Okay. Thank you and good morning.

Welcome to The North West Company fourth quarter conference call. I'm joined here today by John King, our Chief Financial Officer; and Alexis Cloutier, our VP of Legal and Corporate Services.

I am going to start the meeting by asking Alexis to please read our disclosure statement.

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 guaranteed 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's 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.

Thanks, Alexis. All right.

I will begin by providing a brief overview of the fourth quarter on a consolidated basis, followed by some additional color on Canadian and then International operations. Finally, I'll wrap up with a few comments on our outlook in the Next 100 program before opening up the call for questions.

All right. Let's dive right in.

So we had a positive wrap up to the fiscal year with a strong Q4 results. For the quarter, consolidated sales were up 4.9% and net earnings increased by 18.9%.

Our results in the fourth quarter were driven by strong same-store sales gains and a 9.4% increase in gross profit resulting from the impact of higher sales and an increase in the gross profit rate. These factors were partially offset by higher selling, operating and administrative expenses.

The Next 100 operational excellence initiatives has also started to contribute to the bottom line, net of some of onetime costs incurred in the quarter. Let me briefly expand on the consolidated results.

First, offline performance was positive in both Canadian and International operations this quarter on the back of very solid inventory positions and strong in-store execution during the holiday season, which generated uplift on both transaction counts and unit volumes. For the quarter, consolidated same-store sales were up 5.5% on food and 5.1% on general merchandise.

And second, we were able to convert these sales increases to the bottom line earnings. Gross profit dollars were up 9.4% for the quarter, driven by sales and a 141 basis point increase in the gross profit rates due to changes in sales blend, including a lower blend of wholesale sales, lower markdowns and more effective promotions as part of the Next 100 work.

Selling, operating and administrative expenses were up 6.8% for the quarter or 45 basis points as a rate of sales. Higher staff costs including additional resources to support our Next 100 work, an increase in technology and depreciation costs and the impact of foreign exchange on the translation of international expenses were the key factors contributing to this increase.

In the quarter, we also reported $1 million in onetime costs for professional fees to the execution related to the execution of the Next 100 program. These factors were partially mitigated by benefits that are beginning to ramp up from Next 100 initiatives, which more than offset the Next 100 onetime costs in the quarter and help reduce the impact of higher wages, technology expenses and depreciation.

As a result, the company delivered strong bottom line results with EBIT increasing by 17.5% and net earnings increasing by 18.9% for the quarter. Now let's unpack the results beginning with our Canadian operations.

For the quarter, total sales in Canada were up 2.5% and 6.7% on a same-store basis. We had solid sales performance in both food and general merchandise with same-store sales increases of 7.6% in food and 3.4% in GM for the quarter.

Sales continue to be positively impacted by increased consumer demand in certain communities resulting from the continued distribution of First Nations Drinking Water Claim Settlement payments to individuals and the government spending on First Nations Child and Family Services programs, including Jordan's Principal and Inuit Child First programs that help provide greater access to nutritious foods. The same-store sales gains were partially offset by lower wholesale sales and airline revenue compared to the fourth quarter last year.

North Star Air sales in the quarter were impacted by lower third-party revenue as a result of redeploying aircraft capacity to supply the tonnage increase from our retail stores and lower bulk fuel sales. Overall, we are very pleased with the financial performance of NSA and the utilization of aircraft, particularly the cargo services provided to our stores.

Consistent with what I have indicated on a consolidated basis, we were able to convert the sales growth into gross profit gains, which ultimately flowed to the bottom line. For the quarter, gross profit increased 7%, while selling, operating and administrative expenses increased 2.9% or 13 basis points as a rate of sales.

The gross profit rate improved largely due to changes in the sales blend. In addition to the sales blend impact of lower wholesale sales, we also had a change in sales blend within the food categories.

More food services, just to mention some, and a blend shift to higher margin general merchandise categories and a decrease in lower margin motorized sales compared to last year. Lower markdowns, including more effective data driven promotional activity as a part of our Next 100 initiatives was also a factor contributing to the increase in gross profit rate.

Selling, operating and administrative expenses were up in the quarter due to two factors. First, higher staff costs resulting from inflationary and minimum wage increases an increase in depreciation and the impact of new stores.

Second, we invested in additional staff resources, new technology and onetime professional fees to execute our Next 100 operational excellence work, which is required to unlock future growth and deliver the incremental EBIT expected from our Next 100 initiatives. Net impact of these factors was an 18% increase in EBIT for the quarter, which is on top of an 11.2% increase in Q4 last year.

Moving on to our International operations. For the quarter, International sales increased 3.1% in total, driven by same-store sales increases of 2.7% in food and 10% in general merchandise.

The increase in general merchandise sales for the quarter is an improvement in the trend over previous quarters this year and the fourth quarter last year. This positive trend was fueled by solid holiday season execution and underpinned by a strong in-stock position.

Favorable economic conditions in certain Caribbean markets driven by an improved tourism season was also a factor. These factors more than offset headwinds on wholesale sales in Alaska as well as a weaker economic condition in certain commercial fishing communities in Alaska and some South Pacific markets.

From an earnings perspective, we were able to generate some torque to the bottom line in International operations this quarter. Gross profit increased 8.2% due to sales gains and a higher gross profit rate, largely due to changes in sales blend compared to last year.

Optimizing our transport mix through more efficient use of lower cost barge and bypass freight in Alaska and higher market driven gross profit rates in certain Caribbean locations aligned with improved economic conditions were also factors. Selling, operating and administrative expenses increased 7.7% due to higher expenses primarily related to staff costs and additional resources to support our Next 100 work.

These factors resulted in a 10.6% increase in EBIT for the quarter. All right.

Now let me talk briefly about our outlook and provide a few comments on the Next 100 programs. The macroeconomic conditions, as we all know, are uncertain and especially given the recent developments on US Government policy regarding tariffs and the impact of any retaliatory tariffs imposed by Canadian government or other governments.

The impact this will have on the cost of merchandise and inflation in the countries in which we operate is uncertain. This is a fluid situation, but we are taking the steps necessary to actively manage it and mitigate as much as possible any impacts, including potential increases in the cost of merchandise.

This includes a disciplined process to monitor product cost increases and explore alternative sourcing arrangements where possible. And like many other retailers in Canada, we are taking steps to identify products that are impacted by tariffs so that our customers can make an informed choice when purchasing products.

Within this macroeconomic environment, there is also uncertainty in our International operations, particularly in tourism dependent markets and territories and countries that do not have strong government income support programs for individuals. That said, there are tailwinds in Canada that can mitigate some of these uncertainties and risks.

We expect consumer demand in 2025 to continue to be positively impacted by the distribution of First Nations Drinking Water Settlement payments and government spending on First Nations Child and Family Service programs, including Jordan's Principle and Inuit Child First programs. As discussed on previous calls, we continue to focus on driving operational excellence and delivering further value for our customers, our employees and our shareholders through our Next 100 work, while building capabilities to capture future business and market opportunities and helping mitigate the economic headwinds in the current environment.

Our Next 100 work is starting to deliver benefits. While we are pleased with the progress to-date, there is still a lot of work to do.

In 2025, we'll be refining merchandise assortments, including launching new private label programs and implementing store-based inventory forecasting replenishment technology, which is expected to improve on-shelf availability. In addition, we continue to focus on driving efficiencies and cost savings across our business.

The Next 100 work is expected to drive annualized incremental EBIT, which will continue to ramp up in 2025 as each of the initiatives reach maturity. As we lay the groundwork for these improvements, we have invested in additional resources to support the execution of our Next 100 program.

In addition to this investment in resources, we also anticipate continuing to incur onetime costs for professional fees in 2025 as each of the initiatives is operationalized and we'll provide further information on these onetime costs and the benefits in our quarterly reports. Our expectation is that the annualized incremental EBIT from these initiatives will offset the investment in additional resources and onetime costs.

However, there will be timing differences as these costs will be incurred prior to achieving the full annualized benefits. For the first half of 2025, we are expecting these onetime costs to increase with the expectation that the resulting benefits will fully offset these costs by the end of the year.

As a result of these factors, we expect our results in the first quarter of 2025 to moderate from the current run rate, particularly as we take into account the strong performance in Q1 last year, which delivered a 22.3% increase in net earnings. Now let me wrap up things here by saying that the company, as a company, we have proven to be resilient and the capabilities we are developing through the Next 100 combined with the passion and enterprising spirit of NorWester's will enable us to navigate under these uncertain times, while at the same time equipping us with the tools to provide the best value for our customers as we continue to make a positive impact in the communities that we serve.

With that, I will now open up the call if there's any questions.

Hi. Good afternoon.

Thanks for the question and congrats on the good results there. Maybe for my first one, just on the Drinking Water Settlement.

Can you kind of comment maybe on the pace of that money coming in Q4, maybe compared to the previous few quarters? And how has that kind of trended through Q1 so far?

Hi, Ty. You know what, it's been pretty steady.

Actually, I would say over the last two, three quarters, it's been pretty steady as it was in Q4.

Okay. Got it.

And then, in terms of the, that $23 billion Child and Family Service Settlement, I know the claims window for that opened about a month ago today. I'm just curious if you're hearing anything around that within your communities in terms of how that process is kind of working so far.

And then I guess in terms of your own kind of internal preparations, when are you assuming that money starts to roll in and what are your plans in terms of inventory positioning for that?

We haven't heard anything. It's still quite early in the process.

If you can appreciate it's been a couple of weeks. So we don't really have much insight on how it's started or how it's going, known as good news, I guess.

And on the other sense, I would say that we're anticipating probably into 2026 to start seeing some of this money coming in. On the other side of that, obviously, like we have done with many of the other programs, we're looking at amping up inventories where we know our there's pent up demand for our customers.

And that's a strategic venture that we've taken note over the last number of settlements that have come out, including the Drinking Settlement. And we'll just keep a close hand on the pulse and make sure that we're ready when that money starts to drop.

Okay. Great.

And if I could just, yes, sorry.

Sorry, I was just going to finish that off just to put that caveat out there. I understand we are dealing with some administrator some bureaucratic administration.

So you have no plan to survive first contact. But that's if we would have looked backwards in time, we would have anticipated the Water Drinking Settlement monies to come in a lot earlier than it did.

But optimistically, I'm going to say that 2026 is where we're currently anticipating it.

Okay. Understood.

And then if I could just sneak in one more. You referred to some of the progress around your private label initiatives.

Can you maybe just talk a little bit more about how that's being rolled out in terms of initial product categories and I guess the number of stores that that's been implemented in so far? And how's the response from your customers been to-date?

Sure. Yes, so far, it's as far as the private label rollout, it's still in its infancy.

It's at the beginning stages. We expect it to be rolled out to all stores by mid to late Q3.

But we can say that the reception so far has been very positive, obviously bringing some incremental value to our customers. And so far it's been received very well.

Obviously commentary from the customers is very strong as well as the purchases so far. But we're still quite early, but we anticipate it's going to be a very strong program for the stores and the communities.

Okay. Thanks.

I'll jump back in the queue.

All right. Thanks, Ty.

Thank you. Good afternoon, guys.

Hey, Stephen.

Hey, Dan. Thanks.

Just wanted to follow-up just with respect to the Canadian business, nice strong same-store sales growth. But I guess I would have expected maybe a bit more strength on the general merchandise side given some of the payments, Water Settlement payments that have come through.

So I'm just curious, are you seeing those incremental payments being redirected towards food versus general merchandise or are you still seeing that incremental buyer on the GM side?

Well, there was, I mean, we're kind of in between season, but I would say that, yes, we were expecting higher motorized sales. So we had a higher general merchandise sales, but it was then what we anticipated in some of the off categories.

So it was not the higher price point, but it was the higher margin sales, that we experienced. So the motorized sales weren't as high, but some of the other categories, within the general merchandise group with higher margin rates were higher and a lot of the food, people switched over to the food.

We had some strong food sales, strong perishable food sales, high food service. So people were spending a lot of their dollars over there.

Okay. Yes, that's great.

And then maybe just turning to the Next 100, I know you gave some color that the benefits that you're seeing have outweighed kind of the incremental investment as well as the onetime costs. Are you able to are you kind of in a position to give a number of what that annualized EBIT might look like from Next 100 benefits either maybe this year or next year?

I won't go into the EBIT right now, Stephen. But I will say that I anticipate that there, as I indicated, there's about $1 million in onetime cost that we put through last quarter.

And I expect it to be three or four times that in the first quarter of this year. So I will give you that and then I'll kind of as we gauge and we move through, I'll give you more insights in the quarters to come.

Okay. That's helpful.

And I guess based on your commentary. Yes, I guess based on your commentary with respect to Q1, I mean, is it fair to assume that Q1 sounds like maybe more of an investment period, you might not see the costs, the benefits outweighing the costs in Q1, but maybe that turns when you get to the back half of the year.

Is that the way to interpret that?

I think that'd be a good way to narrate that for sure.

Yes. Okay.

Great. Thanks, Dan.

And then maybe just one more question, just turning back to general merchandise. International business was quite strong.

I know you gave a number of factors that contributed to that, but was there anything that kind of stood out in the International business to drive that strong low double-digit general merchandise same-store sales growth number?

Not really. I mean, we did open up a motorized shop in one of our key markets, so that definitely had a play in it.

But other than that, nothing else that really stood out.

Okay. That's great.

Thanks, Dan. I'll put it back to the line.

Appreciate it.

Thank you.

Hey, guys. It's Evan in for Mike.

I guess just starting off with Canada I guess. So this is it's been several quarters now that you called out program spending related to Child and Family Services.

I just want to try to understand that a bit more. Is that incremental spend but not tied to the reform?

Okay. It is tied to the reform, but it's probably not, it's not tied to the settlement money.

So we've talked about this in the past. Like, Jordan, because there was a, it was deemed to be an insufficient level of service to indigenous people in Northern Canada.

So there's identified gap between service. So in the meantime, the government has been working to improving that gap.

As an example, in 2000, so I guess it was two -- three years ago was the bookmark. What year was that?

It was in 2021? 2021, we estimate that there was about $600 million or $700 million spent in this particular area in Northern Canada.

So going towards healthy living and assisting youth and some of the health infrastructure that's existing there. And now we've estimated in 2023, 2024 there to be approximately $2.5 billion to $3 billion.

So there has been a significant increase and that's simply just bringing the level of service up to, I call it on the journey to bring in the level of service up. But this is not per se part of the settlement.

It's just more bridging the gap of the infrastructure deficit.

Okay. Great.

Thanks. And then in terms of the agreement that was reached between the Ontario First Nations and the Federal Government, so it looks like that was that's going to be the first one to be approved.

Just wondering how many of your markets would be impacted by spending from that once it does get approved?

Excuse me. The number you just gave me, but you can look in our circular in our annual statement, you'll be able to -- our annual report and you'll be able to see the number of stores that we have within the Ontario border.

Sorry, I don't have it offhand otherwise I would have, yes.

Yes. And that would impact all of those markets?

I would think so, yes.

Okay. And then just quickly on the airline, given that it seems like it's running pretty much at capacity, what are your thoughts on growing that business?

Yes, absolutely. As we see demand increase, then we're always looking to see where we can make prudent investments to expand the service.

So I would say, yes, our capacity is pretty high. So we would definitely be open to the right acquisition of some more aircraft to continue to service the business that's out there.

Okay. Thanks.

Just switching to International now. How much of your Alaska business is tied to the commercial fishing economy?

And when do you expect to lap the start of the weakness?

I guess it depends on the macro environment. I mean I guess we haven't talked about tariffs and probably the right thing because who knows what's happening.

As of an hour ago I think things have, as I understand, I've been in Board meetings, but I understand things have changed again. But the tariffs will have an impact on the fishing industry in Alaska just given the large number of exports who the customers of some of the Alaska fishing where some of the customers reside over in Asia and outside of the US.

So I think that's going to have an impact. However, as far as the lap, I would expect probably in Q2, I would say, is what I would forecast, but bearing nothing else kind of goes weird as it relates to tariffs.

Right. Okay.

And then in terms of SNAP. What percentage of your international food sales would you say are tied to SNAP?

And how much of that do you think would be at risk from any changes in benefits?

We have a pretty healthy SNAP business. We don't disclose the percentage as you could probably appreciate.

And, I mean, look it depends. I'm not aware of any conversations as of yet that have talked about making further changes to the SNAP benefits.

However, obviously, the changes if there were changes made and there were changes to decrease the amount of SNAP benefits, it would definitely have a negative impact on our business.

Okay, great.

In both Alaska and the Caribbean and so our US markets.

Thank you very much.

Thanks.

Hi. Thanks for taking the follow-up.

I just wanted to ask a quick clarification, Dan, on your comments. I'm expecting maybe a bit of a moderating pace of the growth in Q1.

Were you referring to earnings or was that to the top line to same-store sales as well?

Earnings.

Okay. Great.

That's helpful. And then, I'm also wondering, have you noticed any change in consumer sentiment or shopping behavior at all kind of since the emergence of the tariff threats and volatility a month or so ago?

Is there been any sort of trade down or any impact to general merchandise or more discretionary type of categories in the first few months of the year?

No. Well, we haven't seen that.

Okay. Great.

Thanks.

All right. Thank you, Ty.

Okay. Well, no further comments from myself.

So thank you for attending the conference call and I look forward to speaking with you on our Q1 results.