the company, subscriber fees, held relatively steady. That could also be about to drop, however. As Canada’s broadcasting regulations change and people are free to pick and choose which channels they wish to subscribe to rather than being forced to pick certain bundles.

“I think they’re in a place where they’re in danger of bleeding subscribers and losing some revenue that way,” says James Bradshaw, media reporter for The Globe and Mail, in a phone call. “There are a lot of digital options out there and people are wondering how many channels they want to be paying for and are starting to gear up for the regulatory changes that are coming that are going to allow people, if they want to, to start picking their channels one by one.”

Corus Entertainment May 2015-Jan 2016 by Nathan Caddell

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It is important to note that while the company has seen a drop in income, it is still, in its current state, profitable. “When we say they had a bad year last year, we mean that they saw declines in their revenue overall and they were in a lot of cases kind of below what Bay Street and Wall St had expected of them,” says Bradshaw. “It’s just below what they had been making before so it’s a step in the wrong direction, even though they’re still making money.”

As for whether the acquisition of Shaw will help the company increase its current profits, Whelan, for one isn’t sure. He does think that this deal will harm the general public, however: “Despite the strong PR campaigns, it is important to realize that this is not good for consumers both in terms of choice, pricing and potential job losses.”

“Was it right the move?” asks Bradshaw. “It’s a little early for me to be saying that.”

Corus Entertainment director of communications Sally Tindal declined to comment.

This is a test from Brian Hill.

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