The North West Company Inc. (NWC) Earnings Call Transcript & Summary

Good morning. I'd like to welcome you to this Annual General Meeting of Shareholders of The North West Company Inc. My name is Brock Bulbuck. I am a director of North West and Chair of its Board. We are pleased to host today's meeting virtually via a live video webcast through the Lumi platform, which enables registered shareholders and duly appointed proxy holders the same experience regardless of geographic location to participate, submit questions and vote. I will act as Chair of today's meeting. I will now call this meeting to order. I would like to begin by acknowledging that The North West Company's head office is located on Treaty 1 territory, the traditional lands of the Anishinaabe, Cree, Anishininew, Dakota, and Dene Peoples and the homeland of the Red River Métis. We also acknowledge that Winnipeg's water comes from Shoal Lake 40 First Nation. The North West operates in many First Nations Inuit and Métis territories across Canada, and we hold deep respect for the unique heritage, cultures, and languages represented across these traditional lands. We acknowledge the history of colonialism within Canada, the resulting harms done, and we reaffirm our commitment to reconciliation as outlined in Our Promise to Indigenous Peoples. I would also like to acknowledge those impacted by the devastating wildfires that continue to affect many of the communities we serve. Our thoughts are with those who have been impacted. 2024 was another year of strong results for North West. Sales increased 4.2% to $2.6 billion and net earnings increased 6.7% to $143 million. The company also made capital investments of $131 million and increased the dividends paid to shareholders to $76 million. Underpinning these results is the Next 100 strategy, which is focused on increasing the company's capability to continue to deliver sustainable long-term growth and more value to customers and shareholders through the 4 pillars 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. These results could not be achieved without the passion and dedication of all Nor/Westers from the frontline associates in our stores to our support office teams. And I want to thank them for their continued efforts to North West's mission to be a trusted provider of goods and services within harder-to-access underserved communities and to North West's vision to help make people's lives better in the communities we serve. Operating in remote environments presents its own set of complexities and challenges, and Nor/Westers rose and continue to rise to the challenge each day, including those challenges currently presented by wildfires. Recognizing that talent acquisition and retention are critical to operational success, one of the Board's areas of focus this past year was overseeing management's work on talent development, attraction and retention, which included the training and development of our frontline employees and, in particular, the successful launch of Compass, an innovative learning platform, which has provided employees with new tools to support their professional growth. This year, management and the Board also continued to enhance and deliver on the priorities aligned within our environmental, social and governance framework developed around people, planet, and partnerships. This work builds on North West's promise to indigenous peoples, which reaffirms our commitment to building more collaborative relationships, to enhance the inclusion and social well-being of indigenous peoples of Canada. I would now like to introduce the people joining me at the head table. To my left is Dan McConnell, President and Chief Executive Officer and a director. Next to Dan is Alexis Cloutier, Vice President, Legal and Corporate Secretary. Also attending today is John King, our Executive Vice President and Chief Financial Officer, who is available to answer any financial questions. Kristine Calesso and Jennifer Villareal of TSX Trust Company are attending today's meeting virtually and will act as scrutineers for the meeting. I appoint Alexis Cloutier to act as Secretary for this meeting. I will now ask her to read a notice regarding forward-looking statements.

Thank you, Mr. Chair. Certain information presented today may constitute forward-looking statements. Such statements reflect North West's current expectations, estimates, projections and assumptions. These forward-looking statements are not guarantees of future performance and are subject to certain risks, which could cause actual performance and financial results in the future to vary materially from those contemplated in the forward-looking statements. Any forward-looking statements are current only as of the date they're made, and the company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise, other than what's required by law. For additional information on these risks, please see North West's annual information form under the heading Risk Factors. This presentation may also refer to EBITDA, adjusted EBITDA, and adjusted net earnings, which are not recognized financial measures under international financial reporting standards. For further information, please see North West's annual report under the heading Non-GAAP Financial Measures.

I would now ask the Secretary to report on attendance.

Mr. Chair, the scrutineers have provided me with their report on attendance. The attendance report confirms that a sufficient number of shareholders holding a sufficient number of shares of North West that are entitled to vote are represented in person or by proxy at this meeting to constitute a quorum. As there is a quorum present, this meeting is regularly called and properly constituted for the transaction of business.

A notice calling the meeting, together with a form of proxy, management information circular and proxy statement and annual report containing the financial statements of The North West Company Inc. for the year ended January 31, 2025, and the related auditor's report were provided to each intermediary and registered shareholder of record on the record date for the meeting. We have received an affidavit of mailing from TSX Trust Company, North West's transfer agent, confirming the mailing of the notice. Voting on the items of business to come before today's meeting will be through the Lumi platform only. As described in the management information circular, only registered shareholders and duly appointed proxy holders who received a control number from our transfer agent, TSX Trust Company, are able to vote or ask questions during the meeting. If you have already voted in advance of the meeting and do not wish to change your vote, you do not need to vote again during the meeting. Starting now, you can register your vote on all items of business for today's meeting. To vote, click on the Voting tab on the left of your screen. You will see the meeting resolutions displayed on your screen. To vote, select one of the voting options available. Your vote will automatically be submitted to our transfer agent after you make your selection. Votes may be changed up to the time voting is closed. The poll will remain open until I declare voting on all matters closed right after the motion to approve the advisory resolution on executive compensation is made. Shareholders were encouraged to ask questions ahead of the meeting by contacting the corporate secretary by e-mail, phone, or mail. During the meeting, questions can only be submitted through the Lumi platform. If you are a registered shareholder or proxy holder and wish to ask a question, select the messaging tab on the left of your screen, and in the Ask a Question box, type your question or your phone number and then click the send button. If your question relates to a specific matter of business to be voted on, please also identify the specific matter in the box. If you type your question in the box, the Secretary will read it out at the appropriate time. If you type your phone number in the box, a Lumi representative will phone the number provided. When you answer the call, you will be on mute and you will hear the meeting through your phone. Please mute your computer and listen to the live feed on your phone only. You will be unmuted at the appropriate time for you to ask your question live. Questions can be submitted by registered shareholders or proxy holders at any time during the meeting until I close the question period. We recommend that questions are submitted as soon as possible during the meeting so that they can be addressed at the appropriate time. We will respond to questions relating to matters of business to be voted on at the time such matter is being discussed before a vote is held on each matter. All other questions will be addressed during the general question-and-answer session at the end of the presentations following the formal portion of the meeting. Questions on the same topic or otherwise related may be grouped, summarized and addressed at the same time. Questions should be of interest to all shareholders and not personal in nature. We will endeavor to address all general questions. However, please note that due to time constraints, we may not be able to do so. If you duly submit a question that is not answered during the meeting, including a question relating to a personal matter, we will communicate with you after the meeting if you have provided your contact information. A bit about the format of today's meeting. We will first receive the consolidated financial statements of The North West Company Inc. for the year ended January 31, 2025, and the related auditor's report. We will then vote on the election of the directors, the appointment of our auditors and an advisory resolution on executive compensation and announce the results of our votes. Dan will then address the meeting before we conclude with a question-and-answer session. I would now like to introduce all of the members of the Board of Directors who will be standing for election this year. Stewart Glendinning is from Ocean Ridge, Florida, and is Chief Financial Officer of Dollar Tree, Inc. Stewart is the Chair of our Governance and Nominating Committee. Rachel Huckle is from Toronto and is the Chief Executive Officer for Staples Canada. Annalisa King is from Vancouver and is a past Senior Vice President and Chief Financial Officer of Best Buy Canada. Annalisa is the Chair of our Audit Committee. Violet Konkle is from Fenwick, Ontario and is a past President and Chief Executive Officer of The Brick. Violet is the Chair of our Human Resources, Compensation and Pension Committee. Steven Kroft is from Winnipeg and is the past Chief Executive Officer and Executive Chair of the CEL Group of Companies. Jennefer Nepinak is from Winnipeg and is the Vice President of Strategic Partnerships and Reconciliation at TIPI Group of Companies. Victor Tootoo is from Iqaluit, Nunavut and is the President and Chief Executive Officer of Northern Allied Nunavut Travel Inc. And of course, there is our President and Chief Executive Officer, Dan McConnell; and myself, Brock Bulbuck. We are recommending that you reelect the aforementioned directors to our Board. So with those comments, I would now like to move to the formal part of the meeting. The first item of business is the presentation of the consolidated financial statements of The North West Company Inc. for the year ended January 31, 2025. That should be, yes, 2025 and the related auditor's report. A copy of the financial statements was made available to all shareholders with the notice of meeting. Shareholders are not asked to take any action regarding the financial statements. But if any shareholder has questions relating to the financial statements, I would request that they be asked later in the meeting after Dan completes his presentation. I remind you that the poll for all items submitted to a vote at this meeting is open. The next item of business is the election of directors of The North West Company for the ensuing year. Apart from the directors listed in the management information circular and proxy statement for this meeting, no additional individuals have been nominated for election. We will now turn to questions related to this item of business. Alexis, are there any questions related to this item of business?

There are no questions on this item of business, Mr. Chair.

Having received no questions, I will now entertain a motion with respect to the election of directors. Abby Klippenstein, Canadian Operations Controller and a shareholder of the company, has been asked to place before the meeting the names of those persons proposed to be nominated for election as directors. Pam Pronyk, International Operations Controller and a shareholder of the company, has been asked to second the motion.

I move that each of the persons whose names are listed under the heading Election of Directors in the management information circular, who are Brock Bulbuck, Stewart Glendinning, Rachel Huckle, Annalisa King, Violet Konkle, Steven Kroft, Dan McConnell, Jennefer Nepinak, and Victor Tootoo be elected as directors of The North West Company Inc. for the ensuing year or until their successors are appointed.

Thank you, Abby.

I second the motion.

Thank you, Pam. Please cast your votes before we move on to the next item. [Voting]

We will now proceed with the appointment of auditors and the authorization of the Board of Directors to fix their remuneration. Alexis, are there any questions related to this item of business?

There are no questions on this item of business, Mr. Chair.

Having received no questions, Abby, may I have a motion to appoint the auditors of The North West Company? And Pam, please second the motion.

I move that PricewaterhouseCoopers LLP be appointed as the auditors of The North West Company Inc. to hold office until the next Annual Meeting of Shareholders or until their successor is duly appointed and that the Board of Directors be authorized to fix their remuneration.

Thank you, Abby.

I second the motion.

Thank you, Pam. Please cast your votes before we move on to the next item. [Voting]

We will now consider a nonbinding advisory vote on the approach to executive compensation, which was outlined in the 2025 management information circular that was previously sent to all shareholders. Alexis, are there any questions related to this item of business?

There are no questions on this item of business, Mr. Chair.

Having received no questions, Abby, may I have a motion regarding the compensation of North West executives, please? And Pam, please second the motion.

I move that on an advisory basis and not to diminish the roles and responsibilities of the Board, that the shareholders accept the approach to executive compensation disclosed in The North West Company's 2025 management information circular delivered in advance of this 2025 Annual General Meeting of Shareholders.

Thank you, Abby.

I second the motion.

Thank you, Pam. Please cast your votes. I will close the polls in 30 seconds. [Voting]

The polls are now closed. I have now received the preliminary results of the scrutineer's tabulation of today's votes. The scrutineers confirm the following preliminary vote results. All director nominees received at least 98.81% votes for. Approximately 83.35% of votes are in favor of the appointment of PricewaterhouseCoopers LLP as auditors. And approximately 97.34% of votes in favor of the advisory resolution on executive compensation received. The final results will be available shortly after this meeting on our website at SEDAR+. We will answer any questions registered shareholders or proxy holders may have after Dan's presentation has concluded. Please submit your questions any time during his presentation through the Lumi platform. If you are a registered shareholder or proxy holder and wish to ask a question, select the messaging tab on the left of your screen and in the Ask a Question box, type your question or your phone number and then click the send button. The rules of procedure outlined at the beginning of the meeting will continue to apply for this question-and-answer session. I will now invite Dan to say a few words about the company's strategy and key initiatives that drive our business performance and potential.

Thank you, Brock, and good morning, everyone. Before we begin today, I want to take a moment to acknowledge the devastating wildfires affecting many of the northern communities we serve. Our thoughts are with all those that have been impacted, those who have been displaced, those facing uncertainty, and the many first responders working tirelessly to protect these communities. The North West Company remains committed to supporting our customers and employees safely and responsibly in the weeks and months ahead. It's a privilege to be with you here today as we reflect on the past year and look ahead to our continued journey. This AGM marks a key moment in the next chapter for The North West Company, a moment where we acknowledge the progress we've made and reaffirm our commitment to delivering meaningful long-term value to shareholders and the communities that we serve. Last year, I stood before you and introduced the Next 100, a transformation grounded in operational excellence, enhanced capabilities and community value. Today, I'm proud to share the momentum we've built, the milestones we've reached and the foundation we're laying for the future. 2024 was a year of strong performance with sales up 4.2% to $2.6 billion, driven by same-store sales gains and new store openings. EBIT increased 7% and EBITDA was up 8%. These results speak not only to the disciplined execution of our strategy, but also to the unwavering commitment of Nor/Westers across all of our operations. We know that the high cost of living in the north continues to put pressure on families and communities we serve. Prices for everyday essentials from food to fuel are higher in the north than in the rest of the country, and inflation has only made that gap wider. Unfortunately, wages and income supports haven't kept pace. We see the impact of that every day and we take our accountability seriously. That's why our focus has been on what we can control. We are investing in supply chain improvements to help keep prices as low as possible, expand access to healthy, affordable food and offer promotions to help stretch household budgets further. Supporting our customers through these challenging times remains one of our top priorities. We're putting this into action through the Next 100. This program was launched not as a onetime initiative but as a long-term commitment to creating sustainable value by improving what we sell, how we operate, how we move product and how we scale it. It's about staying true to our values while challenging the status quo across every part of our business while building a stronger, more resilient future. In 2024, we made meaningful progress across each of these pillars, reintroduced new private label assortments in select international markets and are bringing best-in-class private label products from Loblaw to our Canadian stores, improving quality and affordability for our customers. We piloted a new store-based inventory forecasting replenishment system, leading to improved product availability, fewer stock-outs and lower inventory shrink and markdowns. We improved our pricing and promotions to better reflect what our customers care about the most. We optimized labor through advanced scheduling tools that align staffing with customer traffic patterns. This not only improved productivity and reduced inefficiencies, it also supported a better customer experience and a more balanced workload for our teams. We scaled back high-cost print marketing and shifted towards more personalized digital-first tools, improving our marketing ROI and reducing waste while maintaining customer reach and relevance. We continue to expand our use of data across merchandising, marketing and operations to make better, faster decisions that drive results. We invested in upscaling our people teams to meet the evolving needs of both the business and our employees, equipping our leaders to build strong teams and support long-term career growth. Compass, our newly launched training and learning tool, engaged over 4,000 associates and achieved participation levels on par with the industry benchmarks. Our ESG commitments remain integral to this transformation. A key area of focus has been in improving availability of product, particularly perishables. By improving cold chain logistics, forecasting and in-store handling, we are increasing access to fresh food, especially in remote and underserved communities where it matters the most. For North West, enhancing our logistic capabilities is crucial due to the vast distances and challenging climates involved in supplying remote and northern communities. Access to fresh produce is fundamental to healthy living, and in many of the areas we serve, particularly those with limited food infrastructure, our stores are a primary source of nutrition. In 2024, we improved the definition and tagging of foods that support a healthy lifestyle. We believe that promoting long-term health and nutrition will increase customer loyalty and strengthen communities. In Canada, North West continued supporting Ontario's Northern Fruit and Vegetable Program, which educates students on healthy eating and living a healthy lifestyle. North West has invested in and provided fruits and vegetables benefiting 32 schools across 18 communities and supporting over 6,500 students for the '23-'24 school year. Northern store managers process the produce orders, provide a discount on items to provide schools and coordinate food delivery each and every week. We also expanded our partnership with indigenous suppliers, creating more opportunities to feature locally sourced, culturally relevant products on our shelves, further embedding Our Promise to Indigenous Peoples into our operations. Through our promise, we remain focused on building strong relationships, creating inclusive opportunities and supporting long-term well-being. With over 1,800 self-identified indigenous employees, this is not an initiative. It's a foundational part of who we are. These initiatives are already delivering results from reduced waste and to enhanced in-store experience and deeper community impact. They're helping us fulfill our dual responsibility to operate a successful business while improving the quality of life within the communities that we serve. In Alaska, we opened stores in Anaktuvuk Pass, Kotzebue, and an AC Motorsports dealership in Bethel. In the Caribbean and the South Pacific, construction is underway on a new Cost-U-Less store in Guam, and we're expanding our Roadtown Wholesale Trading store in Virgin Gorda. In Canada, we built a new hangar in Thunder Bay and are continuing onward with a major renovation to our Northmart in Iqaluit. These projects are investments in service and growth and in our ability to meet the ever-evolving needs of our customers. The Next 100 isn't just about operations, it's about people. From our frontline associates to our executive team, our culture is shifting. We are embracing new technology, new tools and a mindset of continuous improvement. The launch of Compass is equipping employees with the resources they need to thrive. We're strengthening our leadership pipeline through succession planning and targeted development. At the center of all this are our core principles: customer-driven, passion, enterprise, accountability, trust, and personal balance. These values guide us every day. They are embedded in our strategy and demonstrated by Nor/Westers across all our stores, distribution centers and offices. As we look to the future, our goals are clear: deliver better value for our customers and shareholders, build more resilient operations and invest in our people and strengthen the communities that we serve. Through this work, we're not only generating financial results, we're delivering sustainable people-centered growth. Earlier today, we released our Q1 results. Sales were up 3.9% to $641 million, driven by same-store sales gains. EBIT increased 1.2% and EBITDA increased by 3.2%, which is on top of very strong results last year. More information on our first quarter results is available in our report to shareholders, which is available on our website, but these results reflect the solid foundation we're building and the momentum we're carrying forward. Our focus on operational excellence and continued investment in supply chain innovation, digital tools, and workforce development as part of the Next 100 positions us to navigate and capture new opportunities in our core markets and continue to deliver value to our customers and sustainable returns for our shareholders. Looking beyond 2025, we are actively advancing multiyear plans to enhance our store network, deepen our community partnerships, and evolve our service models to better meet the needs of northern and remote customers. We will continue to build on our legacy while adapting to a changed world, investing in solutions that make life better for the communities that we serve and setting a higher bar for what it means to be a trusted and responsible retailer. To our shareholders and our customers and our partners, your belief in our mission and your trust in our team drive us every day. To all Nor/Westers, thank you for your commitment and for your dedication. The road ahead is exciting and together, we are not just preparing for the next year but for the Next 100. We will now play a short video that brings to life the impact of the Next 100. Thank you. [Presentation]

We will now take questions and comments from our shareholders. Alexis, have we received any questions?

No questions, Mr. Chair.

There being no further questions, I now declare the question and comment session closed. On behalf of management and the Board of Directors, I would like to thank you for attending today.