From the Desk of Irwin Michael – November 20, 2015 Despite the excessive pessimism in U.S. retail stocks during the second half of 2015, we believe that specialty retail is an excellent place to invest. This week two of our favoured specialty retail stocks reported excellent quarterly results. Foot Locker reported that its Q3 comparable store sales increased by 8.7%, compared to expectations of 6.1%. The company is benefiting from strong demand for athletic clothing, with strength in basketball and running shoes as well as classic sneakers. The company was also able to increase its profitability, with higher growth margins and lower relative selling, general and administrative expenses. With their strong free cash flow the company bought back $110 million of stock during the quarter. With Foot Locker maintaining a very strong balance sheet, we foresee robust returns to shareholders including rising dividends and more share buybacks. Home Depot also reported a strong Q3, with comparable store sales increasing by 7.3%. During the quarter, the company increased its store count by seven and grew the number of customer transactions. Similar to Foot Locker, the company increased its profitability through higher gross margins and a reduced SG&A expense rate. We maintain a favourable outlook for Home Depot with a recovering US housing market and strong demand for home renovations. As the market leader in this segment, we expect Home Depot will reap the rewards and deliver higher revenues and free cash flow. Irwin A. Michael, President I.A. Michael Investment Counsel Ltd.