© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Please be advised that this conference call is being recorded. Good day. Welcome to The North West Company Inc. First Quarter Results. I would now like to turn the meeting over to Mr. Edward Kennedy, President and Chief Executive Officer. Mr. Kennedy, please go ahead.
Thank you, operator. Good afternoon, everyone, on our call. Welcome to the first quarter North West conference call. Joining me are Amanda Sutton, our Vice President, Legal and Corporate Secretary; and John King, EVP and CFO of North West. Before I begin with my comments, I'm going to ask Amanda to read our disclosure transcript statement.
Thank you. Before we begin, I remind you that certain information presented today 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.
Okay. Thanks, Amanda. And I was just informed that there was a technical glitch in getting our MD&A posted. So right now, I'm assuming that it's only been out for a short period of time, which is unusual and unfortunate. We're still going to have the conference call, and I apologize for that. I guess things can happen. I think I'll just have to be maybe a little more -- amplify a bit more some of the points, and then we'll see how the questions go if I can help bring things along through that.So looking at the quarter overall, it was one of these quarters where there was a lot of puts and takes on noncomparable and, in some ways, non-core operating type income and expenses. I'll just make a point on the -- on our long-term incentive plan, the board approved and the shareholders did as well today aspects of a new LTIP -- long-term incentive program that will roll into effect as the existing grants and tranches expire. Those will be -- those will include vanilla options. We had a declining strike price option feature before. We thought that, that was great for a total return yield focus as well as growth, but the mark-to-market accounting is very distracting. And we've put more of a waiting onto the performance options, which can stay out for 7 years , which I think is important from a matching of executives' time horizon. I'm only pointing this out now because we are going to have more discussions. There'll be quarters like this on the mark-to-market features of our current LTIP. But as we cycle through and these now-past legacy grants expire, the new ones, including this year's, are going to be replaced with mechanisms and frameworks that are not mark-to-market to the same degree, and we'll do a lot to reduce that volatility.So it's suffice to say that was part of the quarter. We had an FX impact as well. And then we had the noncomp expenses last year with the staff duty tax and the BVI acquisition and other acquisition costs. When you put it all back and forth, it was a fair quarter. We were flattish at the EBITDA line, and we would like to have been better. But at the same time, when we look at the results, we're not discouraged at all. And I'm going to start with taking some of the highlights that I think are indicative of investments we've made that are turning out really, really well. I'll start with the BVI.And what we're seeing in the BVI is that there's a reconstruction economy that we expect will take 2 years, perhaps another year longer. And in -- during that time frame, we'll stimulate the economy with construction jobs and income related to infrastructure rebuilding. The tourism will lag with that because this infrastructure is built -- a great deal of it is directed at the tourism sector. So on the one hand, tourism rebounding will be longer, but at the same time, there'll be a replacement effect with the stimulus from reconstruction. And the same assessment applies to St. Croix, where we also have operational stores -- a store, and we have several units in the BVI.So those have been actually strong markets retail-wise because of the economic activity tied to reconstruction, which, as I mention, will continue, we think, for at least 2 more years.On the other hand of the ledger, as you know, we did not have stores opened that would normally be open in St. Thomas and St. Maarten and a couple in the BVI, and the cost of that was approximately USD 2 million in the quarter, and that's going to continue. September 1, roughly, will be the reopening of our fully operational St. Maarten store. So we'll have the full benefit of its performance in the tourist season through the back end of 2018 and into '19. St. Thomas will not be open until well into next year. We're well underway with our planning. We are seeing the tightness of supply of contractors and tradespeople and the entire -- back to my first point about reconstruction activity, there's a degree of getting in line to have your project scheduled and built, but we're going to be -- taking all the stops to get that store up and running as soon as we can in 2019.Just to continue with international and the way the quarter turned out, the highlights where the -- the locations I've mentioned. We're a little more challenged in Barbados. There was a new competitor that opened there earlier in the year. The Barbados economy has struggled. Some tourist islands that were unaffected by the hurricanes are benefiting. Barbados not as much. They're getting some uptick, but they also have fiscal problems. They've imposed a pretty dampening consumer tax that has affected retail sales across the island. So they are not in the same uptick that we might have hoped for post these hurricanes. So we're doing okay but not to the extent that we had expected.The other 2, call, markets that have been -- or 1 market -- 3 stores, actually, is Guam, and we are a company that pays attention to what happens between North Korea and the United States because the Guam tourism market is directly affected by the Korean tourism sector and even the geopolitical tensions attached to the location of Guam. So that's been, again, a negative effect on tourism into Guam. There's always another side to the picture here, and we are getting more clarity, positive news on the military buildup in Guam. That's permanent in terms of base relocation that's been talked about and discussed for over 10 years, but it is now getting into the operational state. So we certainly see Guam as having a brighter future, medium and long term.Across the map of our other banners, we were so-so in our Alaska business. It was okay. I mean, we think we're going to be decent in the next 2 quarters. We have a challenge in one market where a liquor store was closed. A community permitting decision, really, a community referendum on whether liquor should be sold in the community, and we'll stay tuned on that. That will have an impact on the business in that particular community. But overall, we feel the construction season, the fishing season looks like it's shaping up to be pretty decent. And I'll say the same point and kind of move into Northern Canada on that theme. We are bullish on the construction economy in Northern Canada. You've heard me talk about this for a couple of years now as we've gotten back our intel, with a number of new homes and other infrastructure projects that are planned for this year, it looks like it's one of the highest that we've seen. Our job, of course, is to get our share of consumer spending attached to those higher incomes that are in the construction space, and we're going to be going with that attitude through the summer and fall season.Overall, I -- we did comment and have to bring it up, not so much the calamitous weather events but just the everyday stuff. When you have a long winter road season, that means you've got cold conditions. It's not -- I mean, you're not going to hear me talk about our spring selling except for the fact that clothing sales in Giant Tiger until May, which was a great month, and that that's going to be in Q2. But in the North, it more has to do with the winter roads. So we've got approximately 25 stores that connect to the South for -- between 6 weeks to 3 months. This year, it was more than 3 months. And that extra -- compared to an average year, that extra 6 weeks of traveling south just meant that consumers were shopping and spending their money in other ways and not in our stores. This comes and goes in warmer winters. But from a comp basis, we certainly felt the effect of that. And now that we're in the airline business, we actually saw so the effect on our airline to some degree because the air cargo and air passenger service is softer when people get take roads instead of more expensive planes for their transportation or cargo needs. So we even saw a reverberation into the airline business, particularly in the -- midway through March through to the end of April. That's behind us now, and weather is, again, a factor for a lot of retailers. But we have a more normal selling season into Q2. And we've seen a nice recovery, if anything, there was a bit of a surge from maybe spending that with that shifted over from April into May.I commented today on our Northern business saying that we're very pleased with our convenience Top Categories. They're up to 28% of our total sales. They've got CAGR of close to 6% since 2012. They're very profitable. On a net contribution basis, they're very space efficient, and then we're going to keep doubling down. We have 5 -- 6 -- pardon me, 8 stores opening this year. Five of those are going to be sent up on a modular prototype or test that we're using with ATCO trailers, and the sixth one is actually going to be a modular pharmacy that we're are shipping up on the Sealift is the Arctic. I'd expect that will add 6 stores a year. We have 46 now that are either standalone or cordoned-off stores that would be open later inside our main stores. And it's a winter. We recognize that, and we're going to keep doubling down. The challenge I see is that between that and Top Markets, which is a good investment strategy as well because it really goes after every best markets for investment, is more quivers in our bowl, so to speak, or more energy in our sales because, today, we're not getting enough growth except in rising markets and flat-to-down ones where we're holding our own but not capturing share. A couple of things that we have on our agenda that are going to start in the second half of the year, we had really focused in on our pure retail initiatives that I talked about in the AGM, and that is to look at our road stores. We've got about 30 of those in Canada that we don't think are getting the sales they should from full-basket food shoppers. So this is past convenience. This is about being the food store in town. And we're looking at our store, I mean, from our management structure to pricing and, of course, assortment in those stores, and we'll have some interesting pileups underway in the fall season. The second area is our direct-to-consumer business. And I mentioned at the AGM that it's e-com with a Northern twist. E-com, of course, is digital, but in the North, it's also fax, phone order and in-store ordering because of bandwidth and Internet access issues. We don't -- the size of the prize here is hard to assess. We're not trying to just be another retailer in this space. We want to own what we decide to go into through a combination of superior logistics, curated assortments, credit offering to our customers and loyalty tie-ins, both to spend in our store and spend on our airline.As you mix those 4 value propositions together, we'll find out whether that's compelling enough, but we're certainly, is worth our time to invest some energy and some money into this venture, and we'll report back over the next 2 quarters as we start first with our general merchandise -- our motorized, pardon me, parts and machinery, furniture, then extend to general merchandise and food through Q3 and Q4, and I can provide more detail as we get into that rollout. So those were 2 drivers that we think are interesting to keep the energy going, as I've said, in our food momentum and our overall sales momentum in Northern Canada.Overall, we also talked a little bit about capital spending. Defended, I guess, you could say, our large CapEx last year. We've talked about this for several quarters so it's not news. We're very comfortable with the debt levels. There was a question about that in the AGM, and we feel our business risk is still very controlled and at the low end and we can take on the financial risk we currently have and even some more if we needed to do tuck-in acquisitions or other key investments. The big theme for the rest of the year, though, is very much heads-down operational fine tuning. This applies directly to NSA, and maybe I'll end with that before opening for questions. So with North Star Air, we -- our 2 ATRs, 2 big aircraft investments, one is flying, fully operational as of 2 weeks ago. The second will be fully operational by July 15. And our Thompson base will be fully in service no later than the end of June. We're now servicing stores across the Central Arctic, or Kivalliq region, reaching into the Eastern Baffin and the Western Arctic. This is a major step forward and what we call Phase 2. Phase 2 with the other 2 steps I mentioned will be fully in place by mid-July. And then it's all about, as I said, operational excellence and delivering on the return on the investment we've made in this airline as a key part of enabling our everyday service to stores, controlling cost, service and generally getting an ROI that lives up to our expectations. So that's all underway with the airline. Reconstruction continues in the Caribbean. And then with Giant Tiger, it's a lot of focus on performance improvement. My remarks there at the AGM was that we recognize this as not being core like a Northern Star to our business or even a Southern one for that matter. We know it's not remote. And in some ways, we're our own worst enemy. We think right now that our best bet is to make this core in our minds or management attention standpoint and keep focusing on closing gaps, which we see happening. This is still a very interesting growth part of our business. We just opened a store, for example, in Steinbach, Manitoba. It's a terrific opportunity to be in a rural town like Steinbach and offer folks what's probably the most compelling fashion store in their community without having to drive into Winnipeg, with a great offering of local products they don't get from the big corporate stores who are more central than ever, I'm talking Sobeys and Superstore. So we fit in, in many, many ways. And every time we go to the drawing board and look at this, we tell ourselves that there's a lot of upside here, but we're going have to work hard. Now we have added on the personnel side a new chief merchant for food, and we are going to be coming even harder at the cost and margin, including freight expense, to free up more basis points on the food blend. We'd like to drive up the non-food blend, but we think the food blend itself has a couple of basis points that we can liberate to drive to the bottom line this year. And the final point I'll make on Giant Tiger is, again, there's torque in the business. If we can get decent seasonal selling, then we'll let the high, high-margin product for us in seasonal soft lines and hard lines will take care of itself.So I'm just going to ask John before I open to questions. Again, not realizing you've only have the MD&A for a short period of time, John, are there other things that I should have mentioned that I haven't?
No. I think you covered all of the key items, Edward. And we'll get into the Q&A now. And if there's any further follow-up, we can -- they can contact me.
So operator, we'll open the call for questions, please.
[Operator Instructions] First question is from a participant. [Operator Instructions]
It's Mike Van Aelst. The first question I'd like to ask is on NSA. And you said in past calls that you expected to get to a run rate of, I think, over $8 million of EBITDA once you include new capacity. Now where would you say you are -- were in Q1 relative to this? And how quickly can we -- can you expect -- reasonably expect, to see you get to that run rate of well over $8 million at that?
Well, Q1 was a disappointment relative to plan from a budget standpoint. We were about $800,000 off, which is -- I almost apologize for saying that because nothing changed in the plan. But as we sat down with the executive -- the team at NSA and we've looked at, "Okay, you did your maintenance. You flatline budgeted that." And this is getting more of a grind, but we're just going to explain to you, "But you took your heavy maintenance into Q1, but you flatlined it in the budget." So there's a lot of reasons why the first quarter didn't give us what we had planned for it to get. It doesn't change the run rate of what you just asked, the $8 million, but it meant that, in Q1, there wasn't a 0 contribution. It was negative. So we had a loss in NSA in Q1 entirely tied to 2 things. One is we don't have the planes flying to generate the revenue to get to the $8 million, plus, actually. And two, we've got, I'm not going to call it exceptional but understandably higher ramp-up costs as we add expenses to support these airlines. You -- to be -- these planes are great investments, but they're flying all the time, so they got multiple crews that we're paying in training now before the planes even leave the ground, and that includes some maintenance support and other aspects. So we're essentially building a big airline by Northern standards and incurring those costs upfront. I don't think -- I surely hope I didn't -- I've told you about internal forecasts missed. I'm pretty sure we didn't give guidance that, that run rate was going to be spread across every quarter equally because, as you probably know, the planes have to fly first. So that was a factor. And then another one was the -- I just referred to, and this one is not on the budgeting part of it between ourselves and the NSA team or John's team. It's more the reality of this colder weather. And we're heads down thinking about our store sales, and we realized that when the weather is cold and you can use a road, people don't use airlines as much either. So that was a factor too, but the bigger one was more just understanding the, I would say, it's a growing pain with us and NSA. And we've known we're going to have a loss in the quarter with NSA, we would have probably given guidance on that. We probably would've talked a bit about that. But we certainly aren't backing off of what's happening now as the planes become operational and the revenue kicks in. The map on that is still what it was.
And John, would you be willing to give us a, I guess, a number for the quarter for NSA?
It's actually...
It's actually -- Mike, if you look in the notes to the financial statements, you'll see in the acquisition note the details.
It might be the last one you get because I think that the accounting are we have to do it for a year. But we're certainly going to be accountable to you, as investors, on whether the $8 million has returned once it's returned to us. So you'll get it that way. I mean, you'll get it indirectly, but from a reporting standpoint, we actually have those notes, right, John, for this quarter?
Yes, we do. Yes.
I guess, and when you look at the ramp-up, is it not -- supposed that you see that you get a partial -- you kind of get the partway there in Q3 and maybe closer to full run rate by Q4?
We should be full in Q3. I mean, the key dates here are one ATR fully operational now as of 2 weeks ago; second one, mid-July; and the Thompson base, July -- June 27. So what you -- yes, by August 1, we're into Q3, there's nothing else to do. There's no more capital to spend. It's just running the airplanes.
And there's no reason to expect any initial inefficiencies or kind of...
Well I'm delaying that answer right now. The May and July and even last night, we had our sort of get together with all of our exec teams from different groups, and the NSA guys were -- they had told me end of June, and they said, well, July 15 with all the crews fully operational and at performance. So I'm comfortable right now that August 1, I'd add another 2 weeks to it, we're there.
Okay. And just quick question before I get back on the queue. Just on the tax rate, it was quite a bit lower this quarter. If you were to take out the stock-based comp going forward, what would you expect to be a normal run rate for tax?
Well, it's -- Mike, I think what you're getting at is the impact of the U.S. tax reform. So you're right. If you take out -- the single biggest quarter in the factor was the share-based comp, right, and the fact that, that's not taxable or tax-deductible depending on income and expense. The value of U.S. tax reform on an annual basis is roughly $1.5 million, kind of running off of last year's U.S.-based international earnings. And I'm hedging a little bit because there is likely going to be a bit of an offset to that number as we get a better understanding of some of the other add-on taxes that were part of the U.S. tax reform, like the global intangible low income tax. But that would be a rough number for you.
The next question is from a participant. [Operator Instructions]
It's James Allison calling from Barclays. So following quickly on Michael's questioning with North Star. How quickly would we expect -- or would you expect to transition the airfreight from third party to owned? Is it -- this just going to happen as soon as the airline -- or the second aircraft goes live? Or is there a bit of a transition period?
It happens as soon as we have the crewing in place. So mid-February -- pardon me, mid-May, we transition the roads entirely that were -- that we have slotted for that capacity, and the same thing will happen by mid-July. Those roads will convert completely. I mean, we have backup if the plane didn't fly. I mean, we have other equipment to fly. So the notice is given under the agreements and then the conversion takes place. So it's not likely we still haul a bit of freight with the legacy carrier. It's a clean break done in a route-by-route basis.
Okay. And just switching gears to Giant Tiger. Can you talk a little bit more detail about how you're able to stabilize sales and margins in the quarter or, I guess, at the end of the quarter? Was this more a function of the lapping of price investment from last year lapping, or are you actually seeing any easing in the competitive environment that's allowed to take back some margin?
It's -- we lapped the -- we lapped last year. We went back into our cost with our vendors, and the individual that I brought in now to run the food side of the business is super, I think, very good at this. And she's only been here 6 weeks, but there's a lot of, I'm not going to call it the cost concessions but cost improvements. We've looked at our pricing to make sure that where we need to be on [ Q2 ], and we'll never compromise that. But promotionally speaking, we thought that there were some wins there. We just hadn't been as smart on promotional pricing and giving away too much margin on particular items or page spots. So when you add all that together, I would say it's 2/3 lapping, and 1/3 is what we're doing ourselves. And we'll continue to work on the stuff we can take care of. And it's important, of course, because the torque is big, stabilizing, and then adding 25, 50, 75 basis points is really big for us. So it looks like we're heading in that direction. And then the other aspect will be can we continue our sales momentum in soft goods and hard goods. Seasonally, I think we will. But I -- it looks like it's going to be that kind of a quarter. So...
So would you characterize the competitive environment in Giant Tiger's markets as relatively stable then?
It's stable. It's stable, but it's been reset 300 basis points lower than where it was 2 years ago, for us. And I think we can get part of that back through cost improvement with the vendors, and the rest, we're going to have to live with for now.
Great. And then just quickly on the dividend, it's been over a year since you've increased the quarterly payout. With CapEx coming down this year, will you be revisiting the dividend after Q2? And could you kind of walk us through your thinking there?
Yes. I think we've talked a bit about that, and that's our -- sort of our agenda or cadence on this is that when we get together with the board then, management will have a very good idea of how the year is turning out, where -- how we're delivering on our ROI on the airline side. That's one factor, probably, maybe the bigger one, but we'll make a call then.
The next question is from a participant. [Operator Instructions]
It's Matt Bank, CIBC. I guess, my first question is on Northern Canada. So you talked about a better environment in the summer and fall construction season. Just wondering what gives you the confidence that the macro is going to be positive.
So what we do is we look at -- we do everything from looking at the websites, government, Canada -- Department of Indian Northern Indigenous Affairs (sic) [ Indigenous and Northern Affairs Canada ]. They give not bad disclosure on their capital projects. Then we go ground up. So every store collects -- goes over to the local community administrator band office, et cetera, and gets the number of houses that are planned to be built. All the major capital works projects that are underway with the estimates of that, how many people are going to be working, hopefully, they expect on those projects. And we put those into our spreadsheets. We then compare them to last year, and we look at the delta. So we probably have as good a perspective on that as you can get because it's community-based, and we pay attention to territorial and provincial spending announcements as well. So we come at it from top-down and bottom-up.
Okay, great. And then on the gross margin, it was up 84 bps in the quarter. Coming into this year, you guys have characterized this as a year of margin expansion around Top Categories. Just wondering is that the kind of magnitude that you're looking to do throughout the year? I know there's a lot of moving pieces in the quarter.
That 84 for Canada. Yes. I wouldn't give you the exact number but that -- it's in the range of -- that we'd expect and is very much focused on our Northern business, Alaska and Canada. The drivers that can also drive it, by the way, is not Top Categories. It's the previous question about Giant Tiger margin that folds into that as well. But the convenience top category strategy is a function of blend. We keep growing those categories, which have higher margins, inherently, and two, there is margin expansion opportunity that we're taking. So that adds up. So it's baked into that number. But because it's only one part of the business, albeit a very large one, it could get pushed around by our success or lack thereof in our Giant Tiger margin.
Okay. And I wanted to ask on the convenience store. So this pace of 6 per year sounds like a pretty high number on a base of 42. And I know convenience has been a focus category for some years. So just wondering, has this been enabled by this ATCO trailer model? Like, would you have wanted to open up convenience stores earlier but you just couldn't based on economics of other models?
Yes. That's a great question. And that -- it is a big enabler. I mean, I think if we looked at -- I said for 3 years in my AGM remarks, so I think about that, obviously 18 stores. We needed a model that brought the cost down, and we found one. But I would say we still could do a couple of acquisitions a year as well in those 6. And those tend to be legacy assets. So you're not really paying replacement cost on them. So it will be a combination of tuck-in C-store acquisitions and these modular units. Now if something goes sideways on those, then we'd have to go back and look again. But so far, by putting 6 up there, 1 pharmacy and 5 C-stores, we're obviously pretty comfortable that we think we've got the right solution here to do this with more numbers.
Our next question comes from a participant. [Operator Instructions]
Operator, this used to be a -- it doesn't really matter, I guess. No one seems to hear you except us. Anyways, do you want to -- go ahead, sir, with the question.
It's Sabahat from RBC. Just a follow-up on the convenience store model there. So just to clarify, you have -- is this 46 stores with expanded convenience offering? Or is this 46 kind of just, largely, convenience stores? And when you think about adding 6 per year, does that include these modular units and acquisitions? All in, do you think you'll get to about 6 a year?
Yes. It's 26 -- I don't have it in front of me. I think I believe it's 26 standalone and 17 inside a store that we have today. That's 43, so it's approximate. And all the additions are standalone. And when I say inside a store, I just don't -- I don't mean like because all the stores had a space reallocation, if you will, of counterfeit to this and other Top Categories, but I'm talking about space that's actually closed off with sliding doors and such and has longer hours after hours. So those would be the 16, and then there are 17, and the 26 would be the standalone.
Okay. And then just a Northern Canada, maybe if you can give us an update on where you see the government spend that was expected to come. I think, last quarter, you indicated that you were beginning to see some initial steps, so any update there?
Yes. There's a previous question you might have heard the answer or the question, but it was the same one. I said that we're tracking this, and our forecasts are quite positive. It would be a high level of spending compared to the last, I'd say, 3 or 4 years on housing. And on sewer water, schools are huge but there are a lot of outside labor there, ports, runways, a whole list. But the one that probably stands out the most for us right now is housing.
Okay. Then one last one, I guess, is there any indication of where CapEx could come out to next year as a kind of -- do you see a pretty material step down in how much you're looking to spend next year?
We do. We expect that we're going to get into sustaining CapEx equal to depreciation, and the growth CapEx would be, say, for Giant Tiger stores, we did other, say, 5, 6 C-stores, and then, whatever else we've got, it's a great idea if there was something on the air side, if there was a revenue opportunity for additional of our -- additional cargo. But that would -- so that would take us -- I think, John, we were talking about going from like $55 million to $65 million. Could we go up to $75 million? It depends on how many good ideas we have on the growth CapEx. But as you can tell, I'm not talking about -- at least today in the pipeline, there are no larger investments planned like we had with -- in last year with RTW and NSA.
The next question is from a participant. [Operator Instructions]
It's Neil Linsdell, Industrial Alliance Securities. Just wanted to make sure I understand what you were talking about on RTW. You've got a reconstruction market now which is helping to offset the loss in what would be tourism dollars, is that right?
Yes. So I was down there 2 weeks ago, and discouragingly to me, at first glance, it looked similar to when I was down there 2 weeks after the hurricane. But then you look carefully and there's a harbor situation. The largest charter party for the catamarans which are big business there, they're completely back in business. Their competitor is not, and it kind of goes like that. You've got one where you construct the building, and the other one just looks like it just got hit. So it depends who has insurance, who signed up their contractors first, et cetera. I go to our stores and the ones that are open are booming in the sense that like the prepared food business is up 2,000% because we have to feed construction crews. So you start to get the picture here. If anything, we're having trouble keeping people because they're being a bit away from us, higher-paying construction jobs. So as I spent more time on island and I looked up a scenario it wasn't -- on the one hand, I think it'd be better if the kind of reconstruction proceeded faster just for the general aesthetic and the general living conditions of the island. From a stimulus income standpoint as an everyday retailer, wholesaler and distributor, we're probably indifferent, purely financially. But we're -- we want to see the community get back on its feet. But we seem to be recovering under the current recovery economy, and my point earlier was that -- and St. Croix, it looks the same, and St. Thomas was that there's going to be this kind of spending for just a number of years. And you know the rebuilding of our stores is kind of indicative. I mean, yes, we should be underway. There's a few reasons we weren't and not -- it has a lot to do with getting contractors and getting the tradespeople lined up to do this work. So that's the scenario in the affected in the affected islands. I think if -- we're not in Puerto Rico. We see what's happening there, and it's very similar. Puerto Rico is going to have reconstruction for quite a while.
Okay. So the demand is there, it's just from a different segment, it's from the construction versus the tourism. And is it just a matter -- so the losses that you're talking about or the missed revenue and EBITDA that you're talking about in the quarter than we saw last quarter, that's more of you just not getting the stores open yet, right? So as the stores open up, that will -- we'll see a step function?
Yes. What I -- I was pretty granular, and I mentioned that St. Croix is doing very well. And if we open in St. Thomas and like our competitors are, there's a luck factor, we know they're doing very, very well. Even though there's been a large depopulation, but it's -- the economy is growing with construction. But we're not open. And that's what's driving -- that variance that we've explained in the MD&A is driven strictly off closed doors.
Okay. So all that will come back on. And are you having any kind of problems still because right after hurricanes, obviously, your supply routes were problematic? Has that all cleared up now?
Right. It's lingering. All the ports that I've seen are still challenged with capacity for different reasons, but it's getting better. We try to rattle some chains with the port authorities and so forth. But as recently as, probably, let's say April, we were still having some problems in Tortola with the main port and a backlog of containers.
And do you have any clarity on insurance proceeds coming in and how that's going to be recognized in your financials or when?
Sure, Neil. It's John. At this point, the proceeds coming in from insurance will be tied to the reconstruction of the stores. So we're going to -- there's going to be a timing difference on those, on the receipt of those funds. We're going to rebuild the store and as we rebuild and put the cash out, we'll be filing claims. But there will be a lag factor on that.
[Operator Instructions] The next question is from Michael Van Aelst.
One more question here. So just to summarize, when I listen to everything you're saying about the outlook, once you get NSA up and running in mid-July, fully, the only headwinds or the only kind of drags on your profitability seemed to be the Barbados and the Guam stores. Is there anything else that we're missing?
The liquor store in Alaska. It was a pretty big, busy operation. And who would -- with 240 stores, who would talk about 1 store? But this is a community with a 15,000 population trade area that has no liquor stores, had a plebiscite decided to allow liquor stores, and we opened the only liquor store. There was another license that's granted, but for other different reasons, they didn't open their stores. We had one liquor store serving all these people. And again, we're -- we reflect, obviously, community wishes and rulings so we're standing by now. But based on the fact that it was closed 2 weeks ago, it will be material in the quarter.
[Operator Instructions] We do not have any further questions. I turn it back to you, Mr. Kennedy.
Thanks, operator, and thanks, everyone else, for your patience today in a little bit different situation. I think we had some glitches as well with the call and people identifying themselves. So we'll get all those right next time, and we'll find out what we could have done differently if it was us or whoever to get the MD&A out on time. We will be in Tortola next quarter with our board, and it'll be the afternoon, same time zone as Toronto, when we have our conference call. So we look forward to talking to you then in September. Thanks very much. Have a great summer.
Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.