(TSX:
NWC): The North West
Company Inc. (the "Company" or "North West") today reported its
unaudited financial results for the first quarter ended
April 30, 2020. It also announced that the Board of
Directors have declared a dividend of $0.33 per share to
shareholders of record on June 30, 2020, to be paid on
July 15, 2020.
"Since the COVID-19 outbreak our customers and
communities have relied on North West’s role as a trusted,
essential service provider,” commented President & CEO Edward
Kennedy. “Across the company, our people have provided an
exceptional response to this call. They have adapted to a range of
new work conditions, especially within our front-line positions,
and they have sought out innovative solutions to the many safety
and product supply challenges that were completely unexpected two
months ago. While business volumes have been generally very strong,
we recognize the overall COVID-19 situation remains uncertain. Our
planning continues to cover a range of COVID-19 severity scenarios
as well as opportunities for growth in new areas over the remainder
of 2020 and into next year."
Financial Highlights
First quarter consolidated sales increased 19.8%
to $592.6 million led by same store sales gains across all regions,
the impact of new store sales and the positive impact of foreign
exchange on the translation of International Operations sales.
Excluding the foreign exchange impact, consolidated sales increased
17.6% and were up 15.5%1 on a same store basis. Sales were driven
by investments in lower prices and by COVID-19-related consumer
income and spending changes. One extra day of sales as a
result of February 29 was also a factor.
Gross profit increased 17.9% driven by higher
sales as the gross profit rate decreased 52 basis points compared
to last year. The decrease in gross profit rate was mainly
due to food price reductions in northern Canada aimed at capturing
more local spending dollars and to help mitigate the impact of
COVID-19 on our customers. A secondary factor was a higher blend of
CUL sales which carry a lower gross profit rate consistent with
CUL's discount warehouse format.
Selling, operating and administrative expenses
("Expenses") increased 38.1% and were up 368 basis points to last
year as a percentage to sales substantially due to the impact of
the previously announced Giant Tiger asset impairment and store
closure provision of $9.4 million and $5.0 million in support
office employee severance costs in Canadian Operations, a $4.6
million increase in share-based compensation costs related to
changes in the Company's share price and a $10.7 million
insurance-related gain in International Operations in the first
quarter last year (collectively "Non-comparable Expense Factors").
Excluding the impact of the Non-comparable Expense Factors,
Expenses increased $15.9 million or 12.0% but were down 175 basis
points as a percentage of sales. Of this expense increase, $4.8
million is due to the impact of COVID-19 expenses primarily related
to wage increases for front-line associates, protective equipment
and enhanced sanitation procedures.
Earnings from operations decreased $17.5 million
or 47.4% to $19.5 million compared to $37.0 million last year and
earnings before interest, income taxes, depreciation and
amortization (EBITDA2) decreased $14.9 million or 25.5% to $43.4
million due to the Non-comparable Expense Factors previously
noted. Adjusted EBITDA2, which excludes the Non-comparable
Expense Factors, increased $14.7 million or 32.6% compared to last
year and as a percentage to sales was 10.1% compared to 9.1% last
year as the impact of a sales driven gross profit increase more
than offset higher Expenses.
Net earnings decreased $14.0 million or 53.3% to
$12.3 million. Net earnings attributable to shareholders were $11.3
million and diluted earnings per share were $0.23 per share
compared to $0.51 per share last year due to the factors noted
above. Adjusted net earnings2, which excludes the impact of the
after-tax Non-comparable Expense Factors noted above, increased
$9.5 million compared to last year due to higher sales partially
offset by lower gross profit rates and other Expense factors
previously noted.
Further information on the financial results is
available in the Company's 2020 first quarter Report to
Shareholders, Management's Discussion and Analysis and unaudited
interim period condensed consolidated financial statements which
can be found in the investor section of the Company's website at
www.northwest.ca.
First Quarter Conference
Call
North West will host a conference call results
on June 10, 2020 at 1:30 p.m. (Central Time). To access the
call, please dial 416-641-6104 or 800-898-3989 with a pass code of
7550801. The conference call will be archived and can be
accessed by dialing 905-694-9451 or 800-408-3053 with a pass code
of 2600024 on or before July 10, 2020.
Notice to
Readers
Certain forward-looking statements are made in
this news release, within the meaning of applicable securities
laws. These statements reflect North West's current expectations
and are based on information currently available to management. The
words may, will, should, believe, expect, plan, anticipate, intend,
estimate, predict, potential, continue, or the negative of these
terms, identify forward-looking matters. These statements speak
only as of the date of this press release. The actual results could
differ materially from those anticipated in these forward-looking
statements.
Reliance should not be placed on forward-looking
statements because they involve known and unknown risks,
uncertainties and other factors, which may cause the actual
results, performance, capital expenditures or achievements of North
West to differ materially from anticipated future results,
performance, capital expenditures or achievement expressed or
implied by such forward-looking statements, including the
anticipated impact of the COVID-19 pandemic on the Company's
operations and the Company's related business continuity plans and
the closing of the GTSL Transaction which is subject to commercial
risks and closing conditions that are outside the control of the
Company, such are various third party consents which may cause the
GTSL Transaction to not close on the terms and conditions
negotiated or at all. Factors that could cause actual results to
differ materially from those set forth in the forward-looking
statements include, but are not limited to, business performance,
fluctuations in interest rates and currency values, legislative and
regulatory developments, legal developments, the occurrence of
weather-related and other natural catastrophes, changes in tax
laws, and those risks and uncertainties detailed in the section
entitled Risk Factors in North West's Management's Discussion and
Analysis and Annual Information Form, both for the year-ended
January 31, 2020. The preceding list is not an
exhaustive list of possible factors. These and other factors should
be considered carefully and readers are cautioned not to place
undue reliance on these forward-looking statements. North West
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, other than as required by applicable
law.
Company
Profile
The North West Company Inc., through its
subsidiaries, is a leading retailer of food and everyday products
and services to rural communities and urban neighbourhoods in
Canada, Alaska, the South Pacific and the Caribbean. North West
operates 250 stores under the trading names Northern, NorthMart,
Giant Tiger, Alaska Commercial Company, Cost-U-Less and RiteWay
Food Markets and has annualized sales of approximately CDN$2.0
billion.
The common shares of North West
trade on the Toronto Stock Exchange under the symbol
NWC.
For more information
contact:
Edward Kennedy, President and Chief Executive
Officer, The North West Company Inc.Phone 204-934-1482; fax
204-934-1317; email ekennedy@northwest.ca
John King, Executive Vice-President and Chief
Financial Officer, The North West Company Inc.Phone 204-934-1397;
fax 204-934-1317; email jking@northwest.ca
- Excluding the impact of foreign exchange and one extra day of
sales as a result of February 29
- See Non-GAAP Measures Section of Management's Discussion &
Analysis
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