Q1 2021 North West Company Inc Earnings Call
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Gold sales at all Hershey's Te.
All participants please standby your meeting gets ready to begin.
Please be advised that this conference call is being recorded.
Welcome to the North West Company.
First quarter results conference call I would now like you shouldn't meeting over to Mr. Edward Kennedy, President and Chief Executive Officer. Mr. Kennedy. Please go ahead.
Thank you operator, good afternoon, everyone and welcome to our first quarter call.
Before we get started with the content of the meeting I'd like to Oh pardon me.
We started 1 first besides myself here today is are Dan Mcconnell.
President of International Division, and and the incoming CEO a bit summer Amanda Sutton, our vice President, our legal counsel and Secretary and John King, Our Chief Financial Officer.
So before we get going.
Any anoscopy matter to read our disclosure statement.
Thank you Edward.
Before we begin today I remind you that certain information presented may constitute forward looking statements such statements reflect northwest current expectations estimates projections and assumptions. These forward looking statements are not guarantees of future.
And are subject to certain risks, which could cause actual performance and financial results and the future to vary materially from those contemplated in the forward looking statements.
For additional information on knee threat.
And you see north West annual information form and it's Andy.
Under the heading from risks.
And right.
Thanks Amanda.
So as we all know were reported.
Quarter.
And by the pandemic and.
And that's it.
From and many many ways that still with us, but also when it comes to a sale.
Forecasting and some of the business uncertainties.
And through the rest of this year and probably on a comp basis and.
As a part of next year as well so we'll we'll keep coming back to that as we're talking about results.
In total we were pleased with that.
The sales momentum as much.
B.
Covid calm period, which would be mid March to afterwards, we had a very very strong.
April and 2020 that we knew would be difficult to comp.
But now we've got that behind US and May was strong as well and we've shared some.
And information.
The growth.
And our financials about where are your quarter to date results are and I'll come back to that when I talk about the outlook.
So today I also want to advise because on this call I. This is the entire team that that would be having to call, but otherwise Alex Yao.
And our president of our Canadian.
Retail Division has had left northwest.
And.
Is no longer part of the executive team and.
And.
Today, I will speak about our Canadian business.
Talk about the outlook, but before I do that I'd like to invite down too.
Oh.
The cover of the international.
Our quarterly results and and talk a bit about our outlook for that part of the north West.
Thanks, Dan and over to you.
Thank you Edward.
Good afternoon, everyone.
Let me briefly.
And the current transition process.
And last couple of months and organized and working closely together on this process.
And following comprehensive agenda to ensure and effective transition it's.
It's going according to plan and there is not much more to add at this point other than that the process is going very well and I have huge shoes to fill.
That being said.
And touch and I'm happy to announce the addition of Kevin Procter as president of cost U less cash.
Kevin has over 20 years of experience and the retail sector. He has developed and reinvent the brands and also that store expansions.
The digital group.
And as chief investment officers of level.
And most recently as the COO for save a lot.
<unk> brings extensive experience and building and mentoring teams as well as driving sales and highly competitive markets.
And he will continue COF and track record of profitable growth and lead the business forward.
And regarding the next Alaska commercial company, President and we expect to make an announcement and the next up and coming weeks.
With that let's shift.
And discuss results.
International operations has had a positive start to 2021.
In terms of sales for Q1.
We were able to keep our market share and hold our ground.
And we knew the comparing sales performance gains Q1 last year to be challenging considering all the stock up buying that took place.
Gears and context last year's Q1 same store sales increased by 16, 3% against 2019.
This year total Q1 sales increased by 3.3 per cent on a same store basis were basically flat to last year.
Speaking to the macro drivers for this performance, we still see consumer spending shifts present.
Also income support through the 1.9 trillion dollar American rescue plan launched in March by the by the administration, there's another big factor for our U S markets and lastly, we're seeing COVID-19 related mobility restrictions being gradually lifted as vaccination rates increase, particularly in Alaska and some of our U S territories and the Pacific.
And islands let.
Let me start by talking about general merchandise sales this quarter. They increased 38% on a same store basis tier supply chain assortment and event driven campaigns for our top focus.
Our procurement and logistics teams worked diligently to not only have a well thought out assortment strategy, but also on reaching.
The market on time to meet demand fueled by incoming funds from the American rescue plan.
And Alaska. This was coupled with less mobility restrictions, given our high vaccination rates, which allowed customers from nearby villages to shop, and our hub stores such as vessel.
Similarly, with promotional events like get outdoor camping and receivable better we were.
And Kirby capitalized on that same trend and a reduced mobility restrictions.
Overall categories like Entertainment media and home furnishings continued to exhibit strong results.
In addition to the American rescue plan.
1 of the other key drivers of sales and our Alaska stores as the USDA farmers to families true box program.
Our unique ability.
Reach underserved rural communities positioned ourselves and as an instrumental partner to the government and <unk>.
Providing packaged produce chilled foods and me boxes.
Our AC battery team has also delivered from and in stock and assortment standpoint on the food side, leveraging our relationships with vendors and performing well and categories, such as beverages and frozen products.
The coupons program was extended and to me, which will us against the strong sales from Q2 last year.
And our Caribbean <unk> U S territories positive results were based on the same tailwind factors and.
Addition, we have been observing and gradual return of tourism and markets like the USPI, given low mobility restrictions with vaccination rates.
And it continued to show a positive trend. This has helped improved our performance from categories like fresh produce and alcohol.
On the flip side.
Winds and Caribbean markets like BVI, St Martin and Caruso continuous income support is lacking.
Vaccination rates are improving and mobility restrictions are slowly being revisited by the governments are meaningful.
Tourism reactivation has not been observed.
It's probably important to mention here and it's like territories and Barbara territories, like Barbados and Caruso did suffer from a resurgence of COVID-19 cases earlier in the quarter.
This triggered curfews and mobility restrictions from the government and affected operation hours of our stores.
This is a very different situation towards.
With the U S markets are currently facing.
More recently and he is experiencing COVID-19, resurgence, which is why we're doubling down and our health and safety protocols.
Now speaking and gross profit rates, it's worth noting that there were positively affected by higher blend of general merchandise sales and and <unk>.
Sell through that lowered mark.
That lowered markdowns and inventory shrinkage.
Laurel and of course U S sales were also a factor since they carry lower gross profit range, giving us format.
Day sales and gross profit factors combined with well controlled expenses were the key factors contributing 21 per cent increase and earnings from operations and the quarter.
Looking ahead and international we are expecting lower earnings compared to the strong earnings.
And 2020 as tailwind discuss continue throughout the year, we are expecting overall good results on the CAGR compared to 2019.
As income support Dwindles and U S territories around the fourth quarter economic activity on some of our tourist dependent markets are expected to pick up somewhat dependent on vaccination and mobility restriction levels.
That said.
The consolidation of the positive trends and keep the market share gain are top of mind for the international team and.
And Alaska, we expect to continue growing by expanding our footprint and new markets, adding 3 new stores in 2020.1.
We also are working hard on replicating our success with USDA food box program.
Excuse me over the next 2 years Alaska has.
$500 million allocated to travel Gov.
Governments by the by the administration.
And we are positioning ourselves to serve them and strategic partner <unk> contracts are specific purchases required by the community through these programs.
And our Caribbean and Pacific regions, we will continue to focus on improving our execution at the stores, our assortment and our products.
Flow, we are gearing up for a tourist dependent markets to be prepared for the potential economic pickups by the end of the year and be ready to meet that potential demand. Although this is still uncertain and fluid we need to be prepared.
We're also quick to navigate supply chain challenges as well as cost of goods and freight rate pressures, we're leveraging and actively strengthening our relationships with carriers.
And as well as vendors to mitigate these impacts similarly, inflationary pressures will be balanced appropriately and through pricing keeping our customers and mine, but also considering competitors and a required more margin.
Lastly, I'd like to mention that I'm proud of and tremendous effort is done by our team this quarter and I'm confident on the path, we have outlined to grab the opportunities and face.
And challenges ahead.
Thank you and with.
And that I'll turn it back to you later.
Yeah.
Thanks, Dan that was a I think a great summary of the the difference.
Market situations before I talk about Canada I'll just.
Add a bit to that observation and the.
The American recovery plan is.
We're recognizing and an increasing factor and.
And the income.
The available too.
Our international shoppers and U S territories, and the state of Alaska, and Hawaii, where we have stores. So.
It has kind of and as a dynamic.
For the.
And on the upside.
<unk> increased our confidence on positive positive comps and and the International Division.
When I talk about candidates a bit different.
And again it varies by region and community.
We had a very very strong.
Said earlier.
And we've now gone through and comps are very strong may results.
Our sales and the last 2 weeks have been positive oh for the quarter there they're down we filled our total <unk>.
Quarters, a day performance at -6.6, just to give you a sense and and and not to.
Even though we're not overly concerned that that to us is exceeding expectations and when you look at over on a 2 L y basis over 2 years and.
And it's a very very strong increase.
A 25% so.
We like the trends overall, we think we were we're resetting R. R.
Sales and earnings to something higher than we would have otherwise not achieved.
And through a lot of.
Artwork and some good timing.
For example, our airline is well positioned.
We have the fleet to take advantage of higher business volumes and to start to to go after third party cargo as.
Our board of confirmed or invested.
Invested and through our acquisition of a wide door, a cargo ATR and coming into the fleet at the end of Q3.
And just to back up a bit on on Canada.
And again the numbers are are decent and.
More than that and in terms of the 2 worldwide.
We think we've gotten but who toughest comp months behind us, but now we face the.
The positive or for the for society easing.
Good restrictions, we know there's going to be.
Again, some setbacks, which will make this.
And I'll be throughout Q2 still fairly restricted from mobility and I'll just point out.
And this week you may have seen and outbreak and port Albert He was in the news.
46 cases, even though of the Indian variance and that's in a community that has 94 per cent uptake our first vaccine. So it's really important that.
Our products are distributed.
Broadly and they will be and the next 2 months across Canada, but especially in the north where theres been great great take up overall, but as you can see with the new variance even 1 dose.
You're vulnerable or are you remain vulnerable.
Second and other areas that are noticed are and and a little bit of a concern for us our product availability.
And we're no different.
Hi chain stresses our worldwide today.
And it's hard to say, but at least because we had a very very strong general merchandise quarter anyways, and that's where the stress is really are.
But we're getting into a and they.
Ever heard of 5 and $10 million and sales and big ticket categories that.
We just can't get our hands on the product for and I'm talking specifically about our motorized atvs and snow machines and.
And electronics furniture is a different situation with the tariffs and duties that.
You reversed, but in the meantime are causing a bit of grief and.
And we'll get through this it's not obviously the ideal situations because we know that our customers when they have the income and and if they're shopping and staying closer to home where their store.
So it's just 1 thing that we're having to contend with probably through the next quarter.
Maybe a couple of things I highlighted that I want to touch on from my annual meeting remarks, 1 was telehealth, where we are.
Announced that we're launching our own a virtual platform while disconnects.
Which is a physician service.
And we're gonna do it initially with with indigenous organizations, but also with our own our own stock.
So we can we can test that today, we have and option with another provider we started a while ago and this will give us a great data to.
And to get into a space and the first mover and northern Canada.
We're also starting to tell the optometry and that's part of the new wellness concept store that we're opening and the calories and early.
Bye.
Talk about that as well, it's a very interesting face to the customer and wasn't enough to tuck.
Brand and image.
Leading assortment of health and wellness products and a complete suite of our virtual and in person.
Health care offering in person will be the pharmacy, but also through in person and telephone and Lucy is the optical and.
July and our medical service.
And just to give you some context on the need because it's going to lead into my final remark about impact social impact itself and impact investing.
On the on Bath and island, which is the the and.
Entire sort of catchment area of the calories.
There was an 800 person waiting list.
Optical appointments and that's on a population base and about 15.16000 people. So we.
We are I think true to our mission of.
Of helping people live better quality of lives.
Net services under delivered services and products.
And our areas of the world.
For NOG interested in and.
And when I spoke today about social.
The impact I talked about something that's part of who we are.
Dan touched on it and.
And he and I have worked on this and as many people before us for generations.
And really recognize the northwest the community store.
The community.
Alongside the customer.
West closely and collaboration which we did remarkably well thanks to the communities and our people through the pandemic, it's brought us even closer together.
But when we step back and look at ESG and we're we're always paying attention to ESG.
The other party measures environmental social and governance.
We believe we need to talk more about the social impact part about what we do well.
We're also approached by investors who.
Remind us of that and and the fact that impact investing Ah.
As a point of separation from.
And <unk>.
Our standard ESG metrics, and we believe we're that kind of company always happy.
When we shine, a light and ourselves and there'll be areas that we're going to want to up our game on but just being true to identity and what we were fortunate to do and deliver based on the on the types of activities that we've.
Chosen to to serve and focus on I think boxes and a real good position to tell our stories and be evaluated on that good and bad, but we believe more and the good side and and that will translate into value for all stakeholders.
<unk>.
Those are the areas that I.
And I'd like to.
And just let you know about them again on the outlook, we did provide and it's not.
Already guided that just telling you what our quarter to date performances.
It's really hard to say well, we you know we we were we're quite sure that we're going to fall a little short of last year's earning.
We've got we're not going to go down without a fight in terms of trying to comp last year's numbers and I I know that Dan talked about the tailwind is international we probably won't have those kind of tailwind, although I will say that the indigenous service, Canada budget is extremely aggressive and bullish for income and indigenous communities.
And some of that will have a and effect, but a much longer tail into the next several years.
And finally, I will just say that that some of the things. We started last year that didn't take place. The way. We expected we did close on giant Tiger, we did or had been restructuring and those 2 are positive factors underlying the Canadian bar.
Item line performance.
And irrespective of the topline growth.
The investment and food pricing and as we've shared with investors now for several quarters has is on pause.
We're in 30 markets, we're seeing good results, but we're also seeing a lot of people with stay at home spending patterns that make it hard to separate.
And what we're driving versus what the market.
And conditions Covid related or are making happen. So that pause will be lifted and we'll come back to that initiative and the second half of the year and continue to to iterate it under Dan and his team's leadership.
We do believe theres market share gains to capture.
Through very very smart.
And pricing investments and northern Canada.
With that and John.
And I'll ask you before I I open for questions is there anything that that Jan and I haven't covered that you think we should touch on before we open for questions.
No I don't think so Edward and think we should go to questions. Okay.
Okay.
Operator could you open the call for questions. Please.
Okay.
Thank you we will now take questions from the telephone lines. If you have a question and you're using a speaker phone please gift channel.
And so to me before making your selection.
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And the first question is from Michael and Ost TD Securities. Please go ahead.
Thank you and good afternoon.
No.
1 of my questions have to do with those price investments that you discussed and I think the original.
The numbers that you were talking about and back.
Somewhere in that $10 million to $15 million range, depending on the results and how high you would go.
So maybe you could clarify that and how much how much.
Did you invest before the project went on pause and.
And and I guess when.
And how significant.
And well do you expect it to be once you're done.
Well, it's it's harder to say and then our initial plan was the 10 to 15 or potentially higher we had modeled this and very and different ways and.
Based on the on the tonnage lift and GP dollars.
Contribution.
Assumptions, we made and we really had to start with something and then build on that and <unk>.
And how would rollout so we.
$30 million and 30 stores.
There's another $2 million that where we've recently invested.
But we're cautious so you say that.
5.
The return on that besides engendering.
You know some general customer loyalty is very hard to tell right now so we.
We can't.
Go further Michael until we get.
And we get more space between us and.
And.
And into new normal.
Sure from a mobility.
As far as the range I think that north of $10 million is there's still certainly and the cards that we have we're not deterred from the call. It the idea or the strategy we had sound.
Analytics that took us down this path and said that.
And you really need to get our indexes and in some categories that are low share for us.
Sure.
And just to southern indexes, if if we want to grow tonnage but.
We couldn't we couldn't say now our view and all of this is that we use the word investments specifically, because we expect a return and if consumer behavior.
If you're a doesn't catch it.
It doesn't make a difference and then obviously, it's not a great idea, but right now.
We just don't have enough.
Of our a run rate.
Because the control group of stores versus the 30 isn't differentiated by.
By prices if they're all.
And the same Covid limited mobility situations and.
And that's that's what we're dealing with.
Okay, and sorry did I hear you said you invested $3 million alrighty, Yeah last year okay.
And and and.
And the 3 million did I mean, it if it's there but it's not.
It's not.
And the ROI versus the control group of stores, because when you look at the numbers all the stores are up and.
And we've and I can't tell you.
And when you say you expect that you would expect and return.
Do you measure that some kind of percentage or is it just incremental gross profit dollars or how do you look at that.
It's gross profit dollars.
Alright.
Yeah.
There was a comment and that press release about giant Tiger.
The sales Guy and Tiger.
Yeah.
Resulted in a certain percentage decrease and.
Sales and but I did the math correctly I think it was $37 million rate reduction and sales year over year and the quarter.
Is that correct and is that net of the wholesale sales to giant tiger.
I'm going to let John answer that question.
And maybe we will have to be more.
Or we're not trying to be opaque on this but but.
And we probably should just lay that all out John do you want to comment.
Yeah, Mike It was.
What was your number you were calculated and $37 million you said, yes.
It was the impact of the sale was.
It was higher than that.
And it was net of the wholesale sales coming back and I don't have the exact number right in front of me, but it was it was higher than the 37.
It would've been in a M.
And the 50 range.
So.
And so roughly $50 million of sales reduction net of the increase from wholesale correct.
Okay.
All right. If you can just send me the math on that I'd appreciate it John.
And then.
The you're also right.
Indicated that the sales impact from a fading pandemic is it's difficult to predict over the next year or so so what I'd like to know is how are you positioning the business in terms of inventory levels of things like seasonal and general merchandise and perishables.
Our balance at the risk of having large.
And I and write downs, if you're wrong on 1 side and.
Versus net sales on the other.
Yeah, well, so here's here's you know you're not going to like that because there's more uncertainty but.
And.
And in international.
And dad would know we were both kind of concerned that we're long and electronics.
That turned out to be pretty smart thing because of supply shortages and I think it has helped drive the GM business and international but we had exactly that frame of mind that you're referring to is that okay. We're long and this thing is ending.
Not ending and and it's OK I think electronics was justifiably you know not knowing.
And how does the shortage of chips and everything else is going to affect people because it's a trend obsolescence issue, we're less concerned about the big ticket categories of furniture, and <unk> and motorized. They they are people don't atvs are not upgraded with new bells and whistles every year like a.
Like your TV or a car.
So we're.
Okay going long.
And we're trying to marry that up because and also by the way we're short.
As I said earlier, we didn't think we'd have this degree of of scrambling for products last year, we could scramble and find it because there are a lot of other retailers who had their doors closed and didn't have demand. So we were able to pick up.
Product everywhere to meet the the $270 million sales lift we got into the same stores essentially.
This year people are busier, you're talking and tires numbers, so theyre not going to answer that call.
So we're actually you don't have the problem, you're suggesting and defensive going too long I was encouraging us to go longer.
Because I want to be in front of the customer with a strong and stock position on product that we didn't have the mark down but at worst would carry over to the next season, because we want to sell from a full wagon and.
And not be so representational and our assortments and I'll use something as simple as Trampolines, which are great ring at 500 Bucks.
Longer, but if you're only bringing to youre not going to sell 3.
And sure enough, we couldnt get enough trampoline like again this could be a $2 billion business from $1 billion business. They all add up so we're looking for more product.
And not concerned about obsolescence or markdowns.
Because of the reasons I just mentioned and the.
Last thing I'll say is that our inventory.
Box or higher for another reason.
Our winter road and soon to be artsy lift even though we're very pleased with the efficiency of our air cargo.
And we're also trying to all who do mode optimization and you understand that when you're writing checks for new airplanes.
You can go after.
Third party revenue, which is great, but if you're going to do your own we want to make sure it should be on the plane and the first time.
And we've done this for years, but we took a new algar algorithm approach to it and shifted a few million pounds of freight onto our winter road and that day.
Our cost.
Activity cost base.
Inventories assist that intentionally put your inventories up and nonperishable foods. So what do you add it all up the inventory increases are fine as far as we're concerned and we actually wish we could have more and we just want to stay away. The giant CAGR merchandize, we're buying is not the high risk fashion.
It's the 12 pack socks with 10 Bucks.
And I'll stop so I think right now we're okay. There.
Like I don't think we're going to have a problem and.
If we had a lot of electronics and northern Canada, right now it might be concerned, but we don't.
Okay and.
Yeah.
Ply chain or that you discussed.
That kind of are you.
Subject to some of the same pressures out there with the availability of.
Of.
Cars and stuff like that and revolve around and whatever railcars are our ship shipping trucks or whatever.
Or are you are you on.
Isolate it because you have a lot of your.
Our supply chain and house.
No we're exposed on the import side and.
I mean, I mentioned, atvs and even even domestically produced.
There's no machines and the component shortages and and the huge demand within other parts of Canada urban and near urban markets, where.
Again closer to home activities are just sopping up all this product and we can't get our hands on and off a bit so.
And I don't have a.
<unk> forecast of this effect I mean were working and scrambling to diversify our supply lines.
And what sounds like this happens it's not the best news for North West because.
Yeah, we're more nimble.
And smaller I mean, DANZ or now Kevin Proctor store group can go into Panama, and and some unconventional places to scoop up product and and not big quantities just enough for them, but because we are smaller and we don't have as much weight to throw around so.
Right now and it's not a major red flags, but we we do.
Do we think we're in and get them a T v's and in August.
From Yamaha, but we're watching really carefully because if we don't get enough product on the C lift went off to fly stuff and as we get it.
And that won't be good from a price point standpoint, but we're more concerned about the sales and I'd say right now is probably 10 million.
At risk top line and.
The stuff comes in at about a 30% margin because it is a big ticket.
Okay, Alright, and I'll, let somebody else jump and thank you.
Thank you once again, please press star 1 on your device to keep that if you have any question.
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The next question is from Marc Bitzer, Inc. CIBC. Please go ahead.
Yeah.
Hey, good afternoon could you just talk a bit about the airline and expand on the performance and the quarter and then.
And what your expectations are for.
<unk> growth and any capital needed over the course of the next year or 2.
Sure.
So the airline had a at another.
Good quarter high high utilization and I mentioned in my remarks today that.
This is actually dates back to cover all of 2020, we had record high.
And for a cargo ATR 40 day.
A P R.
Ours were flying per plane are exceeding our expectations.
<unk>.
We have acquired a force a T R. A wide body cargo configuration and that'll be in service and at the beginning of Q and Q3.
So that's a capital investment, but each 1 we were we're justifying based on either we're reducing our third party hours because we do have some contracted aircraft.
And the ATR fleet.
Replace that with our own and and get and accretive rolling out of that and now we're looking at.
<unk> 4 and <unk>.
3 capacity from third party cargo, we did because of the efficiency of our fleet and <unk>.
Things like I mentioned and the annual meeting about like using plastic pallets and 37.
Pounds freed up time, and 15 pallet positions that you know $2 a pound that adds up.
And you can't sell a pallet and you can sell the product that you can replace that weight with.
<unk> and.
And we had more freed up turns of planes that can be used to.
To do contracts with some resource company. So we started to get into the resource.
Company business, we know it's more volatile, but it's it's much more lucrative and north West company pricing enterprising and his arms length between north West.
And doors and in NSA.
We use third party third party reference pricing and activity based costing but the the other types of freight that we can get from third party are are very very attractive. So that's starting to kick into gear as well and.
We have a vision.
So maybe we can articulate it better but it is to become a premier.
And our cargo airline.
And the northern part of Canada.
And we think we're well on our weighted on that path and we model ourselves in some ways after and Linden and air cargo and northern and air cargo.
Alaska and.
And.
Every investment is a big 1 we know that too.
Well, we have partners at some point will we bootstrap our growth through acquisition or joint ventures, all very very possible.
And we know that as we get bigger the base rates at northwest contributes to mitigate the risk gets smaller and so.
<unk>.
We have to be mindful of that but so far the next phase of growth which would be.
Looking at repatriating, even more cargo to the north west to NSA is safe business.
But we wanted to make sure we've got a really strong sense of what the third party cargo demand is going to be like.
We think it's going to be good.
How big that makes the business is still to be finalized if you think about it today and measured by numbers of planes and whether we get into a E jets.
A jet cargo configuration and those are all.
On the planning board.
From a cap.
Oh standpoint beyond the expenditure on that that ACR wide door, which I think John was 8.
$8 million.
That's about right.
There's no capex no growth capex.
Currently on offer.
On the board for this year, but we are doing.
Capex order planning and that that Dan will step into the shoes for working with our NSA team.
Yeah.
And and how much of that's that's very helpful. Thank you how much of north west.
Canadian Air freight goes through and I say and how much of Msas and where.
A lot that trends and how much of msas.
Paucity is devoted to north West and you mentioned that will become a smaller number over time, but any sort of.
Yes, it would be helpful too.
And 2 thirds of our air cargo goes and I say today and it's it's a 80% of.
Do you think of 70 per cent of Nsa's rest of the revenues.
More like 85, given the passenger decline within NSE because of reduced travel under Covid.
No.
When the passenger volumes come back and it.
It'll be 70 per cent cargo of which 80, 885%.
And the north West today.
So there's room to go still rebound and start and in 2 weeks well first of all the growth in northwest components.
It won't get to 100 per cent theres certain regions of the country, where we will not and want.
And we won't want to go out and go there with the infrastructure required.
And at least not.
And as a M term, but each time, we grow into a lane, we're gonna be looking for third party and and you know within that mix and May drop from the 85 per cent I mentioned are 80% too high.
Half and half even if we sign up the right types of contracts.
And.
Okay. Thanks, and then.
And then my other question was just around the competitive environment and the North I mean, I know it's not.
It's not you know it's dynamic as in the South obviously, but I'm just curious if you've seen any shifts I mean, obviously, it's been a tremendously difficult operating environment, but at the same time you know in certain categories. It has been.
[noise] accretive I'm, just curious if at a high level you've seen any changes in the in the in the competitive set or competitive dynamics.
Not on the you know and in terms of increased intensity Oh, we've got a couple of acquisitions I think.
<unk>.
We.
Louis, which we approved today.
I think this gateway is they are big and 1 million cruise ship.
Passenger was I think down or it's a very high number.
1.8 and total tourists. So obviously that was and the Dumpers a family owned business that precipitate the sale, perhaps a little.
And we acquired a store and Rankin inlet, and I think that or just wanted to retire.
You know we've looked at a lot of businesses and.
If they've got the Covid uptick and them then they're talking about the owners.
About what's the normalized base to buy from.
From so we think Theres still out there are you know some companies have been wounded by Covid.
They will recover but they may not have the pockets to wait it out.
And others that we think are really interesting businesses.
Probably have to get through a few new normal quarters, so that they.
So they and we.
Bits and what their run rate is.
I know I'm getting past what your question was what.
There's not a lot of new capital interest.
And investing and that we've seen come into the north certainly not during COVID-19, it's very hard by the way too, but you're going to invest in and build something it's almost impossible with construction costs have gone through the roof.
And we see down but materials are still going to be high but the the labor mobilization costs, when you've got corn teams and so on and that's kept people out of the out of that part of the business and finally, I'll say that came.
And barrel off day, where we exited our our large store, we're doing phenomenally well with a smaller store that we acquired so.
I think we are.
Total company and we're capturing market share I think our cost less number show market share capture as well.
Just to finish the point there is 1 new competitor opening and Guam.
I don't know Dan if you want to add anything to that the timing of that opening.
And it's been and it's been a.
<unk> made a delay because of COVID-19, but we expect it to probably be opened and the mid Q2 of 2022.
But we're keeping a keen eye on it.
The the chain is called Don Donkey, it's a out of out of Japan, and they're in Hawaii, and it's a discount.
Format store.
And our cost we have 3 cost U less stores and Guam of course, there are much bigger ticket.
But it's still.
And when we look at competition it comes and all shapes and sizes and there aren't that many stores and some of these markets. They are never over retailed, but just 1 new entrant.
Causes us to pay attention.
But that's.
Probably what comes to mind right now and I think about new entrants, there's really not a lot else that.
But we're keeping us up at night, 1 pardon me there is another 1 and your store and BVI.
But not a great time to open a store and BVI. So we'll see how about 1 turn zone.
Yeah. Okay. Thanks, and then I guess just the last question.
Our current thoughts on the dividend and.
And sort of payout ratio I mean, obviously it's been.
A really really strong couple of years or a year and a half for northwest and <unk>.
And how do you sort of factor that in when you think about the dividend and payout ratio.
Well, we're not getting into.
Territory past my 10 year for sure because it won't be a dividend before another dividend increase before I retire, but but but I think mark. The difference here is this is unchartered territory were so deep that we levered de Levered right now.
And that's a gift to down I mean in terms of opportunities for growth organic investment and acquisitions, we have.
Have that capacity.
Longer term, we wouldn't build our dividend around financing capacity, so the debt equity and cash generation.
Serge doesn't justify for us which as.
And we consider to be permanent when that dividend goes up.
<unk>.
Would be.
Acquire more visibility, which we usually say.
Especially this year to get Q2 under our belt, and then Dan and and.
And John and the team will look into book with the board and make a recommendation on whether to increase the dividend beginning and in Q3.
But it won't be because of the capital the de Levered part.
And now it'll be because of the visibility we have on all of these questions that I know you have and we have about.
Where do sales and level off under a new normal.
The capital structure as a whole another kettle of fish, we got the in CIB and place and.
And that can be tweaked.
Upward if we think that.
We're in a way to go but I think north or I'll, just leave that now.
Until we roll around September and then you can you can lay that question on Dan and John.
Perfect. Okay. Thanks, a lot and all the best Edward.
Thanks.
Thank you once again, please press star.
And 1 on your device to keep out if you have any question.
Oh.
Thank you. The next question is from southern <unk> RBC capital markets. Please go ahead.
Alright, great, Thanks, and I recall at the beginning.
And sort of a downturn and you were discussing.
And some commentary on the e-commerce strategy and kind of what you might do there I just wanted to check and given where we are today with the.
And our process on that channel and as for the company.
Thank you that's that's a good question for that we should answer we had.
Uh huh.
And we're not an e-commerce focused company and a sense of.
How much of our business can go there and for US profitably go there.
It's not a defensive move for us and there is out shopping and I'm, just giving you a bit of color in terms of for those who.
And kind of followed our journey are or are not journey and to ecommerce and we saw a lot.
Out of convenience type items and I called you know Couche tard single serve foodservice is a big part of our business fuel post office.
Financial services Health services, so, but we do sell products that can be out shop general merchandise are there some areas that we.
We say go ahead do it because we're not in that space, but when you get to.
And nonperishable food and some general merchandise categories. We do think we should be offering a stronger E comm option to our customers.
<unk>.
We were we still believe in and that has been instrumental with that leading that through Alaska geographically, we should really get R. R.
Food wet and.
And I commented and the AGM about our dark store, which did really well last year, but you know the general search, especially in Alaska.
Pretty well developed e-commerce market tighter hub and spoke from acreage out and Fairbanks out to the different communities.
Sure.
So we did very well with her dark store and it was set up.
Feed fortuitous and he was timed perfectly for that for the E com upswing beyond that though we've developed a platform that we can use and.
Mobile based.
And out of a hub stores and so that unlike Canada.
Many and we call hub markets, but larger treaties that have and AC store are surrounded by.
Already in some cases dozens of smaller villages that are too small for and Alaska commercial stores. So.
We're going to kind of do a parallel approach and maybe the best 1 win and.
Keep the dark store of course keep book, so not that span elite and the brand through our wholesale b to b or B to C. And then using the REIT.
<unk> from.
To use the hub and spoke model where you.
And Youre going online your town or small town of 102 hundred 50 people does not have and a C store, but we can get <unk> quicker delivery from.
And the hub of short plane ride over to your village.
Way better than our own span elite and certainly way better than Amazon and Seattle, So those and other things.
Taylor are looking at and and when you look longer term.
And I think I'll just come back to Mark <unk> question on the on the air cargo.
We we still believe there's a couple of things there 1 is well and passenger we if we stay in that space and we're testing a loyalty program and I forgot to mention it to integrate with our stores.
Ours is a handful of stores and northern Ontario, and redo the passenger business once it kicks back up.
<unk>.
But we wanted the air cargo business could be developed where we can get into small packages and into a separate third party E. Commerce type services. So we are starting to look at that too now as we get stabilized and created capacity.
And that we could offer a frequency that would allow us to be a a better option and then today the way people ship to the north for ecommerce. So if we cant sell it we'd be done with the move side of that equation beyond that we're really putting our our our eggs and the basket and Alaska and watching carefully.
And to see how we can we can impact.
Pack and already developed market, and we make inroads and and capture share given our proximity to the customer and take that into Canada, potentially but if it does go into Canada, It's and it's probably leaning heavily on our air cargo side.
And because we're gonna be a new entrant.
And the only thing and I'll say at the end of.
Of the day, and I think I speak for down and I think that.
I've said, it a little bit at the beginning and.
And.
And it has to be materially.
Large and it has to be profitable.
And.
And that's where are we kind of separate ourselves I think from some other retailers that feel they have to do this.
Because defensively and if they don't they're just not going to be and.
And a big part of the game with their customers, we are and a big part of the game and our customers since catalog shopping people have shopped out of the community and now with digital.
Still going on do we want to go after that and leveraging existing core strength.
Not necessarily the technology of ecommerce, but the fact that it has to get there somehow be picked up returned et cetera.
And I guess just based on the last comment is there a lot of I guess have you seen that out of town online penetration increase our ecommerce penetration over the last year.
Not significantly and and.
We know that with some confidence because of our our.
Our prepaid visa card business segment, we are we know where the fans dart in terms of what which retailers are.
Moving up or down and we would get the day, the dominant share of that and and there hasnt been and significant increase I mean, some have gone up a lot from small basis, but theres still a very very.
And we all base.
So it hasn't been a huge shift and I think when you look at our $270 million and sales capture I mean shopping often item like Guam by E. Commerce is like you you are a long way somewhere and the ecommerce suppliers going to ship it to you.
And you have to be prepared to wait.
And we don't sell that class a category, we don't really care, but where we do we haven't seen a big a big change and when I said, we gained market share I think we've gained market share on all channels both.
Capturing from ecommerce.
Because people are shifting their spending to local.
And the types of things that we sell.
And.
And certainly from local competitors as well because of our in stock position.
And so the answer short answer is no big uptick and your comp general broad trends are still it's a great CAGR business. If you're you know whats your core business.
And you know how to make money and it for.
And for US, it's not the death of a thousand.
Cell, but it's a it's small slivers of our business that we really have to be.
Honest about and saying, Okay is there 20 million bucks, there even $10 million of sales.
And will it convert I'd say, 15% okay.
You know that's 1 that's 1 convenient store for us and Northern Canada.
So putting it all and context right, how big of a surprise, where we'll work through that and I know that Dan and I fully endorse the way he has got and set up and Alaska, we're going to really really dig into it.
Sure.
Great. Thanks, so much for the color.
Yeah.
Thank you the next.
And touches from Michael and announced TD Securities. Please go ahead.
And it's just a couple of follow ups.
On the international side.
What are you looking for.
As far as indicators that tourism is is recovering are about to recover and where do you see and what does that day to tell you at this point.
Wayne.
And I'd like to say.
Okay. Thank you well.
Well the first thing you look at is our occupancy and I can tell you and the USPI, particularly St. Thomas It's a it is.
Cool.
So it's you know.
The reason being is because of the.
Hi, vaccinations and and the openness of the market.
Question, it's attracted a lot of tourists from mainland U S. Looking at some of the other markets you look at the AR and the bookings for for and the.
And the BVI for example, or some of the other areas you look for the bookings and the and the crews are and the ships.
Sorry, and in the mornings and the rented.
Rented boats.
And that has been.
And it hasn't been overwhelming so they're they're booking out people are starting to rethink revenge travel is going to probably come.
Come back and the later part of Q3 and Q4, but right now it's really just trying to understand what the jurisdictions.
<unk> they're.
We're gonna do Cayman Islands. For example is still locked down and they haven't made any mentioned on when the cruise ships are gonna be welcome back. So it's just factors like that and right now we're expecting with the vaccinations and kind of coming are being more prevalent there.
Net the tourism will return.
You know kind of acute.
Like Q3, Q4 to some of our tourist bound markets.
So it is really just on bookings keeping our ears to the to the.
The market as far as what's happening and the hotels, what's happening with some of the more like such as moorings and other rental boats and the area and keeping our cash.
He and I on what government is doing with their.
With their protocol around.
Isolation, and how how long people have to be quarantine on arrival.
Okay and.
Last question probably for John.
With the talk of a 15% global minimum tax and <unk>.
And as having some.
<unk> operations and the.
And then tax favorable areas have you taken a lucky and.
So what kind of impact that might have on your business.
Well the short answer Mike is no we are certainly monitoring that.
15% minimum tax.
Looking.
And how that's going to be rolled out.
And what the implications are.
That would hit us.
And 2 markets predominantly BVI and Cayman, but it's still.
It's still early and trying to model out how and when.
And that will impact us like what the.
Looking at Us and the timing pardon me yes.
And might never happen, but.
And just just good data from them, but alright, thanks, guys.
And I got it.
And this is outside of my realm, but it's interesting that and came in and BVI were not there for tax Haven, where and actual offer.
The amount of business and.
Whether that differentiates between the race to the bottom to attract investment.
I don't know, but.
And I'll leave it at that.
Yeah.
Thank you we have no further questioners just from a design back to you and Mr. Kennedy.
Operator.
Just a few.
Clothing and that really are the closing remarks from my career at North West and my role.
Uh huh.
With with you as investors, although I am still here for another.
And the better part of the month and a half so I always say it yeah.
I think that you can contact John and I and I like I mean that so if you wanted someone wanted to ask a question you can but I've thoroughly.
And if they enjoyed I look forward to this part of my role and not just through the outlets calls, but the over the many years I guess I've had over 100 analyst calls.
And but not in my before being CEO and you put them all together.
I know, it's an important part of what you do and and I appreciate that.
Many of you and some before Google were part of a covering north west and your interest in and what we do it's sometimes.
No not the easiest company to deconstruct.
And we've tried to do our best and I know, Dan will do a good job and.
And as well and when you have and we've been able to visit investors.
Through your different firms, helping us and.
And so forth that's been an important part of our.
And Investor Relations. So I appreciate that you <unk> you.
<unk> always included us and thought about us that way.
I think it's helped us build our R. R.
Our story authentically with investors over the years and.
It got us to where we are as far as.
And what people think.
Stock is worth and where they want to invest and a company like us So I want it.
Convey that to you that you play to that part of our important role and our success.
I just wanted to also close by saying that.
Dan touched on at the beginning of his remarks, it has been a very robust transition process.
Dan and I will have a busy summer.
At least all the busy.
Half of something right around I think dad's got a busy complete summer.
After August 1st I'll be a little less busy, but it's certainly heads down and until then.
There's lots of things to cover together everything is going well.
And there's no major fires to put out and who knows and I want to start a couple and see what we can.
And do they get things.
And in parts of the business I think that's good at that and the.
A positive way and I do echo his and he's done a great job on on recruiting and Kevin Procter I think we've got a dynamic leader there we've got a great leader and the BVI.
We're going to have a great 1 and Alaska and and Dan will have a great 1 and.
And Canada, very shortly and reporting to him so things are coming into place.
Look at it as an ongoing.
Advisor and and Investor myself, I I'm I'm very very pleased.
Okay.
And our already I don't want to belabor it but again. Thank you very much everyone. There is 1 part of the meeting that I can no longer say.
So I actually have to turn this over to you and Dan and I'll, let you do the final.
The final wrap up.
Okay, well, it short and sweet as that as I look forward to developing a relationship with you all that the better it is true keenly.
<unk> kind of overview over these last couple of minutes and over.
You guys have obviously developed over the last many years looking forward to kind of learning the business through your lens and kind of solidifying that relationship other than that I guess.
That brings this call to conclusion and I look forward to seeing or speaking with you at.
At the next analyst call and the September.
Thanks, very much everyone.
Thank you.
Thank you. The conference has now ended please disconnect your lines at this time and we thank you for your participation.
Thank you.
[noise].