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The North West Company, Inc. (OTC:NNWWF) Q1 2020 Earnings Conference Call June 10, 2020 2:30 PM ET

Company Participants

Edward Kennedy – President and Chief Executive Officer

Amanda Sutton – Vice President-Legal Counsel and Secretary

Alex Yeo – President-Canadian Retail

Dan McConnell – President-International Retail

John King – Executive Vice-President and Chief Financial Officer

Conference Call Participants

Michael Van Aelst – TD Securities

Stephen MacLeod – BMO Capital Markets

Sabahat Khan – RBC Capital Markets

Michael Van Aelst – TD Securities

Matt Bank – CIBC

Please be advised that this conference call is being recorded. Welcome to the North West Company 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.

Edward Kennedy

Thanks very much. Good afternoon everyone and welcome to our first quarter conference call. Joining me today are Ms. Amanda Sutton our VP, Legal Counsel and Secretary; John King, our Executive Vice President and Chief Financial Officer; Alex Yeo, our President, Canadian Retail; and Dan McConnell, President of International Retail.

Before I begin with my comments I’m going to ask Amanda to read our disclosure statement.

Amanda Sutton

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 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?

Edward Kennedy

Thanks, Amanda. I’m going to provide some initial comments then I’m going to ask Alex and Dan to provide more color on the performance drivers and outlook in their own divisions on the retail side.

Overall, as we started the quarter we had some – we thought some pretty big things on our plate with respect to the announced Giant Tiger transaction, our restructuring in Canada, our pricing investment in Canada, the opening of our largest store in the company, the re-opening of it, pardon me in St. Thomas late in the year was just hitting our stride as well as our new store and very important market Barrow, Alaska. So we had a lot going on in the business and I think we had some very good momentum, and had set ourselves up structurally for a pretty good year in a very busy year in the right areas.

Of course, as we all know everything, a lot of things changed. Mid-March with the outbreak of COVID-19, we continue to work on foundational parts of our business, but we’ve had to adapt like every other individual and organization because of COVID. And we’ll certainly talk about that today.

As we got through the quarter and we saw the impact of changing consumer demands, the one common part that I’d say across all of our business international, Canada retail and our air cargo businesses, the essential nature of the services we provide. And it really does come forward when you were in a situation like this and people depend, we depend on each other as associates at Northwest to be dialed in to the jobs that we have, especially right now.

And I’m very pleased and proud to say that North Westers have risen to that call to action. I mentioned in my AGM remarks that the safety factor has been paramount and we’ve been effective. And to some degree perhaps fortunate that less than 10 individuals in our company and over 8,400 across 17 different territories and countries have contracted COVID. We’ve also kept our stores open. They’d be relied on as essential service providers, unless there’s been a quarantine type shutdown on particular islands.

So that’s kind of a backdrop to what’s turned out to be a very strong quarter sales wise. Margins have been solid. There’s been some shifts in spending that Alex and Dan might touch on. But certainly across all parts of the business with few exceptions we have had a very, very strong sales that have continued into the second quarter.

Just before I turn over to Alex and Dan to comment, I’m going to – I’ll just say that on the airline side we’ve also had a solid quarter. We’ve got our third airplane now with us in terms of the ATR fleet. We’re very busy moving the volumes that are going through our store network. Planes are flying the hours that we expect and they are efficient. So, I just wanted to point that out because that won’t be a part that Alex or Dan touches directly on, but it has been a part of the picture in the quarter as well, a positive part.

And then just finally on the Giant Tiger transaction we’re scheduled to close that in early July. There’s no significant changes. I did mention in my remarks at the AGM that we’ve added two stores to the sold group. We didn’t change the provision. We’re taking a cautious approach to that. We’ll see as we go through the subleasing and assigning of leases whether we can mitigate that, but right now we think that is a very prudent amount, the $9.4 million.

And then finally, before I turn over to Alex and then Dan, I’ll comment on our admin restructuring, we’re still on target for the $17 million annualized savings. Just if you think about that, how that would affect the first six weeks, which is really what the impact it would have on Q1, it wasn’t significant. We had a few positions that are staying on longer because of a change in work activities, tied to COVID and the general pickup in our business and areas that we didn’t anticipate, as well as the timing of the structure and the position eliminations. There was one tranche or group in March, the second at the end of May, and a third at the end of July actually another group at the end of January, so the run rate on this will pick up as we get through the year.

And as I also commented, we had, I guess, you call it an offsetting reduction in expenses tied to reduced travel as one example of just general admin costs are lower given the COVID environment. The one offset, again, this is across the whole company is $4.8 million in safety PPE-type expense is tied to COVID as well as the frontline wage increases we implemented in early in March or mid-March, pardon me, backdated to the beginning of March.

So, with that that you’ve seen the numbers, the comps are high at 15.5% and as I say, they’re spread across all banners. The food is up strongly as well, and that includes all banners, including Giant Tiger.

What I’d like to do now is first turn to Alex Yeo to give just a highlight of what were some of the performance drivers that have brought these results in Northern Canada, as well as Giant Tiger and to comment a little bit on the outlook that we see as best as we can right now, Alex?

Alex Yeo

Thanks, Edward, this is Alex. So, first I’ll open with a commentary on Northern Canada. We had a very strong quarter with a significant growth in both food and general merchandise across most of our categories. There are number of performance drivers that we saw. The first one I’ll comment on is on the pricing investment. We started with a temporary price reduction in 10-plus road stores in response to the travel restrictions that we saw in the number of these communities. And the feedback and response from our customers is extremely strong. We saw significant lifts in sales and unit movement versus comparable road stores and strong community and customer feedback. And that give us a lot of optimism going into that momentum for Q2.

So pricing investment was the first driver of what we saw in the business in Northern Canada. The second and third drivers are related to travel restrictions and increased government support for these communities. As mentioned by Edward in the AGM, we’ve seen additional assistance announced for northern communities, as an example, the government announced initial $305 million investment in northern communities. And this showed up in a number of ways, whether it be contract sales for PPE, additional support communities to maintain travel restrictions, all of which, because of the essential nature of our stores in these communities meant that we are able to support these communities and also capture in terms of food and general merchandise sales.

At the same time because of these travel restrictions, which by the way, occurred across all of our communities, whether it be road stores or area stores, we not only saw a wave of initial stock-up shopping, but also increased spend in our stores as customers started to take this support and spend it on items that they would use at home. So big ticket items, for example, electronics, motorized, home furnishings that would otherwise have – this money would otherwise have normally gone to local shopping hub, but they stay in our communities and because of our strong operations in stock, as well as logistics, we’re able to service this demand and capture the sales in our stores.

In this quarter, Edward alluded to the investments we made in expenses and safeties, safety and sanitation. The additional color I want to add here is that we also invested in hiring additional staff that we’re in our community that we moved into our stores to help with the sales with the sanitation requirements, but also as back up support for our staff in event of a COVID outbreak. So that would be keep these stores open and running in event that it was a COVID outbreak in our communities. So that was part of the expense investment that we put into the Northern Canadian business as well.

The outlook is positive going to Q2, because – and there’s a number of headwinds and tailwinds. In terms of the positive factors, we’re still seeing positive momentum from the pricing investments that I talked about, and we’ve extended that pricing investment into 20 more stores. This is a chance for us to really change the directory of these 30 plus road stores, because at this point the customers are shopping the whole story it’s a really a chance through this pricing investment to change the customer behavior and really capture share, keep share from the out shopping, change price perceptions and to really change the tone and tenor of our relationships with the communities.

At the same time as the government had announced some additional support Nutrition North was expended as of May 1. The government has invested in extending Nutrition North by $25 million. And we operate stores in a number of these communities where the investments are going to. On the flip side though, we are seeing the travel restrictions are trying to lift and so that means that more of our customers will start to leave our communities. That will be a bit of a drag in the sales. And the COVID-19 situation remains uncertain. There is potential for continued outbreaks beyond Q2. And so while Q2 remains positive, the outlook beyond that will still continue to be uncertain, albeit with positive momentum is also uncertain in terms of how long the government programs will continue. Otherwise the overall underlying momentum continues to be positive. So that’s on the Northern Canadian side.

I won’t comment too much on Giant Tiger, other than to say that we didn’t see a significant change in trend versus what was commented on in previous releases. What I will say is that food sales did increase due to stock up shop, but this is offset by softer general merchandise sales as people pull back a discretionary spending to quarter.

Going to Q2 before we closed the transaction, outlook is fairly positive. We’ve seen food sales trends remain returned normalized a little bit, but still above where we were at last year. But as restrictions as slowly that we’ve seen a resurgence spending on basic general merchandise items like home décor, garden, some of these items where in GTSL has traditionally been very strong in. So that’s my commentary in terms of the Northern Canadian Giant Tiger businesses.

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Edward Kennedy

Okay, great, Alex. We’ll hold for questions until maybe I’ll let Dan McConnell, President of International Retail Group provide the same review that Alex did for his store units and then we’ll open for questions. Dan?

Dan McConnell

Okay. Thanks, Edward. So, we had very strong sales increase over in international. Some of the triggers and the reasons for this was definitely came down to the restructuring that we did just within the last 12 months. And it really allowed us to be a lot more nimble and agile to take advantage of some of the changing in the markets that we were experiencing. Our in stock for both banners was around 90%. We also have to give a large call out to our committed staff at the front line. There was really a great expectation from the community and then delivered by all of our staff really taking it seriously and going above and beyond in all of their missions as far as extended hours when some of the stores would shut down, they convert quickly and we’re agile enough to be able to go into a full e-commerce platform in some of the markets, particularly within the Caribbean when they went to a full curfew or a full shutdown in some of the operations.

Some of the other reasons is in the CUL the full, obviously the club concept seems very well for this type of environment. Higher quantities, lower prices are definitely switching people away from traditional grocers and especially within their stock up shop. The food plates which then cost you less also make it a lot easier to do social distancing. The eating, the shopping patterns or some of the eating habits that people were not able to shop at, or were not able to eat at some of the restaurants given the fact that they were most of them are closed, are going to take-out only. This definitely swayed a lot of the shopping habits over into our stores, both in Alaska and in CUL. Much like Alex had indicated in rural Alaska, there was a lot less travel out to markets, this keeping people inside the markets and then shopping over at our AC stores.

Talk a little bit about the economy, excuse me. Alaska definitely has some positive aspects, especially within Q2. The PFD has changed from July and is now going to be a distributor out in – sorry from October typically and is now going to be distributor in July. Typically its $1,600 over the last couple years, now it’s going to be reduced to a $1000, but it’s going to be accompanied by CBRF as well as some of the trickle-on of the stimulus that was distributed in Q1, that’s still coming into the markets. So that is definitely a positive.

The fishing industry that we thought was going to be scaled back as for some of the discussions that were had in Q1. It has now been announced that it will be open. So the fishing season will definitely be advantageous to the Alaskan economy. However, tourism in both Alaska and the Caribbean, which I’ll speak to in just a minute, is going to be a lot lighter and going to have a negative impact on the outlook of the Alaskan economy. However, we do feel that Q2 is going to be strong, stronger than we anticipated, given the incremental dollars they’re going to be in market, followed by what we think is going to be a weaker Q3 in Alaska and an average Q4.

So, when we look over the Caribbean, it’s a little bit, we’re a little less optimistic. Tourism plays a much bigger role, unemployment numbers continue to creep up. Albeit that a lot of the industry in the Caribbean is either directly involved in tourism or a ripple effect as to what the tourism market does. So, we’re looking now fairly, I’d say cautiously, these markets, especially the non-U.S. affiliated markets. Edward mentioned this in his remarks earlier about BVI and some of the other Curacao, Barbados definitely having — facing some headwinds.

Just to kind of give you some an impression on some of the factors that have a pretty positive impact on the markets in prior years. The cruise ship industry, which is unknown at this point, in fact, Cayman Islands has indicated that they are not going to permit cruise ships to dock a thing came in this year. And that could be – last year, Cayman Islands, saw about two million tourists come in as a result of the cruise ship business. BVI would be approximately a million and it would be in those neighborhoods for some of the other islands that we’re servicing over in the international sector.

So, saying that we’re a lot more cautious as far as what our outlook is for the Caribbean optimistic for Alaska. And again we are still experiencing some strong sales increases in the Caribbean, but we’re definitely keeping our eye on the ball and looking for that change to ensure that we’re not in a difficult position with our stock levels, if that demand does start to fall off as we anticipated well later in Q2.

I think that’s really all I have for that right now, Edward.

Edward Kennedy

Okay. Thanks, Dan. I don’t know, John, have we missed anything that we should talk about right now? If not then, operator we’ll open the call for questions. Thank you.

Question-and-Answer Session

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

Q – Michael Van Aelst

Thank you, and good afternoon. First question is on the $17 million of annual cost reductions that you have planned. Can you give – I didn’t quite understand the commentary. Can you tell us how much was recognized in Q1?

Edward Kennedy

It would be in a range of a $1 million. Because it started, it’s only six weeks and most of the reductions are spread over the year.

Michael Van Aelst

Okay. I was under the impression that you were going to get like $10 million to start and then the other $17 million would come in halfway through. Is this delayed?

Edward Kennedy

No, that math would still hold water. It’s not going to be $10 million a month.

Michael Van Aelst

No, $10 million annualized. Okay. So $1 million, six weeks that it was in. Okay. All right. And then the price investments that you’re making, I think on the Q4 call, you’ve talked about $10 million of price investments, and today you mentioned $12 million. Is this just the $10 million is kind of upfront and $12 million is maybe once you increase it next year? Or have you changed the plan?

Edward Kennedy

The plan has changed somewhat. The message I’d say, is based on the change and we’ve got this unprecedented opportunity because of consumer behavior shifting involuntarily that we’re trying to get to be voluntary. And the price investment was geared towards behavior change. We wanted to get capture more local market share, and out shopping spend. Now, we’re capturing the share and we’re doubling down on the price investment. Alex talked about some of the upside we saw out of the gates. We were accelerating that spend that where those $10 million or $12 million, I mean, this is on an annualized basis. There’s a lot of puts and takes in this. I guess, I should say that we should put a tolerance around this because if, for example, we see a more travel, less COVID support income, related income, and as our analytics show that that we’re not getting as much traction with the price investment we would adjust.

So, our best estimate as we looked at this and we talked one of the context of funding it through our, through cost streamline was in that $10 million, but it could be $12 million. It really depends on what we see. And the challenge to all of this right now, Michael, I hope you appreciate is that there’s so much going on because of the fundamentally strong demand for what we sell and that’s not going to go away right away. So, we need to kind of clear the deck of these other drivers of reduced travel mobility, again income support. And then when the dust settles, sometime maybe in Q3 for Northern Canada, we’ll start to see, or the pricing as it stands alone, with the Nutrition North investment as well, which is quite significant as Alex pointed out at $25 million, about $11 million of that will flow through our store. So unfortunately, if anything, there’s more uncertainty, $12 million is our best estimate, but we really don’t know until we get into probably Q3 and can start to separate factors that aren’t COVID related, which today are subsuming what we’re doing.

Michael Van Aelst

Right. So that was actually going to be my next question, because it’s clearly, you’ve had really very, very strong sales. Is there any way that you can, that you’re able to monitor or pull a survey your customers or anything like that to determine how these price investments are being received and whether that’s driving it, or is it just that they can shop anywhere else?

Edward Kennedy

Yes. So, as I mentioned before, there’s a number of ways that we’re trying to triangulate the effective price investment. The first main way is that the price, the initial price investment was only in – was in about 10-plus stores. We have about 20-plus stores, road stores during the quarter, which didn’t receive the price investment which we now are getting it, that allows to almost do a bit of a control test comparison between the two groups of stores. And what we did, all stores got the COVID support and the travel restrictions. And what we saw in the stores, where we had that temporary price reduction was this get lift in sales and tonnage that helped offset the price investment. That’s how we know the instruction. Now, obviously there’s still factors within the accordance with level of support, travel restrictions, but that’s the best way to kind of triangulate whether that was traction with our customers.

Michael Van Aelst

Again. So, should we just assume that since 10 stores got it in Q1 and 20 stores are going to get it in Q2 that you only had about a third of that $12 million investments going in the quarter?

Edward Kennedy

It was actually less, I mean, we still have our other stores as well. So the investment was less than that.

Michael Van Aelst

Okay. And I guess just finally, and then I’ll hand it off to others. You talked about the $4.8 million COVID cost or COVID related costs. Any sense to how long those are going to stay in numbers? Have you started – have any of them started to fall off yet?

Edward Kennedy

Yes. They’re going to fall off significantly in beginning in Q2. The wage increases will be focused on areas that have high COVID transmission rates. And today that would be a couple of stores in Northern Canada. They weren’t – they’re not in place any longer in the international group of stores. So, on an annualized or quarterly basis, the [indiscernible] looks like the high water mark and will be significantly under that in Q2 two and Q3. I don’t know, we haven’t separated the PPE part that we probably should. We’ll have to get back on that. So you understand what, I think the PPE will still be there as far as we know but the lion’s share of that is the frontline wage increases.

Michael Van Aelst

Great. Thank you.

Operator

Thank you. And next question is from Stephen MacLeod from BMO Capital Markets. Please go ahead.

Stephen MacLeod

Thank you. Good afternoon. I just wanted to follow-up on the outlook for Q2, it sounds like it is still quite positive. Can you just provide a little bit of context around maybe quantification, like how you’re trending relative to the strength in Q1, and then you still expecting, like, would you still expect to put up a comp that’s in the double digits or is it strong on a relative basis, but maybe down a bit from where you were in Q1?

Edward Kennedy

Well, we’re only looking at where we are. We’re halfway through Q2. So, I will say that it’s strong. And if you think about the stock up surge was sort of the March story, and then the travel restrictions were kicking in and then the income supports came in. So child benefit payments were increased in May, the senior payments going to go out in July. The PFDs went out in July. The serve payments are in place now, and we’ll cut in half beginning of July. So the income drivers for Q2 are at least the strong as Q1. And we’ve got instead of six weeks we’re going to have three months. I don’t want to say anything more because, these numbers are unprecedented or they could go different way in an unprecedented way.

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But those are – but those are the fundamentals when you’re thinking about, and you can read in the news as much as we can see it in our stores, like where are the income programs going or the travel restriction is going? And then we start to moderate our sales expectations. We think overall that travel will not be the same as it was even when that’s relaxed. We’re getting close to COVID free zone here in Manitoba, but travel restrictions are still pretty strict. You quarantine for 14 days coming from anywhere else in the world into Manitoba, including Canada. So it is a lot of factors here at play. Like we’re confident saying that that Q2 is robust, when we get to Q3 and Q4 then what Dan and Alex, you can tell there’s a lot of uncertainty.

Stephen MacLeod

Okay. Yeah. That that makes sense. That’s helpful. Thank you. And then I think you sort of alluded to it, but I’m just curious with just such high levels of demand and logistics complications of getting product to remote locations. Have you seen any supply chain issues impacting the stores at all?

Edward Kennedy

Lots. Again, it’s, starts like everywhere. You would all shop, you know what the stores look like in March, and then they got a little bit better, but the entire looks like a Halloween pumpkin, lots of holes and gaps and teeth on the shelves, just like people are buying the bike sales, try to buy free weights, try to – ATV sales, like we can’t, we’re selling a lot of ATVs, but so is everyone else, so boats and motors. We’re getting our hands on a lot of furniture because we’re selling a ton of furniture, but that’s not really shooting the lights out in the south. So, it’s been something we’ve managed like we mentioned the fill rate at 80%, 90%. I would have a modest concern about getting sales, as I’m looking at store comments on a replenishment of TVs, and that we have to keep working hard and our category managers have been very creative to source product to meet this demand.

The food side is – has settled down. There’s lots of substitutions. I guess the point I’d make here is that, we still see a robust Q2 to get us through Q2. The PFD that news was dropped. I think Dan with very short notice and we’ve had to pivot quickly to get product into our stores for the July sales demand that’s around the corner now with PFD. And the other – by the way, the other acronym that Dan mentioned is a relief fund for Alaskan rural villages that is in play. Okay. So, I’ve talked maybe too long on this already, but the answer is it’s very, it’s hard to keep consistently in stock, but we’re filling the consumer demand. And we’re getting the sales. I don’t think we’re leaving much on the table that way, but the stores don’t look pretty.

Stephen MacLeod

Okay. Yes, that makes sense. And then maybe just finally, you talked about in the outlook notwithstanding economic uncertainty in the Caribbean. And Alex, you sort of alluded to this as well, but you talked about opportunities to grow market share organically and through acquisitions. Can you talk a little bit about where you would look for those market share gains? Are they in specific niches or you’re talking more just broadly?

Edward Kennedy

It’s going to be in all the regions we operate. It’s interesting, like some of our competition has other – depends on other revenue sources that are, that are vulnerable to travel or to fuel sales, to airplanes, for example. So, they’re weakened, then we’re going to buy them, but in the Caribbean we’re paying attention. In Alaska, we’re looking at some new store opportunities. So it really depends on how the next few months play out, but I’d say that it’s across the board. We’re early stage on that. What I did mention in my remarks that we were also doing is, telemedicine. And it’s not, we haven’t put $5 billion to do it like TELUS, but we are live with pilots on telemedicine. And ours are enabled by the relationships we have with First Nations. And I’m going to be really keen on reporting more on this to our investors as we go through this year and onward, this is a big trigger point, I’m sure of many are aware. The fact that, that virtual billing is now allowed. We’ve waited a long, long time for this to break open. We have a cohort of doctors that work for us, and we also have our telepharmacy. So that’s another one.

And then Alex mentioned B2B, I know your questions about acquisitions, but we’re also looking at wrapping up our business to business sales. We’ve been called on more and more by people to try to find product for them that $310 million that Alex mentioned. Dan and his group have been supplying governments and school districts with PPE. And we’re starting to break into some relationships that we really had anticipated a few months ago. So, we’re just recalibrating whether we turn that on as a growth opportunity, or just sort of make hay, while the sun shines in terms of the current demand.

I think that’s all right now on acquisitions, except that we’re – we see ourselves in that group of retailers that’s moved forward right now with COVID as opposed to the ones that are struggling. We’re definitely not in a struggling camp. And we just have to see what does the whole marketplace look like as the next few months unfold? Certainly in the Caribbean with the economic downturn that’s likely in the fall. There’s going to be some opportunity if we choose to pursue it.

Stephen MacLeod

Okay. That’s great. Thank you very much.

Operator

Thank you. [Operator Instructions] And the next question is from Sabahat Khan from RBC Capital Markets. Please go ahead.

Sabahat Khan

Yeah. Thanks and good afternoon. Just, I guess maybe a longer term question. Have you noticed any change in sort of the productivity of your stores at all? I know there’s historically been a focus on it’s kind of the top markets and so forth. Do the recent event…

Edward Kennedy

I think you cut off.

Sabahat Khan

Hello.

Edward Kennedy

Yes, I’m listening. I don’t think I heard the, at the end of your question. I’m sorry. You were saying…

Sabahat Khan

Yes, it just more – it was more around the – do the recent events and the way consumers have been shopping. Does that change your view on your store network, maybe making a bigger stores even bigger or is it too early to make those decisions?

Edward Kennedy

It’s too early? I’d really like ask Dan, but maybe a little different perspective depending on their marketplace, but I’ll just weigh into one area. So, we haven’t been obvious for those that know us at the leading edge of e-com, our customers don’t shop as heavily that way. But we’re all very concerned about out shopping, physical out shopping, or e-com if to the extent that it applies. We have a dark store in Alaska it’s called Span Elite. Its sales are way up several hundred percent of the small base. All of our stores were turned on to use to the e-commerce platforms to curbside pickup. And the demand was initially pretty high. And a lot of down stores, the cost of less stores. We all know that that’s very inefficient. And when you get north of 4%, 5%, 6%, 7% of your sales, it’s really a drag that has now calm down as people are shopping in person.

But to get around to your question if anything, we go the other way right now, longer term, and that is that the store gets leaner. Doesn’t have, it gets smaller, but we do have a longer term vision of marrying up our physical network with e-commerce likely enabled by micro fulfillment centers that are more bot automated than the things that you do when you have to.

So we’re no different than other retailers there on using MCS or MSDs. We just, haven’t gotten to the point of where we would make that investment. But we certainly see a vision of our stores longer term post-COVID not inconsistent with. By the way, we think that’s semi structurally, that there will be more attention and desire for services locally. This is why it’s so critical that we put our best foot forward today. This is why the price investment is a little bit higher and accelerated because we do see that folks, they really want to go to town, to shop for toilet paper and diapers. They’d like to go experientially for a trip, and we want to give them reasons not to think about going out of town for the things we sell. And we’re doing that today.

Where e-com helps is on range. If we’re going to have extended range in our stores, then e-com can really fill in the gaps and also get our cost structure down in the store to the essentials that people need and not the peripherals that are so expensive to use bricks and mortar for given our inherent cost structure. So those are some of the thoughts that we have.

They are more specific to the Alaska and the Northern Canada business certainly cost you less stands on its own as a very strong, discount, again warehouse club format that has proven to be quite resilient. Perhaps Dan, I know if we contrast BVI where we we’ve had headwind, even though we we’re the dominant retailer. We reflect the retail economy and BVI, as a distributor, a wholesaler and a retailer. I think the format of call, which is in the other islands, not in BVI, has shown to be very, very strong, even with more depressed economic conditions. We don’t – we’re going to retest that in the fall. But so far it’s held its own the comps out of our Cost-U-Less stores are being right out there with our northern stores.

Sabahat Khan

All right thanks for that. And then so of just a follow-up on the e-commerce side, you notice some benefit as people are shopping more end market, but how did you find kind of e-commerce competition? Did you find some of your local customers relying more on e-commerce than in the past? Are there habits there that they are developing that you are keeping an eye on?

Edward Kennedy

There’s been no – and we can track this, not obviously by individual, for privacy reasons, but just the usage of our Visa card, which is the largest prepaid product of its kind. We have a large penetration here that shows us where dollars are going. There has been no increase at all factors, so all decrease in some of the usual suspects for e-com. They aren’t big numbers to begin with except E-calorie [ph], which has a free freight Amazon prime thing going on has for a long time. That’s a different scenario.

So no, we haven’t seen a spike. And I think Dan you might want to comment on the island where the other retailers that struggled to keep their e-com going.

Dan McConnell

Yes, especially, I mean, right out of the gate, it turned on overnight and people were seeing orders 60, 70 orders. And to the point where it shut down the e-commerce platforms on most of our – with most of our competitors, thrilled, the Caribbean us trying to moderate it a little bit more in managing expectations from our customers to bring it over a period of time with our saving grades, but to Edward’s point, I think, it hasn’t – because it hasn’t been executed as well as probably on mainland U.S., particularly in Canada, it hasn’t intrigued the people and the customers to continue to utilize that service, with the exception of maybe in – in some of our islands. Sorry, go ahead.

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Edward Kennedy

Yes, I’m just going to say that actually, that brings up another thought, which is for people who try to use online it’s pretty tough right now. And I don’t think anyone in the north where we do business was getting a great if they wanted to go that route, if it wasn’t the way to go.

Dan McConnell

Mention the disruptions.

Edward Kennedy

Yes, freight disruptions as well, yes. The other point I made in my AGM is not to put a defense with NSA. I mean, we think it’s a great strategic fit. We’ve had some challenges for sure with the two plane crashes last year, but the fact that today we have lift capacity. If we were dependent on third party carriers, I mean, they’ve got government subsidies to keep themselves going with their past revenues, having collapsed, but their service would be imperil. We would be depending on those kinds of carriers to get our product to our customers. That’s not going to happen again. And thanks Den to say, it’s not.

So we we’ve got this advantage that, we’re not fully realizing, but it certainly shows you the strength of it when you get into the situation we’re in right now.

Sabahat Khan

Great, thank you.

Operator

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

Michael Van Aelst

Is NSA receiving any of those government subsidies?

Edward Kennedy

They’re receiving it for the passenger side of their business? Yes. They are not receiving the one per unit. Just let me be very specific, they are receiving the crew, I think that one is crew, but they’re not receiving anything from Transport Canada like Calm Air Canadian North. They’re receiving the normal subsidies if your business volume drops by that 30% threshold, which theirs did.

Michael Van Aelst

Okay. How can we measure that? And then is it material for that business?

Edward Kennedy

It’s not material.

Michael Van Aelst

All right. Are all of the Caribbean stores are all of your Cost-U-Less now Category-5, hurricane resilient.

Edward Kennedy

I’m sorry. Can you repeat that again, Michael? I’m sorry.

Michael Van Aelst

Alright. Are all of the Cost-U-Less stores now, do they now have Category-5 hurricane resiliency?

Alex Yeo

Yes, they do.

Michael Van Aelst

Great. And then finally Giant Tiger, I’d assume you’re going report it and keep it in the results until the day that it’s sold. Is that true, John?

John King

That’s true.

Michael Van Aelst

Okay. And then for the quarter, are you able to give us what Giant Tiger’s numbers were or like revenues EBITDA for this quarter versus last year?

John King

No, like in the first quarter Michael it’s the same number of stores, same business, right?

Michael Van Aelst

Right. But are you able to give an amount that it would be, just so we have an – you gave it to it to us. I think you said zero EBITDA for 2019, from what I recall. Are you able to give us what the gravity in the EBITDA would have been for Q1?

John King

No we’re not breaking that out. And it was – as Alex said in his remarks and Edward, I think, also commented on it was not – like the change in the quarter was not material was in line with the previous results.

Michael Van Aelst

Okay. Alright, thanks. And congratulations on the great result.

Edward Kennedy

I just want to come back. Sorry I was distracted. When I first heard about John was showing me that the TP amount is about a $1 million for the quarter, that six weeks. So the math on that extrapolated that would be of the four point as one. And that PP would be a run rate we’d see going forward, as long as any of us can predict the duration of COVID. $1 million for six weeks to $2 million a quarter.

Operator

Thank you. [Operator Instructions] And the next question that is from Matt Bank from CIBC, please go ahead.

Matt Bank

Hey, good afternoon. I wanted to follow-up a bit on the North Star. So you commented last quarter that you were flat and $1.5 million behind. It sounds [indiscernible] like it was a lot healthier in Q1. But can you just share broadly sort of where you are running versus plan, how you see that playing out for the rest of the year? And how much of an impact does the decline in passenger revenues have? I know it was relatively small, but just curious there.

John King

Yes, it’s not large. It was large enough because it got basically wiped out to qualify for the cruise payment, which basically then covered off the loss of that business volume. So you just park that and say, okay, well, that’s kind of comp to last year, but that’s not really where we’re going to make or lose our way with NSA. So it all comes back to cargo. And it was a strong quarter because we flew the planes. They flew the hours they were supposed to. The maintenance cost per hour was low and controlled. And our plan is to continue that. Now with the third plane coming on we will decrease some of our third party lease costs. That’s all in the plan as well.

I mean the short answer to the question is that our plan is to improve our bottom line in the year. And that’s still the goal. Certainly with the volume of business we’re doing it’s a big boost to what we expected. The airlines are performing above plan based on volume. I’m not sure what else to say. We are concerned. Like, I’ll just give you there’s another area of headwind for us is the ongoing insurance costs at Northwest. We have to really get into this more to find out how we can manage insurance cost. So that that’s on a comp basis. Charging that to NSA that’s a negative against their business, but they’re still up even with that headwind. So we’re talking about several million dollars in insurance cost increases.

Matt Bank

Okay, great. You already touched on this talking about ATVs and you talked about category spending shifts in the MD&A as well. Can you just share maybe a bit more, I know there was a stock up in March and things have sort of evolved a lot, guess where sort of the categories that have been more that you’ve seen a more recent uptick and sort of how things are trending?

John King

Well, it’s really specific to – so at home big ticket durables, furniture, TVs, to the extent they’re not disposable these days and then outside. So like you can’t find a bike anywhere in Canada, not very well. So bikes are sold out and try to find more ATVs, boats, and motors camping, hunting, fishing supplies, those are the categories that are really standing out. There’s, I mean, across the range, there’s also been, I would say, replenishment even of home products bath and bedding, for example. Some of that B2B, PP related, I mean community investment funds that Alex mentioned.

I know Alex or Dan, if you want to jump in on some of the other growth areas.

Alex Yeo

Yes, so I’ll just jump in on Canada and just on the food side. So food side, we kind of mirror a lot what we see in the southern retailers, so there’s a wave of health and wellness bathroom products, paper products, that sort of stuff. And now it’s shifted to center store, baking, baking supply. So I would say a lot of center store items, similar to the way South and retail is seeing. But we’re still seeing elevated levels even going to Q2, that’s for Northern Canada.

John King

Yes, I mean much the same in international. The PFD I mentioned, that’s coming in with CVRF the coastal village regional fund that’s all catered towards big ticket. In the Caribbean, I’d say unfortunately we are heading into hurricane time. And it’s been rumored to be an active season this year. So we’ve been heavily marketing some of the pre-cautionary materials that are required in order to keep people safe there. So that’s a big push. But otherwise it’s pretty much in line with what Alex mentioned.

Alex Yeo

The other comment I will add, it’s not specific to the categories, but we serve generally a lower income consumer who in some ways never has enough income to meet all their needs and wants the way a high saving rate household might. So the income that gets transferred gets spent. And this is where the having the broad range that we do have in our assortment be in stock on that, is incredibly important with or without travel restrictions. In the past pre-COVID for those of all North West they know, you know, that when we have income call them surges, whether it’s natural resource, royalty checks, land claim settlement funds, the child benefit payment increase when it was annualized that first year, the Nutrition North increased, this is very, very important to fill governance step forward, to improve and work with us and other retailers on food security.

But that puts money in people’s pockets to spend in other necessities for their household. So there’s a ripple effect in the local spending that takes place. And if we’re the store that has that product, then we’re the ones that are going to get the business and the sales.

Matt Bank

And just to follow-up on that last comment. I mean, how would you assess your sourcing and logistics versus competitors in your markets? And how bigger in-stock levels stacked up against them?

Edward Kennedy

I think they’re superior. I think that just started on the count, I think, the NSA gives us a huge advantage. The way our stores are laid out we have a bigger focus on big ticket. We’re the largest seller on ATVs in the world, snow machines, skidoos and this is what we do. It’s a very, I would say, bifurcated, but it’s quite a stressed existence, right. On the one hand, we’re trying to sell Tim Hortons. We’re trying to get the center store business through our price investment. But when the sort of the bells rang on big ticket, we were geared to do that. Our buyers, our logistics the way we move our freight in the north, we find room for that product to get to the stores or C lift. So we’re able to flex ourselves to get those sales.

I don’t think any retailer in the North Alaska or Canada can do what we do when it comes to big ticket. And certainly doesn’t have the supply chain advantage that we do.

In the islands, we have a couple of markets where PriceSmart is there otherwise our format is entirely unique in terms of the warehouse club format. So it’s more of the format uniqueness that stands out and as Dan said, it really fits the time we in right now.

Matt Bank

Great. Thank you very much.

Operator

Thank you. [Operator Instructions] There are no further questions at this time. I would now like to turn the meeting back to Mr. Kennedy.

Edward Kennedy

Okay, thanks operator. Well, that will wrap up our call. I appreciate all the questions. We hope that everyone has a safe summer and has time off. We’re going to do the same. We’re going to be busy based on the way the quarter is going. And we’re all – everyone is going to be adapting and adjusting. So we’ll look forward to reporting on how we’re doing and what’s around the corner next when we get back together with you at the end of Q2 in September. Thanks very much.

Operator

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