North West Company Inc
TSX:NWC
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North West Company Inc
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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.
Thanks very much. Good afternoon, everyone. And welcome to our first quarter conference call. Joining me today are Amanda Sutton, our VP, Legal Counsel and Secretary; John King, our Executive Vice President and Chief Financial Officer; Alex Yeo, our President of 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.
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. 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 reopening of it, pardon me, in St. Thomas late in the year, we're just hitting its strides; as well as our new store in very important market, rural Alaska. So we had a lot going on in the business, and I think we had some very good momentum and it 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 and most 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 business is the essential nature of the services we provide. And it really does come forward when you're in a situation like this and people depend -- we depend on each other as associates at North West 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, how fortunate that less than 10 individuals in our company, of over 8,400 across 17 different territories and countries, have contracted COVID. We've also kept our stores open. They've been 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 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 a few exceptions, we have had 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're 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 2 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 a signing 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 it over to Alex and then Dan, a comment on our admin restructuring. We're still on target for the $17 million in annualized savings. Just if you think about that how it would affect the first 6 weeks, which is already 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 in areas that we didn't anticipate as well as the timing of the structure and the [ traditional ] eliminations. There was 1 tranche or group in March, a second at the end of May and a third at the end of July and 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 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 was $4.8 million in safety PPE-type expenses tied to COVID as well as the frontline wage increases we implemented early in March -- or mid-March, pardon me, backdated to the beginning of March. So with that, you've seen the numbers. The comps are high at 15.5%. And as I said, 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 the highlight of what were some of the performance drivers that have brought these results to -- 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?
Thanks, Edward. This is Alex. So first, I'll open with the commentary on Northern Canada. We had a very strong quarter, as you can see, with significant growth in both food and general merchandise across most of our categories. There are a number of performance drivers that we saw. The first one I'll comment on is on the pricing investment. We start with a tempered price reduction in 10-plus road stores in response to the travel restrictions that we saw in a number of these communities. And the feedback and response from our customers is extremely strong. We saw a significant lift in sales and unit movement versus comparable growth stores and strong community and customer feedback. And that gives us a lot of optimism going into the momentum for Q2. So pricing investment was the first driver of what we saw in the business in Northern Canada. The second and third driver is 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 an 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 for communities to maintain travel restrictions. All of which, because of the essential nature of our stores in these communities, meant that we're 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 as area stores, we not only saw a wave of initial stock up shopping, but also increased spend in our stores as customers start 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 off shopping hub but instead stayed in our communities that -- 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 in safety and sanitation. The additional color I want to add here is that we also invested in hiring additional staff that were in our community that we moved into our stores to help with the [ sills ] with the sanitation requirements, but also as backup support for our staff in event of a COVID outbreak, so that we keep these stores open and running in the event that there 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 extended that pricing investment into 20 more stores. This is a chance for us to really change the trajectory of these 30-plus road stores because at this point, the customers are shopping the whole store. So it's really a chance, through this pricing investment, to change the customer behavior and really capture share and keep share from the out shopping, to change price perceptions and to really change tenor -- the tone and tenor of our relationships with the communities. At the same time, as the government announced some additional support, Nutrition North was expanded as of May 1. The government's invested and is expanding 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 that travel restrictions are starting 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 here that will still continue to be uncertain, albeit with positive momentum. It's also uncertain in terms of how long the government programs will continue. So -- but otherwise, the overriding 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 we've commented on in previous releases. While I will say that food sales did increase due to the stock up shop, but this was offset by softer general merchandise sales as people pulled back on discretionary spending in the quarter. Going to Q2, before we close the transaction, outlook is fairly positive. We've seen food sales trends remain -- return to normalize a little bit, but still above where we were last year. But as restrictions is slowly lifted, we've seen a resurgence of spending on basic general merchandise items like home decor, garden, some of these items where GTSL has traditionally been very strong in. So that's my commentary in terms of the Northern Canadian Giant Tiger businesses.
Okay. Great, Alex. We'll hold for questions until maybe I'll let Dan McConnell, President of International Retail Group, to provide the same review that Alex did for his store units, and then we'll open for questions. Dan?
Okay. Thanks, Edward. So again, very strong sales increase over in international. Some of the triggers and the reasons for this 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 are 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 converted 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. And some of the other reasons is in the CUL, the full -- obviously, the club concept suits very well for this type of environment. Higher quantities, lower prices is definitely switching people away from traditional grocers and -- in their stock up shop. The footplates within Cost-U-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 or were not able to eat at some of the restaurants, given the fact that they were -- most of them are closed or 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 of markets. This is keeping people inside the markets and then shopping over at our AC stores. Talk a little bit about the economy. Alaska definitely has some positive aspects, especially within Q2. The PFD has changed from July and is now going to be distributed out in -- sorry, from October, typically, and it's now going to be distributed out in July. Typically, it's $1,600 over the last couple of years. Now it's going to be reduced to $1,000, but it's going to be accompanied by CVRF as well as some of the trickle on of the stimulus that was distributed in Q1 is 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 in 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 at 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 in Cayman this year. And that could be -- last year, Cayman Island saw about 2 million tourists come in as a result of the cruise ship business. BVI would be approximately $1 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 and we're -- 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 anticipate it well later in Q2. I think that's really all I have for that right now, Edward.
Okay. Thanks, Dan. I don't know, John, if we missed anything that we should talk about right now. If not, then operator, we'll open the call for questions.
[Operator Instructions] And the first question is from Michael Van Aelst from TD Securities.
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?
It would be probably in a range of $1 million.
And why is...
Because it started -- it's only 6 weeks and most of the reductions are spread over the year.
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?
No, that math would still hold water. It's not going to be $10 million a month.
No, it's $10 million annualized. So okay, so $1 million, 6 weeks that it was in. Okay. All right. And then the price investments that you're making, I think on the Q4 call, you 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?
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 to the gates. We're accelerating that spend, where there's $ 10 million or $12 million. I mean this is on an annualized basis, there's a lot of puts and takes in this. I mean I guess I should say that we should put a tolerance around this because -- yes, for example, we see more travel, less COVID-support income, related income, and as our analytics show 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 talk about in the context of funding it 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 this right now, Michael, I hope you will 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 where the pricing as it stands alone, with the Nutrition North investment as well, which is quite significant. As Alex pointed out, it's $25 million. About $11 million of that will flow through our stores. 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.
Right. So that was actually going to be my next question because clearly, you've had very, very strong sales. Is there any way that you can -- that you're able to monitor or pull -- 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't shop anywhere else?
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 initial price investment was only -- was in about 10-plus stores. We have about 20-plus other stores -- road stores during the quarter, which didn't receive the price investment which now are getting it. That allows us to almost do a bit of a controlled test comparison between the 2 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 significant lift in sales and tonnage that help offset the pricing. And that's how we know that there is traction. Now obviously, there's still factors within the quarter, which is level of support, travel restrictions. But that's the best way we can kind of triangulate whether there was traction with our customers.
Okay. And so should we just assume that since 10 stores got it in Q1 and 20 stores are going to add to it in Q2 that you only had about 1/3 of that $12 million investment going in the quarter?
It was actually less. I mean we still have our other stores as well so the investment was less than that.
Okay. And I guess just following and I'll hand it off to others. You talked about a $4.8 million COVID cost or COVID-related costs. Any sense as to how long those are going to stay in the numbers? Have you started -- have any of them started to fall off yet?
Yes. They're going to fall off significantly beginning in Q2. These 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 were not in place any longer in the international group of stores. So on an annualized or quarterly basis, the $4.8 million looks like the high watermark and will be significantly under that in Q2 and Q3. I don't know, we haven't set out the PPE part, but the -- we probably should. We'll have to get back on that. So you understand what -- the PPE will still be there as far as we know. But the lion's share of that is the frontline wage increases.
And next question is from Stephen MacLeod from BMO Capital Markets.
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 a quantification, like how you're trending relative to the strength in Q1? I mean are 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?
Well, we're only -- look 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 payment is going to go out in July. The PFDs went out in July. The CERB payments are in place now, it will cut in half beginning in July. So the income drivers for Q2 are at least as strong as Q1. And we've got instead of 6 weeks, we're going to have 3 months. I don't want to say anything more because these numbers are unprecedented, and it could go differently in an unprecedented way. 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 it'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 there's a lot of factors here at play. We're confident saying that Q2 is robust. When we get to Q3 and 4, then what Dan and Alex -- you can tell, there's a lot of uncertainty.
Okay. Yes, that makes sense. That's helpful. 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?
Lots, okay? It 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 store looks like a Halloween pumpkin, lots of holes and gap and teeth on the shelves. Like people are buying like -- 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 and so. So it's been something we've managed, like we mentioned the fill rate of 80% to 90%. I would have a modest concern about getting sales as I'm looking at store comments on 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 to 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 Alaska 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.
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 are you talking more just broadly?
It's going to be in all the regions we operate, the -- it's interesting that some of our competition depends on other revenue sources that are vulnerable to travel or to fuel sales, to airplanes, for example. So they're weakened, don't mean 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 many are aware, the fact 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 are about acquisitions, but we're also looking at ramping up our business-to-business sales. We've been called on more and more by people to try to find product for 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 when the sun shines in terms of the current demand. I think it's all fair now on acquisitions, except that we are seeing ourselves in that group of retailers that's moved forward, right now at COVID, as opposed to the ones that are struggling. We're definitely not in the 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.
[Operator Instructions] And the next question is from Sabahat Khan from RBC Capital Markets.
Just I guess maybe a longer-term question. Have you noticed any change in sort of productivity of your stores at all? I know there's historically been a focus of what's kind of the top market and so forth. Do the recent event...
I think you cut off. I don't...
Hello?
Yes, I'm listening. I don't think I heard the end of your question. I'm sorry, you were saying...
Yes. Is it 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 your bigger stores even bigger? Or is it too early to make those decisions?
It's too early. I'd really like -- Alex and Dan would have maybe build a perspective depending on the marketplace. But I'll just weigh in to one area. So we haven't been -- obviously, for those who 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 off a small base. All of our stores were turned on to -- we use 2 e-commerce platforms to curbside pickup. And the demand was initially pretty high in a lot of down stores, the cost of the 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 calmed 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, it doesn't ever get 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 to any other retailers, they're using MCS -- or MSCs. We just haven't got 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, let's say, 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 pricing investment is a little bit higher and accelerated because we do see that folks, they don't 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 that we sell, and we're doing that today. Where e-com helps is on range. We're going to have extended range in our stores, and e-com can really fill in the gaps and also get our cost structure down 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're more specific to the Alaska and the Northern Canada business. Certainly, Cost-U-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've had headwind, even though we're the dominant retailer. We reflect the retail economy in BVI as a distributor or wholesaler and a retailer. I think the format of CUL, which is in the other island, not in BVI, has shown to be very, very strong even with more depressed economic conditions. We don't -- we're going to recast that in the fall. But so far, it's held its own. The comps out of our cost of the stores have been right out there with our northern stores.
Good. And then sort of just a follow-up on the e-commerce side. I notice some benefit as people are shopping more in market. But how did you find kind of the e-commerce competition? Do you find some of your local customers relying more on e-commerce than in the past? Or their habits there that they're developing that you're keeping an eye on?
There's been no -- and we can track this, not obviously by individual for privacy reasons, but just the usage of our We 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's been no increase at all. In fact, there's a small decrease in some of the usual suspects for e-com. They aren't big numbers to begin with, ex in [ Calgary ], which has a free freight, Amazon Prime thing going on, it 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 versus the other retailers that struggle to keep their e-com going.
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 competitors throughout the Caribbean, us trying to moderate it a little bit more and manage expectations from our customers, springing over a period of time was our saving grace. 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 to -- and the customers to continue to utilize that service. With the exception of maybe in some of our islands. Sorry, go ahead.
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 in the North, where we do business was getting a great -- if they wanted to go that route, it wasn't the way to go,
Especially the disruptions in freight.
Yes, freight disruption as well. Yes, another point I made in my AGM is not to put defense at NSA. I mean we think it's a great strategic fit. We've had some challenges, for sure, with the 2 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 that keep themselves going with their pass-through revenues having collapsed, but their service would be imperiled. We'd be depending on those kind of carriers to get our product to our customers, that's not going to happen again. And thanks to NSA, it's not. So 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.
Next question is from Michael Van Aelst from TD Securities.
Is NSA receiving any of those government subsidies?
They're receiving it for the passenger side of their business, yes. They're not receiving the ones at unit. I guess just let me be very specific. They're receiving the crew, I think that term is crew. But they're not receiving anything from Transport Canada like Calm Air and Canadian North. They're receiving the normal subsidies if your business volume drops by that 30% threshold, which theirs did.
Okay. So how can we measure that? And is it material for that business?
It's not material.
All right. Are all of the Caribbean stores or all of your Cost-U-Less now Category 5 hurricane resilient?
I'm sorry. Can you repeat that again, Michael? I'm sorry.
All right. Are all of the Cost-U-Less stores now, do they now have Category 5 hurricane resiliency?
Yes, they do.
Great. And then finally, Giant Tiger, I assume you're going to report it, keep it in the results until the day that it's sold. That's true, John?
That's true.
Okay. And then for the quarter, are you able to give us what Giant Tiger's numbers were for like revenues at EBITDA for this quarter versus this year?
Like in the first quarter here, Michael, it's the same number of stores, same business, right?
Right. But are you able to give us the amount that you would need, just so we have [ naturally, a selection ] -- like, you gave it to -- I think you said 0 EBITDA for 2019 from what I recall. And are you able to give us the revenue and the EBITDA would have been for Q1?
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. It was in line with the previous results.
Okay. All right. Congratulations on the great results.
I just want to come back -- sorry, I was distracted with -- and pretty much John was showing me, the PPE amount is about $1 million for the quarter. That's 6 weeks. So the math on that extrapolated, that would be, of the $4.8 million, is $1 million. And that PPE would be a run rate we'd see going forward as long as we -- can any of us can predict the duration of COVID? $1 million for 6 weeks. It's [ $2 million ] a quarter.
[Operator Instructions] And the next question is from Matt Bank from CIBC.
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 like it was a lot healthier in Q1. But can you just share broadly sort of where you're running versus plan? How you see that playing out for the rest of the year? And how much of an impact does it decline in passenger revenues have? I know it's relatively small, but just curious there.
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, 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 your question is that we -- 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. So the airline is performing above plan based on volume. I'm not sure what else to say. Where we are concerned, like I'll just give you -- there's another area of headwind for us is the ongoing insurance costs at North West. We have to really get into this more to find out how we can manage insurance costs. So 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, and we're talking about several million dollars in insurance cost increases.
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. Just where sort of the categories that have been more -- that you've seen a more recent uptick? And sort of how things are trending?
Well, it's really specific to -- so at home, big ticket durables, furniture, TVs, to the extent they're not disposal 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 of even of home products, bath and bedding, for example. Some of that B2B PPE-related and the community investment funds that Alex mentioned. I don't know, Alex or Dan, if you want to jump in on some of the other growth areas?
Yes. So I'll just jump in on Canada and just on the food side. So if we say, 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 Southern retail is seeing, but we're seeing -- we're still seeing elevated levels even going into Q2. That's for Northern Canada.
Yes. I mean much the same in international. The PFD I mentioned, that's coming in with the CVRF, the Coastal Village Regional Fund, that's allocated towards big ticket. In the Caribbean, I'd say, unfortunately, we're 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 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.
The other comment I'll add, it's not specific to the categories, but the -- we serve generally a lower income consumer who's always never has enough income 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 who follow North West, they know, you know, that when we have income, call it, 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 increase, this is very, very important that fair governance stepped 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 households. 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.
And just a follow-up on that last comment. I mean how would you assess your sourcing and logistics versus competitors in your markets? And how bigger your in-stock levels stacked up against them?
I think they're superior. I think that -- I'll just start on the -- 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 -- actually, it's bifurcated, but it's quite a stretched 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're 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 sealift. 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 a warehouse club format. So it's more of the format uniqueness that's been so -- and it fits, as Dan said, it really fits the time we're in right now.
[Operator Instructions] There are no further questions at this time. I would now like to turn the meeting back to Mr. Kennedy.
Okay. Thanks, operator. Well, that will wrap up our call. We 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.
Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.