Q4 2020 North West Company Inc Earnings Call
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This conference is being recorded so at school say holes at don't go as you see.
All participants please standby your meeting is ready to begin please be advised at this conference call is being recorded.
Can you share the North West Company, Inc. Fourth quarter results Conference call I would now like to turn the meeting over to Mr. Edward Kennedy, President and Chief Executive Officer. Mr. Kennedy. Please go ahead.
Thank you and welcome everyone to our Q4 at end of year conference call for fiscal 2020.
Joining me today from North West is Amanda Sutton, our VP of legal and General Counsel, John King, Our Chief Financial Officer.
Alex Yeo President of our Canadian retail group.
Mcconnell President of our international retail group and Sandy Riley and share with us the chairman of the North West Company I'm on.
To start the meeting.
Asking of magnitude to read our disclosure transcript.
Thank you Edward before we begin I remind you that certain information presented today at May constitute forward looking statements.
Such statements reflect north West's current expectations estimates projections and assumptions. These forward looking statements are not guarantees of future performance at all.
Our subject to certain risks, which could cause actual performance and financial results in the future to vary materially from those contemplated in the forward looking statements for additional information on these red what you see north West annual information form and at MD&A under the heading risk factors at work.
Thanks, Amanda So we're gonna follow of format.
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So it make some remarks regarding the CEO transition.
Hopefully you've seen at our press release today.
We will stop the.
The call there for questions.
And try to segment at then move then move on to.
To the fourth quarter and year end results.
And at take that approach, so with that Sandy I'll turn it over to you well. Thank you Edward.
It's a pleasure to be on this call I would not normally obviously part of the analyst call and haven't done one of these for awhile since I was the CEO of a public company, but.
I am delighted to be here.
You will all have I've seen from the press release of the entity the information that Edward Kennedy will be retiring as CEO of the North West company on on August 1st and will be replaced.
By Dan Mcconnell, who is currently the.
CEO of President of our operations of International operations based in Boca Raton.
This is a very.
Sort of interesting time in the history of the company Edward has been the Chief Executive Officer for nearly 25 years.
And that in itself is extraordinary.
But when you add on top of that all of that's happened in this company over those years, whether it's the <unk>.
Expansion into the international operations, the increased focus on food the many partnerships that we forged with indigenous entities.
And the growth into areas like health and transportation are at.
It's been a remarkable profit process of diversification and growth and that's been reflected in the numbers North West <unk>.
Sales of whenever became C O or just slightly under $600 billion on this year, where we will be in excess of $2 4 billion. The EBITDA growth is has grown from nearly $60 million to over $300 million.
At the nearly $1.2 billion of of.
Dividends paid out to shareholders over that time end.
What I find particularly remarkable is the compound annual total return for the company over that 25 year period of 24 year period of 15, 6%.
It's a remarkable track record for Edward and for the company.
And for that reason it is a.
Kind of a bittersweet moment for us on the board because we've all.
Come to really value all of Edwards contributions his knowledge of the company.
It's going to be at its going to be a difficult time for us to in the sense of thinking through.
What the company will be like without Edward is as its leader.
Having said that I know from my own experience in business that change brings opportunities. It brings opportunities to rethink how you look at our company and its operations at it gives us the opportunity for fresh eyes to look at the processes at work with at a company. It gives people fresh oxygen on a chance to to flex their there.
Muscles in.
In a business setting and gifts new people a chance to make their mark at.
And as part of that that process of revitalization.
I am very very pleased to.
Analysis of Dan Mcconnell.
We will become the president and Chief Executive Officer of of the company on on August 1st of Dan I spent 20 years with the company. He was hired originally by ever to do at various corporate development projects, but he's he has evolved over the years end in a number of a number of key roles most of them very instrumental in the acquisition of on road town in.
The British Virgin Islands, and then heading up our international operations based on bulk retired we've all on the boardwalk, Dan evolve as a business leader.
And as of as an executive over that 20 year period, and we all feel that his.
Brand of enthusiasm and leadership at.
And our vision will will really resonate well with the company and will be at and he's going to provide a tremendous leadership for for this company in the years ahead.
And so we're all we're all really pleased and delighted that our debt is in place to to.
To take on this current challenge I want to share all of the investors that this is been a very thoughtful and launched a process that we've worked our way through Edward and I started talking about his desire to retire.
Three or four of five years ago I guess it was our first set of first conversation and for some of you've been talking about the process. We should go through on what would be required.
It's been part and parcel of of process at the board of the North West Company as we've as we've moved out longer standing board members and brought in new members to the board who would be I'd be able to work, helping the selection process and work closely with the with the new CEO.
It's been thoughtful and it continues to be thoughtful in the sense that we.
We have we're announcing today that the change will take place.
We're giving you a date August at first.
That gives us a number of months for a for a proper transition to take place at a full download of of information on the various files at Edwards continues to work on Edward himself is has has agreed to.
Be available for a number of months.
Five years in fact after after his retirement to be available to help with our to help Dan or in any way that he Dan feels is a it is helpful to him.
I can tell you that all of US of course see everybody in the company went on transition like this takes place at.
As to rethink how they are going to to work and I can tell you that the board of the company.
He is also going through that same process of figuring out how best we can support them going forward.
In his position as a new CEO of its one thing to have a CEO has been doing the work for 20 years leave the company. It's another with a new C. O. So where we are committing ourselves to the <unk>.
Spend the time on the effort required to be as helpful to Dan as we possibly can be.
And at.
I also have to I have to reiterate at Edwards has built a wonderful management team very capable of all in the sweet spot of their careers in terms of their of their experience on their age are they.
They worked well together.
I think their performance through the pandemic. This year has been nothing short of extraordinary.
And.
At the all of the many experiences I've had in my business I can't I can't think of any of them, where I've been more proud to be associated with with men and women.
Who have really had to deal with challenges as I have been this year with of North West company in the face of Covid and operating in the markets that we operate at dealing with the responsibilities that we have to those communities on I know those men and women are going to step up behind Dan and help him really be successful in his new role.
So we are going to Miss Edward it's going to be a period of transition, but the fundamental core strength of this company remains a day.
We have a very talented group of of of of managers end and keep people throughout the organization. We are of very strong culture of enterprising.
End of enterprise at hard work and community.
Sure.
We operate in markets that where we understand our obligations and we have done a really good job of of supporting those communities an extraordinarily challenging time for them and we have we have learned through COVID-19 that there are more opportunities for us to build of business and the.
Those are going to be the things that drive the development of this company over the course of the next five to 10 years.
I think I'll stop there ever do you may want to say a few words are or do you want to.
Well start with questions, Yes, I would say this on the questions. We're not at this is if you flow if you're calling on asked me or Dan what are you going to do tomorrow, We're just going to do what we're doing right now so at but this is really I'm trying to give you a sense of of thoughtfulness of the process. The time that we've taken and where we're going and I'm happy to answer any.
<unk> of all of that that that part of my my comments.
Right.
Operator can you.
Q any questions.
Perfect. We will now take questions from the telephone line. If you have a question and you're using a speaker phone. Please lift your handset before making your selection. If you have a question. Please press star one on your devices Keypad you may cancel your question at any time by pressing star two.
Press Star one at this time, if you have a question there will be a brief pause of all participants register for questions. Thank you for your patience.
On the first question is from Michael Van <unk> from TD Securities. Please go ahead. Your line is now open.
Hi, good afternoon.
So I guess congratulations on the corner and on the transition that's forthcoming, but I guess, what I would like to just at our.
Just to clarify that I guess given that this has been a of law and thoughtful transition.
And the data has been around for as long as you had within the company.
Is it would it be right to assume that the strict D than strategic vision is already.
That had been.
Black at in the direction of the company for the last couple of years and so we wouldn't expect things to change dramatically.
Well I think you're going to have to give Dan some time to get in the in the in the seat but yeah. Yeah. This is this is an evolution.
And from the Board's perspective, we expect to build on the strengths of the company and build on the direct and the directions that are that we've been working with over the last five to 10 years of but businesses evolve and this business will evolve as it has in the past.
Alright.
Yes.
A lot of a lot of new.
She is coming in line to put their stamp on.
On on at.
Early on or was in the first six months on this.
What I was trying to understand is whether.
Would feel the need to do that if you're on.
Already involved in a lot of the strategic decision, making last couple of years.
I was gonna speaking of second, but I would say that he is he's not becoming CEO until August one of the reasons that we have.
Stage of the process. This way is to give him some time to spend time with Edward.
Getting at full download of debrief on all the on all the areas of that he hasnt been as intimately involved and as has been for example of them again in the international operations and he will he will undoubtedly be asked this question at his first.
First of call in I believe it will be September and you'll have to have an answer for you at that stage.
Great.
On a comment I hope that it is.
Open on thoughtful and providing us answers to our questions over on the conference calls over the next few years similar to the layout of has been I don't think of too many.
All of that I've.
Bellwether spend as much time talking about the negatives of deposits in the company.
It is very helpful on understand alright, I appreciate that and thank you for that feedback and it's you're you're echoing somebody that we on the board of known for a long time that Edward as it looks at at.
As things square on but at both the positives and the negatives.
Yeah.
Thank you.
Thank you the net.
Question is from Mark Petrie from CIBC capital markets. Please go ahead. Your line is now open.
Hey, good afternoon, and I will echo Michael's congratulations to Edward on on a on a fantastic career and a ton of accomplishment. So congratulations to you.
I guess my only of Michael covered almost all my questions, but my only other question was just with regards to our backfill plan for Dan and then also with Dan be relocating to Winnipeg or is he going of the operation if you're going to be continuing to operate out of our out of the U S.
Well I mean, I'll, let Dan talk about the backfill, but he I mean, that's that's something we've been thinking about obviously at as part of this transition he is coming in Winnipeg.
This is of Winnipeg based company and Dan who is from Winnipeg originate at will be coming back to Winnipeg.
And I can I can maybe jump in as of the status of the reporting to me that when we worked on our backfill plan as part of the decentralized approach.
We are going to move to the president structure for both call at AC separately that was in the works. So we can pull the trigger on that and we'll have individuals in those roles before then.
Fix at the helm in August and at least one of those will be internal internal promotion.
Okay. Thank you.
[laughter].
Thank you there are no further questions registered at this time I'll turn the meeting back over to you Mr. Kennedy.
Thank you operator, so we'll we'll stop for questions again after the.
After the results are discussed on.
I'll just start by same picking up our society was that at all I'll talk again about our northwest in my career at everything.
That may be of interest to you are or not at the annual meeting because I got on where crack at a at a quarterly report, but it has been a good process and its been very robust. The board has been very engaged as you would expect.
This has been a big piece of work for me I have a personal stake in every sense and how northwest continues.
I feel of the board has really done good work here and.
And I'm very pleased that I'll be able to work with them now that X per month down and I have worked together for almost 20 years, we do see a I guess Ida high but I also feel like like a.
Chinese referred to the fact that I said this morning, when we talk to our our senior team that I would like to join a company with at the.
The 30 year Guy had just left because I think it does open up new possibilities for people in terms of their roles and they are the scope of of what they can do an end adult center myself to be super suppressing that way, but I think of kind of comes out of territory when you'd be doing something.
As I have for so long I've seen a lot of stuff and it's kind of like that farmers insurance at.
But I also have also fell of Energizer I would've stayed this long everything is to me is fresh and vital at north West and I'm sure that we'll see at that way on.
I feel that again looking back at all just echo Saturday when I look at the team they're kind of in the prime of of of age and experience at as a sweet spot.
And north of US got ton of energy and I think of a lot of energy was not reignited at but it was all of it was just stoked further where merchants.
But the community focus.
And who would love of being a merchant without focus at a safeway or the last year at even this one of which are headed into.
And with that maybe I'll, just segue into end to the financial results I'm going to turn it over to that first and then Alex and I'll come back and talk about the airlines are the number is kind of speak for themselves or continuation of the other quarters.
I think thematic lever we are coming on to another year of that's going to have a lot of.
Uncertainty because we can't tell when we're going to see whatever new normal looks like those two parts of that one window of it revert on what we revert to we do see a lot of stimulus and communities that we serve are ex some of the Caribbean countries that don't have a stimulus like the BVI herself St. Martin.
But.
The lion's share of our business is in communities that do have income supports.
And also continue and that'll continue to help drive our with our merchant instincts are very very good performance. We believe in the first half.
We also see broader stimulus from the by the administration of the federal government the Liberal of Federal government probably in the next budget that is usually a good news.
For northern communities are the north of strategic at a lot of ways, but the addition of a population as infrastructure starved and native Alaskan population of of rural Alaska as well and we are already seen at the early indicators that that Ah theres going to be investments in these in these <unk>.
So we think it'll probably be called of softer landing income wise for communities that we serve as we go into the back half of next year and then into 'twenty. Two so that's a good theme, but I know, you'll probably poke and prod with your questions on what other costs going to be end.
I mean, they're looking at Okay right now as we as we get into another tough comp months, but we've had good good comps into it so far but it's all about to L. Y I know other retailers are talking about that too and at how we're comping against two L. I and obviously, you've got a positive comp against a lot of your way up on two L Y it won't always be at that way through the year of we're going to have negative comps and some quarters end.
Periods.
But we just don't know weighted by how much we do feel of this is set up to be probably our second best year ever.
However, but it's going to take a lot of hard work and there's still a lot of uncertainty. So we kind of stopped forecasting that but we do have good plans.
And I'd like to let down in Alex walked you through both the quarter and give you of kind of a sense of where they see the 20.
'twenty, one unfolding in their respective businesses.
With that Dan I'll turn it over to you.
Okay.
Thank you Andrew and thank you Sandy good afternoon, everyone.
I am deeply honored to have been appointed CEO of North West company for the next stage of its development and I am very excited about our future.
During my 19 years here at the North West Company I've had the opportunity to work only with incredible leaders within the company.
I also had the privilege of working on creating strong relationships with community leaders throughout Northern Canada, Alaska, the Caribbean as well as over in the South Pacific.
I am stepping into some gigantic shoes of thankfully I'm doing so alongside some very experienced and highly capable leaders and passion of our western <unk>.
I have learned and developed under adverse of the last 19 years and I'll be working together very closely with them over the next several months to ensure a seamless transition.
I look forward to speaking with you more about the future of North West company in future meetings.
Lets get down of current business.
Wrapping up our fiscal 2020, it's only fair can you just start by acknowledging and thanking our teams for the terrific job done over this past year.
The pandemic was and continues to be an unprecedented unprecedented event and I'm extremely proud of how our teams of responding to the challenge.
On the embody our core values of passion of being customer driven.
Truly took the heart of our role as leaders and essential service providers for our communities.
Throughout the year of teams were skewed by three guiding principles, one of the health and safety of our customers and employees to maintaining the cannibal assortment through a strong supply chain and three our social social responsibility to our communities.
We believe at the execution of these principles uniquely position ourselves to capitalize on market tailwind this year and achieve our current sales momentum.
Now from a supply side standpoint coming into Q4, we were particularly aware of the importance of having a solid strategy on assortment and inventory flow.
Leveraging strong relationships, we partnered with our vendors and carriers and setup of procurement logistics and store teams to gear up into holiday season.
We plan on advanced has several event driven promotional days scattered throughout the holiday season months as opposed to having single day events like Black Friday Christmas.
We also included of cyber week event in our Seawell banner. We made sure. This was executed at this way with a twofold objective.
<unk>.
Keep enforcing health and safety standards for our staff, while offering a safe environment environment for our customers to shop, and B to make sure of inventory flow processes shield at any possible disruptions in the global supply chain.
From a demand side.
2020, we experience of shifting consumer spending, particularly towards one stop shopping customer stock ups and more in home dining and entertainment.
Mobility restrictions were also a factor, especially in Alaska with less out of market travel that allow customers to shop more at our stores.
All of this was coupled with additional income support within U S States and territories in Q4 at December 2020, Bill stimulus brought to market, an additional $600 per person and extension of unemployment benefit top ups and additional temporary allotments of snap funds, commonly known as food stamps.
Partially offsetting this were headwinds in the Caribbean, notably the BVI, St Martin and Curtis out without deep government resources, which is now carried on into Q4.
In these situations, we are focused on cost control execution, our signature categories and sharper sales promotions to capture available market share equal.
Equally we are focused on social responsibility and the well being of communities of need for example, given our infrastructure and leadership position in the BVI. We recently partnered with the local government to store at our facilities of the COVID-19, Astrazeneca vaccines and we've made available for distribution in the community to date, we have received around 32000 and vaccines from.
Storage.
Alright, now, let's talk about the yearly and quarterly results for the year International sales increased 18, 2% to 734 million U S. Dollars same store sales increased 13, 6% coupled with very solid performance of our reopened store in St. Thomas USPI for the quarter total sales increased by 10.
<unk> four per cent.
Overall of Alaska commercial on cost U less that our food performance, partially reduced by the headwinds mentioned in some of the Caribbean markets, particularly on the BVI.
Our signature category of programming costs of less on programs like our <unk> from Alaska continued to resonate with our customers throughout the year end during this past holiday season food.
Food sales increased 17, 1% per year at 11, 5% on a same store basis.
Q4, food sales increased by seven 5%.
General merchandise sales increased 31, 5% of total and 31, 8% on a same store basis in Q4 general merchandise sales increased by 35, 2% here at the supply side strategy mentioned earlier was instrumental.
And positioned us to have the most relevant assortment to capture consumer spending shifts less travel outside communities and government income support and.
In the fourth quarter category sales were led by motorized, particularly here in Alaska, as well as electronics home furnishing and seasonal categories of our banners.
Gross profit dollars for the year increased 16, 4% driven fundamentally by sales of.
Gross profit rate decreased since the slower performance of BVI resulted in a higher blend of cost U less sales, which were lower margin consistent with the warehouse club format.
Our expenses in 2020 increased seven 7% of last year, when excluding impacts of higher share based compensation costs this year and insurance related gains in the prior year.
This includes around $4 million in COVID-19 related expenses wage premiums and a 5% bonus to non bonus eligible frontline and support office associates.
Now I want to transition to talk more about what the head on.
How we plan to maintain some of the strong momentum and market share gain.
In 2021, we've entered a new phase of this pandemic with rollout of vaccines on the majority of our markets. We expect to see an uptick of our out of community travel, particularly in Alaska, However, social distancing measures might be staying in place for the foreseeable future and we expect degrees of travel restriction and core at Haynes upon arrival.
This at least until herd immunity is reached through vaccination.
Continuing to learn on this topic every day and we'll continue to monitor it closely that said we outlook at somewhere around mid to late 2000, <unk> 2021, our tourist dependent markets will start to see positive impacts of the vaccine in terms of mobility and its resulting economic pickups.
And U S markets income support will continue to flow with a third stimulus package approved by Congress Congress mid March and would probably impact our markets up until the middle of our fiscal Q3.
We don't believe of fourth COVID-19 related stimulus will be issued in the U S market in 2021, but we do see of softer landing for U S States and territories based on forecast at federal infrastructure spending over the next two years of note Native American tribal governments will receive $1 billion in funds over the next two years for this purpose.
We do expect some headwinds of the supply chain side, we have been observing delays and cost pressures on moving freight due to the pandemic ripple effects of the supply demand imbalance at this was heightened with the recent blockage incident, and Suez Canal, leveraging our relationships with the broader range of vendors. We source from 2020 to mitigate these impacts will continue to be a top priority.
Especially for our island markets.
Similarly, inflationary pressures are also a hot topic and the headwinds we expect.
This year rising cost of commodities fuel and freight are at the forefront of our challenges in this upcoming year again, leveraging and diversifying our relationships with vendors and carriers here will be deciding factor on mitigating.
Some of the more controllable price increases we will closely monitor the market and competitors on this front.
Some of those rising costs are expected to be passed on to consumers in line with what other retailers are doing.
In Alaska, we expect to continue growing by expanding our footprint in new markets, adding three new stores in 2021, our E. Commerce business expansion will continue to be to be a focus on the area of two 2021 together with additional partnerships with community support programs like the USDA flow box program.
All I have today, thank you and I'll turn it back to you at <unk>.
Oh, okay, thanks that actually I'm going to turn it to Alex now and then I'll come back on with the with NSA.
NSA and end opening for questions Alex great. Thanks.
Thanks that word in debt first of all I want to congratulate Dan and share it makes them at about working with him.
What I can say is I know, we both share excited about the growth potential of north west, especially when it comes to northern Canada, and I look forward to supporting and partnering with him and his transition to CEO as he fully takes on domain from Edward.
Now I'll turn it in northern Canada, and Northern Canada. We ended the year strong with a continued comps across food and general merchandise sales.
This was driven by the same factors as earlier quarters travel restrictions a strong in stock positions in every day community offerings, coupled with continued at income support from COVID-19 programs.
International These results came about not buy of luck, but as a result of commitment passion and truly enterprising behavior by north west employees from procurement marketing through the logistics and all the way through to the employees in our stores.
On our last call at shed there our sales outlook remains largely positive going into this year. We anticipate continued travel restrictions through part of Q2 and income support through COVID-19 programs, along with day school settlement payments. This.
This outlook has not changed our comparable sales to date of one year comparable sales at eight have remained positive even against double digit increases last year. In Q1, we anticipate that this will start to trend flat to negative as we start to compete against more troubling outspending.
At this trend happens however, we still expect positive income factors to give us a soft landing with less new versus old normal travel.
Line with our work to get sales, we anticipate and we believe we can get CAGR of increases versus 2019 at well above our historical growth rates.
We feel positive about believes at get and keep sales as COVID-19 has given us significant insight and confidence into customer end market share growth opportunities.
We have been aggressively working on initiatives to hold onto as much as we can all of the increased market share gains. Once we are past couple of 19 I'll talk about few of them today.
Firstly, we're actively reviewing our buying at a certain plans to incorporate learnings from COVID-19, whether it be new items, new assortments of promotional and pricing changes to routine greater market share in heavily out shop categories pre COVID-19.
Secondly, we're starting to see benefits from our continued partnership with GT on food and general merchandise procurement, we do anticipate some cost benefits on the food side. This year and we have started flowing GT general merchandise assortment on northern stores, which we will leverage to create new item excitement, great new opening price points and drive incremental market share.
<unk> sales.
Finally, we're turning our at our mine pursuing new business opportunities at.
A few of message already referenced opportunities around telehealth and end.
Virtual health and Tele Optometry, Inc.
In addition to these I want to talk about our business the business growth number.
In 19 and opened our eyes to the significant funding net flows into communities through various government programs at.
And our ability of service communities needs through our business to business sales teams, we've seen significant momentum going into 2021 and we're now building out of plan to grow this business over the next few years.
Anticipate being able to share more details end of progress of our of these various initiatives and the next one to two quarters.
Finally, I want to talk about pricing.
Lots of Investor call I mentioned that we're delaying of for all of the pricing investment until the second half of this year of 2021, when we had a clearer read on payback and resolve.
That continues to be the plan for 2021 we anticipate about a $4 million to $6 million of investment for the full year versus pre COVID-19 in 2019 end.
In the meantime, though we are continuing with our pricing tests, so that we're ready to measure and scale. Once we see clear payback post COVID-19 at.
In summary, I'm optimistic about the outlook for Canadian retail on a two year comp basis, COVID-19, and our ability to meet the needs of the customers and communities that we serve has clearly helped us to gain market share just like in our U S markets, we expect Canadian federal infrastructure spending to be in investment and wage economy driver in the region.
Have you sort of over the next two years.
Together these factors give us confidence to go harder faster leveraged at you know the enterprising behavior of at.
All of our people here in North West.
Cana as much of the market share once COVID-19 subsides.
Many of these initiatives are now underway in Canada, and I look forward to sharing the results with you worked on the den to shape the strategy over the next few quarters and with that I'll hand back over to Edward.
Okay. Thanks.
Thanks, Dan and at Alex I'll just.
Close of some comments about the airline and in other Corp.
Corporate developments at our at our Covid of enabled in a bit more color on the on the outlook.
So the NSA had another strong quarter are they there's a ripple effect on the amount of tonnage that we're moving through our stores.
And the travels through our on Air cargo Division. We've also increased our winter road and we'll have our of big bump on our C left as we look at our forecast for the year on on tonnage expectations.
So at high efficiency with our ETR of program. We've also approved today the acquisition of a force a T. R. A it'll be a wide door.
That'll give us.
At advantage, there's only one other wide door of cargo aircraft of this of this type of and in the north today.
So this will help us of in terms of efficiency and speed further as well as open the door literally for more third party revenue, especially in the resource sector and other specialty payloads at all.
Our at premium revenue rates.
Offsetting this was the the passenger side of the business, which.
As affected of course by reduced travel on it gives us a real good.
Lands into how travel is taking place or not taking place in the north today and I'll just make a point about this.
We think about travel at in the south of the south of us by the South I mean urban urban parts of the world are it's.
It's for business and leisure.
The north of it as more of a highway in the Sky.
And so people will travel just because it's it's there's no road so they'll use it for more of a pedestrian purposes.
And we'll see how that that recovers the the vaccine rates are very high and.
In the north today at Alaska, and none of US are good good penetration of our.
Our distribution of vaccines.
But it isn't the same and end their destination cities coming down to Winnipeg or to Thunder Bay of.
To Ottawa or our Edmonton for example, so there is there certainly has not been any recovery of any meaningful recovery in passenger travel.
We did get support in the quarter of I think a center of numbers of $2 $3 million that was a combination of the.
Of the accused payments that have been going on all year and then this this new program the federal government pushed into other provinces of.
Northern Air carrier support.
We didn't take up all of the money that was put on the table for that program, because we didn't need it and I'm not sure again of.
The money was there and that was that's another story, but we are we did need of bit of assistance. We felt of it's not a lot of money of but it helps I mean, they're the pasture line itself would would not be at will provide the level of service at does without that that type of support. So we certainly appreciate it.
And then like the rest of our business. We know we forecast more more growth are in and tonnage over 2019 for sure. So the airline will have we kind of we can safely say of a good year that way on the cargo side, which is 80% of the of the of the business focus.
On the passenger business will really depend on on how the rest of of the north goes in terms of mobility.
On corporate development I've I've mentioned before that we were looking at acquisitions tuck in acquisitions.
And partnerships and transportation and wholesaling in rural retailing of vertical opportunities, perhaps in the Caribbean.
That's been successful for us in the BVI, It's an interesting time, I mean, I I reads about broadly.
At the activity at M&A we're.
We're not doing mega size deals but.
You know youre looking at denominate or is that or maybe inflated by COVID-19.
So everyone's got to take a deep breath here, an end and back that out and look as you're trying to do when you're evaluating northwest of course, and what are the new normals and.
I think this is still at time to to do at a if it comes our all around and maybe back to the question about CEO transition. A this is something that won't be disrupted by.
Who's on the CLC I mean, these kinds of of of acquisitions of this kind of on strategy growth is completely aligned between Dan and myself and we won't Miss a beat if something is underway if something happens. The fact that one person is leaving and fade into the Bakken ones coming to the front won't make a difference there.
Are going to continue to be opportunistic and a lot of this is of course of a willing buyer and seller. So I just wanted to put that out there because sometimes.
With North West, we do like to talk about things that could happen. So there's no surprises and it is part of our our our growth mandate is to definitely do that and that certainly has put on the table new store growth on Alaska, which we'd like to accelerate even more more tuck in acquisitions there are at.
We find them and the last thing I'll say on on the growth side, that's more organic is on telehealth.
We're opening our first store telehealth.
Physical of snacks, I know, that's inconsistent or oxymoron of physical at the virtual Health Center.
Center in of any calories shortly its end.
New concept store that I might have described before that that marries up of shoppers drug Mart at AR.
At a bit of of whole foods and at our health and wellness focus of but we're also going to have a a.
Telehealth office and tell us tell the optometry. So these are first for us, but the basis of our telehealth is really about apart from that we can partner with indigenous health.
Health organizations to deliver into northern Manitoba, Saskatchewan, and Ontario, and counting on the the building to continue to allow for virtual physician appointments. So we're working on the platform side of the relationship side, we'll have more to talk about their end in our next quarter and of course at that part is as new I won't give you of.
Our forecast on the impact of stuff that it could be material for the company. If we can get our ducks in a row there.
And then just to wrap up again.
As I said at the beginning of the tone is for US is pretty positive you've heard it from from Dan and Alex. We're also realistic where we do have situations on tourist dependent Caribbean Islands, and and things just uncertain on how it's going to unfold, but we believe overall given the and this is a I know of very tough one to measure but.
Within the company I mean, you're you're when you think about north west our comps are usually okay. When they're good but they're not you know of high single digit end and.
Sort of the icing on the cake has always been general merchandise.
And underneath at a very strong food convenience focused layering on the services health financial service, but what we've seen with of general merchandise piece and I think buttressed by the deal with giant Tiger on some of the sourcing things at international has done that we can grow this and maybe it'll become a another layer on the case of not just the icing and I do believe that.
That's a realistic opportunity for north west that we can grow some top line wholesome top line business by basically putting more of the right merchandise in front of our shoppers of where he might not have had the same open to buy dollar of approach in the past, we're now targeting higher targets for sales against 2019.
And being I think realistic on what we can what we can sell on what people will buy locally if you're if you've got the right product and end that they don't necessarily want to travel out of town for Ie for of mattress. So that cumulatively at gives us confidence as well that we can we can hold share end and also be helped by some income tailwind that day.
To continue into 'twenty two.
Okay, I think that's a lot of talking I appreciate the patience and other operator will.
I will turn the call back over to to any questions. Thank.
Thank you once again, please press star one on your devices keypad, if you have a question or comment.
Question is from Michael Van <unk> from TD Securities. Please go ahead. Your line is now open.
Hi, Thank you.
So first question is in the current.
The press release, you talked about.
Yeah.
Enhance customer and community relations at <unk>.
Will enable new partnership opportunities and of course.
And I think environment.
Can you elaborate as to what Youre talking about on this.
I'm Gonna give.
Dan on Alex a bit of Oh, the answer here, Dan perhaps you could start I mean, there was the same box program and then also talk about our <unk>.
And I think that will address it.
So is.
As a part of our approach of Covid basically.
Calling from my from my discussions with you at <unk>. It was really it was the health and safety of the supply chain optimization and then retail.
So at the community, we started unfolding different needs within the kind of government sector, whether it be the USDA contracts that we've now been awarded and it's really getting food out to underserved.
Under service communities fresh food, we're now in the business of distributing boxes of produce and meat to communities that werent able to get this before so this was really of the nature of there was some cares money that they wanted to be able to be effective and efficient with it and given our infrastructure. We were the ones of the only ones.
In Alaska for example, they were able to kind of deliver this product to all the different recipients of the different communities throughout rural Alaska.
Effectively so that's one example, and I think.
I'll pass it over to Alex to probably talk about some of his day to be are examples of all under the same kind of tone.
Yeah of building things that building on dense examples of what was seen at during Covid is that we've developed.
Built at service communities needs on different kinds of business the business requirements.
As a result increased funding increased needs from the community. So examples would be <unk>.
So that's been a huge sales driver for us and what we found at that we have of value proposition that is really strong because again because of of integrated logistics in our ability to pick and pack right. So the belief of packaged of product do all of the work and get it in there too to communities that need it in record time in the format and patching of one that's been really a big driver for us and we've seen.
Repeat business improved community relations as well as you know I would say a much of new customers and new types of Skus that we've never really serious before so it's giving us lots of confidence.
At this is something we can build on and maintain going for it and kept into almost at different stream of income in the communities that we serve.
What type of excuse me you're talking about.
What kind of Skus that we're talking about yes.
Traditionally we've done a lot of sorry go ahead, let me answer that yes, sorry, yes. So traditionally we see at we've generally been servicing more food more.
On a furniture big ticket items, but what we've found now is that we've really.
Really diversify at like we in recent day.
Recent orders, we've diversified to other kinds of GM product school supplies.
You know things like our motorized parts.
So a much wider variety of different types of Skus that we service debt than we have in the past.
I could actually jump in there as well Alex if you can believe at well PPE is the obvious right. We started getting into masks cleaning equipment, but we actually are even because of our infrastructure and we understand how to get things into remote locations. We are we delivered 75 hospital beds up to some of our communities throat.
Real Alaska. So there was really no stoppage at whatever we could use our infrastructure for to support our communities. We we took at.
So that's an example, not that I think we're going to be getting into that.
At this distributor of hospital beds in the future, but at least our community members, who have capital spending budgets that they did have needs and might not have the outreach that we do given the net type of business. We have we've created these partnerships where they come to us and ask us to source. Some of these different items that we can get.
So put it in context, I guess between both groups I mean, we.
We went from doing a few million dollars of these areas. There was a lot of local contract be to be done by store managers, but to put our arms around bigger contracts and some of this is COVID-19 enabled some of it is the stimulus enabled.
At Alaska as of a bill of $1 billion allocated of tribal governments by the by the administration over the next two years, it's going to be spent on.
It's kind of a communal consumer purchase they could buy fridges for all of that all of the houses they can be doing of furniture mega buy it could be institutional like for our seniors home at <unk>.
Could be buying out on the land harvesting equipment for indigenous are hundreds of trackers. So all of these things have been spent in the past.
Of some we've gotten but we really haven't systematically gone after an hour of building a actually a contract sales group.
To do at and our top line, we could have $50 million in 2021.
From the low millions the Delta was very large in 'twenty and we could probably double it again in 'twenty. One now that we're we understand how it works a lot of relationships back to the initial question about community.
And at the state level, having a halving of C level folks now in the state of Alaska is making those connections we would never gotten the USD of contracts, which are multimillion dollar contracts into this year without that end.
So it seems to be of good circle of one of those virtuous circles or flywheel. So we can get going.
And we'll see where at least.
Okay, Great and then your coffee costs were at all.
All of a higher than expected in the quarter can you give us an idea of where you think they are going to be going forward.
Well.
I mean, when you talk about the Covid cost we didn't decide to do some things at year end debt that might have bumped it up like we.
We paid a bonus to turn on.
Non bonus eligible but already paid.
Staff.
Non store staff will do that again in 2021 I wouldn't want to say no, but I would say that that was very unusual the store once where there were some retroactive stores at things done as well, which we tried at the true things up there.
So I think if that's what you're talking about.
And if we if we go forward and look at the situation of the guideline. We've used internally is where theres being community spread and really at risk.
Are more stressful working conditions, we've put it in place but to give you. Some context, there I think right now we don't have it in place anywhere internationally and then how many communities in Canada, Alex what we have at in place right now.
About 10 to 20 on average during the quarter of Tony.
So it's going to ramp down significantly in <unk>.
In 2021 end and supplies will also ramp down because we've we've got an overhang of of stock up PPE.
PPE for our staff.
I can't give you more guidance did not accept that at the number is going to come down quite a bit. It's a positive variance I guess, if you want to call at that.
And our expense forecast for 2021.
Okay, and then finally on insurance costs, you called it out at a higher cost in Q4, but you didn't mention that in Q3. So I'm wondering if this is a new cost.
And if so is there do you expect thats going to continue to rise during 2021.
I think Michael Theres, a bit of of catch up there in terms of how the timing of our policy renewals.
Sure.
So that would be the factor that I think in my mind.
I mentioned in Q4 versus Q3.
Our insurance costs have trended up.
The last three years certainly.
Two hurricane claims in some fire insurance claims end and.
So on.
We do expect.
You know that those increases to moderate as we get into 2021, I would say expect because.
It's a very difficult insurance market.
And so as our policies renew we'll see how that plays out going forward.
Alright, thank you.
Thank you. The next question is from Mark Petrie from CIBC capital markets. Please go ahead. Your line is now open.
Yes, good afternoon again.
Just to clarify on the <unk> opportunity.
These are products that youre not just this isn't just a sort of a supply chain shipping opportunity, but you're also not taking inventory on these are you're taking inventory, but you don't have an expanding inventory on these products, you're basically getting an order and then going in sourcing them at that go ahead of that right.
Yes.
As we get better at this I think there's some beta be that wed actually had put up ahead of time on and see that they went on road on my favorite of the.
Those long classic tables that you see that's of top seller at costs, you'll actually do sell at in the north, but we could sell more we'd probably ship. Those ahead of time and take a forward buy but the rest of of what you're talking about is our contracts that are that are RFP or through relationships. We just find out about them and they may not be fully tendered, but they've got to be shipped by air.
Okay. Thanks, and then I wanted to.
Just ask and hoping you can kind of elaborate on some of the opportunities you see in your assortment.
To capture a greater share of wallet in northern Canada, not b to b, but in the consumer business and is that mostly in big ticket or I don't know any commentary you can provide would be great.
I'm going to turn it to Alex at all set up a bit Alex that maybe it.
It might be a good way to circle back to the price investing in food and some of the things that we've learned from from.
From seeing that whether there'd be hyper sales growth of certain items and categories, what that told us about opportunities and we could get some of those examples Alex.
Yeah, So I'll give you more color stories.
Stores are at different food versus Jan and then food. What we've really discovered is is as everyone has mentioned is the full market share we're losing out shopping on the different modes rates on winter into road. For example, we've seen beverage sales increase a lot. This year because of winter roads are no longer open or not open and so that told US there was a lot more.
Market share at the drop through in beverages for example, so.
What that then he's up is we wanted to be more aggressive either into the promotional levers on the price investments to really go after that market share we're losing some of those categories. So with food, it's a lot more around pricing promotion, a little bit round assortment resident Jeremy merchandise I think.
Just by sheer nature of trying to meet demand, we number one built new programs and new sourcing partnership and also gone after new items at different price points that we never had the courage to do in the past and we've seen great traction of great sell through of I would mentioned mattresses, but we've also built gone to new programs and hardware and new items in and gaming.
<unk>. So it's not just big ticket, it's really we've seen significant lift in traction in new items, and new new new subcategories, and assortments across a broad mix of German merchandise products. So.
And I think that's really coming well together with GTE right. Because you cannot gives us this great new merchandise, we can layer in along with our other categories at go after sort of opportunity. So.
In summary, I would say with food, it's about going after at shopping pricing promotion, a little bit of an assortment in Germany <unk>, it's about the confidence to really build and go after.
New categories and programs more aggressively because now we've got confidence that we'll be able to do at and hold on to that market share.
Yeah.
Okay. Operator next question.
Oh, sorry.
Just on mute do you mind, if I keep going Oh. Yeah. Go ahead go ahead, Mark Okay, sorry about that I was on I was on mute.
Sorry, just to follow up on that on that on the.
On the general merchandise, specifically I think you've in the past had strategies to sort of broaden the assortment and tried to sort of attack.
Attack different opportunities that you've seen this one clearly is is is different because it's at.
Sort of catalyzed by the pandemic.
But are there sort of learnings from some of those past experiences in previous initiatives that you might shaped or changed your approach at this time around.
Maybe I'll wait in a little bit because I.
I've been through a lot of those cycles of although all of us in DAC at both answer.
You still have to align with income.
Or are a lot of our customers are customers that we serve are our lower income in that.
As of necessity, a little bit of an impulse, but of necessity aspects of what they buy and in some of these big ticket items that we've referred to me sound like discretionary, but really it's about replenishment of household inventory of.
Of coaches and Tvs and.
And even boats and motors that are used are atvs for every day likelihood.
So there is tremendous demand for that.
You look at at the at the inventory of the personal household infrastructure in the north.
So it's got to be tied to income if theres a wage economy like happens with construction projects are at.
That's why we're kind of bullish on on this news of both federal governments U S and Canada.
Because we know where that goes it goes into.
Spending at our stores if we've got the product. So that's the first lesson alert I mean, you you can only.
You can only promote so much sales now having said that there's also credit capacity and I think there is a similarity here if theres one that I can think of it in urban markets. We all know people of.
Kind of taking care of their personal balance sheets more of over the last of year end at the north it's not so much becoming net savers, but theyre not at the same level of borrowing in their open to buy or opened of boral they've got.
As much as available so we've talked about this too and whether that happens on the back half of this year into 'twenty. Two we do have have that offer and our sort of our toolkit, which is as credit and we think that that both ways. Both from from wage economy income transfer and then.
Financing debt is supported by clean personal balance sheets.
That we can we can put product in front of our customers that they can they can afford to buy and they want to buy so that that's huge and what I'm talking about here is very granular by region by community. Although some of the income in flux is that we're seeing are going to be broad.
The other one is the other key lesson for US is is there is of saturation I hate to use debt, where John will use it.
The CFO he is thinking about open to buy and how many more at snow machines can yourself kind of thing. So we do look at per capita I mean, we're we're selling at.
Small communities. So we know how many people live there.
How many slow machines are bought and how many would probably be needed to bought that they bought the next year. So there's a bit of that as well and the final or any of my habit, which is more on the on the upside to really get aggressive as to look at where we're getting a high high per capita penetration at could be Max this could be something like Trampolines you know at.
It doesn't sound or at its.
It's an up and down business.
But it's.
We saw a lot of Trampolines and communities there of 100 and at the same size can be at me myself for well that's not good I mean, we're obviously, we should be selling 100, all communities, so where our analysis of of when we start to see these kind of sales increases and we look at patterns of the way people of buying shop, all things being equal.
And then we kind of start to triangulate or close those gaps, but we also are.
I I'm encouraging open to buy on all of.
Use of options on the trampoline because I don't think were on a go long on those if we had of curious of them over to the next season Theres No Tech obsolescence.
You know our turns might go down a bit but we'd have the product in stock to sell we.
We got to be more careful on on on fashion inside of with G. T. I mean, they do a lot of that they do trend and they do treasure Hunt.
We will be looking for their best sellers to offset that risk. So we know that that part of their small, but the flip side is that because of their small communities. Apart from cost of your last you cannot just stock on hand.
And let it fly there's only so many communities at to get it wrong you can't efficiently market down. So we do I think we have a long.
Yes on their alert that we're not going to take risk to chase sales, but but.
I can't say.
Say at better than I think Alex on down already have that we do have a lot of confidence based on what we know will sell for.
From what people bought in the last year and continue to buy into 'twenty one.
That's great I appreciate all the comments thanks.
Thank you there are no further questions registered at this time I will turn the meeting back over to Mr. Kennedy.
Okay. Thanks, operator, and thanks to everyone on the call and and everyone at at the North West end.
That's probably the last time I'll say see you on the next conference call at <unk> that will be the last time I'm on the next conference call. It will be our annual meeting.
So do we do of conference call from there.
We do of course, we do see at.
In my Dotage I'm forgetting the spin.
At this time to go on one more.
[laughter] anyways.
We will look forward to reporting on on veterinary than other very interesting Europe for those on our sector of course, how's it going to turn out in the Q1 will give us another big window into.
Into how we're doing it on we look forward to talking about at them. Thanks very much.
Thank you. The conference has now ended please disconnect your lines at this time and we thank you for your participation.
Okay.
Yeah.
Thank you once again the conference has now.
Please disconnect your lines at this time and we thank you for your participation.