Edward Kennedy - CEO, President and Non-Independent Director Amanda Sutton - VP, Legal John King - CFO and EVP

James Allison - Barclays PLC Matt Bank - CIBC Capital Markets Evan Frantzeskos - TD Securities Sabahat Khan - RBC Capital Markets Stephen MacLeod - BMO Capital Markets

Please be advised that this conference call is being recorded. Good day, and welcome to the North West Company Inc. third quarter results. I would now like to meeting over to Mr. Edward Kennedy, President and Chief Executive Officer. Mr. Kennedy, please go-ahead.

Good afternoon, thank you, operator. Welcome, everyone, to over Third Quarter Conference Call. Joining me today are John King, our CFO; and Amanda Sutton, our Vice President Legal. Before I continue with the call, I'm going to invite Amanda to read the appropriate disclosure statement.

Thank you, Edward. Before we begin, I remind you that certain information presented today may constitute forward-looking statements. Such statements reflect North West's current expectations, estimates, projections and assumptions. These forward-looking statements are not guarantees of future performance and are subject to surrender is, 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 and again, good afternoon. I'm going to start the review with our Canadian operations go through our in Canada then into International and provide more information largely in our RTS on the impacts of our business tied to the hurricanes that affected the third quarter. But first, starting with Northern Canada Retail. Our Northern Canadian business had a pretty good quarter. We were pleased with the comp sales performance over there as well as our overall plan towards more increasingly convenience type items and fresh. Those are focus points of our business. The CAGR quite strong and the margin blend has been very good as well. On the other hand, there was one drag on our business, a couple. One was little smaller still a distraction. It was a -- we had a climate event. It was a series of wildfires in northern Manitoba, evacuated 7000 people from markets we serve. Several stores were closed. And we recovered the bottom line hit wasn't large, less than $1 million, but still it was big deal on our business took a lot of time of people in an effort to deal with those evacuations. More material to us is the effect of higher air freight costs as we ramp up our own airline and cargo service, we are adding equipment. We've had to not much deal about going to those investments actually faster instead of third-party aircraft we plan to lease. In the quarter, we acquired two ATR aircraft, one of which is no repositioned from Vietnam and they were low hours cycle time aircraft, very attractive price we felt. And completely consistent with our fleet build out in terms of expanding our territory coverage with the with our vertical air cargo service. In the meantime though, we're having to do over higher air freight rates that were imposed on us early last year on an annualized basis and the $3 million range. We've chosen through the year and and probably should have talked a little bit of this more. I don't think I got it deeply into this right now, but we chosen to absorb those costs fully and to then offset them as we cost savings our air lines cargo service instead of adjusting prices. Typically, when there's freight rate increases, we do pass them through, but in this case, the nature and scope of them, they all localized, they were really didn't make sense. And as actually challenged step back and look at our pricing and will lead overtime for us to move more so into the zone pricing as opposed to location specific pricing, because we understand now look at the network of over stores the net cost-savings spread little bit here and there across all stores some of these third-party contracts didn't make us much sense to us and allocated costs. So in around way it meant that we weren't really to do that yet and we felt that with the two planes coming on stream in Q2 next year, by the time they are reconfigured for cargo, that we should wait. So I'm just letting you know that because there is another headwind. I think where when we talk about the entire seasons cargo airline at the beginning of the year, even before that, when I talked about having more influence not control over the efficiency and service levels over cargo service that these were headwinds and certainly, into 2017 it was a big factor on the freight cost side of northern Canada's business. All that being said, the northern Canada business is doing well. And seasonally speaking, we think our comps in Q4 are going to be quite good and stronger than Q3 because of colder weather and just the transition we've also achieved in terms of consistency and the growing pains that we are taking place in our airline build-out as well as our conversion over recent distribution from southeastern We did have some continuing growing pains that consolidation service at Montréal, which is now starting to stabilize. Turning to Giant Tiger. No tougher situation Giant Tiger in the sense of margin situation and food. We are we offset some of that without better blend of soft goods at hard goods. We see that continuing in Q4 for sure with again colder weather begin editing in November and December. And its a big focus points for next year as we get over nonfood or soft goods at hard goods blend, which gross profit standpoint is quite the rate of of our food rate into our sales at a higher blend rate through safe allocation, merchandising promotion et cetera. In the meantime, we do have a drag to GT in terms of fruit gross profit rate and being 55% of our business compression, which is another five months cycle through really promotional pricing to defend traffic and share that would have been in June, July time frame so we are still incurring some of that margin compression. But in Q3 and starting into Q4 ,we see the offset and blend from, again, soft goods at hard goods. Turning to international commercial company our AC division had a decent quarter considering the overall muted economic environment that they do business in flat season. And they have again and we find it to be very, very consistent and somewhat of a dependable division for us they hold and gain market share, they control expenses offsetting any margin challenges, continue to grow their share on in comp basis. We did have one store closure in a quarter. This doesn't happen very often, but it was something that was coming up lease expired and they decided to take a store back for themselves, which is perfectly fine and also within their rights on St. Paul Island. I would just point out that this, again, happen very, very rarely and the number of times also occurs is usually, probably 5 in 1 or higher basis. So we recognized that this was a possibility and we're moving forward now. So now I think the bigger news for us certainly in the quarter it's going to be a factor for the next year to 18 months and possibly even two years is the Caribbean region that affects cost to us and RTW, RTW being the acquisition we made last February cost to us down for 10 years. And we have seen the effect of weather in all parts of our business. The scope and the severity of the hurricane that hit -- the two hurricanes, Irma and Maria, did impact our business. We disclosed that in our RTS we mentioned that the EBITDA impact $11.5 million and $1.6 million annualized $6.6 million EBITDA. We will be back in business. We are quite confident. And we're seeing right now on the that as we adjust our cost structure and having a very strong local go-to-market position, even with that Island still at a I would describe as a severe state of devastation and the recovery road is going to be longer, definitely is not going to be a tourist season. We have a very healthy baseline of business. In part because we are primarily for retailer over 85%, and we are a very strong market position in those key essential categories. So as we adjust cost structure and remain very large in the local marketplace, we that to us and where the base businesses is and encouraging. That's the We still have 3 stores closed, but we recapped -- recoup, pardon me, about 85% of the sales through our existing stores. The wholesale businesses is challenged because a lot of the accounts aren't open. These are businesses that are closed and many will be opened but its going to take time. Moving to St. Thomas. That's the store that was totally destroyed. That store is going to be reconstructed. We are working closely with our insurers. We have received significant insurance proceeds already and will receive more next year to completely pay for the replacement cost as well as the insurance. So it's really about getting construction, making sure our plans are exactly what we want them to be. And again, we feel in that market, we have a very, very strong position. There will be some retailers that won't have a stronger position and won't rebuild and won't reopen. And I think that's a function of may be physical capacity, the strength of their inherent value proposition and the fact that the markets are going to be economically challenged for, let me say, 1, 2 years in the case probably even longer. So we factored all that into our planning and we believe that given the strength of our format and the business volumes that we've done before and everything we can do, we're one of those retailers that is resilient and that will be not just a survivor but one that can actually be optimistic in this environment. And I'll just say that we've been to other islands and looked at situations and the one hand you can say that the risk profile higher, but on the other hand, I think, there is not by the time to look at opportunities for growth in accretive acquisitions. Turning to Saint Maarten. The situation there is a little bit different. We are partially open to keep our brand equity going because we can. The store is not totally destroyed, its partially damaged. It's going to be nine more months. I think that's the conservative, but realistic estimate of what is going to be take to reopen the store time wise completely with refrigeration. We're in dry groceries there today. And again -- actually unlike St. Thomas, there many more supermarkets that are damaged or destroyed. And we feel good that our prior position in the market was more than strong enough to justify us recouping and even in subdued economic environment, we will be one of a fewer retailers reopening, I think, just because of their other situations, but we have a very good chance of getting back our business volumes in that market. As we go through all this though, it's a definite transition for us because we don't have those stores open or open fully. And we recognize that that's an impact on our bottom line. In the interim, cash flow wise, the insurance will cover whatever goes out of door for the construction and most of our loss profit opportunities. So that's really not the point here, it's more how we react, the kind of stores we rebuild, and both of these top market stores when you think about program, I guess silver lining, we just funded two more Top Markets stores. But also taking the best of our ideas to rebuild the right type of mix layout and every element of our value proposition will be fine-tuned so we bring the very best of our thinking to these two marketplaces. That's essentially where things stand in the Caribbean. Briefly in the Pacific side, it was an okay quarter. The challenge there it might not be obvious, but we have critical forces effecting the island Guam, specifically the North Korean threat, which has affected tourism into Guam and we are starting to see some impact on our business line on Guam. Otherwise, it's a steady state in the Pacific region. I think that covers. John, is there anything else from the quarter looking back that I have missed? I will talk a little bit about strategy and outlook. I that the fourth quarter I mean, it's been strong especially in our northern businesses because of the weather been favorable, the cost you less side that I think I've covered already. From a strategy side, there is a change in a little bit. We have the top category top market work we Top Markets work, although this product in the pipeline that make next year's CapEx little heavier. Our is to get back to our CapEx at a deposition rate of spend on the sustaining side and we recognize that the big jump of that Top Markets work was showing up as a sustaining CapEx that envelope it's going to take one more year for us to get to that transition because we have this confluence of insurance spending, which is insurance proceeds. We do have the carryforward of over product enterprise IT initiative. So we've got out of the year of heavier spending there. And then as we continue to ramp down Top Markets transition it over a longer period. We got that overlapping. So that would be the biggest reason that you should still expect to see CapEx next year north of $100 million, of which $22 million or $23 million would be paid for through insurance and then the rest would be the combination of over product enterprise, continued spending and Top Markets and the rest of our maintenance CapEx. The other point I'll make, again, on the side is we have a focus on Pure Retail, which is simplifying our stores, all of our processes. We do have technology coming on stream that's going to help us not of just the way we work and free up our store managers and key people's time to really sell and we see that being a big win for next year. Its a sort of an added initiative that we felt was very foundational and that we probably had missed on for a few years now as work was loaded up a lot our stores with lot of good ideas, but not as much time for execution. So that's what's what behind the concept of Pure Retail. And the final point I will make about next year is that it is a very important year for our air cargo initiative as we on board two planes, expand our road network and not so much stabilize but integrate the business now as we get fast growth now some even volumes to really measure engage with the benefits going to be. We're optimistic we're making the right decisions there, but we also know that it's going to be an initiative that takes several years to fully mature. All I'm pointing out is that we are very much in a growth integration point with the two planes coming on and building a hub in Thompson and once we get together, we can pause and start to realize the benefits before we move forward at a faster pace. Operator, I will turn the conference now over to questions.

[Operator Instructions]. The first question is from James Allison from Barclays.

Just a quick question on Giant Tiger and the West. Can you talk a little bit about the current outlook for the consumer? I mean, that looks like inflation is written are you seeing any tonnage growth in the marketplace?

It is getting better. We are seeing some tonnage growth across our grocery categories where we didn't start the year but it is very small. I think one of the challenges that we are getting over right now I mentioned midyear we were still promotional spend. And I feel that we were chasing the market a bit there and chasing traffic quoted in basket basically and then basket. So because we started that in June, I don't think we're quite the same as some other retailers that might be saying that seen inflation. We're still comping a less aggressive promotional strategy. We're watching carefully week-by-week actually to see whether we are over working. But right now, it's still deflationary for us. So that's very specific to our business in the West. More generally, I see a little bit of the foot coming off the gas in the marketplace and some of the pricing, which is good. But as I say, we were a little bit behind. So we're still up against our sales and we create our own deflation to make sure, we're in the game we need to be in the discount site and that make sense to you.

That's great, I guess, just switching gears and looking at capital allocation. I mean, it looks like I had CapEx spend this year and I guess, lesser degree next year and again, with implications from the hurricane damage in business disruption, how was your thinking changed around the potential dividend increase by year-end?

It hasn't. I mean, the thing with us here is dividend that we pay is based on a lot of fundamental longer-term views and principles about the business. And every lens report against events buying airline, the acquisition for acquiring accretion and the business has a risk profile that make sense tied to our overall business that's a plus. The hurricane itself from a cash and cash out standpoint, I guess not the right word self-funding, but we it doesn't dividend picture. The more bigger is variability. It's called the beta or the deviation, I should say, on our cash flow and we have downstroke risk that's more inherent to the business we run, not how we pay for hurricane. So I don't think those factors will come into play, but we were still look at the inherent strength of the business and say, what's trending, is cash flow trending up, is cash flow at least able? And if answering yes to the first one then we think that sustainable this could be a dividend increase for sure. If its the latter then we at least have strong stable strong stable we probably that way too. Really depend on obviously things in the next few months.

The next question is from Matt Bank from CIBC.

I wanted to ask on Alaska and just how consumer behavior has been trending. And can you talk about are you seeing consumers having or spending in the face of this economic uncertainty? And also how in the real area that you're in specifically?

Yes, well, it's interesting was flat. We had a bit of a tailwind from an excellent commercial efficiencies in the summer. So people had paychecks and income to spend in Q3 that helped. I think it also showed that the economy marches to its own tune to a degree. It picks up tourism, if the passenger ships volumes are up which is lower 48 economic health and commercial fishing is irrespective of the whole economy. I'm not saying that its like everything is great in Alaska, but the overhangs and the seems to have certainty around we know where it is, but the uncertainty is more along taxation. Its incredible we've gone now two years without resolution in the state legislature sales tax, income tax, et cetera. So that still an overhang, but the things suggest that the unemployment and the layoffs oiil have leveled off and that the worst is behind us so the psychology of the state is better. I think in Alaska its kind of derivative. What we are seeing that has still effecting negatively. It again depends on the region because Alaska is a constituency of many different regions, but the one negative area that remains is the the North Slope native corporations large regional is tied to oil revenues, tied to oil prices and little bit better there is still down off obviously they're high. So we're finding that there's less economic activity in Alaska a couple of markets those two specifically. As you around go down the coast of Alaska starts to pick up and we head into commercial fishing regions it's even stronger. So, I think, if we look at 2018 and compare it to '17 and '16, we feel better that hit the base in Alaska and the drop on whether it's income tax, which wouldn't really effect our people's much, sales tax would be a negative, but there's enough resiliency there now, for example, $300 million hospital project Alaska, employing well over 1,000 people in construction through the course really good news for us. It is an example of where things going to happen in Alaska that are just different from what's going on in in Juneau. So long answer, but I we're we are more positive of the economy and we think the psyche of our customers is improving. We can't predict another great commercial fishing season, but we know that Alaska, which is our larger store in Alaska, is going to have a very good year because of all the income from the construction of that hospital.

I wanted to just trying to get a better idea ramp-up of North Star. So when the acquisition was announced, you talked about $8 million in annual EBITDA run rate, savings. So with these two new planes are ramping up Q2 next year, when do we start thinking about actually hitting that level? And then how does that look until then?

Yes. So Q2 and that's precisely it would be for us more like P5, which is the second month of Q2, was when we'd have both planes in service target. When we -- I won't give you the forecast for that division broken out, but we would expect EBITDA we would expect to exceed that EBITDA on an annualized basis next year. But we wouldn't be hitting that annualized run rate until the end of P5. So that's all I can say. I mean, that's the fully operational NSA as we envisioned Phase I, Phase II. Phase I being taken over business, Phase II central Arctic. And then, we pause and take a look from there.

Right. And should we think about that being dilutive until that point given the freight cost increases in the ramp up phase?

I think you have to look at dilutive, not so much the acquisition being dilutive, it's more of the compression on our margins. So you've got two sides of the business. There is the cargo side where there pricing northern stars and then the northern stores current freight rates, which are high. On a comp basis, we have another two quarters to go through on that. So I think actually good to stop by February because we'll be copying from last year. That is not dilution we just don't pick up the EBITDA fully until we take that for ourselves in P5. So I kind of overlook that point at the started by saying in my comments about the $3 million we're going to cycle that by the end of February. And then, it's going to be waiting for the planes to come on and replacing the service with North Star.

The next question is from Evan Frantzeskos, TD Securities.

I'm filling in for up Mike today. Just a few questions. First, I guess, on the hurricanes. You mentioned that there was a $1.6 million impact on EBITDA from the store closures. Was there any other that were in the EBITDA number in a quarter that were tie to the hurricanes like cleanup costs or extra labor costs that you would quantify?

Evan, no. That was the net impact.

That was a net impact? Okay. And I guess, then looking at your outlook statement for Cost-U-Less. You mentioned that you expect the performance of the stores not affected by the hurricanes to be flat in aggregate. Would the entire Cost-U-Less business be flat in aggregate if assuming you get your business interruption insurance so would that business interruption insurance makeup for the lost profits from those stores for next year?

Actually, no, Evan. Because the receipt of the business interruption insurance is going to take a while. As we put in the document in the MD&A, we expect the insurance be settled 12 to 15 months. It's the very last part of the policy that settles. And so there's going to be that drag, if you will, that gap in earnings until we settle that and then we open the stores.

Sure. But understanding that there is -- acknowledging the fact there is like timing differences for the receipts of the actual cash. Would the proceeds be enough to cover the loss business to make you flat with the previous year?

I'm

No, I think I understand. Actually, I think the answer is, no, because may not cover replace the store at St. Thomas. The coverage is 12 months. So its going to take 12 months to open St. Thomas, yes. We're looking at 18 months there.

I guess, okay. And then, the final question. In Canada, your outlook statement in the reasonably optimistic, but it doesn't seem to reflective in the same-store sales numbers in the quarter. Have we seen the full benefit of the infrastructure spending in the mining activity in the quarter? And just being offset by Giant Tiger? Or is it more still to come?

Definitely Giant Tiger offset we talked about economic in the North Eagle is on the verge of ramping up activity with their gold mines, but they're not there. Government spending is okay. I think we probably we were more hopeful that would be a bigger factor. I think when out counting on and seeing that's government investment taking place, but its all over the place in starts. But the factor is starting to pick up more. So when we sit down and look at our forecasting for next year, our comps are pretty good for northern Canada and they've being not bad this year. The challenge we have is on the Giant Tiger side for the comps and one can offset the other. So that's the nature of it. I mean, the other pieces you mentioned investment. I think Top Markets have been very strong that way, but it's just did take a lot of maintenance CapEx. So we've looked that at whether we should -- do we keep dragging accelerate it even go back to I think the answer is right to keep dragging it out. We only push the sale so much in the environment we're in. I think our shift to convenience categories is paying off on margin blend. And I think the airline investment is good to do that a lot for us on the cost and service side. So all these will help. What you will see more of next year if he hit our targets, if margin improvement in northern Canada for sure and then on the Giant Tiger side, we expect to comp some of the toughest sales challenges we faced and keep working on that plan. So I think the piece has bottomed that way we might have one more quarter with the Giant Tiger drag. It may not going to be this quarter, it could be Q1 because this one is shaping up whether to be stronger topline seasonally. So those are kind of all the factors going on that we see and we keep looking at the Canadian business in the North and we keep liking it because the fundamentals are still healthy. It's up to us to figure out how to get the most with our business and fundamentals and we've chosen do it through the convenience route and focus on our top stores and the freight side. So they are now running cargo one is coming in on by mid-next year, convenience, we keep tweaking and getting better it's been very, very good for us. And the Top Markets, we've learned that not, but as I say, we decided to spread out a bit. And if there is any upside that if you could say it's optimistic, but I think on the side, we could be surprised there in 2018.

The next question is from Sabahat Khan from RBC Capital Markets.

Just kind of following up there on kind of spend by the government in northern Canada. I guess, do you have any minor side to some projects coming online? Or is it still general expected ramp-up in the money promised a couple of years ago in the budget?

We have an excellent line of sight on school construction and we know which markets those are going to be in. One school can $60 million. So its not like there is 20 schools going into our markets, its more like 5 or 6 but they add up to a lot of money. There is the port work that's the all season, but its a significant investment in the harbor. The housing budget went up. I think the its not enough but it never is. But that is spread across the territories. So we do expect to see more housing starts. There's some airport reconstruction in the north as well. I don't have the numbers in front of me and what that adds up to a as a percentage of GDP. But our numbers tell us, it's about 30% more than the run rate of say the previous not counting last year, which wasn't bad, but the last five years before that. Sometimes the noise is, again receiving government feel even more but there is -- its just that its very locational. When you talk about $50 million into a school and your GDP is only $1.3 billion and that's one school in one community only, that's the nature of what we deal with. So I know it's not giving you a great with the best answer I can give you would be when child benefit payment gets indexed, which it now is that's $30, $40 more in peoples pockets and that helps. So that indexing starts next July and that was great news. We love to see the hasn't been touched in six years and that would be very helpful change for consumers, but we don't see that coming yet.

All right. Just on the hurricanes, you did provide some detail by store. I guess, at a high level, if you look at the $92 million worth of sales across all of those stores, would you say, potentially, like a 25% to 30% of that sales or more could be impacted at the high-level just given stores under construction may not have full run rate?

That 92 is going to be all next year

I think that's the question.

How much of that

Okay. It's also next year, yes I'm with you know, I'm sorry. When we get San Martin opened within nine months, that will take care of I can't give you San Martin sales but a significant percentage of that will be taken care of when we open the Saint Maarten store. The other one the three small stores in BVI we can't compel the landlord to go any faster in each of those sites, its different landlord actually, but I suggest that the BVI recovery is more tied to the general economy BVI than it is to those three stores. They were small to begin with and we've seen migration. Before the tourism seasons hit, the high season, we were seeing lot of recovery of those shoppers into our main stores, our larger store that opened unscathed. But now tourist season, its another challenge because the tourists haven't shown up. So we have more effective supply than the typical capability of the stores to receive sales as the customers spend the money and that's a general reconstruction theme. So of the $92 million, we look at a significant portion back by Q4 next year. Again, I can't be specific giving you store sales and I don't do that for competitive reasons. And then, the rest. I mean, the other big chunk is St. Thomas store, which will come on stream the following year.

Thanks for that color. And then just last one you put commented on Giant Tiger margin. And if I caught that correctly, you are saying that soft and hard good margins are twice that of food and you are seeing a greater mix of these soft and hard goods because promotional color on the

What saying is we've got and this is something that really a gap actually soft and dry categories different reasons going to at length. But I wont but briefly, when we launch this chain I mean, the brand awareness for GT was zero in the west, of course, but the gravitation was to food and we built this food franchise now stronger softer targets franchise. When you walk in Giant Tiger store, you do walk-through apparel, fashion women and children then you have a great seasonal and great home and decor and hard-line items before even you get to food. Food is a traffic driver, no question about that. And we've been shifting more of that as you walk through the store, that promotional space, to make sure we're not selling or promoting more food than we want to get the job done having customers coming to the store. But we're coming from our point that was actually not a weakness at all when margins were higher in food, it was great. You turn the food fast, you made enough cash on it. Now that it's got a drag attached to it, we are highly motivated and we're learning everything we can from Giant Tiger and blend gap. So I wont tell you, but every 0.5 every 50 basis points of blend shift is huge to our bottom line because of the other metric I give you, which is the profit and gross profit rate. How we're going to do that explaining was merchandising lot is through better practices, if the structure and skill of the store, the specialists that support the store that they are all focused on key item merchandising having to order for that's school to completely at the level of the best stores that Giant Tiger runs. And then, overtime, building that blend up closer to what they have in the east and not being dependent on the food to drive gross profit dollars, because at the rates that were achieved now, we're never going to get the returns that we want in that business. We need to do it through hard and soft goods, which is still a very compelling part of GT value offer. It's not that every store is in trouble this way. We have a lot of examples stores like that. We just need to bring more along the achieve that blend shift. And that's got to tell the tale actually Giant Tiger's performance, more so than what's happened over the margin compression in food. It's going to be whether inflation comes back or not, it's going to be our success on that blend shift.

[Operator Instructions]. The next question is from Stephen MacLeod from Capital Markets.

I just wanted to follow-up on GT discussion you were just talking about. Like how easy is it for you to change the shift? I mean, if GT was really established in the West as a full retailer or food traffic driver what's your confidence shift that mix more towards soft and hard goods side?

The confidence is good. It's not excellent because we haven't done it yet. And I'm only going to say this because the mentality of where we spend our time and never focus and never effort, we felt and I said playing catch up on the food side to get the food pricing and promotion right to really make sure the pricing images were our in isle price reduction program, the key items that we're on at, fine-tuning the assortments. So even though we knew about the blend issue, we're kind of obsessed with making sure that we weren't dropping the ball on food. And I'll say this one more piece on food that we will address and its the vendor costing side. I think coming on chasing the cost that we need to support the retailers that are in this market and that's going to be a big focus. But most of the rest is behind us. So now it's okay. What else is going on here that we could influence? So what gives me confidence is focus. I've seen Giant Tiger do it in the East. I've seen stores we have in the West do it. So I don't see why we can't. And I don't need to get all the way to the Giant Tiger east blend, 50 basis point, 100 basis point blend shift, 150 over a couple of years, these would be big, big shifts. They don't sound like much, but again with those metrics, they add up. So I can't tell you that its a slamdunk because we haven't done it yet, but I can tell you that it hasn't been a focus. We've actually been situation where we had to things that are popping up on the food margin and competitive side. And now that we feel stabilized, we know what to do there. We can stay focused on the soft goods and hard goods.

Right. Okay. That's helpful. And then, you mentioned in your prepared remarks just your Pure Retail initiative. Can you just talk a little bit about was that entails and how it differs from your sort of Top Markets?

Sure. First of all, it's all stores and it's a mindset that starts with process and goes to people. And the matter behind it is we wanted the stores to our store best in the company. And it leads back to have an oversupply of people for the positions that we have in terms of the quality and the quantity of focus that we will do this work. Before we get there though, we have to make this work, these roles, structure and highly executable. And the first way to start is process. So we are taking a lot of work out of over stores, measured in hours, redeploying that to selling, actively managing our people and serving customers. You can measure all that and we'll be reporting on it as we go through the year and you want to know what it means. Of course, the downstream effect of it takes a bit of time. But we're confident what we've seen so far because of last one month, 1.5 month priority. It encapsulate our people capability because like I just said, start the process if you get the people. And we felt that's been for us as we more programs in the stores. Well, if you've been following, of course good service, that's very time intensive, its management intensive. So something else has to give always had Top Categories. We haven't process wise on that is nonselling by nature that isn't doesn't meat a very high threshold of is it value to the business we need to have this information, these reports, these process control steps even. Are they really control steps we need, if no one is using them to the value their cost in terms of time and effort. So all that's going to the mix. It's been enabled with the automation we have with our -- which is not coming immediately, but with automatic replenishment, probably 18 months, two years away, but the platform for that advanced scheduling for workforce is coming on stream next year, its part of our suite of products. But first clean up of our process before we put the technology. And I am really bullish about the mentality that comes with that, the attitude set in our office and our It may actually add some cost some manual steps to get ready. Because we don't want to steps store things we do in the office that help stores out. But it's really a good evolution of the way we look at our business from store backwards and to the customer backwards from our stores. And that's what's behind Pure Retail.

There are no further questions registered at this time. I would now like to turn the meeting back to Mr. Kennedy.

Thank you, operator. Thanks, everyone, for your questions. On behalf of John, Amanda and I and everyone at Northwest wish you all a very Merry Christmas and happy holiday season and a new year as well. We forward to being with you on our Q4 conference call in March. Thanks, again.

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