WINNIPEG, March 14, 2019
/CNW/ - (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,
2019. It also announced that the Board of Directors have
declared a dividend of $0.33 per
share, an increase of $0.01 or 3.1%
per share, to shareholders of record on March 29, 2019, to be
paid on April 15, 2019.
"Fourth quarter sales were very robust across most banners
offset by expense pressures and one-time business
disruptions. Our airline continued to invest to bring
aircraft maintenance in-house. This need was reinforced by
the extended downtime of one of our ATR aircraft due to delays with
third party maintenance providers, which in turn required the use
of higher cost third-party aircraft," commented President & CEO
Edward Kennedy. "Our focus for
2019 is on driving same store sales growth that leverage more
positive economic conditions in the north and in key Caribbean markets. We will cycle through
cost inflation with the exception of higher insurance rates which
will be offset by growth".
Financial Highlights
Fourth quarter consolidated sales increased 7.1% to $532.5 million led by same store sales gains in
International Operations, the impact of foreign exchange on the
translation of International Operations sales and new stores in
Canadian Operations. The early issuance of the February
Supplemental Nutrition Assistance Program ("SNAP") benefit payments
in January due to the U.S. Government shut-down and the re-opening
of two stores in the British Virgin
Islands that were previously closed as a result of the
hurricanes last year were also factors contributing to the sales
gains in International Operations. Excluding the foreign
exchange impact, consolidated sales increased 4.5% and were up
4.0%1 on a same store basis. Food
sales1 increased 4.6% and were up 4.6% on a same store
basis and general merchandise sales1 increased 3.5% and
were up 2.0% on a same store basis. These gains were
partially offset by the temporary closure of a NorthMart store in
Iqaluit, Nunavut due to a fire and
the disposition of a stand alone Tim
Hortons in Canadian Operations, and the closure of a
Cost-U-Less ("CUL") store in Kauai,
Hawaii in the first quarter this year.
Gross profit increased 5.4% driven by higher sales but was
partially offset by a 51 basis point decrease in gross profit
rate. The decrease in gross profit rate was primarily due to
competitive pricing pressures and changes in sales blend in
International Operations. Selling, operating and
administrative expenses increased 15.3% and were up 191 basis
points as a percentage to sales. This increase was mainly due
to higher share-based compensation costs, utilities and insurance
expense. The $7.5 million
increase in share-based compensation costs is primarily due to
mark-to-market adjustments resulting in an option expense of
$3.6 million this year compared to an
option expense recovery of $2.8
million last year. The impact of new stores, an increase in
North Star Air Ltd. expenses and the impact of foreign exchange on
the translation of International Operations expenses were also
factors.
Earnings from operations decreased 33.0% to $21.6 million compared to $32.2 million in the fourth quarter last year and
earnings before interest, income taxes, depreciation and
amortization (EBITDA2) decreased 20.8% to $36.9 million mainly due to the increase in
expenses previously noted. Excluding the impact of
share-based compensation option expense, adjusted
EBITDA2 was down 7.6% compared to last year and as a
percentage to sales was 7.6% compared to 8.8% last year.
Income tax expense decreased $9.0
million to $3.8 million and
the consolidated effective tax rate was 21.4% compared to last year
at 44.0%. This decrease was primarily due to U.S. tax reform
in the fourth quarter last year and the blend of earnings in the
International Operations across the various tax rate
jurisdictions. The most significant impact of U.S. tax reform
was a reduction in the federal corporate income tax rate from 35.0%
to 21.0% effective January 1, 2018
and the implementation of a one-time transition tax on
undistributed earnings in foreign subsidiaries. These changes
resulted in additional income tax expense of $5.8 million in the fourth quarter last year.
Net earnings decreased $2.4
million or 14.8% to $13.9
million. Net earnings attributable to shareholders of
the Company were $13.0 million and
diluted earnings per share were $0.27
per share compared to $0.31 per share
last year due to the factors noted above. Excluding the
impact of the share-based compensation option expense and U.S. tax
reform in the fourth quarter last year, adjusted net
earnings2 decreased 7.5% compared to last year due to
the higher expenses as previously noted.
Further information on the financial results is available in the
Company's 2018 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.
2017 Fourth Quarter Income Tax Revision
As previously announced on April 11,
2018, in connection with the issuance of the 2017 annual
audited consolidated financial statements for the year ended
January 31, 2018, the Company
recorded an additional $1.9 million
income tax expense from the amounts recorded in the fourth quarter
2017 unaudited interim period condensed consolidated financial
statements as further described below. The Company reported
its 2017 fourth quarter unaudited consolidated financial statements
on March 15, 2018. On
April 2, 2018, prior to the issuance
of the annual audited consolidated financial statements, the U.S.
Department of the Treasury and the Internal Revenue Service issued
notice 2018-26 providing additional guidance on the calculation of
the transition tax. As a result of this additional guidance,
the Company recorded an additional estimated transition tax of
$1.9 million under section 965 of
U.S. Tax Reform on accumulated undistributed earnings in foreign
subsidiaries in its annual audited consolidated financial
statements for the year ended January
31, 2018. This adjustment increased income tax expense
and decreased net earnings by $1.9
million (US$1.5 million) from
the amounts previously reported in the fourth quarter consolidated
financial statements for both the fourth quarter and the year ended
January 31, 2018. The
comparative figures referenced in this news release and in the
fourth quarter condensed consolidated financial statements for the
three and twelve months ended January 31,
2018 have been revised to include the impact of the
$1.9 million increase in income tax
expense.
Fourth Quarter Conference Call
North West will host a conference call for its fourth quarter
results on March 14, 2019 at 1:30 p.m.
(Central Time). To access the call, please dial
647-484-0476 or 866-519-2796 with a pass code of 096742. The
conference call will be archived and can be accessed by dialing
905-694-9451 or 800-408-3053 with a pass code of 8616095 on or
before April 14, 2019.
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. 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, 2018. 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 245 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.
1 Excluding the foreign exchange impact
2 See Non-GAAP Measures Section of Management's
Discussion & Analysis
SOURCE The North West Company Inc.
