Q2 2020 North West Company Inc Earnings Call
Please be advised that this conference call is being recorded welcome to the Northwest Company Inc. second quarter results Conference call I would now like turn the meeting over to Mr., Edward Kennedy, President and Chief Executive Officer Mr. Kennedy. Please go ahead.
Thank you and good afternoon, everyone. Joining me today, our amount a sudden RVP legal and Secretary John King.
Chief Financial Officer, Alex you.
Those are present their Canadian retail group and Dan Mccarthy Who's President Robert International Retail group.
Before I go any further Alaska matter to read our disclosure statement.
Thank you I'd word.
Before we need we began I remind you that certain information presented today may constitute forward looking statements.
These statements reflect northwest current expectations estimates projections and assumptions. These forward looking statements are not guarantees of future performance that are subject to certain risks, which could cause actual performance and financial results that feature can vary materially from that's contemplated in the forward looking statements for any additional information on the Brad we see northwest annual information.
And it's M.D. and they under the heading right.
There's Edward.
Thanks Amanda.
I want to start the call with some some overview comments and I'm going to.
Right Alex to provide an overview of our Canadian retail operations Adama called did the same for international.
I'm Gonna come back on the call and make some brief comments about our airline performance as well as our investor principles.
Hi back to our dividend or see I'd be we announced as well.
As a general comment.
This this unexpected environment. This is incredibly dynamic of course, a with the cobot 10, demick around us and as I commented in the in the press releases its created unique applications.
For our customers communities, we serve our employees in our business.
Our employees are working exceptionally hard to you can imagine when you have the volume of business increase that we do.
The conditions that were working within although I'm very pleased to say that that our incidents of folks have coated within or 8500, a person employee base is remarkably and and a commendable the low and I think indicative of safety.
And care that.
We're taking for each other and I'm talking a total cases.
Up less than 15 since the beginning of a pandemic amongst at 8500.
Oh.
On a though our our role as the and everyday needs retailer, let's say.
Our responsibility.
It might be viewed as it is a burn it is still there. The next morning, when you get up and you've got a lot of work to do and I want to carload, especially our our value chain roles of planning buying the moving in selling the merchandise that we offer the services that we provide.
These individuals have been hard at work taking time away from work is not being easy physically at travel restrictions being the biggest factor.
And the sheer of momentum that we have and the energy that requires.
It's a it's a challenge at this point to to make sure we can balance our work energy and our workloads.
To regroup to recharge and to keep pushing forward as we see the continuation of of this environment and we learn more about it on how how we react or how we stepped forward as we have recently through the year actually system since the beginning of the cobot outbreak with a much higher levels of community support specifically for naturally.
What we've done with our foundation in another other donations.
As well as a general communication that we have with communities to try to be there.
And regular dialogue on needs that are beyond an individual consumer needs I'm talking about commercial needs business to business government.
Contracts in the supply that Alex and down we'll talk a bit more about.
It's an entire mix and shift of activity while at the same time.
We're trying to keep our eye focused on on what we looked like a as we emerge through koeppen 19, which we expect to be.
This is obviously is I guess the made a mid next year and then beyond the key things that we always had.
On our plate in terms of the right cost for our customers the best logistics and top quality people in our stores and really working R&D.
And this particular situation trying to retain the market share capture that we.
We certainly seem to be a to be gain through the last five or six months.
With that I want to know a invites Alex to out to comment on our Canadian results and the conditions that were working under a taking and really.
Leveraging a two to perform as we have been and then I'll turn it over to that Alex Okay. Thanks, Edwin This is Alex.
So in northern Canada, we continued its strong sales momentum across food and general merchandise.
Grew by a number of factors the first factor being the fact that despite some chose strict shouldn't relaxing from June we saw customers continue to stay closer to home across most of our regions and were able to capture is this a hiring community spending because about R&D everyday offering in food and durable goods general merchandise, even dog food supply situation.
It was still tight at the started the quarter it the food and stock situation has improved and we're also able to secure additional general merchandise to really support the sales and support our communities.
Another factor, helping our customers in the quarter with additional support from the government in response to covert 19.
Whether it be increase income transfers and northern communities, where they had subsidies didn't nutrition north program.
Many of these support programs starting Q1, but we have seen the can you continued benefit to our consumers going to Q2 in Q3.
A third and final factor was the pricing investment that we have started rolling out. We started this investment in Q1 and rolled out about third of our markets in early Q2.
Again, despite the lithium travel restrictions, which have made it easier for customers to out shop. We have continued to see punished sales growth throughout Q2 in Q3 does offset this pricing investment.
Our initial read is that we've captured market share primarily from out shopping but also from competing local food stores.
No the projected annual investment this pricing investment is into each $10 million range for the next 12 months and then rent pick up another 5 million, depending on our tonnage lift and payback.
On the gross profit front, we achieved higher margins due to fastest sell throughs and better utilization of five semi fixed free capacities offset partially by lower margin rates in high performing categories like Comac electronics and motorized vehicles.
Yes, again gives us confidence to continue investing in price as we can see that we can offset pricing investment not just through sales gains both so through these volume driven efficiencies.
In terms of expenses, we continue to invest in safety protocols and equipment as well as additional paying people for our stores.
For keeping protocols, we expect the run rate you would use about half what we saw in Q2 and for people a significant amount. The expenses in Q2 was due to large number of temporary hires we couldn't to some communities in the case of the coke outbreak.
These hires will be exiting our communities over the course of Q3.
We have also transitioned away from abroad premium pay program too much more targeted support for when the store experiences at Cobiz 19 outbreak in the community as well as the special frontline bonus program that will be distributed to our to our front line in Q4 it.
All this oh. This means that you know we expect our expense cobot 19 related expenses to decrease in terms of run rate in the third or fourth quarter.
This means that we expect cobot 19 related expenses to be about $1.1 million per month in Q3 in Q4 compared to about $2.3 million per month in Q2 for Canadian business.
Looking ahead to next year, our northern Canada Canadian sales outlook will remain positive like whatever said, despite very low incidences of Cook 19 across northern Canada to date, we do expect and have seen varying travel restrictions that would remain in place across most of our markets and summit next year until vaccine is widely available there's timing.
I think it dependent on how testing of vaccine development evolves over the next six months, but into very near term. Just this fall. We do expect that more limitations will be put in place or continue to remain in place.
As example, Manitoba, just reinstate it restrictions and travel into northern communities given the recent spiking Cobot 19 cases, the southern regions as a direct result, we do expect to see this continuation of shopping activity that will shift from out shopping to in community and at home or near to home products and services and so we expect from well indeed.
These conditions as we have over the past two quarters, the checking your more customers and hopefully, making our market share gains permanent through lower food prices and starting in Q1 next year to roll off a giant tiger sourced sourced general merchandise offering and notably lower fuel prices for our customers.
We are prepared to face couldn't 19 outbreaks in our communities, which will require us to incur more operational expenses in order to safely keep our staffing customers safe.
Well, it's difficult to quantify it makes you have this risk what I can tell is that almost all of the communities. We serve in northern Canada have been extremely vigilant in very successful compared to other regions of Canada anticipate from renting coven 19 related community spread.
Finally, we then I'll now much smaller GE business effective as of the closing for sales transaction on July 5th we saw pick up in food and general merchandise sales into quarter.
Customers everywhere looking for more of a one stop shop due to Cook 19, and this is a good fit with GE is convenient locations and mix of food in general merchandise.
We expect this momentum to continue for the rest of year without five remaining GT stores with some downside risk of troll restrictions for north are in place throughout most of the year as this would affect out shopping to northern hub communities that these stores are located with.
Thanks.
Okay. Thanks, Alex I'll now turn the meeting over it's down to provide a review of our international business.
[noise] okay. Thanks.
Good afternoon, everyone International and had a very strong second quarter and sales an increase in sales were 24% compared to Q2 last year was led by same store sales increases of 17% as well as the reopening of are staying calm historically USPI.
Requirements of this quarter is predicated first and foremost on the resilience and agility of our teams to quickly adapt to this new Cobi 19 reality.
The staff restructuring performed a little over a year ago has allowed us to have a team with unwavering focus on their specific international markets.
Now our approach has also been based on three pillars health and safety supply chain focus and social responsibility or community relations.
First of all and similarly to the previous quarter. The number one priority has been health and safety of our staffing customers. We have taken all the necessary steps to incorporate seamlessly these new cleaning and safety protocols into our daily routines.
We believe this commitment has resonated with our customers and as Bill Trust and report with them.
Second maintaining a robust supply chain with dependable assortment instrumental to nurturing customer trust our in stock levels have been strong around 90%.
And we've been able to navigate the challenging supply chain disruptions the industry has been experiencing.
This also means that we've been able to keep the most relevant assortment in stock to capitalize on opportunities of having additional government income support and funds, particularly on a U.S. markets.
Let's go to market travel and our Alaskan Pacific in Caribbean region.
Shifting consumer spending more in home dining and entertainment, which allows us to capture additional market share.
Earnings of income support.
Last revenues of $1200 stimulus checks and unemployment benefits top up the U.S. markets were a factor on our increased sales, particularly on general merchandise.
Additional recipients of snap funds better known as the food stamp program of the U.S. government has also had positive impacts on our U.S. territory food sales given increases in funds from the care that you Sta provided many snap households, with emergency supplementary benefits onto the maximum benefit household can receive for.
Example, a rule household of one person in Alaska, Alaska can have a maximum monthly allotment of up to $370 or up to $249 in USPI.
These amounts vary by state these emergency allotments I've been extended through September 2020 on most of our territories.
Similarly, the early issuance of the Permian fund dividend PFD in Alaska in July instead of October also boosted our quarter over quarter results. However, the PFD was $992. This year versus a 1600 six issued last year. Therefore, our food sales increased 20% in total and were 12% on a same.
Our basis.
On the other and general merchandise sales increased 59% in total and same store basis.
Fueled by category, such as electronics, motorized housewares and home furnishings as customer spend their supplementary income while remaining within their communities given travel restrictions.
Our customer count in basket sizes have also increase particularly if you will they are good indication of our captured market share.
9%, increasing customer account for same store sales in the fuel Pacific region mitigated lower accounts in the Caribbean markets given macroeconomic headwinds total see you all customer accounts is 1% higher quarter over quarter for same stores.
In terms of basket size.
Well as whole has had a 25% increase in average basket size.
Alaska has experienced some declines and customer accounts of the tune around 10%, but over 30% increase in basket size.
We believe we've gained market share in most AC markets as customers shop for more items, but less frequently due to cope with 19.
Lastly, as essential service providers on our communities.
Our third pillar of a social responsibility has yielded positive results in sales and community relations, especially thanks to business to business or BBB government contracts.
As major providers in our communities, we have partnered with governments and hospitals to provide ready access personal protective equipment in the Caribbean and the Pacific for example, we partnered with hospitals at American small and the health authority came in to procure these types of products growth.
ASCO, we were awarded a contract within the U.S. da food Bucks program delivered goods dozens of hard to reach communities.
No I wanted to touch on some more of the macroeconomic realities of our markets and also highlight our plans for the third quarter and beyond.
As mentioned on previous calls the Caribbean has had some challenges given the tourism has particularly halted.
The British Virgin Islands has been shut down since late March and as of recent has experienced increasing koby 19 cases.
Given that this market is highly reliant on tourism to the tune of about 50% of the GDP, we expect headwinds to continue throughout the year, our focus for the remainder of 2020.
Ics control expenses maintain our health and safety protocols and recalibrate, our inventory to adjust to our offering those tourism dependent while continuing to serve our core customer as a leading food retailers wholesalers and distributors.
Other Caribbean Islands, we are.
Specialty concerned about or the former Dutch territories of same Martin incur so.
Our government financial support programs are limited.
At the same approach applies as well as playing to our strength as a warehouse discount format.
Last handful of tourism in commercial fishing dependent communities in the southeast region of the state are expected to continue to face employment and income challenges.
On the flip side Tailwinds are expected in the Alaskan Pacific in U.S. territories in the Caribbean.
As we benefit from our central product and service rule combined with some degree of ongoing income support in most regions and continued restrictions on spending activity like travel and food away from home.
We are positioning our inventory to continue to capture these market opportunities, including hurricane season, and holidays and see you. All for example for Black Friday were finalizing a D digital ecommerce strategy to allow our customers to safely shop throughout our alternative channels.
We will continue to build on our commercial business to business relationships. This includes for example, pursuing BBB sales aggressively from villages near Alaska stores and of course are you Sta food program distributing food boxes to neighboring remote communities.
That finalizes my commentary on international operations, I'll turn it back to you.
Thanks, Dan.
Just to add to pick up on a couple of comments.
You clearly there's there's there's factors here that are entirely Ur cobot pandemic related and as Dan mentioned safety and health.
Has so far.
Well controlled and preserved and delivered within our stores.
We don't take that for granted and as Alex pointed out we have contingency plans to if it should happen once it starts stores at the close how it would supply communities.
As far as the the future we don't know, but as we as we look at the current quarters Theres. No question. We have continued strong sales momentum.
And it's now become.
A very.
Current strategy of the company.
So Phil sales the mass because our by plans, we're nowhere near with what the selling.
Results are and that pivot to the sourcing additional product has been.
Like all of our play effort quite exceptional.
Not easy to do but it's a very important focus so supply on the food side is tricky probably actually more in the U.S. in Canada in some ways, but also in general merchandise because the booking time that we have but as we ramped up our buying plans. We feel that we can we can take full advantage of the the customer needs in the behavior changes that are.
And one of the the elements and I think both and also referred to the income support drivers.
We feel it in Canada that theres going to be continued income support for several more months as the.
The served payments switch into the to the a relief payment funds.
For the new Federal program. So we can plan around that and to the degree than we see broad dissemination of a code vaccine being several months of not quarters out we can now.
More structurally adjust our business too.
To serve the the much higher in shopping needs of our customers and continue to invest in price. So that we can we can retain that market share.
When theres, a reversion back to a suppose covance.
Turning to the airline for a minute the the results were very strong and Northstar air.
We've highlighted that that having the our own airplane or air cargo capacity in Canada.
Again, structurally with or without cobot was intended to give us.
And advantage a competitive advantage on speed consistency and cost.
Consistency came through a big time and this quarter because.
We ended up picking up market share, where we will be had capacity, although our own capacity are.
The freight that was flying to Alex's stores.
Fills a lot of the of our available load factors and in fact made those load factors get too.
Incredibly efficient levels.
Timing of bringing a third HCR.
Onstream was very fortuitous in that regard, but we also picked up third party business because some of the coffee carriers that are out there today added cutback theres, they're passenger service and with that they're they're cargo service and our cargo services not cut back and if anything its enhanced over what it was before so wrapped.
Up at all that I think the the northwest brand specifically the brands of our of our banners cost to us.
AC values that are lost commercial company, northern and North North, Florida have been quite strengthened through the last five six months in terms of are stepping up and being there for customers in a safe way our community support programs raising our donation levels.
Staying in touch with communities at all levels, so that we can navigate together.
Through these these very different times and sometimes when these things happen you theres different ways. It can unfold and we're not sure completely how it's going to of course, but so far.
I think it has tested the.
Fortitude and the ability of northwest and we've met that challenge in a very positive way.
One more comment I'll make before talking about our investor a principles are proposition.
At the age Jim I made some remarks about diversity inclusion.
Weve as I committed to a weve tried we were trying hard to encourage a very broad workplace dialogue with in northwest.
Several hundred people, who are on our platform, we'd like to see the.
The active dialogue.
We continue to ramp up even more but we're now in the quarter, we're going to start to take action steps, what kind of inclusion action steps as well as diversity I believe that is a very key differentiation point.
On how diverse it gets represented and levels of power and influence within northwest and practice.
So I'll just invite our investors that are indeed, all of our stakeholders to two to stay tuned for that and we'll continue to report on on again the actions are going to be taking going forward.
Now.
Switching to our to our investors I mean, we havent been.
Happens explicit as we have been just in practice.
Demonstrative of our investor principles and in our value proposition and.
In the last couple of quarters. We've had this discussion with the board to through pretty solidify and refresh ourselves on.
What we want to stand for and I'll just go through some of the elements that we think.
Just like we'd like to we want to be a great company for our customers our employees.
And the communities, we serve as well for our investors.
We do believe in a balanced approach of growth in yield that we've stood by that I want to say time tested I mean, we can always change it but.
We'll give you a lots of warning first if we're going to.
For 30 years and.
And we've noted from time to time that that that approach of of of gross modest growth not necessarily above average, but steady growth and above average yield.
Well statistically empirically generate superior returns over time and it just happened this week or.
Shared with the the board a global are calling out up to that effect were higher dividend lower growth companies. The CAGR was 14% lower dividend higher growth.
Zero dividend growth stocks, all performed poorly over a 1977 2020 timeframe.
We took ours as far back to closely with time, we had to late 19 nineties and we were at 15.6% northwest.
CAGR on yield and growth.
Some of those are higher inflation times than today.
Our focus today, it would be for about 4% to 5% yield of 4% to 5% growth to get total returns at 8% to 10%, but coupled with that and is the is very.
Hi, Def style top decile capital efficiency, which I think we demonstrate with our return on assets and RMB and also top decile on low beta or low volatility and.
That's really important as well to us because we believe that our business risk.
Particularly now perhaps since we've de risked somewhat with Tiger.
Much smaller part of the business allows us to take on more financial risk.
We think we could be one to one that equity or.
Two ties.
Debt to EBITDA as another sort of proxy for that comfortably if we if we needed to without adding a lot of financial risk to what is we believe a very low business risk enterprise as weve constructed today and when you combine all those elements together they lead to some of the decisions. We've made for example to increase our dividend.
At a higher than normal rate, we think that catches up our dividend CAGR to where it should be.
And gives us the yield that we think we should be.
Overall.
It is true too so what we consider to be our cash flow available for distribution after maintenance capex.
And also leads to the normal course issuer bid.
Decision I mean, we do realize that that.
The de leveraging the the the company when is not the best use of capital either.
We are in fact in a cash generating position right now quite a significant one.
We will continue to look for opportunities that fit.
Tightly with the risk return.
Elements of the business that I've just described.
Some of those could be coven 19 triggered and we're very very.
Open to that we're looking talking.
Listening.
But there's no guarantee of it and in the meantime, we think the the IB is a tool we noticed that all other retailers have added many many companies that we should have as well to make sure we keep our capital efficient.
Ends and don't burn a hole in our pockets with it I don't think we have in the past.
So as not so much that it's more making sure we have all the tools in place.
To live up to our Investor proposition.
So that concludes.
It's going to turn to John for second is usually listens.
More carefully about what I might have missed and see says I'm. Okay. So.
Operator, we'll turn the call open for questions, though thank you.
Thank you.
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First question is from Sabahat Khan from RBC capital markets. Please go ahead.
Thanks, and good afternoon.
Part or maybe on.
The the kind of the food comp that you saw during the quarter you called out good mix. There can you maybe talk a little bit about the type of.
Product they were selling and if the mix is expected to continue and then just on the GM comp if you can maybe.
Through maybe the type of products that you are selling and.
How much of that is expected to maybe continue for the back half of this year as things start to open up and maybe.
We'll go out of market, a little bit just little bit of color on both of those numbers.
Okay. So I think the answer I can give will cover both parts of the business the.
The blend part of our food that that has worked against us on margin is.
Service, it's come back a little bit, but is still slower a shelf stable some of the heavy oil shock categories, which have very little shrink.
Our higher blend and overall, our I would say if you take so those would be the two adjustments a higher shelf stable lower prepared foods everything else would be about a similar blend but at much lower shrink levels, the sheer velocity of our sales.
Means much more much less waste and spoilage. So we netted all out were net positive on this.
Little bit less promotional activity has helped as well.
But the biggest driver isn't so much blend it's across the board reduction in shrink because of sales turns and velocity in food. The same actually applies to general merchandise and this is another the blend then and GM is actually a bigger factor, but I'll just since I talked about Franco finished the thought.
Here, where again, we're seeing much higher turns.
Much lower markdowns much lower age stock focus on lessons learnt about what what we should be ordering more of it less of in the future, but the dilutive part of the blend isn't in big ticket durables, that's actually not going to be it impacted by by relaxation of out shopping that is more income driven.
We already have a healthy are caught optimistic market share and things like home furnishings motorized and electronics.
When our customers have the income.
And they're shopping locally.
And we're in stock three conditions will get the sales if roads are opened up where there's more flights out of town. One of those conditions is gone that's true, but the other two conditions are still there so.
GM is again much as more income than than mobility, driven on the food side and to your point about what happens.
Post this call post cobot influenced behaviors.
Depends in part on how well we've been executing today and Dan.
I didn't mention but but part of the market share gains.
Which aren't which help within the islands that we're serving today the high double digit type comps were achieving.
And on honest without income support our because we're in stock because we have superior service and perhaps safety in our stores. So those are but consumer behavior changes that that won't we hoped shift that well back because they are coming or for all the good reasons that have that we think can can survive cobas.
Where the business is coming from an old shop competitor not a localized.
Of course is a behavior change that would could we revert will the reversions be back to the norm or to a new normal no. One can tell but this is where our price investments and our in stock comes into play, especially the price side, we're hoping that we're appealing to be to more people of all of my share of wallet standpoint.
Just to stay with us for items, they really don't want out shop for and now on a from a price value standpoint, we're more compelling and time will tell him thats up a tough one for us like we're trying to run a lot of little test.
Pilots around as we go through this and try to control for the for the Cobot impact.
And as we at this stage, it's difficult I mean, the green shoots are very positive, but theres a lot of of other factors.
At play here that are cobot related so.
We just don't know yet, but that's certainly our goal is to stick with sticks some of that market share to us.
Based on a shift and behavior that we think will be more permanent.
Okay. Thanks for that and then just on the topic of having things in stock and be able to move them around looks like and as a is getting going and you indicated in some third party work.
I think when you did the acquisition you mentioned that.
Taking about using that as a platform to maybe build and expand that capacity do you see this third party business continuing as an encouraging you to maybe invest more buying that business.
As you come out of the Democratic thinking about that we're thinking about it.
We've only got a few quarters under our belt of consistent highly efficient high product productivity type performance from NSX.
The NFL team as we think phenomenal, but they've they've had some some some rough.
Skies, let's call it turbulence to get to where we are today. So it's kind of a left and right have the frame right based on one hand, we're very pleased and very focused on optimizing the the service we provide to Alex the stores and a new lightweight pilot program as a break through.
Some of the direct palette to backdoor stores are saving tons a labor.
One hand, we're optimizing but we're also got one side of US is also looking at growth and where does this take us and again some of those take takes another party to to have a maybe an arrangement that will work.
Or just a journey the right conditions.
They were three quarters I'm, just getting what we're doing done well today and then 20% is a focus on what we could look like down the road, but certainly we have a vision and an aspiration to be the best not just by large largest but a larger solely focused cargo airline.
Serving the north.
Okay, and then in terms of some of the market share gain that you sort of talked about earlier and as you sort of look out.
Sure and beyond.
How are you thinking about just a broader investment plans interest or is any of the top 40 program a few years ago.
Probably helped in the situation, but how are you thinking maybe we are 2021 Capex plans and onwards is there any major changes you're looking to make.
It's a great question, because as part of our overall assessment of maintenance Capex when I spoke about.
Indirectly dividend policy and cash returned to shareholders retained in the business to sustain and grow.
We're kind of cross roads, there because we've looked at top 40, and the capital intensity of it and Thats why we slowed it down.
We recognize that we've got to be careful on our bricks and mortar because the business is changing I mean, we'll learn more as we'd like to our stores be leaner.
Put on a lot of ecommerce activity intended to be driven by more cobot lockdown situations and then consumers would come back to the store, but we are seeing through our dark store in Alaska very very high growth in E Commerce and that has implications that how much you invest in the bricks and mortar.
Side of it having said that our physical store network is the backbone of the company.
[music].
And right now I'd say, it's that we have to pause in step back and look at what's that capital efficient project efficient way to touches many stores as possible to put the essential replacement capex into the stores the store the future not the store of the past.
Today, it's actually a good chat time to take that pause because we can't deploy our capital fully right now the restrictions on construction crews and mobilizing projects into the north is quite severe and as we look at the rest of this year into next year, we're probably going to be at a lower capital spending.
Possibly with below depreciation.
Will there be a catch up in the years ahead hard to say I think the challenge for our team has to come up with again real capital efficient ways to touch a lot of stores.
But not necessarily in these big lumpy 456 million dollar ways, where I'd like to see more quarter million half million dollar touches I don't have any more detail on that but I I think again, because we're in this mode, where we're kind of frozen on on any acceleration of capex.
Because of coal, but it's a chance to step back and and figure out what we really want to do with our maintenance capex going forward.
Thanks, just the last clarification question for me it looks like.
Last year EBITDA revised up by about 3 million in change and just the initial glance indicates might be a restatement.
The compensation line or just a revaluation of that can you maybe clarify the restatement there on the share based compensation.
Well I'm, sorry, Tom I missed a I missed that point.
For the EBIT adjusted EBITDA for last year looks to be both to about 53 million just looks like the share based compensation right. Okay.
Yes, so in enter.
Non adjust or adjusted earnings measures under the non-GAAP measures.
Previously this goes back.
Several quarters Saba, where we were.
Only reporting option expense than we found in talking to people such as yourself and others.
Suggested why don't you just pick up total share based compensation costs and that's all we've done so that that note there that you're referring to is just identifying that on the non-GAAP measures its share based compensation costs and Thats Cross reference to the noted in the financial statements.
Thank you.
Okay.
Thank you next question is from Stephen Macleod. Please state your company or with some proceed with your question.
Thank you said be ammo capital markets good afternoon, guys.
Hi.
I just didn't just wanted to sort of around on a couple of things most notably with respect to the outlook.
The tone in the press release was quite positive.
Tone in the Mdna was more cautious so I just wanted to.
Sort of sort of.
Identify the difference between the two and kind of worry.
Is it sounds as though.
Ultimately.
Nothing at all or you are quite positive with respect to the outlook is that the way to Jupiter.
Yes, if we if we start work where the year started and if we were three cobot of course, and we looked at what our current plans, where they weren't announced at the time, but if you were in our.
Order management planning et cetera, we'd be looking at the GE transaction the admin downsizing.
The price investment in Northern Canada stores, the decentralization that down Mcconnell has been working on it and by the way getting that used to use the contracts and U.S. only once we've got sea level people on the ground running these SP use in Anchorage.
All these things we're in a plan that we felt was a very strong plan for the year.
And then cobot was his layered on top of that so those underlying structural positives ours still there and so we start with that and we say well hold to 2019 plateau is a pretty good plan. We had some pretty we think achievable numbers and we were it was already but we were on our way.
We put we put the customer behavior changes that are going on right now and the the trial restrictions and some of the income supports and our are essential needs position durable goods physician.
Yes, there is I can say, there's no question, we're going to be tracking on numbers higher than we would've been our original plan, which was already we hope to be a very strong year, so that the outlook.
As far as I can tell you now you heard from from down and Alex.
Write down on that on the Caribbean.
We have concerns as you would expect us to.
Going into the tourism season, now and and what's going to happen, we still held very strong gains and mark in certain types of markets to certain types of tourism. For example came in as a higher in tourist market. We've got very very strong performance in there and that island Barbados.
Somewhere and B with USPI, we have very very strong performance in Barbados, that's market share capture so.
We're cautious, though and I think you'd appreciate that.
A couple of quarters of this of this kind of performance and then.
And at a trend that looks like it's continuing.
Still makes us.
Concern to and building contingencies into what could happen if.
If income was to fall off in Barbados.
If there was to be a cobot outbreak in the north.
We have to point these things out and.
And at the same time, we felt we always felt we had some real underlying strength in the business and underlying momentum. So I don't know if I am I, making sense there, but it's it's just trying to balance expectations, including our own.
And not also.
I think I think investors.
I have just watched I mean with other retailers reporting there has been a somewhat underestimation of of the comp sales performance from at home.
Food retailers.
So I appreciate that people are catching up to this but I think there is a deeper shift here as your as I think investors are appreciating.
And and then and then what what can trip that up I mean, obviously, it's not going to be like this forever, but our near term all that would still be very positive and we're now that doesn't mean, it every quarter looks like like Q2, but.
They look.
Quite strong compared to.
And otherwise normal year.
Yes.
Hopefully make sense that's good color. Thank you.
The gross margin or sort of general merchandise same store sales was a whopping close to 55%.
Can you talk little bit about like how much of that you think is potentially a pull forward and demand as people get.
Interior driven by in period spending because the government transfer payments and income assistance versus.
So.
Like how much of that you think is pull forward of spend.
Our past experiences that there is that that little that can happen when we've seen a.
More community are only region specific situations, where there's been an influx of income.
Or at home spending in this case.
It can pull forward for example in next year's Snowmachine sales or a TV sales.
But at this point of so broad and.
We haven't yet seen were if the income continues we have enough things that that lower income individuals need in their household for replacement. So it's not scientific but it's actually is more than what I'm, just saying, where we look at households, we'd look at what's kind of durable consumption are spending is going on.
And we say Okays, yes, you've got this but what about the mattress business what about the with the white appliance business.
Our per capita HPV sales in this market, we're nowhere near what would be considered saturation.
I don't think we're there yet, but I think your point.
Would it be stronger if we get into let's say to put opinion at mid next year into Q3, Q4 next year, where the income and the travel may not be is conducive to our offer.
Notwithstanding the underlying momentum I think we would've had anyways.
Then, yes, there is going to be there could be a double whammy of people starting to travel more and and some saturation because at some point durable goods spending.
Does get there, but I don't think we're we're even close yet after five months just look at the rotation of what we're selling and the committees that we're selling into we're still a few quarters away from that.
Right. Okay. Okay. Thank you.
Okay.
And then.
I guess I guess asked another way and I know you've given some great color as to the call.
Dolls, and Dan, but just curious like kind of visibility do you have into kind of this multi quarter.
Demand strength like like what gives you the confidence.
It's going to be there.
As opposed to fallen off okay. So.
We look at current trends, we look at I mentioned the the.
The conversion, Okay, what started talking about only quarters.
The current status of Cobot, 19, and what's happening with.
With the upticks and trends.
Which affects the north even though that the north today has only a couple of cases, Manitoba just locked down again, no travel to northern Manitoba. The reason that northern cumulative does such a great job keeping covance down essential allows us because they receive.
Severely restricted travel.
Can't see that lightning up because they've had success and I was looking at the south urban market and saying well there they are going up their spiking up we're only getting now into back to school flu season. So it's likely got nowhere to go but up for the next several months. So that to me now we're into Q3 Q4 with very similar conditions.
So what we have today, if not more severe in terms of controls. So thats. The the consumer behavior shift part in terms of where they are with their time and there and their space to move around and then secondly, as the income part and both down and now its touched on this I mean, we do expect the U.S., we'll figure something out to replace the.
The income support although times ticking away.
Our sales have held up very strong even after the the last checks.
But between.
The Democrats and Republicans and how the work out a new package.
We've made just a simple assumption that there'll be some level of income support for low income.
You asked Shaw cadence consumers and citizens.
Through the course of October 19, it won't go to zero in Canada, we feel the same way the Sir payments go away at the end of September, but they've already renounced announced a replacement program, it's $100 a week less but we think that program will be.
Strong part of the income support in the committees that we serve so we have those signals.
One of the rest of course is a merger on how that income support will materialize. The one encanas quite specific both it's when it starts and finishes at six more months. After the end of September and then cobot I mean, I'm, giving you my opinion on what I think the next say three four months look like.
The new year is hard to say.
We've also as I said earlier, we put this opinion that said broad dissemination of coal, but just to just for our own internal plans, we have to buy merchandise to sell.
Were more than one is to say that it's likely into the middle of next year. So that we can plan for the sales that we think we're going to get in spring.
Yes, okay.
Okay. That's that's great color. Thank you very much.
Thank you once again, please press star one on your telephone Keith you have a question or comment. The next question is from Michael Van Aelst from TD Securities. Please go ahead.
Mr. Analyst Your line is now open.
Hi, guys, it's it's happening from Mike.
All my questions have been answered thank you.
Okay.
Yes.
Thank you.
No further questions registered at this time, we'll turn the meeting back over to Mr. Kennedy.
Okay. Thank you operator, thanks to everyone, who the dial it on the call.
As usual if you if you have any follow up questions.
I can be reached or a or John King is your points of contact.
We'll look forward to add to having you on our our Q3 conference call in early December Thanks, very much operator, and good afternoon everyone.
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