Welcome to The North West Company Inc. third quarter results conference call. I would now like to turn the meeting over to Mr. Dan McConnell, President and Chief Executive Officer. Mr. McConnell, please go ahead. Thank you very much, and good afternoon, everybody, and welcome to the North West Company third quarter conference call. I'm joined here today by John King, our Chief Financial Officer, and Amanda Sutton, our VP of Legal and Corporate Secretary. I'm gonna start the meeting off by asking Amanda to 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 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. For additional information on these risks, please see North West Annual Information Form and its MD&A under the heading Risk Factors. Dan? All right, thank you, Amanda. I'm pleased to share with you the details for North West Company's performance for this third quarter. Let me start by giving you just an overview of the results before I dive into the specifics by region and banner. First of all, I wanted to highlight the positive sales momentum across the business. Third quarter consolidated sales increased 0.1% to CAD 554 million. Excluding the impact of lower foreign exchange rate between Canada and U.S., sales increased 2.1% compared to last year. This is really positive considering the exceptional COVID-19 related sales last year. On a same-store basis, sales remained strong with a decrease of only 0.1% compared to a 17.8% increase in the third quarter last year. Keep in mind that on a two-year basis, same-store sales for the quarter were up 17.4% when compared to the third quarter of 2019. This performance definitely speaks to the efforts that we've been putting forward in servicing our customers, and it indicates that we have captured and retained market share and wallet share over this past two-year period. This quarter, it is especially important to consider that consumer income support funds are lower than last year, particularly in Northern Canada, and the mobility restrictions are less stringent today than they were a year ago. Over the past couple of months, in taking advantage of the reduced travel restrictions, I, as well as a lot of the other team members and leaders, have done a lot of travel throughout our markets. The great news is that leadership sees a lot of opportunity for things that we can do better. As a result, the new leadership team, sorry, is very, very encouraged and enthusiastic to do just that. That being said, the main takeaway I wanna underline here is we are very pleased and optimistic after seeing firsthand the commitment, passion, and energy of our associates right across the network. They continue to be focused on our customer experience, pivoting and finding solutions in the middle of a pandemic while keeping health and safety at the top of their mind. This all at the same time as keeping a good in-stock position while navigating the current global supply chain crisis. Our teams understand that the current supply chain environment has the potential of putting our ability to have the right merchandise for our customers at risk. That's why all of our banners have been focusing on moving inventory swiftly across our network. Our teams have planned for months to adjust and avoid potential supply chain congestion by procuring inventory earlier to account for the extended lead times and be in a good stock position to capture the holiday sales. This, this includes actually normalizing inventory levels compared to last year while keeping up with demand and avoiding lost sales. Of course, we continue to leverage our relationships with our suppliers and make sure that they're prioritizing our orders. This is in order to keep us delivering on our promise to our communities, protecting their food security, and ultimately helping them live better. All right. Now let me go and give you a little bit more color around region-specific sales performance. Canadian operations sales increased 0.6% to CAD 315 million. Same-store sales remained strong, only decreasing 3.2% compared to a 22.9% increase last year. On a two-year basis, same-store sales were up 18.4% compared to the third quarter of 2019. These results were achieved even as income support programs dwindled and travel restrictions loosened compared to last year. Our in-stock position is contributing to keeping food sales strong, even on specific remote stores or remote markets where customers are prone to outshopping. As I previously mentioned, we took steps to be in this position by leveraging our supplier relationships and benefiting from owning an airline, which helped us mitigate some of the supply chain disruptions. Total food sales were relatively flat to last year and just 1.5% down on a same-store basis. Categories such as grocery, food, and beverages continued to lead that performance. The impact of lower income support in the markets compared to last year had a much larger impact on general merchandise. Sales decreased 9.8% in total and 10.4% on a same-store basis. However, going back on that two-year basis, general merchandise same-store sales were up 31% compared to 2019. This definitely showing the positive sales trend driven by the business. This was led by categories such as motorized, entertainment, media, toys, as well as some other hard lines. With respect to sales in our international operations, the momentum continues to be strong as income support payments across the U.S. territory continues to fuel that demand. We are also seeing the positive impact of increased travel in some of the tourism-dependent markets, albeit still well below the COVID-19, pre-COVID-19 levels. Overall, international sales increased 4.7% over last year. On a same-store basis, sales remained very strong, increasing 4.4% to last year and increasing 15.9% on a two-year basis. Our signature categories program continues to perform well in our Cost-U-Less banner, particularly on our fresh cart categories like produce and meat. PDP sales has also delivered very strong results in categories such as grocery, food, and beverages, as lower COVID-19 related restrictions have given way for restaurants and bars to get back open again. In Alaska, our strongest stock position also allowed us to capture demand from a strong fishing season down in the coastal village with our coastal stores. Here, it is also important to highlight the impact of the timing of the PFD or the Permanent Fund Dividend. Last year, the dividend was paid $992 and was issued earlier, in fact, in the second quarter. This year there was a slight increase to $1,114, and so it went back to its regular calendar timing, which was paid in the third quarter. On the flip side, the business has also experienced headwinds from supply chain issues and inflationary trends during the quarter. In particular, we felt some of these pressures on our gross profit, which decreased 2.3% compared to last year due to an 80 basis point reduction in rate to sales. The decrease in rate was primarily due to changes in product sales mix, particularly related to general merchandise sales in Canada. However, there were also an impact of inflation costs that were not fully passed on in certain markets, which I'll give you a little commentary just to explain. Unfortunately, in some of our markets, and some of our local competitors are lagging when passing along cost increases to customers. Here, our focus is remaining on keeping both our customers' trust, obviously, and at the same time, trying to keep up with the momentum of the market share. We're trying to keep our market share and grow it. We're definitely very actively monitoring the market for price changes, and we wanna make sure we can be competitive, while at the same time we're continuing to drive value for our our shareholders. In terms of expenses, the quarter, for the quarter, there was a CAD 7.4 million or 5.6% decrease compared to last year. This is mainly due to the decrease in share-based compensation costs related to mark-to-market adjustments from changes in our share price. Excluding the share-based compensation costs, expenses increased CAD 900,000 and were up 12 basis points as a percentage of sales, inclusive of reductions on COVID-19 related cost and decreases in international expenses related to the impact of the foreign exchange. All right, here I wanted to take a brief moment to refer to the performance of the airline. We have seen positive trends in the passenger business. Demand for scheduled passenger flights are picking up following a reduction in community travel restrictions, which have also had a positive impact on charter type flying. This has mitigated the impact of the CAD 1 million payment received third quarter last year from the Canada Emergency Wage Subsidy, which we did not actually receive this year. The cargo business continues to be an asset for the company and has provided a competitive advantage to navigate the supply chain constraints and pent-up demand. On the flip side, we experienced unplanned repairs to our ATRs, which require us to have a higher usage of leased aircrafts. Both these factors had negative impacts on our gross profit rate for the quarter. Lastly, on the airline, the ATR- LCD, which stands for the large cargo door, will start operating this month. This plane is equipped with an oversized panel door on the side that just, it actually helps facilitating unloading of palletized cargo. We're using this plane as kind of a proof of concept to test reduction of aircraft turn times and hangar requirements at base in markets for both our third party as well as our own freight. After all the above is considered, the company's net earnings increased CAD 3.2 million to CAD 39.2 million compared to last year. On a two-year basis, net earnings were up CAD 14.3 million or 57.6% compared to the third quarter of 2019. That said, the after-tax impact of share-based compensation, adjusted net earnings decreased by CAD 4.4 million. However, on a two-year basis, performance is up CAD 14.1 million or 57.9% when compared to the third quarter of 2019. Looking ahead, the short term is still subject to the uncertainties of COVID-19, particularly as we see the development of a new Omicron variant. Based on the strong in-stock position I referred to previously, we are cautiously optimistic about the holiday selling season. However, we acknowledge the fact that consumer income support in our markets, particularly in Northern Canada, will be lower compared to last year. In our Caribbean and Pacific regions, we will continue to focus on improving our execution at the stores, our assortment, and our product flow. We are also seeing positive trends of tourism coming back in some of our Caribbean markets, although still well below pre-pandemic levels. In Alaska, we expect to continue growing by expanding our footprint to new markets. We are confident that we'll hit the goal of three new stores in 2021. Two of them are already open and one's on track to open prior to the fiscal year-end. Heading into 2022, the expansion will continue in Alaska. In Canada, we are focusing our efforts on price optimization strategy. We had paused this initiative for a while given the COVID-19 related volatility, but we are currently recalibrating and doing tests before deploying it banner-wide. We anticipate this will be ready to roll out by Q1 next year. In Northern Canada, we have also been focusing on improving our product flow, which includes initiatives that involve the airline. We continue to explore opportunities to improve our enhanced supply chain and capitalize on the learnings and successes we've had so far navigating through this pandemic related supply chain challenges. We are also doubling down in Canada on improving our assortment and execution at the store level. Overall, we anticipate that the fourth quarter sales to be lower than last year, but higher when compared to 2019. As I mentioned previously, the uncertainties of COVID-19 make sales forecasting quite difficult. All right. Let me wrap it up by saying that we are very pleased with the financial results this quarter, and we will once again like to thank all of our frontline staff and support teams for the passion and commitment shown every day to make people's lives better in the communities that we serve. With that, I'm gonna ask the operator to open up the call for any questions. Thanks. Thank you. We'll now take questions from the telephone lines. If any question and you're using a speakerphone, please lift your hands up before making your selection. If you had a question, please press star one on your device keypad. If at any time you wish to cancel your question, please press the pound sign. Please press star one, at this time if you have a question. There will be a brief pause while the participants' register and thank you for your patience. Our first question is from Michael Van Aelst from TD Securities. Please go ahead. Your line is open. Hi, good afternoon. First question is actually on the comments that you said where inflation was not fully passed on, and I know you said you wanted to try and protect your market share. Are others passing it on and you're just trying to gain a little bit more, or was that the start of your price investments, or are you just waiting till Q1 next year for that? Yeah. The price investment would start next year, and it's really a price optimization. We're building some different systems as to how we can optimize pricing. It's a lowering and a. It's lowering somewhere we can. There's others that we haven't had full transparency that we think we can kinda offset some of those. That's not what I was referring to. What I was actually referring to is in some of our markets, our competitors were slower to take the inflation or to lower their prices or increase their prices, as it relates to inflation. We didn't lead. We waited until they kind of realized, as you can see, that their prices were outweighing. It's just due to some of the sophistication of some of our competitors. We obviously want to drive that price perception. We don't wanna give up market share. We often just make sure that it sometimes is laggard, let me just say that. It sometimes takes a little bit more time for the market to correct in some of the more remote markets, call it. Okay. Have you seen those price increases go through now? I would say they are definitely more so, yes. I would say a majority of them have. Because that's pretty compelling in some instances, so it's harder for people to miss. Okay. When you talk about your price optimization strategy for starting Q1 next year, how will you be measuring the investment? Because in the past you said if you don't get a return off it, then you're not gonna necessarily continue with it. Do you look for the return immediately, or is there? Do you expect a three or six-month lag? How should we expect you to be looking at that? It's a great question. It's really a test timeline. For example, there's a lot of products that are outshopped that were not competitive enough to compel people to shop us locally. It's a pretty like it's as far as it catches on within the market. We're making price investments in some of those other items. With some of the where we think we can make more gross profit dollars, but just lower our rate to sales. That's just comes down to us being more strategic in our pricing strategy. That's effectively it. It doesn't. We won't feel the impact over a long period of time. It's something that we would see some momentum gathering in fairly short order. Okay. Is that something that'll be harder to measure because, you know, you're coming off some high in-market or in-community shopping levels, and now you're almost trying to maintain it rather than grow it, I'd assume. Yeah, that's a great comment. Absolutely. Which is why we've talked about a full launch next year. We will be, we'll be testing it pretty vigorously. We'll have pilot stores. We won't just roll it out to the entire banner. It will be done in pilot stores that we think are more normalized than others, depending on their situation. Okay. With Giant Tiger gone, a lot of the markdowns are probably behind you, but you said you did have some markdowns. Where would we have seen those within the business? You're right. A lot of the Giant Tiger's markdowns are behind us, but there's definitely some other opportunities where we've just had some mis buys. We take this opportunity, there is some money in the market, to mark those down and not hold them on for any extended period of time. We've been definitely more aggressive on clearing out, call it less saleable inventory. Okay. I'll ask one more, and then I'll get back in the queue. The PFD in Alaska was paid late in the quarter, and I'm wondering if you felt the full impact or the full effect of that payment in Q3, or did you think some of it slipped into Q4? I think there is gonna be some trickle over into Q4. We did get a nice portion of it in Q3 for sure. All right. Thank you. All right. Thanks, Michael. Thank you. The next question is from Mark Petrie from CIBC. Please go ahead. Your line is open. Yeah. Good afternoon. I just, Michael touched on a bunch of my questions, but I just wanted to follow up. On the price optimization, can you give us a sense, what parts of your assortment is this gonna be focused on? I mean, I'm assuming food, but if you can be more specific. Roughly what percentage of your SKUs would be affected by this? You're right in your first comment. It's a lot to do with food. But as far as percentage or products, I'll leave that as a TBD, surprise you with everybody else. Okay. All right. Looking forward to that. Just with regards to North Star, I mean, being a drain on gross margin in the quarter, what is that gonna continue into Q4, or next year, or do you feel like you've pretty much addressed that downtime issue? Yeah. I think we've addressed it. I mean, we're gonna. We've been looking, and the team is continuing to get more productive. There was kind of an unseen event, a maintenance issue this year that was kind of a freak accident, I would say. We don't expect that to be a continuance ongoing. Okay. Let me, Mark, rephrase that. I'm not gonna use the word accident. It was an M&R item that came up. I guess I have to watch my terminology when referring to the airline. It was more an M&R issue that came up with one of the engines. A rock, in fact, was sucked into the engine that caused a pretty serious expense. Let me just clarify that, Mark. Yeah. Okay. Helpful. Thank you. Then, just coming back to the topic of the impact or potential impact of lower government support payments on your business, could you just sort of help us understand the relative sort of magnitude of that? How much of that do you think you felt in Q3 versus what we should be expecting into next year? 'Cause I think the impact will potentially be greater and potentially larger in the U.S. business, I'm guessing. But would just appreciate your perspective on that. No, it's a great question, and we're obviously it's something we think about often. I think the impact actually is gonna be in both markets, both Canadian and American markets. Because you know, the American Rescue Plan is now starting to tire. I think that you know, it's depending on what happens, obviously new variant and what kind of impact that and other variants might have on the economy and on the you know, the society in which we live. I'd say that we're thinking things are gonna get back to a more normalized state next year, but what is a normalized state today if it kinda changed the landscape as we know it. I think as we know, everything we know about the funding that's been presented to date, it is gonna be significantly less than it was this year. To what extent, depending on what they introduce next year, I can't really predict at this point. Yeah. Sure. Absolutely. Would you have felt any of that in Q3? I guess maybe a little bit in your Canadian business. I'm not sure exactly, but expectations with regards to the timing of this and when this sort of starts to flow through, again, assuming that, you know, programs are not renewed or reinstated. You're asking me if part of our performance this Q3 was as a result of some of the drag or the overflow of the stimulus program? Is that what you're asking? Yeah, exactly. Basically, like, when all of this flows off and you lap these programs in both Canada and the U.S. Well, it is, I mean, it we do think that there's still a trickle on, we suspect going into Q4 of this year. Much beyond that, again, back to the previously commented, it's unknown to us at this time. Yeah. Okay. I guess one question I just have, you know, sort of more broadly, you know, when you are looking at the stores where there is some more sort of, you know, that are located in regions where out shopping is easier, I think you commented that you're pretty pleased with how much business you are retaining. I'm just curious, you know, when you look at those stores or markets, is there anything you can glean with regards to sort of the composition of baskets or customer spending patterns, that sort of informs how you approach, you know, your business in 2022? Yeah, Mark, definitely. Well, first of all, we've got strong in-stock, so that's helped. Grocery, food, and beverages have been strong, so we're keeping more of that kind of center store shop in market. It's really just being in stock and being at the right price. This is kind of a runoff of some of the pricing work that we've done, call it at the beginning or mid-COVID era. We have received some a good reception there, and that intel will definitely kind of inform more about how we move forward with some of the price optimization, I'll call it, planning in the near future. Okay. Just my last one, I guess, just related to your comments with regards to in-stock. I mean, you spoke pretty positively about your ability to navigate some of the supply chain challenges, but have you had situations where you've had disruptions that have, you know, potentially compromised your in-stock position and potentially your sales, or do you feel like you've navigated this without any sort of material issues? No, we've definitely been impacted, but I've got to say that there's been a lot of substituting. There's been a lot of pivoting, some call it athletic buying, as far as looking for new sources, new suppliers. That's part of the benefit even of having the many different regions that we operate in. I mean, we have a big web that we're able to kind of source from. The key is we're proving to be much stronger than the competition in all the markets that we're currently operating in. That's been one of the big benefits for sure. All right. Understood. All the best into the holidays, guys. Hey, thanks a lot, Mark. Thank you. The next question is from Neil Linsdell from iA Capital Markets. Please go ahead. Yeah. Hi. Thanks, guys. Just to expand on that supply chain question. Across all your regions, you're performing better, I guess, than any of your competitors for supply chain, and you're leveraging that into the rest of your network, I assume. Is that opening up any opportunities for supplying your non-traditional markets for other customers, I'm thinking, that don't have access to those types of supply chains or distribution? Good question. Yes, I would say that there's been some opportunities in our B2B business that we've been able to capitalize on our supply chain. That's definitely been a source of some of our incremental business, and just joining and building new relationships with other groups that we expect to extend on beyond COVID. Yeah, the answer is yes, predominantly in some of the southern markets. Southern markets. You think that might be sticky after all these things are resolved? We hope so. That's the intent for sure. I mean, you find out who your strong partners are in times of need, and it's the best time to build a relationship because they know they can count on us. I hope that they do, to use your words, remain sticky and that we can kind of build that for the future. Okay. If we look at some of these remote communities, I mean, obviously, like travel restrictions were to your benefit right at the beginning of the pandemic. How much has that completely really opened up and customers are willing to travel further to shop, or do you think people are still sticking closer? I'm trying to figure out, you haven't really dropped off as much as I would have thought in some of your sales. It's sticky, you're benefiting from it, but how much of it could still be lost as more restrictions are lifted? Yeah, that's the question. The key is now that we're trying to enlighten the customer experience with everybody when we have them in our store. Trying to take advantage of that and build that relationship. I would say a lot of the markets have been open and people have been mobile, but not nearly as much as they have called it pre-pandemic. I think it's really about while we have the attention, just really building the relationship and the customer experience with the community members. That's really what we're focusing on. As far as what the quantum is, it's just not something I really can share right now because it's not really known. Okay. Fair enough. If I can just finish off on, you know, the standard question. Labor, availability, restrictions, capacity in, you know, different regions and if it's changing depending on which region we're talking about. Yeah. I mean, you know what, we have some stability. I mean, northern markets, it's definitely always been a challenge, let's say, and it's always been something we put a lot of attention to. It's always been a focus, but I'd say that we're focusing now more than ever, simply because I think it's gonna be, you know, there's a battle for talent going on for now, and there will be, I foresee, forever. We've actually put a lot more focus into developing our customer or employee experience. Just recently hired a Chief People Officer to do just that. Their role is to, first and foremost, make the experience for all of our employees as delightful and fulfilling as we can. It's also looking to make sure we can understand exactly what you know what makes a great Nor'Wester, if you will, and you know just really trying to get our story out there so people that are looking for the experience that we can offer them through our stores can find us. It's something, I guess, Neil, in summary, it's something that we're very cognizant of. We're putting a lot of resource and time to it. I like our chances. I think we have a great and very unique kind of story to tell, and it's just about getting it out there and ensuring we can not only attract but you know maintain top people to kinda follow on our vision and our mission. Have you had to do any appreciable salary increases, any specific regions, or had to reduce store hours to accommodate, or has it basically been minor tweaks and just, you know, employee morale and training and support? Well, we haven't had to close stores. When I say tweaks, I mean, we're always ensuring that we're competitive with our compensation packages. That's just a regular practice that we continue to roll with. I would say that no, we haven't. Like, we're open to it. In fact, we've been doing some market studies to ensure that we're on track. You know, I'm happy to say that we are. We have a pretty unique value offer, obviously. Depending on where the stores are, there's a lot of ways that we can make it attractive for people to come and join the team. Okay, thanks. Thanks, Neil. Thank you. Once again, please press star one for any question. The next question is from Michael Van Aelst from TD Securities. Please go ahead. Thanks. A few follow-ups. Your CapEx is going up a reasonable amount next year. Can you give us some color as to what you're spending on differently this year or next year versus this year? Well, there's obviously, I mean, with COVID last year, there's some catch-up. A lot of it is getting some of the work done that we weren't able to do last year. There's also, you know, we have some exciting projects that we're working on that are kind of overdue, and that we think are gonna be great projects for us to to kind of drive the business, continue to sustain the business moving forward. We got Alaska, obviously, we have our new stores that we're working on, and that was three this year, as you recall, and we're gonna aim to do at least that next year. We're just in the midst of building our third store, concluding the build, and that'll be open before the end of this fiscal year. Yeah, no, it's, I'm very happy, if that's a question, I'm very happy with the capital projects that we are underway. A lot of it is, some of it is catch-up, and other of it, other projects are that we're able to conclude or, you know, come to some good, some strong agreements with some of our partners. It's kind of worked. A lot of it's work that's been, let's call it long overdue. It's all good quality work that we're looking to pursue. How much would be maintenance versus growth projects? I'm trying to think off the top of my head, John. I would say there's always a bit of growth, even Michael, in the type of projects we do. Like, our major store renovations would always have a bit of growth in there, so it makes it a little bit tougher to break out. We call it the halo effect. Yeah. A good chunk of that will be, you know, sustaining, if you wanna look at it that way. Dan talked about the new store growth in Alaska. That's certainly a driver. A lot of this is predominantly sustaining. With the growth factor, though. Yeah. As I said, there's always a part of that as opposed to pure new store, you know, growth. Okay. Yeah. I think you talked about a CAD 24.7 million deferred tax liability. How much is still to be paid in the next six months? Good question, Michael. It's come down substantially. I think off the top of my head here, probably our current run rate of taxes paid will continue into the fourth quarter and then start to decrease in Q1 next year. I expect it to normalize. 2020 was exceptionally low for the reasons that we previously talked about. That's the guidance I'll give at this point. Okay. Just finally, the NCIB, do you expect to be any more active on it this year than last or over the next 12 months, let's say? I think we'll take a look at that. I mean, we implemented it last year. It was our first year in. You know, we've been, I guess, active in the market regularly, but on a modest basis. I think that's, you know, we look at that, our investment in the NCIB relative to other capital requirements in the business, opportunities for acquisition and dividend payments. It really is a balancing act, Michael. I wouldn't. I'd say, you know, from your perspective, from shareholders' perspective, continuing on, more of the same. All right. Thank you. Have a great holiday. Thanks. Yep, you too. Thank you. Once again, please press star one for any question. There are no further questions. I'd like to turn the meeting back over to you, Mr. McConnell. Okay. Well, thank you very much, everybody, for attending. Much appreciated. I do appreciate the questions, and same goes for us. We'd like to wish you guys a happy holidays and all the best in the new year, and I'm sure we will be speaking with you and we look forward to it. Thank you. Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.