Fallout From US Slowdown Hits Canada
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The US housing slowdown has brought about a need for Major Furniture Liquidations in Canada and the US.
Liquidation World Inc. (TSX:LQW) today announces a number of new major furniture liquidations being offered throughout its stores in Canada. The recent and dramatic changes to the US housing market, precipitated by the sub-prime mortgage crisis, have impacted a number of major US furniture vendors.No Profit In Liquidation Business
Maurice Chelli, SVP Merchandising said: "The US housing slowdown has had ripple effects in the furniture sector. As a result we have recently acquired several million dollars worth of furniture inventories and we are continuing to see new opportunities almost on a daily basis. The result is a wide array of high quality furniture being liquidated throughout our Canadian outlets.
While these same economic factors are causing price deflation in the North American furniture market in general, the sheer volume of deals has put us in the position of being able to choose the deals that deliver the best value to our customers. In one recent example, we sold more than a million dollars worth of living room furniture for less than $500,000.00. For the value-driven Canadian consumer, there has never been a better opportunity to purchase household furniture."
Inquiring minds might be wondering if the liquidation business is booming. Let's take a look at Liquidation World's Fiscal 2007 Results.
- Canadian operations recorded a net loss of $6.7 million ($0.81 per share) versus net earnings of $1.3 million ($0.16 per share) in fiscal 2006.
- In the US, revenue for the year declined by 4.9% to $28.2 million from $29.7 million in fiscal 2006. US operations recorded a loss of $5.0 million for the year versus net earnings of $0.2 million in fiscal 2006.
- In the US, revenue for the year declined by 4.9% to $28.2 million from $29.7 million in fiscal 2006. US operations recorded a loss of $5.0 million for the year versus net earnings of $0.2 million in fiscal 2006.
- In the fourth quarter of fiscal 2007, the Company announced that it would wind down its US operations and forecasted a loss of $1.5 to $2.5 million related to the closure.
- Subsequent to year end the Company closed 15 of its 18 US outlets.
In spite of the supposition that "there has never been a better opportunity to purchase household furniture" it seems there is no profit in the liquidation business.
With that, Canadian based Liquidation World had no choice but to liquidate its US operations.
Canadian Economy Shows Strains From US Slowdown
The Financial Post is reporting Canadian economy beginning to show the strain.
Canada's manufacturing and forestry sectors may already be in recession and the U.S. slowdown and spike in the Canadian dollar are beginning to have a greater impact on the broader economy, with the mining and wholesale trades contributing to weaker economic growth in November, new figures show.In spite of an enormous housing bubble in Canada, speculation is that Bank of Canada will cut interest rates from 4% to 3%. How far down the road to ZIRP Canada is willing to follow the US remains to be seen.
Canadian gross domestic product (GDP) slowed to 0.1% in November from 0.2% in October, resulting in an annualized growth rate of 2.7%, Statistics Canada figures showed yesterday. The pace of growth is not expected to pick up anytime soon, with the Bank of Canada predicting growth of 1.8% in 2008.
"It's clear that Canada's economy is not immune to the weakness south of the border and the strong Canadian dollar," Sal Guatieri, senior economist at BMO Capital Markets, said.
The agricultural and forestry industry took the biggest hit in November, declining 0.4% for an annualized contraction of 3.8%.
"There's really no sign of a recovery in forestry products," Mr. Guatieri said, adding growth in one of that industry's main markets, the housing sector, was also slowing.
Mining growth fell 0.4% in the month and was down 0.7% on the year. Manufacturing activity declined by 0.3% in November, but remained slightly higher over the year at 0.2%. While wholesale trade fell 0.1%, but maintained a healthy annualized growth rate of 8.8%.
Paul Ferley, assistant chief economist at RBC Capital Markets said the Bank of Canada will likely cut interest rates from 4% to 3% over the next six months as the U.S. slowdown "will likely put additional downward pressure on the pace of activity in Canada."
The further the Bank of Canada is willing to cut, the more pressure there will be to unwind various carry trades.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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