The Globe and Mail reports in its Monday, May 18, edition that as bad as earnings season has been, it is just a taste of what is to come.
The Globe's Tim Shufelt writes that corporate profits in Canada contracted by an estimated 17 per cent in the first quarter, compared with the same period last year. Subsequent quarters will reveal the true level of profit destruction and the resulting economic recession. Nearly every sector of the Canadian stock market had a violent decline in profits, with consumer cyclicals and financials hardest hit.
The second quarter contraction in Canadian profits is expected to approach 40 per cent. Some consumer discretionary names face an existential threat, as many consumers have been either unable to shop or unwilling to spend on non-essentials.
Cineplex ($14.86), which temporarily shuttered its chain of theatres, deferred filing its quarterly financial statements, saying the impact of the COVID-19 pandemic "cannot be quantified at this time." Cineplex shares have declined by more than 50 per cent since the market sell-off began in mid-February. The Globe reported on March 13 that Cineworld Group's deal with Cineplex was on shaky ground. The shares were then worth $8.84.
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