[ad_1] Each week, Cut the Crap Investing founder Dale Roberts shares financial headlines and offers context for Canadian investors. The pandemic holiday season is near This will be our first “global pandemic holiday season.” That phrase does not have a nice festive ring to it, I know. And it might not be full of good cheer. As per what has become the most used pandemic phrase for my wife and me: ”It is what it is.” The holiday season is coming, and the pandemic ain’t going away. Still, North Americans are sure to shop. But how will they shop? Will Canadians and Americans finally fill the malls again? Or will we stay at home and use that iPad and Amazon to cross everything off that holiday list? Deloitte has conducted their 35th holiday shopping survey in an attempt to discover how this season might shape up. We can look to the U.S. study and see many of these behaviours translate to Canada. After all, share many of the same attitudes and fears as our American neighbour, and both countries are experiencing that second wave of the pandemic. The U.S. 2020 Deloitte holiday retail survey shows that four types or segments of shoppers spend between $1,000 and $1,600 US each in the holiday season. Survey respondents offered that they expect to spend 7% less in the pandemic holiday season. And 38% of respondents intend to spend less this year. That’s a level of decline not seen since the financial crisis in 2008 and 2009. From the Deloitte Canadian study: “… one in three (35%) plan to cut back on their holiday spending, especially on travel and dining out, but expect to spend more on groceries and cannabis. Overall, Canadians plan to spend an average of $1,405 over the holidays, compared to $1,706 in 2019.” And it looks as if the shopping malls will largely be avoided by many on both sides of the border. Here are some key insights from the U.S. survey. Nearly 51% of holiday shoppers feel anxious about shopping in-store. Contactless shopping experiences are in demand with 73% planning to have items delivered vs. 62% in 2019; preference for curbside pickup more than doubled YoY. Online retailers (62%) and mass merchants (50%) are the top holiday destinations as shoppers pull back from browsing formats. Amazon might see an additional boost in the holidays, with 66% of Canadians saying they will use Amazon to buy gifts this season. Those mass retailers such as Walmart and Costco appear to be destinations of choice. And once again, with those REITs with exposure to malls might not get the seasonal boost they’re hoping for. The survey also showed that clothing and accessories (shoes, jewelry) are set to see the biggest uptick in demand in the U.S. That would be some good news for those clothing stores who have suffered mightily in the work-from-home economy. The survey offered that most intend to stay close to home and increase their spending on groceries. Those grocers such as Loblaw, Metro and Sobeys have benefited greatly in the pandemic. It looks like they’ll be the recipient of further holiday cheer. The grocers still look like solid investments. In Canada, we may also see a boost in grocery sales. And with alcohol and cannabis sales holding steady year over year. Source: Deloitte To spike your portfolio, you might look to global alcohol giants such as Diageo and Constellation Brands. In Canada, you might the wine conglomerate Peller Estates (Andrew Peller Limited). When Peller reported financial results in August, sales were up 3.4% year over year, and net earnings increased 27% year over year. This will certainly be a unique holiday season with many of the pandemic trends shaping the holiday spirit. ’Tis the season for earnings in Canada While U.S. stock markets get the most attention and make the most noise, it’s time to look at Canadian companies and their earnings. We can check in on the performance of Canadian companies and the state and pace of our economic recovery. In this Globe and Mail article, David Berman offered… “Canadian corporate profits will show a big improvement as the third quarter reporting season picks up momentum over the next couple of weeks, according to analysts and portfolio managers. But don’t expect miracles. Profits generated by companies in the S&P/TSX Composite Index will decline 18.7% in the third quarter, from last year, according to the latest earnings lookahead from Refinitiv.” Refinitiv is a global technology company that focuses on financial data collection, evaluation and analysis. The hope is that the worst is behind us. Profits for the composite index constituents fell 41.7% in the previous (second) quarter, year over year. That quarter included the full extent of lockdowns, while this quarter of reporting will reflect the re-opening of the economy. Of course, many businesses are not yet operating at full capacity and the economy has not returned to 2019 levels. The railways are known as a strong economic barometer. After all, they ship many of the goods in demand across the country. Last week we saw that Canada’s two rails made the exclusive list of Canada-wide moat stocks. CN Rail and Canadian Pacific Rail offered a tale of two rails. For CN Rail, revenue in the third quarter was down 11% compared to a year ago. Earnings were down 16.9% year over year. Canadian Pacific beat analyst expectations for revenues and profits. Revenues were down 6.1%. Canadian Pacific earned $4.12 per share in the third quarter (in Canadian dollars). That’s down just 1% from the third quarter of 2019. All said, there are good signs of solid recovery. A true measure is the volume of goods shipped. From the CN financial report… “Volumes, in terms of revenue ton miles (RTMs), improved sequentially in each month of the third quarter of 2020 and September volumes increased on a year-over-year basis, reflecting demand for certain commodities in-line with 2019 levels.” For now, it appears our economic recovery is on
