Mr. Dan McConnell reports

THE NORTH WEST COMPANY INC. ANNOUNCES FIRST QUARTER EARNINGS AND A QUARTERLY DIVIDEND

North West Company Inc. has released its unaudited financial results for the first quarter ended April 30, 2023. The board of directors has declared a dividend of 38 cents 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 chief executive officer 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 per cent 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 per cent, with food sales increasing 3.4 per cent and general merchandise sales decreasing 4.5 per cent compared with 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 per cent compared with the first quarter last year, as a 2.2-per-cent increase in food same-store sales more than offset a 6.8-per-cent decrease in general merchandise same store sales.

Gross profit

Gross profit increased 5 per cent as sales gains were partially offset by a 73-basis-point decrease in gross profit rate compared with 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 increased $16.6-million or 12.3 per cent compared with 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 with $41.4-million last year and earnings before interest, income taxes, depreciation and amortization (EBITDA) decreased to $59-million compared with $64.9-million last year due to the gross profit and expense factors previously noted. Adjusted EBITDA, which excludes share-based compensation costs, decreased $4.9-million compared with last year and as a percentage to sales was 10.7 per cent compared with 12.4 per cent last year.

Net earnings

Net earnings decreased to $22.2-million compared with $28.2-million last year. Net earnings attributable to shareholders were $20.9-million and diluted earnings per share were 43 cents per share compared with 57 cents per share last year. Adjusted net earnings, 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.

First quarter conference call

North West will host a conference call for its first quarter results on June 7, 2023, at 2 p.m. (Central Time). To access the call, please dial 416-641-6104 or 800-952-5114 with a pass code of 7008952 followed by the pound key. The conference call will be archived and can be accessed by dialling 905-694-9451 or 800-408-3053 with a pass code of 4665813 followed by the pound key on or before July 7, 2023.

About North West Company Inc.

North West Company, 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 $2.4-billion.

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