Canadian Stocks Fall, Led by Gildan, Lululemon, National Bank

By John Kipphoff

Dec. 11 (Bloomberg) -- Canadian stocks fell, led by consumer and finance companies, as apparel makers slid on signs the recession is hurting profit, and banks fell on speculation a deal to restructure asset-backed commercial paper is at risk.

Gildan Activewear Inc. and Lululemon Athletica Inc. had record drops after both the T-Shirt maker and the yoga-wear retailer forecast earnings that fell short of analysts’ estimates. National Bank of Canada, the Canadian lender with the biggest holding of insolvent commercial paper, fell to a six- year low. BCE Inc. slid after its takeover, the biggest buyout in history, was canceled.

“These issues are adding to uncertainty about prospects going forward,” said Rick Hutcheon, who manages about $140 million as chief investment officer at RKH Financial in Toronto. “ The market doesn’t like that.”

The Standard & Poor’s/TSX Composite Index dropped 242.10, or 2.8 percent, to 8,391.90 in Toronto. The benchmark for Canadian stocks, which gets three-quarters of its value from energy, mining and finance shares, has fallen 39 percent in 2008, poised for its worst year, after global credit losses approached $1 trillion and commodities slumped.

Gildan plunged 35 percent to C$11.60 for its steepest decline since trading began 1999. Profit for the 12 months through September 2009 will fall because of a “continuing negative outlook” for T-shirt demand, Gildan said. Industry shipments of T-shirts in the U.S. plunged about 20 percent last month from a year earlier, following a decline of 13 percent in October, Gildan said.

North America’s biggest T-shirt maker expects 2009 profit of $1.10 to $1.30 a share, excluding items. Analysts expected an average of $1.87, according to a Bloomberg survey.

Yoga-Wear

Lululemon Athletica Inc. fell 33 percent to C$8.80, the most in its 16 months of trading. The yoga-wear company that quadrupled profit last year cited the weaker economy and Canadian dollar as it cut its profit forecast.

BCE slid 4.3 percent to C$22.03. The phone company’s C$52 billion ($41 billion) leveraged buyout was abandoned by Ontario Teachers’ Pension Plan and a group of U.S. private-equity firms today after auditor KPMG said last month that the transaction would leave the carrier insolvent.

National Bank of Canada dropped 9.4 percent to C$29.81, the lowest since October 2002. A plan to swap C$32 billion in insolvent asset-backed commercial paper for new notes is in jeopardy as the restructuring committee of investors and financial companies is asking the federal government for as much as C$10 billion in backstops, the Globe and Mail reported, citing two unidentified people familiar with the situation.

Most at Stake

National Bank is the Canadian lender with the most at stake in the ABCP market. It held about C$2.2 billion of the frozen debt as of Oct. 31, the bank said on Dec. 4.

The insolvent asset-backed paper hasn’t traded since August 2007, when investors began to shun the debt because of concerns about links to high-risk U.S. mortgage loans. That month, a group led by Caisse de Depot et Placement du Quebec reached an agreement, called the Montreal Accord, to freeze the notes.

“ABCP won’t go away,” said Hutcheon. “People thought it was wrapped and done and now it’s not.”

The market extended losses in the afternoon as energy and mining shares fell even as oil, gold and copper gained, on concern that a $14 billion plan to bail out the U.S. auto industry, expected to support demand for fuel and industrial metals, lacks support in the Senate.

EnCana Corp. fell 7.4 percent to C$55.22. Canada’s largest natural-gas producer cut its 2009 capital budget, saying that declining energy prices reduced the profitability of some drilling projects.

ACE Aviation Holdings Inc. almost doubled, adding C$3.23 to C$6.58. The parent of Air Canada (AC/B CN), the country’s biggest airline, said that it will seek court and shareholder approvals to wind down the company and distribute assets, including cash and Air Canada shares, to shareholders.

Air Canada dropped a record 29 percent to C$1.28 on concern investors receiving its stock may dump it.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.