North West hands out dividend
Food retailer's first quarter reports sales increase of 10 per cent
Karen K. Ho
Northern News Services
Friday, June 19, 2015
NUNAVUT
Sales are up 10 per cent at North West Company, but conditions in Northern Canada are proving to be challenging for the food retailer.
North West Company executive vice-president Michael McMullen holds a package of tomatoes at Iqaluit's Northmart store. The company's latest quarterly earnings said that sales grew from $376.3 million in the first quarter of 2014, to $414 million this year, an increase of 10 per cent. - NNSL file photo
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The company, which has 18 stores in the NWT and 21 stores in Nunavut, recently released its latest quarterly reports, which pegged sales at $414 million, up from $376.3 million in the first quarter of last year.
President and CEO Edward Kennedy told Nunavut News/North that the territory is part of North West's $150-million, three-year, long-term strategy for the region of Northern Canada, including expansion and renovation of existing stores as well as additional services.
"There's a big lead time simply because of the logistics of mobilizing construction material and planning for this," he said, citing sea lifts and winter roads.
Kennedy was blunt in his economic assessment of the area compared to the company's stores in the Caribbean or Alaska.
"The North is quite difficult," he said. "There's not as much resource development, and government structure spending is quite constrained compared to five years ago."
With the inability to predict how the natural resource development industry will be in the next three years, Kennedy said North West isn't banking on a lot of new income growth in the North.
As a result, the company is taking on initiatives which include building more warehouse space to be more competitive.
Change in marketplace
Online companies that compete with North West have changed shipping policies giving North West Company stores a bit of an edge.
Amazon changed its policy so that every Nunavut customer making an order after April 8 to an area outside Iqaluit now need to pay $29 per shipment, plus $9.99 per pound. Previously, customers who bought the Amazon Prime service got free two-day shipping for $79 a year.
As well, Walmart online shoppers lost their ability to get free shipping in March.
But Kennedy said they would still be big competition.
"We think people are still shopping from the south extensively," he said. "I think there's still a lot of southern retailers that sell into the North that don't provide jobs."
Kennedy said his company could do a better job at drawing in new parents.
"We think we haven't done as good a job as we should," he said, citing the high birthrate in Nunavut. "We know a lot of that money is spent out of the community."
Fuel prices may have gone down in many other regions of the country, but those savings haven't really benefited North West in the North compared to its other markets in the Caribbean or Alaska, said Kennedy. He estimated the rate for Qulliq Energy, the Crown corporation owned by the Government of Nunavut, went up seven per cent last year and hasn't dropped.
"I think oil prices persist in the current range. I think utilities will come around in the North and pass on savings to consumers," he said.
The company's board of directors declared a dividend of 29 cents per share to shareholders of record on June 30, to be paid on July 15.
Some of the other financial highlights in the company's news release were increases of 5.8 per cent for food sales and 6.6 per cent for general merchandise sales.
The company's profits increased by $3 million or 23.8 per cent to $15.7 million and diluted earnings per share was $0.32 up from $0.26 per share last year. The company pointed out that both of its domestic and international operations contributed to the growth of its net earnings.
In a news release, Kennedy cited the company's diversified mix of store types and markets as a big advantage in its first quarter. He cited increased efficiency, a tourism recovery in the Caribbean, improved market conditions for the company's stores in western Canada as well as market share gains in the stores located in Alaska.
As for the future of the company, Kennedy said even with challenges regarding logistics and energy, the company aims to have some form of Tim Hortons available in each of its locations in Northern Canada in the next few years.
"We have placed a bet on the North," he said.
Kennedy remained optimistic in the face of a downturn in government spending and the resource industry.
"It's not a negative story for us. It just means we have to work harder."
On June 11, the day the results of the quarter were announced, shares of North West (TSX:NWC) rose 86 cents to $24.58.
At press time, shares had continued to rise to $25.07.
The company set a new 20-day high on June 16.
