North West Q2 2027 Earnings Report

North West EPS Results

• Actual EPS: C$0.76
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

North West Revenue Results

• Actual Revenue: $681.96 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

North West Announcement Details

• Quarter: Q2 2027
• Date: 9/8/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, September 9, 2026
• Conference Call Time: 8:30AM ET

North West (TSE:NWC), through its subsidiaries, is a leading retailer of food and everyday products and services to rural communities and urban neighbourhoods in Canada, Alaska, the South Pacific and the Caribbean. North West operates 230 stores under the trading names Northern, NorthMart, Giant Tiger, Alaska Commercial Company, Cost-U-Less and RiteWay Food Markets and has annualized sales of approximately CDN$2.6 billion.

North West Q2 2027 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: The company reported solid second-quarter performance, with EBITDA up 5.4%, adjusted net earnings up 5%, and same-store sales gains across both Canadian and international operations.
• Positive Sentiment: Management said First Nations Child and Family Services settlement payments began accelerating in late July and August, with further increases expected in the second half of 2026 and potentially over several years.
• Negative Sentiment: Higher fuel-related freight, labor, utility, depreciation, and other inflationary costs pressured margins and operating expenses. Management identified labor productivity as a key area for improvement, while fuel-cost headwinds are expected to continue in the near term.
• Positive Sentiment: North Star Air’s aircraft fleet renewal is expected to reduce reliance on lower-margin leased aircraft, lower operating and maintenance costs, and add capacity, although the elevated capital spending is described as opportunistic rather than a new ongoing norm.
• Positive Sentiment: International operations continued to benefit from strong general merchandise and motorized-category sales, favorable conditions in some Alaska markets, and resilient tourism demand heading into the holiday season.

Presentation

[Operator]

Welcome to The North West Company Inc's second quarter results conference call. I would now like to turn the meeting over to Dan McConnell, President and Chief Executive Officer. Mr. McConnell, please go ahead.

[Dan McConnell, President and CEO at The North West Company Inc]

Okay. Thank you, operator. Good morning, everyone. Welcome to The North West Company second quarter conference call. I am joined here by John King, our Chief Financial Officer, Alexis Cloutier, our VP of Legal and Corporate Secretary. I am going to start by asking Alexis to read our disclosure statement.

[Alexis Cloutier, VP of Legal and Corporate Secretary at The North West Company Inc]

Thank you, Dan. Before we begin today, I remind you that certain information presented 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 are 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 is required by law. For additional information on these risks, please see North West's annual information form and its MD&A under the heading Risk Factors.

[Dan McConnell, President and CEO at The North West Company Inc]

Thank you, Alexis. I am going to begin with our consolidated results for the quarter, followed by some comments on our outlook, and then I am going to open the call up for some questions. Overall, we delivered solid results for the quarter, driven by same-store sales gains across our business that contributed to a 5.4% increase in EBITDA and a 5% increase in adjusted net earnings. These results were delivered within a challenging inflationary cost environment, and it was impacted really by higher fuel prices, which contributed to sales gains but were also a headwind for our gross profit and expenses. We also had a few factors below the gross profit line that largely offset each other, with the exception of a non-comparable withholding tax expense, which reduced the flow through to the net earnings in the quarter.

[Dan McConnell, President and CEO at The North West Company Inc]

With that overview, I will provide some more context on the key factors impacting our results in the quarter. Consolidated sales in the quarter were up 5.4%, driven by strong same-store sales gains across our business, with Canadian operations store sales up 7.4% and international same-store sales up 5.8%. The impact of fuel-related freight costs, inflation, and retail prices contributed to higher sales in both Canadian and the international operations. In Canadian operations, food and general merchandise same-store sales gains of 7.4% and 7.5%, respectively, were also impacted by the Government of Canada Grocery and Essential Benefit payment to qualifying individuals, which increased compared to the previous GST credit from wildfire-related community evacuations in Northern Canada in the second quarter last year. These factors were partially offset by the closure of our store in Fond du Lac, Saskatchewan, in the first quarter.

[Dan McConnell, President and CEO at The North West Company Inc]

In our international operations, same-store sales were up in all of our business units, driven by solid food sales gains and very strong general merchandise sales, driven particularly in big-ticket categories such as motorized. Sales were impacted by local economic conditions in the communities we serve. For example, higher oil prices have had a positive impact on regional corporate dividends in Alaska. Although the second quarter falls within a lower tourism season in the Caribbean, the economic environment does remain strong in most markets. In addition, we have also gained some market share in certain Alaska stores. These factors more than offset the sale of one of our Cost-U-Less stores earlier this year in advance of our new store in Hagåtña, Guam, which opened on August 28th.

[Dan McConnell, President and CEO at The North West Company Inc]

With that overview of the key factors that contribute to our sales gains, I am going to briefly comment now on consolidated gross profit and expenses. Consolidated gross profit increased 5.7% and improved by 8 basis points as a rate to sales. This reflects the sustained positive impact from our Next 100 initiatives, including refinements of our merchandise assortment and procurement, expanding our private label offering, as well as some changes in sales blend. These improvements were largely offset by the impact of higher fuel-related freight costs. Let me just expand on that point. As we discussed on our previous calls, the impact of fuel-related cost increases varies by market. In northern markets, fuel-related cost increases have a greater impact because of the longer, more complex logistics network required to move merchandise to northern communities in Canada and in Alaska.

[Dan McConnell, President and CEO at The North West Company Inc]

On the other end of the spectrum, for certain Caribbean and Pacific markets, the impact of higher fuel prices have been less pronounced, allowing for a more direct pass-through of fuel-related cost increases. As a result, we took a balanced approach to pricing. Higher fuel-related freight costs were passed through without an additional markup, and we made targeted price investments on certain food items to help reduce the impact of higher fuel costs for our customers. While this created some near-term gross margin pressure, particularly in our Canadian operations, it is aligned with our customer value proposition as a leading retailer in the communities that we serve. Higher fuel costs was also a factor in expenses. Selling, operating, administrative expenses in the quarter increased 6% and were up 13 basis points as a rate to sales compared to last year. The increase was driven by a few factors.

[Dan McConnell, President and CEO at The North West Company Inc]

First, we experienced higher staff costs net of Next 100 productivity gains. The increase in staff costs reflects a combination of wage inflation, resources required to support business growth, and operating requirements across our market, particularly in the northern regions. Staff productivity measures improved from the first quarter, but there continue to be opportunities for improvement, which will be a focus in the back half of the year. In this quarter, we were also impacted by higher depreciation expense, mainly related to store renovations, an increase in fuel-related utility costs, and other inflationary pressures. Really, in summary, even with the headwinds from these cost pressures, we were still able to deliver a 5.4% increase in EBITDA, and a 4.7% increase in EBIT, and a 5% increase in adjusted net earnings when excluding the non-comparable withholding tax expense.

[Dan McConnell, President and CEO at The North West Company Inc]

Now I'm just going to wrap up with a few comments on the Next 100 program and then open the call up for questions. Looking ahead, there are a few key factors that we need to consider. First, we do expect that our Canadian operations will continue to be impacted by increased consumer demand arising from the First Nations Child and Family Services and Claim Settlement payment. As we noted in our report to shareholders, the issuance of a child and care settlement payment to customers in the communities we serve started to increase late in the second quarter compared to the trend over the last two quarters. But the impact was largely offset by a decrease in the First Nations Drinking Water Settlement claim in the quarter compared to last year. The Child and Care Claims Administrator reported that approximately 124,000 claims have been submitted in the removed child class.

[Dan McConnell, President and CEO at The North West Company Inc]

Based on the child and care settlement payment activity observed to date, individuals in 54, I think it's 54 of the 63 impacted communities that we serve have received funds. However, the number of payments distributed remains low in many of the communities. Based on the activity to date, the sales capture and customer spending patterns observed are broadly in line with our expectations. Overall, we expect the distribution of the child and care settlement payments to continue to increase in the second half of 2026 compared to the first half trends and extend for a number of years in front. This is based on the requirements for the individuals in the removed child class to reach the age of majority before payments are issued, combined with the anticipated opening of the application process and distribution of settlement payments for other classes. Excuse me.

[Dan McConnell, President and CEO at The North West Company Inc]

In addition, the approval of the agreement on the long-term reform of First Nations Child and Family Services between the Government of Canada, First Nations Chiefs in Ontario, and Nishnawbe Aski Nation will benefit indigenous peoples and communities that the company serves. These benefits will come directly through programs and indirectly through investment in infrastructure and local employment. However, these benefits are not expected to begin until 2027. The headwinds from the impact of higher oil prices and fuel costs that we experienced in the second quarter are expected to continue in the near term. As I mentioned earlier, we are managing these pressures through a balanced pricing approach and are focused on finding opportunities to help mitigate the impact of these costs on our customers and shareholders.

[Dan McConnell, President and CEO at The North West Company Inc]

As noted in our report to shareholders, we purchased a Basler BT-67 aircraft in the quarter, and we expect to make some additional aircraft purchases as part of our cargo and passenger fleet renewal at North Star Air. The upgrade and renewal of our aircraft will reduce our utilization of lower-margin leased aircraft and are expected to provide lower operating costs and enable efficiencies in maintenance and parts from greater standardization in the fleet, obviously. As the new aircraft are put into service, this will be a big benefit for us for sure. The fleet renewal is also expected to provide additional capacity to support future growth for the business. The purchase of these aircraft has been included in our revised capital expenditure outlook for the year. However, the timing of the purchases is depending on the availability and finding the right deals for the aircraft.

[Dan McConnell, President and CEO at The North West Company Inc]

Finally, with respect to Next 100 work, we are pleased with the positive impacts on gross profit, which have helped to reduce the headwinds of higher fuel-related freight costs I highlighted earlier, and we remain focused on driving further staff productivity gains and expense management to help offset inflationary cost impacts in the business. In summary, we are definitely pleased with the strong sales performance and delivering an increase in earnings within a challenging cost environment. Looking ahead, we remain focused on the factors within our control, serving our customers, managing cost pressures, executing Next 100, underpinned by discipline and capital allocation. With that, I am going to open the call up for some questions.

[Operator]

Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Stephen MacLeod with BMO Capital Markets. Your line is now open.

[Stephen MacLeod, Analyst at BMO Capital Markets]

Thank you. Good morning. Morning, guys.

[Dan McConnell, President and CEO at The North West Company Inc]

Good morning.

[Stephen MacLeod, Analyst at BMO Capital Markets]

Morning. I just wanted to ask about just the trend you are seeing in higher First Nations Child and Family Services Claim Settlement payments coming through late in the quarter. I know you gave a little bit of color on the call, but I am just curious if you can give some color around how you are expecting that to ramp into Q3 and Q4. What sort of spending patterns are you seeing from claimed recipients?

[Dan McConnell, President and CEO at The North West Company Inc]

Can you repeat the end of your question? Sorry, what kind of what?

[Stephen MacLeod, Analyst at BMO Capital Markets]

What kind of spending patterns are you seeing from your claims recipients, and I guess capture rate as well?

[Dan McConnell, President and CEO at The North West Company Inc]

Yeah. Like I said, we're pleased with the capture rate for sure. It's in line with our expectations. As I mentioned, some of the ideal items that we typically see moving when people came, and we anticipated when people came into the money, are definitely moving. We're getting our fair share for sure, Steve. And yeah, it was late July on into August, it started to uptick a little bit. So definitely pleased, anticipating and hoping that it sustains at this rate or hopefully even better over the next number of quarters. But as you know, we've been trying to predict the trajectory and cadence of these payments over a lot of years and without or a number of quarters, probably better well put, but without much success. But right now, the good news is it definitely increased, particularly in August onwards, as it was prior.

[Stephen MacLeod, Analyst at BMO Capital Markets]

Okay. That's great. And I noticed you called out increased motorized sales, but I was just curious. Did I understand, is that isolated to international or do you see that in Canada as well?

[Dan McConnell, President and CEO at The North West Company Inc]

No, Canada as well. For sure.

[Stephen MacLeod, Analyst at BMO Capital Markets]

Yeah. Okay. That is great. Maybe just finally, just on the increased CapEx, sounds like it is mostly related to North Star Air. You made an interesting comment about it being positive to the margin profile. It reduces your utilization of leased aircraft. I am just curious if you can quantify what that margin profile looks like. Just trying to get a sense of the returns on that incremental CapEx.

[Dan McConnell, President and CEO at The North West Company Inc]

Why don't we do this? We will tell you when they are in action and when they get into the flight plan.

[Stephen MacLeod, Analyst at BMO Capital Markets]

Yeah.

[Dan McConnell, President and CEO at The North West Company Inc]

But as far as giving you any kind of quantification at this point, we would stay away from that.

[Stephen MacLeod, Analyst at BMO Capital Markets]

Yeah.

[Dan McConnell, President and CEO at The North West Company Inc]

But we will let you know when they are in action.

[Stephen MacLeod, Analyst at BMO Capital Markets]

Okay. Thanks, Dan. Appreciate it.

[Dan McConnell, President and CEO at The North West Company Inc]

All right. Thanks, Steve.

[Operator]

Thank you. Our next question comes from the line of Cheryl Zhang with TD Cowen. Your line is now open.

[Cheryl Zhang, Analyst at TD Cowen]

Hey, good morning, Dan and John, and thanks for taking our questions. My first one is on the SG&A. I think SG&A excluding share-based comps is up, and you pointed to labor cost and fuel cost inflation. I am wondering if you could help us get a sense of the magnitude of those cost inflation and which one do you think was a bigger contributor?

[Dan McConnell, President and CEO at The North West Company Inc]

Depreciation was up there. Labor is definitely something that we want to get a handle on. Utilities were up. We look around, but I'd say some of the factors that we're going to be paying close attention to, the ones we can control, are certainly labor is an opportunity for us to get back in line. There's a lot of events that occurred. We had some major renovations that we needed to make sure we were ready for, and so we had to increase our labor there. I would say labor is the one that we want to make sure we get our arms around in the future quarters. Like I indicated, it was something we've been focused on prior quarters. It's better than the previous quarter, but we still know that there's opportunities for improvement there.

[Cheryl Zhang, Analyst at TD Cowen]

Okay. Understood. How much pricing did you pass through in Q2, and how much more do you expect to do in Q3? Was the fuel cost entirely passed on, or what's the consumer reaction thus far?

[Dan McConnell, President and CEO at The North West Company Inc]

That's a great question. The consumer reaction is negative. The people are certainly not pleased, as any of the Canadians are not pleased with the inflation that we've experienced recently. I would say we passed on a lot of the inflation, excluding some of the key categories, essential items that our customers obviously need and want. Particularly in Canada, I would say a lot of it has been passed on, except for some of those key categories. I guess I wouldn't quantify it. In the international division, I would say, yeah, I'd probably say at the same rate with the same philosophy, same strategy in place.

[Cheryl Zhang, Analyst at TD Cowen]

Okay. Thanks so much. I'll re-queue.

[Dan McConnell, President and CEO at The North West Company Inc]

Thank you.

[Operator]

Thank you. As a reminder, to ask a question at this time, please press star one one on your touch-tone telephone. Our next question comes from the line of Ty Collin with CIBC. Your line is now open.

[Ty Collin, Analyst at CIBC]

Hey, good morning, guys. Thanks for taking my questions. Maybe just to circle back on your comments around the settlement payments and the acceleration that you have seen since August. We know that these payments have tended to be lumpy in the past. So I just want maybe a little more clarification on what gives you confidence that there has actually been sort of an inflection in the rate of those payments, rather than maybe just seeing a bit of lumpiness over the last month or so.

[Dan McConnell, President and CEO at The North West Company Inc]

Are you talking about in the future or what gives us confidence that we have seen more payments over like I indicated, the last couple of months? Sorry, just to be clear.

[Ty Collin, Analyst at CIBC]

Yeah.

[Dan McConnell, President and CEO at The North West Company Inc]

We are very comfortable that the cadence of payments have increased, as I indicated, late July and into August. Is that your question? Do we think it is going to be at that rate onward into the future? Sorry, Ty. Is that your question?

[Ty Collin, Analyst at CIBC]

Yeah. That is the gist of the question. It seemed like, based on your outlook commentary, that you expect a higher rate of payments to persist. So I am just wondering where that confidence comes from.

[Dan McConnell, President and CEO at The North West Company Inc]

Optimism. Now just thinking about your question. I think it is because of the large number of applications that have been in versus the few number of applications that we feel have been processed as we have experienced. I gave you the numbers. As I indicated, there has been few that have been, a lot of the markets have been touched, not all of them, maybe, what is it, 75% if you did the math. But in a lot of the communities, we have only seen a small number of checks come in. We know there has been a lot of submissions. So I am just using logic, and I would say, okay, so we have seen a few.

[Dan McConnell, President and CEO at The North West Company Inc]

We know that there has been a lot of them processed, but now maybe the program and the system is getting into an efficient state, and we expect there to be, hopefully, and again, it is not busting the doors, but it has been a reasonable increase from previous quarters. So I am just saying that I would hope that this is the new kind of baseline moving forward. But again, you ask a question, I do not know. I cannot say for certain that there is not going to be some more troughs in there, but I would think that they are learning. The applications have been made, and I do not know what would hold them up. But that is probably as good an answer as I can give you.

[Ty Collin, Analyst at CIBC]

Okay, great. No, that's very helpful color. Thanks for that, Dan. Just looking at the same-store sales growth numbers this quarter, obviously quite strong. I'm just wondering, at a high level, how much of that would you attribute to the fuel surcharges that you passed through versus tonnage or some of the other growth drivers that you talked about?

[Dan McConnell, President and CEO at The North West Company Inc]

It's still a healthy sales increase, excluding the pass-through of the fuel. I would say, yeah, and it's higher than normal.

[Ty Collin, Analyst at CIBC]

Okay, great. Just my final question, circling back to the CapEx piece. Is any of this increase, any of this CAD 40 million increase in planned spend, would you characterize any of that as a pull forward from future years? Or is this more of a recent decision to buy versus lease your airline fleet?

[Dan McConnell, President and CEO at The North West Company Inc]

It's often as a driven, it's a finance discussion, really. It's better returns on some of the, we're very patient, just like we are with all of our capital investment, our acquisitions, you could say. So if the right deal is there, and it hits our hurdles, and it has a financial accretion to buy these particular aircraft, which it does, because we get, again, more productivity, more reliability, less maintenance costs. The OCR, the overall cost of ownership, and the cost of operating these planes is accretive, so this is where we have the capital, obviously. So this is what leads to the decision to purchase the aircraft. It's opportunistic, and we have some expensive leases with some aircraft that it's less desirable, and so we're constantly on the hunt for value deals, good value, and we've found them, and that's what's led to the capital expenditure.

[Ty Collin, Analyst at CIBC]

Okay, great. Thanks. All the best. I will pass the line.

[Dan McConnell, President and CEO at The North West Company Inc]

All right, Ty. Thanks.

[Operator]

Thank you. Our next question is a follow-up from Cheryl Zhang with TD Cowen. Your line is now open.

[Cheryl Zhang, Analyst at TD Cowen]

Hi, just wanted to follow up on the cost side and your Next 100 initiatives. I am curious on how much do you think the fuel price and labor inflation pressures could be offset by Next 100?

[Dan McConnell, President and CEO at The North West Company Inc]

Yeah. There's definitely an offset factor there. So further ahead than we would've been if we weren't in the Next 100 program. It also gives us the tools to be able to offset some of these fuel-related pressures. So, there's definitely a connection there. As far as the net differential, it's not something that we would disclose, but I can tell you we're very pleased that we're in the program, if you will.

[Cheryl Zhang, Analyst at TD Cowen]

Okay. Then, just one more on CapEx. Should we be expecting additional fleet upgrades and purchases in the upcoming years, or is this year an exception?

[Dan McConnell, President and CEO at The North West Company Inc]

This year, I think we would follow the same discipline that I mentioned. It's not going to be excessive. This is definitely a high watermark, and it's opportunity-driven. But no, I would say this is definitely not the new norm level of CapEx moving forward.

[Cheryl Zhang, Analyst at TD Cowen]

Okay, understood. Maybe just one more from me.

[Dan McConnell, President and CEO at The North West Company Inc]

Sure.

[Cheryl Zhang, Analyst at TD Cowen]

Your international segment, the tourism stream, is still pretty strong this quarter. Curious if you are seeing any changes going to Q3 on the demand trajectory.

[Dan McConnell, President and CEO at The North West Company Inc]

Not currently. In fact, we are optimistic because we are coming into the holiday season. Maybe more for some of the Western climate in Winnipeg and the like, but no, we are definitely coming into the holiday season going into Q3, so no, we remain optimistic.

[Cheryl Zhang, Analyst at TD Cowen]

Okay. That is helpful. Thank you.

[Dan McConnell, President and CEO at The North West Company Inc]

All right. Thanks, Cheryl.

[Operator]

Thank you. I am currently showing no further questions at this time. I would now like to hand the call back over to Mr. McConnell for closing remarks.

[Dan McConnell, President and CEO at The North West Company Inc]

Thanks, operator, and appreciate the comments and questions. We will look forward to chatting with everybody in December.

[Operator]

This concludes today's conference. Thank you for your participation. You may now disconnect.

[Dan McConnell, President and CEO at The North West Company Inc]

Thanks.

Participants

Executives

• Dan McConnell, President and CEO
• Alexis Cloutier, VP of Legal and Corporate Secretary

Analysts

• Stephen MacLeod, Analyst at BMO Capital Markets
• Cheryl Zhang, Analyst at TD Cowen
• Ty Collin, Analyst at CIBC