(TSX:NWC): The North West Company Inc. (the "Company" or
"North West") today reported its unaudited financial results for
the fourth quarter ended January 31, 2018. It also announced that
the Board of Directors have declared a dividend of $0.32 per share
to shareholders of record on March 29, 2018, to be paid on April
16, 2018.
"Results were strong in priority areas where we
had the most control, notably in Health, Convenience, Financial
Services and the post-hurricane recovery of our British Virgin
Island stores. We were hurt by hurricane carryover disruptions to
supply chains in the Caribbean and severe northern winter
conditions over our key December selling period," commented
President & CEO Edward Kennedy. "Looking forward, we are
focused on improving our Giant Tiger store results and we are
positioned to capture growth and returns from the record investment
we made in other businesses last year. This includes the build out
of our air cargo service and superior performance from spending on
new systems and Top Stores."
Financial Highlights
Sales increased 1.9% to $489.8 million compared
to $480.6 million in the fourth quarter last year due to the
acquisition of Roadtown Wholesale Trading Ltd. ("RTW") in the
British Virgin Islands and the acquisition of North Star Air Ltd.
("NSA") in Canada. Same store sales gains in International
Operations were also a factor. These gains were partially offset by
store closures related to hurricanes in the Caribbean and the
impact of foreign exchange on the translation of International
Operations sales. Excluding the foreign exchange impact,
consolidated sales increased 4.2% and were up 0.3%1 on a same store
basis. Food sales1 increased 1.2% but were flat on a same store
basis. General merchandise sales1 increased 1.8% and were up 1.3%
on a same store basis.
Earnings from operations increased 21.6% to
$32.2 million compared to $26.5 million in the fourth quarter last
year. Gross profit dollars were up 3.8% driven by the acquisition
related sales growth and a 56 basis point increase in gross profit
rate compared to last year. The increase in the gross profit rate
is mainly due to sales blend changes across the various
jurisdictions. Selling, operating and administrative expenses
decreased 0.2% and were down 51 basis points as a percentage to
sales as expenses related to the RTW and NSA acquisitions and new
stores in Canadian Operations were more than offset by the impact
of lower share-based compensation costs and hurricane-related store
closures. Further information on the RTW and NSA acquisitions is
provided in Note 17 to the 2017 fourth quarter unaudited interim
period condensed consolidated financial statements.
The decrease in share-based compensation costs
of $9.2 million was largely due to an option expense recovery of
$2.8 million this year compared to an option expense of $4.6
million last year. A substantial portion of the options granted are
accounted for as a liability and are re-measured based on the share
price at each quarterly reporting date. The lower option expense
this quarter was due to a decrease in the share price in the
quarter this year compared to an increase in the share price in the
fourth quarter last year.
Earnings before interest, income taxes,
depreciation and amortization (EBITDA2) increased 19.9% to $46.6
million due to the RTW and NSA acquisitions and lower share-based
compensation noted above. These gains were partially offset by the
impact of the hurricane-related store closures. Excluding the
impact of share option expense, adjusted EBITDA2 was up 0.7%
compared to last year and as a percentage to sales was 8.9%
compared to 9.0% last year.
In December 2017 new corporate tax legislation
was enacted in the United States which reduced the federal
corporate tax rate from 35% to 21% effective January 1, 2018. There
was also a one-time transition tax introduced on undistributed
accumulated earnings in foreign owned subsidiaries. These changes
resulted in an income tax expense of $3,896, comprised of $1,827
for the re-measurement of deferred tax assets and liabilities and
$2,069 for transition tax related to certain of the Company's
subsidiaries.
Net earnings increased $3.3 million or 21.8% to
$18.3 million and diluted earnings per share were $0.35 per share
compared to $0.30 per share last year due to the factors noted
above. Excluding the impact of share-based compensation option
expense and the one-time tax expense related to U.S. tax reform,
adjusted net earnings2 decreased 1.3%.
Further information on the financial results is
available in the Company's 2017 fourth 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. Hurricane Irma and Maria Impact Hurricane related
store closures negatively impacted sales and EBITDA2 in the quarter
by approximately US$23.6 million and US$2.5 million respectively.
On an annualized basis, these stores represent approximately
US$92.0 million in sales and US$6.6 million in EBITDA2. A CUL store
in St. Maarten was partially re-opened on November 17, 2017. A CUL
Store in St. Thomas and three stores in the BVI require complete
reconstruction and are expected to re-open in 2019. Insurance
proceeds are expected to be sufficient to cover repair and
reconstruction costs. The Company also has business interruption
insurance that will help mitigate the earnings impact of the store
closures however, the settlement is expected to take approximately
12 to 15 months to complete. The settlement of these claims and the
receipt of payments are expected to result in insurance-related
gains in the consolidated statements of earnings in subsequent
periods.
______________________
1 Excluding the foreign exchange impact 2 See
Non-GAAP Measures Section of Management's Discussion &
Analysis
Appointment of Director
North West also announces the appointment of
Brock Bulbuck to its Board of Directors. Mr. Bulbuck is the Chief
Executive Officer of Boyd Group Income Fund. He has been CEO since
2010, but since joining Boyd in 1993, Mr. Bulbuck has served in
many senior leadership roles and has played a leading role in the
overall development and growth of the business. In his current
leadership role at Boyd, he has overall responsibility for the
affairs of Boyd, including strategy, operations and performance. In
addition to his executive management position at Boyd, Mr. Bulbuck
also serves on the Board of Trustees of Boyd Group Income Fund. He
is also a past Chairperson of the Winnipeg Football Club Board of
Directors, a past member of the Canadian Football League Board of
Governors and a current Director of the Pan Am Clinic Foundation.
Mr. Bulbuck has a Bachelor of Commerce (Honors) degree from the
University of Manitoba and is a Chartered Professional
Accountant.
"We are delighted that Brock has agreed to join
our Board," said H. Sanford Riley, Chairman of the Board. "His
experience as a former CFO, and now CEO of The Boyd Group, a
remarkably successful Canadian public company, will augment the
financial and general business skills on our Board. We are looking
forward to his participation in our deliberations."
Fourth Quarter Conference
Call
North West will host a conference call for its
fourth quarter results on March 15, 2018 at 1:30 p.m. (Central
Time). To access the call, please dial 416-406-0743 or 800-898-3989
with a pass code of 1197498. The conference call will be archived
and can be accessed by dialing 905-694-9451 or 800-408-3053 with a
pass code of 8046827 or before April 15, 2018.
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 forwardlooking 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 forwardlooking statements. 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, 2017. 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 239 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
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