Q3 2020 North West Company Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to the North West Company, Inc. Third quarter results Conference call I would now.
Now like turn the meeting over to Mr., Edward Kennedy, President and Chief Executive Officer and.
The Kennedy. Please go ahead.
Thank you Ed and good morning, good afternoon, everyone of offering to our of our Q3 conference call.
I'd like to introduce on our on our call from North West.
Afternoon amount of sudden or the to the legal and corporate Secretary John King, Our Chief Financial Officer, Alex You know who's the president of Hurricane and retail group and and Mcconnell Who's the president of our international retail group.
Before I start with my remarks, I might come out of the to read our disclosure statement.
Thank you Edward before we begin I remind you that certain information presented today may constitute forward looking statements assets.
The statements reflect north west current expectations estimates projections and assumptions. These forward looking statements are not guarantees of future performance and are subject of certain risk of which could cause actual performance and financial results and the teacher to vary materially from the contemplated in the forward looking statements for additional information on these risks please see north.
The annual information form and it and be any under the heading risk factors and work.
X amount of like the last quarter I'm going to.
The allocated time to to book, Alex and the talk about the respective businesses.
And I'll do the very shortly all providing a general overview right now.
I'll talk about the airline and then after a Alex and and and data spoke and I'll wrap up with some comments about the.
The outlook and our priorities that they didnt cover.
In general if you've seen the press release and and the our disclosure of for the quarter a the.
This is a continuation of Thats really started in March with the.
The the the dramatic shifts and the and consumer behavior and everything else and our society.
Tied the COVID-19, and the pandemic.
Our business has has been in general on all of the on a net basis.
Favorably impacted to the extent that were and everyday needs retailer and people are staying close to home were very strong and working and and operating effectively and some difficult circumstances, that's kind of the nature of what we do so now we've layered on the the realities of the of the pandemic. So.
Some of this.
And I think of national to us, but it plays to inherent strength and north west and I'm, putting the safety first.
Reliability right up there with it in terms of and.
The stock supply and been reliably safe and.
I'm very pleased to say that.
Amongst our associates of the the contraction rate is less than the 1%.
Oh, the stores have not had to close and last required by a community order.
We've been able to keep our store and stopped and fully.
Fully operational and I believe exceeded expectations at least compared to two the other other retailers and the space and we look at our and our market share. So I have huge a huge amount of of of pride and and acknowledgment that I want to start by talking about one thing.
And our busy as the are for us and and warehouse to the find more product to sell and we have the operated stores with much higher volumes and we had planned or expected its very very demanding when individuals cannot take.
The time away from work and the normal way they normally they would certifications and traveled geographically that adds to the stress and strain as well.
We're not of the breaking point by any means a this we realized since the pandemic is going to continue for many months and different shapes and forms.
As we get to broad dissemination of the vaccine.
And.
We're.
We're very very.
Attendance and aware of of stresses and strains fatigue factors et cetera, and so I think we're doing as good of job is as we all can two to reenergize and and stay focused on on the meeting customer needs first hand, as we also pivot towards.
What post pet pandemic looks like through the second half of of next year and and beyond.
Again trend wise, there's no great surprise and the quarter and as far as the.
A little bit of what the outlook, we see it continuing.
Not just sort of Q4, but in Twoq and Q1 and two obviously, there's there's big numbers too took a pair of two in terms of of 2020, but there's a lot of other drivers and the in the a and the market in the committee said, we serve that's adjusted we're going to continue to the writing a higher level of sales and ultimately a.
Margin of profit performance.
Yeah, well into next year, and and we think the on.
I'll say, one thing and before I turn the I'm going to turn first to the Alex and the the data regarding the airline we don't have the airline president on the call, but so north of there.
I had another very good quarter and in terms of cargo passenger business and started to to the turned down a with with lockdowns, but the <unk> and the and that had an effect on revenue there, but the the cargo side was running at a very high efficiency.
Tied directly to the cargo volumes.
The connect to our sales and our northern Canada group and it really gave US a of high confidence level and it kind of the and a good learning and of how we can we can turn our planes fast safely and efficiently and get the load factors to where they need to be and and I think this is one example of where there's great learnings during these busy.
Times, a day or quarters of of our.
Of our business that we can take the out and and build on it and suffice to say North Star Air exceeded the plant again this quarter and was the positive contributor to our bottom line.
With that I'm going to the stop now for a for a bit and I.
I'm going to the turn the a the the conference call over to Alex.
And and any questions you might have for him and Northern Canada and then we'll do the same with Ah for down the Cottle talk and what our international business.
Alex over to you.
Thanks.
The dog.
So the northern Canada and.
Cash and deal with continues the market share gains across the banner and this is reflected in our food and general merchandise sales the number of factors here some of.
Which continue onwards from Q2.
The big effect during the quarter was really the increase trouble restrictions due to the increasing number of call. It 19 cases since the late Q2, we're able to capture greater and community spending because of our every day offering around food and general merchandise.
Oh, the called just the importantly, and I think of procurement and logistics and and you know store teams did an excellent job this quarter, where you both get food and German much nice package, our store and were able to meet the increased the medical the customers and keep the spending and market.
Do you want to call. It sees the echo what I would say I think we saw a very strong execution and collaboration and the north in Canadian store teams and image of the 16th and that's kind of day and so this kind of smooth flow rate was really a strong competitive advantage and laws and that's really captured the greater in community spending and in Q3.
The other factor it was really the continued support from the government.
And that really helped and mid teens above the average that's me and comes with a significant number of customers transition from Sir the two.
And you could make some programs the recovery care of getting the benefit as the bells, the Canadian be probably benefit the dose with the sectors that we saw a driver of sales in Q3.
Okay, and do you see positive cash customer response with the ongoing pricing investment.
Couldn't Nike and has made it very challenged and get a full read and the results and keep that period of this type of investment.
And the old habits search and on the feedback and results and pricing investment until the corporate situation and starts the steep like most likely second half of 2021, and so what we are doing and we've done the the role of the price investments until the second half between 21, when we have a clear and beat on P. Bagby results of the customer response, what the.
Means is the I'd mentioned over the last Investor call. The total pricing investment of about eight to 10 million for 22, and one and because of the slowdown we now and it's the only investing about three to 4 million 20 to the one as a result.
On the expense side, we saw and prove expense trends of primarily coming from better management of our cold and Nike related expenses, such as BP and supplies and the as mentioned last quarter and net effect. It was the fact that we transition from a broad across the board.
Most of the better prevent the program.
The different programs, London was more targeted pricing and pay for when the store experiences of the COVID-19 outbreak in the community.
And the special like your and something like that and those are the factors on expenses.
And next year I would mention on sales I look of the mean flushing paused the differences versus historical trends.
With the current vaccination and that's been announced by the government. We anticipate the so restrictions will remain the plays into the second quarter of next year and this will help the increase in community spending.
I addition cuts to the customer and comes will continue to remain above average one factor that is the cold and 18 programs that will kick in the same benefit as well as the Canada recovery benefit. These will continue to go on and into the early part of second quarter of 2021.
The other factor is really the payments from the deep school settlement.
The day sediment and the compensation scheme, it all and vision as Canadians across Canada will force and 10 and in the schools and each customer each community condition of Canadian we'll get a check of $10000 and more it's part of the settlement and.
The they've already been close to about 90, plus dollars and claims meat and 40000 of these claims of already been paid up and the second one of these claims to be meet and that will go into the next year.
A fair amount of the payments will flow to the customers and our communities relative 22, and and that's another factor that will help the theme of customers and incomes.
Now the other thing the <unk> that I think is that part of the sector and 21 is a bite relationship GT.
Out of that start and we expect it to provide the momentum does business in two weeks from.
Firstly, we intend to meet our joint procurement and sites and lots of cash cost savings as a result of binding of volumes.
And what is sold and the next one of the two quarters as we finish up the drugs procurement works and.
The second sector and benefit from the GE relationship that we expect the source more general merchandise of GT, which a lot of right new more elevated assortment of the theme of lower prices to our customers and work and we're really yet the key secretary and allowing us the fourth and market share. The we've captured the sooner and Coke and 19.
And the expense front, we anticipate <unk> expenses to be roughly the cycle you next year.
While the local and Nike related expenses will decrease one that once the takes the uses and place.
And lower cold and <unk> expenses were offset by a catch catch up of maintenance and repairs and other operating expenses that we the free this year due to cold and Nike and travel restrictions.
Oh, the lots and that would make the bunker and they.
We do ports, the visits and seems the and operational risk into the 2021.
And the benefits significant outbreak that could require the store stuff. The icelleight, we anticipate that we would need to run the store with different types of staffing models that could either it's like sales the trend of expenses.
And that would set the mesh and the teams are the so far and we're actively working to mitigate the Smith and I'm confident we can continue and mitigate this risk we felt that the operational plans of all of our stores and working with community leaders and and provision public health officials to ensure that you know in the scenario, we have assets rapid testing and flexible quarantine requirements and not the bus the keep store service.
Across our network.
Most of my comments around the answer of northern can the in business and all the for next year of pause there. Thank you.
Thanks, Alex I think before we do crashes all well get through the whole business the.
Overview and a of will start we'll go next to today and that [noise].
[noise], Thank you and good afternoon, everyone.
Could you share the details of our successful third quarter.
International continues to experience strong sales momentum and has been challenging for everyone.
Greenfield and our teams have stepped up the resilience to keep fulfilling our roles and essential service provider.
Our approach continues to be based on the same three pillars mentioned on previous calls.
The first protecting the health and safety of our customers and employees next.
The next maintaining and dependable service through our focus on supply chain.
And lastly, and unwavering commitment to social responsibility and our communities.
We continue to have and solid in stock levels of relevant assortment and.
In spite of current industry wide disruptions and some parts of the supply chain.
Speaks volumes not only of the tremendous job our teams have been doing and this front, but also our strong relationships with suppliers.
Similarly, our logistics and store teams of shown leadership and managing increases in volume and our merchandising pricing and marketing approaches.
Taylor to seize opportunities and opportunities such as ships and.
And we're spending, particularly one shot stop shopping and more in home dining and entertainment.
Also less out of market travel has allowed customers to shop more of our stores and.
Of course, although not as high as in previous quarters, the availability of additional government income support, particularly in the us markets.
Unemployment benefit top ups and additional emergency a lot of and so snap funds, commonly known as food stamps continue to fuel sales growth.
All of these factors, coupled with better service and safety standards have allowed us to gain market share and specific territories, even islands with no or little income support the Barbados and came and.
As many of food retailers of experienced customer counts of generally declined well basket sizes have increased given the mobility restrictions during the pandemic.
Wherever we operate and very diverse markets and this is not the case for all of our markets.
For example, and Pacific cost the less we saw a 5% increase in customer accounts as well as the 23% increase and basket size. This was partially offset by the Caribbean Sea Walmart.
Yes, which is experiencing different macroeconomic realities. Therefore, our total see you all banner customer count decreased by 1% and our basket size increased 15 on the same store basis.
Yes, Paul the similar trend is the other retailers with lower same store customer accounts and.
And higher basket sizes, as an increase of 23%.
This might be a good.
And time to transition and talk about some of the economic headwinds are Americans have been facing and how we've been managing them.
Caribbean markets have been impacted by the slowdown of tourism.
The British Virgin Islands have been shut down.
And travel since late March and its GDP and 2020 is forecasted to shrink between 13, 17% of briefs increase and Koby 19 cases, particularly in September was met with government imposed restrictions and curfews and included closure of our stores.
This represented the equivalent of 72 less trading days in the quarter.
The reopened borders December onest with certain restrictions, we will closely monitoring of the situation and continue to focus on expense control assortment and stock position and safety protocols. The four.
And Dutch territory. The scene learning curve. So are also experiencing headwinds given the limited government financial support.
Our guiding principles and approach are all similar here.
On the other half and performance has been hampered by travel and mobility restrictions for a handful of stores and Alaska Southeast region from communities depend on tourism and commercial commercial fishing.
And the workers comes were temporary jobs on fisheries during the summer and although the season piece and July some of the employment and income effects will potentially linger until year end now.
Now and at the stage has been set we can go ahead and talk about our results sales growth for the third quarter continues to be robust and seen throughout the seen throughout the year and increase in sales of 17.2 per cent compared to Q3 last year was led by same store sales increase of 10.8 and the continued solid performance of our reopening of same Thomas.
Yes.
Some of the sales increase of 17.4% in total were up 9.6 on total comp stores.
As a part of our DT media relations commitment we continued to execute the contract. We were awarded with the you Sta food box program to Liberty several hard to reach communities throughout rural Alaska.
Overall for international produce grocery food and me led category performance.
In the back of strong in stock positions as well as our signature category of roaming programming cost to the us.
General merchandise sales increased 20.9% and total and 21% comp in spite of the fact that we were comping against the permanent fund dividend the PFP and Alaska, which was released early this July and some of its regular issuance in October.
Also worth noting that obviously, we pick up sales from those funds last quarter. Instead of this one and the PSD was 992 this year versus $1600 last year.
General merchandise and strong performance of big ticket motorized sales, particularly in Alaska free.
International as a whole category, such as entertainment media, Housewares, and sport and outdoor living at a robust quarter.
Sure, we look to play to our strength, particularly and see well where the.
Warehouse format allows us not only to be competitive and pricing and assortment, but also from a safer more socially dis and shopping experience and again, our merchandising pricing and marketing approach allows.
The allows us to capitalize on the one stop shopping behaviors additional income income from government support and certain markets and others and travel restrictions.
In terms of gross profit Q3 has increased 14.1% the last year, driven fundamentally by sales and offset by a lower gross profit rate given the slow performance of BTI and the resulting higher blend of cost of sales, which of course are the lower margin consistent with the format.
Looking ahead recent news the deployment of the COVID-19 vaccine is encouraging from Arkansas and are currently experiencing low tourism.
Outlook and somewhere around mid 2021. These markets will start to see positive impacts of the vaccine in terms of mobility and its resulting economic pickups.
The same time, we expect Tailwinds to continue in Alaska, and Pacific and U.S. territories, and the Caribbean and the stimulus package discussions on the U.S. Congress of restarted and the potential deal seems closer to being approved.
We also expect to keep our market share gains based on the execution of our three pillars across the international banners being reliably in stock combined with current customer shopping behaviors and we'll continue the Tim scales in our favor.
In Alaska, our E Commerce business from stores was launched in April of 2020, complementing our existing span of leads starts store E. Commerce service growth. During 2020 has been strong and we'll definitely focused on this and the up and coming year.
We also expect to continue expanding our Alaskan footprint and the up and coming years with new store openings, averaging between three and four new stores a year.
Coming full circle, our focus will remain on supply chain and merchandising efforts to continue to cash and these market opportunities, especially in the near coming near year coming into Christmas holiday season, as well as of the continued development of and B to B channels of course, we don't expect to be 2020 performance, but our 2021 CAGR into 2019, and we'll definitely be further ahead.
I wouldn't be of what it would be otherwise.
Thank you.
[laughter].
Okay. Thanks, Alex and thanks, Dan just to fill in a few of few things that that weren't mentioned of actually down ended on one of the points I was going to bring up and that is and.
Terms of our of our Capex spend and outlook for growth and.
And our of our disclosure, we mentioned and $75 million and with growth of upside.
I do expect that to the go higher of and it's all good news as far as we're concerned because this would be accretive investment of pure growth and today, we we signed off and for new stores to acquisitions.
And two new a new stores, all and new markets or two and a lot's going to northern Canada.
And we'll continue to look for and other accretive investments of of cost saving nature of specifically and refrigeration and even some of owned versus leased scenarios, where the the cap rates and northern cat or are a way of in excess of our WAC. So.
And and then on top of that as we look situationally of what's going on around us.
We have a couple of a of the situations that May may result in a in the larger growth opportunities through acquisition, but the bread and butter is along the lines of with that and and Alex of mentioned or the price and investment in Northern Canada, we want to come back to that when we have more visibility of the actual impact we are doing it now but in a little more controlled way than we expected.
And then and and Alaska, a much stronger growth the mandate and and ambition than we've had before a lot of this is has been delayed a you can say, it's a good problem, but I can't overstate the the intensity of the of the reactive nature of our business today and when we're we're getting the same.
And we are and serving the customers as we are and keeping our store sales were also very cognizant of the fact that the next the three months could be the the most challenging in terms of operating conditions and our stores and the safety concern.
Considerations that I mentioned and.
Many of you have probably noticed some of the of the recent upsurges and not just broadly speaking and and around the world, but and northern Canada specifically.
And and first nations, where there has been some very very difficult community situations with very high contracts and community spread rates. So our contingency plans are first and foremost built by the safety, but also redundancy funding that will allow us to.
Keep numerous stores open.
Through the backup teams that can be mobilized to to be and community of required. These were all scenario plans and we had in place since last spring I mean, if the will be put the the test.
At all and we all hope not with the all the efforts to flat and the curve and the vaccine the distribution that's going to happen and the next three months at the same time of these height and walk down measures mean that they'll be more and community spending so.
Either way you look at it work and a continued to be extremely busy but we also are pivoting a as Alex and then mess and cities post pandemic realities and and opportunities.
And and we do believe we have a solid market position and won't be like 2020, we're not pretending that it's going to be 2020 levels, but the entering the second half of 2021, we think our format store.
The strength and we've proven to our customers and in terms of behavior changes of shopping local our resiliency and reliability, whether it's the format strength of call or the the brand of our northern and North Mart stores and and they see a will result in and some market share of retention and as Dan mentioned, our CAGR expectations.
Off of 29 actuals are.
Quite far ahead of where the otherwise would of being a based on having connected with our customers. The way, we have and the last a year and still six more months or so to come.
With that I'm going to open for questions before I do I'm going to check with flow and King our CFO to see if John you and listening to all three of US. We've we've missed anything that we should comment on before questions.
No I don't think so Edward I think we should the go to questions.
Okay. Operator, we'll we'll do that we'll open the call for questions. Please.
Thank you Mr. Kennedy, we will now take questions from the telephone lines. If you. Other question and you are using the speakerphone. Please the internet's.
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We have the first question from Michael Van Aelst from TD Securities. Please go ahead. Your line is open.
Hi, great. Thanks very much.
Tried to keep up with all of those comments there are some good detail.
The came out pretty fast so let me just I guess go over a few things.
As far as the NSS is concerned are you able to give us any more financial metrics around the its performance this quarter in terms of revenues and and where you stand relative to the original EBITDA targets.
We're we're in line with the with the the EBITDA target the.
Given the most of the diego's funding for the and.
And.
And I don't think I can give you more specific guidance. The at one point, we talked about the investment and.
And you know the Rona on our acumen of investments, which is close to $100 million and we see that being accretive to our business and based on the way the year has turned out and and our future projections.
I think I would leave it there.
And just say that we're on a of that's been.
Each quarter has been more solve it and although it seems the frantic and May we spoke too fast.
And if we if we convey the sense are really busy we are but the the airline actually has has been slowing down in terms of stability and.
The predictability of their operations, and we're getting a better and better handle on.
The optimization, so I know I'm not directly answering the question, but I'll just say that if it is meeting our financial expectations.
With the exception of the passenger business, which.
We know we'll come back of course pandemic.
Oh, the passenger revenues are down but your.
But your cargo business is up would that mean your external revenues from and as they are actually down just from an accounting perspective.
They would the that's correct.
Okay.
You talked about.
Annual incentive and cost being higher right.
Is that because of it was the strong year or because there and new clients. So well keep these costs higher and future years as well.
The 90% of it is because of the.
Of the year itself against the.
Yeah, and gets target of Hawaii, and the other and the other measures we use.
There was the ER and enhancement and.
Northern counted up but it's not material to your question and if so next year will the.
A significantly lower.
Compensation.
And you know and I laugh of course Weve.
We were just to be so far ahead like we are this year, but that's not realistic so.
And the Avalon give us any idea of what that Ranger and non standard bank.
And costs were.
John What's your thought on the.
Because we typically wouldn't get down to that level of information, Mike and here, we didn't break out the share based compensation cost with.
I know you look at.
No.
And said that though and this is you know of I'll say, we take it under advisement of in terms of disclosure of because.
The swings can be quite large when you come out of the year. We're headed we just looked like we're headed the finish and go into next year.
Okay, and and the press release or the Ambien and you talked about that and.
The new growth areas that you're seeing or what exactly are you referring to the on that front.
Yeah, well first of all of the individual store scores store scale or of if it's the tuck in acquisitions of and I don't I don't think of cobot triggered I think we're just.
We're more focused now and and intentional and Dod we freed up a bit of our time from the reaction to the coated.
Independent store owners community of owned stores.
As I mentioned the force stores, we've just the signed off and today, our two built and two acquisitions. The Dan mentioned the trying to get at least four of those done a year and Alaska.
The other growth we're talking about right now we're looking at as Tele health. We've we've we've put some investment and to the there seems to be a good confluence of circumstance where.
We can now do remote diagnostics with our physician business, we've got of industry, leading telepharmacy platform and we're now putting the code together to the put this in place for a for a full medical suite.
I'll be very happy to give you more detailed out and in the upcoming quarters, but that's more of a it's a greenfield or ground up but it leverages our existing.
Position and and health right now with the pharmacy.
And ours and our small physician service business and it's been indirectly cobot enabled the larger of potential acquisitions type investments and I can't give you specific the except to say that were.
We're talking and discussing and analyzing the.
Whose and our retail space that we might be interested in and working with further.
The partnership acquisition.
And I'd say that that's probably where the waterfront and is covered on growth. The rest of our growth is back into the core business and some of the Capex I mentioned and in terms of the expense saving initiatives that we think are are there for us.
Okay and can you actually give us some color on these two new store builds and two new acquisitions.
And maybe the size of them and and where they are.
They'd be smaller stores and ones and the the full two of them are and none of it.
And into our and Alaska I'm not prepared to know the actual locations, but but they would be medium to smaller stores, which is really what's on the on the docket for us it's consolidating into.
And to the next level of stores that we don't currently have stores and in particular in and Alaska, where we've identified some 45 locations.
And are these I've seen store type.
Oh, no it or not and there are they would be by our standard their general store. So they would have the the full range of of.
The offer a anchored by food.
I'm sorry, no I.
The San corrected the the the one of the active and this is the C store of that will be a combined the convenience store and the motorized the repair depot.
And essentially the northern solution, we do sometimes multiple things that are under the roof, but the other three are more conventional general.
General nor the stores.
Great. Thank you.
Thank you.
Next question is from the Subodh Khan from RBC capital markets. Please go ahead. Your line is open.
Great. Thanks, and good afternoon, and and I guess at a high level I think when somebody of course benefit started earlier and the year I think the expectation was maybe the start to moderate as we got into later and the air and obviously, the and Demicks last as long as well the are you finding sort of.
I could share gains or maybe some more semi permanent change and shopping habits and of how the year evolved I guess compare to.
And you may have thought of few months ago.
Well duration has been the difference and we've all no one knew how long and and then the the income supports of also being more durable, especially in Canada.
I think.
You know Dan spoke about this the format strength and and cost to last and I'd say and server for example, and the Guam market and came and and staying calm and.
We've we've seen the something that tells us that.
You know, we're we're suited for this kind of the shopping environment.
It's really hard.
As you.
As you would probably agree that the predict what are the.
These green shoots of.
A significant market share gains of.
Because in the algorithm is the income of the other shopper and and the.
And the pandemic overhang.
We know there's going to be traveling with of engines at some point or revenge travel as I've heard of described when things open up.
But you know.
We're studying a lot when and what our customers are spending their money on with us and try to double down on on the core of central basket the Phil.
We think we can hold with them whether that through promotional activity.
Or just the their reliably and and helping to reinforce that habit shift. So it's it's too hard to tell right now, but I will say that the the duration of the surprise.
And the of the income support and Canada, and and we expect there will be a stimulus.
Or support program coming out shortly in the of us.
And in general the as Dean just more activity and community not so much because of the restaurant trade that would be more of a urban supermarket thing.
Or or the shift of E com and for US it's more about not travelling staying local shifting your spending to out of the land type activities.
The the sales of our big ticket.
And I guess, we're all going to see how this turns out in terms of of.
What semi permanent shift there are and that kind of behavior.
Okay, and then I guess on the topic of income you mentioned the as mentioned earlier are.
And some of the native of the settlement payments that are come it would sound like the could be sizable I guess is that something that could be of multi quarter benefit how you expect that to sort of flow through.
Yeah, we think that's going to be a Alex you can jump in but likely of full year and pockets and the material material one on our and our northern Canada business.
Alex you have started a little bit the Broncos.
What did happen so far this year and and then going into next year, if you want to expand on the.
Yeah. The short answer is that we do expect that the and multi quarter of benefit from all of next year.
You know again the numbers I cited you know, they're about 90000 and claims right now on a publicly that the meat 40000, I've done that over the that keep both the Eagles and outstanding claims paid out.
In addition, we know that it's more claims the come we don't have the full number that's more claims of the <unk> that will be put in and both of the more complicated claims that will typically take three to six to nine months the profit so.
Sure we expect a lot of.
And comes to come to our customers and then their sales over the next of four quarters into 2021.
Okay, and then on the of 40000 data and settled and all of those are kind of and paid out of that okay, and and agreed I was wondering if there's maybe a little bit of better pick up that already starting to flow and.
Yeah. So that's what we thought and had been paid out and the would have and.
And part of the income above the average and comes out kind of heads up the Sears that's definitely a factor and in our results year to date.
Okay. Thanks, and then just last one on the international markets.
Yes is that the stimulus expectation in the U.S. are expecting to sort of be and the flow through the effect of that to help kind of the Caribbean or how are you thinking about just the the.
The international markets over the course of the next few quarters, Yeah, I'll, let Dan answer that and and explain where which exact territories and markets and benefit from the.
The U.S. payments.
Okay. Yes in fact, we kept pushing it out we thought we were going to get it third and fourth quarter, obviously with obvious reasons too that the U.S. politics. It the it was delayed but now we're we're comfortable we projected that it's going to come out the first quarter of 2021 the.
The markets that would be impacted that obviously are the U.S., a relay and markets such as Guam, the U.S. FBI.
Alaska.
The those namely are the ones that would be a the benefactors of of that payment and it and it will we do anticipate the it'll be a a a nice increase in sales force through probably typically last two or three quarters, depending on the disbursement of the of money and how quickly it gets to those different regions.
And Oh, it's almost identical.
Thank you once again, please press star one on your telephone keypad. If you have the question.
The next question is from Stephen Macleod.
This is the call. Please the supply your company and proceed with your question. Your line is open.
Thank you good morning gets us the Mclachlan BMO capital markets.
I just had a couple of questions here just as it relates to the Canadian business It sounds like.
Continuation from last quarter, but certainly some of the tailwind.
Tailwinds are going to extend into the 2021 and and Alex and some of it sounds like you are sort of the optimistic that it might extend even beyond that the based on the market share gains and you've got and it's.
Is there any way to quantify what you view as the sustainable sales growth level or profitability level, you know exiting the normalization of the pandemic impact.
I'll, let go out and I think.
Sorry go ahead no go.
Hi, Alex was going to say they get from there I'll start for the never you can jump and has ever had mentioned.
You know there's a lot of.
There's a lot of different sectors of kind of like emphasis range. It's I can't really give you like.
Definitive answer what I can tell you is that a number of factors and plans we have in place and tried to hold onto the market share gains.
You know you can post pandemics so.
Mentioned cheeky for example, and some of the assortment changes and and that we're going to make there and the dead thing that the teams are doing that and references we're looking very hard and how customer behavior. The change this quarter and what did the needs of the certainly we carry both and food and general merchandise. So you know I would say we plan to to put in place the really cold and the market share gains we have seen.
Hi, good share gain increases the.
And the hold onto the imposed and Dennis.
And to give the Ocwen same for me right now because there's so much noise and second and each quarter average anything else going at.
Well I'd say that as as as the sort of the dust settles and and we see the.
You know were.
Sure and mobility is and I would tie directly to the cold and the.
Of vaccine and distribution of our price investment is certainly going to be part of the play as we get into this year and some of the learnings and Alex's team has got they've got some pretty serious price investment.
The tests underway, they're just they're just the.
The stirred by all the other noise that's going on.
So that'll that'll be a factor and the second half as well as far as the share of retention when it comes to our planning and I mean, we're I think walk and like a lot of other retailers were playing off of our.
Our 2020 original budgets.
And.
You know I can without giving of the exact numbers there the numbers that we're looking at our.
Our higher than we otherwise would have the and.
You know its we don't see of giving up every dollar of sales in other words that we got we.
We we study where this is coming from we'd look at like type stores and say, okay. We've got penetration of.
The big ticket consumables or durables and this market wide and we get it there what's our per capita spend going on in terms of mattresses Tvs and motorized.
Are there categories, and and subcategories, where we can be either more promotional or just more intentional they've been and stock.
To really drive that business and.
And it's a it's a nice confidence boots, and you think about north West do you think about growth through.
Through income and population and not so much share capture of but this has changed that dynamic I mean, it's and I think it's because we've been there with the right product now there is new categories and you use the one Alex of water coolers, but it's it's it's a bit about a mind shift that we shouldn't be geared to grow faster.
As the company in our same stores through buying.
And to growth areas and I, although that that can be of course income dependent. It also comes to the psychology of the way we go to work every day and.
And again time will tell but our mentality is.
As the keep share not just by selling more of what we sold and 2020, but through new categories and items key items that we that we've learned now that our customers have a real demand for that we're probably being shopped out of town and we did have maybe of the ambition of.
Competence and our risk return basis to go after those sales we do now.
And again, I, probably said a couple of times.
It's not a decade of but we really have to see how this turns out but we're we're placing a lot of bets, they're working capital wise that we can continue to drive sales above our normal run rates.
Okay. That's a that's great. Thank you.
And when you turn to the Alaska is on balance and the outlook.
Tilted towards positive or till the towards towards negative are uncertain I just I just.
Just want to make sure I understand the the different nuances.
Hi, Dan.
Yeah, it's definitely a positive yeah.
Yeah as far as our outlook, we see a lot of opportunities and we do have some areas of growth that were looking seriously at and and as I indicated with our for store year, Oh look and so we think there is some good growth of being still realize in the region.
Okay, Great and then maybe just finally you know each day.
<unk> has E commerce as a competitive threat elevated at all three of the pandemic or is it still something that or is that maybe the competitive landscape hasnt really changed much.
I think uniquely for us it hasn't changed much. It's it's it's got a pretty high penetration rate and Alaska compared Northern Canada ex the calories per Amazon Prime plays.
One market and Canada and that's.
That's important to us.
But in in Alaska.
It's a highly developed out shopping market down.
Dan mentioned that our dark store E. Com platform has had exponential growth off of and.
Middle the little base.
Like a lot of supermarket E com businesses.
And we also saw out of our stores at a hub and spoke you can model and.
And the the go forward and we're going to really lean into is to try to get more share and E. Com. So out of both top firms or channels out of our stores as the hub to sell the smaller villages and then a direct b to C from the dark store and Anchorage.
So I know you're asking me, whether we're you know, we're losing share to E com I'm, saying no. It's it's and it's not it's not exploding its highly developed to the extent that it is developed already and and Alaska and in Canada, and it hasn't shifted dramatically and we see that through our we visa loads.
The might have mentioned this last quarter, where the money has been spent and not by individual of course, but in terms of which which merchants ours are Ah you know the most.
He is going to and.
Our share has increased so again the wolf of spend seems to be the way of people are going right now and and they haven't they haven't shifted the digital of like they have and and suburban markets.
Yeah I love.
After the close then if the store closes then it's all a click and curbside pickup.
And just to add one piece of color that for Northern Canada and what we found is is that if were able to get the talk there quickly and we have this quarter the.
End of the you know the pivot with the comedians and from there already and be able to shop with our store managers and store and so that has been a factor in terms of Ah. That's also protect that and eat lots of potential market share of E. Com never been a sub and threat and I think our ability and stuck and stuff from their water and off any threats and this and this quarters.
Okay. That's great. Thank you very much.
Thank you next question, Matt Bank from RBC. Please go ahead your line is open.
Thanks, Good afternoon first on the on the plan to ramp up sort of growth in Alaska is the biggest change their euro and aggressiveness or are there also just more.
Opportunities the ads the kind of starts coming up.
I'm going to let Dan answer, but first I'm going to give the one overlay and.
We talked about and we've we've acted on this of splitting the business up a wind down and took on the international role.
He's based and Boca.
But we've created a ton of mis executive team of in Alaska. The we took the buyers that work together for both banners out of Seattle and relocated the two either acreage or book.
In general North West is headed towards we have a very strong managing director and the B the <unk>.
More and more decentralized and with more authority and I think the lens, we're seeing on the Alaska business reflects that and.
Maybe I'll, let you pick it up from there.
Okay, Yes that is that the big portion of and that was the first part of your question with the focus and the second part of being a that there is a lot of potential and it's really come to light now we're able to do a partner of some of our native Corp.'s and Alaska, because we have.
Shown what we can do throughout this crisis, our in stock levels have been extremely strong and of the benefits. Therefore through the for the communities are that much more magnified. So it's a it's both but now we're we're putting the core focus to it and.
Again, it's we've had the some successful so far and were pretty.
Pretty excited about what's the what's going to come down over the next the two or three years.
Yeah. So that's the.
I think I think just out of it to that like I I see US right now is the only retailer of consequence, and and the state that's actually base there like the decision, making authorities and Accountabilities are in the state.
We have to do a little bit better on GR and government relations and but that will come with time, but the insights that were gathering on whether it's the stronger E. Com play are lean and.
Or new store growth I think is entirely tied to the and.
The last time, we did this we had more decentralized management you might ask why did the centralized it I mean, I guess I fell into and efficiency trop, but certainly right now and it's the right structure for the times and what that is on Earth with his team I think as the real compelling growth opportunity for AC.
And then there will be more to come like and whether this is quite a little bit deeper and our retail vertical in terms of more new locations.
He called me the another channel.
But we also see potentially down the road that it could play for the <unk> horizontally like it has the northern Canada for us the whether its an airline or and health products and services and it doubles. The just examples of once you're in the space and you are fully and trends and the communities again.
And you find different places that you can invest and and be part of their everyday needs.
Okay, Great and then on the you know the air of sort of planning for 21, and just the general comment that you know you're expecting higher CAGR and then you would of previously how much of that is driven by an expectation of per minute knee less out of market shopping and can you share like.
What percentage of customer wallet as far as you can understand is out of shop in normal years, and then any anything around how that how of that is changing and how much of that could be permanent.
It's yeah.
It's too hard to do I mean, we you know, having just done a deeper dive and Alaska down and his team of.
You know the looked at shares and our share as our tend to be high but theres still they're not 80 per cent, they're not 90, they're not 70 cumulatively there. So there's.
You know, we we might have picked up 10.
Ah and 10% or south and whenever that is basis points.
But there's still a lot of room to grow.
And we haven't actually I I don't think we can even with confidence get down to that granularity right now I.
I guess or the the force time you. The just on her of idle the time that we're.
We're extremely reactive and a positive way to meet the existing need so we're still assessing and I think as the year unfolds I mean 21 won't look like 20, obviously, but.
But it's going to have a lot of uncertainties attached to it we think with upside potential.
You know again, not trying to hold us to the beating 2020, that's not the point I know of your question.
And that visibility that you're looking for and people are desperately seeking I think it has to get in line with the with just the the natural a you know.
As time passes and we get more you know more and more proof of <unk> or whats kind of whats actually happening here and and I. Obviously, it's a very big disclosure point for us in terms of letting investors know, how we see the world and the next two quarters going to be really important but I don't think we can go much further right now at least to be responsible.
We'd be still expected of beyond what we said already that it wouldn't be useful to you.
[noise] [noise]. Thank you.
Thank you.
The next question from Michael Van Aelst from TD Securities. Please go ahead. Your line is open.
Thank you.
So along the same line than it might be difficult but.
Yeah, when you I know that you're seeing good market share gains and you think you can hold onto a good chunk of the.
But.
Are you able to the.
Term and how much of the sales gains you're seeing this year is due to some of the temporary government income support.
Versus the limitations on travel.
Your <unk>.
The two of the same I'm just trying to.
Like when you like.
You know and look at and if we were in and.
In the non cobot environment, we'd be looking for a mid single digit comps.
We'd be pretty happy with that off of maintenance Capex and other.
The other initiatives like Keith key role pricing.
Pricing investment, we hoped would drive a little bit more than that and I could always go back to the investor presentations that.
I did March right after the and the team.
The transaction.
And then downsizing.
And then I remember I had one slide in a couple of bullet points and cobot.
No it's.
Koby will take up all the slides.
So.
You took the delta.
The mid single digits to where we are now all of that Delta belongs.
To something induced the related to correlated to the.
The pandemic.
I think that's the math I think the math is.
20, minus five to 15, 15% or whatever you know the quarterly comps are.
Keeping that core five.
The other and yet because we think we've got a stronger market position or having a higher absolute EBITDA EBITDA.
As the base here are the kind of things that.
I know you're thinking about and we are too.
But.
It started out with we looked at the pricing investment the we be reducing prices and the road stores and and that's helped and we're still we've reduced prices and we'll keep trying to invest and price.
But it's just so hard to tell and though.
And.
And that's why we pulled back because we thought were not learn enough about this.
And the current environment and I would I would allocate all that the example, I just gave I would allocate the entire of 15% of the endemic and.
Say that we five of the came from what we're gonna do anyways.
So I guess I'm, just trying to so that and a hard time reconciling and Paul the comments made because and definitely there's a lot of good things going on right and.
Uh huh.
But then.
And the one hand, you're saying that you expect to see benefits continue through 2021, and the number from a number of factors and then I think and maybe just on the international side. The probably applies the Canada was the 2021 is not likely going to be has got the 2020 and.
And just trying to understand the is like.
I don't know if you're willing to go this way, but I mean are you expecting 2021.
The be down from 2020, just because of 2020 is just such a huge year.
Yes, we do.
Oh yeah.
Like the the comp.
Well I don't have fixed the cop 20 per head.
And I say that you know you know would.
Could we the up I mean, if you know I don't think we as a society want us northwest to be up next year over.
You know the the very high.
The performance figures this year, because that would be a sign of a continuation of cobot.
The other costs that you know we're not the good.
And haven't been good for society overall, we all know that so it's it's a our best thinking again, we we just put a pin and at a mid year.
And your distribution that could be a bit early looking out the Canadian.
The distribution information that the that we've got it suggests that might be optimistic that there's going to be.
A very broad distribution by mid year or so.
So.
You are still coffee and tea.
20 per cent comps right and if you of the same circumstances, which we do expect for a couple of more quarters.
Of the mobility.
Dropping local income support.
You're still coffee and no off of the prior year of so you could say using you know you're I think two of your rationale it's coming from we should at least the.
You know level till the year before and those quarters and the.
There's some inflation, we all know coming in with food.
But the back half of the year, if we all agree and believe we're going to see a.
The you know.
Cobot distribution of vaccine distribution, and then there's going to be a different set of consumer behaviors and now we're going to be competing or comping. This year's third and fourth quarter against the different consumer behaviors and as much as we're going to retain some of that.
It would be.
Just wrong thought of it wrong to say the rather get it all and more what you'd Rick what you'd have to to the to be 2020.
So yeah, that's the bus the Super long answer I apologize. The short answer is no. We our earnings would be shocking if 2021, it was higher than 2024, and a multiyear and a multi year CAGR off of 2019 base of.
I think either down or Alex or both pointed out that will be we think will be seen definitely ahead of where we would otherwise be.
Okay. That's helpful. I mean, I don't think anybody's expecting and to be able to the match 2020, but some of the comments are quite the bullshit. Okay. You know what I think you've got it okay, I'm glad and the thought boy, you're really asking us to two due to the 2020 no what we're talking about.
It is is growth.
If nothing happened needs of the growth things, we'd be talking about I mentioned, the centralization price investment we lowered our admin structure you know the the GT divestiture, we de risk the business there.
And proved our EBITDA performance and got rid of some of the Capex that was not really helping us. So all those things we'd be talking about now.
But were not and and if it's a hard and it's hard to do that because it's hard to isolate the the all of the positive impacts of the but what Weve tried to talk about today as well as some other growth areas and addition to those namely the new stores and Alaska.
The E com and Alaska that we'd be pursuing anyways.
Opportunistic acquisitions and tell the tele health would be where where were we could do more tied to coal bid, but we haven't no detailed there to share with you.
So yeah, no we were optimistic about growth because were looking past a into the new normal and we think adding new stores will always give us growth getting great refrigeration into our stores with a and accretive Rona that meets our threshold is also great too and we certainly have the financial position to have to make these investments and still do our AR and see I'd and an increase.
And our dividend and so forth. So we want to do that as well but.
But I don't know I don't want to give the impression at.
At all to any any any one that we're expecting to the match 2020 and 2021 in terms of I spoke of.
Okay. Thank you and then just one last question your non controlling interest of about 70, 580% or something like that year over year, which is I believe this is tied to the British Virgin Island the assets. So.
But I think you stated that the.
Assets were under some pressure so what's go why is that up so much.
I'll, let John answer the.
Yes, Mike it's it's substantially all of the BB why there's a little bit of noise in there and the quarter and and I think if you look.
You're right, though that we did see some we have seen some pressure certainly on the sales side.
Our operations and the B the I have done a very good job on controlling costs. So the the sales decrease was has.
It has been mitigated somewhat on the bottom line, but that's really what would that is the non controlling interest piece the so.
So the profit drop meaningfully then I guess and and BB I'd, just point and because of that yes.
There's another small a non controlling interest that within that and.
International group that came into play as well.
Okay.
All right.
Thank you.
Thank you and no further questions registered at this time I will turn the call back to Mr. Kennedy.
Okay. Thanks, operator of.
Of I know, we share a lot of information I think we had some good discussion here I think our commitment is his first of all again through our.
Customers are.
Employees to be safe and reliable I think our.
Our work and that as the and strong and we have a lot of hard work to do and.
We'd like to take a short of the longer term pardon me postpaid the pandemic perspective, we tried to share that with you, but we really feel right now that the that on a 30 60 96 month basis, we've got still from heavy lifting to do to the serve our communities to serve our customers and stay safe the get sales.
And the keep an eye open for for growth and I think it could be very interesting as we get through the next two quarters too.
To give our investors more clarity in the fact ourselves gain more clarity on on how this is all going to turn out.
With that I'd and behalf from management team and and all the all of the folks and northwest I'd like to wish the investors on the call those who listen and later of the very best the of the of the of the holiday season as best as I can be and these are the is very try and and unusual circumstances, and we'll look forward to ER and the new year, we wish you and your here as well the happy new year.
The same you on the call again, and I believe it's going to be April 7th.
Our Q1 results. Thank you very much everyone and take care.
Yes.
Thank you and the conference is now and did please disconnect your lines at this time and we thank you for your participation.
[noise].