All participants, please stand by. Your conference is now ready to begin. Welcome to The North West Company Inc. First 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, and good afternoon, and welcome to The North West Company First Quarter Conference Call. I'm joined here today with John King, our Chief Financial Officer, and Amanda Sutton, our VP of Legal and Corporate Secretary. I'm going to start the meeting by asking Amanda to read our disclosure statement. Thank you, Dan. Before we begin, I remind you that certain information presented today 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. Thanks, Amanda. Before I begin, let me once again thank everyone that participated in the AGM this morning. For today's call, I'll start by providing a brief overview of our first quarter results. I'll provide commentary around our outlook, including our journey ahead and building for the future, before opening up for questions. Our consolidated sales in this quarter increased 7.5% as same store food sales offset lower general merchandise sales across all of our banners. These results are consistent with the consumer shopping trends we've seen over the past few quarters. Our customers continue to shift spending towards food and essentials and away from discretionary purchases as a result of higher cost inflation and lower government income support. Our gross profit rate continues to be impacted by increasing merchandise and freight costs that were not fully passed through in retail prices in the Canadian operations. Combined with changes in sales plan and an increase in markdowns, these pressures have reduced our consolidated gross profit rate by 73 basis points. Our gross profit dollars were up 5% compared to the same quarter last year. Our expenses during this quarter increased by CAD 16.6 million, or 12.3%. Cost inflationary pressures on staff and fuel-based utilities expenses, coupled with new store expenses and foreign exchange impact on the translation of international operation expenses, were key drivers for the increase. Adjusted net earnings, which excludes the impacts of share-based compensation costs, were down CAD 5.1 million, or 16.4%. Let me provide some additional context on sales results, starting with our Canadian operations. In Canada, sales increased 8.4% in total, and were up 2.2% on a same-store basis. As we continue to lap pandemic-related sales increases last year, the main factors contributing to the overall increase were inflation, the new store openings last year, and an overall good in-stock position. Same-store food sales increased 3.4%, and same-store general merchandise sales decreased 3.4%. As previously mentioned, the shift in consumer spending towards food and away from discretionary general merchandise purchases was still a factor, but certainly less pronounced compared to previous quarters. The other key factor worth noting is that North Star Air had another strong quarter, with both top-line and bottom-line growth driven by increases in third-party cargo contracts as well as in passenger volumes. In the international operations, in contrast to the Canadian operations, it was a much tougher quarter in international operations from a sales perspective. Total sales were down 0.5% to last year. There was a significant shift in consumer spending from general merchandise to food. There were two key factors that impacted sales in the first quarter. First, there was less income support compared to last year. Second, to a lesser degree, the closure of our Cost-U-Less Curaçao store earlier in the quarter. Let me unpack the issue of income support. Income support is reduced in general compared to last year, but in particular, there was a meaningful reduction in SNAP payments in the U.S. territories. In fact, across the industry in the U.S., retailers experienced a reduction of SNAP sales, given the fact that during the pandemic, there was a temporary boost of SNAP benefits that ranged between $95 and up to the maximum benefit allotted for that particular family in a given state. This increased SNAP benefit expired in February, which, combined with the impact of higher inflation, negatively affected customers' purchasing power, resulted in a shift in the spending. This combination of lower income support payments and higher inflation was a key factor that resulted in a 16.5% decrease in general merchandise, same-store sales, and a 0.6% decrease in food sales. In terms of gross profit and expenses, during previous calls, we have highlighted inflation and cost control as our top priority for our business. We're still seeing cost increases, although at a more moderate pace compared to the last three quarters of 2022. For the communities we serve in the North, the impact of higher fuel and transportation costs on the shelf prices is greater when compared to southern retailers, given the remote nature of our markets. Our teams have prioritized operational excellence to help mitigate the impact of inflation as we continue to work with suppliers and transportation partners to minimize these cost escalations. We have been taking a balanced approach to making sure we retain the trust of our customers while trying to manage our revenues and gross profit dollars. In some instances, the impact of higher merchandise and freight cost inflation was not fully passed through in retail prices. This balancing act, coupled with the changes in sales blend and higher markdowns on general merchandise due to the demand shifts highlighted earlier, contributed to the 73 basis point decrease in our gross profit rate. In terms of expenses, the 12.3% increase in the quarter is primarily driven by cost inflation, the impact of foreign exchange on the translation of the international operation expenses. The impact of inflation compared to the first quarter last year contributed to a decrease in overall expenses, and specifically staff costs and utility expenses. That said, we were slow to adjust our store labor hours based on the changes in sales. This is a key area of focus as we look to drive more productivity and efficiency in our cost structure. The impact of foreign exchange rates on the translation of our international operations expenses was also a significant factor and accounted for almost a quarter of the overall increase. Typically, we are naturally hedged for this, but given the international sales results, it had a higher impact during this quarter. Now let me make a few comments on the inventory. Our levels are higher than last year, largely due to inflation that affected the resupply of winter road inventory and higher general merchandise inventory in the Canadian operations. The impact of foreign exchange on the translation of international operations inventories was also a large factor. The increase in general merchandise inventories in Canada is mainly concentrated in snow machines, ATVs, boats and motors, as well as home furnishings and appliances. Given the durability of these items and the relevance they have in the communities we serve, we expect to sell through these items. We have adjusted our ordering where needed as we continue to calibrate our inventory levels based on current demand. That said, we didn't have the sell-through we expected in some apparel and seasonal categories, which resulted in additional markdown accounts in the quarter. Okay, now, before providing commentary on the outlook, I want to offer a few notes on recent developments of the business. First, as noted in our media release early in May, our Northern store in Fox Lake, Alberta, was destroyed by the wildfires in Western Canada. Thankfully, our staff in the community has been safely evacuated. Unfortunately, this also results in the loss of over 80 homes and other facilities within the community. Secondly, a few weeks ago, Super Typhoon Mawar made landfall in Guam. I'm happy to report that our employees are safe. The damage to our three stores in Guam appears to be minimal. However, there will be some building and equipment repairs and product loss due to power outages. Both the fires and typhoons are a devastating situation for many people across the communities we serve, and we are working with local resources to provide support to our employees and the community. All right, let's transition and talk about the outlook and our journey ahead. Throughout our history as a company, we have proven time and time again that we are resilient and that we are committed to making an impact on the communities that we serve. As noted in my AGM remarks, we are excited about our journey ahead and operational excellence strategies and a couple of key initiatives. We believe it is essential for us to be proactive, tackle head-on the market shifts impacting the business, and work on optimizing both top and bottom-line levers. I won't repeat all my comments from our AGM this morning, I want to highlight a few key points. Starting with our goal, which is to drive meaningful productivity and efficiency gains for cost savings in order to reinvest for faster and more sustainable growth while optimizing margins and delivering meaningful ESG outcomes. The key initiatives are targeted at driving efficiencies in our core business, reducing costs, and enhancing our customer value offer. This will drive sustainable top and bottom-line growth while fulfilling our ESG goals. For example, we are focusing on key opportunity areas like. One, operational efficiency. This includes things like optimizing how we transport goods across our land, air, and sea network to help mitigate freight cost inflation, reducing inventory shrink, and enhancing our store labor planning. Ultimately, these operational efficiencies will grow the bottom line. Two, improving our customer offering, creating value by creating the right assortment and merchandising it effectively. This will help grow gross margin rate from top line by driving volume of higher demand and higher-margin items our customers want. Underpinning this work is developing our analytical capabilities across the business to drive data-driven decision making that will support assortment, planning, pricing, and promotions. This gives you a flavor of what we are targeting in the journeys ahead, and we look forward to updating you that more on that as the quarters come. With that, let me open it up for any questions. Thank you. Thank you. Yes, thank you. We will now take questions from the telephone lines. If you have a question and you are using a speakerphone, please lift your handset before making your selection. If you have a question, please press star one on the device's keypad. You can cancel your question also at any time by pressing star two. Please press star one at this time if you have a question. There will be a brief pause while the participants register. We thank you for your patience. Thank you. The first question is from Michael Van Aelst from TD Cowen. Please go ahead. Your line is open. Thank you. Good afternoon. I'll start with a clarification. In your press release, you said that revenue excluding Forex was up 5.1%. Food was up 3.4%, and GM was down 4.5%. I don't understand that math, how total can be up more than food if GM was down? I'm not sure if I'm reading that incorrectly. I think the total, Mike, was, I think there's the foreign exchange piece is what's coming into that. Okay, because it, just to continuing the sentence, so I'm assuming the food and GM number was not excluding Forex then, is that what you're saying? Yes, that's correct. Okay. All right, thank you. Then, you talked about how people are shifting from GM to food, but overall, food isn't growing significantly more than what it is historically, and particularly in the international, it was down 0.6%. Is it strictly the SNAP lower SNAP benefits that resulted in the lower food same store sales in international, or are you seeing more competition or economic pressures? I would say it's. No, we're definitely not. Just to clarify, we were up.6, not that it's a significant change, but we were up.6. Okay. Yeah, sorry. In food and international. That's okay. No, we're not losing market share. There is definitely an alter or a shift in purchases, like I said, over to food from GM, but it's really just, I think the cost pressures on the communities that we're serving. That would probably have to be the summary of it. Lot less money in market, in particularly than last year, up considerably, obviously, from prior years before pandemic, but it really was... The first quarter of last year, Michael, there was still a lot of money in market, and as a result, you know, we had a very strong quarter. It's really, it's the comp, what we're comparing it against, and it's a factor of not having the disposable income that, I guess, that they have in the past, but definitely not giving up market share, and there's been no increased competition. As mentioned. Perfect. Thank you. The Water settlement payment, I'm finding it kind of hard to figure out when these are coming. Do you know anything about the timing of when those are going to start reaching the people in the market and how significant they might be? Well, we expect them to be significant in the range of the inventory increase that you see in our, on our balance sheet. We also anticipate that they're going to be coming in Q3 and Q4 of this year. To your first comment, it's not, it's not conclusive, but from the due diligence and the poking around that we've done, that's when we are preparing for it, and that's why we're ready for sales when the, when that money does arrive. Okay. Q3, Q4, it sounds like it's split up, like people who are, who, I guess register and applied for it, get it early, get it in Q3 and Q4, and then, and other people get it the following year, I believe, right? Yeah, that's correct. Okay. People are keen and, you know, probably have a number of ATVs in their eyes are a little more eager and aggressive in getting the money that we can that they can turn over to some of the things that they're required or that they're looking to get. Okay. Finally, I guess the OpEx was up, I think, 13%, excluding stock-based comp. Can you rank the various factors that you talked about that's driving this growth rate and when each one of them will get cycled? Sure. Well, staffing, as I mentioned, was definitely a big one. There's a couple of factors there. Obviously, there's minimum wage has increased. We have, we're paying more for employees. We also have some factors in there that we can't control. As I mentioned, we were slow to react to some of the volume reductions. That's something that I can assure you that we are fully focused on to bringing it more in line with our expectations and budget. I mentioned also a number of the initiatives, like this is something that we were anticipating as far as the, not only because of the inflation, but because of the money reduction in market. We've been looking and setting ourselves up in the program that we developed and the journey that I've talked about, to be more productive, to gain more synergy out of our business, to make sure we get our expenses in line over the future quarters. Some of the things obviously are gonna be a little quicker that we can respond to, as some of the things I just indicated, getting our sales and labor ratios in line at the store level, and then other things will have a little bit more of a delayed impact. We, nonetheless, know that there's a lot of productivity that we can still gain from kind of through a more of a focused approach throughout the entire business. I'd say staff costs, occupancy, and some of our occupancy costs, obviously, the diesel generator power, utilities were up pretty significantly in the quarter. I'd say those are probably a couple of the big levers. You mentioned freight in the press release. Freight seems to be coming down for some. Are you seeing that yet? We're starting to see it into the future quarters. We know that there's opportunities to bring it down, but it hasn't come down quickly enough for us to have the benefit in the first quarter. Yes, we do anticipate that it's going to be coming down in the future quarters. Great, thank you. I'll hand it over to someone else. Mike, just before you go, I want to step back, to circle back to your opening comment on the sales there. I misspoke. Like that is, I see the sense that you're referring to it is excluding foreign exchange. The numbers that you quoted there include in general merchandise. The difference that isn't there is other sales, which, the key driver there was, as Dan talked about, was, the performance of the airline in, the Canadian operations. Okay, perfect. Thank you. Thank you. Once again, please press star one on the devices keypad if you have a question, star one. The next question is from Stephen MacLeod from BMO Capital Markets. Please go ahead, your line is open. Thank you. Good, good afternoon. Just wanted to dig in a little bit on the gross margin. You know, obviously, still seeing inflation coming through on that number. Just wondering, look, are you seeing the ability to pass through price, or are you seeing inflation easing at all, sort of when you think about where you are today versus maybe compared to the end of the quarter? We do see inflation easing somewhat, but we also, like I said, we are taking a balanced approach to passing on more margin. It's particularly in Canada, that's, you know, in the international, our rate is in a reasonable position. It's more of a sales issue, as I indicated, and then managing some expenses that correlate to those sales. In Canada, yes, we do have to push on more margin, but we also have to pull a lot of the levers that I just spoke about with Michael, and that is getting more efficiencies and productivity out of our existing business. It's kind of a two-prong approach, but by all means, we do, you know, we are obviously in a situation, we do have to start passing on more of those, the inflationary pressures onto the customer. Right. Okay, okay. That's helpful. Then, you know, if you think about the balance of the year, I know lots of moving parts, but you are beginning to comp more normalized periods beginning in Q2. I'm just curious, you know, how do you view that evolving through the year? I mean, do you expect to see sort of more significant sales growth when you roll into Q2 and Q3, compared to what you've seen over the last couple of quarters? Or is it perhaps a bit more muted, just given the fact that we're seeing lots of puts and takes around things like macro and the ongoing impacts of inflation? I think my bigger opportunities are gonna be well, my outside opportunity later in the year is definitely on some of the money coming into the markets through the water settlement, as an example. I do think this is gonna be a focus on managing our back of house, managing our expenses, going back and realizing some of the value that maybe has been taken from us, from our vendors, to put it bluntly. I think there's room there for us to capture more value for our margin and for our customers as well. I do really think it's gonna be a, yeah, it's gonna be a back of the house game, and it's really gonna be tightening up and getting more productivity out of our existing business, which I am optimistic. This is something, again, I know I've spoken about it briefly on past calls and quarters, but it's something that we've been ramping up, and I would say we're ready for the challenge. You know, I mentioned some of the examples of the items or work streams that we're gonna be focusing on, and I can tell you that all hands are on deck, and it's gonna be that's where we're gonna be putting our focus over the next two quarters, for sure. Okay, that's great. Thanks, guys. Thanks. Thank you. There are no further questions registered at this time. I will return the call back to Mr. McConnell. Okay, well, thank you very much, Paul, and, we will speak to you next quarter. Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.