WINNIPEG, Manitoba, Sept. 04, 2024 (GLOBE NEWSWIRE) -- (TSX:NWC): The North West Company Inc. (the "Company" or "North West") today reported its unaudited financial results for the second quarter ended July 31, 2024. It also announced that the Board of Directors has declared a quarterly dividend of $0.40, an increase of $0.01 or 2.6% per share, to shareholders of record on September 30, 2024, to be paid on October 15, 2024.
"Overall, we are very pleased with the results this quarter where we delivered increases in adjusted EBITDA and adjusted net earnings in comparison to a strong second quarter last year," commented President & CEO, Dan McConnell. "Looking ahead, we are optimistic about the foundation we are building across our company through our focus on operational excellence initiatives and the momentum in our Canadian business which collectively, are expected to offset near-term uncertainty related to economic and inflationary pressures in our International Operations."
Financial Highlights
Sales Second quarter consolidated sales increased 4.6% to $646.5 million compared to $618.1 million last year driven by same store sales gains, the impact of foreign exchange on the translation of International Operations sales and new stores. Excluding the foreign exchange impact, consolidated sales increased 3.8%, with food sales increasing 3.9% and general merchandise and other sales increasing 3.4% compared to last year. On a same store basis, sales increased 4.3%1 compared to the second quarter last year led by a 6.8%1 increase in same store sales in Canadian Operations. A 0.9%1 increase in same store sales in International Operations was also a factor.
Gross Profit Gross profit increased 7.5% to $219.8 million compared to $204.4 million last year due to sales gains and a 91 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 food sales, and a decrease in markdowns.
Selling, Operating and Administrative Expenses Selling, operating and administrative expenses ("Expenses") increased $15.1 million or 10.1% compared to last year and were up 127 basis points as a percentage to sales. The increase in Expenses is mainly due to cost inflation impacts, including higher wage costs, an increase in depreciation, the impact of foreign exchange on the translation of International Operations Expenses and higher vessel repairs incurred through our investment in Transport Nanuk Inc. ("TNI") in Canadian Operations. The impact of a $5.5 million increase in share-based compensation costs primarily due to adjustments from changes in the Company's share price partially offset by a $3.7 million loss on our Fox Lake, Alberta store that was destroyed by wild fire in the second quarter last year (collectively "Non-Comparable Expenses2") were also factors.
Earnings From Operations Earnings from operations ("EBIT") increased 0.4% to $54.9 million compared to $54.7 million last year and earnings before interest, income taxes, depreciation and amortization ("EBITDA2") increased 4.1% to $83.4 million compared to $80.1 million last year due to the sales, gross profit and Expense factors previously noted. A $1.8 million decrease in earnings from our investment in TNI compared to last year resulting from an increase in vessel repairs, that also temporarily delayed the start of the sealift shipping season, combined with lower International shipping rates, was also a factor. Adjusted EBITDA2, which excludes the Non-Comparable Expenses, increased 6.1% to $88.4 million compared to $83.3 million last year and as a percentage to sales was 13.7% compared to 13.5% last year.
Income Tax Expense Income tax expense increased to $13.6 million compared to $12.0 million last year due to higher earnings and an increase in the effective tax rate to 27.0% compared to 24.0% last year. The increase in the effective tax rate is largely due to the impact of The Global Minimum Tax Act ("GMTA") – Pillar Two legislation enacted in Canada on June 20, 2024, but is effective as of the beginning of the Company's fiscal year. This legislation applies a minimum effective tax rate of 15% on income earned in each jurisdiction in which the Company operates resulting in a $1.0 million increase in income tax expense and a 198 basis point increase in the effective tax rate in the quarter.
Net Earnings Net earnings decreased 3.0% to $36.9 million compared to very strong net earnings of $38.0 million last year. Net earnings attributable to shareholders were $35.3 million and diluted earnings per share were $0.73 per share compared to $0.76 per share last year. Adjusted net earnings2, which excludes the after-tax impact of the Non-Comparable Expenses, increased $0.6 million or 1.6% to $40.7 million compared to $40.0 million last year due to the gross profit, Expense and GMTA - Pillar Two income tax expense factors.
Non-GAAP Financial Measures
The Company uses the following non-GAAP financial measures: earnings before interest, income taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA and adjusted net earnings. The Company believes these non-GAAP financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company for the reasons outlined below.
Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) is not a recognized measure under IFRS. Management believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides investors with an indication of the Company's operational performance before allocating the cost of interest, income taxes and capital investments. Investors should be cautioned however, that EBITDA should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of the Company's performance. The Company's method of calculating EBITDA may differ from other companies and may not be comparable to measures used by other companies.
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.
These measures do ...
