Mr. Edward Kennedy reports
THE NORTH WEST COMPANY INC. ANNOUNCES FIRST QUARTER EARNINGS AND A QUARTERLY DIVIDEND
North West Company Inc. has provided its unaudited financial results for the first quarter ended April 30, 2018. It also announced that the board of directors has declared a dividend of 32 cents per share to shareholders of record on June 29, 2018, to be paid on July 16, 2018.
"During the quarter we completed key work that will drive revenue this year. We've done a great job improving our in-stock position in the BVI and St. Croix, and we are growing these businesses amidst the posthurricane reconstruction activity on these islands. North Star Air was still in ramp-up phase with new aircraft and hangars all expected to be operational by the end of June," commented president and chief executive officer Edward Kennedy. "Late in the quarter we started to achieve sales gains and stable margins at Giant Tiger, which we have continued into the second quarter. These factors should add to the stronger performance we expect from our northern businesses over the upcoming summer and fall construction seasons."
Sales decreased 4.1 per cent to $465.7-million compared with $485.8-million in the first quarter last year and were down 1.4 per cent excluding the impact of foreign exchange. The store closures related to hurricanes in the Caribbean in the third quarter last year negatively impacted sales in the quarter by approximately $23.9-million and more than offset the acquisition of North Star Air Ltd. (NSA), new stores in Canadian operations and same-store sales gains in international operations. Same-store sales were down 0.3 per cent due to lower food and general merchandise sales. Food sales decreased 6.0 per cent and were down 0.3 per cent to last year on a same-store basis. General merchandise sales increased 0.4 per cent but were down 0.4 per cent on a same-store basis.
Gross profit dollars were down 1.5 per cent as the decrease in sales more than offset an 84-basis-point increase in gross profit rate compared with last year. The increase in the gross profit rate is mainly due to a higher percentage of convenience-related sales. Selling, operating and administrative expenses decreased 8.4 per cent and were down 122 basis points as a percentage to sales due to lower share-based compensation costs, the impact of hurricane-related store closures and $5.8-million in RTW acquisition costs last year. The RTW acquisition costs were substantially related to stamp duties paid to the government of the British Virgin Islands (BVI). Further information on the impact of the hurricanes is provided below.
Earnings from operations increased 52.9 per cent to $25.6-million compared with $16.7-million in the first quarter last year and earnings before interest, income taxes, depreciation and amortization (EBITDA) increased 31.3 per cent to $39.5-million due to the factors previously noted. Excluding the impact of share option expense and RTW acquisition costs, adjusted EBITDA was down 5.8 per cent compared with last year and as a percentage to sales was 8.1 per cent compared with 8.3 per cent last year, largely due to the hurricane-related store closures in international operations which negatively impacted EBITDA in the quarter by $2.0-million.
Income tax expense decreased $1.8-million to $3.8-million and the consolidated effective tax rate was 17.0 per cent compared with 38.0 per cent last year. The decrease in the effective tax rate is primarily due to the change in non-taxable share-based compensation in the Canadian operations, the non-tax deductible RTW acquisition costs last year and changes in earnings of the company's subsidiaries across various tax jurisdictions. The reduction in the U.S. federal corporate income tax rate from 35.0 per cent to 21.0 per cent effective Jan. 1, 2018, as part of U.S. tax reform was also a factor.
Net earnings increased $9.5-million or 104.8 per cent to $18.6-million. Net earnings attributable to shareholders of the company were $17.8-million and diluted earnings per share were 36 cents per share compared with 17 cents per share last year due to the factors noted above. Excluding the impact of share-based compensation option expense and the RTW acquisition costs, adjusted net earnings decreased 11.7 per cent largely due to the impact of the hurricane-related store closures in international operations.
Further information on the financial results is available in the company's 2018 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.
First quarter conference call
North West will host a conference call for its first quarter results on June 13, 2018, at 2 p.m. Central Time. To access the call, please dial 416-340-2217 or 800-898-3989 with a pass code of 5859656. The conference call will be archived and can be accessed by dialling 905-694-9451 or 800-408-3053 with a pass code of 6095235 or before July 13, 2018.
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 237 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 $2.0-billion.
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