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Retail spending slows after rapid recovery – The Globe and Mail

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Shoppers wear masks at a mall on July 20, 2020 in Laval, Quebec. Of late, the retail sector has been helped on several fronts. With more stores open, Canadians have been able to satiate any pent-up demand from earlier in the pandemic.

Ryan Remiorz/The Canadian Press

Canadian retail sales increased by a modest 0.6 per cent in July, a sign that pent-up demand has been satisfied after blowout gains in the early weeks of reopening.

Higher sales at auto dealers and gasoline stations helped to drive July’s gain. After removing those components, retail sales fell 1.2 per cent as home-improvement and sporting-goods stores – two areas of strength during the COVID-19 pandemic – saw buying sprees fade.

Despite a slower pace of spending, further gains are expected: In a preliminary estimate, Statistics Canada said Friday that retail sales rose 1.1 per cent in August.

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“While the headline gain was a bit shy of expectations, the much bigger and more important picture is that retail and wholesale activity just carved out perfect V-shaped rebounds,” said Douglas Porter, chief economist at Bank of Montreal, in a client note. “And, that rebound was maintained in August,” he added, referencing Statscan’s early estimate.

Canadian retailers have experienced a quick recovery. Retail spending fell 31 per cent between February and April as stores were forced to shutter under pandemic restrictions. What followed was record month-to-month gains in May (19 per cent) and June (24 per cent) as lockdown restrictions were eased, bringing sales above prepandemic levels.

July’s increase was more like a “normal” report, Mr. Porter said.

During the month, scorching gains for many retailers began to dissipate. Sales at building supplies and gardening stores fell 11.6 per cent in July, but were still 4.7-per-cent higher than a year earlier. Sporting goods, hobby and book stores dropped 8.8 per cent, but were 11.4-per-cent higher than the previous July. Grocery sales fell for a fourth consecutive month, but remained stronger than before the outbreak.

“The increase in restaurant activity likely accounted for the noticeable dent in food store sales,” said Royce Mendes, senior economist at CIBC Capital Markets, in a client note.

The auto sector enjoyed a solid month. Vehicle dealers tallied a 3.5-per-cent gain in July, with used-car dealers rising 11.5 per cent. Gas stations were lifted 6.1 per cent because of higher fuel prices and more car trips.

Clothing stores continued their rebound, with sales rising 11.2 per cent to $2.5-billion in July. However, revenue was still weaker than before the pandemic.

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Of late, the retail sector has been helped on several fronts. With more stores open, Canadians have been able to satiate any pent-up demand from earlier in the pandemic. Moreover, household disposable income surged 10.8 per cent in the second quarter because of historic transfers of emergency aid from the federal government. Further, with many service industries still heavily curtailed, Canadians have shifted some spending to goods.

Still, the outlook for consumption is somewhat uncertain.

“The continued federal government income support programs and low interest rates will remain supportive for consumer spending,” said Ksenia Bushmeneva, a Toronto-Dominion Bank economist, in a research note. “However, there are also significant headwinds, such as the still-high level of unemployment, uncertainty with respect to [loan] deferral programs, and rising COVID-19 cases.”

Timelier data from Canadian banks suggest consumer spending has levelled off or even fallen in recent weeks.

By the end of August, spending was slightly lower than at the beginning of the month, according to Royal Bank of Canada data. Transactions were “relatively stable” in early September compared with a year ago, but had dipped since mid-August, the Bank of Nova Scotia found.

“Most provinces show a decline since mid-August and the recent pickup in the number of COVID-19 cases could slow the recovery further,” the Scotiabank report said.

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Cenovus to cut up to 25% of workforce after merger with Husky – Financial Post

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Article content continued

“As with any merger of this type, there will be overlap and there will be some difficult decisions as we work to create a combined organization best positioned for the future,” Husky spokeswoman Kim Guttormson said.

Cenovus spokesman Reg Curren also confirmed the cuts.

Guttormson added that many details had yet to be determined as part of the integration planning process and the transaction has not yet closed.

The $3.8 billion combination announced on Sunday, the largest Canadian oil and gas deal in nearly four years based on enterprise value, may pressure peers to get bigger or sell.

Half of the $1.2 billion in targeted savings will be achieved through job cuts and reductions in corporate overhead costs, including streamlined IT systems and procurement savings, the companies said.

Rival producer Suncor Energy Inc this month said it would cut up to 15 per cent of its workforce over the next year and a half, while Exxon Mobil Corp was expected to cut jobs soon in the United States and Canada.

© Thomson Reuters 2020

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Cenovus to cut up to 25% of combined workforce with Husky Energy after merger – CBC.ca

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The $3.8-billion merger between Cenovus Energy and Husky Energy will result in a trimming of the workforce by as much as 25 per cent, CBC News has confirmed.

“The estimate is that the reductions will be approximately 20 per cent to 25 per cent of the combined workforce, which is about 8,600 employees and contractors,” Reg Curren, senior media advisor for Cenovus, said in an email to CBC News on Tuesday, two days after the merger was announced.

The majority of the job cuts of 1,720 to 2,150 positions are expected to take place in Calgary, where both firms are headquartered.

The new company will operate as Cenovus Energy and will be based out of Calgary.

“As with any merger of this type, there will be overlap and there will be some difficult decisions as we work to create a combined organization best positioned for the future,” Kim Guttormson, communications manager at Husky, said in an emailed statement.

Deal generally applauded 

Cenovus CEO Alex Pourbaix said his company’s merger with rival Husky would create a new entity that’s stronger, more resilient and operating with ‘significantly reduced’ risk to market volatility. (Jeff McIntosh/The Canadian Press)

Cenovus CEO Alex Pourbaix said the merger would create a new entity that’s stronger, more resilient and operating with “significantly reduced” risk to market volatility.

His counterpart at Husky, CEO Rob Peabody, said the deal would allow the combined companies to “make better returns in a tougher environment.”

Analysts generally applauded the surprise Cenovus-Husky hookup for its operational advantages but criticized the plus-20-per-cent premium in the price for Husky.

Husky Energy president and CEO Robert Peabody said the two companies have talked about a merger for several years, but discussions picked up in March. (Jeff McIntosh/The Canadian Press)

“The deal does make strategic sense,” said Manav Gupta of Credit Suisse in a note to investors.

“Like U.S. E&P (exploration and production companies), Canadian energy companies also need to come together, cut costs and become leaner to better adapt to lower energy demand in [a] post-pandemic world.”

Both companies are carrying a relatively hefty amount of debt and that’s why joining forces made financial sense. 

While the oilpatch has struggled for many years, this deal is happening in a remarkably unique time in the industry, with many companies bleeding money with historically low oil prices that even turned negative this year.

The oil pipeline and tank storage facilities at the Husky Energy oil terminal in Hardisty, Alta. Husky’s CEO says the combined company will be better able to achieve climate targets, such as the goal to have net-zero emissions by 2050. (Larry MacDougal/The Canadian Press)

Cenovus shares fell by as much as 15 per cent to $4.15 in Monday trading in Toronto before closing down 8.4 per cent at $4.47.

Husky, meanwhile, gained as much as 14.2 per cent to $3.62 before closing up 12 per cent at $3.55

Earlier in 2020, Cenovus and Husky shares had lost 63 per cent and 70 per cent of their value, respectively.

Cenovus expects to find savings of $1.2 billion.

More mega-mergers likely, analyst says

The all-share deal will likely spark more mega-mergers among Canadian oil and gas majors, according to a veteran oilsands analyst.

“This is likely just the start of big deals in Canadian energy land and thus it begs the question of who is next?” said analyst Phil Skolnick of Eight Capital in a report on Monday.

“As seen in the U.S. with the accelerated M&A activity, when there’s one meaningful transaction, there’s likely more to come.”

Several industry observers point to Calgary-based oilsands producer MEG Energy Inc. as the leading potential target, noting Husky’s failed $3.3-billion hostile takeover attempt of its smaller rival two years ago.

The Husky-Cenovus merger calls for Husky shareholders to receive 0.7845 of a Cenovus share plus 0.0651 of a Cenovus share purchase warrant in exchange for each Husky common share if the deal is concluded.

Cenovus shareholders would own about 61 per cent of the combined company and Husky shareholders about 39 per cent.

The transaction must be approved by at least two-thirds of Husky’s shareholders but Hong Kong billionaire Li Ka-Shing controls 70 per cent of Husky’s shares and has agreed to vote them in favour of the deal.  

Third-quarter results expected this week

The announcement Sunday came just as Calgary’s oilsands companies are about to start rolling out third-quarter financial results, with Suncor Energy Inc. set to report Wednesday and both Cenovus and Husky scheduled to report on Thursday.

Alberta Energy Minister Sonya Savage said in a statement that she predicts opponents of Canada’s energy sector will “seize upon today’s news.”

“But projections show continued global demand for fossil fuels well into the future,” she said. “We believe that Canada should not cede that market to countries like Russia and Saudi Arabia.”

“As companies across the globe navigate unprecedented economic times, job restructurings are an unfortunate reality of weathering the storm. 

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Cenovus to cut up to 25% of combined workforce with Husky Energy after merger – CBC.ca

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The $3.8-billion merger between Cenovus Energy and Husky Energy will result in a trimming of the workforce by as much as 25 per cent, CBC News has confirmed.

“The estimate is that the reductions will be approximately 20 per cent to 25 per cent of the combined workforce, which is about 8,600 employees and contractors,” Reg Curren, senior media advisor for Cenovus, said in an email to CBC News on Tuesday, two days after the merger was announced.

The majority of the job cuts of 1,720 to 2,150 positions are expected to take place in Calgary, where both firms are headquartered.

The new company will operate as Cenovus Energy and will be based out of Calgary.

“As with any merger of this type, there will be overlap and there will be some difficult decisions as we work to create a combined organization best positioned for the future,” Kim Guttormson, communications manager at Husky, said in an emailed statement.

Cenovus CEO Alex Pourbaix said his company’s merger with rival Husky would create a new entity that’s stronger, more resilient and operating with ‘significantly reduced’ risk to market volatility. (Jeff McIntosh/The Canadian Press)

Cenovus CEO Alex Pourbaix said the merger would create a new entity that’s stronger, more resilient and operating with “significantly reduced” risk to market volatility.

His counterpart at Husky, CEO Rob Peabody, said the deal would allow the combined companies to “make better returns in a tougher environment.”

Husky Energy president and CEO Robert Peabody said the two companies have talked about a merger for several years, but discussions picked up in March. (Jeff McIntosh/The Canadian Press)

Analysts generally applauded the surprise Cenovus-Husky hookup for its operational advantages but criticized the plus-20-per-cent premium in the price for Husky.

“The deal does make strategic sense,” said Manav Gupta of Credit Suisse in a note to investors.

“Like U.S. E&P (exploration and production companies), Canadian energy companies also need to come together, cut costs and become leaner to better adapt to lower energy demand in [a] post-pandemic world.”

Both companies are carrying a relatively hefty amount of debt and that’s why joining forces made financial sense. 

While the oilpatch has struggled for many years, this deal is happening in a remarkably unique time in the industry, with many companies bleeding money with historically low oil prices that even turned negative this year.

The oil pipeline and tank storage facilities at the Husky Energy oil terminal in Hardisty, Alta. Husky’s CEO says the combined company will be better able to achieve climate targets, such as the goal to have net-zero emissions by 2050. (Larry MacDougal/The Canadian Press)

Cenovus shares fell by as much as 15 per cent to $4.15 in Monday trading in Toronto before closing down 8.4 per cent at $4.47.

Husky, meanwhile, gained as much as 14.2 per cent to $3.62 before closing up 12 per cent at $3.55

Earlier in 2020, Cenovus and Husky shares had lost 63 per cent and 70 per cent of their value, respectively.

Cenovus expects to find savings of $1.2 billion.

The all-share deal will likely spark more mega-mergers among Canadian oil and gas majors, according to a veteran oilsands analyst.

“This is likely just the start of big deals in Canadian energy land and thus it begs the question of who is next?” said analyst Phil Skolnick of Eight Capital in a report on Monday.

“As seen in the U.S. with the accelerated M&A activity, when there’s one meaningful transaction, there’s likely more to come.”

Several industry observers point to Calgary-based oilsands producer MEG Energy Inc. as the leading potential target, noting Husky’s failed $3.3-billion hostile takeover attempt of its smaller rival two years ago.

The Husky-Cenovus merger calls for Husky shareholders to receive 0.7845 of a Cenovus share plus 0.0651 of a Cenovus share purchase warrant in exchange for each Husky common share if the deal is concluded.

Cenovus shareholders would own about 61 per cent of the combined company and Husky shareholders about 39 per cent.

The transaction must be approved by at least two-thirds of Husky’s shareholders but Hong Kong billionaire Li Ka-Shing controls 70 per cent of Husky’s shares and has agreed to vote them in favour of the deal.

The announcement Sunday came just as Calgary’s oilsands companies are about to start rolling out third-quarter financial results, with Suncor Energy Inc. set to report Wednesday and both Cenovus and Husky scheduled to report on Thursday.

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