The North West Company Inc. (TSX: NWC) Q1 2025 Earnings Call | 06/11/2025

14 days ago

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Here's a summary of The Northwest Company's First Quarter Fiscal Year 2026 Earnings Call:

The Northwest Company Q1 FY26 Earnings Call Summary

The Northwest Company reported a positive start to fiscal year 2026, with sales growth and increased net earnings despite comparing to a strong prior-year quarter. The company's performance was driven by gains in food sales and an improved gross profit rate, stemming from changes in sales mix and lower markdowns. They also highlighted ongoing strategic initiatives under their "Next 100" program.

Key Financial Highlights (Q1 FY26 vs. Q1 FY25):

Total Sales: Up 3.9%.
Net Earnings: Increased 2.2% (on top of a 22.3% increase in Q1 FY25). Adjusted net earnings (excluding share-based compensation and Next 100 one-time costs) increased 14.2%.
Same-Store Food Sales: Up 4%.
Gross Profit Dollars: Up 0.2%.
Gross Profit Rate: Increased due to changes in sales mix and lower markdowns.
Expenses: Up 8.7% or 120 basis points as a rate of sales, primarily due to higher staff and technology costs for the "Next 100" program, increased depreciation, and foreign exchange impact. Includes $2.1 million in one-time costs, offset by financial benefits from "Next 100" initiatives.
Canadian Operations:
- Total Sales: Up 2%.
- Food Sales: Up 1.9%.
- General Merchandise and Other Sales: Up 2.2% (higher pharmacy/retail fuel offset softer general merchandise).
- Gross Profit: Up 5.1% (benefited from food service/crush departments, improved markdowns, and data-driven promotions).
- EBIT: Decreased 6.2% (compared to 20.9% increase in Q1 FY25) due to higher expenses.
- Adjusted EBITDA: Increased 5.8% (on top of 11.3% increase in Q1 FY25).
International Operations:
- Delivered strong sales and earnings gains.
- Same-Store Sales: Up 2.8% overall (2.6% in food, 5.2% in general merchandise).
- Gross Profit: Increased 5.4% due to higher sales and gross profit rate (lower wholesale sales in Alaska, higher market-driven rates in Caribbean).

Strategic Initiatives & Outlook ("Next 100" Program):

AI-Powered Promotions: Implementing more effective data-driven promotions as part of the "Next 100" initiatives, leading to a focus on "green promotions" (positive financial impact).
Cost Efficiencies: Reducing print media, gaining store labor productivity, and other cost savings. These operational improvements are progressing well.
Expanded Private Label: Begun rolling out an expanded private label offering in Canadian operations.
Labor Optimization: Implementing enhanced labor optimization processes.
Inuit Child First Initiative (ICFI): Government of Canada extended funding for the Inuit Child First Initiative. However, the distribution of funding to individuals is expected to be reduced compared to the broader food voucher program in 2024. This change is currently uncertain regarding its duration or if the 2024 program will resume. The company hopes it will revert to the 2024 model as the current approach is not reaching those in need effectively.
Wildfires in Northern Canada: Four communities are evacuated, ten semi-evacuated (affecting roughly 10% of Northwest's 140 northern Canada stores). Sales are significantly reduced in these locations, though adjacent communities may see a positive impact. Perishable products were donated. No damage to assets reported so far. The situation's impact on Q2 is noted.
First Nations Child and Family Services Program: Expects payments to be distributed into Q1 2026. This program is seen as having more visibility and structure than the drinking water settlement.
North Star Air (Airline Subsidiary): Had a good quarter, performing as expected, with no negative impacts from wildfires; in fact, it provided flexibility to assist communities.
Next 100 Maturity: The full maturity and clear run rate benefits of the "Next 100" program are expected by 2026.
Tariffs: Begun to see some uncertainty regarding tariffs. The company will continue to monitor the evolving dynamics.
Overall Outlook: Remaining optimistic and focused on controllable factors, despite ongoing uncertainties.

The company emphasizes its commitment to operational excellence, cost efficiency, and delivering value to customers, employees, and shareholders through its "Next 100" program.

About this video

The North West Company Inc. (TSX: NWC) reported Q1 2025 results on June 11, 2025, delivering mixed results as earnings per share (EPS) of $0.6417 surpassed analyst expectations of $0.60, while revenue came in at $641.4 million, missing forecasts of $648.2 million. Consolidated sales grew 3.9% year-over-year, driven by a 4% increase in same-store food sales and a 2.2% rise in net earnings. Gross profit dollars climbed 7.2%, with the gross profit margin improving by 103 basis points, reflecting changes in sales mix and lower markdowns. Despite the positive earnings surprise, the company’s stock declined 5.4% following the release, closing at $54.29, as investors reacted to the revenue shortfall and higher expense growth of 8.7%—including $2.1 million in one-off costs related to the Next 100 initiative. Adjusted net earnings rose 14.2%, and EBIT increased 11% for the quarter, but overall profitability was partially offset by increased M&A and share-based compensation expenses. Canadian operations saw a 5.1% rise in gross profit, though EBIT declined 6.2% due to higher costs. International operations posted an 11% EBIT increase, with same-store food sales up and gross profit growth of 5.4%. The company maintains a strong financial profile, with consistent dividend payments for 35 consecutive years and moderate debt levels. Outlook: Management remains cautious on economic conditions and tariff impacts, noting that tariff increases have been modest so far but remain a fluid risk. Consumer demand is expected to stay positive, partly supported by ongoing First Nations drinking water settlement payments, though at a slower pace than in 2024. The company continues to invest in private label expansion, inventory optimization, and operational efficiencies, while monitoring the impact of wildfires and changes in government funding. #NorthWestCompany #NWC #EarningsCall #Q12025 #EPSBeat #RevenueMiss #Retail #Dividend #Outlook #Investing #InsideTicker

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