(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, 2023. It also announced that the Board of Directors
has declared a dividend of $0.38 per share to shareholders of
record on June 30, 2023, to be paid on July 14, 2023.
“Our results this quarter reflect the continuing
negative impact of high inflation and comparing to the strong
results last year that were positively impacted by COVID-19-related
income support payments”, said President and CEO Dan McConnell. “We
remain focused on providing the essential products and services
that meet our customers’ needs and finding cost efficiencies and
productivity gains within our business to help offset the impact of
higher inflation. I am optimistic about the operational excellence
strategy and initiatives we are undertaking and the opportunities
for growth within our business which will provide value to our
customers and shareholders”.
Financial Highlights
Sales First
quarter consolidated sales increased 7.5% to $593.6 million led by
sales gains in Canadian Operations and the impact of foreign
exchange on the translation of International Operations sales. An
increase in airline revenue in Canadian Operations and the impact
of new stores were also factors. Excluding the foreign exchange
impact, consolidated sales increased 5.1%, with food sales
increasing 3.4% and general merchandise sales decreasing 4.5%
compared to last year. Similar to previous quarters, the impact of
higher merchandise and freight cost inflation continued to result
in changes in product sales blend as consumers allocated more of
their spending to food and reduced purchases of general
merchandise, although to a lesser extent than the first quarter
last year. On a same store basis, sales increased 0.9%1 compared to
the first quarter last year, as a 2.2% increase in food same store
sales more than offset a 6.8% decrease in general merchandise same
store sales.
Gross Profit
Gross profit increased 5.0% as sales gains were partially offset by
a 73 basis point decrease in gross profit rate compared to last
year. The decrease in gross profit rate was mainly due to changes
in sales blend, the impact of higher freight and merchandise cost
inflation that was not fully passed through in retail prices and an
increase in markdowns.
Selling, Operating and Administrative
Expenses Selling, operating and administrative expenses
("Expenses") increased $16.6 million or 12.3% compared to last year
and were up 109 basis points as a percentage to sales. The increase
in Expenses is mainly due to cost inflation impacts including
higher staff costs and fuel-based utility expenses, the impact of
foreign exchange on the translation of International Operations
Expenses and new store expenses.
Earnings From Operations
Earnings from operations (EBIT) decreased to $33.8 million compared
to $41.4 million last year and earnings before interest, income
taxes, depreciation and amortization ("EBITDA2") decreased to $59.0
million compared to $64.9 million last year due to the gross profit
and Expense factors previously noted. Adjusted EBITDA2, which
excludes share-based compensation costs, decreased $4.9 million
compared to last year and as a percentage to sales was 10.7%
compared to 12.4% last year.
Net Earnings Net earnings
decreased to $22.2 million compared to $28.2 million last year. Net
earnings attributable to shareholders were $20.9 million and
diluted earnings per share were $0.43 per share compared to $0.57
per share last year. Adjusted net earnings2, which excludes the
after-tax impact of the share-based compensation costs, decreased
$5.1 million compared to the COVID-19-related driven earnings last
year due to the gross profit and Expense factors previously noted
and higher interest expense, partially offset by the impact of a
lower effective tax rate.
Non-GAAP Financial Measures
The Company uses the following non-GAAP
financial measures: earnings before interest, income taxes,
depreciation and amortization ("EBITDA"), adjusted EBITDA and
adjusted net earnings. The Company believes these non-GAAP
financial measures provide useful information to both management
and investors in measuring the financial performance and financial
condition of the Company for the reasons outlined below.
Earnings Before Interest, Income Taxes,
Depreciation and Amortization (EBITDA) is not a recognized
measure under IFRS. Management believes that in addition to net
earnings, EBITDA is a useful supplemental measure as it provides
investors with an indication of the Company's operational
performance before allocating the cost of interest, income taxes
and capital investments. Investors should be cautioned however,
that EBITDA should not be construed as an alternative to net
earnings determined in accordance with IFRS as an indicator of the
Company's performance. The Company's method of calculating EBITDA
may differ from other companies and may not be comparable to
measures used by other companies.
Adjusted EBITDA and Adjusted Net
Earnings are not recognized measures under IFRS.
Management uses these non-GAAP financial measures to exclude the
impact of certain income and expenses that must be recognized under
IFRS. The excluded amounts are either subject to volatility in the
Company's share price or may not necessarily be reflective of the
Company's underlying operating performance. These factors can make
comparisons of the Company's financial performance between periods
more difficult. The Company may exclude additional items if it
believes that doing so will result in a more effective analysis and
explanation of the underlying financial performance. The exclusion
of these items does not imply that they are non-recurring.
These measures do not have a standardized
meaning prescribed by GAAP and therefore they may not be comparable
to similarly titled measures presented by other publicly traded
companies and should not be construed as an alternative to the
other financial measures determined in accordance with IFRS.
Reconciliation of consolidated earnings
from operations (EBIT) to EBITDA and adjusted EBITDA:
|
|
|
First Quarter |
($ in thousands) |
|
2023 |
|
|
2022 |
|
|
|
|
Earnings from operations
(EBIT) |
$ |
33,768 |
|
$ |
41,431 |
Add:
Amortization |
|
25,184 |
|
|
23,514 |
EBITDA |
$ |
58,952 |
|
$ |
64,945 |
Adjusted for: |
|
|
|
Share-based compensation expense |
|
4,834 |
|
|
3,737 |
Adjusted EBITDA |
$ |
63,786 |
|
$ |
68,682 |
Reconciliation of consolidated net
earnings to adjusted net earnings:
|
|
|
First Quarter |
($ in thousands) |
|
2023 |
|
|
2022 |
|
|
|
|
Net earnings |
$ |
22,197 |
|
$ |
28,161 |
Adjusted for: |
|
|
|
Share-based compensation expense, net of tax |
|
3,860 |
|
|
3,000 |
Adjusted net earnings |
$ |
26,057 |
|
$ |
31,161 |
Certain share-based compensation costs are
presented as liabilities on the Company's consolidated balance
sheets. The Company is exposed to market price fluctuations in its
share price through these share-based compensation costs. These
liabilities are recorded at fair value at each reporting date based
on the market price of the Company's shares at the end of each
reporting period with the changes in fair value recorded in
selling, operating and administrative expenses.
Further information on the financial results is
available in the Company's 2023 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 for its
first quarter results on June 7, 2023 at 2:00 p.m. (Central
Time). To access the call, please dial 416-641-6104 or 800-952-5114
with a pass code of 7008952#. The conference call will be archived
and can be accessed by dialing 905-694-9451 or 800-408-3053 with a
pass code of 4665813# on or before July 7, 2023.
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.
Forward-looking statements about the Company, including its
business operations, strategy and expected financial performance
and condition. Forward-looking statements include statements that
are predictive in nature, depend upon or refer to future events or
conditions, or include words such as “expects”, “anticipates”,
“plans”, “believes”, “estimates”, “intends”, “targets”, “projects”,
“forecasts” or negative versions thereof and other similar
expressions, or future or conditional future financial performance
(including sales, earnings, growth rates, capital expenditures,
dividends, debt levels, financial capacity, access to capital, and
liquidity), ongoing business strategies or prospects, the Company's
intentions regarding a normal course issuer bid, the potential
impact of a pandemic on the Company's operations, supply chain and
the Company's related business continuity plans, the realization of
cost savings from cost reduction plans, and possible future action
by the Company.
Forward-looking statements are based on current
expectations and projections about future events and are inherently
subject to, among other things, risks, uncertainties and
assumptions about the Company, economic factors and the retail
industry in general. They are not guarantees of future performance,
and actual events and results could differ materially from those
expressed or implied by forward-looking statements made by the
Company due to changes in economic conditions, political and market
factors in North America and internationally. These factors
include, but are not limited to, changes in inflation, interest and
foreign exchange rates, the Company's ability to maintain an
effective supply chain, changes in accounting policies and methods
used to report financial condition, including uncertainties
associated with critical accounting assumptions and estimates, the
effect of applying future accounting changes, business competition,
technological change, changes in government regulations and
legislation, changes in tax laws, unexpected judicial or regulatory
proceedings, catastrophic events, the Company's ability to complete
and realize benefits from capital projects, E-Commerce investments,
strategic transactions and the integration of acquisitions, the
Company's ability to realize benefits from investments in
information technology ("IT") and systems, including IT system
implementations, or unanticipated results from these initiatives
and the Company's success in anticipating and managing the
foregoing risks.
The reader is cautioned that the foregoing list
of important factors is not exhaustive. Other risks are outlined in
the Risk Management section of the 2022 Annual Report and in the
Risk Factors sections of the Annual Information Form and Management
Information Circular, material change reports and news releases.
The reader is also cautioned to consider these and other factors
carefully and not place undue reliance on forward-looking
statements. Other than as specifically required by applicable law,
the Company does not intend to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
Additional information on the Company, including
our Annual Information Form, can be found on SEDAR at www.sedar.com
or on the Company's website at www.northwest.ca.
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 225 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$2.4
billion.
The common shares of North West
trade on the Toronto Stock Exchange under the symbol
NWC.
For more information
contact:
Dan McConnell, President and Chief Executive
Officer, The North West Company Inc. Phone 204-934-1482; fax
204-934-1317; email dmcconnell@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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