(TSX: NWC): The North West
Company Inc. (the "Company" or "North West") today announced its
unaudited financial results for the fourth quarter ended January
31, 2022 and released its 2021 Annual Report and Annual Information
Form. The Annual Report includes the Company's Annual Audited
Consolidated Financial Statements and Management's Discussion and
Analysis for the year ended January 31, 2022. These documents are
available on the Company's profile on the SEDAR website at
www.sedar.com and on the Company's website at www.northwest.ca. It
also announced that the Board of Directors have declared a dividend
of $0.37 per share to be paid on April 28, 2022 to shareholders of
record on April 21, 2022.
CEO Comments on Fourth Quarter Results
and Annual Results
“Our results in 2021 were rooted in a pandemic
response focused on the health and safety of our customers and
employees, procurement and distribution of essential items and a
strong community focus,” commented President and CEO Dan McConnell.
“Strong execution and alignment throughout the organization were
key factors in achieving the financial results in the fourth
quarter and for the year. As we enter 2022, we face ongoing
COVID-19 uncertainties, world-wide supply chain constraints,
inflationary pressures and lower consumer income support in our
markets. These factors are expected to result in lower earnings in
2022 compared to 2021 but meaningfully above pre-pandemic (2019)
levels. Beyond these challenges we will continue to strengthen our
core retail business with a “Customer Driven” focus, improving
in-store execution, assortment, and product flow through leveraging
our logistics capabilities and pursuing growth through new markets,
channels, products and services.”
Fourth Quarter and Annual
Results
The following table provides a summary of
selected information for the fourth quarter and annual results.
Further information on the fourth quarter and annual financial
performance is provided in the 2021 Annual Report available on the
Company's website at www.northwest.ca or on SEDAR at
www.sedar.com.
Selected Fourth
Quarter(3)
and Annual Information
|
Three Months |
|
Three Months |
|
Twelve Months |
|
Twelve Months |
|
|
Ended |
|
Ended |
|
Ended |
|
Ended |
($ in
thousands, except per share) |
January 31, 2022 |
January 31, 2021 |
January 31, 2022 |
January 31, 2021 |
Sales |
|
$ |
579,019 |
|
|
$ |
565,191 |
|
|
$ |
2,248,796 |
|
|
$ |
2,359,239 |
|
Same store sales %
increase/(decrease)(2) |
|
|
0.1 |
% |
|
|
16.8 |
% |
|
|
(0.4 |
)% |
|
|
19.0 |
% |
Gross profit |
|
$ |
184,714 |
|
|
$ |
187,873 |
|
|
$ |
737,751 |
|
|
$ |
774,553 |
|
Selling, operating and
administrative expenses |
|
|
(135,126 |
) |
|
|
(138,759 |
) |
|
|
(517,326 |
) |
|
|
(565,204 |
) |
EBITDA(1) |
|
|
72,964 |
|
|
|
71,410 |
|
|
|
311,375 |
|
|
|
301,427 |
|
EBIT |
|
|
49,588 |
|
|
|
49,114 |
|
|
|
220,425 |
|
|
|
209,349 |
|
Interest expense |
|
|
(3,170 |
) |
|
|
(3,448 |
) |
|
|
(13,058 |
) |
|
|
(16,808 |
) |
Income taxes |
|
|
(10,810 |
) |
|
|
(12,834 |
) |
|
|
(49,916 |
) |
|
|
(48,981 |
) |
Net earnings |
|
|
35,608 |
|
|
|
32,832 |
|
|
|
157,451 |
|
|
|
143,560 |
|
Net earnings attributable to
shareholders of the Company |
|
|
34,581 |
|
|
|
32,060 |
|
|
|
154,802 |
|
|
|
139,874 |
|
Net earnings per share -
basic |
|
|
0.72 |
|
|
|
0.66 |
|
|
|
3.21 |
|
|
|
2.87 |
|
Net earnings per share -
diluted |
|
|
0.71 |
|
|
|
0.63 |
|
|
|
3.16 |
|
|
|
2.82 |
|
Cash flow from operating
activities |
|
|
84,704 |
|
|
|
106,660 |
|
|
|
224,135 |
|
|
|
338,718 |
|
Cash flow used in investing
activities |
|
|
(15,142 |
) |
|
|
(11,904 |
) |
|
|
(75,861 |
) |
|
|
(66,900 |
) |
Cash flow used in financing
activities |
|
|
(77,935 |
) |
|
|
(81,765 |
) |
|
|
(170,196 |
) |
|
|
(227,060 |
) |
Cash
dividends per share |
|
$ |
0.37 |
|
|
$ |
0.36 |
|
|
$ |
1.46 |
|
|
$ |
1.38 |
|
(1) See Non-GAAP Financial Measures section
below.(2) All references to same store sales exclude the
foreign exchange impact. (3) Unaudited interim financial
information.
Annual
Highlights
- Net earnings
increased $13.9 million or 9.7% and were up 82.5% compared to
2019.
- Earnings from
Operations ("EBIT") increased 5.3% and were up 69.1% compared to
2019.
- EBITDA(1) increased
3.3% on top of a 37.3% increase in 2020.
- Same store sales(2)
were marginally lower by 0.4% compared to a 19.0% increase in same
store sales last year.
- Six new stores were
opened, three in Canada and three in International Operations.
- Alaska Commercial
Company delivered 3.3 million pounds of produce, dairy and meat to
115 communities in Alaska in connection with the Farmers to
Families Food Box Program.
- Return on equity(1)
was 29.0% and has averaged 22.7% over the past 10 years.
- Return on net
assets(1) improved to 23.8% compared to 22.4% in 2020.
- Debt-to-Equity
decreased to 0.41 compared to 0.56 at January 31, 2021.
- Quarterly dividends
increased $0.01 per share or 2.8% to $0.37 per share.
- The Company
purchased 807,037 shares under a normal course issuer bid.
Fourth Quarter Results
Consolidated Fourth Quarter
Sales Sales for the quarter increased 2.4% to
$579.0 million led by same store sales gains in International
Operations and the impact of new store sales. These gains were
partially offset by the negative impact of foreign exchange on the
translation of International Operations sales. Excluding the
foreign exchange impact, consolidated sales increased 2.9%. Same
store sales were up 0.1%(2) on top of a 16.8% increase in the
fourth quarter last year and were up 17.1% compared to 2019. Food
sales(2) increased 3.0% and were up 2.6% on a same store basis
compared to last year and increased 15.0% compared to 2019. General
merchandise sales(2) decreased 6.3% and were down 9.2% on a same
store basis coming off of a 39.8% COVID-19-related same store sales
gain last year, but were up 27.3% compared to 2019. Sales continued
to be impacted by COVID-19-related factors including consumer
spending changes in favor of in-community and at-home activities,
higher cost inflation and increases in government income support
payments to individuals in the U.S. compared to last year. These
factors were partially offset by restricted hours and store
closures in certain markets with higher outbreaks of COVID-19 and
lower government income support payments to individuals in Canada
compared to last year.
Gross Profit Gross profit
decreased 1.7% as the impact of sales gains was more than offset by
a 134 basis point decrease in gross profit rate compared to last
year. The decrease in gross profit rate was primarily due to
changes in product sales blend, higher inventory shrinkage and
markdowns compared to strong sell-through-driven lower shrink and
markdowns last year as well as the impact of cost inflation that
was not fully passed through in retail prices.
Selling, Operating and Administrative
Expenses Selling, operating and administrative expenses
("Expenses") decreased $3.6 million compared to last year and were
down 121 basis points as a percentage to sales. The decrease in
Expenses is largely due to a $9.5 million insurance-related gain
this year compared to a $5.3 million gain last year, lower annual
incentive plan costs and the impact of foreign exchange on the
translation of International Operations Expenses. These factors
were partially offset by expenses related to new stores and higher
share-based compensation costs compared to last year.
COVID-19-related expenses were $5.6 million compared to $5.8
million last year and included $4.1 million in special payments to
non-bonus eligible front-line associates in recognition of their
contributions to serving our customers. Excluding the insurance
gains and share-based compensation costs, Expenses decreased 0.1%
compared to last year.
Earnings from operations and
EBITDA(1) Earnings from operations or
earnings before interest and taxes ("EBIT") increased $0.5 million
to $49.6 million compared to $49.1 million last year and EBITDA(1)
increased $1.6 million to $73.0 million due to the sales, gross
profit and Expense factors previously noted. Adjusted EBITDA(1),
which excludes share-based compensation costs and insurance-related
gains, decreased $1.9 million compared to last year and as a
percentage to sales was 11.6% compared to 12.2%.
Interest Expense Interest
expense decreased 8.1% to $3.2 million compared to $3.4 million
last year mainly due to lower average debt levels.
Income Tax Expense Income tax
expense was $10.8 million compared to $12.8 million last year and
the consolidated effective tax rate was 23.3% compared to 28.1%
last year. The decrease in the income tax rate was primarily due to
lower Global Intangible Low-Taxed Income ("GILTI") tax and the
blend of earnings in International Operations across various tax
rate jurisdictions.
Net Earnings Consolidated net
earnings increased $2.8 million to $35.6 million. Net earnings
attributable to shareholders were $34.6 million and diluted
earnings per share were $0.71 per share compared to $0.63 per share
last year due to the factors noted above. Adjusted net earnings(1),
which excludes the impact of the after-tax insurance-related gains
and the after-tax share-based compensation costs, increased $1.9
million or 6.1% compared to last year driven by earnings gains in
International Operations, lower interest costs and the impact of a
lower effective tax rate as previously noted.
Annual
Results
Consolidated
Sales Sales for the year ended January 31,
2022 (“2021”) decreased 4.7% to $2.249 billion compared to $2.359
billion for the year ended January 31, 2021 (“2020”), but were
up 7.4% compared to $2.094 billion for the year ended
January 31, 2020 (“2019”). The decrease in sales compared to
2020 was largely due to lower sales in Giant Tiger stores resulting
from the sale and closure of most of the Company's Giant Tiger
stores last year net of the impact of wholesale food sales to the
sold Giant Tiger stores in connection with the Giant Tiger
Transaction and the impact of foreign exchange on the translation
of International Operations sales.
Gross
Profit Gross profit decreased
4.8% to $737.8 million compared to $774.6 million last year due to
lower sales as the gross profit rate was only down 2 basis points
compared to last year.
Selling, Operating and
Administrative Expenses Selling,
operating and administrative expenses (“Expenses”) of
$517.3 million decreased $47.9 million or 8.5% compared to
last year and were down 96 basis points as a percentage of sales.
The decrease in Expenses is largely due to lower store expenses
related to the Giant Tiger Transaction, a decrease in
COVID-19-related expenses, lower annual incentive plan costs and
the impact of foreign exchange on the translation of International
Operations Expenses. The impact of Non-Comparable Factors, which
includes a $10.6 million decrease in share-based compensation costs
due to mark-to-market adjustments, a $12.8 million increase in
insurance-related gains this year, and a $9.4 million Giant Tiger
store closure provision and a $24.7 million gain related to the
Giant Tiger Transaction last year, were also factors. Excluding the
Non-Comparable Factors, Expenses decreased $39.7 million or 7.1%
due to the factors previously noted.
Earnings from Operations (EBIT)
and
EBITDA(1) Earnings
from operations or earnings before interest and income taxes
("EBIT”) increased 5.3% to $220.4 million compared to $209.3
million last year and were up $90.1 million or 69.1% compared to
2019 due to the sales, gross profit and Expense factors previously
noted. Earnings before interest, income taxes, depreciation and
amortization ("EBITDA(1)") increased 3.3% to $311.4 million
compared to $301.4 million last year and was up $91.8 million or
41.8% compared to 2019. Adjusted EBITDA(1), which excludes the
impact of the previously noted Non-Comparable Factors, increased
$1.8 million or 0.6% on top of the exceptional COVID-19-related
earnings gains last year and was up $100.2 million or 48.9%
compared to 2019 driven by earnings gains in both Canadian and
International Operations.
Interest
Expense Interest expense decreased 22.3% to $13.1
million compared to $16.8 million last year due to lower average
debt levels partially offset by higher interest rates.
Income Tax
Expense Income taxes increased to $49.9 million
compared to $49.0 million last year and the effective tax rate for
the year was 24.1% compared to 25.4% last year. The increase in
income tax expense is due to higher earnings partially offset by a
lower effective tax rate. The decrease in the effective income tax
rate is primarily due to the change in the amount of non-deductible
share-based compensation costs in Canadian Operations compared to
last year, a decrease in the GILTI tax and the blend of earnings in
International Operations across various tax rate jurisdictions.
Net
Earnings Consolidated net earnings increased 9.7%
to $157.5 million compared to $143.6 million last year and
were up 82.5% or $71.2 million compared to 2019. Net earnings
attributable to shareholders of the Company were $154.8 million
compared to $139.9 million last year and diluted earnings per share
were $3.16 per share compared to $2.82 per share last year due to
the factors previously noted. Excluding the impact of the
previously noted Non-Comparable Factors, adjusted net earnings1
increased $8.6 million or 5.9% compared to last year and were up
$78.0 million or 103.5% compared to 2019.
Chairman
Transition
This year Sandy Riley will retire as Chairman
from the Board of Directors following the Company’s Annual General
Meeting on June 8, 2022. Mr. Riley was first elected as a Director
in 2003 and has been Chairman since 2008. "Mr. Riley is a
highly-regarded business leader who has served on many Boards and
we have been fortunate to benefit from his knowledge and experience
on our Board over the past 19 years. I would like to thank Sandy
for his leadership and commitment to North West," commented
President and CEO, Dan McConnell. Mr. Riley will be succeeded by
Brock Bulbuck subject to his re-election at that meeting. Mr.
Bulbuck has been a Director of North West since 2018 and most
recently served as Executive Chairman of Boyd Group Services Inc.
and was its Chief Executive Officer from 2010 to 2019. “I’m
delighted that Brock Bulbuck has agreed to assume the role of
Chairman,” commented Mr. Riley. “Brock’s leadership will complement
an experienced team of Directors that will work closely with the
senior management team in the years ahead.”
Non-GAAP Financial
Measures
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.
(1) Earnings Before Interest,
Income Taxes, Depreciation and Amortization (EBITDA), 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.
Reconciliation of Consolidated
Net Earnings to EBITDA and Adjusted EBITDA
|
Consolidated |
|
Fourth Quarter |
|
Year-to-date |
($ in thousands) |
|
2021 |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2019 |
|
EBIT |
$ |
49,588 |
|
|
$ |
49,114 |
|
|
$ |
26,734 |
|
|
$ |
220,425 |
|
|
$ |
209,349 |
|
|
$ |
130,353 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
23,376 |
|
|
|
22,296 |
|
|
|
23,699 |
|
|
|
90,950 |
|
|
|
92,078 |
|
|
|
89,222 |
|
EBITDA |
$ |
72,964 |
|
|
$ |
71,410 |
|
|
$ |
50,433 |
|
|
$ |
311,375 |
|
|
$ |
301,427 |
|
|
$ |
219,575 |
|
Gain on insurance settlement |
|
(9,492 |
) |
|
|
(5,306 |
) |
|
|
(3,205 |
) |
|
|
(18,124 |
) |
|
|
(5,306 |
) |
|
|
(18,170 |
) |
Share-based compensation expense |
|
3,615 |
|
|
|
2,871 |
|
|
|
190 |
|
|
|
11,854 |
|
|
|
22,495 |
|
|
|
3,550 |
|
Gain on disposition of Giant Tiger stores |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24,712 |
) |
|
|
— |
|
Giant Tiger asset impairment and store closure provision |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,411 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
67,087 |
|
|
$ |
68,975 |
|
|
$ |
47,418 |
|
|
$ |
305,105 |
|
|
$ |
303,315 |
|
|
$ |
204,955 |
|
Reconciliation of consolidated
net earnings to adjusted net earnings:
|
Fourth Quarter |
|
Year-to-Date |
($ in thousands) |
|
2021 |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2019 |
|
Net earnings |
$ |
35,608 |
|
|
$ |
32,832 |
|
|
$ |
17,263 |
|
|
$ |
157,451 |
|
|
$ |
143,560 |
|
|
$ |
86,273 |
|
Gain on insurance settlement,
net of tax |
|
(6,152 |
) |
|
|
(4,460 |
) |
|
|
(2,340 |
) |
|
|
(13,275 |
) |
|
|
(4,460 |
) |
|
|
(13,887 |
) |
Share-based compensation
expense, net of tax |
|
2,875 |
|
|
|
2,106 |
|
|
|
305 |
|
|
|
9,234 |
|
|
|
18,855 |
|
|
|
2,991 |
|
Gain on disposition of Giant
Tiger stores, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,991 |
) |
|
|
— |
|
Giant
Tiger asset impairment and store closure provision, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,874 |
|
|
|
— |
|
Adjusted Net Earnings |
$ |
32,331 |
|
|
$ |
30,478 |
|
|
$ |
15,228 |
|
|
$ |
153,410 |
|
|
$ |
144,838 |
|
|
$ |
75,377 |
|
The Company recorded gains on insurance claims.
These gains were due to the difference between the replacement cost
of the assets destroyed and their book value and also for the
recovery of business interruption losses on certain insurance
claims.
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.
(2) Return on Net Assets
(RONA) is not a recognized measure under IFRS.
Management believes that RONA is a useful measure to evaluate the
financial return on the net assets used in the business. RONA is
calculated as earnings from operations (EBIT) for the year divided
by average monthly net assets. The following table reconciles net
assets used in the RONA calculation to IFRS measures reported in
the consolidated financial statements as at January 31 for the
following fiscal years:
($ in millions) |
|
2021 |
|
|
|
2020 |
|
|
|
2019 |
|
Total assets |
$ |
1,219.3 |
|
|
$ |
1,191.2 |
|
|
$ |
1,215.5 |
|
Less: Total liabilities |
|
(639.1 |
) |
|
|
(685.9 |
) |
|
|
(788.6 |
) |
Add:
Total debt and lease liabilities |
|
349.7 |
|
|
|
402.0 |
|
|
|
550.1 |
|
Net Assets Employed |
$ |
929.9 |
|
|
$ |
907.3 |
|
|
$ |
977.0 |
|
(3) Return on Average Equity
(ROE) is not a recognized measure under IFRS.
Management believes that ROE is a useful measure to evaluate the
financial return on the amount invested by shareholders. ROE is
calculated by dividing net earnings for the year by average monthly
total shareholders' equity. There is no directly comparable IFRS
measure for return on equity.
Additional information regarding the financial
performance of North West can be found within the 2021 Annual
Report, Annual Audited Financial Statements and the Annual
Information Form available on the Company's website at
www.northwest.ca or on SEDAR at www.sedar.com.
Fourth Quarter Conference
Call
North West will host a conference call for its
fourth quarter results on April 13, 2022 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 3868168. The conference call will be archived
and can be accessed by dialing 905-694-9451 or 800-408-3053 with a
pass code of 8255528 on or before May 14, 2022.
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 and the anticipated
duration and impact of the COVID-19 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. Factors
that could cause actual results to differ materially from those set
forth in the forward-looking statements 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 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, 2022. 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 and developing small population communities
in northern Canada, rural Alaska, the South Pacific and the
Caribbean. North West operates 216 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$2.2 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
The North West (TSX:NWC)
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Von Mär 2024 bis Apr 2024
The North West (TSX:NWC)
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Von Apr 2023 bis Apr 2024