NORTH WEST CO. $27.10 (Toronto symbol NWC; TSINetwork Rating: Extra Risk) (604-231-1100; www.northwest.ca; Shares outstanding: 48.5 million; Market cap: $1.3 billion; Dividend yield: 4.6%) sells food and everyday products and services through 225 stores. They’re mainly in northern communities across Canada and Alaska. The company also operates 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 the country’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 13 Cost-U-Less warehouse stores. Those discount outlets are in remote island communities across the South Pacific and the Caribbean.
In its fiscal 2016 fourth quarter, which ended July 31, 2016, North West’s sales rose 2.6%, to $460.6 million from $448.7 million a year earlier. Earnings per share fell 10.5%, to $0.34 from $0.38. The drop was the result of smaller profits in Canada. They offset the positive impact of the high U.S. dollar and growth in the company’s international operations.
North West will probably earn $1.62 a share in fiscal 2017, and the stock trades at 16.7 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 the company’s results, but the strong U.S. dollar should help 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.
