Despite the Blue Jays’ 10-4 victory against the Arizona Diamondbacks on Wednesday, Rogers Communications Inc. may not be in the clear.

The telecommunications company bought control of the Toronto-based baseball team for $160 million in 2000. With their success on Wednesday, the company said its revenue increased by 6% from $3.245 billion in the last quarter ended March 31, to $3.455 billion in the three months ended June 30.

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However, their cable revenue suffered losses with a 7% decrease in television revenue and 15% decrease in phone revenue. They also lost 53% of television subscribers from 49,000 to 23,000 within the two quarters. While their Internet revenue rose by 15% this quarter mostly due to more subscribers to their broadband Internet services.

Though the media revenue increased by 6%, Rogers attribute some of their losses to lower advertising revenue with traditional media like television, radio and print.

Dr. Ramon Baltazar, a professor at Dalhousie’s Rowe School of Business said the numbers does not surprise him.

“The landscape in advertising has changed from the traditional media like cable television to the Internet,” said Baltazar. “A lot of the advertising is being done on the Internet as well as mobile.”

Jun Zhou, another professor at Dalhousie’s Rowe School of Business says mass advertising does not work any more.

“When you watch TV, it’s the same advertisement for thousands and millions of people,” said Zhou. “Facebook, for example, will give you types of advertisements by checking your personal data and try to figure out your interests. Then they put together very calculated advertisements so these adverts would be more effective than traditional television.”

Baltazar also points out that advertising setbacks is not the only reason why Rogers’ cable revenue is suffering. He emphasized that many people watch a small number of channels relative to the amount available in their cable package.

“A lot of people will watch two or three channels out of the 100 they’re given. I think the problem may be related less to advertising and more to the fact that there are changing cost benefits and preferences in the market that they are targeting,” he said. “There’s a changing landscape of entertainment from the traditional sources of media to streaming.”

Zhou adds to this and says, “People now have alternative ways to watch TV, like Netflix, instead of subscribing to a cable service. There are alternative ways of entertainment and this would naturally challenge cable providers because it gives people more flexibility to enjoy the same stuff they want to see instead of following traditional cable.”

Baltazar further explains that streaming and Internet service is where Rogers should focus on expanding but he admitted it would be hard for the company.

“For example, Google can’t just go out and compete in the cable business because they don’t know what they’re doing,” he said. “It’s the same thing with Rogers and other companies that started in the cable business; they are really good at it but relatively don’t know what they’re doing when it comes to the Internet. So if they continue to invest in that [streaming and internet], eventually they will develop that capability. But it’s not as if these streaming companies are standing still. They’re innovating everyday, so everyday Rogers has to try and catch up to what they’re doing.”

Indigo Books and Music Inc.’s eReading revenue has fallen by nearly 60 per cent since 2013.

According to the company’s 2016 annual report, its eReading revenue has decreased  to 1.5 per cent of the company’s total revenue.In 2013, the company’s eReading revenue accounted for 4 per cent of its total revenue.

Senior Partner at J.C. Williams Group, John C. Williams, says, the decrease in eReading revenue is a pretty substantial drop.

The Toronto-based retail consultant says, “it’s more than worrisome, it’s a huge problem.”

Indigo acknowledges that eReading market is growing. In its annual report, the company warns that the increased retail competition may have a negative impact on revenue.

Increase in eReading market The dip in Indigo’s eReading revenue comes as more Canadians say they’re consuming books electronically.

In 2015, EKOS Research Associates released a report measuring the reading habits of Canadians. The study was conducted on behalf of the Association of Canadian Publishers, and concluded that almost half of Canadians, 48 per cent, reported spending more time reading eBooks in the past year.   

Source: Public Opinion on the Value of Books in the English Language Book Sector, EKOS Research Associates Inc. 

Close to half, 45 per cent, said they access digital books exclusively on eReaders.

Kobo

Indigo has a retail partnership with Kobo, a Toronto-based eReading service with over 12 million readers in 190 countries.

The company’s eReading revenue is based on revenue from Kobo eReaders, eReader accessories, and Kobo eBooks.

According to the 2016 annual report, Kobo is “now the world’s second most popular eReader.”

A spokesperson for Indigo declined to comment on the state of eReading revenue. She deferred all comment to the company’s recent annual report.

Williams points to competitors, like Amazon, who have cornered the market, as a reason for Indigo’s declining eReading revenue.

Amazon, ‘They play a better game.’ 

He says Amazon has a ‘superior’ model.

“The sheer amount of books covered by Amazon, the pricing and the speed, everything about their website, the overall experience is just better.”

He says, “they play a better game.”

“When somebody’s chewing away at your core product, you have to look at creating a different playing field and play a different game,” he says.“When you’re attacked, you have to diversify.”

Williams says, that’s what Indigo is doing by diversifying its offerings. He says you can see it. Some Indigo stores have shifted to focus more on lifestyle, gift, and department store model.

“They are diversifying into broader assortments, including decor and toys,” says Williams.

Indigo 2015-2016 Stock Market Chart 

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Source: TradingView

Diverse offerings

While eReading revenues have dropped by close to 60 per cent, general merchandise revenue has grown.

It’s increased by more than 10 per cent of the company’s total revenue over the past four years. Between 2013 and 2016, general merchandise revenue grew from 23 to 34 per cent of total revenue.

Since 2013, there has been a slow decline in print revenue. It’s decreased from 70 to 62 per cent of total revenue in the last four years.

Williams emphasizes that the increased competition from Amazon isn’t exclusive to Indigo, and eReading.

“This is going on in all commodities that Amazon is in. They’re just an amazing, amazing company,” he says. “They might just rule the world.”

In addition to driving up operating costs for Air Canada, the weak Canadian dollar also saw the company’s net debt jump close to 27 percent over the last year.

As the loans are in U.S. dollars, the unfavourable exchange saw the debt grow and continue a trend that’s been manifest since 2012. Since then, the net debt of the airline has almost doubled, from $1.9B to $3.7B. A visualization of the five-year trend can be seen below.

But the debt shouldn’t worry stockholders too much. At least not with the interest rate the way it is.

“Borrowing is a really good thing as long as the interest rate stays cheap. Problem is when you get caught,” says Barry Prentice, transportation economist at the University of Manitoba. “When the economy turns on you, or the interest rates suddenly go up and you have a lot of debt.”

The lower the interest rate, the smaller the earnings required to cover the interest.

In 2015, Air Canada reported another year of income growth, continuing a five-year period of overall growth.

But despite a steadily growing bottom line, the airline could still be in trouble, should their earnings not keep up.

“If you start losing money, you can lose all your equity pretty fast. So that’s why people look and watch these numbers with some care, because they present a risk for the company,” says Prentice. The problems that the weak exchange rate causes for Air Canada’s bottom line is discussed at length in their 2015 Annual Report.

A prudent investment

The willingness to take on debt should also be seen in conjunction with Air Canada’s decision to renew their fleet. From a strict business perspective, borrowing money could be the right move.

“That would be not an unreasonable thing to do, because they’re refreshing the fleet, which makes it a more attractive product,” says Karl Moore,  professor at McGill University. “That would be something they’re looking at, how do we remain competitive. So it might be seen as a prudent, reasonable investment.”

Any decision to take on more debt should be considered in light of what the money will be going to.

“You may be taking on debt to do that, but debt’s not a bad thing depending on why you’re taking on debt, and whether the business will sustain it over time,” says Moore.

Should the winds of fortune change and repayments suddenly loom large, the nature of Air Canada’s business will also be in their favour, says Prentice.

“For most company, the crisis, if it comes, comes because of cash flow. The airlines have a huge cash flow, because the product they’re selling is four-five hundred dollars a shot – an airline ticket. As long as you can continue to cashflow your debt, you can keep going for a long time,” says Prentice.

A safety net

The necessity of Air Canada’s service will also act as a safety net, especially given the prominent place they occupy in the market.

“The nature of travel is that business travel isn’t going to drop off that much, because people will need to travel,” says Prentice. “They’re obviously in a very dominant position. Right now it’s a pretty cozy duopoly between WestJet and Air Canada.”

Air Canada’s history with the government, however, might even turn into overconfidence from lenders and investors.

“Air Canada’s a very big company and I think there’s always the feeling in the back of the mind of any investor or the bank that the government will never let them go out of business,” says Prentice. “So they can probably have more debt than an equivalent sort of business because of who they are and where they are.”

Reitmans? That’s where my mom buys her jeans. Or at least that’s what millennials think according to retail analyst Jean Rickli.

“It takes time to shake that image,” says Rickli, a senior advisor at J.C. Williams Group.

But this retail facelift may be underway as the company, that operates over 700 stores under six banner names including Reitmans and Addition Elle, reported a loss of nearly 25 million dollars in its latest report.

‘A more youthful look’

Rickli says he sees the company taking steps to rejuvenate its image.

“They brought in the Subban family, father and sons to give it more of a youthful look,” Rickli says.

The hockey family were brought in as brand ambassadors for the company’s youth-targeted RW&Co stores.

But the Subbans weren’t Reitmans only new faces.

The company also brought in headline grabbing models Tess Holliday and Ashley Graham as well as Suits actress Meghan Markle as design collaborators.

In a March 2016 letter to shareholders, the company’s chairman and CEO Jeremy Reitman said the 2016 fiscal year was challenging but that the company is repositioning itself.

“We plan to open 12 new stores, close 50 stores (including 23 Smart Set), remodel 64 stores and convert 6 remaining Smart Set stores at a capital cost of approximately $18 million,” the CEO’s letter reads.

The letter also states that the company will be redesigning its distribution centre due to the rise of online shopping.

Reitmans Stock Chart by PaygePriscillaRubyWoodard on TradingView.com

Social media

It takes more than clothing to draw in millennials Rickli says.

In store events, online shopping and social media all play an important role in appealing to shoppers who Rickli says are flooded with buying options.

“An Instagram presence, images, Facebook, Twitter. All of these things have to be tackled at the same time and in a coherent effort,” Rickli says.

Coffee and clothing

An emerging retail trend Rickli sees is to create a sense of community within a store.

Montreal retailer Frank and Oaks caught on to this trend when they saw a majority of their business coming from Austin, Texas.

After doing a bit of digging, the company realized Austin is a university town and young buyers there were seeking a sense of community.

Trying to cater to what its clients craved, the store made room for more than clothing. Along with men’s fashions, its stores have a coffee and barbershop.

“It creates that community, where customers will gather and just meet friends that are searching the same values,” says Rickli.

Halifax shoppers share their thoughts on Reitmans

Older brands repositioning

Reitmans isn’t the only Canadian retailer trying to keep up.

“You can see that trend as to how these older brands are having to reposition themselves,” says Rickli.

Montreal based clothing chain Le Château has been slower to make changes but Rickli says the company is starting to catch on.

The company recently purchased a new distribution centre to help grow its online business. Rickli says he also sees store locations beginning redesign.

As more of Reitmans’ Smart Set shops close their doors next week, Rickli says he believes the retailer will endure.

“They’ve been around, they’ve had strong brands before,” says Rickli. He believes the company will bounce back. “But it takes time.”

Despite a low Canadian dollar, Air Canada profits rise due to a continuing drop in jet fuel costs. Figures released in its Annual Report published this week show a marked decrease in operating costs. Compared to the previous year, 2015 jet fuel costs were down $35 million, after adjustments on foreign exchange rates. These savings boosted liquidity, and contributed to robust free cash flows.

Air Canada’s Stock Prices

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Source: TradingView.com

Figures from the operating expenses chart show a decline in costs. Those savings are offset by a drop in the Canadian dollar. Jet fuel is the air carrier’s chief operating expense and is paid in US dollars. The low value of the Canadian dollar has reduced fiscal gains in the range of 25 million dollars in expenses. Despite the poor exchange rate on the Canadian dollar, Air Canada exhibits strong corporate results across several key measurements, explained Fred Lazar, an economist at York University and an expert on the airline industry.

Other gains in net profit are a result of expenses recovered from Air Canada’s restructuring of debt and the recent bankruptcy of a heavy maintenance firm that serviced the air carrier, allowing it to find alternatives that led to significant cost savings. Overall, reduced costs helped boost the company’s operating cash flows by a wide margin. Although not a core financial instrument, the statement of cash flows helps stakeholders gauge a firm’s liquidity, solvency and general performance, according to the Canadian Institute of Chartered Accountants’ Handbook.

Source of data: 2015 Air Canada Annual Report

A portion of Air Canada’s financial statement annotated in DocumentCloud
(click inside the annotation to see the entire document and other annotations)

Source: 2015 Air Canada Annual Report

A portion of Air Canada’s financial statement annotated in DocumentCloud
(click inside the annotation to see the entire document and other annotations)

Source: 2015 Air Canada Annual Report

A portion of Air Canada’s financial statement annotated in DocumentCloud
(click inside the annotation to see the entire document and other annotations)

Source: 2015 Air Canada Annual Report

The net gains for Air Canada have not resulted in dividend payouts to shareholders, however. Lazar notes that other considerations may influence the Board of Directors’ decision with respect to dividends, including paying down debt, which will strengthen the carrier’s competitive position in the long term. Shareholders can opt to cash in on the company’s improved stock price, which rose by 69 cents per diluted share over the previous year. If shareholders decide to exercise that option, they will realize a capital gain over the original cost at purchase.

Consumers see less direct benefits from the slide in jet fuel prices, Lazar said. The analyst points to other recent changes introduced by the carrier to boost sales. Such incentives include seat sales, which are driven by competitor moves. In addition, Lazar notes that Air Canada recently reconfigured many aircraft in its fleet, adding seats to increase capacity and generate revenues. As the Alberta economy continues its downturn, expect fares to be periodically reduced in response to these and other economic events, he stated.

Source of data: 2015 Air Canada Annual Report

A portion of Air Canada’s financial statement annotated in DocumentCloud
(click inside the annotation to see the entire document and other annotations)

Source: 2015 Air Canada Annual Report

Despite a banner year, don’t expect Air Canada management to go on a spending spree or its Board of Directors to take a less cautionary approach. Commodity prices such as jet fuel are beyond management’s direct control, as is the exchange rate on the US dollar. How long the windfall savings on the price of jet fuel may last is unpredictable. Investors may decide to cash in their shares or expect a higher sale profit if 2016 performance matches or exceeds that of 2015, while consumers can expect competitive ticket pricing during 2016, if current trends prevail.

A subsidiary pharmaceutical company based in Laval, Que. may not be able to continue operating if spending on research outpaces its assets, according to interim financial statements released July 11.

Acasti Pharma Inc., specializes in developing and selling krill-based products, such as medical food and over-the-counter drugs, to treat cardiovascular disease.

The company acquired an intellectual property license to study and conduct clinical trials in 2008 by its parent company, Neptune Technologies and Bioressources.

As a subsidiary, Acasti is supposed to take on the heavy lifting when it comes to research and development.

But it may be taking on more than it can carry.

“It’s a pretty hard slog,” said associate professor at University of Toronto pharmacy school Dr. Paul Grootendorst. “They could be facing some setbacks.”

In its 2015 statements, Acasti stated that the corporation’s “expected level of expenses in the research and development phase of its drug candidate significantly exceed current assets.”

Signs of trouble found in 2015

The reason for the increase in research is due to trials and re-trials for a new drug candidate supposed to help treat plaque buildups in the arteries.

Acasti also re-categorized expenses into research that were previously under general and administrative expenses.

Acasti did this to “reflect more appropriately the way in which economic benefits are derived from these expenses,” according to its 2016 interim statements.

Of course, it’s common for subsidiaries to spend significantly for research and development. 

“There is an increasing division of labour (between parent and subsidiary),” Grootendorst said. “You partner with a small company, and you acquire the assets.”

Part of Acasti’s problems is that it’s not taking in enough revenue and negative cash flow.

There was an 85 per cent decrease in revenue of sales from 2014 to 2015. Now in 2016, there was a 78 per cent decrease over the span of three months – from $5,154 in February to $2,888 in May.

As for its cash flow, the company itself says in its 2015 statements that it has “incurred significant operating losses and negative cash flows from operations since its inception.”

And even 2013

Acasti’s stocks took a huge plunge in 2013 around the time the company and its parent announced it would end agreements with many US pharmaceutical firms that also specialize in krill-based products.

Watch Acasti’s stock ticker in real time.

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Watch the video below to learn how subsidiary pharmaceutical companies work. Looking ahead

Still, the company has hopes that it will find the money it needs to remain in business.

“(Acasti) will establish strategic alliances and raise the necessary capital and make sales,” according to the 2016 statements.

Traditionally, raising more funds as a subsidiary would consist of more support from the parent company or funding from a venture capitalist.

Another larger company may take in the subsidiary and start dishing out milestone payments.

Milestone payments are paid by the parent company when the subsidiary reaches a critical goal in research.

The company also hopes to acquire approval for their products by the US Food and Drug Administration in addition to expanding to other markets.

Acasti and its parent Neptune formed a partnership with a US company in 2009 which ultimately resulted in a legal dispute over a patent that ended in Acasti and Neptune’s favour.

But internally, Acasti is trying to make some changes.

Two new members were elected to the board of directors at Acasti’s annual general meeting on July 15.

The new fiscal year will now end at the end of March instead of the end of February in order to be better aligned with industry standards.

Read the 2015 financial statements and the 2016 interim statements from Acasti below.