The North West Company is turning its attention inward as it tries to add some extra zing to its lacklustre bottom line over the next few years.
The discount junior department store chain won't be relying on acquisitions and new store openings as the main drivers of sales and profit growth
Company president and CEO Edward Kennedy told a packed annual shareholders' meeting Wednesday in Winnipeg the discount junior department store chain won't be relying on acquisitions and new store openings as the main drivers of sales and profit growth.
Instead, it will grow by focusing on improving the performance of its existing retail operations, which include 223 stores under the Giant Tiger, Northern and NorthMart banners in Canada, AC Value Center in Alaska and Cost-U-Less in the South Pacific and Caribbean. One of the ways it hopes to do that is by spending more time and resources on further improvements to its 40 best- performing stores and on expanding sales in its most profitable product and service categories.
Those are the areas that offer the greatest potential for growth, Kennedy explained, and should produce the biggest bang for the buck.
Shareholders were told 2013 was a challenging year for North West because of increased competition from online retailers and discount-retail heavyweights such as Walmart and Target. Economic conditions also weren't the greatest in some of the remote communities where its stores are located.
As a result, the company saw net earnings grow by only 0.6 per cent to $64.3 million from $63.9 million in fiscal 2012. First-quarter financial results released Wednesday showed while sales grew by 3.2 per cent to $376.3 million, net earnings declined by 1.8 per cent to $12.7 million, or 26 cents per share, from $12.9 million, or 27 cents per share, in the first three months of 2013.
The recent lacklustre performance prompted one of the company's longtime institutional investors -- Quebec-based Montrusco Bolton Investments -- to propose a number of changes to the company's executive compensation packages. It also wanted North West to go back to focusing on Northern Canada and Alaska, where competition isn't as fierce. Shareholders rejected all five proposals by an overwhelming majority.
Kennedy said the company will be devoting about half of its capital spending to improvements at its 40 best-performing stores, and will be devoting more in-store space and resources to further expanding sales of its most profitable products and services. That includes such things as fresh and convenience foods and health- and financial-related services.
He told shareholders the company won't halt new store openings altogether. It expects to continue adding two or three new Giant Tiger stores per year in Western Canada.