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Northwest Company (NWC) reported a robust performance in Q4 2024, with consolidated sales rising 4.9% and net earnings increasing by 18.9%. The company's gross profit dollars grew by 9.4%, driven by strong same-store sales in both food and general merchandise. With a market capitalization of $1.07 billion and impressive revenue growth of 33.8% over the last twelve months, the company has demonstrated strong momentum. According to InvestingPro analysis, NWC maintains a "GREAT" overall Financial Health Score of 3.12 out of 5. Despite these positive results, the company anticipates more moderate growth in Q1 2025, influenced by macroeconomic uncertainties and potential tariffs. The stock price of New World Cobalt, a separate entity, showed a decrease of 5% recently, closing at $0.019, which is near its 52-week low.
Key Takeaways
- Consolidated sales increased by 4.9% in Q4 2024.
- Net earnings rose by 18.9%, with strong contributions from food and general merchandise.
- The company is launching new private label programs, with full rollout expected by Q3 2025.
- Uncertain macroeconomic conditions and potential tariffs may impact future performance.
- The Next 100 operational initiatives are expected to contribute to future earnings.
Company Performance
In Q4 2024, Northwest Company demonstrated resilience with significant growth in both sales and earnings. The company's focus on innovation and operational efficiency, such as the introduction of private label programs and store-based inventory technology, has bolstered its performance. Despite challenges in certain markets like Alaska, the company has benefited from favorable conditions in Caribbean markets and positive consumer demand in some communities.
Financial Highlights
- Revenue: Increased by 4.9% in Q4 2024.
- Net earnings: Increased by 18.9% in Q4 2024.
- Gross profit dollars: Up 9.4%.
- EBIT: Increased by 17.5%.
Outlook & Guidance
Northwest Company expects Q1 2025 results to moderate compared to the previous quarter, with incremental EBIT anticipated from the Next 100 initiatives. The company is closely monitoring potential impacts from tariffs and government policies, and is optimistic about future benefits from First Nations settlements, expected to start in 2026. Investors should note that the next earnings announcement is scheduled for May 8, 2025. InvestingPro subscribers can access detailed financial forecasts, including the projected EPS of $0.23 for FY2025, along with comprehensive Pro Research Reports that provide deep-dive analysis of NWC's business model and growth prospects.
Executive Commentary
Dan McConnell, CEO of Northwest Company, emphasized the company's resilience and the positive reception of its private label initiatives. He stated, "We have proven to be resilient, and the capabilities we are developing through the Next 100 combined with the passion and enterprising spirit of Norwesters will enable us to navigate under these uncertain times."
Risks and Challenges
- Potential tariffs could impact costs and profitability.
- Economic uncertainty may affect consumer spending and demand.
- Challenges in Alaska's commercial fishing communities could impact regional performance.
- The timing and impact of First Nations settlements remain uncertain.
- Changes in government policies and SNAP benefits may pose risks.
Q&A
During the earnings call, analysts inquired about the impacts of the First Nations settlements and the benefits of the Next 100 program. Executives addressed concerns regarding international and Canadian market performance and potential risks from SNAP benefits and tariffs.
Full transcript - New World Cobalt Ltd (NWC) Q4 2025:
Dan McConnell, CEO, Northwest Company: Okay. Thank you, and good afternoon. Welcome to the Northwest Company fourth quarter conference call. I'm joined here today by John King, our Chief Executive sorry, Chief Financial Officer and Alexis Cluchay, our VP, Legal and Corporate Secretary. I'm going to start off the meeting by asking Alexis to please read our disclosure statement.
Alexis Cluchay, VP, Legal and Corporate Secretary, Northwest Company: Thank you, Dan. Before we begin today, I remind you that certain information presented may constitute forward looking statements. Such statements reflect NorthWest's current expectations, estimates, projections and assumptions. These forward looking statements are not guarantees of future performance and are 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. Any forward looking statements are current only as of the date they're made, and the company disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future results or otherwise, other than what's required by law.
For additional information on these risks, please see Northwest annual information form and its MD and A under the heading risk factor.
Dan McConnell, CEO, Northwest Company: Thanks, Alexis. All right. I will begin by providing a brief overview of the fourth quarter on a consolidated basis, followed by some additional color on Canadian and then international operations. Finally, I'll wrap up with a few comments on our outlook in the NEXT 100 program before opening up the call for questions. All right, let's dive right in.
So we had a positive wrap up to the fiscal year with a strong Q4 results. For the quarter, consolidated sales were up 4.9% and net earnings increased by 18.9%. Our results in the fourth quarter were driven by strong same store sales gains and a 9.4% increase in gross profit, resulting from the impact of higher sales and an increase in the gross profit rate. These factors were partially offset by higher selling, operating and administrative expenses. The Next 100 operational excellence initiatives was also started to contribute to the bottom line, net of some of onetime costs incurred in the quarter.
Let me briefly expand on the consolidated results. First, top line performance was positive in both Canadian and international operations this quarter on the back of very solid inventory positions and strong in store execution during the holiday season, which generated uplift on both transaction counts and unit volumes. For the quarter, consolidated same store sales were up 5.5% on food and 5.1% on general merchandise. And second, we were able to convert these sales increases to the bottom line earnings. Gross profit dollars were up 9.4% for the quarter, driven by sales and a 141 basis point increase in the gross profit rates, duty changes and sales win, including a lower blended wholesale sales, lower markdowns and more effective promotions as part of the Next 100 work.
Selling, operating and administrative expenses were up 6.8% for the quarter or 45 basis points for the rate of sales. Higher staff costs, including additional resources to support our Next 100 work, an increase in technology and depreciation costs, and the impact of foreign exchange on the translation of international expenses were the key factors contributing to this increase. In the quarter, we also reported $1,000,000 in onetime costs for professional fees to the execution related to the execution of the Next 100 program. These factors were partially mitigated by benefits that are beginning to ramp up from Next 100 initiatives, which more than offset the Next 100 onetime costs in the quarter and helped reduce the impact of higher wages, technology expenses and depreciation. As a result, the company delivered strong bottom line results with EBIT increasing by 17.5% and net earnings increasing by 18.9% for the quarter.
So let's unpack the results beginning with our Canadian operations. For the quarter, total sales in Canada were up 2.56.7% on a same store basis. We had solid sales performance in both food and general merchandise with same store sales increases of 7.6% in food and 3.4% in GM for the quarter. Sales continue to be positively impacted by increased consumer demand in certain communities resulting from the continued distribution of First Nations drinking water claim settlement payments to individuals and the government spending on First Nations child and family services programs, including Jordan's principal and Inuit child first programs that help provide greater access to nutritious foods. The same store sales gains were partially offset by lower wholesale sales and airline revenue compared to the fourth quarter last year.
NorthStar Air sales in the quarter were impacted by lower third party revenue as a result of redeploying aircraft capacity to supply the tonnage increase from our retail stores and lower for bulk fuel sales. Overall, we are very pleased with financial performance of NSA and the utilization of aircraft, particularly the cargo services provided to our stores. Consistent with what I've indicated on a consolidated basis, we were able to convert the sales growth into gross profit gains, which ultimately slowed to the bottom line. For the quarter, profit increased 7%, while selling, operating and administrative expenses increased 2.9% or 13 basis points as a rate of sales. The gross profit rate improved largely due to changes in the sales plan.
In addition to the sales plan, impact of lower wholesale sales, we also had a change in sales blend within the food categories. More food services, just to mention some, and a blend shift to higher margin general merchandise categories and a decrease in lower margin motorized sales compared to last year. Lower markdowns, including more effective data driven promotional activity as a part of our Next 100 initiatives, was also a factor contributing to the increase in gross profit rate. Selling, operating and administrative expenses were up in the quarter due to two factors. First, higher staff costs resulting from inflationary and minimum wage increases.
Excuse me. An increase in depreciation and the impact of new stores. Second, we invested in additional staff resources, new technology and onetime professional fees to execute our next 100 operational excellence work, which is required to unlock future growth and deliver the incremental EBIT expected from our Next 100 initiatives. Net impact of these factors was an 18% increase in EBIT for the quarter, which is on top of an 11.2% increase in Q4 last year. Moving on to our international operations.
For the quarter, international sales increased 3.1% in total, driven by same store sales increases of 2.7% in food and 10% in general merchandise. The increase in general merchandise sales for the quarter is an improvement in the trend over previous quarters this year and the fourth quarter of last year. This positive trend was fueled by solid holiday season execution and underpinned by a strong in stock position. Favorable economic conditions in certain Caribbean markets driven by improved tourism season was also a factor. These factors more than offset headwinds on wholesale sales in Alaska as well as a weaker economic condition in certain commercial fishing communities in Alaska and some South Pacific markets.
From an earnings perspective, we were able to generate some torque to the bottom line in international operations this quarter. Gross profit increased 8.2% due to sales gains and a higher gross profit rate, largely due to changes in sales blend compared to last year. Optimizing our transport mix through more efficient use of lower cost barge and bypass freight in Alaska and higher market driven gross profit rates in certain Caribbean locations, aligned with improved economic conditions were also factors. Selling, operating and administrative expenses increased 7.7% due to higher expenses, primarily related to staff costs and additional resources to support our Next 100 work. These factors resulted in a 10.6% increase in EBIT for the quarter.
All right. Now let me talk briefly about our outlook and provide a few comments on the NEXT 100 program. Macroeconomic conditions, as we all know, are uncertain, and especially given the recent developments on U. S. Government policy regarding tariffs and the impact with any retaliatory tariffs imposed by Canadian government or other governments.
The impact this will have on the cost to merchandise and inflation in the countries in which we operate is uncertain. This is fluid situation, but we are taking the steps necessary to actively manage it and mitigate as much as possible any impacts, including potential increases in the cost of merchandise. This includes a disciplined process to monitor project product cost increases and explore alternative sourcing arrangements where possible. And like many other retailers in Canada, we are taking steps steps to identify products that are impacted by tariffs tariffs, sorry, so that our customers can make an informed choice when purchasing products. Within this macroeconomic environment, there is also uncertainty in our international operations, particularly in tourism dependent markets and territories and countries that do not have strong government income support programs for individuals.
That said, there are tailwinds in Canada that can mitigate some of these uncertainties and risks. We expect consumer demand in 2025 to continue to be positively impacted by the distribution of First Nations drinking water settlement payments and government spending on First Nations child and family service programs, including Jordan's principal and Inuit child first programs. As discussed on previous calls, we continue to focus on driving operational excellence and delivering further value for our customers, our employees, and our shareholders through our Next 100 work while building capabilities to capture future business and market opportunities and helping mitigate the economic headwinds in the current environment. Our next 100 work is starting to deliver benefits. While we are pleased with pleased with the program to date, there is still a lot of work to do.
In 02/2025, we'll be refining merchandise assortments, including launching new private label programs and implementing store based inventory forecasting replenishment technology, which is expected to improve on shelf availability. In addition, we continue to focus on driving efficiencies and cost savings across our business. The next 100 work is expected to drive annualized incremental EBIT, which will continue to ramp up in 2025 as each of the initiatives reach maturity. As we lay the groundwork for these improvements, we have invested in additional resources to support the execution of our NexoBrid program. In addition to this investment in resources, we also anticipate continuing to incur onetime costs for professional fees in 2025 as each of the initiatives is operationalized, and we'll provide further information on these onetime costs and the benefits in our quarterly reports.
Our execution our expectation, excuse me, is that the annualized incremental EBIT from these initiatives will offset the investment in additional resources and onetime costs. However, there will be timing differences as these costs will be incurred prior to achieving the full annualized benefits. For the first half of twenty twenty five, we are expecting these onetime costs to increase with the expectation that the resulting benefits will fully offset these costs by the end of the year. As a result of these factors, we expect our results in the first quarter of twenty twenty five to moderate from the current run rate, particularly as we take into account the strong performance in Q1 last year, which delivered a 22.3% increase in net earnings. Now let me wrap up things here by saying that the company as a company, we have proven to be resilient, and the capabilities we are developing through the next one hundred combined with the passion and enterprising spirit of Norwesters will enable us to navigate under these uncertain times, while at the same time, equipping us with the tools to provide the best value for our customers as we continue to make a positive impact in the communities that we serve.
With that, I will now open up the call if there's any questions.
Conference Operator: Thank you. We'll now take questions from the telephone lines. If you have a question, please press 1. You may cancel your question at any time by pressing 2.
Analyst: Congrats on the good results there. Maybe for my first one, just on the drinking water settlement. Can you kind of comment maybe on the pace of that money coming in, in Q4 maybe compared to the previous few quarters? And how has that kind of trended through Q1 so far?
Dan McConnell, CEO, Northwest Company: You know what, it's been pretty steady. Actually, I would say over the last two, three quarters, it's been pretty steady as it was in Q4.
Analyst: Okay. Got it. And then in terms of the that $23,000,000,000 child and family service settlement, I know the claims window for that opened about a month ago today. I'm just curious if you're hearing anything around that within your communities in terms of how that process is kind of working so far. And then I guess in terms of your own kind of internal preparations, what are you assuming that, that money starts to roll in?
And what are your plans in terms of inventory positioning for that?
Dan McConnell, CEO, Northwest Company: We haven't heard anything. It's still quite early in the process. You can appreciate it's been a couple of weeks. So we don't really have much insight on how it's started or how it's going. No news is good news, I guess.
And on the other sense, I would say that we're anticipating probably into 02/1926 to start seeing some of this money coming in. On the other side of that, obviously, like we have done with many of the other programs, we're looking at amping up inventories where we know our there's pent up demand for our customers. And that's a strategic venture that we've taken note over the last number of settlements that have come out, including the drinking settlement. And we'll just keep a close hand on the pulse and make sure that we're ready when that that money starts to drop. Okay.
Great. And if I could just yes, sir. Sorry. I was gonna finish that off. Just put that caveat out there.
Understand we are dealing with some administrator some bureaucratic administration. So, you know, you have no plans to provide first contact. But that's if we would have looked backwards in time, we would have anticipated the water drinking settlement money to come in a lot earlier than it did. But optimistically, I'm gonna say that 2026 is is where we're currently anticipating it.
Analyst: Okay. Understood. And then if I could just sneak in one more. You referred to some of the progress around your private label initiatives.
Stephen MacLeod, Analyst, BMO Capital Markets: Can you maybe just talk a
Analyst: little bit more about how that's being rolled out in terms of initial product categories and I guess the number of stores that, that's been implemented in so far? And how's the response from your customers been to date?
Dan McConnell, CEO, Northwest Company: Sure. Yes. So far, it's as far as the private label rollout, it's still in its infancy. It's at the beginning stages. We expect it to be rolled out to all stores by mid to late Q3.
But we can say that the reception so far has been very positive, obviously, bringing some incremental value to our customers. And so far, it's been received very well. Obviously, commentary from the customers is very strong as well as the the purchases so far. But we're still quite early, but we anticipate it's gonna be a very strong program for the stores and the communities. Okay.
Thanks. I'll jump back in the queue. Alright. Thanks, guys.
Conference Operator: Thank you. The next question is from Stephen MacLeod from BMO Capital Markets. Please go ahead.
Stephen MacLeod, Analyst, BMO Capital Markets: Thank you. Good afternoon, guys. Hey, Stephen. Hey, Dan. Thanks.
Just wanted to follow-up. Just with respect to the Canadian business, you know, a nice nice strong same store sales growth. But I I guess I would have expected maybe a bit more strength on the general merchandise side given some of the payments, what are some of the payments that have come through. So I'm just curious. Are are you seeing, you know, those, those incremental payments being being redirected towards food versus general merchandise, or or or are you are you still seeing, you know, that incremental buyer, on the GM side?
Dan McConnell, CEO, Northwest Company: Well, if there was it was I mean, we're kind of in between season, but I would say that, yeah, we were we were expecting higher motorized sales. So we had a higher general merchandise sales, but it was, you know, than what we anticipated in some of the off categories. So it was not the higher price point, but it was the higher margin sales that that we experienced. So motorized sales weren't as high, but some of the other categories within the general merchandise group with our margin rates were higher, and a lot of the food people switched over to the food. We had some strong food sales, strong perishable food sales, high food service.
So people were spending a lot of their dollars over there.
Stephen MacLeod, Analyst, BMO Capital Markets: Okay. Yeah. That's great. And then maybe just turning to the next 100. You know, I I know you gave some color about, you know, the the benefits that you're seeing have outweighed kind of the incremental investments as well as the onetime costs.
Are you able to are are you kind of in a position to give a a number of what that annualized EBIT might look like from next 100 benefits, either maybe this year or next year?
Dan McConnell, CEO, Northwest Company: I won't I won't go into the EBIT right now, Steve, but I will say that I anticipate that there you know, as I indicated, there's about a million dollars in onetime cost that we put through last quarter, and I expect it to be three or four times that in the first quarter of this year. So I will give you that, and then I'll kind of as we gauge and we move through, I'll give you more insights in the quarters to come.
Stephen MacLeod, Analyst, BMO Capital Markets: Okay. That's that's helpful. And I guess based on your commentary yeah. I guess based on your commentary with respect to q one, I mean, is it fair to assume that, you know, q one sounds like maybe
Dan McConnell, CEO, Northwest Company: more of an investment period? You might not see the costs the
Stephen MacLeod, Analyst, BMO Capital Markets: benefits outweighing the costs in in q one, but maybe that turns when you get to the back half of the year. Is that is that the way to interpret that?
Dan McConnell, CEO, Northwest Company: I think that'd be a good way to to to narrate that for sure. Yeah. Okay. Great. Thanks, Dan.
And then maybe just one more question.
Stephen MacLeod, Analyst, BMO Capital Markets: Just turning back to general merchandise. International business was was quite strong. I know you gave a a number of factors that that contributed to that. But was there anything that kinda stood out in the international business to drive that strong, you know, low double digit general merchandise same store sales growth number?
Dan McConnell, CEO, Northwest Company: Not really. I mean, we did open up a a motorized shop in one of our key markets, so that definitely had a play in it. But other than that, nothing else that really stood out.
Conference Operator: Thank you. The next question is from Michael Van Aelst from TD Securities. Please go ahead.
Evan, Analyst, TD Securities: Hey, guys. It's Evan in for Mike. I guess, start just starting off with Canada, I guess. So this is since several quarters now that you called out program spending relate to child and family services. I just wanna I'm trying to understand that a bit more.
Is that incremental spend but not tied to the reform?
Dan McConnell, CEO, Northwest Company: Okay. It is tied to the reform, but it's probably not it's not tied to the settlement money. So we've talked about this in the past. Like, Jordan, because there was a it was deemed to be an insufficient level of service to indigenous people in Northern Canada. So there's a there there was a definite gap between service.
So in the meantime, the government has been working to improving that gap. As an example, in February so I guess it was two two years ago was the benchmark. What what year was that? Was in 02/2021. Two thousand '20 '1, we we estimate that there was about 6 or $700,000,000 spent in this particular area in Northern Canada.
So going towards healthy living and assisting youth and some of the health infrastructure that's existing there. And now we've estimated in 2023, '20 '20 '4 there to be approximately 2,500,000,000.0 to $3,000,000,000 So there has been a significant increase, and that's simply just bringing the level of service up to, call it on the journey to bringing the level of service up. But this is not per se part of the settlement. It's just more bridging the gap of the infrastructure deficit.
Evan, Analyst, TD Securities: Okay. Great. Thanks. And then in in terms of of of the agreement that was reached between Ontario First Nations and the federal government, so it looks like that was that's gonna be the first one to be approved. Just wondering how many of your markets would be impacted by by spending from that once it does get approved?
Dan McConnell, CEO, Northwest Company: Excuse me. The number would have saved me, but you can look in our circular or in our annual statement, you'll be able our annual report, and you'll be able to see the number of stores that we have within the Ontario border. Sorry. I don't have it offhand. Otherwise Yeah.
Yeah.
Evan, Analyst, TD Securities: And and and and that would impact all of those markets?
Dan McConnell, CEO, Northwest Company: Would think so. Yes.
Evan, Analyst, TD Securities: Okay. And then just quickly on on the airline. Given that it's it's it's seems like it's it's running pretty much at at capacity, what are your thoughts on on on growing that business?
Dan McConnell, CEO, Northwest Company: Well, yeah, absolutely. As we see demand increase, then we're always looking to see where we can, you know, make prudent investments to expand the expand the service. So I would say, yeah, our our capacity is is pretty high. So we would we would definitely be open to the right acquisition of some some more aircraft to continue to service the business that's that's out there.
Evan, Analyst, TD Securities: Okay. Thanks. Just switching to international now. How much of your Alaska business is is is tied to the commercial fishing economy? And and when when do you expect to to lap lap the start of the weakness?
Dan McConnell, CEO, Northwest Company: I guess it depends on the macro environment. I mean, that I guess we we haven't talked about tariffs. It's probably the right thing because who knows what's happening is as of an hour ago, I think things have as I understand, I've been in board meetings, but I understand things have changed again. But the the tariffs will have an impact on the fishing industry in in Alaska, just given the large number of exports, who the customers of some of the Alaska fishing, where the where the where where some of the customers reside over in Asia and outside of the of of The US. So I think that's gonna have an impact.
However, as far as is the lap, I would expect probably in q two, I would say, is is is what I would forecast, but very nothing else. Kinda goes weird as it relates to tariffs.
Evan, Analyst, TD Securities: Right. Okay. And then in terms of of SNAP, what percentage of your of your international food sales would you say are tied to SNAP? And how much of that do you think would be at risk from any changes in in benefits?
Dan McConnell, CEO, Northwest Company: We have a pretty healthy we have a pretty healthy SNAP business. We we don't disclose the percentage as you can probably appreciate. And, I mean, look, it it depends. I'm not aware of any conversations as of yet that have talked about making further changes to the SNAP benefits. However, obviously, the the changes if there were changes made and there were changes to decrease the amount of SNAP benefits, it would definitely have a negative impact on our business Okay.
Great. In both Alaska and and The Caribbean, and so are our US markets.
Evan, Analyst, TD Securities: Thank you very much.
Dan McConnell, CEO, Northwest Company: Thanks.
Conference Operator: The next question is from Ty Collins from CIBC. I
Analyst: just wanted to ask a quick clarification, Dan, on your comments, expecting maybe a bit of a moderating pace of the growth in Q1. Were you referring to earnings? Or was that to the top line, to same store sales as well? Earnings. Okay.
Great. That's helpful. And then I'm also wondering, have you noticed any change in consumer sentiment or shopping behavior at all kind of since the emergence of you know, the tariff threats and then volatility, you a month or so ago. There any there's been any sort of a trade down or or any impact to, you know, general merchandise or or more discretionary type of categories in the first few months of the year?
Dan McConnell, CEO, Northwest Company: Nope. Well, we haven't seen that.
Analyst: Great. Thanks.
Dan McConnell, CEO, Northwest Company: Alright. Thank you, Seth. Thank
Conference Operator: you. There are no further questions at this time. I would like to turn the meeting back over to Mr. McConnell.
Dan McConnell, CEO, Northwest Company: Okay. Well, no further comments from myself. So thank you for attending the conference call, and I look forward to speaking with you on our Q1 results.
Conference Operator: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.
Speaker 6: This conference is no longer being recorded.
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