(TSX: NWC): The North West
Company Inc. (the "Company" or "North West") today reported its
unaudited financial results for the third quarter ended
October 31, 2020. It also announced that the Board of
Directors have declared a dividend of $0.36 per share to
shareholders of record on December 31, 2020, to be paid on
January 15, 2021.
“North West continues to provide essential
products and services that people depend on during this
unprecedented pandemic," commented President and CEO Edward
Kennedy. ”Our associates are incredibly dedicated, community-minded
and enterprising, as shown by their ability to take on the
challenges and opportunities uniquely presented to us. I am
especially proud of how we’ve risen to even higher levels of
community responsibility while keeping our focus on fast-shifting
customer needs. Throughout, health and safety remain our first
priority, as seen in the low rate of COVID-19 transmission within
our work and shopping spaces.
Our sales gains show the strength of an everyday
needs offering and an exceptional ability to sustain our business
within difficult operating conditions, without serious disruption.
These are the main reasons we have increased market shares across
all of our store banners and regions.
Our effort is balanced between immediate
reactions to the pandemic and work that will make us a more
compelling shopping choice in the years ahead. We were well along
this path before last March and since then we have forged deeper
connections with existing and new customers. We also see new growth
areas that build on these relationships and our core abilities.
As we confront the current, most precarious
stages of the pandemic, the stress on the people and communities we
work with and live in is at its highest. Our resolve, experience
and resources are even deeper than at the beginning and I am
confident we will be a reliable, reassuring and safe presence
through the next several months and until a vaccine is broadly
distributed.“
Financial Highlights
Third quarter consolidated sales increased 6.4%
to $553.0 million and were up 17.8% on a same store basis driven by
market share gains and COVID-19-related factors including a
continuing shift towards in-community spending as well as income
support provided by different jurisdictions within which the
Company operates. These factors were largely offset by a decrease
in sales due to the sale of 36 of the Company's Giant Tiger stores
which was completed in the second quarter (the "Giant Tiger
Transaction").
Gross profit increased 9.3% driven by higher
sales and an 88 basis point rate increase compared to last year
primarily due to favourable changes in product sales blend and
higher inventory turns contributing to lower markdowns and
inventory shrinkage. These factors were partially offset by lower
margin rates in the British Virgin Islands, a higher blend of CUL
sales which carry a lower gross profit rate consistent with CUL's
discount warehouse format and the impact of lower margin wholesale
food sales as part of the Giant Tiger Transaction.
Selling, operating and administrative expenses
("Expenses") were flat to last year and down 158 basis points as a
percentage to sales. The decrease in Expenses related to the Giant
Tiger Transaction and lower Canadian administration costs was
offset by higher share-based compensation costs, an increase in
annual incentive plan costs and the impact of COVID-19-related
expenses. Excluding the impact of the share-based compensation
costs, Expenses decreased $8.5 million or 6.4% and were down 308
basis points as a percentage to sales. This decrease is primarily
due to the reductions previously noted and the impact of $2.3
million in store opening, support office restructuring and
relocation costs in International Operations last year.
Earnings from operations increased $15.9 million
to $52.9 million compared to $37.0 million last year and earnings
before interest, income taxes, depreciation and amortization
(EBITDA2) increased $16.4 million to $75.7 million due to the
sales, gross profit and Expense factors previously noted. Adjusted
EBITDA2, which excludes share-based compensation costs, increased
$24.8 million compared to last year and as a percentage to sales
was 15.1% compared to 11.3% as the impact of sales gains and gross
profit rate improvements in the quarter more than offset higher
Expenses.
Net earnings increased $11.1 million to $35.9
million. Net earnings attributable to shareholders were $34.6
million and diluted earnings per share were $0.71 per share
compared to $0.49 per share last year due to the factors noted
above. Adjusted net earnings2, which excludes the impact of the
after-tax share-based compensation costs, increased $18.5 million
compared to last year driven by earnings gains in Canadian
Operations and International Operations resulting from the factors
previously noted.
Further information on the financial results is
available in the Company's 2020 third 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.
Third Quarter Conference
Call
North West will host a conference call results
on December 9, 2020 at 1:30 p.m. (Central Time). To access the
call, please dial 416-340-2217 or 800-806-5484 with a pass code of
3198094. The conference call will be archived and can be accessed
by dialing 905-694-9451 or 800-408-3053 with a pass code of 4473728
on or before January 9, 2021.
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 Company's
intentions regarding a normal course issuer bid, the anticipated
impact of the COVID-19 pandemic on the Company's operations and the
Company's related business continuity plans and the realization of
expected savings from administrative cost reduction plans. 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 211 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.
1 Excluding the impact of foreign exchange2 See
Non-GAAP Measures Section of Management's Discussion &
Analysis
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
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