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This way of thinking about a company’s value isn’t necessarily new. Ray Kroc, the founder of McDonald’s, is said to have once asked a group of MBA students to tell him what business they thought he was in. They volunteered that he was in the hamburger business. He countered that, “My business is real estate.” Similarly, Baker describes HBC primarily as “an investment company at the crossroads of real estate, operating companies and digital companies.”
Similarly, Canadian Tire is typically thought of as a retailer, but its ecosystem is more complex than most people may appreciate, as their suite of assets extends beyond their most recognisable store. Over time, the firm’s acquisitions of Mark’s (formerly Mark’s Work Wearhouse), Party City, the Helly Hansen apparel brand, and SportChek have allowed the firm to combine assets in retail, automotive and gasoline, financial services and specialty brands, enhancing the firm’s retail footprint and strengthening its market position across multiple sectors.
The company is also known for its paper Canadian Tire money, first introduced in 1958, an early cash rewards loyalty program. Using its own pseudo-currency made the store feel like a board game come to life and was extremely popular. Today, Canadian Tire money is digital, and the Canadian Tire Bank has been licensed under the Banking Act since 2003. Canadian Tire Financial Services is a subsidiary of the company and now offers credit cards, insurance products, and other financial services. So, is Canadian Tire a bank, an insurer, or a retailer? It’s all of the above. And this plays a significant role in driving loyalty, measured by the frequency and amount that the consumer spends through their Triangle Rewards program, which replaced Canadian Tire Money in 2018.
Investors can even invest in Canadian Tire’s collection of real estate holdings through a REIT (real estate investment trust) through the Toronto Stock Exchange. The REIT owns the buildings and land that Canadian Tire (and other of its retail brands) lease from them. The contracts stipulate that the REIT is entitled to annual rent increases.
The collection of these assets and subsidiaries creates a mutually reinforcing flywheel for the business. It also complicates the definition of Canadian Tire’s relevant marketplace. How should an analyst account for the gas stations and convenience stores owned by Canadian Tire Petroleum, where people collect points and other incentives through Triangle Rewards? Or PartSource, the specialty automotive parts retailer owned by Canadian Tire? The same question is raised with Mark’s (clothing and footwear), SportChek (sports apparel), Helly Hansen (outdoor apparel) or Party City (party supplies). The more diverse holdings a company has, the more difficult it can be to value the company.
Overly simplistic calls for more competition miss this critical point and simplify an increasingly complex set of economic questions. More and more companies are moving from competing within industries to competing to accumulate vast ecosystems of assets. Trying to put companies into neatly defined buckets or industries misses the point. Commerce is a complex web of relationships among many different stakeholders. Just when you think you’ve wrapped your mind around it, a company can shape-shift and confound a rigid sectoral definition.
Companies increasingly want to insert themselves into every aspect of our daily lives, enveloping us in their ecosystem. As we go about our daily lives, everything we do becomes a cash-out opportunity, and we transfer a bit of our paycheque to a monopolist or oligopolist. Industries, be gone. We are the asset.
Excerpted from The Big Fix: How Companies Capture Markets and Harm Canadians by Denise Hearn and Vass Bednar. Copyright 2024. Reprinted by permission of Sutherland House Books.
At the close in Toronto, the S&P/TSX Composite gained 0.42%.
The best performers of the session on the S&P/TSX Composite were Algoma Steel Group Inc (TSX:ASTL), which rose 7.48% or 1.02 points to trade at 14.65 at the close. Meanwhile, Energy Fuels Inc. (TSX:EFR) added 5.14% or 0.44 points to end at 9.00 and Alimentation Couche Tard Inc (TSX:ATD) was up 3.86% or 2.76 points to 74.19 in late trade.
The worst performers of the session were International Petroleum Corp (TSX:IPCO), which fell 4.51% or 0.75 points to trade at 15.87 at the close. OceanaGold Corporation (TSX:OGC) declined 3.69% or 0.15 points to end at 3.91 and CES Energy Solutions Corp (TSX:CEU) was down 3.44% or 0.27 points to 7.59.
Falling stocks outnumbered advancing ones on the Toronto Stock Exchange by 499 to 430 and 107 ended unchanged.
Shares in Algoma Steel Group Inc (TSX:ASTL) rose to 52-week highs; rising 7.48% or 1.02 to 14.65.
The S&P/TSX 60 VIX, which measures the implied volatility of S&P/TSX Composite options, was up 1.18% to 11.17.
Gold Futures for December delivery was up 0.01% or 0.30 to $2,754.90 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in December fell 5.29% or 3.80 to hit $67.98 a barrel, while the January Brent oil contract fell 5.36% or 4.05 to trade at $71.58 a barrel.
CAD/USD was unchanged 0.01% to 0.72, while CAD/EUR unchanged 0.17% to 0.67.
The US Dollar Index Futures was up 0.02% at 104.16.
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What are your key concerns about the incoming oil and gas emissions cap?
It seemed like a straightforward question posed to an oil and gas industry group executive last week.
“Unfortunately, under the new C-59 legislation, I’m not permitted to express the specific concerns,” said Tristan Goodman, head of the Explorers and Producers Association of Canada.
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“I can say we oppose it. I can’t talk about anything associated with why.”
Bill C-59 is legislation passed this summer by the federal government that includes amendments to the federal Competition Act, designed to prevent greenwashing and require businesses to substantiate certain environmental claims.
It says companies can’t represent the benefits of their activity to protect or mitigate the environmental effects of climate change, if it’s “not based on adequate and proper substantiation, in accordance with internationally recognized methodology.”
However, the as-yet undefined methodology, the size of the potential penalties and the burden of proof being put on companies have ignited a pushback from the Alberta government, companies and industries across Canada.
The Alberta government has said the changes “constitute a threat” to Canadian businesses and the country’s competitiveness.
In July, the Competition Bureau launched public consultations to help its development of enforcement guidance surrounding environmental claims.
An examination of dozens of more than 200 submissions made to the bureau this fall — and posted online this week — underscore the concerns rolling in from various corners.
Noon News Roundup
Article content
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It includes submissions from organizations such as Fertilizer Canada, the City of Calgary’s Enmax Corp., the Canadian Federation of Agriculture, the Canadian Aquaculture Industry Alliance, the TMX Group, the Railway Association of Canada, and a number of energy producers and groups.
“Only the most naive would believe these amendments were not aimed squarely at silencing Canada’s energy industry,” Karen Ogen, CEO of the First Nations LNG Alliance, wrote in the group’s submission.
The Canadian Chamber of Commerce states the new provisions “go far beyond what we consider a reasonable approach,” and its punitive penalties create “a significant risk of ‘greenhushing,’ where environmentally beneficial initiatives may be stifled due to heightened compliance risks and uncertainty.”
“The vague and authoritarian nature of the amendments are not reflective of the democratic and equitable principles that are key to the proper functioning of Canada,” said a submission from Athabasca Oil Corp.
“In particular, these amendments will effectively muzzle the energy industry.”
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Article content
After the rules came out, the Pathways Alliance group of oilsands producers and several petroleum producers pulled environmental information from their websites, citing the unclear nature of the rules.
Those backing the legislation say it’s meant to protect consumers and Canadians from false assertions in any sector.
“This does not mean businesses cannot tout their progress on sustainability, but they should be honest and truthful claims,” states a submission by Greenpeace Canada.
“Businesses that may be subject to the new laws may pose them as a threat to free speech or even a direct violation of free speech. In our view, this issue may be used as a delay tactic to avoid enforcement of the provisions and to question the legitimacy of them.”
Greenpeace’s Keith Stewart noted the bureau’s detailed rules are still being developed, which is why the consultation is taking place.
The online submissions highlight the deep concerns of many businesses, investors and industry organizations, that this will lead to less discussion about critical issues, such as how companies decarbonize.
Advertisement 5
Story continues below
Article content
“Our ability to remain transparent has been significantly compromised,” due to the changes to the act, states a submission from Suncor Energy.
The language about being able to substantiate claims about sustainability to align with internationally recognized methodologies “is vague, overreaching and globally unprecedented.”
However, a submission by Ecojustice and the Canadian Association of Physicians for the Environment called on the bureau’s guidance to specify certain commercial practices are regarded as deceptive marketing, without the need for a case-by-case assessment.
Recommended from Editorial
This would include “using ‘green’ imagery, such as clear blue skies, lush forests or other robust ecosystems as a way to strategically appropriate nature and environmental values in order to strengthen green messaging,” their submission stated.
It also calls for the bureau’s guidance to strictly limit fossil fuel advertising.
Advertisement 6
Story continues below
Article content
Several business groups called for a delay in the provisions being enforced. Others said they’re worried about how the rules might conflict with existing regulatory filing requirements to disclose information to governments or regulators.
“The reality is that the new provisions impact and create risk for virtually every sector of the Canadian economy,” says a letter submitted by the Canada West Foundation and signed by 11 different organizations.
Meanwhile, investor groups and businesses worry the new provisions will prevent companies from setting future goals to reduce emissions or reach environmental targets.
“Companies should be encouraged to make and maintain net-zero commitments, even if the way to achieve those commitments depends on technology that is not fully developed yet,” Enmax states in its letter.
“The new provisions add uncertainty where clarity is needed, undoing progress that has been made in the area of environmental disclosure,” said the TMX Group, which operates the Toronto Stock Exchange.
The federal government flatly rejects the notion it’s trying to silence the energy industry as it also moves ahead with policies such as the oil and gas emissions cap, pointing out all sectors must live up to the anti-greenwashing standards.
Advertisement 7
Story continues below
Article content
“It’s simple: If the oil and gas sector makes a claim about the work they are doing, such as advertising campaigns promoting large-scale carbon capture projects, they need to be backed up by the facts,” said Audrey Milette, press secretary to Industry Minister Francois-Philippe Champagne.
A Competition Bureau spokesperson said Friday that it’s reviewing the submissions and aims to finalize the new guidelines within the next few months.
But the landscape has clearly shifted with the new amendments, according to business leaders.
“What has changed? A lot,” Pathways Alliance president Kendall Dilling said in a statement.
“Although our work in environmental innovation hasn’t stopped, the changes to the act have constrained our ability to communicate about them.”
Chris Varcoe is a Calgary Herald columnist.
Article content
What are your key concerns about the incoming oil and gas emissions cap?
It seemed like a straightforward question posed to an oil and gas industry group executive last week.
“Unfortunately, under the new C-59 legislation, I’m not permitted to express the specific concerns,” said Tristan Goodman, head of the Explorers and Producers Association of Canada.
Advertisement 2
Story continues below
Article content
“I can say we oppose it. I can’t talk about anything associated with why.”
Bill C-59 is legislation passed this summer by the federal government that includes amendments to the federal Competition Act, designed to prevent greenwashing and require businesses to substantiate certain environmental claims.
It says companies can’t represent the benefits of their activity to protect or mitigate the environmental effects of climate change, if it’s “not based on adequate and proper substantiation, in accordance with internationally recognized methodology.”
However, the as-yet undefined methodology, the size of the potential penalties and the burden of proof being put on companies have ignited a pushback from the Alberta government, companies and industries across Canada.
The Alberta government has said the changes “constitute a threat” to Canadian businesses and the country’s competitiveness.
In July, the Competition Bureau launched public consultations to help its development of enforcement guidance surrounding environmental claims.
An examination of dozens of more than 200 submissions made to the bureau this fall — and posted online this week — underscore the concerns rolling in from various corners.
Noon News Roundup
Article content
Advertisement 3
Story continues below
Article content
It includes submissions from organizations such as Fertilizer Canada, the City of Calgary’s Enmax Corp., the Canadian Federation of Agriculture, the Canadian Aquaculture Industry Alliance, the TMX Group, the Railway Association of Canada, and a number of energy producers and groups.
“Only the most naive would believe these amendments were not aimed squarely at silencing Canada’s energy industry,” CEO of the First Nations LNG Alliance, wrote in the group’s submission.
The Canadian Chamber of Commerce states the new provisions “go far beyond what we consider a reasonable approach,” and its punitive penalties create “a significant risk of ‘greenhushing,’ where environmentally beneficial initiatives may be stifled due to heightened compliance risks and uncertainty.”
“The vague and authoritarian nature of the amendments are not reflective of the democratic and equitable principles that are key to the proper functioning of Canada,” said a submission from Athabasca Oil Corp.
“In particular, these amendments will effectively muzzle the energy industry.”
Advertisement 4
Story continues below
Article content
After the rules came out, the Pathways Alliance group of oilsands producers and several petroleum producers pulled environmental information from their websites, citing the unclear nature of the rules.
Those backing the legislation say it’s meant to protect consumers and Canadians from false assertions in any sector.
“This does not mean businesses cannot tout their progress on sustainability, but they should be honest and truthful claims,” states a submission by Greenpeace Canada.
“Businesses that may be subject to the new laws may pose them as a threat to free speech or even a direct violation of free speech. In our view, this issue may be used as a delay tactic to avoid enforcement of the provisions and to question the legitimacy of them.”
Greenpeace’s Keith Stewart noted the bureau’s detailed rules are still being developed, which is why the consultation is taking place.
The online submissions highlight the deep concerns of many businesses, investors and industry organizations, that this will lead to less discussion about critical issues, such as how companies decarbonize.
Advertisement 5
Story continues below
Article content
“Our ability to remain transparent has been significantly compromised,” due to the changes to the act, states a submission from Suncor Energy.
The language about being able to substantiate claims about sustainability to align with internationally recognized methodologies “is vague, overreaching and globally unprecedented.”
However, a submission by Ecojustice and the Canadian Association of Physicians for the Environment called on the bureau’s guidance to specify certain commercial practices are regarded as deceptive marketing, without the need for a case-by-case assessment.
Recommended from Editorial
This would include “using ‘green’ imagery, such as clear blue skies, lush forests or other robust ecosystems as a way to strategically appropriate nature and environmental values in order to strengthen green messaging,” their submission stated.
It also calls for the bureau’s guidance to strictly limit fossil fuel advertising.
Advertisement 6
Story continues below
Article content
Several business groups called for a delay in the provisions being enforced. Others said they’re worried about how the rules might conflict with existing regulatory filing requirements to disclose information to governments or regulators.
“The reality is that the new provisions impact and create risk for virtually every sector of the Canadian economy,” says a letter submitted by the Canada West Foundation and signed by 11 different organizations.
Meanwhile, investor groups and businesses worry the new provisions will prevent companies from setting future goals to reduce emissions or reach environmental targets.
“Companies should be encouraged to make and maintain net-zero commitments, even if the way to achieve those commitments depends on technology that is not fully developed yet,” Enmax states in its letter.
“The new provisions add uncertainty where clarity is needed, undoing progress that has been made in the area of environmental disclosure,” said the TMX Group, which operates the Toronto Stock Exchange.
The federal government flatly rejects the notion it’s trying to silence the energy industry as it also moves ahead with policies such as the oil and gas emissions cap, pointing out all sectors must live up to the anti-greenwashing standards.
Advertisement 7
Story continues below
Article content
“It’s simple: If the oil and gas sector makes a claim about the work they are doing, such as advertising campaigns promoting large-scale carbon capture projects, they need to be backed up by the facts,” said Audrey Milette, press secretary to Industry Minister Francois-Philippe Champagne.
A Competition Bureau spokesperson said Friday that it’s reviewing the submissions and aims to finalize the new guidelines within the next few months.
But the landscape has clearly shifted with the new amendments, according to business leaders.
“What has changed? A lot,” Pathways Alliance president Kendall Dilling said in a statement.
“Although our work in environmental innovation hasn’t stopped, the changes to the act have constrained our ability to communicate about them.”
Chris Varcoe is a Calgary Herald columnist.
Article content
By Eric Van Enk on October 26, 2024.
As an economist and portfolio manager, I’ve been allocating significant time analyzing the potential impact for the economy and specific sectors resulting from either a Trump or Harris win in the upcoming U.S. election. There are effectively six potential outcomes from the U.S. election on November 5th, Harris wins the presidency with Democratic house & senate, Republican house & senate or split house & senate; or Trump wins the presidency with Democratic house & senate, Republican house & senate or split house & senate. Each sector of the economy is expected to be impacted differently depending on the six potential outcomes. For example, the best-case scenario for U.S. oil companies may be a Trump victory with a Republican house & senate which would be expected to reduce regulation and remove impediments to growth. Conversely, the automobile industry could be a substantial loser from a Trump victory as he is expected to severely limit the production of automobiles in Mexico which would negatively impact profits for companies like GM. What bothers me is neither presidential candidate appears to have a plan to balance the U.S. budget.
As shown in this week’s chart, the percentage of U.S. GDP now being spent on interest payments (maintaining U.S. government debt; red line) has risen substantially in recent years to the current level of 3%. Notice the percentage of GDP spent on interest costs is now at similar levels to those experienced in the 1980’s and 90’s when interest rates were substantially higher than they are today.
This is a result of absolute and relative U.S. debt levels being much higher today than they were then. Also notice the U.S. federal budget balance as a percentage of GDP (blue line) has been going the wrong way since the late 1990’s – the last U.S. president to run a budget surplus was Bill Clinton. Notice the size of the U.S. deficit is much smaller now than it was during the depths of COVID, however, at 7.2% of GDP, it remains at a high level, especially considering the U.S. isn’t currently in a recession. Typically, government spending is increased to offset the negative impact of recessions and then decreases as the economy exits recession and begins to grow. In this way, deficits can be used as a shock absorber during times of economic weakness.
However, since the late 1990’s, we’re witnessing a phenomenon known as structural deficits – subsequent U.S. governments running deficits regardless of the strength of the economy. Structural deficits contribute to inflation and increase the amount of the budget allocated to servicing debt relative to spending on other government priorities (social programs, etc.). Just like individuals, countries can go bankrupt. Many countries have declared bankruptcy over the years, countries like Argentina have done it more than once by taking on too much debt.
As the world’s largest economy and reserve currency, the U.S. defaulting on its debt could upset the world order and would undoubtedly have a significant negative impact for the global economy.
In Canada, thankfully, we’ve been more prudent and haven’t run as large of deficits for as long as they have been in the U.S. However, the concern is that we could be heading down a similar path to the U.S. if the federal government doesn’t have a plan for running budget surpluses in the foreseeable future.
National Bank Financial – Wealth Management (NBFWM) is a division of National Bank Financial Inc. (NBF), as well as a trademark owned by National Bank of Canada (NBC) that is used under licence by NBF. NBF is a member of the Canadian Investment Regulatory Organization (CIRO) and the Canadian Investor Protection Fund (CIPF), and is a wholly owned subsidiary of NBC, a public company listed on the Toronto Stock Exchange (TSX: NA). The information contained herein has been prepared by Eric Van Enk, associate portfolio manager and wealth adviser at NBF. I have prepared this article to the best of my judgment and professional experience to give you my thoughts on various financial aspects and considerations.
The opinions expressed represent solely my informed opinions and may not reflect the views of NBF. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein. The opinions expressed do not necessarily reflect those of NBF.
Eric Van Enk is a wealth adviser & associate portfolio manager with National Bank Financial in Medicine Hat. He is a graduate of the University of Calgary, as well as a CFA charter holder with 20 years of financial markets experience in New York, Toronto and Calgary. He can be reached at eric.vanenk@nbc.ca
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