NORTH WEST CO. $28.74 (Toronto symbol NWC; TSINetwork Rating: Extra Risk) (604-231-1100; www.northwest.ca; Shares outstanding: 48.5 million; Market cap: $1.4 billion; Dividend yield: 4.3%) sells food and everyday products and services through 225 stores, mainly in northern communities across Canada and Alaska. It also operates stores in remote regions of Hawaii, the South Pacific and the Caribbean.
North West signed a 30-year deal in 2002 with Ottawa- based Giant Tiger for the exclusive right to open and operate Giant Tiger general merchandise stores in Western Canada. Giant Tiger operates 200 stores elsewhere in Canada.
In Canada’s northern regions, North West operates most of its stores under the Northern banner (121), followed by Giant Tiger (34), Quickstop (14) and NorthMart (6).
The company gets about 60% of its revenue from Canada. The remaining 40% of sales comes from 33 stores in Alaska and its 13 Cost-U-Less warehouse stores. Those mid-sized outlets are in remote island communities across the South Pacific and the Caribbean.
In its fiscal 2016 third quarter, which ended April 30, 2016, North West’s sales rose 6.0%, to $439.0 million from $414.0 million a year earlier. Earnings per share rose 15.6%, to $0.37 from $0.32, on fewer shares outstanding. If you exclude the positive impact of the high U.S. dollar, earnings rose 8.9%.
The company will probably earn $1.84 a share in 2016, and the stock trades at 15.6 times that forecast. Oil and mining firms have laid off workers and are spending less on new projects in northern Canada and Alaska. That will hold back North West’s results, but the strong U.S. dollar should continue to offset that by boosting the contribution of its stores in the South Pacific, the Caribbean and, of course, the U.S.
North West Company is a buy.
