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

Thank you operator. Good afternoon everyone and welcome to our first quarter call. Before we get started with the content of the meeting, I would like to -- pardon me. Let me introduce everyone first. Besides myself here today are Dan McConnell, President of International Division and the incoming CEO this summer, Amanda Sutton, our Vice President, Legal, Counsel and Secretary and John King, our Chief Financial Officer. So before we get going, I will ask Amanda to read our disclosure statement.

Thank you Edward. Before we begin today, I remind you that certain information presented 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 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's Annual Information Form and its MD&A under the heading Risk Factors. Edward?

Thanks Amanda. So as we all know, we are reporting our fifth quarter that's affected by the pandemic. And unfortunately in many ways, it's still with us but also when it comes to sales forecasting and some of the business uncertainties, through the rest of this year and probably on a comp basis into part of next year as well. So we will keep coming back to that as we are talking about results. In total, we were pleased with the sales momentum as much pre-COVID comp period which would be mid-March to afterwards. We had a very, very strong April in 2020 that we knew would be difficult to comp. But now, we are through that behind us and May was strong as well and we have shared some of information in our financials about where our quarter-to-date results are I will come back to that when I talk about the outlook. So today, I also want to advise, because on this call, this is the entire team that would be handling the call, but otherwise Alex Yeo, who is President of our Canadian Retail Division has left North West and is no longer a part of the executive team and today I will speak about our Canadian business, talk about the outlook. But before I do that, I would like invite Dan to cover the international quarterly results and talk a bit about our outlook for that part of the North West business. Thanks Dan. Over to you.

Thank you Edward. Good afternoon everyone. To start, let me briefly touch on the current transition process. Over the past couple of months, Edward and I have been working closely together on this process. We have been following comprehensive agenda to ensure an effective transition. It's going according to plan and there's not much more to add at this point other than the process is going very well and I have huge shoes to fill. That being said, I am happy to announce the addition of Kevin Proctor as President of Cost-U-Less. Kevin has over 20 years of experience in the retail sector. He has developed and reinvented brands and also led store expansions as COO of the Digicel Group, as Chief Investment Officer for Lidl and most recently as the CEO for Save A Lot. He brings extensive experience in building and mentoring teams as well as driving sales in highly competitive markets. We are confident he will continue the CUL's track record of profitable growth and lead the business forward. Now regarding the next Alaska Commercial Company President, we expect to make an announcement in the next up and coming weeks. With that, let's shift gears and discuss results. International operations has had a positive start to 2021. In terms of sales for Q1, we were able to keep our market share and hold our ground. We knew the comparing sales performance against Q1 last year could be challenging considering all the stock-up buying that took place. As a context, last year's Q1 same store sales increased by 16.3% against 2019. For this year, total Q1 sales increased by 3.3%. On a same store basis, we were basically flat to last year. Speaking to the macro drivers for this performance, we still see consumer spending shifts present. Also, income support through the $1.9 trillion American Rescue Plan launched in March by the Biden administration is another big factor for our U. S. markets. And lastly, we are seeing COVID-19 related mobility restrictions being gradually lifted as vaccination rates increase, particularly in Alaska and some of our U. S. territories in the Pacific and Caribbean Islands. Let me start by talking about general merchandise sales. This quarter, they increased 30.8% on a same store basis. Fewer supply chain, assortment and adventuring campaigns were top focus. Our procurement and logistics teams worked diligently to not only have a well thought of assortment strategy but also on reaching the market on time to meet demand fueled by incoming funds from the American Rescue Plan. In Alaska, this was coupled with less mobility restrictions, given the high vaccination rate which allowed customers from nearby villages to shop in our hub stores such as Bethel. Similarly with promotional events like get outdoor camping and our AC Banner, we were able to capitalize on that same trend of reduced mobility restrictions. Overall, categories like entertainment, media and home furnishings continued to exhibit strong results. In addition to the American Rescue Plan, one of the other key drivers of sales in our Alaska stores is the USDA Farmers to Families Food Box Program. Our unique ability to reach under-serviced rural communities positioned ourselves as an instrumental part of the government in providing packaged produce, chilled food and meat boxes. Our AC Banner better team has also delivered from and in-stock and assortment standpoint on the food side, leveraging our relationships with vendors and performing well in categories such as beverages, meat and frozen products. The Food Box Program was extended into May which will us against the strong sales from Q2 last year. In our Caribbean and Pacific U. S. territories, positive results were based on the same tailwind factors. In addition, we have been observing a gradual return of tourism in markets like the USVI, given low mobility restrictions with vaccination rates that continue to show positive trends. This has help to improve our performance on categories like fresh produce and alcohol. On the flip side, headwinds in territory markets like BVI, Saint Martin and Curacao continue as income support is lacking. Although vaccination rates are improving and mobility restrictions are slowly being revisited by the government, a meaningful tourism reactivation has not been observed. It's probably important to mention here is that territories like Barbados and Curacao did suffer from a resurgence of COVID-19 cases earlier in the quarter. This triggered curfews and mobility restrictions from the government that affected operation hours of our stores. This is a very different situation to what the U.S. markets are currently facing. More recently, BVI has experienced a COVID-19 resurgence which is why we are doubling down on our health and safety protocols. Now speaking to gross profit rates, it's worth noting that they were possibly affected by a higher blend of general merchandise sales and an improved sell-through that lowered markdowns and inventory shrinkage. Lower blend of Cost-U-Less sales were also a factor since they carry lower gross profit rates given its format. These sales and gross profit factors combined with well controlled expenses were the key factors contributing to the 21% increase in earnings from operations in the quarter. Looking ahead, in international, we are expecting lower earnings compared to the strong earnings in 2020 as tailwinds discussed continue throughout the year but we are expecting overall good results on the CAGR compared to 2019. As income support dwindles on U.S. territories around the fourth quarter, economic activity on some of our tourist dependent markets are expected to pick up somewhat dependent on vaccination and mobility restriction levels. That said, the consolidation of the positive trends to keep the market share gain are top of mind for the international team. In Alaska, we expect to continue growing by expanding our footprint to new markets, adding three new stores in 2021. We also are working hard on replicating our success with the USDA Food Box Program. Over the next two years, Alaska has $500 million allocated to tribal governance by the Biden administration. And we are positioning ourselves to serve them as strategic partner through B2B contracts or specific purchases required by the community through these programs. In our Caribbean and Pacific regions, we will continue to focus on improving our execution of the stores, our assortment and our product flow. We are gearing up for our tourist dependent markets to be prepared for the potential economic pickups by the end of the year and be ready to meet that potential demand. Although, this is still uncertain and fluid, we need to be prepared. We are also quick to navigate supply chain challenges as well as cost of goods and freight rate pressures. We are leveraging and actively strengthening our relationships with carriers as well as vendors to mitigate these impacts. Similarly, inflationary pressures will be balanced appropriately through pricing, keeping our customers in mind but also considering competitors and our required margins. Lastly, I would like to mention that I am proud of the tremendous efforts done by our team this quarter and I am confident on the path we have outlined to grab the opportunities and face the challenges ahead. Thank you. And with that, I will turn it back to you, Edward.

Thanks Dan. That was, I think, a great summary of the different market situations. Before I talk about Canada, I will just maybe add a bit to that observation. The American Recovery Plan is, we are recognizing, an increasing factor and in the income that will be available to international shoppers in U.S. territories and the state of Alaska and Hawaii where we have stores. So it has kind of a dynamic on the upside, increase our confidence on positive comps in the international division. When I talk about Canada, it's a bit different. Again, it varies by region and community. We had a very, very strong, as I said earlier, April and we have now gone through and comped our very strong May result. Sales in the last few weeks have been positive. But for the quarter, they are down. We filled our full quarter-to-date performance at minus 6.6%. Just to give you a sense and not to, we are not overly concerned. That, to us, is exceeding the expectations. And when we look at it over on a 2LY basis, over two years, it's a very, very strong increase at 25%. So we like the trends overall. We think we are resetting our base sales and earnings to something higher than we would have otherwise not achieved through a lot of hard work and some good timing. For example, our airline is well positioned. We have the fleet to take advantage of higher business volumes and to start to go after third-party cargo as we sort of confirm that we invested in through our acquisition of a wide door and a cargo ATR 80 coming to the fleet at the end of Q3. Just to back up a bit on Canada, again the numbers are decent and more than that in terms of the 2LY. We think we have got the two toughest comp months behind us but now we face the positive for society easing of COVID restrictions. We know there's going to be again some setbacks which will make this probably throughout Q2 still fairly restrictive for mobility and I will just point out this week you may have seen an outbreak in Port Alberni was in the news, 46 cases, even though of the Indian variant and that's in a community that has 94% uptake of first vaccine. So it's really important that second vaccines are distributed broadly and they will be in the next two months across Canada, but especially in the north where there's been great take up overall. But as you can see with the new variant, even one dose makes you vulnerable or you remain vulnerable. Other areas that are of notice and a little bit of concern for us are product availability. We are no different. It's supply chain stresses are worldwide today. It's hard to say. But at least, we had a very, very strong general merchandise nice quarter anyway. And that's where the stresses really are. But we are getting into the neighborhood of $5 million to $10 million of sales in big ticket categories that we just can't get our hands on the product for. And I am talking specifically about motorized ATVs, snow machines and electronics. Furniture is a different situation with the tariffs and duties that may be reversed. But in the meantime, it caused a bit of grief. We will get through this. It's not obviously the ideal situation because we know that our customers when they have the income and if they are shopping and staying closer to home where there is a store. So it's just one thing that we are having to contend with probably through the next quarter. A couple things I highlighted, I want to touch on from my annual meeting remarks. One was telehealth where we have announced that we are launching our own virtual platform Wellness Connect which is a physician service. And we are going to do it initially with indigenous organizations but also with our own our own staff. So we can test that. Today, we have an option with another provider we started awhile ago. And this will give us a great beta to get into a space of the first mover in Northern Canada. We are also starting tele-optometry and that's part of a new wellness concept store that we are opening in Calgury in early July. I spoke about that as well. It's a very interesting face to the customer with and Inuktitut brand and image, a leading assortment of health and wellness products and a complete suite of our virtual and in-person healthcare offering. In-person will be the pharmacy but also through in-person and telepharmacy is the optical and in our medical service. Just to give you some context on the need, this is going to lead into my final remark about impact, social impact and social impact investing. On Baffin Island, which is the entire sort of catchment area of the Calgury. There's an 800 person waiting list for an optical appointment. And that's on a population base of about 15,000, 16,000 people. So we are, I think, true to our mission of helping people live better quality of life. Unment services, under-delivered services and products areas we are very, very interested in. And when I spoke today about social impact, I talked about something that's part of who we are. Dan touched on it. And he and I have worked on this as have many people before us for generations, really recognizing North West as a community store that elevates the community alongside the customer that works closely in collaboration which we did remarkably well thanks to the communities and our people through the pandemic. It's brought us even closer together. So when we step back and look at ESG and we are always paying attention to ESG reporting measures, environmental and social governance, we believe we need to talk more about the social impact part of what we do. We are also approached by investors who remind us of that. And the fact that impact investing is a point of separation from more standard ESG metrics. And we believe, we are that kind of company, always have been. When we shine the light on ourselves, there will be areas that we are going to want to up our game on. But just being true to our identity and what we are fortunate to do and deliver based on the type the committees that we have chosen to serve and focus on, I think, puts us in a real good position to tell our stories and be evaluated on that, good and bad. But we believe more on the good side and that will translate into value for all stakeholders. Those are the areas that I would like to just let you know about. Again, on the outlook we did provide, it's not really guidance but just telling you what our quarter-to-date performance is. It's really hard to say. We are quite sure that we are going to fall a little short of last year's earnings but we are not going to go down without a fight in terms of trying to comp up last year's numbers. And I know that Dan talked about the tailwinds in international. We probably won't have those kind of tailwinds. Although I will say that the Indigenous Services Canada budget is extremely aggressive and bullish for income in indigenous communities. And some of that will have an effect but a much longer tail into the next several years. And finally, I will just say that some of the things we started last year that didn't take place the way we expected, we did close on Giant Tiger. We did our admin restructuring. And those two are positive factors underlying the Canadian bottomline performance, irrespective of the topline growth. The investment in food pricing, as we have shared with investors now for several quarters, is on pause. We are in 30 markets where we are seeing good results but we are being a lot of people with stay-at-home spending pattern that make it hard to separate what we are driving versus what the market conditions COVID related are making happen. So that pause will be lifted and we will come back to that initiative in the second half of the year and continue to iterate it under Dan and his team's leadership because we do believe there is market share gains to capture through very, very smart food pricing investments in Northern Canada. With that, John, I will ask you before I open for questions. Is there anything that Dan and I haven't covered that you think we should touch on before we open for questions?

No. I don't think so, Edward. I think we should go to questions.

Okay. Operator, could you open the call for questions, please? Thanks.

[Operator Instructions]. And the first question is from Michael Van Aelst, TD Securities. Please go ahead.

Thank you. Good afternoon. So one of my questions have to do with those price investments that you discussed. And I think the original numbers that you were talking about investing, somewhere in that $10 million to $15 million range, depending on the results and how high you would go. So maybe you could clarify that? And how much did you invest before the project went on pause? And I guess how significant do you expect it to be once you are done?

Well, it's harder to say. Our initial plan was the $10 million to $15 million or potentially higher. We had modeled this in different ways and based on the tonnage lift and GP dollar contribution assumptions we made. And we really had to start with something and then build on that and decide how it would roll out. So $30 million in 30 stores. There's another $2 million that we have recently invested but we are cautious. So you would say, that's $5 million. The return on that, besides engendering some general customer loyalty it's very hard to tell right now. So we can't go further, Michael, until we get more space between us and into new normal shopping mobility. As far as the range I think that north of $10 million is still certainly in the cards. Like we are not deterred from, call it, the idea or the other strategy. We have sound analytics that took us down this path that said that we really need to get our indexes in some categories that are low share for us, just to southern indexes, if we want to grow tonnage. But we couldn't we couldn't say no. Out view in all of this is that we use the word investment specifically because we expect a return and if consumer behavior doesn't catch it, doesn't make a difference then obviously it's not a great idea. But right now, we just don't have enough of a run rate because the control group of stores versus the $30 million isn't differentiated by prices if they are all the same COVID limited mobility situation and that's what we are dealing with.

Okay. Sorry, did I hear you said you invested $3 million already?

Yes. Last year.

Okay.

And the $3 million didn't -- I mean it's there but it's not getting you the ROI versus the control group of stores because when you look at the numbers all the stores are up and we can't tell you of it.

And when you say you would expect a return, do you measure that as some kind of percentage? Or is it just incremental gross profit dollars? Or how do you look at that?

It's gross profit dollars.

All right. There was a comment in the press release about Giant Tiger. The sale of Giant Tiger resulted in certain percentage decrease in sales. And if I did the math correctly, I think it was $37 million reduction in sales year-over-year in the quarter. Is that correct? And is that net of the wholesale sale to Giant Tiger?

I am going to let John answer that question. Maybe we will have to be more, we are not trying to be opaque on this but we probably should just lay that all out. So John, do you want to comment?

Yes. Mike, what was your number? You were calculating $37 million, you said?

Yes.

Yes. It was the impact of the sale was higher than that. And it wasn't out of the wholesale sales coming back in. I don't have the exact number right in front of me but it was higher than the $37 million. It would have been in the $50 million range.

Okay. So roughly $50 million sales reduction, net of increase from wholesale?

Correct.

Okay. If you could just send me the math on that, I would appreciate it, John.

Okay.

And then, you also rightly indicated that the sales impact from abating pandemic is difficult to predict over the next year or so. So what I would like to know is, how are you positioning the business in terms of inventory levels of things like seasonal and general merchandise and perishables to balance out the risk of having the large inventory write-downs if you are wrong on one side versus missed sale on the other?

Yes. Well, you are not going to like this because there is more uncertainty. So in international and Dan would know, we were both kind of concerned that we are long in electronics. That turned out to be pretty smart thing because of supply shortages and I think it's helped drive the GM business in international. But we had exactly that frame of mind that you are referring to is that, okay, we are long and this thing is ending. Well, it's not ending and it's okay. I think electronics justified the not knowing how this storage of chips and everything else is going to affect people because it's a trend obsolescence issue. We are less concerned about the big ticket categories of furniture and motorized, people don't ATVs are not upgraded with new bells and whistles every year like your TV or a car. So we are okay going long and we are trying to marry that up. And also, by the way, we are short. Like as I said earlier, we didn't think we would have this degree of scrambling for products. Last year, we could scramble and find it because there are a lot of the retailers who have their doors closed and didn't have demand. So we were able to pick up products everywhere to meet the $270 million sales lift we got out of the same stores essentially. This year, people are busier. You saw the entire numbers, so they are not going answer that call. So we actually don't have the problem you are suggesting in the sense of going too long. I was encouraging us to go longer because I want to be in front of the customer with a strong in-stock position. On product that we didn't have to markdown but at worst would carry over to the next season because we want to sell from a full wagon and not be so representational in our assortments. And I will use something as simple as trampolines which are a great ring at $500. But if you only bring in two, you are not going to sell three. And sure enough, we couldn't get enough trampolines. Like again, this could be a $2 million business or $1 million business, they all add up. So we are looking for more products. We are not concerned about obsolescence or markdown because of the reasons I just mentioned. And the last thing I will say is that our inventories are higher for another reason. In our winter road and soon to be our sealift, even though we are very pleased with the efficiency of our air cargo division, we are also trying to do load optimization. And you understand that when you are writing checks for new airplanes. You can go after third-party revenue, which is great. But if you are going to do your own, we want to make sure it should be on the plane in the first time. And we have done this for years. But we took a new algorithm approach to it and shifted a few million pounds of freight onto our winter road. And that's activity cost based analysis that intentionally puts your inventories up in nonperishable foods. So when you add it all up, the inventory increases are fine as far as we are concerned and we actually wish we could have more. And we just want to stay away, the Giant Tiger merchandise we are buying is not the high risk fashion. It's the 12-pack socks for $10, that kind of stuff. So I think right now, we are okay there. Mike, I don't think we are going to have a problem. And if we had a lot of electronics in Northern Canada right now, I might be concerned but we don't.

Okay. And the supply chain that you discussed, are you subject to some of the same pressures out there with availability of cars and stuff like that, whatever rail cars or shipping trucks or whatever? Or are you isolated because you have a lot of your own supply chain in-house?

No. We are exposed on the import side. And I mentioned ATVs, even domestically produced snow machines and the component shortages and the huge demand within other parts of Canada, urban and near-urban markets where, again, closer to home activities are just sapping up all this product and we can't get our hands on enough of it. So I don't have a forecast of this effect. We are working and scrambling to diversify our supply lines. When something like this happens, it's not the best news for North West because, yes, we are more nimble and smaller. I mean Dan's or now Kevin Proctor's store group can go into Panama and some unconventional places to scoop up product and not big quantity, just enough for them. But because we are smaller, we don't have as much weight to throw around. So right now, it's not a major red flag but we think we were to get some ATVs in August from Yamaha, but we are watching this really carefully because if we don't get enough product on the sealift, we will have to fly stuff in as we get it and that won't be good from a price point standpoint. But we are more concerned about the sales. And I would say, right now it's probably $10 million at risk topline and this stuff comes in at about a 3% margin because it is big ticket.

Okay. All right. I will let somebody else jump in. Thank you.

[Operator Instructions]. The next question is from Mark Petrie, CIBC. Please go ahead.

Hi. Good afternoon. Could you just talk a bit about the airline, expand on the performance in the quarter and then what your expectations are for growth in any capital needed over the course of the next year or two?

Sure. So the airline had another very good quarter, high utilization. I mentioned in my remarks today that this actually dates back to cover all of 2020. We had record high utilization for cargo ATR. So the hours we are flying per plane are exceeding our applications. We have acquired a fourth ATR yard, a wide body cargo configuration, that will be in service at the end of Q3. So that's capital investment. But each one we are justifying based on either we are reducing our third-party hours because we do have some contracted aircraft in the ATR fleet. So we replace that with our own and get an accretive loan out of that. And now we are looking at capacity for intentional capacity for third-party cargo. We did, because of the efficiency of our fleet and things like I mentioned in the annual meeting results, like using plastic pellets of 37 pounds freed up times 15 pellet positions at $2 a pound, that adds up, you can't sell a pellet but you can sell the product that you can replace that weight with. And we had more freed up turns of planes that could be used to do contracts with some resource companies. So we started to get into the resource company business. We know it's more volatile but it's much more lucrative. North West Company pricing enterprise is at arm's length between North West stores and NSA. We use third-party reference pricing and activity based costing. But the other types of freight that we can get from third-party are very, very attractive. So that's starting to kick into gear as well. And we have a vision. Maybe we can articulate it better but it is to become a premier cargo airline in the northern part of Canada. And we think we are well on our way on that path. And we modeled ourselves in some ways after Lynden Air Cargo and Northern Air Cargo in Alaska. And every investment is the big one, we know that too. Will we have partners at some point? Will we bootstrap our growth through acquisition or joint ventures? All very, very possible. We know that as we get bigger the base rate that North West contributes to mitigate the risk gets smaller. So we have to be mindful of that. But so far, the next phase of the growth which would be looking at repatriating even more cargo to the North West, to NSA, is safe business. But we want to make sure we have got a really strong sense of what the third-party cargo demand is going to be like. We think it's going to be good. How big that makes the business is still to be finalized, if you think about it today measured by numbers of plane and whether we get into a jet cargo configuration. Those are all on the planning board. From a CapEx standpoint, beyond the expenditure on that ATR wide door, which I think, John, was done $8 million.

That's about right

There's no CapEx, no growth CapEx currently on the board for this year. But we are doing a lot of planning that Dan will step into the shoes for working with our NSA team.

That's very helpful. Thank you. How much of North West Canadian air freight goes through NSA? And where do you think that trends? And how much of NSA's capacity is devoted to North West? And you mentioned that will become a smaller number over time. But any sort of goal or targets would be helpful.

Yes. Two-thirds of our air cargo goes to NSA today. And it's 70% of NSA's revenues. More like 85%, given the passenger decline within NSA because the reduced travel under COVID. So when the past year come back, it will be 70% cargo, of which 80%, 85% is North West today. So there's room to still rebalance that and in two ways. Well, first of all, to grow the North West component. It won't get to 100%. There's certain regions of the country where we will not want to go there with the infrastructure required, at least not in the medium term. But each time we grow into a lane, we are going to be looking for third-party. And within that mix, it may drop from the 85% I mentioned or 80% to half-and-half even, if we sign up the right types of contracts in.

Okay. Thanks. And then my other question was just around the competitive environment in the North. I mean I know it's not as dynamic as in the South obviously. But I am just curious if you have seen any shifts? I mean obviously it's been a tremendously difficult operating environment but at the same time in certain categories it has been lucrative. I am just curious if, at a high level, you have seen any changes in the competitive set or competitive dynamic?

Not in terms of increased intensity. We had a couple of acquisitions. I think Skagway, which we approved today, I think is a big, is it a million cruise ship passengers, I think, Dan. It's a very high number that they get. 1.8 million in total tourist. So obviously, that was in the numbers. Family-owned business. So that precipitates the sale perhaps a little bit. We acquired a store in Rankin Inlet. I think that owner just wanted to retire. We looked at a lot of businesses and if they have got the COVID uptick in them, then they are talking about the owners about what's the normalized base to buy from. So we think they are still out there. Some companies have been wounded by COVID. They will recover. But they do not have the pockets to wait it out and others that we think are really interesting businesses probably have to get through a few new normal quarters so that they and we see what the run rate is. I know I am getting past to what your question was. But there's not a lot of new capital interest in investing in that we have seen going into the north, certainly not during COVID. It's very hard, by the way, if you are going to invest and then build something, it's almost impossible. Construction costs have gone through the roof. That will come down. But materials are still going to be high. But the labor mobilization costs, when you have got quarantines and so on, has kept people out of that part of the business. And finally, I will say that up in Bethel, Alaska where we exited our large store, we are doing phenomenally well but the smaller store that we acquired. So I think we are capturing market share. I think our Cost-U-Less number show market your share capture as well. Just to finish the point. There is one new competitor in Guam. I don't know Dan if you want to add anything to that, the timing of that opening?

There's been a major delay because of COVID. But we expect it to probably be open in the mid Q2 of 2022. But we are keeping a keen eye on it.

That the chain is called Don Don Donki. It it's out of Japan. They are in Hawaii. It's a discount format store. We have three Cost-U-Less stores in Guam. Of course, they are much bigger ticket. But it's still, when we look at that competition, it comes in all shapes and sizes and there aren't that many stores in some of these markets. They never over retail but just one new entrant causes us to pay attention. But that's broadly what comes to mind right now when I think about new entrants. There's really not a lot else that's keeping us up at night. Pardon me. There is another one, a new store in BVI, but not a great time to open a store in BVI. So we will see how that one turns out.

Yes. Okay. Thanks. And then I guess just a last question. What are your thoughts on the dividend and payout ratio? I mean obviously, it's been a really, really strong couple of years or a year-and-a-half for North West. And how do you sort of factor that in when you think about the dividend and payout ratio?

Well, we are not getting into territory past my tenure for sure. There wouldn't be another dividend different increase before I retire. But I think, Mark, the difference here is this is uncharted territory. We are delevered right now. That's the gift to Dan. I mean in terms of opportunities to grow organic investment and acquisition, we have that capacity. Longer term, we wouldn't build our dividend around financing capacity. So the debt equity and cash generation surge doesn't justify for us which we consider to be permanent when that dividend goes up would require more visibility, which we usually say. And especially this year, as we get Q2 under our belt and then Dan and John and the team will look with the board and make a recommendation on whether to increase the dividend beginning in Q3. But it won't be because of the capital, the delevered part we are in now. It will be because of the visibility we have on all these questions that I know you have and we have about where do sales level off on under a new normal. The capital structure is a whole another kettle of fish. We have got the NCIB in place and that can be tweaked upward if we think that's the way to go. But I think with I will just leave that now, Mark, till we roll around September. And then you can lay that question on Dan and John.

Terrific. Perfect. Okay. Thanks a lot and all the best, Edward.

Thanks.

[Operator Instructions]. The next question is from Sabahat Khan, RBC Capital Markets. Please go ahead.

Okay. Great. I recall at the beginning of sort of the downturn you were discussing some commentary on the e-commerce strategy and kind of what you might do there. I just wanted to check, given where we are today, what the thought process on that channel is for the company?

Thank you. That's a good question that we should answer. We are not an e-commerce focused company in the sense of how much of our business can go there and for us profitably go there. It's not a defensive move for us. There is out shop. I am just giving you a bit of color in terms of, for those who kind of followed our journey or not journey into e-commerce. We saw a lot of convenience type items, call it Couche-Tard, single serve, food service is a big part of our business, fuel, post office, financial services, health services. But we do sell products that can be out shopped, general merchandise. There's some areas that we say, go ahead, do it because we are not in that space. But when we get to food and nonperishable food and some general merchandise categories we do think we should be offering a stronger e-com option to our customers. We still believe and Dan has been instrumental with that, leading that through Alaska geographically we should really get our feet wet and I commented in the AGM about our dark store which did really well last year with the general surge, especially in Alaska pretty well developed e-commerce market, tighter hub and spoke from Anchorage and Fairbanks out to the different communities by air. So we did very well with our dark store. It was set up already. And fortuitously was timed perfectly for the e-com upswing. Beyond that though, we have developed a platform that we can use mobile based out of hub stores. Unlike Canada, many would it hub markets but larger communities that have an AC Store are surrounded by, in some cases, dozens of smaller villages that are too small for a large commercial stores. So we are going to kind of do a parallel approach and may the best one win. Keep the dark store, of course. Keep focus on that, Span Elite is the brand for our wholesale B2B arm or B2C.And then using the retail arm through the use of hub and spoke model where you are going online, your small town of 250 people is not have any c-store. But we can get you quicker delivery from the hub, a short plane ride over to your village, way better than our own Span Elite and certainly way better than Amazon in Seattle. So those are come of the things that we are looking at. And when you look longer term and I think this has come back to Mark Petrie's question on the air cargo. We still believe that there's a couple things there. One is passenger. We stay in that space. We are testing a loyalty program, that I forgot to mention, to integrate with our stores. There's a handful of stores in Northern Ontario where do the pass-through business once it kicks back up. But we wanted the air cargo business could be developed where we can get into small packages and into a separate third-party e-commerce type services. So we are starting to look at that too now as we get stabilized and in created capacity that we could offer a frequency that would allow us to be a better option than today the way people ship to the North for e-commerce. So if we can't sell it, we would be the move side of the equation. Beyond that, we are really putting our eggs in the basket in Alaska and watching carefully to see how we can impact an already developed market and we make in roads and capture share given our proximity to the customer and take that into Canada potentially. But if it does go into Canada, it would then probably lean heavily on our air cargo side because we are going to be a new entrant. And the only thing I would say, at the end of the day and I think I speak for Dan on this, is that I said it a little at the beginning is., it has to be materially large and it has to be profitable. And that's where we kind of separate ourselves, I think, from some other retailers that feel they have to do this because defensively if they don't, they are just not going to be in a big part of the game with the customers. We are in a big part of the game with our customers. Since catalog shopping, people have shopped out of the community. And now with digital, it's still going on. Do we want to go after that leveraging existing core strengths, not necessary the technology of e-commerce but the fact that it has to get there somehow, be picked up and returned, et cetera.

And I guess just based on the last comment, is there a lot of, I guess, have you seen that out of town online penetration increase or e-commerce penetration over the last year?

Not significantly. And we know that with some confidence because of our prepaid Visa card business segment, we know where the spends are in terms of which retailers are moving up or down. And we get the dominant share of that and there hasn't been a significant increase. I mean some have gone up a lot in small bases, but they are still a very, very small base. So it hasn't been a huge shift. And I think when you look at our $270 million of sales capture, chopping off an island like Guam by e-commerce is like you are a long ways from where the e-commerce suppliers are going to ship it to you. You have to be prepared to wait. If we don't sell that class of category, we don't really care. But where we do, we haven't seen a big change. And when I said, we have gained market share, I think we have gained market share on all channels, both capturing from e-commerce. I guess people are shifting their spending to local into types of things that we sell and certainly from local competitors as well because of our in-stock position. So the answer, short answer is no big pickup in e-com. General broad trends are still, it's a great CAGR business if you know what's your core business and you know how to make money in it. For us, it's not the death of thousand cuts, but it's small slivers of our business that we really have to be honest about in saying, okay, is there $20 million there? Is there even $10 million of sales? And will it convert at, say, 15%, okay? That's one convenience store across for us in Northern Canada. So putting it all in context, right, how big is the price. We will work through that and I know that Dan and I fully endorse the way he's got it set up in Alaska and we are going to really, really dig into it.

Good. Thanks so much for the color.

Thank you. The next question is from Michael Van Aelst, TD Securities. Please go ahead.

Thanks. Just a couple follow-ups. On the international side, what are you looking for as far as indicators that tourism is recovering or about to recover? And where do you see and what does that data tell you at this point?

Dan, I would like you to take that.

Sure. Okay. Thank you. Well, the first thing you look at is occupancy. And I can tell you in the USVI, particularly St. Thomas, it is full. The reason being, it's because of the high vaccinations and the openness of the market that's attracted a lot of tourists from mainland U. S. Looking at some of the other markets, you look at the bookings in the BVI for example or some of the other areas. You look for the bookings in the cruise or in the ships, sorry, in the moorings in the rented boats. And it hasn't been overwhelming. So they are booking out. People are starting to, we think, revenge travel is going to probably come back in the later part of Q3 and Q4. But right now, it's really just trying to understand what the jurisdictions are going to do. Cayman Islands, for example, is still locked down. They haven't made any mention of when the cruise ships are going to be welcome back. So it's just factors like that. And right now, we are expecting with the vaccinations kind of being more prevalent that tourism will return by Q3, Q4 to some of our tourist-bound markets. So it's really just on bookings, keeping our ears to the market as far as what's happening in the hotels, what's happening with some of the more, like such as moorings and other rental boats in the area and keeping a keen eye on what government is doing with their protocol around isolation and how long people have to be quarantined on arrival.

Okay. And last question, probably for John. With the talk of a 15% global minimum tax and you guys having some operations in tax favorable areas, have you taken a look as to what kind of impact that might have on your business?

Well, the short answer, Mike, is no. We are certainly monitoring that, the 15% minimum tax, looking at how that's going to be rolled out and what the implications are. That would hit us in two markets predominately, BVI and Cayman. But it's still early in trying to model out how and when that will impact us, like what the amount is and the timing, pardon me.

Yes. I mean it might never happen but just good to have some insight. All right. Thanks guys. And good luck, Edward.

I am just going to make, this is outside of my realm, but it's interesting that in Cayman and BVI, we are not there as a preferred tax haven. We are an actual operating business. And whether that differentiates between the race to the bottom to attract investments, I don't know. But I will leave it at that.

Thank you. We have no further questions registered at this time. Back to you, Mr. Kennedy.

Thanks operator. Just a few closing and really are the closing remarks for my career at North West and in my role with you as investors, although I am still here for another, I guess, the better part of a month-and-a-half. So I always say at the end that you can contact John and I and I mean that. So if you wanted to ask me a question, you can. But I thoroughly, I would say, enjoyed. I look forward to this part of my role and not just through the analyst calls but the over the many years of, I guess I have had over 100 analyst calls, probably more than that before being CEO. You put them all together. I know it's an important part of what you do and I appreciate many of you and some before who were part of covering North West and your interest in what we do. At sometimes, I know not the easiest company to deconstruct. We try to do our best and I know Dan will do a good job. And as well, when we have been able to visit investors through your different firms helping us and so forth, that's been an important part of our investor relations. So I appreciate that you have always included us and thought about us that way. I think it's helped us build our story authentically with investors over the years. And it got us to where we are. As far as what people think they stock is worth and whether they want to invest in a company like us. So I wanted to convey that to you that you played that part of an important role in our success. I just want to also close by saying that Dan touched on at the beginning of his remarks. It has been a very robust transition process. Dan and I will have a busy summer, at least I will have the busy half of the summer. I think Dan is going to have a busy complete summer. But after August 1, they will be a little less busy. But it certainly heads down until then. There's lots of things to cover together. Everything is going well. There's no major fires to put out. And who knows we might to want to start a couple and see what we can do, I guess, to get things going in parts of the business. I think Dan is good at that in a positive way. And I do echo he's done a great job on recruiting Kevin Proctor. I think we have got a dynamic leader there. We have got a great leader BVI. We are going to have a great one in Alaska. And Dan will have a great one in Canada very shortly reported to him. So things are coming into place. As I look at it, as an ongoing adviser and an investor myself, I am very, very pleased. Okay. It's been an hour already. I don't want to belabor it. But again, thank you very much everyone. There is one part of the meeting that I can no longer say. So I actually have to turn this over to you, Dan. I will let you do the final wrap up.

Okay. Well as short and sweet as that is, I look forward to developing a relationship with you all that Edward has so keenly kind of overviewed over these last couple of minutes and you guys have obviously developed over the last many years. I am looking forward to kind of learning the business through your lens and kind of solidifying that relationship. Other than that, I guess that kind of bring this call to conclusion. And I look forward to seeing or speaking with you at the next analyst call in that September.

Thanks very much everyone.

Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.

Thank you.