North West : 2023/09/12 - 2nd Quarter ending July 31, 2023

THE NORTH WEST COMPANY INC.

Report to Shareholders

Quarterly Period Ended July 31, 2023

2023 SECOND QUARTER REPORT TO SHAREHOLDERS

Report to Shareholders

The North West Company Inc. reports its results for the second quarter ended July 31, 2023. Sales increased 6.8% to $618.1 million led by same store sales gains and the impact of foreign exchange on the translation of International Operations sales. Excluding the foreign exchange impact, sales increased 5.4% compared to last year and were up 4.7%1 on a same store basis.

Second quarter net earnings increased 17.5% to $38.0 million compared to $32.4 million last year and net earnings attributable to shareholders were $36.8 million or $0.76 per share compared to $0.64 per share last year on a diluted earnings per share basis as sales gains and an increase in gross profit rate offset higher expenses.

The Board of Directors has approved a quarterly dividend of $0.39 per share, an increase of $0.01 or 2.6% per share, to shareholders of record on September 29, 2023.

On behalf of the Board of Directors:

Brock Bulbuck	Daniel G. McConnell
Chair of the Board	President and Chief Executive Officer

Management's Discussion & Analysis

The following Management's Discussion & Analysis should be read in conjunction with the Company's 2023 second quarter unaudited interim period condensed consolidated financial statements for the period ended July 31, 2023 ("Interim Condensed Consolidated Financial Statements") and the audited annual consolidated financial statements and accompanying notes included in the 2022 Annual Report.

1. Excluding the foreign exchange impact
2. See Non-GAAP Measures Section of Management's Discussion & Analysis

2 THE NORTH WEST COMPANY INC. - SECOND QUARTER 2023

Second Quarter Highlights

CONSOLIDATED RESULTS SECOND QUARTER

Key Performance Indicators and Selected Second Quarter Information:

		Three Months Ended
($ in thousands, except per share)		July 31, 2023		July 31, 2022
Sales	$	618,095	$	578,874
Same store sales %(1)
Food		4.7 %		(1.3)%
General Merchandise		4.7 %		(18.8)%
Total		4.7 %		(4.1)%
Gross profit	$	204,444	$	184,057
Selling, operating and administrative expenses		149,758		137,962
EBITDA(2)		80,108		70,444
Earnings from operations (EBIT)		54,686		46,095
Interest expense		4,612		3,429
Income taxes		12,029		10,295
Net earnings		38,045		32,371
Net earnings attributable to shareholders of the Company		36,777		31,395
Net earnings per share - basic		0.77		0.66
Net earnings per share - diluted		0.76		0.64

Sales Second quarter consolidated sales increased 6.8% to $618.1 million led by same store sales gains, mainly due to higher inflation, and the impact of foreign exchange on the translation of International Operations sales. The impact of new stores in Canadian and International Operations and an increase in other sales in Canadian Operations largely related to higher airline revenue were also factors. These factors were partially offset by the loss of our store in Fox Lake, Alberta on May 5, 2023 due to wild fire and the closure of our Cost-U-Less store in Curacao, Netherlands early in the first quarter this year. The exchange rate used for the translation of International Operations sales increased to 1.3342 compared to 1.2864 last year. Excluding the foreign exchange impact, consolidated sales increased 5.4%, with food sales increasing 5.0% and general merchandise and other sales increasing 6.8% compared to last year. On a same store basis, sales increased 4.7%1 compared to the second quarter last year led by a 7.2% increase in same store sales in Canadian Operations driven by food and general merchandise sales gains. A 1.3% same store sales increase in International Operations was also a factor.

Gross Profit Gross profit increased 11.1% driven by sales gains and a 128 basis point increase in gross profit rate compared to last year. The increase in gross profit rate was largely due to changes in sales blend and a higher pass through of cost inflation in retail prices compared to last year. An increase in the airline gross profit rate in Canadian Operations resulting from higher third party cargo and charter passenger business was also a factor.

1. Excluding the foreign exchange impact
2. See Non-GAAP Measures Section of Management's Discussion & Analysis

REPORT TO SHAREHOLDERS 3

Selling, Operating and Administrative Expenses Selling, operating and administrative expenses ("Expenses") increased $11.8 million or 8.6% compared to last year and were up 40 basis points as a percentage to sales. The increase in Expenses is mainly due to cost inflation impacts including higher staff costs and fuel-based utility expenses, the impact of foreign exchange on the translation of International Operations Expenses, new store expenses and an increase in depreciation. A $3.7 million expense resulting from the write-off of assets in our Fox Lake, Alberta store that was destroyed by a wild fire was also a factor. These factors were partially offset by a $2.7 million decrease in share-based compensation costs primarily due to mark-to-market adjustments resulting from changes in the Company's share price. Further information on share-based compensation is provided in Note 14 to the Interim Condensed Consolidated Financial Statements. Excluding the Fox Lake store asset write-off and share-based compensation, Expenses increased $10.8 million or 7.9% compared to last year largely due to cost inflation and the impact of new stores previously noted.

Earnings From Operations Earnings from operations (EBIT) increased 18.6% to $54.7 million compared to $46.1 million last year and earnings before interest, income taxes, depreciation and amortization ("EBITDA2") increased to $80.1 million compared to $70.4 million last year due to the gross profit and Expense factors previously noted. Adjusted EBITDA2, which excludes share-based compensation costs and the asset write-off of the Fox Lake store destroyed by wild fire, increased $10.7 million or 14.7% to $83.3 million compared to $72.6 million last year and as a percentage to sales was 13.5% compared to 12.6% last year.

Interest Expense Interest expense increased to $4.6 million compared to $3.4 million last year mainly due to higher borrowing costs. Further information on interest expense is provided in Note 12 to the Company's Interim Condensed Consolidated Financial Statements.

Income Tax Expense Income tax expense increased to $12.0 million compared to $10.3 million last year due to higher earnings as the consolidated effective tax rate was 24.0% compared to 24.1% last year.

Net Earnings Net earnings increased 17.5% to $38.0 million compared to $32.4 million last year. Net earnings attributable to shareholders were $36.8 million and diluted earnings per share were $0.76 per share compared to $0.64 per share last year. Adjusted net earnings2, which excludes the after-tax impact of the share-based compensation costs and the asset write-off related to the loss of the Fox Lake store, increased $6.1 million or 17.9% compared to last year due to the gross profit, Expense and interest factors previously noted.

Comprehensive Income Comprehensive income was $31.0 million compared to $31.5 million last year as the impact of higher net earnings was more than offset by the change in foreign exchange impact on the translation of International Operations.

1. Excluding the foreign exchange impact
2. See Non-GAAP Measures Section of Management's Discussion & Analysis

4 THE NORTH WEST COMPANY INC. - SECOND QUARTER 2023

Year-To-Date Highlights

CONSOLIDATED RESULTS

Key Performance Indicators and Selected Year-To-Date July 31, 2023 Information:

		Year-to-date
($ in thousands, except per share)		July 31, 2023		July 31, 2022
Sales	$	1,211,659	$	1,130,890
Same store sales %(1)
Food		3.4 %		0.6 %
General Merchandise		(1.2)%		(17.5)%
Total		2.8 %		(2.4)%
Gross profit	$	389,373	$	360,097
Selling, operating and administrative expenses		300,919		272,571
EBITDA(2)		139,060		135,389
Earnings from operations (EBIT)		88,454		87,526
Interest expense		9,104		6,452
Income taxes		19,108		20,542
Net earnings		60,242		60,532
Net earnings attributable to shareholders of the Company		57,671		58,775
Net earnings per share - basic		1.21		1.23
Net earnings per share - diluted		1.19		1.21

Sales Year-to-date sales increased 7.1% to $1.212 billion largely due to same store sales gains in Canadian Operations, the impact of foreign exchange on the translation of International Operations sales and new store sales. Excluding the foreign exchange impact, consolidated sales increased 5.2% compared to last year with food sales increasing 4.2% and general merchandise and other sales increasing 8.7%. The increase in general merchandise and other sales was mainly due to an increase in airline revenue and higher general merchandise sales in Canadian Operations. These factors were partially offset by lower general merchandise sales in International Operations. Same store sales were up 2.8%1 compared to last year as a 3.4% increase in food sales more than offset a 1.2% decrease in general merchandise sales as the impact of higher cost inflation has resulted in changes in sales blend as consumers allocated more of their spending to food and reduced purchases of general merchandise.

Gross Profit Gross profit increased 8.1% due to the impact of higher sales and a 30 basis point increase in the gross profit rate. The increase in gross profit rate was primarily due to changes in sales blend and a higher pass through of cost inflation in retail prices compared to last year. Higher airline gross profit from third party cargo and charter passenger business was also a factor. These factors were partially offset by higher markdowns and inventory shrink compared to last year.

Selling, Operating and Administrative Expenses Selling, operating and administrative expenses ("Expenses") increased $28.3 million or 10.4% and were up 74 basis points as a percentage to sales. The increase in Expenses is largely due to cost inflation impacts including higher staff costs and fuel-based utility expenses, the impact of foreign exchange on the translation of International Operations Expenses, new store expenses, an increase in depreciation and the $3.7 million asset write-off from the loss of our store in Fox Lake, Alberta that was destroyed by wild fire. These factors were partially offset by a $1.6 million decrease in share-based compensation costs. Excluding the share-based compensation and Fox Lake wild fire-related loss, Expenses increased $26.2 million or 9.8% compared to last year primarily due to the cost inflation, foreign exchange and new store factors previously noted.

1. Excluding the foreign exchange impact
2. See Non-GAAP Measures Section of Management's Discussion & Analysis

REPORT TO SHAREHOLDERS 5