The North West Company Inc.
2024 Annual Report
Financial Highlights
All currency figures in this report are in Canadian dollars, unless otherwise noted
Year Ended
Year Ended
Year Ended
($ in thousands, except per share information)
January 31, 2025
January 31, 2024
January 31, 2023
RESULTS FOR THE YEAR
Sales
$
2,576,344
$
2,471,678
$
2,352,760
Same store sales % increase/(decrease) (1)
4.4 %
2.9 %
(0.8) %
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (2)
$
325,165
$
301,173
$
278,678
Earnings from operations (EBIT)
209,546
195,897
180,305
Net earnings
143,253
134,291
125,836
Net earnings attributable to The North West Company Inc.
137,296
129,391
122,190
Cash flow from operating activities (3)
260,625
230,427
182,838
FINANCIAL POSITION
Total assets
$
1,527,505
$
1,396,010
$
1,336,890
Debt
295,776
281,576
290,050
Total equity
794,714
705,773
647,900
FINANCIAL RATIOS
Debt-to-equity
.37:1
.40:1
.45:1
Return on net assets (RONA) (2)
17.8 %
17.7 %
17.9 %
Return on average equity (ROE) (2)
19.3 %
19.9 %
20.5 %
Sales blend: Food
77.2 %
76.9 %
77.3 %
General Merchandise and other
22.8 %
23.1 %
22.7 %
PER SHARE ($) - DILUTED
EBITDA (2)
$
6.70
$
6.22
$
5.73
Net earnings attributable to The North West Company Inc.
2.83
2.67
2.51
Cash flow from operating activities
5.37
4.76
3.76
Market price: January 31
46.44
38.89
36.24
high
55.93
40.49
40.09
low
37.15
29.58
30.55
(1) All references to same store sales exclude the foreign exchange impact.
(2) See Non-GAAP Financial Measures section.
(3) See Consolidated Liquidity and Capital Resources.
THE NORTH WEST COMPANY INC. 2024
Annual Report
TABLE OF CONTENTS
Management's Discussion & Analysis
Forward-Looking Statements .....................................................................................
2
President & CEO Message ..........................................................................................
3
Chair of the Board Message .......................................................................................
4
Our Business Today ...................................................................................................
5
Vision, Principles and Strategies .................................................................................
6
Key Performance Drivers and Capabilities Required to Deliver Results ......................
8
Consolidated Results and Financial Performance ......................................................
8
Canadian Operations Financial Performance .............................................................
11
International Operations Financial Performance ........................................................
13
Consolidated Liquidity and Capital Resources ..........................................................
15
Quarterly Financial Information
..................................................................................
19
Fourth Quarter Highlights ..........................................................................................
20
Disclosure Controls ...................................................................................................
23
Internal Controls Over Financial Reporting ................................................................
23
Outlook .....................................................................................................................
23
Risk Management .....................................................................................................
24
Corporate Social Responsibility & Sustainability .........................................................
30
Critical Accounting Estimates ....................................................................................
31
New Accounting Standards Implemented ................................................................
33
Future Accounting Standards ....................................................................................
33
Non-GAAP Financial Measures ..................................................................................
34
Glossary of Terms & Abbreviations ............................................................................
36
Eleven-Year Financial Summary ................................................................................
37
Consolidated Financial Statements
Management’s Responsibility for Financial Statements .............................................
39
Independent Auditor’s Report ...................................................................................
40
Consolidated Balance Sheets .....................................................................................
45
Consolidated Statements of Earnings ........................................................................
46
Consolidated Statements of Comprehensive Income ...............................................
47
Consolidated Statements of Changes in Shareholders’ Equity ...................................
48
Consolidated Statements of Cash Flows ....................................................................
49
Notes to Consolidated Financial Statements .............................................................
50
Shareholder Information .......................................................................................
77
Corporate Governance ...........................................................................................
78
MANAGEMENT'S DISCUSSION & ANALYSIS
Unless otherwise stated, this Management's Discussion & Analysis
(“MD&A”) for The North West Company Inc. (“NWC”) and its
subsidiaries (collectively, “North West Company”, the “Company”,
“North West”, or “NWC”) is based on, and should be read in
conjunction with the 2024 annual audited consolidated financial
statements and accompanying notes. The Company's annual
audited consolidated financial statements and accompanying notes
for the year ended January 31, 2025 are in Canadian dollars, except
where otherwise indicated, and are prepared in accordance with
International Financial Reporting Standards as issued by the
International Accounting Standards Board (“IFRS”).
The Board of Directors, on the recommendation of its Audit
Committee, approved the contents of this MD&A on April 9, 2025
and the information contained in this MD&A is current to April 9,
2025, unless otherwise stated.
FORWARD-LOOKING STATEMENTS
This MD&A contains forward-looking statements about North West
including its business operations, strategy, expected financial
performance and condition, and legal matters. Specific forward-
looking statements in this MD&A include, but are not limited to,
future or conditional future financial performance (including sales,
earnings, growth rates, capital expenditures, dividends, debt levels,
financial capacity, access to capital and liquidity), ongoing business
strategies or prospects, the Company's plans regarding sales of
private label products and intentions regarding a normal course
issuer bid and the number of shares purchased, the potential impact
of a pandemic on the Company's operations, supply chain and the
Company's related business continuity plans, the realization of cost
savings from cost reduction plans, the anticipated impact of The
Next 100 strategic priorities and possible future action by the
Company. Forward-looking statements are contained throughout
this MD&A and are typically identified by words such as “expects”,
“anticipates”, “plans”, “believes”, “estimates”, “intends”, “targets”,
“projects”, “forecasts”, “foresees”, “could”, “goals”, “intends”, “seeks”,
“strives”, “will”, “may”, “should” and other similar expressions, or
negative versions thereof, as they relate to North West and its
management.
Forward-looking statements are based on current expectations
and projections about future events and are inherently subject to,
among other things, risks, uncertainties and assumptions about the
Company, economic factors and the retail industry in general.
Forward-looking statements reflect the Company’s estimates,
beliefs and assumptions, which are based on management’s
perception of historical trends, current conditions and expected
future developments, as well as other factors it believes are
appropriate in the circumstances. The Company’s estimates, beliefs
and assumptions are inherently subject to significant business,
economic, competitive and other uncertainties and contingencies
regarding future events and, as such, are subject to change. The
Company can give no assurance that such estimates, beliefs and
assumptions will prove to be correct. Numerous risks and
uncertainties could cause the Company’s actual results to differ
materially from those expressed, implied or projected in the forward-
looking statements, including those described in this MD&A and the
Company’s 2024 Annual Information Form. Such risk and
uncertainties include, but are not limited to: changes in inflation,
tariffs, commodity prices, interest and foreign exchange rates,
government fiscal health and changes in government policy that
result in a reduction in financial support for programs benefiting
individuals including Nutrition North Canada ("NNC"), Jordan's
Principle and Inuit Child First in Canadian Operations, and the U.S.
Supplemental Nutrition Assistance Program ("SNAP") and Alaska by-
pass mail system in International Operations, which contribute to
lower living costs for eligible customers, the Company's ability to
maintain an effective supply chain, changes in accounting policies
and methods used to report financial condition, uncertainties
associated with critical accounting assumptions and estimates,
including estimates of contingent consideration, the effect of
applying future accounting changes, business competition,
technological change, changes in government regulations and
legislation, changes in tax laws, unexpected judicial or regulatory
proceedings, catastrophic events, the Company's ability to complete
and realize benefits from capital projects, E-Commerce investments,
strategic transactions and the integration of acquisitions, the
Company's ability to realize benefits from investments in information
technology ("IT") and systems, including IT system implementations,
or unanticipated results from these initiatives and the Company's
success in anticipating and managing the foregoing risks.
The reader is cautioned that the foregoing list of factors that
may affect the Company’s forward-looking statements is not
exhaustive. Other risks and uncertainties not presently known to the
Company or that the Company presently believes are not material
could also cause actual results or events to differ materially from
those expressed in its forward-looking statements. Additional risks
and uncertainties are discussed in the Company’s materials filed with
the Canadian securities regulatory authorities from time to time,
including, without limitation, the Risk Factors sections of the 2024
Annual Information Form, and in our most recent consolidated
financial statements, management information circular, material
change reports and news releases. The reader is also cautioned to
consider these and other factors carefully and not place undue
reliance on forward-looking statements, which reflect the Company’s
expectations only as of the date of this MD&A. Other than as
specifically required by applicable law, the Company does not intend
to update any forward-looking statements whether as a result of
new information, future events or otherwise.
Additional information on the Company, including our Annual
Information Form, can be found on SEDAR+ at www.sedarplus.ca or
on the Company's website at www.northwest.ca.
2
THE NORTH WEST COMPANY INC. 2024
President & CEO Message
The past year has been a testament to our hard work and
commitment, and I am proud of all we have achieved. 2024 was a
year marked by strong financial performance, strategic growth, and a
firm commitment to the communities we serve throughout
northern Canada, Alaska, the South Pacific and the Caribbean.
Despite the challenges we faced in a constantly shifting
landscape, North West remains adaptable and strong. Beyond
delivering impressive financial results for our shareholders, we
continue to identify and pursue opportunities that deliver value to
the communities we proudly serve and yield long-term, sustainable
growth and value to our shareholders.
A critical part of our success this past year has been narrowing
our focus on our Next 100 strategy, specifically identifying
opportunities within four areas: what we sell, how we operate, how
we move it, and how we scale it. In 2024, we continued to identify
opportunities to deliver more value within these four areas. Our work
this year resulted in the launch of new private label products in
select International markets, gaining access to Loblaw’s best-in-class
private label products in our Canadian Operations, new pricing and
promotion strategies, enhanced labour optimization, and testing a
new store-based inventory forecasting and replenishment tool.
While a significant amount of progress has been made, there is still a
lot of work to do, and we remain committed to driving further
Operational Excellence in every aspect of our business.
Operating in remote environments presents its own set of
complexities. Within our Canadian Operations, we continue to face
the challenges of extreme weather and inadequate infrastructure
that negatively impacts the product we move by road, rail, air and
sea, that significantly increases the cost of delivering merchandise to
our stores. In many northern communities there is a lack of adequate
airport facilities, runways, sea ports and storage. These challenges
serve as a reminder that for northern Canada, supply chain problems
are not just logistical, they are also infrastructure-related. That is why
we remain committed to identifying and implementing solutions
that tackle the most pressing challenges facing the communities we
serve in northern Canada, so we can remain focused on providing
our customers and the communities we serve with reliable, trusted
service and the best value possible.
In 2024, our International Operations presented us with
opportunities to expand our footprint and deepen relationships with
the communities we serve. In Alaska, we opened a new store in
Anaktuvuk Pass, converted our AC Quickstop convenience store in
Bethel to an AC Motorsports dealership and opened a new AC store
in Kotzebue with expanded merchandise assortments and services.
We are also building a new Cost-U-Less wholesale retail store in
Agana, Guam and undertaking a major expansion of our RoadTown
Wholesale Trading store in Virgin Gorda, BVI. These investments will
ensure our customers have access to the products and services they
need.
Throughout 2024’s successes and setbacks, we have stayed true
to our core principles: Customer Driven, Passion, Enterprise,
Accountability, Trust and Personal Balance. Nor’Westers are guided
by these principles, and while the work we are tasked with isn’t
always easy, they act as reminders of the commitment we have
made to the communities we serve. This past year, I have witnessed
first-hand the resiliency, adaptability and dedication of Nor’Westers
making a meaningful impact, and I am confident that the solid
foundation we continue to strengthen will support growth and
long-term success for generations to come.
Embedded within our sustainability strategy and ESG
framework, “Our Promise to Indigenous Peoples” remains central to
everything we do. As one of Canada’s largest private employers of
Indigenous People, with 1,861 self-identified Indigenous employees
serving northern Indigenous communities, we have a responsibility
to ensure we are fostering stronger, more collaborative relationships
with community leaders and governments to support inclusion,
social well-being, and meaningful progress in the spirit of Truth and
Reconciliation.
In closing, I want to extend my sincere appreciation and thanks
to our dedicated Nor’Westers who lead with passion and
determination, going above and beyond to serve our communities,
making a real difference through their commitment and hard work. I
also want to express my gratitude to our customers, suppliers,
shareholders and community partners. Your trust and support is why
we’re here, and you inspire us to keep raising the bar higher.
Daniel G. McConnell
President & CEO
April 9, 2025
3
ANNUAL REPORT
Chair of the Board Message
I am pleased to share the progress the North West Company
has made over the past year, guided by the Board’s commitment to
strong governance and strategic oversight. As we navigate an
evolving business landscape, the Board remains focused on ensuring
North West has the strategy and resources in place to sustain long-
term growth while delivering on our purpose of serving remote and
underserved communities.
2024 was another year of strong results for the North West
Company. Sales increased 4.2% to $2.6 billion, driven by same-store
sales growth and new store openings, which contributed to EBIT and
EBITDA(1) increasing 7.0% and 8.0% respectively. The Next 100
strategy is focused on increasing the Company’s capability to
continue to deliver sustainable, long-term growth by identifying
opportunities to deliver even more value to customers and
shareholders through specific areas of what we sell, how we operate,
how we move it, and how we scale it. These priorities have started to
drive improvements and position the Company for the future.
In addition to the Next 100 strategy, the Board also oversees
and monitors North West’s ESG strategy, including “Our Promise to
Indigenous Peoples” and management’s ongoing focus on Diversity,
Equity, and Inclusion ("DEI"). Recognizing that talent acquisition and
retention are critical to operational success, one of the Board’s areas
of focus this past year was reviewing management’s work on talent
development, attraction and retention, which included identifying
high-potential leaders and succession planning. Another factor that
is critical to our success is the training and development of our front-
line employees. The successful launch of “Compass”, an innovative
learning platform, has provided employees with new tools to
support their well-being and professional growth. These efforts will
help ensure North West continues to be guided by strong,
experienced leaders well into the future.
On behalf of the Board, I extend my appreciation to all
Nor’Westers for their dedication to our mission of making people’s
lives better in the communities we are privileged to serve and to
shareholders for their continued support in our pursuit of this
mission.
Brock Bulbuck
Chair of the Board
April 9, 2025
4
THE NORTH WEST COMPANY INC. 2024
Management's
Discussion &
Analysis
OUR BUSINESS TODAY
The North West Company is a leading retailer to rural and
developing small population communities in the following regions:
northern Canada, rural Alaska, the South Pacific and the Caribbean.
Our stores offer a broad range of products and services with an
emphasis on food and a compelling value offer of being the best
local shopping choice for everyday household and lifestyle needs.
North West's core strengths include: our ability to adapt to
varied community preferences and priorities; our on-the-ground
presence with hard-to-replicate operating skills, customer insights
and facilities; our logistics capability in moving product to remote
markets; and, our ability to apply these strengths within
complementary businesses.
North West has a rich enterprising legacy as one of the longest
continuing retail enterprises in the world. The Company traces its
roots back to 1668 and many of our stores in northern Canada have
been in operation for over 200 years.
Our stores in Alaska and northern Canada serve communities
with populations ranging from 300 to 9,000. A typical store is 6,500
square feet in size and offers food, family apparel, housewares,
appliances, outdoor products and services such as fuel, post offices,
pharmacies, quick-service prepared food, prepaid card products,
ATMs, cheque cashing, income tax return preparation and
proprietary credit programs.
Growth at North West is driven by market share capture within
existing locations and from applying our expertise and infrastructure
to new product categories, markets and complementary businesses.
The latter includes vertical investments in shipping and air cargo,
wholesaling to independent stores, and retailing through mid-sized
warehouse and supermarket format stores serving the South Pacific
islands and the Caribbean.
A key strength and ongoing strategy of North West is our ability
to seize unique community-by-community selling opportunities
better than our competition. Flexible store models, store
management selection and education, store-level merchandise
ordering, community relations and incentive plans are all ingredients
of our approach to sustain a leading market position. Our
enterprising culture, our execution skills in general, and our logistics
and selling skills specifically, are also essential components to
meeting customer needs within each market we serve.
North West delivers its products and services through the
following retail, wholesale and complementary businesses:
Canadian Operations
•
121 Northern stores, offering a combination of food, financial
services and general merchandise to remote northern Canadian
communities;
•
5 NorthMart stores, targeted at larger northern markets with an
emphasis on an expanded selection of fresh foods, apparel and
health products and services;
•
30 Quickstop convenience stores, offering extended hours,
ready-to-eat foods, fuel and related services in northern
Canadian markets;
•
5 Giant Tiger ("GT") junior discount stores, offering family
fashion, household products and food in northern market
locations;
•
3 Valu Lots discount centers and direct-to-customer food
distribution outlets for remote communities in Canada;
•
1 Solo Market store, targeted at less remote, rural markets;
•
3 Pharmacy and Convenience stores, stand-alone northern
pharmacies and convenience stores;
•
2 NWC Motorsports dealership offering sales, service, parts and
accessories for Ski-doo, Honda, Can-Am and other premier
brands;
•
Crescent Multi Foods ("CMF"), a distributor of produce and
fresh meats to independent grocery stores in Saskatchewan,
Manitoba and northwestern Ontario;
•
North West Tele-pharmacy Solutions, a leading provider of
contract tele-pharmacist services to rural hospitals and health
centres across Canada; and
•
Transport Nanuk Inc. and North Star Air Ltd. ("NSA"), water
and air-based transportation businesses, respectively, serving
northern Canada.
International Operations
•
34 Alaska Commercial Company ("AC") stores, similar to
Northern and NorthMart, offering a combination of food and
general merchandise to communities across remote and rural
regions of Alaska;
•
4 Quickstop convenience stores within rural Alaska;
•
1 AC Motorsports dealership offering sales, service, parts and
accessories for Honda, Yamaha, Ski-doo and Can-Am brands;
•
Pacific Alaska Wholesale ("PAW"), a leading distributor to
independent grocery stores, commercial accounts and
individual households in rural Alaska;
•
12 Cost-U-Less ("CUL") mid-size warehouse stores, offering
discount food and general merchandise products to island
communities in the South Pacific and the Caribbean; and
•
9 Riteway Food Markets and a significant wholesale
operation (collectively "RTW") in the British Virgin Islands.
5
ANNUAL REPORT
VISION
At North West our mission is to be a trusted provider of goods and
services within harder-to-access, under-served communities. Our
vision is to help our customers live better. This starts with our
customers' ability and desire to shop locally with us for the widest
possible range of products and services that meet their everyday
needs. We respond by striving to be innovative, reliable, convenient,
welcoming and adaptable, at the lowest local price, within what are
typically higher cost environments. For our associates, we strive to be
a preferred, fulfilling place to work. For our investors, we strive to
deliver sustainable, total returns through earnings growth, dividends
and disciplined capital allocation.
PRINCIPLES
The way we work at North West is shaped by six core principles:
Customer Driven, Enterprising, Passion, Accountability, Trust, and
Personal Balance.
Customer Driven refers to looking through the eyes of our
customers while recognizing our presence as a supportive
community citizen.
Enterprising is our spirit of innovation, improvement and growth,
reflected in our unrelenting focus on new and better products,
services and processes.
Passion refers to how we value our work and the opportunity to
make a positive impact in our customers' lives.
Accountability is our management approach to getting work done
through effective roles, tasks and resources.
Trust at North West means doing what you say you will do, with
fairness, integrity, inclusion and respect.
Personal Balance is our commitment to sustaining ourselves and
our organization, so that we work effectively and sustainably in our
roles and for our customers and communities.
STRATEGIES
The strategies at North West are guided by our vision and aligned
with a total return approach to investment performance. We aim to
deliver top-quartile returns through earnings growth and dividend
yield with opportunities considered in terms of their growth
potential and ability to sustain an attractive cash return within a
lower business risk profile.
The Company's overriding goal is to offer essential products
and services that help our customers to live better and to deliver
sustainable growth through operational excellence and by
continuing to build capability for the future through the following
priorities:
•
striving for operational excellence in all facets of our business
with a priority on ensuring in-stock availability on essential
products that our customers rely on and reducing costs to help
provide value to our customers;
•
investing to grow our business through store openings in new
and existing markets, store renovations, refined merchandise
assortments and expanded product categories and services,
including pursuing wholesale and B-to-B opportunities,
consistent with our core capability as an essential everyday
products and service provider in remote markets;
•
building a superior logistics and supply chain capability with an
ongoing focus on optimizing our transportation mix and air
cargo capability to provide faster, more reliable and lower cost
service to our stores and customers in remote markets;
•
optimizing the IT infrastructure for our stores and support
offices to deliver efficiencies and more streamlined processes
and drive improvements in category management, pricing, data
analytics,
forecasting,
replenishment
and
inventory
management; and
•
delivering on the priorities aligned within our Environmental,
Social and Governance ("ESG") framework developed around
People, Planet and Partnerships. This includes ensuring that we
attract, develop and retain top talent that is inclusive of the
diverse peoples and cultures that are represented within the
communities we serve and that we are responsible towards the
planet, the communities we serve and other stakeholder
interests.
Collectively these priorities are referred to as "The Next 100", which is
focused on driving operational excellence, expanding our
capabilities and pursuing value for our customers, our employees,
our shareholders and the communities we serve. The initiatives
within the Next 100 program noted above leverage the power of
data through new tools and analytics, and will be enabled by
investments in technology and training which will help sustain the
benefits of this work in the years to come. The Next 100 touches on
every aspect of our business and aims to drive annualized
incremental EBIT, which is expected to ramp-up through 2025 and
2026 as our initiatives reach maturity. As we lay the groundwork for
these improvements, we are investing in additional resources and
technology to support the execution of the Next 100 program. In
addition to this investment in resources, we anticipate incurring one-
time costs, including professional fees and other expenses, in
advance of the incremental EBIT being realized.
6
THE NORTH WEST COMPANY INC. 2024
Following is an update on the work in 2024 related to these strategic
priorities:
Operational Excellence We continue to focus on being in-stock on
food and other essential items such as transportation, home
furnishings and appliances, while striving to provide value for our
customers within a high cost environment by minimizing as much as
possible the impact of cost increases from suppliers. In addition, we
continue to seek opportunities to deliver cost savings in other
aspects of our business through improved store labour planning,
lower inventory shrink and other expense management initiatives.
In 2024, we piloted an inventory forecasting and replenishment
application which is planned to be rolled out to stores in northern
Canada in 2025. The implementation of forecasting and
replenishment is expected to improve our in-stock position on
essential food items, reduce inventory shrink and enable more
efficient logistics planning.
Investing in Stores, Products and Services Three new stores were
opened, including two stores in Canadian Operations and one store
in International Operations as follows:
•
a Quickstop convenience store in Grassy Narrows, Ontario;
•
a Valu Lots store in Fisher River, Manitoba;
•
an AC store in Anaktuvuk Pass, Alaska.
In addition, an AC Quickstop convenience store in Bethel, Alaska was
converted into an AC Motorsports dealership.
As part of the refinement of merchandise assortments included in
our Next 100 work, the Company added Loblaw Companies Ltd. as a
supplier and expects to begin selling Loblaw private label products
in its northern Canada stores in the first quarter of 2025 as the new
assortments are implemented. Development of new private label
products for our International Operations began in 2024, with the
implementation of an expanded private label assortment planned
for late 2025.
Building a Superior Logistics and Supply Chain Capability NSA's
cargo aircraft utilization rates and service levels continue to meet
targets and deliver consistent service to northern Canada and were a
key factor in maintaining good in-stock rates in our stores. Third
party cargo, charter and scheduled passenger business contributed
to earnings gains in 2024. NSA is building a hangar in Thunder Bay,
Ontario to support its cargo and passenger business, which is
expected to be completed in the second quarter of 2025.
Optimizing our IT Infrastructure Investments are being made in
upgrading hardware and replacing legacy software, including the
implementation of new pricing and data analytics software, and the
implementation of a new warehouse management system ("WMS")
in International Operations in 2025 followed by the implementation
of the WMS in Canadian Operations in 2026.
Environmental, Social and Governance ESG is integrated within
our strategies and work priorities and guide our decisions across the
Company. We recognize that one of the strengths of our Company is
the diversity of our workforce and that continuing to enhance a
culture of diversity, equity and inclusion is critical to our business and
our ability to attract, develop and retain top talent. We completed a
prioritization exercise to determine which areas of ESG have the
greatest impact on our business and business partners, including the
communities we serve, employees and other stakeholders. The
results of this exercise have been incorporated into our strategy and
work priorities. Our ESG strategy is embedded in our business
operations and unique business model, supporting underserved
communities in remote geographical locations.
As we continue to develop and implement our action plans, we
recognize that this is an ongoing learning process that requires
adaptability to make progress towards our ESG objectives. Our ESG
strategy also aims to complement "Our Promise to Indigenous
Peoples" and our commitment to building more collaborative
relationships that will enhance the inclusion and social well-being of
Indigenous People in Canada. North West is fully committed to the
spirit of reconciliation reflected in the Truth and Reconciliation
Commission of Canada's Call to Action and final report.
In 2024, North West received an Impact Award from Canadian Grocer
in the Diversity, Equity and Inclusion category for our Indigenous
Procurement Strategy which aims to reduce barriers and obstacles to
allow the development of economic partnerships with local and
Indigenous businesses and suppliers. In addition, we continued to
advance our Indigenous Cultural training as part of Our Promise to
Indigenous Peoples, having over 200 employees in associate,
manager, director and executive roles completing a two-day
Indigenous Cultural workshop.
Another factor that is critical to our success is talent attraction,
development and retention, including the training and development
of our front-line employees. In 2024, we launched “Compass”, an
innovative learning platform, that has provided employees with new
tools to support their well-being and professional growth.
Further information on our ESG Strategy is provided in the Corporate
Social Responsibility and Sustainability section.
7
ANNUAL REPORT
KEY PERFORMANCE DRIVERS AND
CAPABILITIES REQUIRED TO DELIVER RESULTS
The financial capability to sustain the competitiveness of our
core strengths and to pursue growth: Our investment priorities
center on our store management and front line people, lower costs
to help mitigate inflationary price increases, next level technology
and superior logistics.
The ability to be a leading community store in every market we
serve: We strive to connect with the customers and communities
we serve in a highly valued way. It starts with being able to tailor our
store formats, product/service mix, community support and store
compensation, while still realizing the efficiencies of our size.
Investing in relationships, embracing a broad range of products,
services and store sizes, flexible technology platforms and “best
practice” work processes, are required to achieve this goal.
Our ability to build and maintain supportive community
relations: To preserve our community access we must be trusted,
open, respectful, adaptable and socially helpful. Store leases and
business licenses are often subject to community approval and
depend on our track record in these areas and the perceived
community and customer value of our retail store compared to other
options.
Our ability to develop highly capable store level employees and
work practices: Store work and related processes must drive sales
and efficiently enable our store-level personnel to manage the other
key facets of their store. This enables our full potential to realize local
selling opportunities, meet our customer service commitments and
build and maintain positive community relationships. It recognizes
that our store roles must be compelling and provide opportunities to
learn and reach their full potential in order to attract and retain the
best people, including our on-going ability to hire within-
community.
Our ability to deliver merchandise and information through our
unique store network: The integration and build-out of our air
cargo capability in northern Canada enables us to deliver and receive
products faster, cheaper and more reliably compared to third-party
providers. Similar advantages are possible through our investment
in information technology.
Consolidated Results
2024 Highlights
•
Three new stores were opened, two in Canadian Operations
and one in International Operations, in addition to converting
an existing store in Bethel, Alaska to an AC motorsports
dealership.
•
Sales increased 4.2%.
•
Net earnings increased $9.0 million or 6.7%.
•
Return on average equity(1) was 19.3%.
•
Return on net assets(1) was 17.8%.
•
Debt-to-Equity was 0.37 at January 31, 2025 and has remained
below 1.0 since 2000.
•
Quarterly dividends increased $0.01 per share or 2.6% to $0.40
per share in September 2024 and annual dividends per share
have increased 3.1% on a compound annual growth basis over
the past 10 years.
FINANCIAL PERFORMANCE
Some of the key performance indicators used by management to
assess results are summarized in the following table:
Key Performance Indicators and Selected Annual Information
($ in thousands, except per share)
2024
2023
2022
Sales
$ 2,576,344
$ 2,471,678
$ 2,352,760
Same store sales % increase/
(decrease)(2)
4.4 %
2.9 %
(0.8) %
EBITDA(1)
$ 325,165
$
301,173
$ 278,678
Earnings from operations
$ 209,546
$
195,897
$ 180,305
Net earnings
$ 143,253
$
134,291
$ 125,836
Net earnings attributable to
shareholders of the
Company
$ 137,296
$
129,391
$ 122,190
Net earnings per share -
diluted
$
2.83
$
2.67
$
2.51
Cash flow from operating
activities(3)
$ 260,625
$
230,427
$ 182,838
Cash dividends per share
$
1.58
$
1.54
$
1.50
Total assets
$ 1,527,505
$ 1,396,010
$ 1,336,890
Total long-term liabilities
$ 457,937
$
439,579
$ 440,384
Return on net assets(1)
17.8 %
17.7 %
17.9 %
Return on average equity(1)
19.3 %
19.9 %
20.5 %
(1) See Non-GAAP Financial Measures section.
(2) All references to same store sales exclude the foreign exchange impact.
(3) See Consolidated Liquidity and Capital Resources section.
8
THE NORTH WEST COMPANY INC. 2024
Following is an analysis of the significant factors that impacted the
financial results and key performance indicators:
Consolidated Sales Sales for the year ended January 31, 2025
(“2024”) increased 4.2% to $2.576 billion compared to $2.472 billion
for the year ended January 31, 2024 (“2023”), and were up 9.5%
compared to $2.353 billion for the year ended January 31, 2023
(“2022”). The increase in sales compared to 2023 was due to same
store sales gains, the impact of foreign exchange on the translation
of International Operations sales and new store sales. These factors
were partially offset by lower wholesale sales. Excluding the foreign
exchange impact, sales increased 3.5% from 2023 and were up 7.8%
compared to 2022. The increase in sales compared to 2022 is largely
due to same store sales gains, the impact of foreign exchange, sales
from new stores and higher inflation.
On a same store basis, sales were up 4.4% compared to a
same store sales increase of 2.9% in 2023 and a 0.8% decrease in
2022 as shown in the following table:
Same Store Sales
(% increase/(decrease))
2024
2023
2022
Food
4.5 %
3.4 %
1.7 %
General merchandise (GM)
4.1 %
(0.1) %
(13.3) %
Total food & GM sales
4.4 %
2.9 %
(0.8) %
The impact of higher merchandise and freight cost inflation in
2023 and 2022 resulted in changes in product sales blend as
consumers allocated more of their spending to food and reduced
purchases of general merchandise.
Consolidated food sales increased 4.7% from 2023 and were up
3.8% excluding the foreign exchange impact. Same store food sales
increased 4.5% on top of a 3.4% increase last year. On a quarterly
basis, same store food sales increased 3.8% in the first quarter
followed by increases of 4.6%, 3.8% and 5.5% in the second, third
and fourth quarter respectively. Canadian food sales increased 4.7%
and International food sales increased 2.7% excluding the foreign
exchange impact.
Consolidated general merchandise sales increased 4.0%
compared to 2023 and were up 3.5% excluding the foreign
exchange impact. Same store general merchandise sales increased
4.1% for the year compared to a 0.1% decrease last year. On a
quarterly basis, same store general merchandise sales increased 3.9%
in the first quarter followed by increases of 1.9%, 5.3% and 5.1% in
the second, third and fourth quarter respectively. Canadian general
merchandise sales increased 4.1% and International general
merchandise sales increased 1.7% excluding the foreign exchange
impact.
Other sales, which include airline revenue, financial services, fuel
and pharmacy, increased 1.2% compared to 2023 mainly due to
higher pharmacy sales. An increase in retail fuel sales and financial
services revenue were also a factor. Other sales increased 13.6%
compared to 2022 mainly due to higher airline revenue in North Star
Air ("NSA") and sales gains in pharmacy and fuel.
Sales Blend The table below shows the consolidated sales blend
over the past three years:
2024
2023
2022
Food
77.2 %
76.9 %
77.3 %
General merchandise and
other
22.8 %
23.1 %
22.7 %
Canadian Operations accounted for 57.3% of total sales (57.4% in
2023 and 56.2% in 2022) with International Operations accounting
for the remaining 42.7% (42.6% in 2023 and 43.8% in 2022).
(1) See Non-GAAP Financial Measures section.
Gross Profit Gross profit increased 7.3% to $868.3 million
compared to $809.4 million last year due to higher sales and a 95
basis point increase in the gross profit rate. The higher gross profit
rate compared to last year was largely due to changes in sales blend,
including a lower blend of wholesale sales. Lower markdowns,
including more effective data-driven promotional activity as part of
our Next 100 work, compared to last year was also a factor.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses (“Expenses”) of $658.8 million
increased $45.3 million or 7.4% compared to last year and were up
75 basis points as a percentage of sales. The increase in Expenses is
largely due to higher staff costs related to inflationary and minimum
wage increases and an investment in additional resources required
to execute the Next 100 operational excellence work, an increase in
depreciation and the impact of foreign exchange on the translation
of International Operations Expenses. The impact of new stores,
higher vessel repairs incurred through our investment in Transport
Nanuk Inc., an increase in share-based compensation costs and one-
time costs related to our Next 100 work were also factors. These
factors were partially offset by the $3.7 million asset write-off from
the loss of our store in Fox Lake, Alberta that was destroyed by wild
fire last year. The investment in additional resources and Next 100
one-time costs are required to unlock the future growth and
incremental EBIT expected from the Next 100 initiatives. Further
information on the Next 100 is provided in the Strategies and
Outlook sections.
Earnings from Operations (EBIT) and EBITDA(1) Earnings from
operations or earnings before interest and income taxes ("EBIT”)
increased $13.6 million or 7.0% to $209.5 million compared to $195.9
million last year, and increased $29.2 million or 16.2% compared to
$180.3 million in 2022. Earnings before interest, income taxes,
depreciation and amortization ("EBITDA(1)") increased 8.0% to $325.2
million compared to $301.2 million last year, and was up $46.5
million or 16.7% compared to 2022. The increase in EBIT and EBITDA
compared to 2023 and 2022 is due to the sales, gross profit and
Expense factors previously noted. Adjusted EBITDA(1), which excludes
the impact of share-based compensation, one-time Next 100 costs
and the Fox Lake store fire loss last year, increased $22.4 million or
7.0% to $340.4 million compared to $318.0 million last year and was
up $48.6 million or 16.7% compared to 2022. The impact of the Next
100 one-time costs was more than offset by more effective data-
driven promotional activity, including a reduction in print media and
other cost savings initiatives.
9
ANNUAL REPORT
Additional information on the financial performance of
Canadian Operations and International Operations is provided on
pages 11 and 13 respectively.
Interest Expense Interest expense decreased 3.9% to $18.3 million
compared to $19.1 million last year. This decrease is due to lower
average debt levels and interest rates. Average debt levels decreased
1.3% compared to last year mainly due to a decrease in amounts
drawn on revolving loan facilities. The average cost of debt was 4.3%
compared to 4.7% last year. Further information on interest expense
is provided in Note 19 to the consolidated financial statements.
Income Tax Expense Income taxes increased to $48.0 million
compared to $42.6 million last year and the effective tax rate for the
year was 25.1% compared to 24.1% last year. The increase in income
tax expense is due to higher earnings and the impact of a higher
effective tax rate. The increase in the effective tax rate is substantially
due to the impact of The Global Minimum Tax Act ("GMTA") – Pillar
Two legislation included in Bill C-69 that was enacted in Canada on
June 20, 2024. This legislation implements the Pillar Two global
minimum tax regime developed by the Organisation for Economic
Co-operation and Development ("OECD") which applies a minimum
effective tax rate of 15% on income earned in each jurisdiction in
which the Company operates. The Company operates retail stores in
the Cayman Islands, Barbados and British Virgin Islands which are
impacted by the GMTA - Pillar Two legislation. Changes in the
effective income tax rate may also occur as a result of various factors,
including changes in tax law, the impact of discrete items, including
the taxation of share-based compensation and insurance gains,
changes in tax estimates and the blend of earnings across the
various tax rate jurisdictions. Further information on income tax
expense, the effective tax rate and deferred tax assets and liabilities is
provided in Note 10 to the consolidated financial statements.
(1) See Non-GAAP Financial Measures section.
(2) Net earnings attributable to shareholders of the Company.
Net Earnings Consolidated net earnings increased $9.0 million or
6.7% to $143.3 million compared to $134.3 million last year, and are
up $17.4 million or 13.8% compared to 2022. Net earnings
attributable to shareholders of the Company were $137.3 million
compared to $129.4 million last year and diluted earnings per share
were $2.83 per share compared to $2.67 per share last year due to
the factors previously noted. Excluding the impact of the share-
based compensation, one-time Next 100 costs and the Fox Lake
store fire loss last year, adjusted net earnings(1) increased $7.8 million
or 5.3% to $154.8 million compared to $147.0 million last year, and
were up $18.7 million or 13.8% compared to 2022 adjusted net
earnings(1) of $136.0 million. In 2024, the average exchange rate used
to translate International Operations sales and expenses was 1.3775
compared to 1.3504 last year and 1.3088 in 2022.
The Canadian dollar's depreciation versus the U.S. dollar compared
to 2023 had the following net impact on the 2024 results:
Sales........................................................................increase of $21.7 million or 2.0%
Earnings from operations..............................................increase of $1.2 million
Net earnings...........................................................................increase of $1.0 million
Diluted earnings per share...................................increase of $0.02 per share
Total Assets Consolidated total assets for the past three years is
summarized in the following table:
($ in thousands)
2024
2023
2022
Total assets
$ 1,527,505
$
1,396,010
$
1,336,890
Consolidated assets increased $131.5 million or 9.4% compared to
2023 and were up $190.6 million or 14.3% compared to 2022. The
increase in consolidated assets compared to last year and 2022 is
mainly due to an increase in current assets, largely driven by higher
inventories and cash, and an increase in property and equipment.
Further information on the change in current assets is provided in
the working capital section below. The increase in property and
equipment is largely due to new stores, store renovations and
investments in fixtures and equipment. An increase in property and
equipment in NSA, including the replacement of a PC-12 aircraft and
the start of construction of a hangar in Thunder Bay, Ontario, was
also a factor. Further information on property and equipment is
provided in Note 7 to the consolidated financial statements. The
impact of foreign exchange was also a factor as the year-end
exchange rate used to translate International Operations assets
increased to 1.4485 compared to 1.3412 last year and 1.3382 in 2022.
Consolidated working capital for the past three years is
summarized in the following table:
($ in thousands)
2024
2023
2022
Current assets
$ 550,268
$ 502,905
$ 474,844
Current liabilities
$ (274,854)
$ (250,658)
$ (248,606)
Working capital
$ 275,414
$ 252,247
$ 226,238
Working capital increased $23.2 million or 9.2% to $275.4
million compared to $252.2 million in 2023 and increased $49.2
million or 21.7% compared to $226.2 million in 2022. Current assets
increased $47.4 million or 9.4% compared to last year and were up
$75.4 million or 15.9% compared to 2022. The increase in current
assets compared to 2023 and 2022 is primarily due to an increase in
inventories, cash and prepaid expenses. Further information on
current assets is provided in the net assets employed section under
Canadian
Operations
and
International
Operations.
Further
information on the increase in cash is provided in the consolidated
statements of cash flows and the Consolidated Liquidity and Capital
Resources section.
Current liabilities increased $24.2 million or 9.7% to $274.9
million compared to $250.7 million last year and were up $26.2
million or 10.6% compared to $248.6 million in 2022. The increase
compared to 2023 and 2022 is substantially due to an increase in
accounts payable and accrued liabilities mainly due to the timing of
payments of trade accounts payable. Further information on working
capital for the Canadian Operations and International Operations is
on page 12 and page 14 respectively.
10 THE NORTH WEST COMPANY INC. 2024
The following graph shows the RONA and ROE for the past
three years:
(1) See Non-GAAP Financial Measures section.
Return on net assets employed ("RONA") increased to 17.8%
compared to 17.7% in 2023 and decreased compared to 17.9% in
2022. The increase compared to last year is due to a 7.0% increase in
EBIT and a 6.6% increase in average net assets employed. Additional
information on net assets employed for the Canadian Operations
and International Operations is on page 12 and page 14 respectively.
Return on average equity ("ROE") decreased to 19.3% compared
to 19.9% in 2023 due to the impact of higher average equity mainly
related to an increase in retained earnings and accumulated other
comprehensive income compared to last year partially offset by a
6.7% increase in net earnings. Further information on shareholders'
equity is provided in the consolidated statements of changes in
shareholders' equity in the consolidated financial statements.
Total Long-Term Liabilities Consolidated total long-term liabilities
for the past three years is summarized in the following table:
($ in thousands)
2024
2023
2022
Total long-term liabilities
$ 457,937
$
439,579
$
440,384
Consolidated long-term liabilities increased $18.4 million or
4.2% to $457.9 million compared to 2023 and were up $17.6 million
or 4.0% from 2022.
The increase in long-term liabilities compared to 2023 is
primarily due to higher long-term debt resulting from an increase in
amounts drawn on revolving loan facilities and the impact of foreign
exchange on the translation of U.S. denominated debt. An increase
in defined benefit plan obligations was also a factor. The increase in
long term liabilities compared to 2022 is due to the impact of foreign
exchange and an increase in lease liabilities and defined benefit plan
obligations. Additional information on long-term debt, lease
liabilities and defined benefit plan obligations is provided in Note 12,
Note 8 and Note 13 respectively to the consolidated financial
statements.
Canadian Operations
FINANCIAL PERFORMANCE
Canadian Operations results for the year are summarized by the key
performance indicators used by management as follows:
Key Performance Indicators
($ in thousands)
2024
2023
2022
Sales
$ 1,475,039
$ 1,418,961
$ 1,323,185
Same store sales %
increase/(decrease)
5.8 %
5.7 %
(2.4) %
EBITDA (1)
$ 223,546
$ 204,089
$ 185,458
Earnings from operations
$ 146,875
$ 133,909
$ 119,090
Return on net assets (1)
21.0 %
19.8 %
19.1 %
(1) See Non-GAAP Financial Measures section.
Sales Canadian Operations sales increased $56.1 million or 4.0% to
$1.475 billion compared to $1.419 billion in 2023 and were up $151.9
million or 11.5% compared to 2022. The increase in sales compared
to 2023 and 2022 was due to same store sales gains and the impact
of new stores. Higher pharmacy sales, retail fuel sales and financial
services revenue were also factors. These factors were partially offset
by lower wholesale food sales and lower airline revenue compared
to very strong airline revenue gains last year.
Food sales accounted for 67.0% of total Canadian Operations
sales compared to 66.6% last year. The balance was made up of
general merchandise and other sales at 33.0% (33.4% in 2023). Other
sales consist primarily of airline revenue, financial services revenue,
fuel and pharmacy.
Food sales increased by 4.7% from 2023 and were up 10.2%
compared to 2022. Same store food sales increased 6.1% on top of a
5.9% increase in 2023 and a 0.4% increase in 2022. On a quarterly
basis, same store food sales increased 4.4% in the first quarter
followed by increases of 7.6% and 4.8% in the second quarter and
third quarter respectively, and a 7.6% increase in the fourth quarter.
General merchandise sales increased 4.1% from 2023 and were
up 13.9% compared to 2022. Same store sales in 2024 increased
4.3%, compared to a 5.3% increase in 2023 and a 13.3% decrease in
2022. On a quarterly basis, same store general merchandise sales
increased 6.4% in the first quarter compared with increases of 2.7%,
5.3% and 3.4% in the last three quarters.
Other sales increased 1.4% from 2023 and were up 14.4%
compared to 2022. The increase in sales compared to 2023 was
mainly due to higher pharmacy and retail fuel sales and an increase
in financial services revenue. These factors were partially offset by
lower airline revenue this year compared to very strong airline
revenue gains last year related to higher third-party cargo volumes
and higher passenger-related revenues. The increase in other sales
compared to 2022 is primarily due to higher airline revenue,
pharmacy sales and retail fuel sales.
11
ANNUAL REPORT
Sales Blend The table below shows the sales blend for the
Canadian Operations over the past three years:
2024
2023
2022
Food
67.0 %
66.6 %
67.8 %
General merchandise and other
33.0 %
33.4 %
32.2 %
Same Store Sales Canadian Operations same store sales for the
past three years are shown in the following table. Sales in 2024 were
positively impacted by increased consumer demand in certain
communities arising from payments to individuals from First Nations
Drinking Water Claim Settlements and from First Nations Child and
Family Services programs, including Jordan's Principle and Inuit Child
First programs, that help provide greater access to nutritious food.
Sales in 2023 were positively impacted by government inflation relief
payments to individuals to help mitigate higher cost of living. The
decrease in general merchandise same store sales in 2022 was
mainly due to higher merchandise and freight cost inflation that
contributed to changes in sales blend as consumers allocated more
of their spending to food and reduced purchases of general
merchandise.
Same Store Sales
(% increase/(decrease))
2024
2023
2022
Food
6.1 %
5.9 %
0.4 %
General merchandise (GM)
4.3 %
5.3 %
(13.3) %
Total food & GM sales
5.8 %
5.7 %
(2.4) %
Gross Profit Gross profit dollars increased 7.8% compared to last
year driven by sales gains and an increase in the gross profit rate. The
higher gross profit rate was largely due to changes in sales blend,
including a lower blend of wholesale food sales. Lower markdowns,
including more effective data-driven promotional activity as part of
our Next 100 work compared to last year, was also a factor.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses (“Expenses”) increased 7.1%
from 2023 and were up 80 basis points as a percentage of sales. The
increase in Expenses is primarily due to higher staff costs related to
inflationary and minimum wage increases and an investment in
additional resources required to execute the Next 100 operational
excellence work. An increase in depreciation, the impact of higher
vessel repair costs incurred through our investment in Transport
Nanuk Inc., additional Expenses from new stores and one-time costs
related to our Next 100 work were also factors. These factors were
partially offset by the impact of the $3.7 million asset write-off
resulting from the Fox Lake store fire loss last year.
Earnings from Operations (EBIT) and EBITDA(1) Earnings from
operations increased $13.0 million or 9.7% to $146.9 million
compared to $133.9 million in 2023 and were up $27.8 million or
23.3% compared to $119.1 million in 2022. Earnings from operations
as a percentage of sales was 10.0% compared to 9.4% last year and
9.0% in 2022. EBITDA(1) increased $19.5 million or 9.5% to $223.5
million compared to $204.1 million last year and was up $38.1 million
or 20.5% compared to 2022. EBITDA as a percentage of sales was
15.2% compared to 14.4% in 2023 and 14.0% in 2022. The increase in
EBIT and EBITDA compared to 2023 and 2022 was due to the sales,
gross profit and Expense factors previously noted. Adjusted EBITDA(1),
which excludes the impact of share-based compensation, Next 100
one-time costs and the Fox Lake store fire loss last year, increased
$16.3 million or 7.4% compared to last year and was up $38.6 million
or 19.6% compared to 2022. The Next 100 one-time costs were more
than offset by more effective data-driven promotional activity,
including a reduction in print media and other cost savings
initiatives.
(1) See Non-GAAP Financial Measures section.
Net Assets Employed Net assets employed increased 5.5% to
$709.9 million compared to $672.8 million last year and were up
9.3% compared to $649.2 million in 2022 as summarized in the
following table:
($ in millions at the end of the fiscal year)
2024
2023
2022
Property and equipment
$
457.7
$
417.5
$
403.3
Right-of-use assets
60.6
62.0
50.8
Inventories
186.1
178.3
169.3
Accounts receivable
99.0
103.9
94.9
Other assets
111.9
105.0
125.9
Liabilities
(205.4)
(193.9)
(195.0)
Net assets employed
$
709.9
$
672.8
$
649.2
The increase in property and equipment compared to last year
and 2022 was mainly due to investments in stores, including store
renovations, fixtures and equipment replacements, investments in
staff housing and two new stores. An increase in property and
equipment in NSA mainly due to the replacement of a PC-12 aircraft,
the purchase of aircraft engines and the construction of a hangar in
Thunder Bay, Ontario that is expected to be completed in the
second quarter of 2025 were also factors.
12 THE NORTH WEST COMPANY INC. 2024
Inventory increased $7.8 million or 4.4% compared to 2023 and
was up $16.8 million or 9.9% compared to 2022 mainly due to the
impact of higher cost inflation, new stores and an increase in sealift
inventory to leverage lower freight costs. Average inventory levels in
2024 decreased $0.2 million or 0.1% compared to 2023 but were up
$25.4 million or 15.9% compared to 2022. Inventory turnover
increased to 5.2 times compared to 4.9 times last year but was down
compared to 5.3 times in 2022.
Accounts receivable decreased $4.9 million or 4.8% compared
to last year but were up $4.1 million or 4.2% compared to 2022. The
decrease compared to last year is primarily due to a decrease in the
current portion of the promissory note receivable. Further
information on accounts receivable and the promissory note
receivable is provided in Note 5 and Note 25 respectively to the
consolidated financial statements. Average accounts receivable
decreased $2.8 million or 2.8% compared to 2023 but were up $10.2
million or 11.9% compared to 2022.
Other assets increased $6.9 million or 6.6% compared to last
year but were down $14.0 million or 11.1% compared to 2022. The
increase compared to last year is mainly due to an increase in
defined benefit plan assets and higher prepaid expenses and cash.
These factors were partially offset by a decrease in the promissory
note receivable which is down $4.6 million compared to last year
and down $26.3 million compared to 2022 as a result of payments
and the $12.6 million current portion recorded in accounts
receivable. A decrease in deferred tax assets compared to 2022 was
also a factor. Further information on defined benefit plan assets and
obligations is provided in Note 11 and Note 13 to the consolidated
financial statements and further information on deferred tax assets
and liabilities is provided in Note 10 to the consolidated financial
statements.
Liabilities increased $11.5 million or 5.9% from 2023 and were
up $10.4 million or 5.3% compared to 2022. The increase compared
to 2023 and 2022 is mainly due to an increase in accounts payable
and accrued liabilities related to the timing of payments and an
increase in the defined benefit plan obligation.
Return on Net Assets (RONA(1)) The return on net assets
employed for Canadian Operations increased to 21.0% from 19.8% in
2023 and was up compared to 19.1% in 2022. The increase
compared to last year is due to a 9.7% increase in EBIT and a $24.0
million or 3.6% increase in average net assets due to the factors
previously noted.
(1) See Non-GAAP Financial Measures section.
International Operations
(Stated in U.S. dollars)
FINANCIAL PERFORMANCE
International Operations results for the year are summarized by the
key performance indicators used by management as follows:
Key Performance Indicators
($ in thousands)
2024
2023
2022
Sales
$ 799,496
$ 779,559
$ 786,656
Same store sales % increase/
(decrease)
2.4 %
(1.1) %
1.3 %
EBITDA(1)
$
73,770
$ 71,893
$ 71,225
Earnings from operations
$
45,496
$ 45,903
$ 46,772
Return on net assets (1)
13.2 %
14.5 %
16.0 %
(1) See Non-GAAP Financial Measures section.
Sales International sales increased 2.6% to $799.5 million compared
to $779.6 million in 2023, and were up $12.8 million or 1.6%
compared to 2022. The increase in sales compared to 2023 was due
to same store sales gains and the impact of new stores in Alaska.
These factors were partially offset by lower wholesale sales. Sales
were positively impacted by improved tourism in certain Caribbean
markets and an increase in the Alaska Permanent Fund Dividend
("PFD") to $1,702 this year compared to $1,312 last year. These factors
were partially offset by weaker economic conditions related to
commercial fishing in Alaska. The increase in sales compared to 2022
is due to same store sales gains and new store sales partially offset by
the closure of a Cost-U-Less ("CUL") store in Curacao, Netherlands in
the first quarter of 2023 and a PFD of $3,284 in 2022. Same store sales
increased 2.4% compared to a 1.1% decrease in 2023 and a 1.3%
increase in 2022. Food sales accounted for 90.9% (90.7% in 2023) of
total sales with the balance comprised of general merchandise and
other sales at 9.1% (9.3% in 2023). Other sales consist primarily of
retail fuel sales and financial services revenue.
Food sales increased 2.7% from 2023 and were up 3.2%
compared to 2022 due to new stores and the impact of higher
inflation. Same store food sales were up 2.3% compared to a 0.3%
increase in 2023 and a 3.3% increase in 2022. On a quarterly basis,
same store food sales increased 3.1% and 1.0% in the first and
second quarter followed by increases of 2.4% and 2.7% in the third
and fourth quarter respectively.
General merchandise sales increased 1.7% from 2023 but were
down 11.6% from 2022. On a same store basis, general merchandise
sales were up 3.5% compared to a 13.3% decrease in 2023 and a
13.3% decrease in 2022. On a quarterly basis, same store general
merchandise sales decreased 4.3% and 0.2% in the first and second
quarter followed by increases of 5.2% and 10.8% in the third and
fourth quarter respectively.
Other sales, which consist primarily of retail fuel sales and
financial services revenue, were down 6.9% from 2023 and were
down 13.5% from 2022 largely due to lower retail fuel sales.
Sales Blend The table below shows the sales blend for the
International Operations over the past three years:
2024
2023
2022
Food
90.9 %
90.7 %
89.5 %
General merchandise and other
9.1 %
9.3 %
10.5 %
13
ANNUAL REPORT
Same Store Sales International Operations same store sales for the
past three years are shown in the following table. Same store sales in
2024 were impacted by the factors previously noted including
improved tourism in certain Caribbean markets and an increase in
PFD payments compared to last year. In 2023 and 2022, the impact
of higher merchandise and freight cost inflation resulted in changes
in product sales blend as consumers allocated more of their
spending to food and reduced purchases of general merchandise.
Same Store Sales
(% increase/(decrease))
2024
2023
2022
Food
2.3 %
0.3 %
3.3 %
General merchandise (GM)
3.5 %
(13.3) %
(13.3) %
Total food & GM sales
2.4 %
(1.1) %
1.3 %
Gross Profit Gross profit dollars increased 4.3% due to the impact
of higher sales and an increase in the gross profit rate largely related
to changes in sales blend, including the impact of lower wholesale
sales. More effective data-driven promotional activity as part of our
Next 100 work was also a factor.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses (“Expenses”) increased 5.7%
compared to last year and were up 69 basis points as a percentage
of sales. The increase in Expenses is primarily due to higher staff
costs, including an investment in resources to support the Next 100
operational excellence work, an increase in depreciation and the
impact of Expenses from new stores. A $0.8 million increase in share-
based compensation costs compared to last year largely related to
changes in the Company's share price was also a factor.
Earnings from Operations (EBIT) and EBITDA(1) Earnings from
operations decreased $0.4 million or 0.9% to $45.5 million compared
to $45.9 million in 2023 and were down $1.3 million or 2.7%
compared to $46.8 million in 2022 due to the sales, gross profit and
Expense factors previously noted. Earnings from operations as a
percentage of sales was 5.7% compared to 5.9% last year. EBITDA(1)
increased $1.9 million or 2.6% to $73.8 million and was 9.2% as a
percentage of sales compared to 9.2% in 2023. Adjusted EBITDA(1),
which excludes the impact of share-based compensation and Next
100 one-time costs, increased $3.0 million or 4.0% to $76.5 million
compared to $73.5 million last year.
(1) See Non-GAAP Financial Measures section.
Net Assets Employed International Operations net assets
employed of $350.2 million increased $23.3 million or 7.1%
compared to last year and were up $50.3 million or 16.8% compared
to 2022 as summarized in the following table:
($ in millions at the end of the fiscal year)
2024
2023
2022
Property and equipment
$ 181.0
$ 169.4
$ 151.7
Right-of-use assets
39.9
39.4
39.6
Inventories
107.9
100.7
93.1
Accounts receivable
13.8
13.2
12.8
Other assets
80.9
73.2
73.0
Liabilities
(73.3)
(69.0)
(70.3)
Net assets employed
$ 350.2
$ 326.9
$ 299.9
Property and equipment increased $11.6 million or 6.8% compared
to last year primarily due to investments in new stores, store
renovations and fixtures and equipment replacements. In 2024,
investments in new stores included a store in Anaktuvuk Pass, Alaska
which is a new market and a new AC store in Kotzebue, Alaska that
replaces a smaller store in the same community.
Inventories increased $7.2 million or 7.1% compared to last year
and were up $14.8 million or 15.9% from 2022 largely due to cost
inflation and the impact of new stores, including the opening of a
motorsports dealership in Bethel, Alaska. Average inventory levels in
2024 increased $7.5 million or 7.6% compared to 2023 and were up
$7.3 million or 7.4% compared to 2022. Inventory turnover decreased
to 5.4 times compared to 5.7 times in 2023, and was down
compared to 5.8 times in 2022.
Other assets increased $7.7 million or 10.5% compared to last
year and were up $7.9 million or 10.8% compared to 2022
substantially due to an increase in cash and deferred tax assets.
Liabilities increased $4.3 million or 6.2% compared to 2023 and
were up $3.0 million or 4.3% compared to 2022 primarily due to
higher trade accounts payable related to the timing of payments.
Return on Net Assets (RONA(1)) The return on net assets
employed for International Operations decreased to 13.2%
compared to 14.5% in 2023 due to a 0.9% decrease in EBIT and a
$28.8 million or 9.1% increase in average net assets.
(1) See Non-GAAP Financial Measures section.
14 THE NORTH WEST COMPANY INC. 2024
Consolidated Liquidity
and Capital Resources
The following table summarizes the major components of cash flow:
($ in thousands)
2024
2023
2022
Cash provided by (used in):
Operating activities before
change in non-cash working
capital and other
$ 274,448
$ 256,402
$ 234,116
Change in non-cash working
capital
(14,276)
(23,233)
(50,905)
Change in other non-cash items
453
(2,742)
(373)
Operating activities
260,625
230,427
182,838
Investing activities
(131,004)
(107,701)
(106,802)
Financing activities
(119,047)
(128,270)
(68,298)
Effect of foreign exchange
3,452
94
1,645
Net change in cash
$ 14,026
$
(5,450)
$
9,383
Cash from Operating Activities Cash flow from operating
activities increased $30.2 million or 13.1% to $260.6 million
compared to $230.4 million in 2023 largely due to higher earnings
and the change in non-cash working capital mainly related to the
change in accounts payable and accrued liabilities, inventories and
accounts receivable compared to the prior year. Further information
on working capital is provided in Note 21 to the consolidated
financial statements and in the Canadian and International net assets
employed sections on pages 12 and 14 respectively.
Cash flow from operating activities and unutilized credit
available on existing loan facilities are expected to be sufficient to
fund operating requirements, pension plan contributions, sustaining
and planned growth-related capital expenditures as well as
anticipated dividends during 2025.
Cash Used in Investing Activities Net cash used in investing
activities was $131.0 million compared to $107.7 million in 2023 and
$106.8 million in 2022. The increase compared to 2023 and 2022 is
largely due to investments in new stores, store renovations,
equipment replacements and investments in aircraft, a hangar in
Thunder Bay, Ontario, staff housing and information technology.
Further information on purchases of property and equipment and
intangible asset additions is provided in Note 7 and Note 9 to the
consolidated financial statements.
Net investing in Canadian Operations was $87.5 million, net of
$15.0 million in proceeds from the promissory note receivable
compared to $59.4 million, net of $15.0 million in proceeds from the
promissory note receivable in 2023 and $73.8 million, net of $9.8
million in proceeds from the promissory note receivable in 2022. A
summary of the Canadian Operations investing activities is included
in net assets employed on page 12.
Investing in International Operations was $43.5 million
compared to $48.3 million in 2023 and $33.0 million in 2022. The
decrease compared to 2023 is substantially due to new stores, store
renovations and investments in fixtures and equipment. A summary
of the International Operations investing activities is included in net
assets employed on page 14.
The following table summarizes the number of stores and
selling square footage under North West's various retail banners at
the end of the fiscal year:
Number of Stores
Selling square footage
2024
2023
2024
2023
Northern
121
121
701,484
701,484
NorthMart
5
5
128,185
128,185
Quickstop
34
34
46,846
47,604
Giant Tiger
5
5
90,470
90,470
Alaska Commercial
34
33
277,519
274,783
Cost-U-Less
12
12
318,846
318,846
Riteway Food Market
9
9
61,899
61,899
Other Formats
10
8
68,037
62,902
Total at year-end
230
227
1,693,286
1,686,173
In Canadian Operations, a Quickstop convenience store opened in
Grassy Narrows, Ontario and a Valu Lots store opened in Fisher River,
Manitoba. Total selling square footage in Canada increased to
1,022,735 compared to 1,018,357 in 2023 due to the new stores.
In International Operations, an AC store opened in Anaktuvuk
Pass, Alaska and a Quickstop convenience store was converted to a
Motorsports dealership in Bethel, Alaska. Total selling square footage
increased to 670,551 compared to 667,816 last year.
Cash Used in Financing Activities Net cash used in financing
activities decreased to $119.0 million compared to $128.3 million in
2023 largely due to changes in long-term debt related to amounts
drawn on revolving loan facilities and share purchases under the
normal course issuer bid ("NCIB"), partially offset by an increase in
lease payments. Further information on dividends, the NCIB, interest
and long-term debt is provided in the following sections.
15
ANNUAL REPORT
Shareholder Dividends The Company paid dividends of $75.5
million or $1.58 per share compared to $73.5 million or $1.54 per
share in 2023. The following table shows the quarterly cash
dividends per share paid for the past three years:
2024
2023
2022
First Quarter
$ 0.39
$ 0.38
$
0.37
Second Quarter
0.39
0.38
0.37
Third Quarter
0.40
0.39
0.38
Fourth Quarter
0.40
0.39
0.38
Total
$ 1.58
$ 1.54
$
1.50
The payment of dividends on the Company's common shares is
subject to the approval of the Board of Directors and is based on,
among other factors, the financial performance of the Company, its
current and anticipated future business needs and the satisfaction of
solvency tests imposed by the Canada Business Corporations Act
(“CBCA”) for the declaration of dividends. The dividends were
designated as eligible dividends in accordance with the provisions of
the Canadian Income Tax Act.
The following table shows dividends paid in comparison to
cash flow from operating activities for the past three years:
2024
2023
2022
Dividends
$
75,525
$
73,533
$ 71,805
Cash flow from operating
activities
$ 260,625
$
230,427
$ 182,838
Dividends as a % of cash flow
from operating activities
29.0 %
31.9 %
39.3 %
Dividends as a percentage of cash flow from operating activities
decreased to 29.0% compared to 31.9% in 2023, and was down
compared to 39.3% in 2022, substantially due to the changes in cash
flow from operating activities as previously noted. Dividends as a
percentage of cash flow from operating activities has averaged
30.3% over the past five years.
The Company has a well established track record of increasing
dividends. Over the past ten years, the dividend has increased at a
compound annual growth rate ("CAGR") of 3.1% as shown in the
following graph:
On April 9, 2025, the Board of Directors approved a quarterly
dividend of $0.40 per share to shareholders of record on April 16,
2025 and to be paid on April 24, 2025.
Normal Course Issuer Bid On November 19, 2024, the Company
renewed its Normal Course Issuer Bid ("NCIB"). Under the NCIB, the
Company may acquire up to a maximum of 4,765,289 of its shares, or
approximately 10% of its float for cancellation over the following 12
months. During the year ended January 31, 2025, the Company did
not purchase any common shares. During the year ended January
31, 2024, the Company purchased 153,998 common shares having a
book value of $0.6 million for cash consideration of $5.0 million. The
excess of the purchase price over the book value of the shares of
$4.4 million was charged to retained earnings. All shares purchased
were cancelled.
In connection with the NCIB, the Company has established an
automatic securities purchase plan with its designated broker to
facilitate the purchase of shares under the NCIB at times when the
Company would ordinarily not be permitted to purchase its shares
due to regulatory restrictions or self-imposed blackout periods.
Under the plan, before entering a self-imposed blackout period, the
Company may, but is not required to, ask the designated broker to
make purchases under the NCIB within specific parameters.
Sources of Liquidity At January 31, 2025, the Company has
US$70.0 million in senior notes it issued in two tranches; US$35.0
million due June 16, 2027 with a fixed interest rate of 2.88% and
US$35.0 million due June 16, 2032 with a fixed interest rate of 3.09%.
Interest is payable semi-annually on both tranches. The Company
also has outstanding $100.0 million senior notes that mature
September 26, 2029 and have a fixed interest rate of 3.74%. All of the
senior notes are secured by certain assets of the Company and rank
pari passu with the Company's other senior debt comprised of the
$400.0 million loan facilities and the US$52.0 million loan facilities
(collectively "Senior Debt"). The US$70.0 million senior notes have
been designated as a hedge against the U.S. dollar investment in the
International Operations. For more information on the senior notes
and financial instruments, see Note 12 and Note 15 to the
consolidated financial statements.
Canadian Operations have $400.0 million in committed,
revolving loan facilities that mature on March 1, 2027. These loan
facilities bear a floating rate of interest based on Bankers
Acceptances rates plus a stamping fee or the Canadian prime
interest rate. These facilities are secured by certain assets of the
Company and rank pari passu with the Company's other Senior Debt.
At January 31, 2025, the Company had $94.5 million outstanding on
these facilities (January 31, 2024 - $87.6 million).
Canadian Operations also have US$52.0 million committed,
revolving loan facilities that mature on March 1, 2027. These loan
facilities, which bear interest at SOFR plus a spread, are secured by
certain assets of the Company and rank pari passu with the
Company's other Senior Debt. At January 31, 2025, the Company had
US$NIL outstanding on these facilities (January 31, 2024 - US$NIL).
International Operations have a US$50.0 million revolving loan
facility that matures January 25, 2028. This facility bears a floating
rate of interest based on SOFR plus a spread and is secured by
certain accounts receivable and inventories of the International
Operations. At January 31, 2025, the International Operations had
US$NIL outstanding on this facility (January 31, 2024 - US$NIL).
The loan facilities and senior notes contain covenants and
restrictions including the requirement to meet certain financial ratios
and financial condition tests. The financial covenants include an
interest coverage ratio and a leverage test. At January 31, 2025, the
Company is in compliance with the financial covenants under these
facilities. Current and forecasted debt levels are regularly monitored
for compliance with debt covenants.
16 THE NORTH WEST COMPANY INC. 2024
Interest Costs and Coverage
2024
2023
2022
Coverage ratio
11.5
10.3
12.2
Earnings from operations ($ in millions) $ 209.5
$
195.9
$
180.3
Interest ($ in millions)
$
18.3
$
19.1
$
14.8
The coverage ratio of earnings from operations ("EBIT") to interest
expense increased to 11.5 times compared to 10.3 times in 2023 and
decreased from 12.2 times in 2022. The increase in the interest
coverage ratio compared to 2023 is due to a $0.8 million or 4.2%
decrease in interest expense and a 7.0% increase in consolidated
EBIT as previously noted. Additional information on interest expense
is provided in Note 19 to the consolidated financial statements.
Contractual Obligations and Other Commitments
Contractual obligations of the Company at January 31, 2025 are
listed in the chart below:
($ in thousands)
Total
0-1 Year
2-3 Years
4-5 Years
6 Years+
Long-term debt
$ 295,927
$
—
$ 145,229
$ 100,000
$ 50,698
Lease payments
160,850
25,936
38,615
29,678
66,621
Other liabilities(1)
17,226
2,750
14,476
—
—
Total
$ 474,003
$ 28,686
$ 198,320
$ 129,678
$ 117,319
(1) At year-end, the Company had additional long-term liabilities of $41.3
million which include other liabilities, defined benefit plan obligations and
deferred income tax liabilities. These liabilities have not been included as the
timing and amount of the future payments are uncertain.
Post-Employment Benefits The Company sponsors defined
benefit and defined contribution pension plans covering the
majority of Canadian employees. The Company recorded net
actuarial gains on defined benefit pension plans of $3.6 million, net
of deferred income taxes in other comprehensive income. This
compares to net actuarial gains on defined benefit pension plans of
$5.8 million in 2023 and $7.9 million in 2022, net of deferred income
taxes in other comprehensive income. These gains in other
comprehensive income were immediately recognized in retained
earnings. Actuarial gains and losses occur primarily due to changes
in the discount rate used to calculate pension liabilities and returns
on pension plan assets.
In 2025, the Company will be not be required to contribute to
the defined benefit pension plans. In addition to cash funding, a
portion of the pension plan obligation may be settled by the
issuance of a letter of credit in accordance with pension legislation.
In 2024, the Company's defined benefit pension plans were in a
surplus position and there were no cash contributions required
compared to $0.8 million in 2023 and $1.2 million in 2022. The actual
amount of the contribution may be different from the estimate
based on actuarial valuations, plan investment performance,
volatility in discount rates, regulatory requirements and other factors.
The Company also expects to contribute approximately $7.8 million
to the defined contribution pension plan and U.S. employees savings
plan in 2025 compared to $7.4 million in 2024 and $6.8 million in
2023. Additional information regarding post-employment benefits is
provided in Note 13 to the consolidated financial statements.
Director and Officer Indemnification Agreements The Company
has agreements with its current and former directors, trustees and
officers to indemnify them against charges, costs, expenses, amounts
paid in settlement and damages incurred from any lawsuit or any
judicial, administrative or investigative proceeding in which they are
sued as a result of their service. Due to the nature of these
agreements, the Company cannot make a reasonable estimate of
the maximum amount it could be required to pay to counterparties.
The Company has also purchased directors', trustees' and officers'
liability insurance. No amount has been recorded in the consolidated
financial statements regarding these indemnification agreements.
Other Indemnification Agreements The Company provides
indemnification agreements to counterparties for events such as
intellectual property rights infringement, loss or damage to property,
claims that may arise while providing services, violation of laws or
regulations, or as a result of litigation that might be suffered by the
counterparties. The terms and nature of these agreements are based
on the specific contract. The Company cannot make a reasonable
estimate of the maximum amount it could be required to pay to
counterparties. No amount has been recorded in the consolidated
financial statements regarding these agreements.
Additional information on commitments, contingencies and
guarantees is provided in Note 23 to the consolidated financial
statements.
Related Parties The Company has a 50% ownership interest in a
Canadian Arctic shipping company, Transport Nanuk Inc. and
purchases freight handling and shipping services from Transport
Nanuk Inc. and its subsidiaries. The purchases are based on market
rates for these types of services in an arm's length transaction.
Additional information on the Company's transactions with
Transport Nanuk Inc. is included in Note 24 to the consolidated
financial statements.
Letters of Credit In the normal course of business, the Company
issues standby letters of credit in connection with defined benefit
pension plans, purchase orders and performance guarantees. The
aggregate potential liability related to letters of credit is
approximately $18.0 million (January 31, 2024 - $19.0 million).
Capital Structure The Company's capital management objectives
are to deploy capital to provide an appropriate total return to
shareholders while maintaining a capital structure that provides the
flexibility to take advantage of growth opportunities, sustain existing
assets, meet obligations and financial covenants and enhance
shareholder value. The capital structure of the Company consists of
bank advances, long-term debt and shareholders' equity. The
Company manages capital to optimize efficiency through an
appropriate balance of debt and equity. In order to maintain or
adjust its capital structure, the Company may purchase shares for
cancellation pursuant to normal course issuer bids, issue additional
shares, borrow additional funds, adjust the amount of dividends paid
or refinance debt at different terms and conditions.
17
ANNUAL REPORT
The Company's capital structure over the past three years is
summarized in the following graph:
On a consolidated basis, the Company had $295.8 million in debt
and $794.7 million in equity at the end of the year and a debt-to-
equity ratio of 0.37:1 compared to 0.40:1 last year. From 2022 to 2024,
equity has increased $146.8 million or 22.7% and debt has increased
$5.7 million or 2.0%. During this same period, the Company has
made capital expenditures, including acquisitions and net of
promissory note proceeds, of $347.1 million and has paid dividends
of $220.9 million. This reflects the Company's balanced approach of
investing to sustain and grow the business while providing
shareholders with an annual cash return.
The debt outstanding at the end of the fiscal year is
summarized as follows:
(CAD$ in thousands at the end of
the fiscal year)
2024
2023
2022
CAD$ senior notes
$ 100,000
$ 100,000
$ 100,000
US$ senior notes
101,245
93,701
93,483
Canadian loan facilities
94,531
87,607
96,032
Promissory note payable
—
268
535
Total debt
$ 295,776
$ 281,576
$ 290,050
Consolidated debt at the end of the year increased $14.2 million or
5.0% to $295.8 million compared to $281.6 million in 2023, and was
up $5.7 million or 2.0% from $290.1 million in 2022. The change in
debt is largely due to changes in amounts drawn on the revolving
loan facilities and the impact of foreign exchange on the translation
of U.S. denominated debt compared to 2023 and 2022. The
Company has US$70.0 million in debt at January 31, 2025
(January 31, 2024 - US$70.2 million, January 31, 2023 - US$70.4
million) that is exposed to changes in foreign exchange rates when
translated into Canadian dollars. The exchange rate used to translate
U.S. denominated debt into Canadian dollars at January 31, 2025
("2024") was 1.4485 compared to 1.3412 at January 31, 2024 ("2023")
and 1.3382 at January 31, 2023 ("2022"). The change in the foreign
exchange rate resulted in a $7.5 million increase in debt compared
to 2023 and a $7.8 million increase compared to 2022. Average debt
outstanding during the year excluding the foreign exchange impact
decreased $6.0 million or 2.1% from 2023 but was up $26.7 million or
10.5% compared to 2022.
Lease liabilities at the end of the fiscal year are summarized as
follows:
(CAD$ in thousands at the end of
the fiscal year)
2024
2023
2022
Current portion of lease liability
$ 20,848
$ 19,408
$ 18,644
Non-current lease liabilities
105,558
104,483
93,833
Total lease liabilities
$ 126,406
$ 123,891
$ 112,477
Lease liabilities increased $2.5 million or 2.0% to $126.4 million
compared to $123.9 million in 2023 and were up $13.9 million or
12.4% compared to $112.5 million in 2022. The increase compared to
2023 and 2022 is due to new leases net of lease payments. Further
information on lease liabilities is provided in Note 8 to the
consolidated financial statements.
Shareholders' Equity The Company has an unlimited number of
authorized shares and had issued and outstanding shares at
January 31, 2025 of 47,871,258 (January 31, 2024 - 47,711,467). The
Company has a Share Option Plan that provides for the granting of
options to certain officers and senior management. Each option is
exercisable into one common share of the Company at a price
specified in the option agreement. At January 31, 2025, there were
1,128,718 options outstanding representing 2.4% of the issued and
outstanding shares. In addition to share options, there were 329,143
in Performance Share Units ("PSUs") that may be settled by the
issuance of shares based on meeting certain performance criteria
and 242,874 in Director Deferred Share Units ("DDSUs") that may be
settled by the issuance of shares. Further information on share
options, PSUs and DDSUs is provided in Note 14 to the consolidated
financial statements.
Effective June 12, 2019, the Company amended the rights of its
shares to align them with the Canada Transportation Act ("CTA"), as
amended by the provisions of the Transportation Modernization Act
(Canada). The purpose of these amendments is to increase the
permitted level of foreign ownership allowed in respect of Canadian
air service from 25% to 49%, subject to certain restrictions.
The Company's share capital is comprised of Variable Voting
Shares and Common Voting Shares. The two classes of shares have
equivalent rights as shareholders except for voting rights. Holders of
Variable Voting Shares are entitled to one vote per share except
where (i) the number of outstanding Variable Voting Shares exceeds
49% of the total number of all issued and outstanding Variable
Voting Shares and Common Voting Shares, or (ii) the total number of
votes cast by or on behalf of the holders of Variable Voting Shares at
any meeting on any matter on which a vote is to be taken exceeds
49% of the total number of votes cast at such meeting.
If either of the above-noted thresholds is surpassed at any time,
the vote attached to each Variable Voting Share will decrease
automatically without further act or formality. Under the
circumstances described in paragraph (i) above, the Variable Voting
Shares as a class cannot carry more than 49% of the total voting
rights attached to the aggregate number of issued and outstanding
Variable Voting Shares and Common Voting Shares of the Company.
Under the circumstances described in paragraph (ii) above, the
Variable Voting Shares as a class cannot, for the given Shareholders'
meeting, carry more than 49% of the total number of votes cast at
the meeting.
18 THE NORTH WEST COMPANY INC. 2024
Variable Voting Shares may only be held, beneficially owned or
controlled, directly or indirectly, by persons who are not Canadians
(within the meaning of the CTA). An issued and outstanding Variable
Voting Share is converted into one Common Voting Share
automatically and without any further act of the Company or the
holder, if such Variable Voting Share becomes held, beneficially
owned and controlled, directly or indirectly, otherwise than by way
of security only, by a Canadian, as defined in the CTA. Further
information on the Company's Variable Voting Shares and Common
Voting Shares is provided in the 2025 Management Information
Circular which is available on the Company's website at
www.northwest.ca or on SEDAR+ at www.sedarplus.ca.
At January 31, 2025, there were 16,749,614 Variable Voting
Shares, representing 35.0% of the total shares issued and
outstanding. Further information on the Company's share capital is
provided in Note 16 to the consolidated financial statements.
Book value per share attributable to shareholders, on a diluted
basis, at the end of the year increased to $15.90 per share compared
to $14.14 per share in 2023. Total shareholders' equity increased
$88.9 million or 12.6% compared to 2023 substantially due to an
increase in retained earnings and accumulated other comprehensive
income. Further information is provided in the consolidated
statements of changes in shareholders' equity in the consolidated
financial statements.
QUARTERLY FINANCIAL INFORMATION
Historically, the Company's first quarter sales are the lowest and fourth quarter sales are the highest, reflecting consumer buying patterns. Due
to the remote location of many of the Company's stores, weather conditions are often more extreme compared to other retailers and can affect
sales in any quarter. Net earnings generally follow higher sales, but can be dependent on changes in merchandise sales blend, promotional
activity in key sales periods, variability in share-based compensation costs related to changes in the Company's share price and other factors
which can affect net earnings.
The following is a summary of selected quarterly financial information:
($ thousands)
Q1(2)
Q2
Q3
Q4
Total(2)
Sales
2024
$
617,519
$
646,487
$
637,452
$
674,886
$
2,576,344
2023
$
593,564
$
618,095
$
616,910
$
643,109
$
2,471,678
EBITDA(1)
2024
$
67,908
$
83,413
$
83,445
$
90,399
$
325,165
2023
$
58,952
$
80,108
$
82,977
$
79,136
$
301,173
Earnings from operations (EBIT)
2024
$
39,822
$
54,881
$
54,102
$
60,741
$
209,546
2023
$
33,768
$
54,686
$
55,746
$
51,697
$
195,897
Net earnings
2024
$
27,155
$
36,897
$
36,395
$
42,806
$
143,253
2023
$
22,197
$
38,045
$
38,038
$
36,011
$
134,291
Net earnings attributable to shareholders of the Company
2024
$
25,527
$
35,300
$
35,375
$
41,094
$
137,296
2023
$
20,894
$
36,777
$
37,228
$
34,492
$
129,391
Earnings per share-basic
2024
$
0.53
$
0.74
$
0.74
$
0.86
$
2.87
2023
$
0.44
$
0.77
$
0.78
$
0.72
$
2.71
Earnings per share-diluted
2024
$
0.53
$
0.73
$
0.72
$
0.85
$
2.83
2023
$
0.43
$
0.76
$
0.77
$
0.71
$
2.67
(1) See Non-GAAP Financial Measures section.
(2) The first quarter of 2024 had 90 days of operations compared to 89 days of operations in 2023 as a result of February 29th which resulted in 366 days of
operations in 2024 compared to 365 days of operations in 2023.
19
ANNUAL REPORT
Fourth Quarter Highlights
CONSOLIDATED RESULTS FOURTH QUARTER
Key Performance Indicators and Selected Fourth Quarter
Information
($ in thousands, except per share)
2024
2023
2022
Sales
$ 674,886
$
643,109
$ 635,164
Same store sales % change(2)
Food
5.5 %
2.0 %
4.0 %
General Merchandise
5.1 %
(1.9) %
(6.1) %
Total
5.4 %
1.4 %
2.1 %
Gross profit
$ 234,801
$
214,692
$ 201,177
Selling, operating and
administrative expenses
(174,060)
(162,995)
(153,353)
EBITDA(1)
90,399
79,136
73,460
Earnings from operations
60,741
51,697
47,824
Interest expense
(4,705)
(4,894)
(4,192)
Income taxes
(13,230)
(10,792)
(8,503)
Net earnings
42,806
36,011
35,129
Net earnings attributable to
shareholders of the
Company
41,094
34,492
33,930
Net earnings per share - basic
0.86
0.72
0.71
Net earnings per share -
diluted
$
0.85
$
0.71
$
0.69
(1) See Non-GAAP Financial Measures section.
(2) All references to same store sales exclude the foreign exchange impact.
Consolidated Fourth Quarter Sales Sales for the quarter increased
4.9% to $674.9 million driven by same store sales gains, the impact of
foreign exchange on the translation of International Operations sales
and sales from new stores. These factors were partially offset by
lower wholesale sales and airline revenue compared to last year.
Excluding the foreign exchange impact, consolidated sales increased
2.7% with food sales increasing 4.2% and general merchandise and
other sales decreasing 1.2% as an increase in same store general
merchandise sales was more than offset by lower airline revenue.
Same store sales were up 5.4%(2) compared to the fourth quarter last
year, with Canadian Operations same stores sales up 6.7% and
International Operations same store sales up 3.5% compared to last
year. On a same store basis, food sales(2) increased 5.5% and general
merchandise sales(2) increased 5.1%.
Gross Profit Gross profit increased 9.4% due to sales gains and a 141
basis point increase in gross profit rate compared to last year. The
increase in gross profit rate was largely due to changes in sales
blend, including a lower blend of wholesale sales. Lower markdowns,
including more effective data-driven promotions as part of our Next
100 work, compared to last year was also a factor.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses ("Expenses") increased $11.1
million compared to last year and were up 45 basis points as a
percentage to sales. The increase in Expenses is largely due to higher
staff costs, including an investment in resources to support the Next
100 operational excellence work, an increase in depreciation, the
impact of foreign exchange on the translation of International
Operations Expenses and new stores. An increase in information
technology costs was also a factor. These factors were partially offset
by lower share-based compensation costs. The Company incurred
$1.0 million in one-time costs for professional fees related to the
execution of its Next 100 strategy. The impact of these costs was
more than offset in the quarter by more effective data-driven
promotional activity, including a reduction in print media and other
cost savings initiatives.
Earnings from operations and EBITDA(1) Earnings from operations
or earnings before interest and taxes ("EBIT") increased $9.0 million or
17.5% to $60.7 million compared to $51.7 million last year and
EBITDA(1) increased $11.3 million or 14.2% to $90.4 million compared
to $79.1 million last year due to the sales, gross profit and Expense
factors previously noted. Adjusted EBITDA(1), which excludes share-
based compensation costs and Next 100 one-time costs, increased
$9.1 million or 10.8% compared to last year and as a percentage to
sales was 13.7% compared to 13.0% last year.
Interest Expense Interest expense decreased 3.9% to $4.7 million
compared to $4.9 million last year. The decrease in interest expense
is mainly due to lower average borrowing costs. Further information
on debt is provided in Note 12 to the consolidated financial
statements.
Income Tax Expense Income tax expense was $13.2 million
compared to $10.8 million last year and the consolidated effective
tax rate was 23.6% compared to 23.1% last year. The increase in the
effective income tax rate was due to the the blend of earnings across
the various tax rate jurisdictions and the taxation of discrete items,
including share-based compensation. Further information on
income tax expense is provided in Note 10 to the consolidated
financial statements.
Net Earnings Consolidated net earnings increased $6.8 million or
18.9% to $42.8 million compared to $36.0 million last year. Net
earnings attributable to shareholders were $41.1 million and diluted
earnings per share were $0.85 per share compared to $0.71 per share
last year due to the factors previously noted. Adjusted net earnings(1),
which
excludes
the
impact
of
the
after-tax
share-based
compensation costs and Next 100 one-time costs, increased $5.1
million or 12.8% compared to last year due to earnings gains in both
Canadian Operations and International Operations.
20 THE NORTH WEST COMPANY INC. 2024
CANADIAN OPERATIONS
FOURTH QUARTER
Canadian Operations results for the fourth quarter are summarized
by the following key performance indicators:
Key Performance Indicators
($ in thousands)
2024
2023
2022
Sales
$ 385,169
$ 375,950
$ 361,397
Same store sales % change
Food
7.6 %
4.4 %
4.3 %
General Merchandise
3.4 %
1.4 %
(2.9) %
Total
6.7 %
3.7 %
2.6 %
EBITDA (1)
$
63,248
$ 55,253
$ 50,511
Earnings from operations
$
43,865
$ 37,166
$ 33,417
(1) See Non-GAAP Financial Measures section.
Sales Canadian Operations sales increased 2.5% to $385.2 million
due to a 6.7% increase in same store sales. The impact of new stores
was also a factor. These factors were partially offset by lower
wholesale sales and airline revenue compared to the fourth quarter
last year. Food sales increased 5.2% as same store sales gains of 7.6%
were partially offset by lower wholesale sales. General merchandise
and other sales decreased 2.3% compared to last year as a 3.4%
increase in general merchandise same store sales was more than
offset by lower airline revenue compared to strong airline revenue
gains in the fourth quarter last year. Sales were positively impacted
by increased consumer demand in certain communities arising from
payments to individuals from First Nations Drinking Water Claim
Settlements and from First Nations Child and Family Services
programs, including Jordan's Principle and Inuit Child First programs,
that help provide greater access to nutritious food.
Gross Profit Gross profit increased 7.0% due to sales gains and an
increase in gross profit rate largely related to changes in sales blend,
including a lower blend of wholesale sales. Lower markdowns,
including more effective data-driven promotional activity, compared
to last year was also a factor.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses ("Expenses") increased 2.9%
and were up 13 basis points as a percentage to sales compared to
the fourth quarter last year primarily due to higher staff costs related
to inflationary and minimum wage increases and an investment in
additional resources required to execute the Next 100 operational
excellence work. An increase in depreciation, the impact of new
stores, higher technology related costs and the Next 100 one-time
costs previously noted were also factors.
Earnings from Operations (EBIT) and EBITDA(1) Canadian fourth
quarter earnings from operations increased $6.7 million or 18.0% to
$43.9 million compared to $37.2 million last year and EBITDA(1)
increased $8.0 million or 14.5% to $63.2 million compared to $55.3
million in the fourth quarter last year due to the sales, gross profit
and Expense factors previously noted. Adjusted EBITDA(1), which
excludes the impact of share-based compensation costs and Next
100 one-time costs, increased $5.6 million or 9.6% compared to last
year and was up $10.9 million or 20.3% compared to 2022.
INTERNATIONAL OPERATIONS
FOURTH QUARTER
(Stated in U.S. dollars)
International Operations results for the fourth quarter are
summarized by the following key performance indicators:
Key Performance Indicators
($ in thousands)
2024
2023
2022
Sales
$ 203,966
$ 197,750
$ 203,064
Same store sales % change
Food
2.7 %
(0.9) %
3.7 %
General Merchandise
10.8 %
(11.2) %
(14.0) %
Total
3.5 %
(2.0) %
1.4 %
EBITDA(1)
$
19,127
$ 17,449
$ 16,921
Earnings from operations
$
11,893
$ 10,755
$ 10,630
(1) See Non-GAAP Financial Measures section.
Sales International Operations fourth quarter sales increased 3.1% to
$204.0 million compared to $197.8 million in the fourth quarter last
year due to a 3.5% increase in same store sales and the impact of
new stores in Alaska. These factors were partially offset by lower
wholesale sales in Alaska. Food sales increased 2.8% and were up
2.7% on a same store basis compared to a 0.9% same store sales
decrease last year. General merchandise sales increased 9.6% and
were up 10.8% on a same store basis compared to a decrease of
11.2% last year. Sales were positively impacted by improved
economic conditions in tourism-dependent markets in the
Caribbean which more than offset the impact of weaker economic
conditions in certain markets in the South Pacific and weaker
economic conditions related to commercial fishing in Alaska. An
improved in-stock position of transportation merchandise compared
to last year was also a factor contributing to the increase in general
merchandise sales.
Gross Profit Gross profit increased 8.2% compared to last year due
to higher sales and an increase in gross profit rate. The increase in
gross profit rate is largely due to changes in sales blend, including a
lower blend of wholesale sales.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses ("Expenses") increased 7.7%
compared to last year largely due to higher staff costs, including an
investment in resources to support the Next 100 operational
excellence work, an increase in depreciation and the impact of new
store costs.
Earnings From Operations ("EBIT") and EBITDA(1) Earnings from
operations increased 10.6% to $11.9 million compared to $10.8
million last year and EBITDA(1) increased 9.6% to $19.1 million
compared to $17.4 million in the fourth quarter last year due to the
sales, gross profit and Expense factors previously noted. Adjusted
EBITDA(1), which excludes the impact of share-based compensation
and Next 100 one-time costs, increased $1.7 million or 9.6%
compared to last year and was up $2.4 million or 13.5% compared to
2022.
21
ANNUAL REPORT
CONSOLIDATED CASH FLOWS
FOURTH QUARTER
The following table summarizes the major components of the fourth
quarter cash flow:
($ in thousands)
2024
2023
2022
Operating activities
$ 108,282
$ 90,481
$ 100,230
Investing activities
(52,627)
(41,606)
(51,907)
Financing activities
(57,177)
(66,916)
(38,500)
Effect of foreign exchange
1,921
(1,450)
(43)
Net change in cash
399
(19,491)
9,780
Cash, beginning of period
66,986
72,850
49,029
Cash, end of period
$ 67,385
$ 53,359
$ 58,809
Cash From Operating Activities
The following table summarizes the major components of the cash
flow from operating activities in the fourth quarter:
($ in thousands)
2024
2023
2022
Net earnings for the period
$ 42,806
$ 36,011
$ 35,129
Adjustments for:
Amortization
29,658
27,439
25,636
Provision for income taxes
13,230
10,792
8,503
Interest expense
4,705
4,894
4,192
Equity settled share-based
compensation
(249)
245
1,879
Taxes paid
(11,368)
(11,089)
(11,635)
Loss on disposal of property
and equipment
257
1,185
144
Operating activities before
change in non-cash working
capital and other
79,039
69,477
63,848
Change in non-cash working
capital
30,732
19,847
37,272
Change in other non-cash items
(1,489)
1,157
(890)
Cash from operating activities
$ 108,282
$ 90,481
$ 100,230
Cash from Operating Activities Cash flow from operating
activities increased $17.8 million or 19.7% to $108.3 million
compared to $90.5 million in the fourth quarter of 2023 and was up
$8.1 million or 8.0% compared to 2022. The increase compared to
last year is substantially due to higher earnings and the change in
non-cash working capital largely related to changes in accounts
payable and accrued liabilities, inventories and accounts receivable
compared to the prior year.
Cash Used in Investing Activities
The following table summarizes the major components of the cash
flow used in investing activities in the fourth quarter:
($ in thousands)
2024
2023
2022
Purchase of property and
equipment
$ (49,200)
$ (36,937)
$ (51,572)
Intangible asset additions
(3,437)
(4,731)
(562)
Proceeds from disposal of
property and equipment
10
62
227
Cash used in investing activities
$ (52,627)
$ (41,606)
$ (51,907)
Cash Used in Investing Activities Net cash used in the fourth
quarter for investing activities was $52.6 million compared to $41.6
million in 2023 and $51.9 million in 2022. Investing activities in the
quarter include store renovations, equipment replacements and
ongoing construction of a hangar in Thunder Bay, Ontario which is
expected to be completed in the second quarter of 2025. The
investments in intangible assets is related to software.
Cash Used in Financing Activities
The following table summarizes the major components of the cash
flow used in financing activities in the fourth quarter:
($ in thousands)
2024
2023
2022
Net decrease in long-term debt
$ (27,330)
$ (39,278)
$ (11,258)
Payment of lease liabilities,
principal
(5,996)
(5,607)
(5,073)
Payment of lease liabilities,
interest
(1,420)
(1,165)
(1,067)
Dividends
(19,148)
(18,607)
(18,144)
Interest paid
(3,283)
(3,126)
(3,028)
Issuance of common shares
—
867
70
Cash used in financing activities
$ (57,177)
$ (66,916)
$ (38,500)
Cash Used in Financing Activities Cash used in financing activities
in the fourth quarter decreased to $57.2 million compared to $66.9
million in 2023 but was up compared to $38.5 million in 2022. The
change compared to the fourth quarter last year is substantially due
to changes in long-term debt resulting from amounts drawn on
revolving loan facilities compared to last year.
22 THE NORTH WEST COMPANY INC. 2024
DISCLOSURE CONTROLS
Management is responsible for establishing and maintaining a
system of disclosure controls and procedures to provide reasonable
assurance that material information relating to the Company is
reported to senior management, including the Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”) on a timely basis so
that decisions can be made regarding public disclosure. Based on an
evaluation of the Company's disclosure controls and procedures, as
required by National Instrument 52-109 (Certification of Disclosure in
Issuers' Annual and Interim Filings), the Company's CEO and CFO
have concluded that these controls and procedures were designed
and operated effectively as of January 31, 2025.
INTERNAL CONTROLS OVER
FINANCIAL REPORTING
Management is also responsible for establishing and maintaining
internal controls over financial reporting to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with International Financial Reporting Standards. All
internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be
effective can only provide reasonable assurance with respect to
financial reporting and may not prevent or detect misstatements.
Projections of any evaluations of effectiveness to future periods are
subject to the risk that controls may become ineffective because of
changes in conditions or the degree of compliance with policies and
procedures may deteriorate. Furthermore, management is required
to use judgment in evaluating controls and procedures. Based on an
evaluation of the Company's internal controls over financial
reporting using the Internal Control - Integrated Framework
published by The Committee of Sponsoring Organizations of the
Treadway Commission (“COSO Framework”), 2013, the Company's
CEO and CFO have concluded that the internal controls over
financial reporting were designed and operated effectively as at
January 31, 2025. There have been no changes in the internal
controls over financial reporting for the year ended January 31, 2025
that have materially affected or are reasonably likely to materially
affect the internal controls over financial reporting.
OUTLOOK
The near-term outlook continues to be influenced by uncertainty
related to the economy, the impact of changes in U.S. government
policy regarding tariffs, the impact of retaliatory tariffs that may be
implemented and inflation. There is also uncertainty regarding
potential changes to U.S. income support programs for individuals
including the Supplemental Nutrition Assistance Program ("SNAP"),
however, the resiliency of the Company's essential everyday product
and service offering is expected to help mitigate some of this
uncertainty. In addition, the near-term outlook is expected to be
impacted by the following:
•
The Canadian Operations are expected to continue to be
impacted by increased consumer demand arising from the First
Nations Drinking Water Settlement which is comprised of
approximately $2 billion in payments to individuals and
impacted First Nations and $6 billion to support construction,
upgrading, operation and maintenance of water infrastructure
on First Nations land. This settlement impacts approximately 30
communities served by the Company's stores representing a
portion of the total settlement. Payments are being distributed
to individuals and it is expected that settlement payments will
continue to be issued through 2025 however, the amount and
timing of the payments to individuals in the communities
served by the Company's stores is uncertain.
•
In 2025, the Company expects to incur one-time costs for
professional fees and other expenses related to the Next 100
initiatives as outlined in the Strategies section as the initiatives
are operationalized. These one-time costs are expected to be
offset by the annualized incremental EBIT of the initiatives
however, the costs will be incurred before the full annualized
benefits are achieved. Further information on these one-time
costs and the expected benefits will be provided in our
quarterly reports.
On July 5, 2020, the Company sold 36 of its 46 Giant Tiger stores
to Giant Tiger Stores Limited for cash consideration of $45.0 million
payable in $15.0 million installments on the second, third and fourth
anniversaries of the transaction closing date, and up to $22.5 million
in contingent consideration based on achieving certain financial
measures in 2024 and 2025. The total consideration recorded by the
Company at the time of the transaction included $12.5 million in
estimated contingent consideration in accordance with IFRS 9 -
Financial Instruments. The amount of consideration is dependent on
achieving certain financial measures which may result in the actual
amount of contingent consideration being higher or lower than the
amount estimated by the Company, including the possibility of no
further consideration owing if certain financial measures are not met.
The determination of the total amount of the contingent
consideration is expected to be finalized by the fourth quarter of
2025. Further information is provided in Note 25 to the consolidated
financial statements.
Beyond the near-term outlook previously noted, the medium
and longer-term outlook for the Company is favourable based on
the resiliency of our essential everyday product and service value
offer and the upside expected from enhancing our core capabilities
to deliver operational excellence and sustainable earnings growth
aligned with our Next 100 work. The impact of Government of
Canada transfer and settlement payments and higher infrastructure
and services spending is expected to benefit Indigenous people in
the communities we serve. On October 24, 2023, the Federal Court
of Canada approved the final settlement agreement of $23.3 billion
in compensation to be paid to individuals impacted by First Nations
Child and Family Services programs and other services. Based on the
information available, each claimant is expected to receive a
minimum payment of approximately $40,000 with additional
amounts determined based on individual circumstances. The
application window for the first two classes of claims opened on
March 10, 2025. While the timing of these compensation payments is
uncertain, the Company does not expect the payments to be
distributed until late 2025 or 2026.
23
ANNUAL REPORT
In addition to the First Nations Child and Family Services
compensation payments to individuals, on July 11, 2024, the
Government of Canada announced an agreement in principle to
provide $47.8 billion to be disbursed over 10 years for the long-term
reform of the First Nations Child and Family Services program and
Jordan’s Principle. This agreement is designed to provide predictable
funding for services and benefits for Indigenous children, youth,
young adults and families and builds on the previous agreement-in-
principle to provide $20 billion in funding over five years. However,
on October 17, 2024, members of the Assembly of First Nations
rejected the $47.8 billion agreement and instructed the Assembly of
First Nations leadership to take a new approach to negotiating a
different final agreement to address concerns raised. The agreement
on the long-term reform of the First Nations Child and Family
Services Program is subject to final approvals and a motion before
the Canadian Human Rights Tribunal to end its oversight over the
First Nations Child and Family Services Program.
In 2025, the Company expects that capital expenditures, net of
expected proceeds from the promissory note receivable will be in
the $145.0 million range (2024 - $131.0 million, net of $15.0 million in
proceeds from the promissory note receivable). The timing and
amount of store-based capital expenditures in 2025 are expected to
continue to be impacted by the availability of building materials and
labour shortages, in addition to other delays that can occur with
remote location capital projects.
RISK MANAGEMENT
The mandate of the Board of Directors includes ensuring that
processes are in place to identify and manage the principle risks of
the business, including environmental and climate-related risks, for
which the Board has delegated primary responsibility to the Audit
Committee. The North West Company maintains an Enterprise Risk
Management ("ERM") program which assists in identifying,
evaluating and managing risks that may reasonably have an impact
on the Company. Management is accountable for completing an
annual ERM assessment to evaluate risks and the potential impact
that the risks may have on the Company's financial performance and
ability to execute its strategies and achieve its objectives. The results
of this annual assessment and quarterly updates are presented to the
Audit Committee and reported to the Board of Directors. The
principle risks, including environmental and climate-related risks, and
the related mitigation strategies are incorporated into the
Company's strategic planning process.
The North West Company is exposed to a number of risks in its
business. The descriptions of the risks below are not the only ones
facing the Company. Additional risks and uncertainties not presently
known to the Company, or that the Company deems immaterial,
may also impair the operations of the Company. If any of such risks
actually occur, the business, financial condition, liquidity, results of
operations and reputation of the Company could be materially
adversely affected. Readers of this MD&A are also encouraged to
refer to the Key Performance Drivers and Capabilities Required to
Deliver Results and Outlook sections of this MD&A, as well as North
West's Annual Information Form, which provides further information
on the risk factors facing the Company and which is hereby
incorporated by reference. While the Company employs strategies to
minimize these risks, these strategies do not guarantee that events
or circumstances will not occur that could negatively impact the
Company's financial condition and performance.
Careful consideration should be given to the risk factors which
include, but are not limited to, the following:
Employee Development and Retention Attracting, retaining and
developing high caliber employees is essential to effectively
managing our business, executing our strategies and meeting our
objectives. Due to the vast geography, small size and remoteness of
the Company's individual markets, there is an ongoing need for
capable staffing, particularly at the store management level. The
degree to which the Company is not successful in retaining and
developing employees and establishing appropriate succession
plans could lead to a lack of knowledge, skills and experience
required to effectively run our operations and execute our strategies
and could negatively affect financial performance. The Company's
overall priority on building and sustaining store people capability
reflects the importance of mitigating this risk. In addition to
compensation programs and investments in staff housing that are
designed to attract and retain qualified personnel, the Company also
continues to implement and refine initiatives such as comprehensive
store-based manager-in-training programs.
These risks also impact the Company's airline operations.
Transport Canada has Canadian Airline Regulations ("CAR") with
respect to pilot fatigue and flight duty times. These regulations have
resulted in an increase in the number of pilots required by NSA
which, combined with a Canada-wide shortage of pilots and aircraft
mechanics, may result in higher recruitment and compensation
costs and have a negative impact on the Company's financial
performance. Changes to flight schedules, operating schedules,
fatigue
management
systems
and
employee
recruiting,
compensation and training programs are expected to help mitigate
the impacts of the new regulations and employee development and
retention risk.
In addition to the foregoing, a pandemic could impact the
health and wellness of the Company's employees, result in labour
shortages or the temporary closure of stores, distribution facilities,
airline or support offices.
Competition The Company has a leading market position in a large
percentage of the markets it serves. Sustaining and growing this
position depends on our ability to continually improve customer
satisfaction while identifying and pursuing new sales opportunities.
We actively monitor competitive activity and we are proactive in
enhancing our value offer elements, ranging from in-stock position
to service and pricing. To the extent that the Company is not
effective in responding to consumer trends or enhancing its value
offer, it could have a negative impact on the Company's financial
performance and reputation. Furthermore, the entry of new
competitors, an increase in competition, both local and outside the
community, a significant expansion of E-Commerce, or the
introduction of new products and services in the Company's markets
could also negatively affect the Company's financial performance.
Cyber-security The Company relies on the integrity and continuous
availability of its IT systems including networks, data hosting and
processing facilities, cloud-based services and hardware. In the
ordinary course of business, the Company collects, processes,
transmits and retains confidential and personal information
(collectively "Confidential Information") regarding the Company and
its customers, employees and suppliers. The Company's IT systems
are exposed to the risks of “cyber-attack”, including viruses that can
disrupt, paralyze or prevent access to IT systems or result in
unauthorized access to Confidential Information.
24 THE NORTH WEST COMPANY INC. 2024
The Company has security software and measures, including
monitoring, testing and employee training, to prevent unauthorized
access to its IT systems and Confidential Information, and to reduce
the likelihood of disruptions, and continues to make investments in
this area to mitigate cyber threats. Cyber-attacks are constantly
evolving and are becoming more frequent and sophisticated in
nature and there is a risk that the Company's security measures or its
third party service providers' security measures, may be breached or
unauthorized access may not be detected on a timely basis.
Furthermore, employee error, faulty password management or
malfeasance may result in unauthorized access to IT systems and
Confidential Information. Any prolonged failure relating to IT system
availability, breaches of IT system security, a significant loss of data,
an impairment of data integrity or unauthorized access to
Confidential Information, could adversely affect the financial
performance, operations and reputation of the Company and may
result in regulatory enforcement actions or litigation.
Community Relations A portion of the Company's sales are
derived from communities and regions that restrict commercial land
ownership and usage by non-Indigenous or non-local owned
businesses, or which have enacted policies and regulations to
support locally-owned businesses. We successfully operate within
these environments through initiatives that promote positive
community and customer relations. These include store lease
arrangements with community-based development organizations
and initiatives to recruit local residents into management positions
and to incorporate community stakeholder advice into our business
at all levels. Further information on community relations is provided
under Corporate Social Responsibility and Sustainability. To the
extent the Company is not successful in maintaining these relations
or is unable to renew lease agreements with community-based
organizations, or is subject to punitive fees or operating restrictions,
it could have an adverse effect on the Company's reputation and
financial performance.
Climate Change, Natural Disasters and Fire The Company's
operations are exposed to extreme weather conditions ranging from
blizzards to hurricanes, typhoons and cyclones which can cause loss
of life, damage to or destruction of key stores and facilities, or
temporary business disruptions. The stores located in the South
Pacific, Caribbean and coastal areas of Alaska are also at risk of
earthquakes, volcano and tsunamis which can result in loss of life
and destruction of assets. The destruction of assets and the impact
on the local economy resulting from these types of extreme weather
conditions, particularly where more than one location is impacted,
could have a material adverse effect on the operations and financial
condition and performance of the Company. Severe weather
conditions can also have a negative impact on NSA's operations by
disrupting the transportation of merchandise and passengers.
The impact of warmer ocean water temperatures has increased
the risk of frequency, severity and duration of hurricanes and
typhoons especially in the northeastern Caribbean. Collectively the
stores in this region have sales of $426.3 million and assets of $215.4
million for the year-ended January 31, 2025. In 2017, islands in this
region were devastated by two category five hurricanes which
resulted in the destruction of the Company's CUL store in St. Thomas
and three RTW stores and significantly damaged a CUL store in St.
Maarten. Rebuilding has significantly increased resiliency to future
hurricanes however, these markets remain exposed to this risk.
The Company completed a specific climate-related risk
management assessment of its stores in the northeastern Caribbean
and upgraded its most hurricane-vulnerable stores to improve the
building construction to a category five hurricane resiliency level.
These improvements help mitigate the impact of hurricanes on the
Company's stores however, there can be no certainty that the
damage from hurricanes will not include significant damage to or
loss of stores and warehouses. In addition, hurricanes can result in
significant damage to or destruction of important infrastructure,
including residences, which in turn may result in people relocating
from an island. Any prolonged reduction in population in the
communities the Company operates in could have a material impact
on the financial performance of the Company.
Longer-term global warming conditions would also have a
more pronounced effect, both positive and negative, on the
Company's most northern latitude stores. On the downside, global
warming will result in rising sea levels, which will cause flooding, and
melting permafrost which could damage or destroy the Company's
stores, warehouses and housing. The Company operates in 72
communities in northern Canada and 20 communities in Alaska that
are potentially exposed to changes in permafrost. Collectively, stores
in these communities have sales of $950.4 million and assets of
$493.6 million for the year ended January 31, 2025. Rising sea levels
and melting permafrost would also have the same negative impact
on our customers which, combined with the potential damage to
our facilities, could have a material adverse effect on the Company's
operations, financial condition and performance. The Company has
in-depth knowledge of and expertise in construction in northern
markets and continues to incorporate new engineering and
construction techniques in designing buildings and facilities to help
mitigate the impact of changing permafrost conditions and
minimize damage to the permafrost.
The Company relies upon the availability of winter roads to 40
communities in northern Canada. Global warming conditions may
shorten or eliminate the availability of winter roads which would
result in higher transportation costs to these remote locations. To the
extent that higher transportation costs cannot be offset by other
cost reductions or passed on through higher prices, this may result in
lower operating margins which may have an adverse effect on the
Company's financial performance. This risk related to the availability
of winter roads is partially mitigated by the utilization of the
Company's wholly-owned airline to transport merchandise to its
stores.
On the upside, global warming could result in higher economic
growth in the Company's northern markets and would reduce some
operating expenses such as utility costs and enable the Company to
use lower-cost sealift year-round to transport merchandise to the
Company's stores compared to higher cost air transportation.
The Company's stores in northern Canada and Alaska are
exposed to the risk of wild fires and other fire related losses. In many
of the Company's remote northern markets, there is limited fire
fighting equipment and capability. In the event of a fire, there is a
high risk of a complete loss of the building, equipment and
inventory. In 2023, the Company's store in Fox Lake, Alberta was
destroyed by wildfire. In 2018, the Company also had three fires in
northern Canada which destroyed one store and significantly
damaged two other stores. Two of the fires were caused by electrical
malfunction and one was arson-related. The Company was able to
re-open the stores with reduced selling square footage and a limited
merchandise assortment while reconstruction and repairs were
being completed. The Company completed an independent review
of its fire mitigation policies and procedures to identify opportunities
to improve fire prevention in its northern Canada stores and has
upgraded facilities to reduce the risk of fire-related losses.
25
ANNUAL REPORT
In addition to the risk mitigation activities previously noted, the
Company also maintains insurance to help mitigate the impact of
losses however, there can be no assurance that one or more large
claims or that any given loss will be mitigated in all circumstances.
Further information on insurance risk is provided below.
Economic Environment External factors which affect customer
demand and personal disposable income, and over which the
Company exercises no influence, include government fiscal health,
general economic growth, changes in commodity prices, inflation,
tariffs, price increases from suppliers, unemployment rates, personal
debt levels, levels of personal disposable income, interest rates and
foreign exchange rates. Changes in inflation rates, commodity prices,
tariffs, price increases from suppliers and foreign exchange rates are
unpredictable and may impact the cost of merchandise and the
prices charged to consumers which in turn could negatively impact
the Company's reputation and financial results. A pandemic could
result in an economic downturn, restrictions on travel and trade,
disruptions to financial markets and negatively impact the availability
and cost of capital, which in turn could have an adverse impact on
the Company's financial results and condition.
Our largest customer segments derive most of their income
directly or indirectly from government infrastructure spending or
direct payment to individuals in the form of social assistance, child
care benefits and old age security. While these tend to be stable
sources of income, independent of economic cycles, a decrease in
government income transfer payments to individuals, a recession or
a significant and prolonged decline in consumer spending, could
have an adverse effect on the Company's operations and financial
performance.
Furthermore, customers in many of the Company's markets
benefit from product cost subsidies through programs such as
Nutrition North Canada ("NNC"), Jordan's Principle and Inuit Child
First in Canadian Operations, and the U.S. Supplemental Nutrition
Assistance Program ("SNAP") and Alaska by-pass mail system in
International Operations, which contribute to lower living costs for
eligible customers. If there are changes in government policy that
result in a reduction in financial support for these programs, or if
these subsidies and programs are not adjusted for cost inflation,
there could be a negative impact on consumer demand for the
Company's products and services which could have an adverse
effect on the Company's operations, financial condition and
reputation.
A major source of employment income in the remote markets
where the Company operates is generated from local government
and spending on public infrastructure. This includes housing,
schools, health care facilities, military facilities, roads and sewers.
Local employment levels will fluctuate from year-to-year depending
on the degree of infrastructure activity and a community's overall
fiscal health. A similar fluctuating source of income is employment
related to tourism and natural resource development. A significant or
prolonged reduction in government transfers, spending on
infrastructure projects, natural resource development and tourism
spending would have a negative impact on consumer income which
in turn could result in a decrease in sales and gross profit, particularly
for more discretionary general merchandise items.
Management regularly monitors economic conditions and
considers factors which can affect customer demand in making
operating decisions and the development of strategic initiatives and
long-range plans however, changes in economic conditions may
adversely impact consumer demand for the Company's products
and services which could adversely affect the Company's financial
performance, financial condition and reputation.
Logistics and Supply Chain The Company relies on a complex and
elongated outbound supply chain due to the remoteness of the
Company's stores. The delivery of merchandise to a substantial
portion of the Company's stores involves multiple carriers and
multiple modes of transportation including trucks, trains, aircraft,
ships and barges through various ports and transportation hubs. The
Company's reputation and financial performance can be negatively
impacted by supply chain events or disruptions outside of the
Company's control, including changes in foreign and domestic
regulations which increase the cost of transportation; the quality of
transportation infrastructure such as roads, ports and airports; labour
disruptions at transportation companies; the impact of a pandemic,
that reduces the availability of product or restricts transportation to
distribution facilities or the communities the Company serves; the
impact of severe weather; or the consolidation, financial difficulties
or bankruptcy of transportation companies. To help mitigate these
risks, the Company owns an airline, North Star Air Ltd., and has an
investment in Transport Nanuk Inc., an arctic shipping company,
which provides the Company with greater control over key
components of our logistics network and service to our stores in
northern Canada.
Business Model and Change Management The Company sells a
broad range of products and services across geographically and
culturally diverse markets within a high operating cost environment.
Operational scale can be difficult to achieve across these remote
geographies and the complexity of the Company's business model is
higher compared to more narrowly-focused or larger retailers.
Management continuously assesses the strength of its customer
value offer to ensure that specific markets, products and services are
financially attractive. The Company continues to focus on simplifying
work across the business, with an emphasis on store processes.
Certain Company initiatives may reduce the cost of operations and
help ensure the Company has an efficient operating structure. These
initiatives may include improving processes and generating
efficiencies across the Company’s administrative, store and
distribution network. The success of strategic initiatives is dependent
on effective leadership and change management to realize their
intended benefits. Ineffective leadership or change management
could result in a lack of integrated processes and procedures,
decreased employee engagement, ineffective communication and
training, a lack of requisite knowledge or may not achieve the
benefits intended. Any of the foregoing could disrupt operations or
increase the risk of customer dissatisfaction. To the extent the
Company is not successful in developing and executing its
strategies, it could have an adverse effect on the financial condition,
reputation and financial performance of the Company.
Information Technology The Company relies on information
technology (“IT”) to support the current and future requirements of
the business. A significant or prolonged disruption in the Company's
current IT systems could negatively impact day-to-day operations of
the business which could adversely affect the Company's financial
performance and reputation. In 2025, the Company will be
implementing a new Warehouse Management System ("WMS"), an
inventory forecasting and replenishment application at store level,
and pricing and data analytics software.
26 THE NORTH WEST COMPANY INC. 2024
The failure to successfully upgrade legacy systems, or to
migrate from legacy systems to new IT systems, could have an
adverse effect on the Company's operations, reputation and financial
performance. There is also a risk that the anticipated benefits, cost
savings or operating efficiencies related to upgrading or
implementing new IT systems may not be realized which could
adversely affect the Company's operations, financial performance or
reputation. To help mitigate these risks, the Company uses a
combination of specialized internal and external IT resources as well
as a strong governance structure and disciplined project
management.
The Company also depends on accurate and reliable
information from its IT systems for decision-making and operating
the business. As the volume of data and the complexity and
integration of IT systems increases, there is a greater risk of errors in
data or misinterpretation of the data which could negatively impact
decision making and in turn, have an adverse effect on the
Company's financial performance.
Environmental The Company owns and leases a large number of
facilities and real estate, particularly in remote locations, and is
subject to environmental risks associated with the contamination of
such facilities and properties. The Company operates retail fuel
outlets in a number of locations and uses fuel to heat stores and
housing. The Company also has aviation fuel storage containers and
operates aviation fuel dispensing equipment. Contamination
resulting from gasoline, heating and aviation fuel is possible. The
Company employs operating, training, monitoring and testing
procedures to minimize the risk of contamination. The Company also
operates refrigeration equipment in its stores and distribution
centres which, if the equipment fails, could release gases that may
be harmful to the environment. The Company has monitoring and
preventative maintenance procedures to reduce the risk of this
contamination occurring. Even with these risk mitigation policies and
procedures, the Company could incur increased or unexpected costs
related to environmental incidents and remediation activities,
including litigation and regulatory compliance costs, all of which
could have an adverse effect on the reputation and financial
performance of the Company.
Laws, Regulations and Standards The Company is subject to
various laws, regulations and standards administered by federal,
provincial and foreign regulatory authorities, including but not
limited to income, commodity and other taxes, securities laws, anti-
trust and competition laws, NNC and SNAP regulations, duties,
currency repatriation, health and safety, labour and employment
standards, minimum wage laws, Payment Card Industry ("PCI")
standards, anti-money laundering ("AML") regulations, licensing
requirements,
product
packaging
and
labeling
regulations,
hazardous waste regulations and zoning laws. New accounting
standards and pronouncements or changes in accounting standards
may also impact the Company's financial results.
These laws, regulations and standards and their interpretation
by various courts and agencies are subject to change. In the course
of complying with such changes, the Company may incur significant
costs. Failure by the Company to fully comply with applicable laws,
regulations and standards could result in financial penalties,
assessments, sanctions, loss of operating licenses or legal action that
could have an adverse effect on the reputation, financial condition
and financial performance of the Company.
The Company is also subject to various privacy laws and
regulations regarding the protection of personal information of its
customers and employees. Any failure in the protection of this
information or non-compliance with laws or regulations could
negatively
affect
the
Company's
reputation
and
financial
performance.
A portion of the Company's sales and net earnings are derived
from financial services and pharmacy operations, which are subject
to additional laws, regulations and standards. Changes in legislation
regarding financial services fees, including but not limited to ATM,
pre-paid Visa card and cheque-cashing fees and fees earned on
customer accounts receivable, could have an adverse impact on the
Company's financial performance if other fees or offsetting cost
reductions
cannot
be
implemented.
In
Canada,
on-going
prescription drug reform, changes in dispensing fees and the
implementation of a national pharmacare system could have an
adverse effect on the Company's financial performance if other fees
or offsetting cost reductions cannot be implemented.
The airline industry is also subject to extensive legal, regulatory
and administrative controls and oversight, including airline safety
standards. Failure by the Company to comply with these laws,
regulations and standards could result in the loss of operating
licenses and could have an adverse effect on the Company's financial
performance and reputation.
Furthermore, changes in legislation, including costs associated
with recycling and disposal of consumer goods packaging and food
waste, hazardous waste regulation, carbon taxes and the
implementation of other greenhouse gas reduction initiatives and
regulations related to transitioning to a low-carbon and more
climate resilient future, could result in additional costs which could
have a negative impact on the Company's financial performance if
the Company is not able to fully pass on these additional costs to its
customers or identify other offsetting cost reductions and
efficiencies. In addition, failure to comply with these laws, standards
and regulations could have an adverse affect on the Company's
financial performance, financial condition and reputation.
Food, Drug, Product and Service Safety The Company is exposed
to risks associated with food and drug safety, product packaging,
labelling,
handling,
storage
and
distribution,
and
general
merchandise product defects. The Company also operates
pharmacies and provides tele-pharmacy services and is subject to
risks associated with the distribution of prescription drugs, errors
made through medication dispensing or patient services and
consultation. Food sales represent approximately 77% of total
Company sales. A significant outbreak of a food-borne illness or food
safety issues including food tampering or contamination, or
increased public concerns with certain food products could have an
adverse effect on the reputation and financial performance of the
Company and could lead to unforeseen liabilities from legal claims.
The Company has food preparation, handling, dispensing and
storage procedures which help mitigate these risks.
The Company also has product recall procedures in place in the
event of a food-borne illness outbreak or product defect. The
existence of these procedures does not eliminate the underlying
risks and the ability of these procedures to mitigate risk in the event
of a food-borne illness or product recall is dependent on their
successful execution.
27
ANNUAL REPORT
Social Social and political issues raise public awareness,
perspectives and actions through protests and/or media campaigns.
Issues that may relate to the Company’s business include, but are not
limited to food security, minimum wages, Indigenous rights, diversity
and inclusion, local and ethical sourcing, nutritional labelling, the
environment and climate change. Ineffective action or inaction on
these matters, including perceived failure to adequately address
these matters, could adversely affect the Company’s reputation or
financial performance.
Fuel and Utility Costs Compared to other retailers, the Company is
more exposed to fluctuations in the price of energy, particularly oil.
Due to the vast geography and remoteness of the store network,
expenses related to aviation fuel, diesel-generated electricity and
heating fuel costs are a more significant component of the
Company's and its customers' expenses. To the extent that
escalating fuel and utility costs cannot be offset by alternative
energy sources, energy conservation practices or offsetting
productivity gains, this may result in higher retail prices or lower
operating margins which may affect the Company's financial
performance and reputation. In this scenario, consumer retail
spending could also be negatively affected by higher household
energy-related expenses which could have an adverse effect on the
Company's financial performance.
Insurance The Company manages its exposure to certain risks
through an integrated insurance program which combines an
appropriate level of self-insurance and the purchase of various
insurance policies. The Company's insurance program is based on
various lines and limits of coverage and is arranged with financially
stable insurance companies as rated by professional rating agencies.
Global insurance market conditions continue to be challenging as
insurance companies limit their capacity for underwriting risks in
certain geographic areas such as the Caribbean and northern
Canada or in sectors such as aviation. Insurance companies that do
provide coverage in these areas are requiring significantly higher
insurance premiums and higher self-insured retention levels from
companies. These factors are expected to continue to result in
higher insurance costs and changes in self-insured retention levels
which may result in greater earnings volatility in the event of future
losses. There can be no assurance that the Company's insurance
program will be sufficient to cover one or more large claims, or that
any given risk will be mitigated in all circumstances. There can also
be no assurance that the Company will be able to continue to
purchase insurance coverage at reasonable rates or maintain its self-
insured retention levels. To the extent that the Company's insurance
policies do not provide sufficient coverage for a loss, it could have an
adverse impact on the Company's operating results and financial
condition.
Vendor and Third Party Service Partner Management The
Company relies on a broad base of manufacturers, suppliers and
operators of distribution facilities to provide goods and services.
Events, such as a pandemic, or disruptions affecting these suppliers
outside of the Company's control could in turn result in delays in the
delivery of merchandise to the stores and therefore negatively
impact the Company's reputation and financial performance. A
portion of the merchandise the Company sells may be sourced from
less developed countries which increases certain risks to the
Company including risks associated with product safety, general
merchandise product defects and products that do not meet the
required standards. Additionally, products sourced from less
developed countries may have an increased risk of non-compliance
with human rights, forced labour, child labour and ethical and safe
business practices which could negatively impact the Company's
reputation. The Company uses offshore consolidators and sourcing
agents to monitor product quality and ethical sourcing standards
however, the Company does not have any direct influence over how
these vendors and service partners are managed and there is no
certainty that these risks can be completely mitigated in all
circumstances.
NSA also relies upon suppliers and third party service partners
for specialized aviation parts and aircraft maintenance services. A
prolonged disruption affecting the supply of parts or provision of
maintenance services could negatively impact the availability of
aircraft to service the Company's stores and customers, or result in
higher than anticipated costs, which could have an adverse effect on
the Company's financial performance and reputation.
Ethical Business Conduct The Company has a Code of Business
Conduct and Ethics policy which governs both employees and
Directors. The Company also has a Whistleblower Policy that
provides direct access to members of the Board of Directors.
Unethical business conduct could negatively impact the Company's
reputation and relationship with its customers, investors and
employees, which in turn could have an adverse effect on the
financial performance of the Company.
Income Taxes In the ordinary course of business, the Company is
subject to audits by tax authorities. The Company regularly reviews
its compliance with tax legislation, filing positions, the adequacy of
its tax provisions and the potential for adverse outcomes. While the
Company believes that its tax filing positions are appropriate and
supportable, the possibility exists that certain matters may be
reviewed and challenged by the tax authorities. If the final outcome
differs materially from the tax provisions, the Company's income tax
expense and its earnings could be affected positively or negatively in
the period in which the outcome is determined.
28 THE NORTH WEST COMPANY INC. 2024
Litigation and Casualty Losses In the normal course of business,
the Company is involved in and potentially subject to claims and
legal proceedings that may involve its customers, suppliers and
others. The potential outcomes of claims and legal proceedings is
uncertain. The Company records a provision for litigation claims if
management believes the Company has liability for such claim or
legal action. If management's assessment of liability or the amount
of any such claim is incorrect, any difference between the final
judgment amount and the provision would become an expense or a
recovery in the period such claim was resolved. If the Company is
unsuccessful in defending its position, the resolution of claims could
have an adverse effect on the Company's financial results, financial
condition and reputation.
In February 2025, two Statements of Claims for putative class
action proceedings were filed in the Manitoba Court of King’s Bench
against The North West Company Inc. and certain Canadian
subsidiaries: Kusugak et al (the “Kusugak Claim”) and Muskego et al
(the “Muskego Claim”, collectively with the Kusugak Claim, the
“Claims”). The Claims allege that the Company misrepresented the
amount of federal subsidy it passed through to consumers through
the Nutrition North Canada subsidy program (the "Subsidies")
between April 1, 2011 and the present. The Claims are brought by
individuals who allegedly purchased subsidized goods at the
Company’s stores in Nunavut, Quebec and Manitoba, and seek
damages including, for alleged negligent misrepresentation and
unjust enrichment as well as breach of contract, the Competition Act
and certain provincial and territorial consumer protection acts. These
actions are at an early stage and have not been certified as class
proceedings. The Company believes these Claims are without merit
and maintains that its practices regarding the Subsidies were fully
compliant with the Government of Canada agreements and plans to
actively defend these actions.
Consistent with risks inherent in the aviation industry, NSA
could be subject to large liability claims arising out of major
accidents or disasters involving aircraft which can result in serious
injury, death or destruction of property. Accidents and disasters may
occur from factors outside of the Company’s control such as severe
weather, lightning strikes, wind shear and bird strikes. Any such
accident or disaster could have a material adverse effect on the
Company’s reputation, results from operations and financial
condition.
Management of Inventory Success in the retail industry depends
on being able to select the right merchandise, in the correct
quantities in proportion to the demand for such merchandise. A
miscalculation of consumer demand for merchandise could result in
having excess inventory for some products and missed sales
opportunities for others which could have an adverse effect on the
Company's operations, financial performance and reputation. Excess
inventory may also result in higher markdowns or inventory
shrinkage all of which could have an adverse effect on the financial
performance of the Company. In 2025, the Company will begin
implementing a new IT application for inventory forecasting and
replenishment at store level and a warehouse management system
in International Operations. The failure to successfully implement
these applications and the applicable processes and change
management requirements, may increase the risks associated with
inventory management.
Post-Employment Benefits The Company engages professional
investment advisors to manage the assets in the defined benefit
pension plans. The performance of the Company's pension plans
and the plan funding requirements are impacted by the returns on
plan assets, changes in the discount rate and regulatory funding
requirements. If capital market returns are below the level estimated
by management or if the discount rate used to value the liabilities of
the plans decreases, the Company may be required to make
contributions to its defined benefit pension plans in excess of those
currently contemplated, which may have an adverse effect on the
Company's financial performance.
The Company regularly monitors and assesses the performance
of the pension plan assets and the impact of changes in capital
markets, changes in plan member demographics, and other
economic factors that may impact funding requirements, benefit
plan expenses and actuarial assumptions. The Company makes cash
contributions to the pension plan as required and also uses letters of
credit to satisfy a portion of its funding obligations. Effective January
1, 2011, the Company entered into an amended and restated staff
pension plan and added a defined contribution plan. Under the
amended pension plan, all members who did not meet a qualifying
threshold based on number of years in the pension plan and age
were transitioned to the defined contribution pension plan effective
January 1, 2011 and no longer accumulate years of service under the
defined benefit pension plan. Effective January 1, 2022, the defined
benefit pension plan for Canadian-based executives was closed to
new members however, members prior to the closure will continue
to accumulate service in the plan until the end of their employment.
All of the Company's defined benefit pension plans are closed to
new members and all new eligible employees will participate in the
staff defined contribution plan. Further information on post-
employment benefits is provided on page 31 and in Note 13 to
the consolidated financial statements.
Geopolitical Changes in the domestic or international political
environment may impact the Company's ability to source and
provide products and services. Acts of terrorism, riots and political
instability could have an adverse effect on the financial performance
of the Company.
Dependence on Key Facilities There are five major distribution
centres which are located in Winnipeg, Manitoba; Anchorage, Alaska;
San Leandro, California; Port of Tacoma, Washington; and a third
party managed facility in Fort Lauderdale, Florida. In addition, the
Company's Canadian Operations support office is located in
Winnipeg, Manitoba, NSA's support office is located in Thunder Bay,
Ontario and the International Operations has support offices in
Anchorage, Alaska and Boca Raton, Florida. A significant or
prolonged disruption at any of these facilities due to fire, severe
weather conditions, natural disasters, or otherwise could have a
material adverse effect on the financial performance of the
Company.
Financial Risks In the normal course of business, the Company is
exposed to financial risks that have the potential to negatively
impact its financial performance. The Company manages financial
risk with oversight provided by the Board of Directors, who also
approve specific financial transactions. The Company uses derivative
financial instruments only to hedge exposures arising in respect of
underlying business requirements and not for speculative purposes.
These risks and the actions taken to minimize the risks are described
below. Further information on the Company's financial instruments
and associated risks are provided in Note 15 to the consolidated
financial statements.
29
ANNUAL REPORT
Credit Risk Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to meet its
contractual obligations. The Company is exposed to credit risk
primarily in relation to individual and commercial accounts
receivable. The Company manages credit risk by performing regular
credit assessments of its customers and provides allowances for
potentially uncollectible accounts receivable. The Company does not
have any individual customer accounts greater than 10% of total
accounts receivable.
Liquidity Risk Liquidity risk is the risk that the Company will not be
able to meet its financial obligations as they come due or can do so
only at excessive cost. The Company manages liquidity risk by
maintaining
adequate
credit
facilities
to
fund
operating
requirements, pension plan contributions and planned sustaining
and growth-related capital expenditures, and regularly monitoring
actual and forecasted cash flow and debt levels. At January 31, 2025,
the Company had undrawn committed revolving loan facilities
available of $438.8 million (January 31, 2024 - $433.9 million). The
undrawn capacity on existing loan facilities and the maturity dates of
these facilities helps reduce liquidity risk. Further information on
liquidity is provided in the Consolidated Liquidity and Capital
Resources section.
Currency Risk Currency risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates. The Company is exposed to currency risk,
primarily the U.S. dollar, through its net investment in International
Operations and its U.S. dollar denominated borrowings. The
Company manages its exposure to currency risk by hedging the net
investment in foreign operations with a portion of U.S. dollar
denominated borrowings as described in the Sources of Liquidity
section. At January 31, 2025, the Company had US$70.0 million in
U.S. denominated debt compared to US$70.2 million at January 31,
2024 and US$70.4 million at January 31, 2023. Further information on
the impact of foreign exchange rates on the translation of U.S.
denominated debt is provided in the Capital Structure section.
The Company is also exposed to currency risk relating to the
translation of International Operations earnings to Canadian dollars.
In 2024, the average exchange rate used to translate U.S.
denominated earnings from the International Operations was 1.3775
compared to 1.3504 last year. The Canadian dollar's depreciation in
2024 compared to the U.S. dollar in 2023 positively impacted
consolidated net earnings by $1.0 million. In 2023, the average
exchange rate was 1.3504 compared to 1.3088 in 2022 which
resulted in an increase in 2023 consolidated net earnings of $1.5
million compared to 2022.
Interest Rate Risk Interest rate risk is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Company is exposed to interest
rate risk primarily through its long-term borrowings. The Company
manages exposure to interest rate risk though a combination of fixed
and floating interest rate debt and may use interest rate swaps.
Further information on long-term debt is provided in Note 12 to the
consolidated financial statements. As at January 31, 2025, the
Company had no outstanding interest rate swaps.
CORPORATE SOCIAL RESPONSIBILITY &
SUSTAINABILITY
The North West Company opened its first store in 1668 as a trading
post in the Cree Nation of Waskaganish in northern Canada and
many of our stores in northern Canada and Alaska have been in
operation for over 200 years. Our continuing presence in the
communities we serve is based on sustainable practices that reflect
our adaptability and respect for the social license and underlying
trust we must earn.
Our ESG Strategy is embedded across our business operations
and influences our unique business model, supporting underserved
communities in remote geographical locations. We aim to achieve
positive change through a shared-value framework that benefits
people and our planet and supports creating strong partnerships for
the future. Our ESG Strategy framework highlights ESG risks and
opportunities that are important to our business and partners.
Our vision is at the heart of our ESG Strategy, which is centred
on the community and employee experience. Wherever we can, we
look to find opportunities to build trust with our community partners
and provide them with the products and services they need.
Through our ESG Strategy, we seek to enable positive change in the
communities we serve by supporting their journey for improved
health, nutrition and overall quality of life. We also strive to improve
the experience of our employees by creating a more diverse,
equitable and inclusive work environment, where employees can
further develop their skills and grow their careers within our
organization.
Our ESG Strategy is defined by a clear pathway to drive our
efforts towards a more sustainable and equitable future, accelerating
progress to benefit people, the planet and partnerships.
People Help employees and local communities to advance towards
a healthier, inclusive and equitable future.
Planet Promote the protection of the environment and address
climate change.
Partnerships Maintain trust with our partners, by aligning to
regulations and operating responsibly in global supply chains.
The Board of Directors are accountable for overseeing the
Company's Corporate Social Responsibility and Sustainability which
are integrated within the Company's risk management and strategic
planning process. In addition to the information provided on climate
change and environmental risk factors previously noted under Risk
Management, further information on the Sustainability Report and
and the report on Fighting Against Forced Labour and Child Labour
in Supply Chains Act ("Modern Slavery") are available on the
Company's website at www.northwest.ca.
30 THE NORTH WEST COMPANY INC. 2024
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with IFRS
requires management to make estimates, assumptions and
judgments that affect the application of accounting policies and the
reported amounts and disclosures made in the consolidated
financial statements and accompanying notes. Judgment has been
used in the application of accounting policy and to determine if a
transaction should be recognized or disclosed in the consolidated
financial statements, while estimates and assumptions have been
used to measure balances recognized or disclosed. These estimates,
assumptions and judgments are based on management's historical
experience, knowledge of current events, expectations of future
outcomes and other factors that management considers reasonable
under the circumstances. Certain of these estimates and
assumptions require subjective or complex judgments by
management about matters that are uncertain and changes in these
estimates could materially impact the consolidated financial
statements and disclosures. Management regularly evaluates the
estimates and assumptions it uses and revisions are recognized in
the period in which the estimates are reviewed and in any future
periods affected. The areas that management believes involve a
higher degree of judgment or complexity, or areas where the
estimates and assumptions may have the most significant impact on
the amounts recognized in the consolidated financial statements
include the following:
Valuation of Accounts Receivable The Company records an
allowance for doubtful accounts related to trade accounts receivable
that may potentially be impaired. The Company recognizes loss
allowances for expected credit losses ("ECL's") on accounts
receivable. The change in ECL's is recognized in net earnings and
reflected as an allowance against accounts receivable. The Company
uses historical trends, timing of recoveries and management's
judgment as to whether current economic and credit conditions are
such that actual losses are likely to differ from historical trends. A
significant change in one or more of these factors could impact the
estimated allowances for doubtful accounts recorded in the
consolidated balance sheets and the provisions for debt loss
recorded in the consolidated statements of earnings. Additional
information on the valuation of accounts receivable is provided in
Note 5 and the Credit Risk section in Note 15 to the consolidated
financial statements.
Valuation of Inventories Inventories are stated at the lower of cost
and net realizable value. Significant estimation is required in: (1) the
determination of margin factors used to convert inventory to cost;
(2) recognizing merchandise for which the customer's perception of
value has declined and appropriately marking the retail value of the
merchandise down to the perceived value; and (3) estimating
inventory losses, or shrinkage, occurring between the last physical
count and the balance sheet date.
Inventory shrinkage is estimated as a percentage of sales for the
period from the date of the last physical inventory count to the
balance sheet date. The estimate is based on historical experience
and the most recent physical inventory results. To the extent that
actual losses experienced vary from those estimated, both
inventories and cost of sales may be impacted.
Changes or differences in these estimates may result in changes
to inventories on the consolidated balance sheets and a charge or
credit to cost of sales in the consolidated statements of earnings.
Additional information regarding inventories is provided in Note 6 to
the consolidated financial statements.
Post-Employment Benefits The defined benefit plan obligations
are accrued based on actuarial valuations which are dependent on
assumptions determined by management. These assumptions
include the discount rate used to calculate benefit plan obligations,
the rate of compensation increase, retirement ages and mortality
rates. These assumptions are reviewed by management and the
Company's actuaries.
The discount rate used to calculate benefit plan obligations and
the rate of compensation increase are the most significant
assumptions. The discount rate used to calculate benefit plan
obligations and plan asset returns is based on market interest rates,
as at the Company's measurement date of January 31, 2025 on a
portfolio of Corporate AA bonds with terms to maturity that, on
average, matches the terms of the defined benefit plan obligations.
The discount rate used to measure the benefit plan obligations for
fiscal 2024 was 4.62% compared to 4.88% in 2023 and 4.70% in 2022.
Management assumed a rate of compensation increase of 4.0% for
fiscal 2024, 2023 and 2022.
These assumptions may change in the future and may result in
material changes in the defined benefit plan obligation on the
Company's consolidated balance sheets, the defined benefit plan
expense on the consolidated statements of earnings and the net
actuarial gains or losses recognized in comprehensive income and
retained earnings. Changes in financial market returns and interest
rates could also result in changes to the funding requirements of the
Company's defined benefit pension plans. Additional information
regarding the Company's post-employment benefits, including the
sensitivity of a 100 basis point change in the discount rate, is
provided in Note 13 to the consolidated financial statements.
Amortization of Long-lived Assets and Right-of-Use Assets The
Company makes estimates about the expected useful lives of long-
lived assets, including right-of-use assets and aircraft, the expected
residual values of the assets and the most appropriate method to
reflect the realization of the assets future economic benefit. This
includes using judgment to determine which asset components
constitute a significant cost in relation to the total cost of an asset.
Changes to these estimates, which can be significant, could be
caused by a variety of factors, including changes in expected useful
lives or residual values, changes to maintenance programs and
changes in utilization of the aircraft. Estimates and assumptions are
evaluated at least annually and any adjustments are accounted for as
a change in estimate, on a prospective basis, through amortization
expense in the Company's consolidated statements of earnings.
Business Combinations The Company accounts for business
combinations using the acquisition method of accounting which
requires the acquired assets and assumed liabilities to be recorded at
their estimated fair values. Judgment is required to determine the
fair value of the assets and liabilities with the most significant
judgment and assumptions required to determine the estimated fair
values of intangible assets, particularly trade names.
The Company uses the royalty relief method to determine the
fair value of the trade name intangible assets. This technique values
the intangible assets based on the present value of the expected
after-tax royalty cash flow stream using a hypothetical licensing
arrangement. Significant assumptions include, among others, the
determination of projected revenues, royalty rate, discount rates and
anticipated average income tax rates.
31
ANNUAL REPORT
Impairment of Long-lived Assets The Company assesses the
recoverability of values assigned to long-lived assets after
considering potential impairment indicated by such factors as
business and market trends, future prospects, current market value
and other economic factors. Judgment is used to determine if a
triggering event has occurred requiring an impairment test to be
completed. If there is an indication of impairment, the recoverable
amount of the asset, which is the higher of its fair value less costs of
disposal and its value in use, is estimated in order to determine the
extent of the impairment loss. Where the asset does not generate
cash flows that are independent from other assets, the Company
estimates the recoverable amount of the cash-generating unit
("CGU") to which the asset belongs. For tangible and intangible
assets excluding goodwill, judgment is required to determine the
CGU based on the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets. To the extent that the
carrying value exceeds the estimated recoverable amount, an
impairment charge is recognized in the consolidated statements of
earnings in the period in which it occurs.
Various assumptions and estimates are used to determine the
recoverable amount of a CGU. The Company determines fair value
less costs of disposal using estimates such as market rental rates for
comparable properties, property appraisals and capitalization rates.
The Company determines value in use based on estimates and
assumptions regarding future financial performance. The underlying
estimates for cash flows include estimates for future sales, gross
margin rates and store expenses, and are based upon the stores' past
and expected future performance. Changes which may impact
future cash flows include, but are not limited to, competition,
general economic conditions and increases in operating costs that
cannot be offset by other productivity improvements. To the extent
that management's estimates are not realized, future assessments
could result in impairment charges that may have a significant
impact on the Company's consolidated balance sheets and
consolidated statements of earnings.
Goodwill Goodwill is not amortized but is subject to an impairment
test annually or whenever indicators of impairment are detected.
Judgment is required to determine the appropriate grouping of
CGUs for the purpose of testing for impairment. Judgment is also
required in evaluating indicators of impairment which would require
an impairment test to be completed. Goodwill is allocated to CGUs
that are expected to benefit from the synergies of the related
business combination and represents the lowest level within the
Company at which goodwill is monitored for internal management
purposes, which is both the Company's Canadian Operations and
International Operations segments before aggregation.
The value of the goodwill was tested by means of comparing
the recoverable amount of the operating segment to its carrying
value. The recoverable amount is the greater of its value in use or its
fair value less costs of disposal. The operating segment's recoverable
amount was based on fair value less costs of disposal. A range of fair
values was estimated by inferring enterprise values from the product
of financial performance and comparable trading multiples. Values
assigned to the key assumptions represent management's best
estimates and have been based on data from both external and
internal sources. Key assumptions used in the estimation of
enterprise value include: budgeted financial performance, selection
of market trading multiples and costs to sell. To the extent that
management's estimates are not realized, future assessments could
result in impairment charges that may have a significant impact on
the Company's consolidated balance sheets and consolidated
statements of earnings.
The Company performed the annual goodwill impairment test
in 2024 and determined that the recoverable amount exceeded its
carrying value. No goodwill impairment was identified and
management considers any reasonably foreseeable changes in key
assumptions unlikely to produce a goodwill impairment.
Income and Other Taxes Deferred tax assets and liabilities are
recognized for the future income tax consequences attributable to
temporary differences between the financial statement carrying
values of assets and liabilities and their respective income tax bases.
Deferred income tax assets or liabilities are measured using enacted
or substantively enacted income tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The calculation of current and
deferred income taxes requires management to use judgment
regarding the interpretation and application of tax legislation in the
various jurisdictions in which the Company operates. The calculation
of deferred income tax assets and liabilities is also impacted by
estimates of future financial results, expectations regarding the
timing of reversal of temporary differences and assessing the
possible outcome of audits of tax filings by the regulatory agencies.
Changes or differences in these estimates or assumptions may
result in changes to the current or deferred income tax balances on
the consolidated balance sheets, a charge or credit to income tax
expense in the consolidated statements of earnings and may result
in cash payments or receipts. Additional information on income
taxes is provided in Note 10 to the consolidated financial statements.
Leases The values of right-of-use assets and lease liabilities are
measured based on whether renewal options are reasonably certain
of being exercised and an estimate of the incremental borrowing
rate specific to each leased asset if the interest rate in the lease is not
readily determined. The incremental borrowing rate for the Canadian
and International Operations is determined based on the applicable
corporate bond yield curve with an adjustment that reflects the
security.
Promissory Note Receivable This financial asset includes
management's estimate of the fair value of contingent consideration
receivable for the sale of its Giant Tiger stores. The amount of
consideration is dependent on achieving certain financial measures
which may result in the actual amount of contingent consideration
being higher or lower than the amount estimated by the Company,
including the possibility of no further consideration owing if certain
financial measures are not met. Additional information on the
promissory note receivable is included in Note 15 and Note 25 to the
consolidated financial statements.
32 THE NORTH WEST COMPANY INC. 2024
NEW ACCOUNTING STANDARDS IMPLEMENTED
In October 2022, the IASB issued amendments to IAS 1 - Presentation
of Financial Statements, which specifies that covenants whose
compliance is assessed after the reporting date do not affect the
classification of debt as current or non-current at the reporting date.
The Company adopted these amendments this year and determined
there was no impact on the consolidated financial statements.
The principal components of the Government of Canada's Global
Minimum Tax Act ("GMTA") - Pillar Two legislation was included in Bill
C-69 and enacted into law on June 20, 2024, and follow the Pillar
Two model rules from the Organisation for Economic Co-operation
and Development ("OECD"). These rules were developed by the
OECD and designed to ensure that large, multinational enterprises
would be subject to a minimum effective tax rate of 15% in each
jurisdiction they operate. The Company operates retail stores in the
Cayman Islands, Barbados and British Virgin Islands which are
impacted by the GMTA - Pillar Two legislation. GMTA top up tax of
$1.4 million has been included in the Company's income taxes.
Additional information is provided in Note 10 to the consolidated
financial statements
In May 2023, the IASB issued amendments to IAS 12 - Income Taxes
which introduced a mandatory temporary exception from the
recognition and disclosure of deferred taxes related to the
implementation of Pillar Two model rules. The Company adopted
this amendment during the second quarter of 2024 and has applied
the exception to recognizing and disclosing information regarding
Pillar Two deferred income tax assets and liabilities.
FUTURE ACCOUNTING STANDARDS
In April 2024, the IASB issued IFRS 18 - Presentation and Disclosure in
Financial Statements to improve the comparability of the financial
performance of similar entities. The standard replaces IAS 1 and
primarily impacts the statements of earnings where companies will
be required to present separate categories of income and expense
for operating, investing and financing activities. IFRS 18 will also
require management-defined performance measures to be
explained and included in a separate note within the consolidated
financial statements. The standard is effective for annual reporting
periods beginning on or after January 1, 2027, including interim
financial statements, and requires retrospective application. The
Company is assessing the impact of the new standard.
In May 2024, amendments to IFRS 9 - Financial Instruments and IFRS 7
- Financial Instruments: Disclosures were issued. These amendments
clarify the timing of recognition and derecognition of a financial
asset or financial liability. Also included in the amendments are
clarifications regarding the classification of financial assets, including
those with features linked to environmental, social and corporate
governance. The amendments require additional disclosure for
financial instruments with contingent features and investments in
equity instruments classified at fair value through other
comprehensive income. These amendments are effective for annual
periods beginning on or after January 1, 2026, with early adoption
permitted. The adoption is not expected to have a material impact
on the Company's consolidated financial statements.
There are no further IFRS Accounting Standards or IFRIC
interpretations that are not yet effective that would be expected to
have a material impact on the Company's consolidated financial
statements.
33
ANNUAL REPORT
NON-GAAP FINANCIAL MEASURES
These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled
measures presented by other publicly traded companies and should not be construed as an alternative to the other financial measures
determined in accordance with IFRS.
(1) Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA and Adjusted Net Earnings are
not recognized measures under IFRS. Management uses these non-GAAP financial measures to exclude the impact of certain income and
expenses that must be recognized under IFRS. The excluded amounts are either subject to volatility in the Company's share price or may not
necessarily be reflective of the Company's underlying operating performance. These factors can make comparisons of the Company's financial
performance between periods more difficult. The Company may exclude additional items if it believes that doing so will result in a more
effective analysis and explanation of the underlying financial performance. The exclusion of these items does not imply that they are non-
recurring.
Reconciliation of earnings from operations to EBITDA and adjusted EBITDA
Consolidated
Fourth Quarter
Year-to-date
($ in thousands)
2024
2023
2022
2024
2023
2022
Earnings from operations
$
60,741
$
51,697
$
47,824
$
209,546
$
195,897
$
180,305
Add:
Amortization
29,658
27,439
25,636
115,619
105,276
98,373
EBITDA
$
90,399
$
79,136
$
73,460
$
325,165
$
301,173
$
278,678
Share-based compensation expense
1,376
4,558
3,878
14,250
13,167
13,131
The Next 100 one-time costs (1)
991
—
—
991
—
—
Fox Lake wildfire asset write-off (2)
—
—
—
—
3,694
—
Adjusted EBITDA
$
92,766
$
83,694
$
77,338
$
340,406
$
318,034
$
291,809
Canada
Fourth Quarter
Year-to-date
($ in thousands)
2024
2023
2022
2024
2023
2022
Earnings from operations
$
43,865
$
37,166
$
33,417
$
146,875
$
133,909
$
119,090
Add:
Amortization
19,383
18,087
17,134
76,671
70,180
66,368
EBITDA
$
63,248
$
55,253
$
50,551
$
223,546
$
204,089
$
185,458
Share-based compensation expense
631
3,605
3,049
10,854
10,971
10,983
The Next 100 one-time costs (1)
619
—
—
619
—
—
Fox Lake wildfire asset write-off (2)
—
—
—
—
3,694
—
Adjusted EBITDA
$
64,498
$
58,858
$
53,600
$
235,019
$
218,754
$
196,441
International (Stated in U.S. dollars)
Fourth Quarter
Year-to-date
($ in thousands)
2024
2023
2022
2024
2023
2022
Earnings from operations
$
11,893
$
10,755
$
10,630
$
45,496
$
45,903
$
46,772
Add:
Amortization
7,234
6,694
6,291
28,274
25,990
24,453
EBITDA
$
19,127
$
17,449
$
16,921
$
73,770
$
71,893
$
71,225
Share-based compensation expense
520
707
623
2,465
1,626
1,641
The Next 100 one-time costs (1)
258
—
—
258
—
—
Adjusted EBITDA
$
19,905
$
18,156
$
17,544
$
76,493
$
73,519
$
72,866
(1) The Next 100 one-time costs include professional fees and other non-recurring expenses incurred in the implementation of the Next 100
work outlined in the Strategies section.
(2) On May 5, 2023, the Company's store in Fox Lake, Alberta was destroyed by wildfire which resulted in a write-off of assets.
34 THE NORTH WEST COMPANY INC. 2024
Reconciliation of consolidated net earnings to adjusted net earnings:
Fourth Quarter
Year-to-Date
($ in thousands)
2024
2023
2022
2024
2023
2022
Net earnings
$
42,806
$
36,011
$
35,129
$
143,253
$
134,291
$
125,836
Share-based compensation expense, net of tax
1,074
3,523
2,976
10,818
10,177
10,213
The Next 100 one-time costs, net of tax (1)
720
—
—
720
—
—
Fox Lake wildfire asset write-off, net of tax (2)
—
—
—
—
2,551
—
Adjusted Net Earnings
$
44,600
$
39,534
$
38,105
$
154,791
$
147,019
$
136,049
(1) The Next 100 one-time costs include professional fees and other non-recurring expenses incurred in the implementation of the Next 100
work outlined in the Strategies section.
(2) On May 5, 2023, the Company's store in Fox Lake, Alberta was destroyed by wildfire which resulted in a write-off of assets.
Certain share-based compensation costs are presented as liabilities on the Company's consolidated balance sheets. The Company is exposed
to market price fluctuations in its share price through these share-based compensation costs. These liabilities are recorded at fair value at each
reporting date based on the market price of the Company's shares at the end of each reporting period with the changes in fair value recorded
in selling, operating and administrative expenses. Further information on share-based compensation is provided in Note 14 and Note 18 to the
consolidated financial statements.
(2) Return on Net Assets (RONA) is not a recognized measure
under IFRS. Management believes that RONA is a useful measure to
evaluate the financial return on the net assets used in the business.
RONA is calculated as earnings from operations (EBIT) for the year
divided by average monthly net assets. The following table
reconciles net assets used in the RONA calculation to IFRS measures
reported in the consolidated financial statements as at January 31 for
the following fiscal years:
($ in millions)
2024
2023
2022
Total assets
$ 1,527.5
$ 1,396.0
$ 1,336.9
Less: Total liabilities
(732.8)
(690.2)
(689.0)
Add: Total debt and lease liabilities
422.2
405.5
402.5
Net Assets Employed
$ 1,216.9
$ 1,111.3
$ 1,050.4
(3) Return on Average Equity (ROE) is not a recognized measure
under IFRS. Management believes that ROE is a useful measure to
evaluate the financial return on the amount invested by
shareholders. ROE is calculated by dividing net earnings for the year
by average monthly total shareholders' equity. There is no directly
comparable IFRS measure for return on equity.
35
ANNUAL REPORT
GLOSSARY OF TERMS & ABBREVIATIONS
AC Alaska Commercial Company store banner.
Basic earnings per share Net earnings attributable to shareholders of
The North West Company Inc. divided by the weighted-average number
of shares outstanding during the period.
Basis point A unit of measure that is equal to 1/100th of one percent.
Book value per share Equity attributable to shareholders of The North
West Company Inc. divided by the number of shares, basic or diluted,
outstanding at the end of the year.
B-to-B Business to business sales.
B-to-C Business to consumer sales.
Compound Annual Growth Rate ("CAGR") The compound annual
growth rate is the year-over-year percentage growth rate over a given
period of time.
CUL Cost-U-Less store banner.
Debt covenants Restrictions written into banking facilities, senior notes
and loan agreements that prohibit the Company from taking actions that
may negatively impact the interests of the lenders.
Debt loss An expense resulting from the estimated loss on potentially
uncollectible accounts receivable.
Debt-to-equity ratio Provides information on the proportion of debt
and equity the Company is using to finance its operations and is
calculated as total debt divided by shareholders' equity.
Diluted earnings per share The amount of net earnings for the period
attributable to shareholders of The North West Company Inc. divided by
the weighted-average number of shares outstanding during the period
including the impact of all potential dilutive outstanding shares at the
end of the period.
EBIT (Earnings From Operations) Net earnings before interest and
income taxes provides an indication of the Company's performance prior
to interest expense and income taxes.
EBIT margin EBIT divided by sales.
EBITDA Net earnings before interest, income taxes, depreciation and
amortization provides an indication of the Company's operational
performance before allocating the cost of interest, income taxes and
capital investments. See Non-GAAP Financial Measures section.
EBITDA margin EBITDA divided by sales.
ESG Environmental, social and governance.
Fair value The amount of consideration that would be agreed upon in
an arm's length transaction between knowledgeable, willing parties who
are under no compulsion to act.
Gross profit Sales less cost of goods sold and inventory shrinkage.
Gross profit rate Gross profit divided by sales.
GT Giant Tiger store banner.
Hedge A risk management technique used to manage interest rate,
foreign currency exchange or other exposures arising from business
transactions.
Interest coverage Net earnings before interest and income taxes
divided by interest expense.
Next 100 The Company's strategy focused on driving operational
excellence, expanding our capabilities and pursuing value for our
customers, our employees and our shareholders. The initiatives within the
Next 100 program leverage the power of data through new tools and
analytics, and will be enabled by investments in technology and training,
which will help sustain the benefits of this work in the years to come.
Further information on the Next 100 strategy and work priorities is
provided in the Strategies section.
NSA North Star Air Ltd., a regional airline providing cargo and passenger
services in northern Canada.
Return on Average Equity ("ROE") Net earnings divided by average
shareholders' equity. See Non-GAAP Financial Measures section.
Return on Net Assets ("RONA") Net earnings before interest and
income taxes divided by average net assets employed (total assets less
accounts payable and accrued liabilities, income taxes payable, defined
benefit plan obligations, deferred tax liabilities, and other long-term
liabilities). See Non-GAAP Financial Measures section.
RTW Roadtown Wholesale Trading Ltd. collectively consisting of the
Riteway Food Markets banner, a Cash and Carry store and a significant
wholesale operation.
Same store sales Is a supplementary financial measure of retail food and
general merchandise sales performance from stores that have been open
more than 52 weeks in the periods being compared, excluding the
impact of foreign exchange and the estimated impact of the extra day of
sales due to February 29th. Total same store sales consists of retail food
and general merchandise sales and excludes other sales.
SOFR Secured Overnight Financing Rate.
WMS Means warehouse management system.
Working capital Total current assets less total current liabilities.
Year The fiscal year ends on January 31. Each fiscal year has 365 days of
operations with the exception of a "leap year" which has 366 days of
operations as a result of February 29. The following table summarizes the
fiscal year:
Fiscal
Year
Year-ended
Fiscal
Year
Year-ended
2024*
January 31, 2025
2018
January 31, 2019
2023
January 31, 2024
2017
January 31, 2018
2022
January 31, 2023
2016*
January 31, 2017
2021
January 31, 2022
2015
January 31, 2016
2020*
January 31, 2021
2014
January 31, 2015
2019
January 31, 2020
2013
January 31, 2014
* Indicates years that had 366 days of operations due to February 29th.
36 THE NORTH WEST COMPANY INC. 2024
Eleven-Year Financial Summary
Fiscal Year ($ in thousands )
2024
2023
2022
2021
2020
Consolidated Statements of Earnings
Sales - Canadian Operations
$ 1,475,039
$ 1,418,961
$ 1,323,185
$ 1,291,139
$ 1,376,188
Sales - International Operations
1,101,305
1,052,717
1,029,575
957,657
983,051
Sales - Total
2,576,344
2,471,678
2,352,760
2,248,796
2,359,239
EBITDA(2) - Canadian Operations
223,546
204,089
185,458
215,209
206,498
EBITDA(2) - International Operations
101,619
97,084
93,220
96,166
94,929
EBITDA(2) - Total Operations
325,165
301,173
278,678
311,375
301,427
Amortization - Canadian Operations
76,671
70,180
66,368
61,881
62,357
Amortization - International Operations
38,948
35,096
32,005
29,069
29,721
Amortization - Total
115,619
105,276
98,373
90,950
92,078
Interest
18,301
19,051
14,836
13,058
16,808
Income taxes
47,992
42,555
39,633
49,916
48,981
Net earnings attributable to shareholders of the Company
137,296
129,391
122,190
154,802
139,874
Cash flow from operating activities
260,625
230,427
182,838
224,135
338,718
Dividends paid during the year
75,525
73,533
71,805
70,420
67,276
Capital and intangible asset expenditures
146,354
123,411
117,112
94,070
75,244
Net change in cash
14,026
(5,450)
9,383
(22,110)
43,349
Consolidated Balance Sheets
Current assets(4)
$ 550,268
$
502,905
$ 474,844
$ 403,358
$ 396,860
Property and equipment
719,771
644,681
606,310
554,457
531,794
Right-of-use assets
118,194
114,501
102,632
100,844
107,766
Promissory note receivable(4)
—
4,558
26,299
40,283
49,020
Other assets, intangible assets and goodwill
120,217
112,536
105,098
98,585
98,440
Deferred tax assets
19,055
16,829
21,707
21,746
7,288
Current liabilities
274,854
250,658
248,606
294,490
315,135
Long-term debt and other liabilities
457,937
439,579
440,384
344,579
370,802
Total Equity
794,714
705,773
647,900
580,204
505,231
Consolidated Dollar Per Share ($)
Net earnings - basic
$
2.87
$
2.71
$
2.55
$
3.21
$
2.87
Net earnings - diluted
2.83
2.67
2.51
3.16
2.82
EBITDA(2),(3)
6.80
6.31
5.82
6.45
6.18
Cash flow from operating activities(3)
5.45
4.83
3.82
4.64
6.95
Dividends paid during the year(3)
1.58
1.54
1.50
1.46
1.38
Equity (basic shares outstanding end of year)
16.60
14.79
13.57
12.12
10.39
Market price at January 31
46.44
38.89
36.24
35.05
32.37
Statistics at Year End
Number of stores - Canadian
170
168
164
161
159
Number of stores - International
60
59
58
55
53
Selling square feet (000's) end of year - Canadian Stores
1,023
1,018
1,004
998
986
Selling square feet (000's) end of year - International Stores
671
668
686
677
667
Sales per average selling square foot - Canadian
$
1,445
$
1,404
$
1,322
$
1,302
$
1,057
Sales per average selling square foot - International
$
1,645
$
1,555
$
1,511
$
1,425
$
1,479
Number of employees - Canadian Operations
4,777
5,070
5,024
4,926
4,735
Number of employees - International Operations
2,226
2,312
2,287
2,598
2,204
Average shares outstanding (000's)
47,788
47,747
47,865
48,268
48,758
Shares outstanding at end of fiscal year (000's)
47,871
47,711
47,751
47,879
48,613
Shares traded during the year (000's)
35,727
46,137
52,348
50,474
60,827
Financial Ratios
EBITDA(2) (%)
12.6
12.2
11.8
13.8
12.8
Earnings from operations (EBIT) (%)
8.1
7.9
7.7
9.8
8.9
Total return on net assets(2) (%)
17.8
17.7
17.9
23.8
22.4
Return on average equity(2) (%)
19.3
19.9
20.5
29.0
30.7
Debt-to-equity
.37:1
.40:1
.45:1
.41:1
.56:1
Dividends as % of cash flow from operating activities
29.0
31.9
39.3
31.4
19.9
Inventory turnover (times per year)
5.3
5.2
5.6
6.3
7.1
(1) IFRS 16 - Leases was applied retrospectively with restatement of certain prior year figures as
described in Accounting Standard Changes Implemented in 2019 as disclosed in the 2019 Annual
Report. Amounts prior to 2018 have not been restated for IFRS 16. Certain 2017 amounts have
been restated upon the adoption of IFRS 15. Amounts prior to 2017 have not been restated for IFRS
15.
(2) See Non-GAAP Financial Measures on page 34.
(3) Based on average basic shares outstanding.
37
ANNUAL REPORT
2019
2018(1)
2017 (1)
2016
2015
2014
Fiscal Year ($ in thousands )
Consolidated Statements of Earnings
1,271,552
1,246,133 1,199,473
1,125,330
1,089,898
1,042,168
Sales - Canadian Operations
822,841
767,353
785,649
718,763
706,137
582,232
Sales - International Operations
2,094,393
2,013,486 1,985,122
1,844,093
1,796,035
1,624,400
Sales - Total
140,359
130,399
112,393
109,736
98,276
100,896
EBITDA(2) - Canadian Operations
79,216
87,623
57,231
56,762
53,071
36,942
EBITDA(2) - International Operations
219,575
218,022
169,624
166,498
151,347
137,838
EBITDA(2) - Total Operations
62,983
57,577
39,796
35,291
31,781
30,302
Amortization - Canadian Operations
26,239
24,444
15,857
13,076
12,245
10,070
Amortization - International Operations
89,222
82,021
55,653
48,367
44,026
40,372
Amortization - Total
20,948
19,640
10,145
7,220
6,210
6,673
Interest
23,132
25,738
34,135
33,835
31,332
27,910
Income taxes
82,724
86,739
67,154
77,076
69,779
62,883
Net earnings attributable to shareholders of the Company
161,117
155,725
141,419
126,024
132,987
115,086
Cash flow from operating activities
64,351
62,329
62,315
60,169
58,210
56,180
Dividends paid during the year
121,605
103,219
122,035
77,745
75,983
52,329
Capital and intangible asset expenditures
(10,261)
13,288
(5,083)
(7,000)
8,114
6,776
Net change in cash
Consolidated Balance Sheets
$ 399,593
$ 376,297 $ 335,003
$ 327,938
$ 335,581
$ 315,840
Current assets
555,075
514,946
469,993
358,121
345,881
311,692
Property and equipment
127,870
127,794
—
—
—
—
Right-of-use assets
—
—
—
—
—
—
Promissory note receivable
104,765
96,119
91,502
86,909
83,293
68,693
Other assets, intangible assets and goodwill
28,233
34,705
34,450
32,853
29,040
28,074
Deferred tax assets
194,084
196,938
171,212
152,244
155,501
146,275
Current liabilities
594,482
541,907
377,580
285,792
280,682
248,741
Long-term debt and other liabilities
426,970
411,016
382,156
367,785
357,612
329,283
Total equity
Consolidated Dollar Per Share ($)
$
1.70
$
1.78 $
1.38
$
1.59
$
1.44
$
1.30
Net earnings - basic
1.68
1.77
1.36
1.57
1.43
1.29
Net earnings - diluted
4.50
4.47
3.48
3.43
3.12
2.85
EBITDA(2),(3)
3.30
3.19
2.91
2.60
2.74
2.38
Cash flow from operating activities(3)
1.32
1.28
1.28
1.24
1.20
1.16
Dividends paid during the year(3)
8.76
8.43
7.60
7.57
7.37
6.80
Equity (basic shares outstanding at end of year)
27.56
31.17
29.14
29.28
30.53
26.56
Market price at January 31
Statistics at Year End
198
193
188
185
181
178
Number of stores - Canadian
51
52
51
47
47
47
Number of stores - International
1,617
1,571
1,552
1,518
1,463
1,422
Selling square feet (000's) end of year - Canadian Stores
662
669
668
676
676
676
Selling square feet (000's) end of year - International Stores
$
798
$
798 $
781
$
755
$
756
$
742
Sales per average selling square foot - Canadian
$
1,236
$
1,148 $
1,169
$
1,063
$
1,045
$
849
Sales per average selling square foot - International
5,587
5,672
5,915
5,715
5,482
4,921
Number of employees - Canadian Operations
2,046
2,253
2,119
1,882
1,896
1,726
Number of employees - International Operations
48,751
48,697
48,680
48,524
48,509
48,432
Average shares outstanding (000's)
48,751
48,751
48,690
48,542
48,523
48,497
Shares outstanding at end of fiscal year (000's)
45,013
46,269
38,836
49,189
35,631
24,080
Shares traded during the year (000's)
Financial Ratios
10.5
10.8
8.5
9.0
8.4
8.5
EBITDA(2) (%)
6.2
6.8
5.7
6.4
6.0
6.0
Earnings from operations (EBIT) (%)
13.5
15.3
16.7
20.1
19.5
18.4
Total return on net assets(2) (%)
20.5
23.2
18.3
21.8
20.6
19.3
Return on average equity(2) (%)
.96:1
.89:1
.82:1
.62:1
.63:1
.61:1
Debt-to-equity
39.9
40.0
44.1
47.7
43.8
48.8
Dividends as % of cash flow from operating activities
5.8
6.0
6.0
6.1
6.2
5.7
Inventory turnover (times per year)
(4) At January 31, 2025, accounts receivable includes $12,570 of the
promissory note receivable (January 31, 2024 - $22,500). See Note 25
to the consolidated financial statements for additional information.
38 THE NORTH WEST COMPANY INC. 2024
Management’s Responsibility for Financial Statements
The management of The North West Company Inc. is responsible for the preparation, presentation and integrity
of the accompanying consolidated financial statements and all other information in the annual report. The
consolidated financial statements have been prepared by management in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board and include certain amounts that are
based on reasonable estimates and judgment by management.
In order to meet its responsibility and ensure integrity of financial information, management has established a
code of business ethics, and maintains appropriate internal controls and accounting systems. An internal audit
function is maintained that is designed to provide reasonable assurance that assets are safeguarded, transactions are
authorized and recorded and that the financial records are reliable.
Ultimate responsibility for financial reporting to shareholders rests with the Board of Directors. The Audit
Committee of the Board of Directors, consisting of independent Directors, meets periodically with management and
with the internal and external auditors to review the audit results, internal controls and the selection and consistent
application of appropriate accounting policies. Internal and external auditors have unlimited access to the Audit
Committee. The Audit Committee meets separately with management and the external auditors to review the
consolidated financial statements and other contents of the annual report and recommend approval by the Board of
Directors. The Audit Committee also recommends the independent auditor for appointment by the shareholders.
PricewaterhouseCoopers LLP, an independent firm of auditors appointed by the shareholders, have completed
their audit in accordance with Canadian generally accepted audited standards and submitted their report as follows.
Daniel G. McConnell
John D. King, CPA, CA, CMA
PRESIDENT & CEO
EXECUTIVE VICE-PRESIDENT &
THE NORTH WEST COMPANY INC.
CHIEF FINANCIAL OFFICER
THE NORTH WEST COMPANY INC.
April 9, 2025
39
CONSOLIDATED FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP
Richardson Building, 1 Lombard Place, Suite 2300, Winnipeg, Manitoba, Canada R3B 0X6
T.: +1 204 926 2400, F.: +1 204 944 1020, Fax to mail: ca_winnipeg_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Independent auditor’s report
To the Shareholders of The North West Company Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of The North West Company Inc. and its subsidiaries (together, the Company) as at
January 31, 2025 and 2024, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated balance sheets as at January 31, 2025 and 2024;
the consolidated statements of earnings for the years then ended;
the consolidated statements of comprehensive income for the years then ended;
the consolidated statements of changes in shareholders' equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
40 THE NORTH WEST COMPANY INC. 2024
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended January 31, 2025. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Inventories
Refer to note 3 – Material accounting policies and
note 6 – Inventories to the consolidated financial
statements.
As at January 31, 2025, the Company held
inventories of $342 million at warehouses, stores
and other locations. Inventories are valued at the
lower of cost and net realizable value. The cost of
warehouse inventories is determined using the
weighted-average cost method. The cost of retail
inventories is determined using the retail method of
accounting for general merchandise inventories
and the weighted-average cost method for food
inventories. Net realizable value is estimated based
on the amount at which inventories are expected to
be sold, taking into consideration decreases in
retail prices due to obsolescence, damage or
seasonality. Valuing inventories requires
management to use judgment and estimates
related to the determination of margin factors used
to convert inventory to cost, future retail sales
prices and reductions, inventory losses or
shrinkage during periods between the last physical
inventory count and the balance sheet date.
We considered this a key audit matter due to the
magnitude of the inventories balance, the judgment
by management in determining the value of
inventories and the audit effort involved in testing
the inventories balance at year-end.
Our approach to addressing the matter included the
following procedures, among others:
Tested the operating effectiveness of relevant
controls relating to the inventory valuation
process, including management's estimate of
the inventory provision.
Tested the operating effectiveness of relevant
controls relating to the physical inventory count
process for a sample of stores and warehouses
during the year and performed independent
test counts.
For a sample of inventory items at year-end,
tested the underlying data to purchase
invoices.
For a sample of general merchandise inventory
items valued using the retail method of
accounting at year-end, tested the underlying
data to most recent retail selling prices.
For a sample of general merchandise inventory
items valued using the retail method of
accounting at year-end, tested the underlying
data used by management and evaluated the
reasonableness of the margin factors applied to
convert inventories to cost.
Tested that inventories at year-end were
recorded at the lower of cost and net realizable
value by comparing a sample of inventory
items to the most recent retail selling prices of
the inventory items.
Tested that inventories at year-end were
recorded in the correct period by comparing a
41
CONSOLIDATED FINANCIAL STATEMENTS
Key audit matter
How our audit addressed the key audit matter
sample of inventory purchases before and after
year-end to receiving documents and purchase
invoices.
Tested how management estimated the
inventory provision at year-end; evaluated the
appropriateness of management's inventory
provisioning method; tested the underlying
data; and evaluated the reasonableness of the
assumptions used by management by
assessing the percentage of shrinkage based
on actual results from the physical inventory
counts performed during the year and historical
percentage of shrinkage.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis and the information, other than the consolidated financial statements and our
auditor’s report thereon, included in the annual report.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
42 THE NORTH WEST COMPANY INC. 2024
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
43
CONSOLIDATED FINANCIAL STATEMENTS
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the Company as a basis for forming an opinion on
the consolidated financial statements. We are responsible for the direction, supervision and review of
the audit work performed for purposes of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Patrick Green.
Chartered Professional Accountants
Winnipeg, Manitoba
April 9, 2025
44 THE NORTH WEST COMPANY INC. 2024
Consolidated Balance Sheets
($ in thousands)
January 31, 2025
January 31, 2024
CURRENT ASSETS
Cash
$
67,385
$
53,359
Accounts receivable (Note 5)
119,023
121,606
Inventories (Note 6)
342,397
313,414
Prepaid expenses
21,463
14,526
550,268
502,905
NON-CURRENT ASSETS
Property & equipment (Note 7)
719,771
644,681
Right-of-use assets (Note 8)
118,194
114,501
Promissory note receivable (Note 25)
—
4,558
Goodwill (Note 9)
53,679
50,519
Intangible assets (Note 9)
28,226
29,768
Deferred tax asset (Note 10)
19,055
16,829
Other assets (Note 11)
38,312
32,249
977,237
893,105
TOTAL ASSETS
$
1,527,505
$
1,396,010
CURRENT LIABILITIES
Accounts payable and accrued liabilities
$
250,175
$
228,297
Current portion of long-term debt (Note 12)
—
268
Current portion of lease liabilities (Note 8)
20,848
19,408
Income tax payable (Note 10)
3,831
2,685
274,854
250,658
NON-CURRENT LIABILITIES
Long-term debt (Note 12)
295,776
281,308
Lease liabilities (Note 8)
105,558
104,483
Defined benefit plan obligation (Note 13)
20,855
18,725
Deferred tax liability (Note 10)
12,972
13,383
Other long-term liabilities
22,776
21,680
457,937
439,579
TOTAL LIABILITIES
732,791
690,237
SHAREHOLDERS’ EQUITY
Share capital (Note 16)
179,819
177,951
Contributed surplus
5,744
9,359
Retained earnings
529,916
464,556
Accumulated other comprehensive income
56,527
32,826
Equity attributable to The North West Company Inc.
772,006
684,692
Non-controlling interests
22,708
21,081
TOTAL EQUITY
794,714
705,773
TOTAL LIABILITIES & EQUITY
$
1,527,505
$
1,396,010
See accompanying notes to consolidated financial statements.
Approved on behalf of the Board of Directors
“Annalisa King”
“Brock Bulbuck”
DIRECTOR
DIRECTOR
45
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Earnings
Year Ended
Year Ended
($ in thousands, except per share amounts)
January 31, 2025
January 31, 2024
SALES
$ 2,576,344
$ 2,471,678
Cost of sales
(1,708,020)
(1,662,259)
Gross profit
868,324
809,419
Selling, operating and administrative expenses (Notes 17, 18)
(658,778)
(613,522)
Earnings from operations
209,546
195,897
Interest expense (Note 19)
(18,301)
(19,051)
Earnings before income taxes
191,245
176,846
Income taxes (Note 10)
(47,992)
(42,555)
NET EARNINGS FOR THE YEAR
$
143,253
$ 134,291
NET EARNINGS ATTRIBUTABLE TO
The North West Company Inc.
$
137,296
$ 129,391
Non-controlling interests
5,957
4,900
TOTAL NET EARNINGS
$
143,253
$ 134,291
NET EARNINGS PER SHARE (Note 22)
Basic
$
2.87
$
2.71
Diluted
$
2.83
$
2.67
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING (000's)
Basic
47,788
47,747
Diluted
48,558
48,431
See accompanying notes to consolidated financial statements.
46 THE NORTH WEST COMPANY INC. 2024
Consolidated Statements of Comprehensive Income
Year Ended
Year Ended
($ in thousands)
January 31, 2025
January 31, 2024
NET EARNINGS FOR THE YEAR
$
143,253
$ 134,291
Other comprehensive income, net of tax:
Items that may be reclassified to net earnings:
Exchange differences on translation of foreign controlled subsidiaries
25,447
(10)
Items that will not be subsequently reclassified to net earnings:
Remeasurements of defined benefit plans (Note 13)
3,589
5,848
Remeasurements of defined benefit plans of equity investee
—
111
Total other comprehensive income, net of tax
29,036
5,949
COMPREHENSIVE INCOME FOR THE YEAR
$
172,289
$ 140,240
OTHER COMPREHENSIVE INCOME ATTRIBUTABLE TO
The North West Company Inc.
$
27,290
$
5,854
Non-controlling interests
1,746
95
TOTAL OTHER COMPREHENSIVE INCOME
$
29,036
$
5,949
COMPREHENSIVE INCOME ATTRIBUTABLE TO
The North West Company Inc.
$
164,586
$ 135,245
Non-controlling interests
7,703
4,995
TOTAL COMPREHENSIVE INCOME
$
172,289
$ 140,240
See accompanying notes to consolidated financial statements.
47
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Changes in Shareholders' Equity
($ in thousands)
Share
Capital
Contributed
Surplus
Retained
Earnings
AOCI (1)
Total
Non-
Controlling
Interests
Total
Equity
Balance at January 31, 2024
$ 177,951 $
9,359 $ 464,556 $ 32,826 $ 684,692 $
21,081 $ 705,773
Net earnings for the year
—
—
137,296
—
137,296
5,957
143,253
Other comprehensive income
—
—
3,589
23,701
27,290
1,746
29,036
Comprehensive income
—
—
140,885
23,701
164,586
7,703
172,289
Equity settled share-based payments
(Note 14)
23
(1,842)
—
—
(1,819)
—
(1,819)
Dividends (Note 20)
—
—
(75,525)
—
(75,525)
(6,076)
(81,601)
Issuance of common shares (Note 16)
1,845
(1,773)
—
—
72
—
72
1,868
(3,615)
(75,525)
—
(77,272)
(6,076)
(83,348)
Balance at January 31, 2025
$ 179,819 $
5,744
$ 529,916
$ 56,527 $ 772,006 $
22,708 $ 794,714
Balance at January 31, 2023
$ 176,091 $
13,017 $ 407,182 $ 32,931 $ 629,221 $
18,679 $ 647,900
Net earnings for the year
—
—
129,391
—
129,391
4,900
134,291
Other comprehensive income/(loss)
—
—
5,848
(105)
5,743
95
5,838
Other comprehensive income of
equity investee
—
—
111
—
111
—
111
Comprehensive income/(loss)
—
—
135,350
(105)
135,245
4,995
140,240
Common shares purchased and
cancelled (Note 16)
(557)
—
(4,443)
—
(5,000)
—
(5,000)
Equity settled share-based payments
(Note 14)
(226)
(2,980)
—
—
(3,206)
—
(3,206)
Dividends (Note 20)
—
—
(73,533)
—
(73,533)
(2,593)
(76,126)
Issuance of common shares (Note 16)
2,643
(678)
—
—
1,965
—
1,965
1,860
(3,658)
(77,976)
—
(79,774)
(2,593)
(82,367)
Balance at January 31, 2024
$ 177,951 $
9,359 $ 464,556 $ 32,826 $ 684,692 $
21,081 $ 705,773
(1) Accumulated Other Comprehensive Income
See accompanying notes to consolidated financial statements.
48 THE NORTH WEST COMPANY INC. 2024
Consolidated Statements of Cash Flows
Year Ended
Year Ended
($ in thousands)
January 31, 2025
January 31, 2024
CASH PROVIDED BY (USED IN)
Operating activities
Net earnings for the year
$
143,253
$ 134,291
Adjustments for:
Amortization (Notes 7, 8, 9)
115,619
105,276
Provision for income taxes (Note 10)
47,992
42,555
Interest expense (Note 19)
18,301
19,051
Equity settled share-based compensation (Note 14)
(1,819)
(3,206)
Taxes paid
(49,188)
(43,065)
Loss on disposal of property and equipment
290
1,500
274,448
256,402
Change in non-cash working capital (Note 21)
(14,276)
(23,233)
Change in other non-cash items
453
(2,742)
Cash from operating activities
260,625
230,427
Investing activities
Purchase of property and equipment (Note 7)
(140,210)
(114,199)
Intangible asset additions (Note 9)
(6,144)
(9,212)
Proceeds from disposal of property and equipment
350
710
Proceeds from promissory note receivable
15,000
15,000
Cash used in investing activities
(131,004)
(107,701)
Financing activities
Net increase/(decrease) in long-term debt (Note 12)
6,545
(8,891)
Payment of lease liabilities, principal
(24,663)
(20,936)
Payment of lease liabilities, interest (Note 19)
(5,458)
(4,821)
Dividends (Note 20)
(75,525)
(73,533)
Dividends to non-controlling interests (Note 20)
(6,076)
(2,593)
Interest paid
(13,942)
(14,461)
Issuance of common shares (Note 16)
72
1,965
Common shares purchased and cancelled (Note 16)
—
(5,000)
Cash used in financing activities
(119,047)
(128,270)
Effect of changes in foreign exchange rates on cash
3,452
94
NET CHANGE IN CASH
14,026
(5,450)
Cash, beginning of year
53,359
58,809
CASH, END OF YEAR
$
67,385
$
53,359
See accompanying notes to consolidated financial statements.
49
CONSOLIDATED FINANCIAL STATEMENTS
Notes to
Consolidated
Financial
Statements
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JANUARY 31, 2025 AND 2024
1.
ORGANIZATION
The North West Company Inc. ("NWC" or "the Company") is a
corporation amalgamated under the Canada Business Corporations
Act ("CBCA") and governed by the laws of Canada. The Company,
through its subsidiaries, is a leading retailer to rural and remote
communities in the following regions: northern Canada, rural Alaska,
the South Pacific and the Caribbean. These regions comprise two
reportable
operating
segments:
Canadian
Operations
and
International Operations.
The address of its registered office is 77 Main Street, Winnipeg,
Manitoba. These consolidated financial statements have been
approved for issue by the Board of Directors of the Company on
April 9, 2025.
2.
BASIS OF PREPARATION
(A) Statement of Compliance The consolidated financial
statements
have
been
prepared
in
accordance
with
International Financial Reporting Standards as issued by the
International Accounting Standards Board ("IFRS Accounting
Standards").
(B)
Basis of Measurement The consolidated financial statements
have been prepared on a going concern basis, under the
historical cost convention, except for the following which are
measured at fair value, as applicable:
•
Liabilities for share-based payment plans (Note 14)
•
Defined benefit pension plan (Note 13)
•
Assets and liabilities acquired in a business combination
The methods used to measure fair values are discussed further
in the notes to these consolidated financial statements.
(C) Functional and Presentation Currency The presentation
currency of the consolidated financial statements is Canadian
dollars, which is the Company’s functional currency. All
financial information is presented in Canadian dollars, unless
otherwise stated, and has been rounded to the nearest
thousand.
3.
MATERIAL ACCOUNTING POLICIES
The accounting policies set out below have been applied to all years
presented in these consolidated financial statements, and have been
applied consistently by both the Company and its subsidiaries using
uniform accounting policies for like transactions and other events in
similar circumstances.
(A) Basis of Consolidation Subsidiaries are entities controlled,
either directly or indirectly, by the Company. Control is
established when the Company has rights to an entity's variable
returns, and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Company until
the date that control ceases. The Company assesses control on
an ongoing basis.
Net earnings or loss and each component of other
comprehensive income are attributed to the shareholders of
the Company and to the non-controlling interests. Total
comprehensive income is attributed to the shareholders of the
Company and to the non-controlling interests even if this
results in the non-controlling interests having a deficit balance
on consolidation.
A joint arrangement can take the form of a joint operation
or a joint venture. Joint ventures are those entities over which
the Company has joint control of the rights to the net assets of
the arrangement, rather than rights to its assets and obligations
for its liabilities. The Company’s 50% interest in Transport
Nanuk Inc. has been classified as a joint venture. Its results are
included in the consolidated statements of earnings using the
equity method of accounting. The consolidated financial
statements include the Company's share of both earnings and
other comprehensive income from the date that significant
influence or joint control commences until the date that it
ceases. Joint ventures are carried in the consolidated balance
sheets at cost plus post-acquisition changes in the Company’s
share of net assets of the entity, less any impairment in value.
All significant inter-company amounts and transactions
have been eliminated.
(B)
Business Combinations Business combinations are
accounted for using the acquisition method of accounting. The
consideration transferred is measured at the fair value of the
assets given, equity instruments issued and liabilities assumed
at the date of exchange. Acquisition costs incurred are
expensed and included in selling, operating and administrative
expenses. Any contingent consideration to be transferred by
the acquirer will be recognized at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent
consideration which is deemed to be an asset or liability will be
recognized in either net earnings or as a change to other
comprehensive income ("OCI"). If the contingent consideration
is classified as equity, it will not be remeasured and settlement
is accounted for within equity.
Identifiable assets acquired, and liabilities and contingent
liabilities assumed in a business combination, are measured
initially at their fair values at the acquisition date irrespective of
the extent of any non-controlling interest. The excess of the
cost of the acquisition over the fair value of the Company’s
share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is
recognized directly in the consolidated statements of earnings.
50 THE NORTH WEST COMPANY INC. 2024
Non-controlling interests are measured either at fair value
or their proportionate share of the acquiree's identifiable net
assets at the date of acquisition.
(C)
Revenue Recognition Revenue on the sale of goods and
services is recorded at the time the sale is made or service is
rendered to the customer. Sales are presented net of tax,
returns and discounts and are measured at the fair value of the
consideration received or receivable from the customer for the
products sold or services supplied. Service charges on
customer account receivables are accrued each month on
balances outstanding at each account’s billing date.
(D) Inventories Inventories are valued at the lower of cost and
net realizable value. The cost of warehouse inventories is
determined using the weighted-average cost method. The cost
of retail inventories is determined using the retail method of
accounting for general merchandise inventories and the
weighted-average cost method for food inventories. Cost
includes the cost to purchase goods net of vendor rebates plus
other costs incurred in bringing inventories to their present
location and condition. Net realizable value is estimated based
on the amount at which inventories are expected to be sold,
taking into consideration decreases in retail prices due to
obsolescence, damage or seasonality.
Inventories are written down to net realizable value if net
realizable value declines below carrying amount. When
circumstances that previously caused inventories to be written
down below cost no longer exist or when there is clear
evidence of an increase in selling price, the amount of the
write-down previously recorded is reversed.
(E)
Vendor Rebates Consideration received from vendors related
to the purchase of merchandise is recorded on an accrual basis
as a reduction in the cost of the vendor’s products and reflected
as a reduction of cost of sales and related inventory when it is
probable they will be received and the amount can be reliably
estimated.
(F)
Property and Equipment Property and equipment are stated
at cost less accumulated amortization and any impairment
losses. Cost includes any directly attributable costs, borrowing
costs on qualifying construction projects, and the costs of
dismantling and removing the items and restoring the site on
which they are located. When major components of an item of
property and equipment have different useful lives, they are
accounted for as separate items. Amortization methods, useful
lives and residual values are reviewed at each reporting date
and adjusted if appropriate. Assets under construction and land
are not amortized. Amortization is calculated from the dates
assets are available for use using the straight-line method to
allocate the cost of assets less their residual values over their
estimated useful lives.
Estimated useful lives of Property and Equipment are as follows:
Buildings
3% – 8%
Leasehold improvements 3% – 20%
Aircraft
3% – 20%
Fixtures and equipment 8% – 20%
Computer equipment 12% – 33%
Major aircraft maintenance overhaul expenditures, including
labour, are capitalized and depreciated over the expected life of
the maintenance cycle. Any remaining carrying value, if any, is
derecognized when the major maintenance overhaul occurs.
All other costs associated with maintenance of aircraft fleet
assets are charged to the consolidated statements of earnings
as incurred.
(G) Impairment of Non-financial Assets Tangible assets and
definite life intangible assets are reviewed at each balance sheet
date to determine whether events or conditions indicate that
their carrying amount may not be recoverable. If any such
indication exists, the recoverable amount of the asset, which is
the higher of its fair value less costs of disposal and its value in
use, is estimated in order to determine the extent of the
impairment loss. Where the asset does not generate cash flows
that are independent from other assets, the Company estimates
the recoverable amount of the cash-generating unit ("CGU") to
which the asset belongs. For tangible and intangible assets
excluding goodwill, the CGU is the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of
assets. CGUs may comprise individual stores or groups of
stores.
Goodwill and indefinite life intangible assets are not
amortized but are subject to an impairment test annually and
whenever indicators of impairment are detected. Goodwill is
allocated to CGUs that are expected to benefit from the
synergies of the related business combination and represents
the lowest level within the Company at which goodwill is
monitored for internal management purposes.
Any impairment charge is recognized in the consolidated
statement of earnings in the period in which it occurs, to the
extent that the carrying value exceeds its recoverable amount.
Where an impairment loss other than an impairment loss on
goodwill subsequently reverses due to a change in the original
estimate, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount. Impairment
charges on goodwill are not reversed.
All impairment losses are recognized in the consolidated
statements of earnings. An impairment loss, except an
impairment loss related to goodwill, is reversed if the reversal
can be related objectively to an event occurring after the
impairment loss was recognized.
(H) Leases At contract inception, the Company assesses whether a
contract is, or contains a lease and recognizes a right-of-use
asset and a lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus
any initial direct costs incurred and an estimate of costs to
dismantle and remove or restore the underlying asset, less any
lease incentives received.
Subsequent to initial measurement, the Company applies
the cost model. Right-of-use assets are subsequently amortized
using the straight-line method from the lease commencement
date to the earlier of the end of their useful life or the end of the
lease term. The estimated useful lives of right-of-use assets are
determined based on the shorter of the lease term and the
useful life of the underlying asset. Right-of-use assets may also
be reduced by impairment losses and adjusted for
remeasurements of the lease liability, as applicable.
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The lease liability is initially measured at the present value
of the lease payments unpaid at the commencement date
using the interest rate implicit in the lease or the Company's
incremental borrowing rate. Lease payments are comprised of
fixed payments including in-substance fixed payments, variable
lease payments based on an index or rate, amounts expected to
be payable under residual value guarantees and the exercise
price under a purchase option that the Company is reasonably
certain to exercise and certain early termination costs. The
period over which the lease payments are discounted is the
reasonably certain lease term, which may include lease renewal
options. Generally, the Company uses its incremental
borrowing rate as the discount rate.
Each lease payment is apportioned between the
repayment of the lease liability and a finance cost. The finance
cost is recognized in interest expense in the consolidated
statements of earnings using the effective interest rate method.
The lease liability is remeasured when there is a change in
future lease payments arising from a change in an index or rate,
a change in lease term, a change in the assessment of an option
to purchase the right-of-use asset or a change in an expected
residual value guarantee.
The Company has elected not to recognize right-of-use
assets and lease liabilities for certain short-term leases that have
a lease term of 12 months or less and leases of low-value assets.
Variable lease payments that do not depend on an index or rate
are also expensed as incurred. The Company recognizes these
lease payments as an expense in the consolidated statements
of earnings.
(I)
Borrowing Costs Borrowing costs directly attributable to the
acquisition or construction of qualifying assets are capitalized as
part of the cost of the respective asset until it is ready for its
intended use. Qualifying assets are those assets that necessarily
take a substantial period of time to prepare for their intended
use. Borrowing costs are capitalized based on the Company’s
weighted-average cost of borrowing. All other borrowing costs
are expensed as incurred.
(J)
Goodwill Goodwill represents the excess of the consideration
transferred over the fair value of the identifiable assets,
including intangible assets, and liabilities of the acquiree at the
date of acquisition. Goodwill is not amortized but is subject to
an impairment test annually and whenever indicators of
impairment are detected. Goodwill is carried at cost less
accumulated impairment losses.
(K)
Intangible Assets Intangible assets with finite lives are carried
at cost less accumulated amortization and any impairment loss.
Amortization is recorded on a straight-line basis over the term
of the estimated useful life of the asset as follows:
Software
3 – 7 years
Non-compete agreements 3 – 5 years
Other
5 – 10 years
Intangible assets with indefinite lives comprise the Cost-U-Less
and Riteway Food Markets banners. These assets are not
amortized but instead tested for impairment annually or more
frequently if indicators of impairment are identified.
(L)
Share-based Payment Transactions
Equity settled plans Certain stock options and certain
performance share units settled in common shares are equity
settled share-based payment plans. The grant date fair values
of these benefits are recognized as an employee expense over
the vesting period, with corresponding increases in equity.
The fair value of these plans is determined using an option
pricing model. Market conditions attached to certain equity-
settled share-based payments are taken into account when
estimating the fair value of the equity instruments granted.
Upon exercise or settlement of equity-based instruments,
consideration received, if any, together with amounts
previously recorded in contributed surplus are recorded as an
increase to share capital.
Cash settled plans Certain stock options, certain performance
share units, the executive deferred share unit plan and the
director deferred share unit plan are cash settled share-based
payments. These plans are measured at fair value at each
balance sheet date and a charge or recovery is recognized
through the consolidated statements of earnings over the
vesting period. A corresponding adjustment is reflected in
accounts payable and accrued liabilities or other long-term
liabilities.
Estimates related to vesting conditions are reviewed
regularly and the value of the charges under both cash settled
and equity settled plans are adjusted in the consolidated
statements of earnings to reflect expected and actual levels of
benefits vesting.
(M) Foreign Currency Translation The accounts of foreign
operations have been translated into the presentation currency,
Canadian dollars. Assets and liabilities are translated at the
period-end exchange rate, and revenues and expenses at the
average rate for the period. Foreign exchange gains or losses
arising from the translation of the net investment in foreign
operations and the portion of the U.S. denominated borrowings
designated as a hedge against this investment are recorded in
equity as other comprehensive income. Foreign exchange
gains or losses recorded in accumulated other comprehensive
income ("AOCI") are recognized in net earnings when there is a
reduction in the net investment in foreign operations.
Items included in the consolidated financial statements of
the Company and its subsidiaries are measured using the
currency of the primary economic environment in which the
entity operates ("functional currency"). Transactions in foreign
currencies are translated to the respective functional currencies
at exchange rates approximating the rates in effect at the
transaction dates. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are retranslated to
the functional currency at the exchange rate ruling at that date.
52 THE NORTH WEST COMPANY INC. 2024
(N) Income Taxes Income tax expense includes taxes payable on
current earnings and changes in deferred tax balances. Current
income tax expense is the expected tax payable on taxable
income for the period, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax
payable in respect of previous periods.
The Company accounts for deferred income taxes using
the liability method of tax allocation. Under the liability
method, deferred income tax assets and liabilities are
determined based on the temporary differences between the
financial statement carrying values and tax bases of assets and
liabilities, and are measured using substantively enacted tax
rates and laws that are expected to be in effect in the periods in
which the deferred income tax assets or liabilities are expected
to be realized or settled. The measurement of deferred tax
reflects the tax consequences that would follow the manner in
which the Company expects to settle the carrying amount of its
assets and liabilities. A deferred tax asset is recognized to the
extent that it is probable that future taxable earnings will be
available against which the temporary difference can be
utilized. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that
the related tax benefit will be realized. Deferred tax assets and
liabilities are offset when they relate to income taxes levied by
the same taxation authority and there is a legally enforceable
right to offset the amounts.
Income tax expense is recognized in the consolidated
statements of earnings, except to the extent that it relates to
items recognized directly in other comprehensive income or in
equity, in which case the related income tax expense is also
recognized in other comprehensive income or in equity
respectively.
(O) Employee Benefits The Company maintains either a defined
benefit or defined contribution pension plan for the majority of
its Canadian employees, and an employee savings plan for its
U.S. employees. Other benefits include employee bonuses,
employee share purchase plans and termination benefits.
Defined Benefit Pension Plan The actuarial determination of the
defined benefit obligations for pension benefits uses the
projected unit credit method prorated on services which
incorporates management’s best estimate of the discount rate,
salary escalation, retirement rates, termination rates and
retirement ages of employees. The discount rate used to value
the defined benefit obligation is derived from a portfolio of high
quality Corporate AA bonds denominated in the same currency
in which the benefits are expected to be paid and with terms to
maturity that, on average, match the terms of the defined
benefit plan obligations. Bonds included in the curve are
denominated in the currency in which the benefits will be paid
that have terms to maturity approximating the terms of the
related pension liability.
The amount recognized in the consolidated balance
sheets at each reporting date represents the present value of
the defined benefit obligation, and is reduced by the fair value
of plan assets. Any recognized asset or surplus is limited to the
present value of economic benefits available in the form of any
future refunds from the plan or reductions in future
contributions. To the extent that there is uncertainty regarding
entitlement to the surplus, no asset is recorded. The Company’s
funding policy is in compliance with statutory regulations and
amounts funded are deductible for income tax purposes.
The actuarially determined expense for current service is
recognized annually in the consolidated statements of earnings.
The actuarially determined net interest costs on the net defined
benefit plan obligation are recognized in interest expense.
All actuarial remeasurements arising from defined benefit
plans are recognized in full in the period in which they arise in
the consolidated statements of comprehensive income, and
are immediately recognized in retained earnings. The effect of
the asset ceiling is also recognized in other comprehensive
income.
Defined Contribution Pension Plans The Company sponsors
defined contribution pension plans for eligible employees
where fixed contributions are paid into a registered plan. There
is no obligation for the Company to pay any additional amount
into these plans. Contributions to the defined contribution
pension plans are expensed as incurred.
Short-term Benefits An undiscounted liability is recognized for
the amount expected to be paid under short-term incentive
plans or employee share purchase plans if the Company has a
present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the
obligation can be estimated reliably.
Termination Benefits Termination benefits are expensed at the
earlier of when the Company can no longer withdraw the offer
of those benefits and when the Company recognizes costs for a
restructuring. If the effect is material, benefits are discounted to
present value.
(P)
Provisions A provision is recognized if, as a result of a past
event, the Company has a present legal or constructive
obligation that can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to settle the
obligation.
(Q) Financial Instruments
Recognition and derecognition The Company initially
recognizes financial instruments on the trade date at which it
becomes a party to the contractual provisions of the
instrument. Financial instruments are initially measured at fair
value. For financial assets or financial liabilities not measured at
fair value through profit or loss, transaction costs that are
directly attributable to the acquisition or issue of the financial
asset or financial liability are included in the initial fair value.
Financial assets are derecognized when the contractual
rights to receive cash flows and benefits related from the
financial asset expire, or the Company transfers the control or
substantially all the risks and rewards of ownership of the
financial asset to another party. Financial liabilities are
derecognized when obligations under the contract expire, are
discharged or cancelled. Financial assets and liabilities are offset
and the net amount presented in the consolidated balance
sheets when the Company has a legal right to offset the
amounts and intends to either settle on a net basis or realize
the asset and settle the liability simultaneously.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial assets On initial recognition, all financial assets are
classified to be subsequently measured at amortized cost, fair
value through other comprehensive income or fair value
through profit and loss. The Company’s financial assets
comprised of cash, accounts receivable, promissory note
receivable and other financial assets are classified as amortized
cost. Interest revenue, consisting primarily of service charge
income on customer accounts receivable and interest imputed
on promissory note receivable are included in sales in the
consolidated statements of earnings. The Company has no
material assets measured at fair value.
The Company recognizes loss allowances for expected
credit losses (“ECL’s") on accounts receivable and the
promissory note receivable. The change in ECL’s is recognized
in net earnings and reflected as an allowance against accounts
receivable. The Company uses historical trends, timing of
recoveries and management’s judgment as to whether current
economic and credit conditions are such that actual losses are
likely to differ from historical trends.
Financial liabilities On initial recognition, financial liabilities are
classified to be subsequently measured at amortized cost or fair
value. The Company’s financial liabilities comprised of long-
term debt, accounts payable, accrued liabilities, lease liabilities
and certain other liabilities are classified as amortized cost.
Interest expense is recorded using the effective interest rate
method and included in the consolidated statements of
earnings as interest expense. The Company has no material
liabilities measured at fair value.
Hedging The Company is exposed to financial risks associated
with movements in foreign exchange rates. The Company uses
a net investment hedge to counterbalance gains and losses
arising on the retranslation of foreign operations with gains and
losses on a financial liability. The Company has designated
certain U.S. denominated debt as a hedge of its net investment
in International Operations.
To the extent that the hedging relationship is effective, the
foreign exchange gains and losses arising from translation of
this debt are included in other comprehensive income and
presented within shareholders’ equity as accumulated other
comprehensive income. These gains and losses are fully or
partially reclassified to earnings on disposal or partial disposal of
foreign operations. Any ineffective portion of the changes in
fair value of the hedging item is recognized immediately in
earnings.
To qualify for hedge accounting, the Company documents
its risk management strategy, the relationship between the
hedging instrument and the hedged item and the nature of the
risks being hedged. The Company also documents the
assessment of the effectiveness of the hedging relationship to
show that the hedge has been and will likely be highly effective
on an ongoing basis.
Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated, exercised, or no longer
qualifies for hedge accounting. At that time, any cumulative
gain or loss on the hedging instrument recognized in
accumulated other comprehensive income is retained in equity
until the forecasted transaction occurs. If a hedged transaction
is no longer expected to occur, the net cumulative gain or loss
recognized in other comprehensive income is transferred to the
consolidated statements of earnings for the period.
(R)
Cash Cash comprises cash on hand and balances with banks.
(S)
Net Earnings Per Share Basic net earnings per share are
calculated by dividing the net earnings attributable to
shareholders of The North West Company Inc. by the weighted-
average number of common shares outstanding during the
period. Diluted net earnings per share is determined by
adjusting these net earnings and the weighted-average
number of common shares outstanding for the effects of all
potentially dilutive shares, which comprise potential shares
issued under the Share Option Plan, Performance Share Unit
Plan and Director Deferred Share Unit Plan.
(T)
Dividends Dividends declared and payable to the Company's
shareholders are recognized as a liability in the consolidated
balance sheets in the period in which distributions are declared.
(U) Use of Estimates, Assumptions & Judgment The
preparation of consolidated financial statements in conformity
with IFRS Accounting Standards requires management to make
estimates, assumptions and judgments that affect the
application of accounting policies, the reported amounts of
revenues and expenses during the reporting period and
disclosure of contingent assets and liabilities in the
consolidated financial statements and notes. Judgment has
been used in the application of accounting policy and to
determine if a transaction should be recognized or disclosed in
these consolidated financial statements while estimates and
assumptions have been used to measure balances recognized
or disclosed.
Estimates, assumptions and judgments are based on
management’s historical experience, best knowledge of current
events, conditions and actions that the Company may
undertake in the future and other factors that management
believes are reasonable under the circumstances. Estimates
and underlying assumptions are reviewed on an ongoing basis.
Certain of these estimates require subjective or complex
judgments by management about matters that are uncertain
and changes in these estimates could materially impact the
consolidated financial statements and notes. Revisions to
accounting estimates are recognized in the period in which the
estimates are reviewed and in any future periods affected.
The areas that management believes involve a higher
degree of judgment or complexity, or areas where the
estimates and assumptions may have the most material impact
on the amounts recognized in the consolidated financial
statements include the following:
•
Allowance for doubtful accounts is estimated based on an
expected credit loss impairment model based on historical
trends, timing of recoveries and management's judgment
as to whether current economic and credit conditions are
such that actual losses are likely to differ from historical
trends (Notes 5, 15)
•
Inventories are remeasured based on the lower of cost and
net realizable value (Note 6)
•
Amortization methods for property and equipment,
including aircraft and right-of-use assets, are based on
management's estimate of the most appropriate method
to reflect the pattern of an asset's future economic benefit.
This includes judgment of what asset components
constitute a material cost in relation to the total cost of an
asset (Notes 7, 8)
•
Impairment of long-lived assets is influenced by judgment
in determining indicators of impairment and estimates
used to measure impairment losses, if any (Note 7)
54 THE NORTH WEST COMPANY INC. 2024
•
Goodwill and indefinite life intangible asset impairment is
dependent on judgment used to identify indicators of
impairment and estimates used to measure impairment
losses, if any (Note 9)
•
Income taxes have judgment applied to determine when
tax losses, credits and provisions are recognized based on
tax rules in various jurisdictions (Note 10)
•
Defined benefit pension plan obligation and expense
depends on assumptions used in the actuarial valuation
(Note 13)
•
Leases require assumptions and estimates in order to
determine the value of the right-of-use assets and lease
liabilities, the implicit and incremental borrowing rates, as
applicable, and whether renewal options are reasonably
certain of being exercised (Note 8)
•
Promissory note receivable includes management's
estimate of the fair value of contingent consideration
receivable for the sale of its Giant Tiger stores (Note 25)
(V) Share capital Common shares are classified as equity.
Incremental costs directly attributable to the issue of ordinary
shares are recognized as a deduction from equity, net of any tax
effects. Share repurchases are deducted from share capital at
their historical average cost and the excess between the
repurchase price and historical average cost charged to
retained earnings.
(W) Government Grants The Company recognizes government
grants for expenses incurred in the consolidated statements of
earnings on a systematic basis in the periods in which the
associated expenses are recognized, provided the Company will
comply with the grant conditions and there is reasonable
assurance they will be received.
(X)
New Standards Implemented In October 2022, the IASB
issued amendments to IAS 1 - Presentation of Financial
Statements, which specifies that covenants whose compliance is
assessed after the reporting date do not affect the classification
of debt as current or non-current at the reporting date. The
Company adopted these amendments this year and
determined there was no impact on the consolidated financial
statements.
The principal components of the Government of Canada's
Global Minimum Tax Act ("GMTA") - Pillar Two legislation were
included in Bill C-69 and enacted into law on June 20, 2024, and
follow the Pillar Two model rules from the Organisation for
Economic Co-operation and Development ("OECD"). These
rules were developed by the OECD and designed to ensure that
large, multinational enterprises would be subject to a minimum
effective tax rate of 15% in each jurisdiction they operate. The
Company operates retail stores in the Cayman Islands, Barbados
and British Virgin Islands jurisdictions which are impacted by
the GMTA - Pillar Two legislation.
In May 2023, the IASB issued amendments to IAS 12 - Income
Taxes which introduced a mandatory temporary exception from
the recognition and disclosure of deferred taxes related to the
implementation of Pillar Two model rules. The Company
adopted this amendment during the second quarter of 2024
and has applied the exception to recognizing and disclosing
information regarding Pillar Two deferred income tax assets and
liabilities.
(Y)
Future Standards and Amendments In April 2024, the IASB
issued IFRS 18 - Presentation and Disclosure in Financial
Statements to improve the comparability of the financial
performance of similar entities. The standard replaces IAS 1 and
primarily impacts the statements of earnings where companies
will be required to present separate categories of income and
expense for operating, investing and financing activities. IFRS
18 will also require management-defined performance
measures to be explained and included in a separate note
within the consolidated financial statements. The standard is
effective for annual reporting periods beginning on or after
January 1, 2027, including interim financial statements, and
requires retrospective application. The Company is assessing
the impact of the new standard.
In May 2024, amendments to IFRS 9 - Financial Instruments and
IFRS 7 - Financial Instruments: Disclosures were issued. These
amendments
clarify
the
timing
of
recognition
and
derecognition of a financial asset or financial liability. Also
included in the amendments are clarifications regarding the
classification of financial assets, including those with features
linked to environmental, social and corporate governance. The
amendments require additional disclosure for financial
instruments with contingent features and investments in equity
instruments
classified
at
fair
value
through
other
comprehensive income. These amendments are effective for
annual periods beginning on or after January 1, 2026, with early
adoption permitted. The adoption is not expected to have a
material impact on the Company's consolidated financial
statements.
There are no further IFRS Accounting Standards or IFRIC
interpretations that are not yet effective that would be
expected to have a material impact on the Company's
consolidated financial statements.
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4.
SEGMENTED INFORMATION
The Company is a retailer of food and everyday products and
services in two geographical segments, Canada and International.
The Canadian segment consists of subsidiaries operating retail stores
and complimentary businesses to serve northern Canada. The
International segment consists of subsidiaries operating in the
continental United States, Caribbean and South Pacific. Financial
information for these business segments is regularly reviewed by the
Company’s President and Chief Executive Officer to assess
performance and make decisions about the allocation of resources.
The following key information is presented by geographic segment:
Consolidated Statements of Earnings
Year Ended
January 31, 2025
January 31, 2024
Sales
Canada
Food
$ 988,323
$
944,325
General merchandise and other
486,716
474,636
Canada
$ 1,475,039
$ 1,418,961
International
Food
$ 1,001,050
$
955,321
General merchandise and other
100,255
97,396
International
$ 1,101,305
$ 1,052,717
Consolidated
$ 2,576,344
$ 2,471,678
Earnings before amortization, interest and income taxes
Canada
$ 223,546
$
204,089
International
101,619
97,084
Consolidated
$ 325,165
$
301,173
Earnings from operations
Canada
$ 146,875
$
133,909
International
62,671
61,988
Consolidated
$ 209,546
$
195,897
Supplemental Information
January 31, 2025
January 31, 2024
Assets
Canada(1)
$ 914,178
$
865,040
International(1)
613,327
530,970
Consolidated
$ 1,527,505
$ 1,396,010
Year Ended
January 31, 2025
January 31, 2024
Canada
Int'l
Canada
Int'l
Purchase of property and
equipment
$ 98,149 $ 42,061 $ 68,451 $ 45,748
Total amortization
$ 76,671 $ 38,948 $ 70,180 $ 35,096
(1) Canadian total assets includes goodwill of $11,025 (January 31,
2024 – $11,025). International total assets includes goodwill of
$42,654 (January 31, 2024 – $39,494).
5.
ACCOUNTS RECEIVABLE
January 31, 2025
January 31, 2024
Trade accounts receivable
$
88,161
$
96,324
Corporate and other accounts
receivable(1)
43,537
37,991
Less: allowance for doubtful
accounts
(12,675)
(12,709)
$
119,023
$
121,606
(1) At January 31, 2025, Corporate and other accounts receivable includes
$12,570 of the promissory note receivable (January 31, 2024 - $22,500). See
Note 25.
The carrying values of accounts receivable are a reasonable
approximation of their fair values. The maximum exposure to credit
risk at the reporting date is the carrying value of each class of
receivable mentioned above. Credit risk for trade accounts receivable
is discussed in Note 15. Corporate and other accounts receivable
have a lower risk profile relative to trade accounts receivable because
they are largely due from government or corporate entities.
Movements in the allowance for doubtful accounts for customer and
commercial accounts receivables are as follows:
January 31, 2025
January 31, 2024
Balance, beginning of year
$
(12,709)
$
(11,385)
Net charge
(10,631)
(10,940)
Written off
10,665
9,616
Balance, end of year
$
(12,675)
$
(12,709)
6.
INVENTORIES
Inventories, which include aviation-related parts of $10,591
(January 31, 2024 – $6,422), are valued at the lower of cost and net
realizable value. Valuing inventories requires the Company to use
estimates related to: the determination of margin factors used to
convert inventory to cost; future retail sales prices and reductions,
inventory losses or shrinkage during periods between the last
physical count and the balance sheet date; and vendor rebates
based on the volume of purchases during a period of time, product
remaining in closing inventory and the probability that funds will be
collected from vendors. Included in cost of sales for the year ended
January 31, 2025, the Company recorded $2,047 (January 31, 2024 –
$3,476) for the write-down of inventories as a result of net realizable
value being lower than cost. There was no reversal of inventories
written down previously that are no longer estimated to sell below
cost during the year ended January 31, 2025 or 2024.
56 THE NORTH WEST COMPANY INC. 2024
7.
PROPERTY & EQUIPMENT
January 31, 2025
Land
Buildings
Leasehold
improvements
Fixtures &
equipment
Aircraft
Computer
equipment
Construction
in process
Total
Cost
Balance, beginning of year
$ 21,633
$ 729,064
$
80,448
$ 418,084
$ 123,579
$ 71,685
$ 41,784
$ 1,486,277
Additions
159
56,392
3,925
28,659
18,561
8,523
23,991
140,210
Disposals/retirements
—
(1,603)
(3,258)
(8,958)
(2,918)
(2,041)
—
(18,778)
Effect of movements in foreign exchange
1,054
20,012
2,149
12,058
—
3,041
802
39,116
Total January 31, 2025
$ 22,846
$ 803,865
$
83,264
$ 449,843
$ 139,222
$ 81,208
$ 66,577
$ 1,646,825
Accumulated amortization
Balance, beginning of year
$
—
$ 403,296
$
46,354
$ 295,515
$
52,130
$ 44,301
$
—
$ 841,596
Amortization expense
—
30,891
5,043
24,059
14,666
8,132
—
82,791
Disposals/retirements
—
(1,249)
(3,190)
(8,781)
(2,879)
(2,039)
—
(18,138)
Effect of movements in foreign exchange
—
9,265
1,253
7,639
—
2,648
—
20,805
Total January 31, 2025
$
—
$ 442,203
$
49,460
$ 318,432
$
63,917
$ 53,042
$
—
$ 927,054
Net book value January 31, 2025
$ 22,846
$ 361,662
$ 33,804
$ 131,411
$ 75,305
$ 28,166
$ 66,577
$ 719,771
January 31, 2024
Land
Buildings
Leasehold
improvements
Fixtures &
equipment
Aircraft
Computer
equipment
Construction
in process
Total
Cost
Balance, beginning of year
$ 20,538
$ 666,458
$
70,091
$ 389,310
$ 119,098
$ 65,209
$ 60,432
$ 1,391,136
Additions/(transfers)
1,288
64,228
11,493
41,597
6,919
7,322
(18,648)
114,199
Disposals/retirements
(211)
(1,733)
(1,618)
(13,273)
(1,188)
(887)
—
(18,910)
Reclassification
—
—
—
—
(1,250)
—
—
(1,250)
Effect of movements in foreign exchange
18
111
482
450
—
41
—
1,102
Total January 31, 2024
$ 21,633
$ 729,064
$
80,448
$ 418,084
$ 123,579
$ 71,685
$ 41,784
$ 1,486,277
Accumulated amortization
Balance, beginning of year
$
—
$ 376,996
$
43,002
$ 285,672
$
39,812
$ 39,344
$
—
$ 784,826
Amortization expense
—
27,603
4,453
21,721
14,239
5,787
—
73,803
Disposals/retirements
—
(1,410)
(1,263)
(12,118)
(1,053)
(856)
—
(16,700)
Reclassification
—
—
—
—
(868)
—
—
(868)
Effect of movements in foreign exchange
—
107
162
240
—
26
—
535
Total January 31, 2024
$
—
$ 403,296
$
46,354
$ 295,515
$
52,130
$ 44,301
$
—
$ 841,596
Net book value January 31, 2024
$ 21,633
$ 325,768
$
34,094
$ 122,569
$
71,449
$ 27,384
$ 41,784
$ 644,681
The Company reviews its property and equipment for indicators of impairment. No assets were identified as impaired for the years ended
January 31, 2025 and January 31, 2024.
Interest capitalized
Interest attributable to the construction of qualifying assets was capitalized using an average rate of 4.5% and 5.1% for the years ended
January 31, 2025 and 2024 respectively. Interest capitalized in additions amounted to $711 (January 31, 2024 – $315). Accumulated interest
capitalized in the cost total above amounted to $4,374 (January 31, 2024 – $3,663).
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8.
RIGHT-OF-USE ASSETS & LEASE LIABILITIES
Right-of-use assets
January 31, 2025
Land & buildings
Fixtures &
equipment
Aircraft
Total
Cost
Balance, beginning of year
$
223,690
$
10,505
$
—
$
234,195
Additions
6,014
1,902
1,461
9,377
Disposals/retirements
(3,805)
(115)
—
(3,920)
Lease extensions and other items
13,501
22
—
13,523
Effect of movements in foreign exchange
9,123
15
—
9,138
Total January 31, 2025
$
248,523
$
12,329
$
1,461
$
262,313
Accumulated amortization
Balance, beginning of year
$
115,332
$
4,362
$
—
$
119,694
Amortization expense
20,748
2,419
406
23,573
Disposals/retirements
(3,805)
(73)
—
(3,878)
Impairment losses
(143)
—
—
(143)
Effect of movements in foreign exchange
4,871
2
—
4,873
Total January 31, 2025
$
137,003
$
6,710
$
406
$
144,119
Net book value January 31, 2025
$
111,520
$
5,619
$
1,055
$
118,194
January 31, 2024
Land & buildings
Fixtures &
equipment
Aircraft
Total
Cost
Balance, beginning of year
$
197,358
$
9,251
$
—
$
206,609
Additions
15,742
2,579
—
18,321
Disposals/retirements
(4,595)
(1,325)
—
(5,920)
Lease extensions and other items
14,948
—
—
14,948
Effect of movements in foreign exchange
237
—
—
237
Total January 31, 2024
$
223,690
$
10,505
$
—
$
234,195
Accumulated amortization
Balance, beginning of year
$
100,324
$
3,653
$
—
$
103,977
Amortization expense
19,252
2,034
—
21,286
Disposals/retirements
(3,414)
(1,325)
—
(4,739)
Impairment losses
(860)
—
—
(860)
Effect of movements in foreign exchange
30
—
—
30
Total January 31, 2024
$
115,332
$
4,362
$
—
$
119,694
Net book value January 31, 2024
$
108,358
$
6,143
$
—
$
114,501
58 THE NORTH WEST COMPANY INC. 2024
Lease liabilities
The total current and long-term lease liability is $20,848 (January 31,
2024 – $19,408) and $105,558 (January 31, 2024 – $104,483),
respectively. The Company's lease liabilities are discounted at its
incremental borrowing rate, generally calculated from applicable
Canadian and U.S. corporate bond yields. At January 31, 2025, lease
liabilities reflect a weighted-average risk-free rate of 4.4% (January 31,
2024 – 4.1%) and weighted-average remaining lease term of 9.9
years (January 31, 2024 – 10.5 years).
Maturity analysis - contractual undiscounted cash flows
January 31, 2025
0-1 year
$
25,936
2-3 years
38,615
4-5 years
29,678
6 years+
66,621
Total undiscounted cash flows
$ 160,850
Variable Lease Expense
Some property leases contain variable payment terms that are linked
to sales generated from a store. For individual stores, up to 100% of
lease payments are on the basis of variable payment terms. Variable
payment terms are used for a variety of reasons, including
minimizing the fixed costs base for newly established stores.
Variable lease payments that depend on sales are recognized in net
earnings in the period in which the condition that triggers those
payments occurs. Some aircraft leases also contain variable payment
terms based on usage and are recognized as operating expenses.
The Company had variable lease expense not included in lease
liabilities of $6,652 (January 31, 2024 – $6,145).
Extension Options
Some store leases contain extension options exercisable by the
Company up to one year before the end of the non-cancellable
contract period. Where practicable, the Company seeks to include
extension options in new leases to provide operational flexibility.
The extension options held are exercisable only by the Company
and not by the lessors. The Company assesses at lease
commencement whether it is reasonably certain to exercise the
extension options. The extension options included by the Company
do not extend the lease beyond ten years. The Company reassesses
whether it is reasonably certain to exercise the options if there is a
significant event or significant change in circumstances within its
control.
Other leases
Short-term and low value lease payments are not material.
9.
GOODWILL & INTANGIBLE ASSETS
Goodwill
January 31, 2025
January 31, 2024
Balance, beginning of year
$
50,519
$
50,431
Effect of movements in foreign
exchange
3,160
88
Balance, end of year
$
53,679
$
50,519
Goodwill represents the excess of the consideration transferred to
acquire businesses over the fair value of their identifiable assets.
Goodwill Impairment Testing
A goodwill asset balance of $42,654 (January 31, 2024 – $39,494)
relates to acquisition of subsidiaries by the Company's International
Operations. A goodwill asset balance of $11,025 (January 31, 2024 –
$11,025) relates to acquisitions by the Company's Canadian
Operations. These balances were tested by means of comparing the
recoverable amount of the operating segment to its carrying value.
The recoverable amount was based on its fair value less costs to sell.
The recoverable amount was estimated from the product of financial
performance and trading multiples observed for both the Company
and other publicly traded retail companies. Values assigned to the
key assumptions represent management's best estimates and have
been based on data from both external and internal sources. This
fair value measurement was categorized as a Level 3 fair value
measurement based on the inputs in the valuation technique used.
Key assumptions used in the estimation of enterprise value are as
follows:
•
Financial performance was measured with actual and
budgeted earnings based on sales and expense growth
specific to each store and the Company's administrative
offices. Financial budgets and forecasts are approved by
senior management and consider historical sales volume
and price growth;
•
The ratio of enterprise value to financial performance was
determined using a range of market trading multiples from
the Company and other public retail companies; and
•
Costs to sell have been estimated as a fixed percentage of
enterprise value. This is consistent with the approach of an
independent market participant.
No impairment has been identified on goodwill, and management
considers reasonably foreseeable changes in key assumptions are
unlikely to produce a goodwill impairment.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets
January 31, 2025
Software
Store banners
Non-Compete and
Other
Total
Cost
Balance, beginning of year
$
68,961
$
10,315
$
15,972
$
95,248
Additions
6,029
—
115
6,144
Effect of movements in foreign exchange
1,596
826
544
2,966
Total January 31, 2025
$
76,586
$
11,141
$
16,631
$ 104,358
Accumulated Amortization
Balance, beginning of year
$
53,349
$
—
$
12,131
$
65,480
Amortization expense
8,392
—
863
9,255
Effect of movements in foreign exchange
1,048
—
349
1,397
Total January 31, 2025
$
62,789
$
—
$
13,343
$
76,132
Net book value January 31, 2025
$ 13,797
$ 11,141
$
3,288
$ 28,226
Intangible assets
January 31, 2024
Software
Store banners
Non-Compete and
Other
Total
Cost
Balance, beginning of year
$
61,728
$
10,291
$
15,517
$
87,536
Additions
8,772
—
440
9,212
Disposals/retirements
(1,578)
—
—
(1,578)
Effect of movements in foreign exchange
39
24
15
78
Total January 31, 2024
$
68,961
$
10,315
$
15,972
$
95,248
Accumulated Amortization
Balance, beginning of year
$
45,818
$
—
$
11,024
$
56,842
Amortization expense
9,087
—
1,100
10,187
Disposals/retirements
(1,578)
—
—
(1,578)
Effect of movements in foreign exchange
22
—
7
29
Total January 31, 2024
$
53,349
$
—
$
12,131
$
65,480
Net book value January 31, 2024
$
15,612
$
10,315
$
3,841
$
29,768
Work in process
As at January 31, 2025, the Company had incurred $146 (January 31,
2024 – $1,788) for intangible assets that were not yet available for
use, and therefore not subject to amortization.
Intangible Asset Impairment Testing
The Company determines the fair value of the store banners using
the Relief from Royalty approach. This method requires
management to make long-term assumptions about future sales,
terminal growth rates, royalty rates and discount rates. Sales
forecasts for the following financial year together with medium and
terminal growth rates ranging from 2% to 5% are used to estimate
future sales, to which a royalty rate of 0.5% is applied. The present
value of this royalty stream is compared to the carrying value of the
asset. No impairment has been identified on intangible assets and
management considers reasonably foreseeable changes in key
assumptions are unlikely to produce an intangible asset impairment.
60 THE NORTH WEST COMPANY INC. 2024
10. INCOME TAXES
The following are the major components of income tax expense:
Year Ended
January 31, 2025
January 31, 2024
Current tax expense:
Current tax on earnings for
the year
$ 51,019
$ 43,543
Withholding taxes
105
124
Over provision in prior years
(94)
(2,893)
$ 51,030
$ 40,774
Deferred tax expense:
Origination and reversal of
temporary differences
$ (3,886)
$
(775)
Impact of change in tax rates
14
(8)
Under provision in prior years
834
2,564
$ (3,038)
$
1,781
Income taxes
$ 47,992
$ 42,555
Income tax expense varies from the amounts that would be
computed by applying the statutory income tax rate to earnings
before taxes for the following reasons:
Year Ended
January 31, 2025
January 31, 2024
Earnings before income taxes
$ 191,245
$ 176,846
Combined statutory income
tax rate
24.9 %
23.9 %
Expected income tax expense
$ 47,662
$ 42,259
Increase (decrease) in income taxes resulting from:
Non-deductible expenses
$ 1,285
$
693
Utilization of previously
unrecognized losses
(3,245)
(269)
Withholding taxes
105
124
Impact of change in tax rates
14
(8)
GMTA - Pillar 2 tax(1)
1,420
—
Under/(over) provision in prior
years
740
(329)
Other
11
85
Provision for income taxes
$ 47,992
$ 42,555
Income tax rate
25.1 %
24.1 %
(1) The Company is subject to the Organization for Economic Co-
operation and Development's ("OECD's") Pillar Two global minimum
tax regime, effective January 1, 2024, as a result of the enactment of
the Global Minimum Tax Act ("GMTA") in Canada. For the year-
ended January 31, 2025, the Company recognized current tax
expense of $1,420 related to the top-up tax on the profits of the
Company's retail operations in the Cayman Islands, Barbados and the
British Virgin Islands.
Changes in the combined statutory income tax rate primarily reflect
changes in earnings of the Company's subsidiaries across various tax
jurisdictions.
Deferred tax assets of $1,869 (January 31, 2024 – $4,655) arising from
certain foreign income tax losses were not recognized on the
consolidated balance sheets. The income tax losses expire from
2028 – 2033.
Deferred income tax charged (credited) to other comprehensive
income during the year is as follows:
Year Ended
January 31, 2025
January 31, 2024
Net investment hedge:
Origination and reversal of
temporary difference
(1,008)
(28)
$ (1,008)
$
(28)
Defined benefit plan
actuarial gain:
Origination and reversal of
temporary difference
$ 1,321
$
2,151
Impact of change in tax rates
4
1
$ 1,325
$
2,152
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows:
February 1, 2024
Taxes (charged)
credited to net
earnings
Taxes (charged)/
credited to OCI
Other
adjustments
January 31, 2025
Deferred tax assets:
Property & equipment
$
11,991
$
2,616
$
—
$
153
$
14,760
Lease obligation
29,809
(538)
—
966
30,237
Inventory
5,319
310
—
199
5,828
Share-based compensation and long-term incentive plans
6,375
146
—
90
6,611
Defined benefit plan obligation
2,221
407
(1,325)
—
1,303
Accrued liabilities
3,025
878
—
278
4,181
Unrealized foreign exchange loss
—
—
—
883
883
Other
1,233
186
—
110
1,529
$
59,973
$
4,005
$
(1,325)
$
2,679
$
65,332
Deferred tax liabilities:
Goodwill & intangible assets
$
(1,452)
$
(21)
$
—
$
(117)
$
(1,590)
Property & equipment
(15,680)
957
—
(440)
(15,163)
Right-of-use assets
(27,668)
83
—
(896)
(28,481)
Unrealized foreign exchange gain
(125)
—
1,008
(883)
—
Investment in joint venture
(2,281)
(32)
—
—
(2,313)
Deferred limited partnership earnings
(2,929)
(1,840)
—
—
(4,769)
Other
(6,392)
(114)
—
(427)
(6,933)
$
(56,527)
$
(967)
$
1,008
$
(2,763)
$
(59,249)
$
3,446
$
3,038
$
(317)
$
(84)
$
6,083
As presented on consolidated balance sheets:
January 31, 2025
January 31, 2024
Deferred tax assets
$
19,055
$
16,829
Deferred tax liabilities
(12,972)
(13,383)
$
6,083
$
3,446
62 THE NORTH WEST COMPANY INC. 2024
February 1, 2023
Taxes (charged)
credited to net
earnings
Taxes
(charged)/
credited to OCI
Other
adjustments
January 31, 2024
Deferred tax assets:
Property & equipment
$
10,913
$
1,082
$
—
$
(4)
$
11,991
Lease obligation
27,425
2,351
—
33
29,809
Inventory
4,557
758
—
4
5,319
Share-based compensation and long-term incentive plans
6,419
(47)
—
3
6,375
Defined benefit plan obligation
4,044
329
(2,152)
—
2,221
Accrued liabilities
2,676
345
—
4
3,025
Deferred limited partnership earnings
1,674
(1,674)
—
—
—
Other
797
444
—
(8)
1,233
$
58,505
$
3,588
$
(2,152)
$
32
$
59,973
Deferred tax liabilities:
Goodwill & intangible assets
$
(1,458)
$
9
$
—
$
(3)
$
(1,452)
Property & equipment
(16,320)
655
—
(15)
(15,680)
Right-of-use assets
(25,426)
(2,209)
—
(33)
(27,668)
Unrealized foreign exchange loss
(153)
—
28
—
(125)
Investment in joint venture
(2,189)
(77)
—
(15)
(2,281)
Deferred limited partnership earnings
—
(2,929)
—
—
(2,929)
Other
(5,563)
(818)
—
(11)
(6,392)
$
(51,109)
$
(5,369)
$
28
$
(77)
$
(56,527)
$
7,396
$
(1,781)
$
(2,124)
$
(45)
$
3,446
In assessing the recovery of deferred income tax assets, management considers whether it is probable that the deferred income tax assets
will be realized. The recognition and measurement of the current and deferred tax assets and liabilities involves dealing with uncertainties in
the application of complex tax regulations and in the assessment of the recoverability of deferred tax assets. The ultimate realization of
deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences
are deductible.
Actual income taxes could vary from these estimates as a result of future events, including changes in income tax laws or the outcome of
tax reviews by tax authorities and related appeals. To the extent the final outcome is different from the amounts initially recorded, such
differences, which could be significant, will impact the tax provision in the period in which the outcome is determined.
No deferred tax has been recognized in respect of temporary differences between the carrying value and tax value of investments in
subsidiaries. The Company is in a position to control the timing and reversal of these differences and believes it is probable that they will not
reverse in the foreseeable future. The temporary differences associated with the Company’s foreign subsidiaries are approximately $337,135 at
January 31, 2025 (January 31, 2024 – $303,835).
11. OTHER ASSETS
January 31, 2025
January 31, 2024
Investment in joint venture (Note 24)
$ 17,140
$
16,903
Defined benefit plan asset (Note 13)
19,060
13,365
Other
2,112
1,981
$ 38,312
$
32,249
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. LONG-TERM DEBT
January 31, 2025
January 31, 2024
Current:
Promissory note payable (6)
$
—
$
268
Non-current:
Revolving loan facility (1)
$
—
$
—
Revolving loan facilities (2)
—
—
Revolving loan facilities (3)
94,531
87,607
Senior notes (4)
101,245
93,701
Senior notes (5)
100,000
100,000
$ 295,776
$ 281,308
Total
$ 295,776
$ 281,576
(1) The committed, revolving U.S. loan facility provides the
International Operations with up to US$50,000 for working capital
requirements and general business purposes. This facility matures
January 25, 2028, bears a floating rate of interest based on SOFR plus
a spread and is secured by certain accounts receivable and
inventories of the International Operations. At January 31, 2025, the
International Operations had drawn US$NIL (January 31, 2024 –
US$NIL) on this facility.
(2) The US$52,000 loan facilities mature March 1, 2027 and bear
interest at SOFR plus a spread. These committed loan facilities are
secured by certain assets of the Company and rank pari passu with
the $100,000 senior notes, the US$70,000 senior notes due in 2027
and 2032, and the $400,000 Canadian Operations loan facilities. At
January 31, 2025, the Company had drawn US$NIL (January 31, 2024
– US$NIL) on these facilities.
(3) These committed, revolving loan facilities provide the
Company's Canadian Operations with up to $400,000 for working
capital and general business purposes. These facilities are secured
by certain assets of the Company and rank pari passu with the
$100,000 senior notes, the US$70,000 senior notes due in 2027 and
2032 and the US$52,000 loan facilities. These facilities mature March
1, 2027 and bear a floating interest rate based on the Canadian
Overnight Repo Rate rate or the Canadian prime interest rate.
(4) These US$70,000 senior notes comprise US$35,000 due June 16,
2027 with a fixed interest rate of 2.88% and US$35,000 due June 16,
2032 with a fixed interest rate of 3.09%. The senior notes are secured
by certain assets of the Company and rank pari passu with the
$400,000 Canadian Operations loan facilities, the $100,000 senior
notes and the US$52,000 loan facilities.
(5) The $100,000 senior notes mature September 26, 2029, have a
fixed interest rate of 3.74%, are secured by certain assets of the
Company and rank pari passu with the $400,000 Canadian
Operations loan facilities, the US$70,000 senior notes due in 2027
and 2032 and the US$52,000 loan facilities.
(6) Promissory notes payable are non-interest bearing, have annual
principal payments and are secured by certain assets of the
Company.
13. POST-EMPLOYMENT BENEFITS
The Company sponsors defined benefit and defined contribution
pension plans covering the majority of Canadian employees.
Effective January 1, 2011, the Company entered into an amended
and restated staff pension plan, which incorporated legislated
changes, administrative practice, and added a defined contribution
provision (the “Amended Plan”). Under the Amended Plan, all
members as of December 31, 2010 who did not meet a qualifying
threshold based on number of years in the pension plan and age
were transitioned to the defined contribution pension plan effective
January 1, 2011 and no longer accumulate years of service under the
defined benefit pension plan. The defined benefit pension
previously earned by members transitioned to the defined
contribution plan, will continue to accrue in accordance with the
terms of the plan based on the member’s current pensionable
earnings. Members who met the qualifying threshold on January 1,
2011, elected between accruing a defined contribution benefit and
continuing to accrue a defined benefit pension in accordance with
the provisions of the Amended Plan. All of the Company's defined
benefit pension plans are closed to new members.
The defined benefit pension plans are based on years of service
and final average salary. The Company uses actuarial reports
prepared by independent actuaries for accounting purposes as at
January 31, 2025 and January 31, 2024. The accrued pension
benefits and funding requirements were last determined by actuarial
valuation as at December 31, 2023. The next actuarial valuation is
required as at December 31, 2026. The Company also sponsors an
employee savings plan covering certain U.S. employees with at least
six months of service. Under the terms of the plan, the Company is
obligated to make contributions that range between 3% and 5% of
eligible compensation.
During the year ended January 31, 2025, the Company's funded
pension plans were in a surplus position and no cash contributions
were required (January 31, 2024 – $816). During the year ended
January 31, 2025, the Company contributed $7,367 to its defined
contribution pension plans and U.S. employees savings plans
(January 31, 2024 – $6,767). There are no funding obligations for the
defined benefit pension plans for the year commencing February 1,
2025. The actual amount paid may vary from the estimate based on
actuarial valuations being completed, investment performance,
volatility in discount rates, regulatory requirements and other factors.
64 THE NORTH WEST COMPANY INC. 2024
Movement in plan assets and defined benefit obligation
Information on the Company’s defined benefit plans, in aggregate, is
as follows:
January 31, 2025
January 31, 2024
Plan assets:
Fair value, beginning of year
$
99,302
$
94,712
Accrued interest on assets
4,739
4,377
Benefits paid
(4,917)
(4,204)
Plan administration costs
(483)
(590)
Employer contributions
—
816
Employee contributions
1
1
Return on assets greater than
discount rate
9,195
4,190
Fair value, end of year
$ 107,837
$
99,302
Plan obligations:
Defined benefit obligation,
beginning of year
$ (104,662)
$ (106,900)
Current service costs
(1,452)
(1,654)
Employee contributions
(1)
(1)
Interest on plan liabilities
(4,980)
(4,907)
Benefits paid
5,744
4,990
Actuarial remeasurement due to:
Plan experience
(632)
1,379
Financial assumptions
(3,649)
2,431
Defined benefit obligation, end of
year
$ (109,632)
$ (104,662)
Plan deficit
$
(1,795)
$
(5,360)
As presented on consolidated balance sheets:
January 31, 2025
January 31, 2024
Other asset (Note 11)
$
19,060
$
13,365
Defined benefit plan obligation
(20,855)
(18,725)
Plan deficit
$
(1,795)
$
(5,360)
Registered plans are funded in accordance with the applicable
statutory funding rules and regulations governing the particular
plans.
Defined benefit obligation
The following actuarial assumptions were employed to measure the
plan:
January 31, 2025
January 31, 2024
Discount rate on plan liabilities
4.62 %
4.88 %
Rate of compensation increase
4.00 %
4.00 %
Discount rate on plan expense
4.88 %
4.70 %
Inflation assumption
2.00 %
2.00 %
The assumptions used are the best estimates chosen from a range of
possible actuarial assumptions, which may not necessarily be borne
out in practice. The weighted-average duration of the defined
benefit obligation at the end of the reporting period is 13.0 years
(January 31, 2024 – 12.7 years).
The average life expectancy in years of a member who reaches
normal retirement age of 65 is as follows:
January 31, 2025
January 31, 2024
Average life expectancies at age 65 for current pensioners:
Male
21.7
21.7
Female
24.2
24.1
Average life expectancies at age 65 for current members aged 45:
Male
22.9
22.8
Female
25.3
25.2
Assumptions regarding future mortality experience are set based on
actuarial advice in accordance with published statistics and
experience. For the years ended January 31, 2025 and 2024,
mortality assumptions have been estimated at 106% of the base
mortality rates in the CPM2014PRIV table based on pension size and
industry classification.
Sensitivity of key assumption
The following table outlines the sensitivity of a 1% change in the
discount rate used to measure the defined benefit plan obligation
and cost for the defined benefit pension plans. The table reflects the
impact on both the current service and interest cost expense
components.
The sensitivity analysis provided in the key assumption table is
hypothetical and should be used with caution. The sensitivities have
been calculated independently of any changes in other assumptions.
Actual experience may result in changes in a number of key
assumptions simultaneously. Changes in one factor may result in
changes in another, which could amplify or reduce the impact of
such assumptions.
January 31, 2025
January 31, 2024
Define benefit plan obligation
Impact of:
1% increase
$
(12,814)
$
(12,005)
1% decrease
15,572
14,752
Benefit plan cost
Impact of:
1% increase
$
(1,154)
$
(1,026)
1% decrease
700
704
Plan assets
The major categories of plan assets as a percentage of total plan
assets are listed below. The pension plans have no direct investment
in the shares of the Company.
January 31, 2025
January 31, 2024
Plan assets:
Canadian equities (pooled)
20.1 %
19.4 %
Global equities (pooled)
39.8 %
38.9 %
Real estate equities (pooled)
8.3 %
9.4 %
Debt securities
31.8 %
32.3 %
Total
100.0 %
100.0 %
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Governance and plan management
The Company's Pension Committees oversee the pension plans.
These committees are responsible for assisting the Board of Directors
to fulfill its governance responsibilities for the plans. The committees
assist with plan administration, regulatory compliance, pension
investment and monitoring responsibilities.
Plan assets are subject to the risk that changes in market prices,
such as interest rates, foreign exchange and equity prices will affect
their value. A Statement of Investment Policy and Procedures
("SIPP") guides the investing activity of the defined benefit pension
plans to mitigate market risk. Assets are expected to achieve, over
moving three to four-year periods, a return at least equal to a
composite benchmark made up of passive investments in
appropriate market indices. These indices are consistent with the
policy allocation in the SIPP.
Periodically, an Asset-Liability Modeling study is done to update
the policy allocation between liability hedging assets and return
seeking assets. This is consistent with managing both the funded
status of the defined benefit pension plans and the Company's long-
term costs. It assists with adequately securing benefits and
mitigating year-to-year fluctuations in the Company's cash
contributions and pension expense. The defined benefit plans are
subject to, and actively manage, the following specific market risks:
Interest rate risk: is managed by allocating a portion of plan
investments to liability hedging assets, comprised of a passive long
bond fund.
Currency risk: is managed through asset allocation. A significant
portion of plan assets are denominated in the same currency as plan
obligations.
Equity price risk: The defined benefit pension plans are directly
exposed to equity price risk on return seeking assets. Fair value or
future cash flows will fluctuate due to changes in market prices
because they may not be offset by changes in obligations.
Investment management of plan assets is outsourced to
independent managers.
Statements of earnings and comprehensive income
The following pension expenses have been charged to the
consolidated statements of earnings:
Year ended
January 31, 2025
January 31, 2024
Employee costs (Note 18)
Defined benefit pension plan,
current service costs included
in post-employment benefits
$
1,452
$
1,654
Plan administration costs
483
590
Defined contribution pension
plan
5,460
5,034
Savings plan for U.S. employees
1,907
1,733
$
9,302
$
9,011
Interest expense (Note 19)
Accrued interest on assets
$ (4,739)
$ (4,377)
Interest on plan liabilities
4,980
4,907
$
241
$
530
The following amounts have been included in other comprehensive
income:
Year ended
January 31, 2025
January 31, 2024
Current Year:
Return on assets greater than
discount rate
$
9,195
$
4,190
Actuarial remeasurement due to:
Plan experience
(632)
1,379
Financial assumptions
(3,649)
2,431
Taxes on actuarial remeasurement
in OCI
(1,325)
(2,152)
Net actuarial remeasurement
recognized in OCI
$
3,589
$
5,848
Cumulative gains/(losses) recognized in AOCI:
Cumulative gross actuarial
remeasurement in AOCI
$ 27,569
$ 22,655
Taxes on cumulative actuarial
remeasurement in AOCI
(9,499)
(8,174)
Total actuarial remeasurement
recognized in AOCI, net
$ 18,070
$ 14,481
The actual return on the plans assets is summarized as follows:
Year ended
January 31, 2025
January 31, 2024
Accrued interest on assets
$
4,739
$
4,377
Return on assets greater than
discount rate
9,195
4,190
Actual return on plan assets
$ 13,934
$
8,567
14. SHARE-BASED COMPENSATION
The Company offers the following share-based payment plans:
Performance Share Units (PSUs); Share Options; Director Deferred
Share Units (DDSUs); Executive Deferred Share Units (EDSUs) and an
Employee Share Purchase Plan. The purpose of these plans is to
directly align the interests of the participants and the shareholders of
the Company by providing compensation that is dependent on the
performance of the Company’s common shares.
The total expense relating to share–based payment plans for
the year ended January 31, 2025 was $14,250 (January 31, 2024 –
$13,167). The carrying amount of the Company’s share-based
compensation arrangements including PSU, share option, DDSU and
EDSU plans are recorded on the consolidated balance sheets as
follows:
January 31, 2025
January 31, 2024
Accounts payable and accrued
liabilities
$ 2,750
$ 3,340
Other long-term liabilities
14,476
12,562
Contributed surplus
9,901
10,255
Total
$ 27,127
$ 26,157
66 THE NORTH WEST COMPANY INC. 2024
Performance Share Units
The Company has granted PSUs to officers and senior management.
Each PSU entitles the participant to receive either a cash payment
equal to the market value of the number of notional units granted or
one share of the Company for each notional unit granted at the end
of the vesting period based on the achievement of specific
performance based criteria. The PSU account for each participant
includes the value of dividends from the Company as if reinvested in
additional PSUs. PSU awards vest with the employee on the third
fiscal year following the date of the grant to which the award relates.
Compensation expense is measured based on the grant date fair
market value of the award and recognized over the vesting period
based on the estimated total compensation to be paid.
Compensation costs related to the PSUs for the year ended
January 31, 2025 are $7,654 (January 31, 2024 – $7,465). Equity
settled PSUs are redeemed with shares transferred from a trust
established for this plan or by issuing shares from treasury. There
were 174,389 PSUs (January 31, 2024 – 195,752) partially settled by
releasing 85,618 shares (January 31, 2024 – 96,070) from the
employee trust during the year ended January 31, 2025. There were
13,631 PSUs (January 31, 2024 - NIL) partially settled by releasing
6,743 shares issued from treasury (January 31, 2024 - NIL). The total
number of PSUs outstanding at January 31, 2025 that may be settled
in treasury shares is 329,143 (January 31, 2024 – 326,611).
Director Deferred Share Unit Plan
This Plan is available for independent Directors. Participants are
credited with deferred share units for the amount of the annual
equity retainer, and for the portion of the annual cash retainer and
fees each participant elects to allocate to the DDSU plan. Each
deferred share unit entitles the holder to receive either a cash
payment equal to the market value of the number of DDSUs granted
or one share of the Company. The DDSUs are exercisable by the
holder at any time after they cease to be a Director, but no later than
December 31 of the first calendar year commencing after they leave
the Company. A participant may elect at the time of exercise of any
DDSUs, subject to the consent of the Company, to have the
Company pay an amount in cash equal to the aggregate current
market value of the shares, determined based on the closing price of
the shares on the TSX on the trading day preceding the exercise
date. This cash payment is in consideration for the surrender by the
participant to the Company the right to receive shares from
exercising the DDSUs. Effective December 2016, the Plan was
amended for those DDSUs credited to participants for the portion of
the annual cash retainer and fees each participant elects to allocate
to the Plan. The holder of these DDSUs is entitled to receive at the
time of exercise, an amount in cash equal to the aggregate current
market value of the shares, determined based on the closing price of
the shares on the TSX on the trading day preceding the exercise
date.
Compensation expense is initially measured at the time of the
grant. Subsequent changes in the fair value of the DDSUs based on
changes in the market value of the Company's shares are recognized
at each reporting date. The DDSU plan compensation costs for the
year ended January 31, 2025 are $3,352 (January 31, 2024 – $2,766).
The total number of deferred share units outstanding at January 31,
2025 is 242,874 (January 31, 2024 – 264,838). There were 60,007
DDSUs exercised during the year ended January 31, 2025
(January 31, 2024 – 52,214), all of which were settled in cash
(January 31, 2024 – 25,000 DDSUs settled in cash).
Executive Deferred Share Unit Plan
The EDSU plan was implemented to assist executive management to
meet the Company's minimum share ownership guidelines. This
plan provides for the granting of deferred share units to those
executives who elect to receive a portion of their annual short-term
incentive payment in EDSUs, subject to plan limits. Effective April
2016, participants are credited with EDSUs based on the amount of
their annual short-term incentive payment allocated to the plan and
the fair market value of the Company's shares. The EDSU account for
each participant includes the value of dividends from the Company
as if reinvested in additional EDSUs. The EDSUs are exercisable at any
time after the executive ceases to be an employee of the Company,
but no later than December 31 of the first calendar year
commencing after the holder ceased to be an employee. Each EDSU
entitles the holder to a cash payment equal to the market value of
the equivalent number of the Company's shares, determined based
on their closing price on the TSX on the trading day preceding the
exercise date.
Total compensation expense is measured at the time of the
grant. Subsequent changes in the fair value of the EDSUs based on
changes in the market value of the Company's shares are recognized
at each reporting date. The EDSU plan compensation costs for the
year ended January 31, 2025 are $185 (January 31, 2024 – $65).
Share Option Plan
The Company has a Share Option Plan (the "Plan") that provides for
the granting of options to certain officers and senior management.
Options are granted at fair market value based on the volume
weighted-average closing price of the Company’s shares for the five
trading days preceding the grant date. Effective June 14, 2011, the
Plan was amended and restated. The amendments afford the Board
of Directors the discretion to award options giving the holder the
choice, upon exercise, to either deduct a portion of all dividends
declared after the grant date from the options exercise price or to
exercise the option at the strike price specified at the grant date
("Declining Strike Price Options"). No Declining Strike Price Options
have been issued since 2017 and all options issued subsequently are
standard options ("Standard Options"). Each option is exercisable
into one share of the Company at the price specified in the terms of
the option. Declining Strike Price options allow the employee to
acquire shares or receive a cash payment based on the excess of the
fair market value of the Company’s shares over the exercise price.
The fair value of the Declining Strike Price Options is
remeasured at the reporting date and recognized both in net
earnings and as a liability over the vesting period. The grant date fair
value of the Standard Options is recognized in net earnings and
contributed surplus over the vesting period.
The maximum number of shares available for issuance under
the Plan is a fixed number set at 4,354,020, representing 9.1% of the
Company’s issued and outstanding shares at January 31, 2025. Fair
value of the Company's options is determined using an option
pricing model. Share options granted vest on a graduated basis over
four years and are exercisable over a period of seven years. The share
option compensation costs for the year ended January 31, 2025 are
$1,988 (January 31, 2024 – $1,930). The fair values for options issued
during the year were calculated based on the following assumptions:
January 31, 2025
January 31, 2024
Fair value of options granted
$
7.24
$
6.05
Exercise price
$
39.04
$
39.05
Dividend yield
4.0 %
4.2 %
Annual risk-free interest rate
3.5 %
2.7 %
Expected share price volatility
26.1 %
24.6 %
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The assumptions used to measure options at the balance sheet
dates are as follows:
January 31, 2025
January 31, 2024
Dividend yield
N/A
4.0 %
Annual risk-free interest rate
N/A
4.0 %
Expected share price volatility
N/A
18.2% to 25.6%
The expected dividend yield is estimated based on the quarterly dividend rate and the closing share price on the date the options are granted.
The expected share price volatility is estimated based on the Company's historical volatility over a period consistent with the expected life of
the options. The risk-free interest rate is estimated based on the Government of Canada bond yield for a term to maturity equal to the
expected life of the options.
The following continuity schedules reconcile the movement in outstanding options during the year:
Number of options outstanding
Declining Strike Price Options
Standard Options
January 31, 2025
January 31, 2024
January 31, 2025
January 31, 2024
Outstanding options, beginning of year
50,558
301,683
1,351,692
1,383,056
Granted
—
—
231,870
211,484
Exercised
(50,558)
(251,125)
(451,294)
(224,923)
Forfeited or cancelled
—
—
(3,550)
(17,925)
Outstanding options, end of year
—
50,558
1,128,718
1,351,692
Exercisable at end of year
—
50,558
559,821
743,499
The weighted-average share price on the dates options were exercised during the year was $45.86 (January 31, 2024 – $38.99).
Weighted-average exercise price
Declining Strike Price Options
Standard Options
January 31, 2025
January 31, 2024 January 31, 2025
January 31, 2024
Outstanding options, beginning of year
$
27.24
$ 31.71
$
32.80
$ 31.22
Granted
—
—
39.18
39.05
Exercised
27.05
27.82
30.63
28.73
Forfeited or cancelled
—
—
35.66
35.69
Outstanding options, end of year
$
—
$ 27.24
$
34.97
$ 32.80
Exercisable at end of year
$
—
$ 27.24
$
31.91
$ 30.39
Summary of options outstanding by grant year
Outstanding
Exercisable
Grant
year
Range of
exercise price
Number
outstanding
Weighted-average
remaining
contractual years
Weighted-average
exercise price
Options
exercisable
Weighted-average
exercise price
2018
$
27.77-27.77
47,959
0.2
$
27.77
47,959
$
27.77
2019
$
28.13-28.32
114,295
1.2
$
28.13
114,295
$
28.13
2020
$
29.23-29.23
149,889
2.4
$
29.23
149,889
$
29.23
2021
$
34.67-35.51
177,510
3.3
$
35.32
107,729
$
35.29
2022
$
32.79-35.83
208,545
4.3
$
35.62
95,406
$
35.60
2023
$
39.05-39.05
198,650
5.2
$
39.05
44,543
$
39.05
2024
$
39.04-51.89
231,870
6.2
$
39.18
—
$
—
68 THE NORTH WEST COMPANY INC. 2024
Employee Share Purchase Plan
The Employee Share Purchase Plan provides participants with the opportunity to acquire an ownership interest in the Company. The Company
contributes an additional 33% of the amount invested, subject to a maximum annual contribution of 2% of the participants' base salary. The
plan is administered by a trustee who uses the funds received to purchase shares on the TSX on behalf of the participating employees. These
shares are registered in the name of the plan trustee on behalf of the participants.
The Company’s contribution to the plan is recorded as compensation expense. The employee share purchase plan compensation costs
for the year ended January 31, 2025 are $1,071 (January 31, 2024 – $941).
15. FINANCIAL INSTRUMENTS
The Company's activities expose it to a variety of financial risks including liquidity risk, credit risk and market risk. The Company's overall risk
management program focuses on minimizing potential adverse effects on financial performance.
The Company manages funding and financial risk management with oversight provided by the Board of Directors, who also approve
specific financial transactions. The Company uses derivative financial instruments only to hedge exposures arising in respect of underlying
business requirements and not for speculative purposes.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due or can do so only at excessive cost.
The Company’s operational cash flow is reasonably stable and predictable. This reflects the business risk profile of the majority of markets in
which the Company operates and its product mix. Cash flow forecasts are produced regularly and reviewed against the Company’s debt
portfolio capacity and maturity profile to assist management in identifying future liquidity requirements. The Company’s funding strategy is to
ensure a mix of funding sources offering flexibility and cost effectiveness to match the business requirements.
The Company is financed by a combination of cash flow from operating activities, bank advances, senior notes and committed revolving
loan facilities. At January 31, 2025, the Company had undrawn committed revolving loan facilities available of $438,796 (January 31, 2024 –
$433,935) which mature in 2027 and 2028 (Note 12). The undrawn available capacity is net of the aggregate potential liability for letters of
credit of $18,188 (January 31, 2024 – $18,051).
The following table analyzes the Company’s financial liabilities into relevant maturity groupings based on the remaining period from the
balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows or an
estimation in respect of floating interest rate liabilities, and as a result may not agree to the amounts disclosed on the balance sheet.
2025
2026
2027
2028
2029
2030+
Total
Accounts payable and accrued liabilities
$
250,175 $
— $
— $
— $
— $
— $ 250,175
Long-term debt (Note 12)
11,021
11,021
151,413
5,307
104,005
52,858
335,625
Total
$
261,196 $
11,021 $
151,413 $
5,307 $
104,005 $
52,858 $ 585,800
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Company’s exposures to credit risk arise primarily
from holdings of cash, customer and commercial accounts
receivable and promissory note receivable.
To mitigate credit risk, the Company maintains deposits with
financial institutions with minimum equivalent short-term credit
ratings of “A1”. The maximum exposure on cash is equal to the
carrying amount of these instruments.
It is the Company’s policy that customers who wish to trade on
credit terms are subject to credit verification procedures including
policies governing: credit approvals, limits, collections and fraud
prevention. The Company provides impairment allowances for
potentially uncollectible accounts receivable. Receivable balances
are comprised of approximately forty thousand customers spread
across a wide geography, substantially reducing the Company’s risk
through the diversity of its customer base. Further, receivables are
centrally monitored on an ongoing basis with the result that the
Company’s exposure to individual customers is generally not
significant. The maximum exposure net of impairment allowances is
$119,023 (January 31, 2024 – $121,606). The Company does not
have any individual customers greater than 10% of total accounts
receivable. At January 31, 2025, the Company’s gross maximum
credit risk exposure is $131,698 (January 31, 2024 – $134,315). Of this
amount, $21,523 (January 31, 2024 – $12,456) is more than 60 days
past due. The Company has recorded an allowance against its
maximum exposure to credit risk of $12,675 (January 31, 2024 –
$12,709) which is based on expected credit losses for similar financial
assets.
The Company has an unsecured, non-interest bearing
promissory note receivable of $12,570 (January 31, 2024 – $27,058)
from Giant Tiger Stores Limited of which $12,570 (January 31, 2024 –
$22,500) has been reclassified to accounts receivable. See Note 25.
As at January 31, 2025 and 2024, the Company has no
significant credit risk related to derivative financial instruments.
Market risk
(a)
Currency risk The Company operates internationally and is
exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the U.S. dollar. Foreign
exchange risk arises from U.S. dollar denominated borrowings
and net investments in foreign operations.
Management is responsible for managing foreign currency
risk. The Company’s U.S. dollar net investment is exposed to
foreign currency translation risk. The Company has hedged
US$70,000 of this risk with U.S. dollar denominated borrowings.
No ineffectiveness was recognized from the net investment
hedge.
In respect of recognized foreign currency assets and
liabilities, the Company has limited exposure. Procurement
and related borrowing activity are generally conducted in
currencies matching cash flows generated by underlying
operations,
providing
an
economic
hedge
without
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
sophisticated treasury management. Short-term imbalances in
foreign currency holdings are rectified by buying or selling at
spot rates when necessary.
Management considers a 10% variation in the Canadian
dollar relative to the U.S. dollar reasonably possible.
Considering all major exposures to the U.S. dollar as described
above, a 10% appreciation of the Canadian dollar against the
U.S. dollar in the year-end rate would cause net earnings to
decrease by approximately $100 (January 31, 2024 - $100). A
10% depreciation of the Canadian dollar against the U.S. dollar
year-end rate would cause net earnings to increase by
approximately $100 (January 31, 2024 – $100).
The Company may use derivative financial instruments to
manage market risk. These transactions are approved by the
Board of Directors. The derivatives are entered into with
financial institution counter parties rated AA-.
(b)
Interest rate risk Interest rate risk is the risk that the fair value of
future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. The Company is exposed to
interest rate risk primarily through its long-term borrowings.
The Company manages exposure to interest rate risk by
monitoring its blend of fixed and floating interest rates, and
may modify this blend using interest rate swaps. The goal of
management is to manage the trade-off between obtaining the
most beneficial effective rates of interest, while minimizing the
impact of interest rate volatility on earnings.
Management considers a 100 basis point change in
interest rates reasonably possible. Considering all major
exposures to interest rates as described above, based on
floating rate borrowings outstanding at January 31, 2025, a 100
basis point increase in the risk-free rate would cause net
earnings to decrease by approximately $692 (January 31, 2024 –
$642). A 100 basis point decrease would cause net earnings to
increase by approximately $692 (January 31, 2024 – $642).
(c)
Accounting classifications and fair value estimation The following
table comprises the carrying amounts of the Company’s
financial instruments. Financial instruments are either carried at
amortized cost using the effective interest rate method or fair
value.
The Company uses a three-level hierarchy to categorize
financial instruments carried at fair value as follows:
•
Level 1 – Fair values measured using quoted prices
(unadjusted) in active markets for identical instruments
•
Level 2 – Fair values measured using directly or
indirectly observable inputs, other than those included
in Level 1
•
Level 3 – Fair values measured using inputs that are not
based on observable market data
These amounts represent point-in-time estimates and may not reflect fair value in the future. These calculations are subjective in nature,
involve uncertainties and are a matter of significant judgment.
January 31, 2025
Assets (Liabilities) carried at
amortized cost
Maturity
Carrying amount
Fair value
Cash
Short-term
$
67,385
$
67,385
Accounts receivable (1)
Short-term
119,023
119,023
Other financial assets
Long-term
1,989
1,989
Accounts payable and accrued liabilities
Short-term
(247,425)
(247,425)
Long-term debt
Long-term
(295,776)
(280,336)
(1) At January 31, 2025, $12,570 of the promissory note receivable due within the next 12 months is included in accounts receivable (January 31, 2024 – $22,500).
See Note 25.
70 THE NORTH WEST COMPANY INC. 2024
January 31, 2024
Assets (Liabilities) carried at
amortized cost
Maturity
Carrying amount
Fair value
Cash
Short-term
$
53,359
$
53,359
Accounts receivable
Short-term
121,606
121,606
Promissory note receivable
Long-term
4,558
4,558
Other financial assets
Long-term
1,830
1,830
Accounts payable and accrued liabilities
Short-term
(224,957)
(224,957)
Current portion of long-term debt
Short-term
(268)
(268)
Long-term debt
Long-term
(281,308)
(261,628)
The methods and assumptions used in estimating the fair value of the Company’s financial instruments are as follows:
•
The fair value of short-term financial instruments approximates their carrying values due to their immediate or short-term period to
maturity. Any differences between fair value and book values of short-term financial instruments are considered to be insignificant.
•
The fair value of long-term debt with fixed interest rates is estimated by discounting the expected future cash flows using the current risk-
free interest rate on an instrument with similar terms adjusted for an appropriate risk premium. This is considered a level 2 fair value
estimate.
•
The carrying value of the promissory note receivable is a reasonable approximation of fair value. The fair value when recognized was
estimated by calculating the present value of the future expected cash flows using an effective interest rate derived from comparable
debt issuances.
Capital management
The Company’s objectives in managing capital are to deploy capital
to provide an appropriate total return to shareholders while taking
into consideration key risks. Management maintains a capital
structure that provides the flexibility to take advantage of the growth
opportunities of the business, maintain existing assets, meet
obligations and financial covenants and enhance shareholder value.
The capital structure of the Company consists of bank advances,
long-term debt, lease liabilities and shareholders’ equity. The
Company manages capital to optimize efficiency through an
appropriate balance of debt and equity. In order to maintain or
adjust its capital structure, the Company may purchase shares for
cancellation pursuant to normal course issuer bids, issue additional
shares, borrow additional funds, adjust discretionary capital
spending and adjust the amount of dividends paid or refinance debt
at different terms and conditions all subject to market conditions
and the terms of any underlying agreements..
The Company’s process and policies for managing capital are
monitored by management and are reflected in the following
measures:
(a)
Debt-to-equity ratio At January 31, 2025, the debt-to-equity ratio
was 0.37 compared to 0.40 last year. The debt-to-equity ratio is
within the Company’s objectives. The debt-to-equity ratio is
calculated as follows:
January 31, 2025
January 31, 2024
Current portion of long-term
debt (Note 12)
$
—
$
268
Long-term debt (Note 12)
295,776
281,308
Total debt
$
295,776
$
281,576
Total equity
$
794,714
$
705,773
Debt-to-equity ratio
0.37
0.40
(b)
Financial covenants As a result of borrowing agreements
entered into by the Company, there are certain financial
covenants that must be maintained. Financial covenants
include an interest coverage ratio and a leverage test.
Compliance with financial covenants is reported quarterly to
the Board of Directors. During the years ended January 31, 2025
and 2024, the Company is in compliance with all financial
covenants. Other than the requirements imposed by these
borrowing agreements and solvency tests imposed by the
CBCA, the Company is not subject to any externally imposed
capital requirements.
Capital management objectives are reviewed on an annual basis.
The capital management objectives were substantially unchanged
for the year ended January 31, 2025.
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. SHARE CAPITAL
Authorized – The Company has an unlimited number of Common
Voting Shares and Variable Voting Shares.
Shares
Consideration
January 31, 2024
47,711,467
$
178,409
Issued under share-based compensation
plans (Note 14)
159,791
1,845
Balance at January 31, 2025
47,871,258
$
180,254
Shares held in trust, January 31, 2024
(129,452)
(458)
Purchased for future settlement of PSUs
(80,000)
(301)
Released for settlement of PSUs (Note 14)
85,618
324
Shares held in trust, January 31, 2025
(123,834)
$
(435)
Issued and outstanding, net of shares
held in trust, January 31, 2025
47,747,424
$
179,819
January 31, 2023
47,750,605
$
176,323
Purchased and cancelled (1)
(153,998)
(557)
Issued under share-based compensation
plans (Note 14)
114,860
2,643
Balance at January 31, 2024
47,711,467
$
178,409
Shares held in trust, January 31, 2023
(65,522)
(232)
Purchased for future settlement of PSUs
(160,000)
(571)
Released for settlement of PSUs (Note 14)
96,070
345
Shares held in trust, January 31, 2024
(129,452)
$
(458)
Issued and outstanding, net of shares
held in trust, January 31, 2024
47,582,015
$
177,951
(1) Variable voting shares and common voting shares purchased pursuant to
NCIB program. The Company records shares repurchased on a transaction
date basis.
Voting rights
The Company's share capital is comprised of Variable Voting Shares
and Common Voting Shares. The two classes of shares have
equivalent rights as shareholders except for voting rights. Holders of
Variable Voting Shares are entitled to one vote per share except
where (i) the number of outstanding Variable Voting Shares exceeds
49% of the total number of all issued and outstanding Variable
Voting Shares and Common Voting Shares, or (ii) the total number of
votes cast by or on behalf of the holders of Variable Voting Shares at
any meeting on any matter on which a vote is to be taken exceeds
49% of the total number of votes cast at such meeting.
If either of the above-noted thresholds is surpassed at any time,
the vote attached to each Variable Voting Share will decrease
automatically without further act or formality. Under the
circumstances described in paragraph (i) above, the Variable Voting
Shares as a class cannot carry more than 49% of the total voting
rights attached to the aggregate number of issued and outstanding
Variable Voting Shares and Common Voting Shares of the Company.
Under the circumstances described in paragraph (ii) above, the
Variable Voting Shares as a class cannot, for the given Shareholders'
meeting, carry more than 49% of the total number of votes cast at
the meeting.
Variable Voting Shares may only be held, beneficially owned or
controlled, directly or indirectly, by persons who are not Canadians
(within the meaning of the Canada Transportation Act). An issued
and outstanding Variable Voting Share is converted into one
Common Voting Share automatically and without any further act of
the Company or the holder, if such Variable Voting Share becomes
held, beneficially owned and controlled, directly or indirectly,
otherwise than by way of security only, by a Canadian, as defined in
the Canada Transportation Act ("CTA").
At January 31, 2025, shares outstanding of 47,871,258 included
16,749,614 (January 31, 2024 – 17,649,571) Variable Voting Shares,
representing 35.0% (January 31, 2024 – 37.0%) of the total shares
issued and outstanding.
Normal Course Issuer Bid
On November 19, 2024, the Company renewed its Normal Course
Issuer Bid ("NCIB"). Under the NCIB, the Company may acquire up to
a maximum of 4,765,289 of its shares, or approximately 10% of its
float for cancellation over the following 12 months. During the year
ended January 31, 2025, the Company purchased no common
shares. During the year ended January 31, 2024, the Company
purchased 153,998 common shares having a book value of $557 for
cash consideration of $5,000. The excess of the purchase price over
the book value of the shares of $4,443 was charged to retained
earnings. All shares purchased were cancelled.
In connection with the NCIB, the Company has established an
automatic securities purchase plan with its designated broker to
facilitate the purchase of shares under the NCIB at times when the
Company would ordinarily not be permitted to purchase its shares
due to regulatory restrictions or self-imposed blackout periods.
Under the plan, before entering a self-imposed blackout period, the
Company may, but is not required to, ask the designated broker to
make purchases under the NCIB within specific parameters.
17. EXPENSES BY NATURE
Year Ended
January 31, 2025
January 31, 2024
Employee costs (Note 18)
$ 380,043
$
355,498
Amortization
115,619
105,276
Operating lease rentals
5,116
5,653
72 THE NORTH WEST COMPANY INC. 2024
18. EMPLOYEE COSTS
Year Ended
January 31, 2025
January 31, 2024
Wages, salaries and benefits
including bonus
$ 356,491
$ 333,320
Post-employment benefits (Note 13)
9,302
9,011
Share-based compensation (Note 14)
14,250
13,167
Included in the above are the following amounts in respect of key
management compensation:
Wages, salaries and benefits
including bonus
$
7,478
$
7,348
Post-employment benefit expense
701
661
Share-based compensation
8,418
7,050
Key management personnel are those individuals who have the
authority and responsibility for planning, directing and controlling
the activities of the Company. The Company’s key management
personnel are comprised of the Board of Directors, Chief Executive
Officer and the senior officers of the Company.
19. INTEREST EXPENSE
Year Ended
January 31, 2025
January 31, 2024
Interest on long-term debt
$ 13,759
$
14,775
Interest on lease liabilities
5,458
4,821
Net interest on defined benefit
plan obligation (Note 13)
241
530
Interest imputed on promissory
note receivable (Note 25)
(446)
(760)
Interest capitalized (Note 7)
(711)
(315)
Interest expense
$ 18,301
$
19,051
20. DIVIDENDS
The following is a summary of the dividends recorded in
shareholders' equity and paid in cash:
Year Ended
January 31, 2025
January 31, 2024
Dividends recorded in equity
and paid in cash
$ 81,601
$ 76,126
Less: Dividends paid to non-
controlling interests
(6,076)
(2,593)
Shareholder dividends
$ 75,525
$ 73,533
Dividends per share
$
1.58
$
1.54
The payment of dividends on the Company’s common shares is
subject to the approval of the Board of Directors and is based upon,
among other factors, the financial performance of the Company, its
current and anticipated future business needs, and the satisfaction of
solvency tests imposed by the CBCA for the declaration of dividends.
Dividends are recognized as a liability in the consolidated financial
statements in the year in which the dividends are approved by the
Board of Directors.
On April 9, 2025, the Board of Directors declared a dividend of
$0.40 per common share to be paid on April 24, 2025 to
shareholders of record as of the close of business on April 16, 2025.
21. CHANGE IN NON-CASH WORKING CAPITAL
The changes in non-cash working capital were as follows:
Year Ended
January 31, 2025
January 31, 2024
Change in:
Accounts receivable
$
(5,925)
$
(2,063)
Inventories
(17,667)
(19,371)
Prepaid expenses
(6,588)
(5,868)
Accounts payable and
accrued liabilities
14,255
1,031
Other
1,649
3,038
Change in non-cash working
capital
$ (14,276)
$ (23,233)
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. NET EARNINGS PER SHARE
Basic net earnings per share is calculated based on the weighted-average shares outstanding during the year. The diluted net earnings per
share takes into account the dilutive effect of all potential ordinary shares. The average market value of the Company’s shares for purposes of
calculating the dilutive effect of share options is based on quoted market prices for the period that the options were outstanding.
($ and shares in thousands, except earnings per share)
Year Ended
January 31, 2025
January 31, 2024
Diluted earnings per share calculation:
Net earnings attributable to shareholders for the year (numerator for diluted earnings per share)
$ 137,296
$ 129,391
Weighted-average shares outstanding (denominator for basic earnings per share)
47,788
47,747
Dilutive effect of share-based compensation
770
684
Denominator for diluted earnings per share
48,558
48,431
Basic earnings per share
$
2.87
$
2.71
Diluted earnings per share
$
2.83
$
2.67
23. COMMITMENTS, CONTINGENCIES AND
GUARANTEES
Contingencies
In the ordinary course of business, the Company is subject to audits
by taxation authorities. While the Company believes that its filing
positions are appropriate and supportable, the possibility exists that
certain matters may be reviewed and challenged by the taxation
authorities. The Company regularly reviews the potential for adverse
outcomes and the adequacy of its tax provisions. The Company
believes that it has adequately provided for these matters. If the final
outcome differs materially from the provisions, the Company’s
income tax expense and its earnings could be affected positively or
negatively in the period in which the matters are resolved.
The Company is involved in various legal proceedings arising in
the normal course of business. It is not currently possible to predict
the outcome of the Company's legal proceedings with certainty and
the amounts that may ultimately be assessed against the Company.
Management regularly assesses the adequacy of provisions for such
proceedings and adjusts any provisions accordingly.
The following is a description of the Company's significant legal
proceedings:
In February 2025, two Statements of Claims for putative class
action proceedings were filed in the Manitoba Court of King’s Bench
against The North West Company Inc. and certain Canadian
subsidiaries: Kusugak et al (the “Kusugak Claim”) and Muskego et al
(the “Muskego Claim”, collectively with the Kusugak Claim, the
“Claims”). The Claims allege that the Company misrepresented the
amount of federal subsidy it passed through to consumers through
the Nutrition North Canada subsidy program (the "Subsidies")
between April 1, 2011 and the present. The Claims are brought by
individuals who allegedly purchased subsidized goods at the
Company’s stores in Nunavut, Quebec and Manitoba, and seek
damages including, for alleged negligent misrepresentation and
unjust enrichment as well as breach of contract, the Competition Act
and certain provincial and territorial consumer protection acts. These
actions are at an early stage and have not been certified as class
proceedings. The Company believes these Claims are without merit
and maintains that its practices regarding the Subsidies were fully
compliant with the Government of Canada agreements and plans to
actively defend these actions. The Company does not currently have
any accruals or provisions for these Claims recorded in these
consolidated financial statements.
74 THE NORTH WEST COMPANY INC. 2024
Guarantees
The Company has provided the following guarantees to third parties:
The Company has entered into indemnification agreements
with its current and former directors and officers to indemnify them,
to the extent permitted by law, against any and all charges, costs,
expenses, amounts paid in settlement and damages incurred by the
directors and officers as a result of any lawsuit or any judicial,
administrative or investigative proceeding in which the directors and
officers are sued as a result of their service. These indemnification
claims will be subject to any statutory or other legal limitation period.
The nature of the indemnification agreements prevents the
Company from making a reasonable estimate of the maximum
potential amount it could be required to pay to counterparties. The
Company has purchased director and officer liability insurance. No
amount has been recorded in the consolidated financial statements
with respect to these indemnification agreements.
In the normal course of operations, the Company provides
indemnification agreements to counterparties for various events
such as intellectual property right infringement, loss or damages to
property, claims that may arise while providing services, violation of
laws or regulations, or as a result of litigation that might be suffered
by the counterparties. The terms and nature of these
indemnification agreements prevents the Company from making a
reasonable estimate of the maximum potential amount it could be
required to pay to counterparties. No amount has been recorded in
the consolidated financial statements with respect to these
indemnification agreements.
24.
SUBSIDIARIES AND JOINT VENTURES
The Company’s principal operating subsidiaries are set out below:
Proportion of voting rights held by:
Activity
Country of Organization
Company
Subsidiary
NWC GP Inc.
General Partner
Canada
100 %
North West Company Holdings Inc.
Holding Company
Canada
100 %
The North West Company LP
Retailing
Canada
100 % (less one unit)
NWC (U.S.) Holdings Inc.
Holding Company
United States
100 %
The North West Company (International) Inc.
Retailing
United States
100 %
Roadtown Wholesale Trading Ltd.
Retailing
British Virgin Islands
77 %
North Star Air Ltd.
Airline
Canada
100 %
The investment in joint venture comprises a 50% interest in a Canadian Arctic shipping company, Transport Nanuk Inc. At January 31, 2025, the
Company’s share of the net assets of its joint venture amount to $17,140 (January 31, 2024 – $16,903) comprised assets of $18,383 (January 31,
2024 - $18,603) and liabilities of $1,243 (January 31, 2024 – $1,700). During the year ended January 31, 2025, the Company purchased freight
handling and shipping services from Transport Nanuk Inc. and its subsidiaries of $11,500 (January 31, 2024 – $10,050).
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25. PROMISSORY NOTE RECEIVABLE
On July 5, 2020, the Company sold 36 of its 46 Giant Tiger stores to Giant Tiger Stores Limited for cash consideration of $45,000, subject to
working capital adjustments, and additional contingent consideration payable of up to $22,500. The estimated consideration was recorded as
an unsecured, non-interest bearing promissory note. The final cash consideration installment of $15,000 was received during the period ended
January 31, 2025.
The fair value of the promissory note is comprised of the net present value of the estimated additional contingent consideration accrued at the
time of the transaction, discounted using an interest rate specific to the counterparty. For the year-ended January 31, 2025, the Company
recognized interest income of $446 (January 31, 2024 – $760) on the promissory note receivable (Note 19) and it had an estimated fair value of
$12,570 (January 31, 2024 – $27,088) of which $12,570 (January 31, 2024 – $22,500) has been reclassified to accounts receivable. The first
installment of $7,500 of contingent consideration was due in 2024 with the determination of the total amount of contingent consideration
dependent on the achievement of profitability milestones in 2024 and 2025 which is expected to be finalized by the fourth quarter of 2025.
76 THE NORTH WEST COMPANY INC. 2024
Shareholder Information
Fiscal Year
Quarter Ended
Share
Price High
Share
Price Low
Share
Price Close
Volume
EPS1
2024
$55.93
$37.15
$46.44
35,726,520
$2.83
April 30, 2024
41.12
38.12
39.02
6,576,857
0.53
July 31, 2024
45.75
37.15
44.71
7,727,276
0.73
October 31, 2024
53.45
42.02
52.41
9,045,444
0.72
January 31, 2025
55.93
45.50
46.44
12,376,943
0.85
2023
$40.49
$29.58
$38.89
46,137,203
$2.67
April 30, 2023
40.49
34.50
39.74
11,059,985
0.43
July 31, 2023
39.86
30.38
32.10
15,947,371
0.76
October 31, 2023
36.43
29.58
35.36
11,605,807
0.77
January 31, 2024
39.96
34.77
38.89
7,524,040
0.71
2022
$40.09
$30.55
$36.24
52,348,183
$2.51
April 30, 2022
40.09
34.80
35.83
18,392,266
0.57
July 31, 2022
36.70
32.91
34.48
12,240,571
0.64
October 31, 2022
36.72
30.55
35.45
13,111,355
0.61
January 31, 2023
38.34
34.61
36.24
8,603,991
0.69
1 Net earnings per share are on a diluted basis.
Total Return Performance (% at January 31)
This chart illustrates the relative performance of shares of The North West Company
Inc. over the past five years compared to the TSX Composite Index. These measures
incorporate the reinvestment of dividends.
The North West Company Inc.
Anticipated Dividend Dates*
Record Date: April 16, 2025
Payment Date: April 24, 2025
Record Date: June 27, 2025
Payment Date: July 15, 2025
Record Date: September 29, 2025
Payment Date: October 15, 2025
Record Date: December 31, 2025
Payment Date: January 15, 2026
*Dividends are subject to approval by the
Board of Directors
The
2025
Annual
General
Meeting
of
Shareholders of The North West Company Inc.
will be held on Wednesday, June 11, 2025 at
11:30 am (Central Time) by virtual only meeting
via live audio webcast online.
Transfer Agent and Registrar
TSX Trust Company
600 The Dome Tower
333-7th Ave SW
Calgary, AB
Toll-free: 1 800 387 0825
www.tsxtrust.com
Stock Exchange Listing
The Toronto Stock Exchange
Stock Symbol NWC
ISIN #: CA6632782083
CUSIP #: 663278208
Number of shares issued and outstanding at
January 31, 2025: 47,871,258
Auditors
PricewaterhouseCoopers LLP
Five Year Compound Annual Growth (%)
77
Corporate Governance
Complete disclosure of The North West Company Inc's. corporate governance is provided in the Company’s Management Information Circular,
which is available on the Canadian Securities Administrators’ website at www.sedarplus.ca or in the investor section of the Company’s website
at www.northwest.ca.
EXECUTIVES
EXECUTIVES
BOARD OF DIRECTORS
Daniel G. McConnell
Leanne G. Flewitt
Brock Bulbuck, Chair
President & Chief Executive Officer
Vice-President, Chief Transformation Officer
Stewart F. Glendinning 1, 2
Jim R. Caldwell
Matt D. Johnson
President, Canadian Retail
Vice-President, Cost-U-Less Merchandising
Rachel L. Huckle 2, 3
Kyle A. Hill
Matthew A. LeClair
Annalisa King 1, 2
President, Alaska Commercial Company
Vice-President, Canadian Supply Chain
Logistics and Distribution
Violet A. M. Konkle 1, 3
J. Kevin Proctor
Walter E. Pickett
Steven Kroft 1, 3
President Retail, Cost-U-Less & Riteway
Vice-President & General Manager,
Alaska Commercial Company
Daniel G. McConnell
John D. King
Randy L. Roller
Jennefer Nepinak 1, 3
Executive Vice-President &
Vice-President & General Manager, Facilities
Chief Financial Officer
& Store Planning
Victor Tootoo1, 2
Alison F. Coville
Douglas S. Ruckle
Chief People Officer
Vice-President, Alaska Commercial Company
Merchandising
Vineet Gupta
Nicolas Sabogal
Chief Information Officer
Vice-President, Strategy, Planning & Analytics
BOARD COMMITTEES
1 Governance and Nominating
Cole J.A. Akerstream
Kevin T. Sie
2 Audit
Vice-President, Real Estate &
Vice-President, Finance
3 Human Resources, Compensation and
Store Development
Pension
Michael T. Beaulieu
James W. Walker
Vice-President, Canadian Store Operations
Vice-President & General Manager,
For additional copies of this report or for
Alaska Commercial Company
general information about the Company,
Wholesale Operations
contact the Corporate Secretary:
David M. Chatyrbok
Frank W. Kelner
Vice-President, Canadian Merchandising
Chair & Chief Executive Officer,
The North West Company Inc.
North Star Air Ltd.
Gibraltar House, 77 Main Street
Winnipeg, Manitoba Canada R3C 2R1
Hong Chung
Jeffrey B. Stout
Vice-President, IT Business Applications
President & Chief Operating Officer,
T 204 934 1756 F 204 934 1317
North Star Air Ltd.
board@northwest.ca
Company Website: www.northwest.ca
Alexis E. Cloutier
Thomas J. Meilleur
Vice-President, Legal &
Vice-President, North Star Air Ltd.
Corporate Secretary
Shannon L. Earle
Vice-President, People & Culture
78 THE NORTH WEST COMPANY INC. 2024
Nor'Westers are associated with the vision,
perseverance, and enterprising spirit of the original
North West Company and Canada's early fur trade.
We trace our roots to 1668, and the establishment of
one of North America's early trading posts at
Waskaganish on James Bay. Today, we continue to
embrace this pioneering culture as true "frontier
merchants."
The North West Company Inc.
Gibraltar House, 77 Main Street
Winnipeg, Manitoba Canada R3C 2R1
T 204 934 1756 F 204 934 1317
Toll -free 1 800 563 0002
investorrelations@northwest.ca
www.northwest.ca