December 10, 2018

The North West Company (NWC)

The North West Company (NWC) – also known as NWC and North West – is a name synonymous with service in Canada’s isolated northern and rural communities; however few realize that the company also has considerable assets in Western Canada, rural Alaska, the South Pacific, and even the Caribbean (due to the company’s recent acquisition of Cost-U-Less warehousing stores)!  The North West Company does most of their business it the retailing sector, with a focus on food and necessities.  It is safe to say that the company has a very different business model than just about every other retailer or food company on the market today.  They state that, “Out core strengths center on our ability to adapt our product mix to each market we serve; our logistics expertise in moving product to, and operating stores within, remote or difficult to serve locations.  The NWC actually has a history that dates all the way back to the initial exploration of North America over 340 years ago.  It has many unique locations that serve small towns of 500-7,000 people.  The company owns many subsidiaries, and its most well-known brands would be Northern, Northmart, Giant Tiger, AC Value Center, and Cost-U-Less.  They have a yearly revenue stream of roughly $1.5 billion (CAD).  It is also the biggest company in Canada’s North in terms of employees at over three thousand.

 

Most recently the North West Company (NWC) has co-opted with the Canadian government to try and provide Northern families with a much more economical health choices menu at their local grocery stories.  They hope to see items such as lettuce, apples, and other fresh essentials decrease in price by about 20%.  This would represent a $6 million savings to Northerners in the first year alone.  This program was made possible by the participation of the Federal Government, and their food subsidy program titled, “Nutrition North Canada.”  The government has also allowed the NWC more leeway in determining its shipping options, giving it a more efficient shipment rate.  Dependence on “junk food” and meat-heavy diets have plagued many Northern communities for years now as most people had a difficult time fitting expensive produce into their grocery budgets.

 

While the North West Company (NWC) is not a “sexy” investment, or one that is likely to suddenly boom, it does offer several competitive advantages in its field, and after 340 years of business, is pretty much the definition of a mature and stable company.  In a recent study done by the company they found that 90% of households that shop at their locations do so every month.  With 85% of their locations over two-hours away from big-box competition, this represents a considerable retailing advantage that is tough to find anywhere else.  As a mature company, the NWC returns about 50% of cash flow to investors every year, and have established a very attractive dividend yield of 4.7%.  It is currently trading at around $20 a share, and has a performance-to-earnings ratio of 13.69.  The stock has a market cap of almost exactly a billion dollars.

 

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