Q1 2020 North West Company Inc Earnings Call

Participants do you spend by your meeting is ready to begin.

Please be advised that this conference call is being recorded.

Welcome to the Northwest Company first quarter results Conference call I would now like to turn the meeting over to Mr. Edwards Kennedy, President and Chief Executive Officer Mr. Kennedy. Please go ahead.

Thanks very much.

Good everyone and welcome to our first quarter conference call joining.

Joining me today, our arms around the sudden RVP legal counsel and and Secretary John King, Our Executive Vice President Chief Financial Officer.

Alex you know, our president occasion, retail and Mcconnell President of international retail.

Before I begin with my comments I'm going to ask amounted to read our exposure. So thank you Edwards before we begin today I remind you that certain information presented may constitute forward looking statements such statements reflect northwest current expectation.

Estimates projections that assumption is forward looking statements are not guarantees of future performance that are subject to certain risks, which could cause actual performance.

Financial results in a feature to vary materially from those kind of played into the fourth any statements for additional information on these threats cc northwest.

<unk> farm and it <unk> under the heading risk factors Edward Thanks Amanda.

I'm going to provide some initial comments that I might to Oh, Alex and down to provide more color on the.

Performance drivers at all what can their own divisions on the retail side.

Overall.

As we started the quarter or we had some we thought some pretty big things on our plate with respect to.

Oh, the announced drying Tiger transaction, our restructuring in Canada or pricing investment in Canada.

Opening of our largest store the in the company the real pardon me in Saint Thomas.

Later, the year, just hitting its stride as well as our new stored and very important market barrel Alaska. So.

We had a lot going on in the business I think we had some very good.

The momentum in a set ourselves up structurally for.

A pretty good or your.

In in a very busy or the right areas of course as we all everything a lot of things changed mid March with Djokovic of Cobot 19, a we've continued to work on foundational parts of our business, but we've had to adopt like every other animals individual and organization because of cobot.

And we'll certainly talk about that today.

As we as we go through the quarter and and we are we saw the or the impact of changing consumer demands.

The one common part that I thought I'd say across all of our business.

International Canada retail and our.

Our air cargo business is the essential nature of the services we provide.

And.

It's a it really does come forward when you're in a situation like this and people and we depend on each other as this is a associates that northwest to.

To be ER dialed in.

To the jobs that we have especially right now and I'm very pleased and proud to say that the nor westars have risen to that call to action.

I mentioned my age ever remarks that the the safety factor has been Paramount and.

We've been a effective and to some degree perhaps fortunate that less than 10 individuals in our company of over 8400 across 17 different territories in countries.

I have contracted coal, but we've also kept our stores open a they'd be relied on is because the central service providers and.

And lastly, lessors me to quarantine type shutdown on one particular islands.

So.

That's kind of a a backdrop to.

What's turned out to be a very strong quarter sales wise.

Margins have been solid there's been some shifts and spending that.

Alex and Dan My touch on.

But certainly across all parts of the business.

With with few exceptions.

We have had a very very strong sales that have continued into the second quarter.

Just before I turn over to a.

Two or two oxen down to comment I'm going to I'll, just say that on the airline side. We've also had a solid quarter.

We've got a our third airplane now.

With us.

In terms of the our fleets were very busy moving.

The the volumes that are that are going through our store network.

Planes are flying the hours that we expect and as there are efficient so.

I just wanted to point that out because a that won't be apart that Alex or Dan touches directly on but it has been.

Part of the picture in there in the quarter as well a positive part and then just finally on the dry Tiger transaction were scheduled to close out in early July there's no significant changes I did mentioned in my remarks today, Jim that we've added two stores to the sole group we didn't change the provision and we're taking a cautious approach to that we'll see a.

As a as we go through the the subleasing and a sign of leases, whether we can mitigate that but right. Now we think that is a very prudent about the nine point fourmillion.

And then finally before I turn over to Alex and then Dan.

A common our aardman restructuring.

We're still on target so for the $17 million annualized savings Justin if you're thinking about that how that would affect the first six weeks, which is really what the impact of what happens on Q1. It wasn't significant we had a few positions that are staying on a on longer because of a change in work activity is tied to covert and the general.

A pickup in our in our business in areas that we didn't anticipate.

As well as the timing of of the structure and the position eliminations. There was one tranche or a group in March a second at the end of May in a third at the end of July it actually another group at the end of January so the the run rate on this will pick up as we get through the year.

I also commented we had.

I guess, you called offsetting reduction in expenses tied to a.

Reduced travel as one example of I was just general admin costs are lower given the cobot environment. The one offset thing and this is across the whole company was $4.8 million and.

Safety P. P type expenses tied to covert as well as the the frontline wage increases we implemented in.

Early in March or mid March pardon me backdated at the beginning of March.

So with.

That you've seen the numbers.

The the comps are high at 15.5, and as I say this spread across all banners. The food is up strongly as well and that includes all banners, including <unk> Tiger.

What I'd like to do now as a first turn to Alex you ought to give a just a a a highlight of oversaw the performance drivers that.

[noise] brought these results to.

In Northern Canada.

Well, it's dry tiger and at the comments a little bit on the outlook that we see as best as we can right now Alex.

Thanks at Britain.

Alex So first off opened with a commentary on northern Canada.

We had a very strong quarters, you without significant growth in both food and general merchandise across most about categories. There number performance drivers that we saw the first one I'll comment on is on the pricing investment.

We started with a temporary price reduction in 10 plus wrote stores.

In response to the trade restrictions that we saw in that number these communities and the feedback in response for our customers is extremely strong we saw significant lists in sales and you didn't movement versus comparable road stores and strong community and customer feedback.

And that gives us a lot of optimism going to the momentum for acute Q2, so pricing investment. It was the first driver what we saw in the business in Northern Canada.

The second and third drivers related to travel restrictions and increased government support for these communities.

As you know as as mentioned the evident in the each yet we've seen additional assistance announced for northern communities. As an example, the government announce initial 305 million dollar investment.

In northern communities and this show them in number of ways, whether the contract sales for GP.

Additional support communities to maintain travel restrictions all of which because of the essential nature of our stores. In these committees meant that we're able to support these communities in us and capture in terms of food and general merchandise sales.

At the same tight because of these troubled restrictions, which by the way occurred across all of our communities, whether it be roads stores or as area stores.

Only saw a wave of initial startup shopping but also increased spend in our stores as customers started to take this support and spend it on items that they would use at home. So big ticket items for example, electronics motorized home furnishings.

That would otherwise have this money isn't the only gone to look all shopping hub, but they stay in our communities that and because of our strong operations in stock as well as logistics.

Well to service this demand and capture the sales in our stores.

And this quarter ever alluded to.

The investments, we mean expenses and safety safety and sanitation.

The additional color I want to add here is that we also invested in hiring additional staff.

We're in our community that we moved into our stores to help with the sills with the sensation requirements. Both of those backup support press staff and event, if a corporate outbreaks that keep these stores open and running.

In the event that it was a corporate outbreak in our communities. So that was part of the expense investment that we put into the northern Canadian business as well.

I'll look as positive going to Q2.

Because there's a number of headwinds and tailwinds in terms of the positive factors, we're still seeing positive momentum from the pricing investments that talked about and we extended that pricing investment into 20 more stores.

This is a chance for us it really change the trajectory of these 30 plus road stores.

Because at this point the customers a shopping the whole story, it's a really a chance through his pricing investment to change the customer behavior and really capture share share from the out shopping.

Cheap price perceptions and to really changed tenor the tone and tenor of hard relationships with the communities.

At the same time at the government announced some additional support nutrition North was expected as of May 1st commence invested as extending nutrition north by $25 million and we operate stores in a number of these communities where the investments that going to.

On the flip side, though we are seeing that Charlotte restrictions that strength to lift and so that means that more of our customers will start to leave our communities that will be a bit of attracting the sales and the coast 19 situation remains answer and that is potential for continued outbreaks beyond Q2, and so while Q2 remains positive outlook yet that will.

Contv answer, albeit with positive.

Positive momentum is also uncertain in terms of how long the government programs will continue.

So.

As a waste of the old fried underlying momentum continues to be positive.

So that's on the northern Canadian site I won't comment too much in giant tegra than to say that we didn't see a significant change in trend versus what was commented on in previous.

Releases, well I will say that food sales did increase due to stock up shop, but this was offset by softer general merchandise sales as people pull back a discretionary spending to quarter.

Going to Q2 before we close the transaction. We know outlook is fairly positive we've seen food sales trends remain returned to normalized little bit I still above where we work last year buys restrictions a slow units that we see never decision spending on basic share our merchandise items like home decor garden. Some of these items were GTL has traditionally been very.

Strong and.

That's my commentary in terms of the northern Canadian Genentech and distances, Okay, great Alex will hold for questions until maybe a although I'll, let Dan Mcconnell President of international retail or group to provide the same the same for a review that that Alex it for a for his his store units and then we'll oh.

Questions.

Yeah.

Okay things that are so.

Then very strong sales increase over going international some of the triggers and the reasons for this was definitely came down to a the restructuring that we did just oh within the last.

12 months.

Really allowed us to be a lot more nimble agile to take advantage of some of the changing in the markets that we were experiencing our in stock for both banners was around 90%.

We also have to give a large call out to our committed stop at the front line. There was really a agreed a expectation from the community and then delivered by all of our stuff.

Really taking it seriously and.

Going above and beyond and all of their or their missions as far as extended hours when some of the stores with would shut down they can very quickly and were able we're agile enough to be able to go into a full ecommerce platform in some of the markets, particularly in the Caribbean.

When they went to a.

A full curfew or a full shutdown somebody operations.

In some of the other reasons isn't the seawell the full obviously the club concepts. He was very well for this type of environment.

Higher quantities lower prices is definitely a switching people away from traditional grocers and especially with the within their stock up shop.

The foot plates within costs, you less also making a lot easier to do a social distancing.

The eating the shopping patterns or some of the eating habits that people were not able to shop, but we're not able to eat at some of the restaurants, given the fact that they were most of them are close we're going to take it would only this definitely suite a lot of the shopping habits over into our stores both in Alaska and for you all.

Much like Alex It indicated in rural Alaska, There was a lot less travel auto markets. This keeping people inside the markets and then shopping over it or AC stores.

Talk a little bit about the economy.

Good.

Alaska definitely has them a positive aspect specialty within Q2. The PSD has changed from July and is now going to be a distributor to odeon or sorry from October typically and it's not going to be distributed own July typically it's $1600 over the last couple of years now it's good it's going to be reduced to 1000.

But it's going to be accompanied by CV RF as well is that some of the trick along of the stimulus that was distributed in Q1, it's still coming into the markets.

So that is definitely a a positive the fishing industry that we thought was gonna be scaled back as for some of the discussions ever had in Q1. It has now been announced that it will be open. So the fishing season will definitely be advantageous to the Alaskan economy. However, tourism in both Alaska and agreement with <unk>.

Between just a minute is gonna be a lot later and going to have a negative impact on the Oh look of the Alaskan economy. However, we do feel acute who is going to be strong when I was stronger than we anticipated given the incremental dollars, they're gonna be in market.

Followed by where we think is going to be a a weaker Q3 in Alaska and probably in an average Q4.

So when we look over the Caribbean, it's a little bit we're a little less optimistic.

Tourism plays a much bigger role unemployment numbers continue to creep up a albeit that a lot of the industry in the a color or in the Caribbean is.

Either directly involved in tourism or.

A ripple effect as to what the tourism market does.

So we're looking we're looking a fairly.

I'd say cautiously these markets, especially the non U.S. affiliated markets. Edward mentioned this in is a in his remarks earlier about beady eye and some of the other occur as sell Barbados definitely having a facing some headwinds.

Just to kind of give you some an impression on <unk>.

Some of the factors that have a pretty positive impact on the markets in prior years, the cruise ship industry, which is unknown at this point.

In fact, Cayman Islands that has indicated that they are not going to permit cruise ships to dock thing came in this year and that could be last year Cayman Islands, Sabo 2 million a tourist come in as a result of the cruise ship business BB I would be approximately 1 million and it would be in those neighborhoods for some of the other islands that were asked.

Servicing over in the international sector.

So saying that.

There were a lot more cautious as far as what our outlook is for the Caribbean optimistic for Alaska.

And again, we are we are still experiencing some strong sales increases in the Caribbean and where but were definitely keeping around the ball and looking for that for that change.

To ensure that we're not in a.

A a difficult position with the our stock levels, if that demand does start to fall off as we anticipated well later in Q2.

I think that's a that's really all they have.

For that right now.

Okay. Thanks, Dan.

I don't know John we missed anything that we should talk about right now if if not then operator, we'll open the call for questions.

Thank you.

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Yes.

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And the first question is from Michael Banal from TD Securities. Please go ahead.

Thank you and good afternoon.

First question is on the 17 million of annual cost reduction that you had planned.

Can you give I didn't quite understand.

Commentary can you tell us how much was recognized in Q1.

It would be.

And the range $5 million.

And why because it started its only six weeks.

And most of the reductions are spread over the year.

Yeah, I was on the impression or youre going to get like 10 million to start and then they other 17 come in halfway through is this the late.

No that that math would still hold water, it's not going to be 10 million among.

No at 10 million.

Okay, So a million.

Six weeks said it was there.

Okay.

All right.

And then.

The the price investments that you're making I think on the Q4.

Oh, you talked about $10 million.

Price investments in today, you mentioned 12 million.

Just.

The 10 million is kind of friends and 12 million is maybe once you incur increase it next year or have you changed the plant.

The plan has has changed somewhat the the message I'd say a.

Is based on the the change in like we've got this.

Uh huh.

Unprecedented opportunity because of consumer behavior shifting.

In voluntarily that we're trying to get to be voluntary.

And the price investment was geared towards behavior change, we wanted to get captured more local market share and old shopping spent.

Now are capturing the share and we're doubling down on the price investment Alex talked about some of the the upside we saw the gates or accelerating that spend.

The whether it's 10 or 12 I mean this is on an annualized basis. There's a lot of puts and takes and that's I guess I should say.

Oh, we should put a tolerance around this because.

Yes for example.

We see a more travel less covance support income related income.

And as our analytics show that that.

We're not getting as much traction with the price investment we would we would adjust.

So our best estimate as we looked at this and we talk one of the context of funding it through our through cost streamline was in that 10 million, but it could be 12.

It really depends on what we see and the challenge all that's right now Michael and I Hope you appreciate is that there's so much going on.

Because of the.

The fundamentally strong demand.

For what we sell.

And that's not going to go away right away. So we need we need to kind of clear the DAC of.

These other drivers of.

Reduced travel mobility.

Again income support and then when it and the dust settles sometime maybe in Q3 for Northern Canada will start to see.

Pricing as it stands alone, but the attrition north investment as well, which is quite significant.

ALS pointed out at $25 million about 11 million or that will flow through our stores. So.

Unfortunately, if anything there's more uncertainty 12, as our best estimate, but we really don't know until we get into probably Q3. It can start to separate factors that aren't cobot related which today our subsuming what we're doing.

So I was actually going to be my next question because clearly you had really very very strong sales.

Is there anyway that you can say you're.

Able to monitor or what Paul survey, your customers or anything like that to determine.

How these price investments are being.

Received.

And whether that's driving it or is it just that they can shop anywhere else.

So as I mentioned before.

There's a multiple ways that we're trying to triangulate the impact the price investment. The first mean ways that price. The initial price investment was only and I was was in about 10 plus stores with about 20, plus other stores road stores during the quarter, which didn't receive price investment. We should now are getting it that allows to almost do a bit of control test comparison.

Between the two stores and what we did all stores got to covert support and travel restrictions and what we saw in the stores, where we had that temporary price reduction with significant lift in sales and tonnage that help offset price investment. That's how we know that as traction now obviously, there's still factors into quite intense level support Charles restrictions, but that's the best we can kinda.

Triangulate, whether that was traction with our customers.

Okay, and so it should we just assume that since and stores guarded in Q1, and 20 stores are going again add to it.

In.

Q2 that you only had about.

A third of that 12 million dollar investments.

Going in the quarter.

It was actually less I mean, we still have our other stores as well so the the investment was was less than that.

Yeah.

Okay and.

I guess, just fine and then I'll hand, it off the others you talked about.

$4.8 million called me costs.

Our corporate related costs.

Any sense as to how long those are going to state numbers have you started and many of them started to fall off yet.

Yeah, they're going to fall off significantly.

And beginning in Q2, we the wage increases will will be a.

Focused on areas that up high cobot, a transmission rates and today that would be a couple of stores and northern Canada.

They if they weren't there are not in place any longer in the international group of stores.

So on or on an annualized quarterly basis. The four eight as looks like the high watermark and will be significantly under that in Q2 in Q3, I don't know we haven't separate the PV part, but the we probably should we'll have to get back on that so you understand what the pp will still be there as far as we know.

But the the of the lion share of that as the the frontline wage increases.

Thank you.

Thanks.

Next question is from Stephen Macleod from BMO capital markets. Please go ahead.

<unk>.

Thank you good afternoon.

I I just wanted to follow up on more outlook for Q2, which sounds like it is still quite positive can you just provide a little bit of context around maybe quantification like how you're trending relative to the strengths in Q1, maybe you're still expecting like would you still expect to put up a comp that's in the double digits.

There's a strong on a relative basis, but maybe down a bit from where you were in Q1.

Well, we're only look at where we are we're halfway through Q2 so.

I will say that its strong and if you think about.

The sort of as backup surge was sort of the March story.

And then the.

Travel restrictions were kicking in and then the income supports came in so child benefit payments or a talk were increased in.

May.

The senior payments going to go out and.

July.

The PFT is going out in July the served payments are in place now it will cut in half beginning in July.

So the income drivers for Q2 or at least the strongest Q1.

And we've got.

Instead of six weeks are gonna have three months.

I don't want to say anything more because.

These these numbers are unprecedented or they could go a different way in an unprecedented way.

But those are but those are the fundamentals we're thinking about you can read in the news as much as we can see it in our stores.

Like where are the income programs going or the travel restrictions going and then we start to moderate our sales expectations. We think overall that travel will not be the same as it was even when that's relax we're getting close to covert free zone here in Manitoba travel restrictions are still pretty strict 14 for 14 days coming from anywhere else in the world into Manitoba, including Canada.

So.

There's a lot of factors here at play.

Like we're confident saying this but Q2 is robust.

Uh huh.

When we get to Q3 and four then went down and Alex you can tell there's a lot of uncertainty.

Okay, Yeah that that makes sense that's helpful. Thank you.

And then I think you sort of alluded to it but I'm just curious what with with.

You know just such high levels of demand and.

You know logistics complications of getting product to remote locations have you seen any supply chain issues impacting.

Impacting the stores at all.

Loss.

Okay. It's starts like everywhere you would all shop.

The stores look like in March and and they've got a little bit better but.

The entire so looks like a Halloween pumpkin lots, a holes and got from teeth and the shells.

There is like people are buying.

The bike sales try to buy free weights try to.

Hey, TV sales like we can't we're selling a lot of 80, these but still as everyone else. So boson motors were getting our hands on lot of furniture, because were selling the type of furniture, but that's not really.

During the lights out and so in the south so.

It's good it's it's been something we've managed like we mentioned the fill rate at 80, 90%.

I would have a modest concerned that about getting sales.

As I looking at store comments on a replenishment of Tvs and.

We have to keep working hard in our category managed to be very creative to source product to meet this demand.

The food side as has settled down there's lots of substitution.

I guess the point I'd make here is that we still see a robust Q2.

To get us so I'll have to get us through Q2 the PFT.

That news was dropped I think down with very short notice and.

We've had to pivot quickly to get product into our stores for the July sales demand that's around the corner now with PFT.

And the other by the other acronym the Dan mentioned a is that represented a relief fund for Alaskan rural villages, but that doesn't play.

Okay. So I've talked maybe too long and this already but the answer is it's very it's hard to keep consistently in stock, but we're filling the consumer demand.

And we're getting the sales I don't think where they've been much on the table that way, but the stores don't look pretty.

Okay, Yeah that makes sense.

And then maybe just finally I can you talk about in the outlook.

Notwithstanding economic uncertainty in the Caribbean and.

Accidents or you sort of alluded to this is wall, but talked about opportunities to grow market share organically and through acquisitions can you talk a little bit about we're worried you would look to those market share gains are they in specific niches or you're talking more just broadly.

It's going to be in all all the regions we operate.

The it's interesting myself our competition has other depends and other revenue sources that are but are vulnerable to.

To travel.

Or to fuel sales.

The airplanes for example.

So there are there we can let me we're going to buy them.

But.

In the Caribbean, we're paying attention and Alaska, we're looking at some new store opportunities.

So it really depends on how the next few months play out, but I'd say that it's across the board where early stage on not a what I did mentioned in my remarks that we were also doing is tele medicine.

And it's not we haven't put $5 billion into it like tell us, but we are live with pilots on telemedicine and ours are enabled by the relationships we have with first nations.

And I'm going to be ready keen on reporting more on this to our investors as we go through this year and onward. This is a big trigger point I'm sure. Many are aware the fact that that a virtual billing is now a loud we've waited a long long time for this to break open we have a a cohort of doctors that work for us and we also have our telepharmacy.

So that's another one and then Alex mentioned, a b to B and all your questions about acquisitions, but we're also looking to add.

Wrapping up our business to business sales weve been called on more and more by people to try to find product for them.

The $310 million that Alex mentioned, Dan and his group had been supply and governments in school districts with Pp and we're starting to break into some relationships that we really had anticipated a few months ago. So we're just recalibrating, whether we turn that on as a.

As a growth opportunity or just sort of make hay, while the sun shines in terms of.

Of the current demand.

I think that's all serono on acquisitions, except that we're.

Yes, we are see ourselves in that group or retailers that's moved forward.

Right now a little bit as opposed to the ones that are that are struggling we're definitely not in the struggling cap.

And we just have to see what what is the whole marketplace look like as the next few months unfold certainly in the Caribbean with the economic downturn. This likely in the fall there's going to be some some opportunity if we choose to to pursue it.

Okay. That's a that's great. Thank you very much.

Thank you.

Once again, please press star one on your telephone keypad you have a question.

And the next question is from Subodh <unk> from RBC capital markets. Please go ahead.

Yeah, Thanks, and good afternoon, I'm, just I guess, maybe a longer term question have you noticed any change in sort of the productivity or stores at all I know, there's historically been a focus on that hub markets and so forth do the recent events.

Sorry.

Okay.

I think you cut off I don't.

Okay.

Hello.

I'm, let's do I don't think I heard the end of your question I'm. Sorry. This is more around that was more around the do the recent events in the wake consumers have been shopping does that change your view on your store network, maybe making your bigger stores even bigger.

Or is it too early to make those decisions.

It's too early.

I'd really like Oxendine would have maybe to build a prospectus paying their marketplace. While just went to one area. So we move we have we havent seen obviously for those and also the leading edge of E com our customers.

Don't shop is heavily that way, but we're all very concerned about oh shopping physical shopping or E. Com, if two except that it applies we have a dark store in Alaska.

It's called span elite if sales are way up several hundred percent off a small base.

All of our stores.

We are turned on to a we used to ecommerce platforms to curbside pickup.

And.

The demand was initially a pretty pretty high.

In a lot of down stores, the the cost of the stars.

We all know that that's very inefficient and when you get north of four or 567% of your sales, it's really a drag.

That is now calm down as people are shopping in person, but to get around to your question.

If anything we go the other way right now longer term.

And that is that the strongest leaner.

Does that I get smaller, but we do have a longer term vision of marrying up our physical network with E Commerce.

Likely enabled by micro fulfillment centers that are more bought automated than the things that you you do when you have to so we're no different than other retailers there on using M.S. and Mcs our mfcs.

We just haven't gone to the point of where we would make that investment, but we certainly see in a vision of our stores longer term post cobot not inconsistent with we by the way we think that's such a semi structurally that there will be more attention desire for services locally there's a wide. So critical that we put our best foot forward. Today. This is why the price investments.

Little bit higher and accelerated because we do see that folks. They don't really want to go to town to shop for quite a paper in diapers they'd like to go expressly for a trip and we want to give them reasons not to think about going out and talent for the things that we sell and we're doing that today.

We're E com houses on range.

We're gonna have extended range in our stores and then E. Com can can really filling the gaps and also get our cost structure down on the start to the essential that people need and not the peripherals that are so expensive to use bricks and mortar for given our inherent cost structure.

So those are some of the thoughts that we have a they're more specific to the Alaska and the northern Canada business certainly cost you less stands on its own is a very strong discount again warehouse club formats.

That has proven to be quite resilient.

Perhaps down I know, if we contrast, BB eyewear, we've we've had headwind even though we are the where the dominant retailer we reflect the retail economy NBV eyes, the distributor a wholesaler and retailer.

I think the format.

Call, which is in the other islands ought to be VI has shown to be very very strong even with a.

More depressed economic conditions out we don't we're going to retest that in the fall.

But so far it's a it's held its own the comps out of our cost of the stores I mean, right up there with our our northern stores.

Okay. Thanks for that and then so just a follow up on the E. Commerce site you noticed.

Some benefit as people are shopping more end market.

How did you find I'm kind of the ecommerce competition do you find some of your local customers relying more on E commerce than in the past or their habits, there that they're developing.

Keep again I don't.

There's been no and we can track this not obviously by individual for privacy reasons, but just the usage of our we visa card which is.

The largest prepaid product of its kind a we have a lot large penetration here that.

Shows us where dollars are going theres been no increase at all in fact, a small decrease and.

Some of the a the usual suspects for E com they aren't big numbers to begin with ex Callaway, which has a a free freight Amazon Prime thing going on has for a long time, that's a different scenario.

So no we havent seen a spike.

And I think Dan.

You might want to comment on the island or the other retailers have struggled to keep their E com going.

Yeah, especially I mean right out of the gate. It turned on overnight and people were seeing orders 60, 70 orders and to the point, where it shut down the ecommerce platforms on most Americans with most of our competitors thrilled the Caribbean.

That's trying to moderated a little more a little bit more in.

Manage expectations from our customers, bringing over a period of time with our saving Grace, but Edwards point I think it hasn't it hasnt because it.

Got it hasn't been executed.

As well as.

Probably on mainland U.S., particularly in Canada, a it has in threeq the people too and the customers to continue to.

Utilize that service with the exception that maybe and keep in silver or island. Sorry go ahead, yeah on what's going to say that actually that brings up another thought which as you know we buy from people who try to use online it's pretty tough right now.

And I don't think in the north or we do business was getting a great. If they wanted to go that route it wasn't the way to go fishing disruption to bring this yeah freight disruptions as well yeah. Another point I've made him a GM is.

[laughter].

Not to put a defensive and I say I mean, we.

We think it's a great strategic fit we've had some challenges for sure with the.

The two playing a crashes last year, but the the fact that today.

We have lift capacity, if we were dependent on third party carriers I mean, they've.

They they've got.

Government subsidies to keep themselves going with their pass through revenues, having collapse, but theres service would be imperiled, we'd be depending on those kind of carriers to get our product to our customers that's not going to happen again.

Thanks, Dan and say, it's not so we've got this advantage that.

We're not fully realizing but it certainly shows you.

The strength of it when you get into situation we're in right now.

Great. Thank you.

Thank you.

Your next question from Michael Banal from TD Securities. Please go ahead.

Is emmis day, receiving any of those government subsidies.

The receiving it for the passenger side of their business.

No they're not receiving the ones that unit I guess, just let me very specific they're receiving the crew I think there for them as crew.

But they're not receiving anything transport Canada like.

Column Air and K North.

There are seem in the normal subsidies if your business volume drops by that 30% threshold, which there's did.

Okay, so and it or how can we measure that.

In a material.

It's not material.

All right.

Our all of the Caribbean doors are all of you see less stores now category five hurricane resilient.

I'm, sorry can you repeat that again, Michael Im sorry, Okay alright.

Our all of the coffee less stores now.

No. They now have category five hurricane resiliency.

Yes, they do.

Great.

Great and then finally.

Giant Tiger I assume you're going to report it.

Keep it in their results until the day.

That it's sold.

That's true gone.

That's true Okay, and then for the quarter are you able to give us what giant Tigers numbers work or like revenues and EBITDA.

For this quarter versus last year.

No they into in the first quarter here, Michael It's the same same number of stores same business right.

Right, but were you able to able to give us a map.

Yes.

Thank you gave it to it I think you said your EBITDA for 2019 from what our call I'm able to give us something revenue would have been for Q1.

I know, we're not we're not breaking that out and it relates as Alex said in his remarks and Edward I think also commented on it was not like the change in the quarter was not material within inline with the previous result, okay.

All right, thanks, and congratulations on the credit.

I just want to come back sort out distractive, which I presume John assured me that the ppm hours, it's about a million dollars for the quarter that six weeks, so them out on that extrapolated that would be a of the four point as one.

And that PT would be a run rate, we'd see going forward as long as we can any of us can predict the duration of cold.

$1 million for six weeks into February it simulator quarter.

Yeah Yeah.

Thank you once again, please press star one on the telephone keypad you have a question.

The next question is from Matt banks on CNBC. Please go ahead.

Hey, good afternoon, I wanted to follow up a bit on the North Star. So commented last quarter I'm. There you were flat and a $1.5 million behind it sounds like it was a lot healthier in in Q1, but can you just share broadly sort of where where you're running versus plan. How you see that playing out for the rest of the year and.

How much of that impact as a decline in passenger revenues had I know, it's relatively small, but just curious there.

Yes, it's not it's not large it was large enough that because it got basically wiped out to qualify for the the cruise payment, which basically then covered off the loss of that business volume. So you're just parked out and say, okay. That's kind of comp to last year, but that's not really where were you.

We're going to make her lose our away with an assays. So it all comes back to cargo.

And it was a strong quarter because we flew the planes. They flew the hours there were supposed to.

The domain as cost per hour was was low and controlled.

And our plan is to continue that now with the third plant coming on we will decrease some of our third party lease costs. That's all the plan as well.

I mean, the short answer to question is that we have our plan is to improve our bottom line.

In the year and so that's still the goal certainly with the the volume of business, we're doing it's a big boost.

What we expected that so the airlines performing above plan.

Based on volume.

I'm not sure what else to say.

Where we are concerned like I'll just give you there is another area of headwind for US is the Onpoint insurance costs at northwest we have to.

Due to really get into this more to find out how we can we can manage insurance costs. So that's on a comp basis charting that too and I'd say that that's a negative.

Against their business, but theres still up even without the headwinds and we're talking about several million dollars an insurance cost increases.

Okay great.

You did you already touched on this talking about eightv than in and you talked about category spending shifts in the endgame as well can you just share maybe a bit more you know I know there was stock up in margin into sort of a volatile I guess, where sort of the categories that had that had been more that use.

No more recent uptake and and sort of how things are trending.

Well I, it's really specific to.

So at home.

Big ticket durables furniture.

Tvs extent, they're not disposal these days.

And then outside so like you can't find a bike anywhere in Canada, not pretty well so bikes are sold out and try to find more.

18, these boats and motors camping hunting fishing supplies.

Those are the categories that are really standing out.

I mean across the range.

Theres also been I would say replenishment of even of home products.

Boston betting for example, some of that would be to be a pp related community in investment funds that Alex mentioned.

I don't know Alex are down if you want to jump in on some of the other growth areas. Yes. So I'll just jump in on Canada interest on the food site. So if we say it we have mirror a lot, but we see in the south and retailers that as a wave of health and wellness bathroom products.

Good for products that starts to announce shifted to center store baking baking supply. So I would say love center store items similar to waste held in retail it seemed but we're seeing we're still seeing elevated levels, even going to Q2.

Thats, great Northern Canada.

Yeah, I mean, much the same in international a the PFT I mentioned, that's coming in with CBRN off the coast village Regional fund that's allocated towards big ticket.

In the Caribbean.

I see unfortunately, we're heading into a hurricane time, and it's been rumored to be a inactive season. This year. So we've been heavily a marketing some of the cautionary materials that are required in order to keep people save there. So that's a that's a big push.

But otherwise it's a it's pretty much in line with what Alex mentioned.

The other thing, but it's not specific to the categories, but.

The we serve generally a lower income.

Consumer who.

It's always never has enough income.

Meet all they're all their needs and wants the way a a high saving rate household might so.

The income that gets transferred gets spent and this is where the having having the broad range that we do have in our in our assortment bienenstock on that is incredibly important.

There was that will travel restrictions in the past pre quoted.

For those who follow northwest they know you know that when we have income.

Column surges, whether its natural resource royalty checks.

Claim settlement funds.

The child benefit payment increase when it was annualized that first year, they nutrition north decrease.

Increase like this is very very important to feel governance step forward to improve and work with us and other retailers on food security, but that puts money in people's pockets to span and other necessities for their household so there's a ripple effect and the local spending that takes place. It if were the store that has that product.

We are the ones that are going to get the business and the sales.

And just to just a follow up on that on that last comment I mean, how will you a sense youre your sourcing in logistically versus versus competitors in your markets in how how how have bigger in stock levels stacked up against them.

I think there superior I think that Oh.

Ill just starting on account I think the.

NSC it gives us a a huge advantage the where stores are laid out we have a bigger focus on on big ticket, where the largest seller from quantities in the world Snowmachine. It's good news.

And this is what we do as it's a very.

Actually bifurcate it, but it's quite a stress existence right because on one hand, we're trying to sell Tim Hortons.

We're trying to get the center store business through our price investment, but when the.

Sort of the bells rang on Big ticket, we we were geared to do that our buyers are logistics.

The way, we move our freight in the north we find room for that product to get to the stores are see left so we're able to to flex ourselves to get those sales.

I don't think any retailer.

In the north.

Costco or Katich can do it we do when it comes to big ticket and certainly doesn't have the supply chain advantage that we do.

In the islands.

We have a couple of markets, where price smart is there a otherwise our format as entirety unique in terms of a warehouse club pharma.

So it's more of the format uniqueness that stands out and it fits as Dan said, it really fit the time, we're in right now.

Great. Thanks very much.

Thank you.

So again, please press star one on your telephone keypad you have a question.

There are no further questions at this time I would now like to turn and making good back to Mr. Kennedy.

Okay. Thanks, operator.

Well that will wrap up our call I appreciate all the questions.

We hope that everyone has a a safe a say summer.

And has time off.

We're going to do the same we're going to be busy based on the way the quarters going and.

There were all everyone is going to be adapting and adjusting so we'll look forward to reporting on how we're doing and what's what's around the corner next when we get back together with you at the end of Q O Q2 in September thanks, very much.

Thanks. The conference has now ended disconnect your lines at this time and thank you for your participants.

This conference is no longer being recorded no. This is putting all this it goofy homes. It does does.

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50 for them.

Please note that this conference call has ended please disconnect your lines at this time. Thank you.

Okay.

The company.

She was funding.

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I mean since you've.

This conference call has ended.

Disconnect your lines at this time thank you.

Okay.

You know.

She was pending.

[music].

Got it sounds like 50, though.

Please note that this conference call has ended please disconnect your lines at this time. Thank you.

Okay.

Yeah, she would funding.