The Cost-U-Less franchise was severely impacted by hurricanes Irma and Maria, with multiple stores in the Eastern Caribbean being destroyed or damaged during the September storms, according to recently released financial statements from its parent firm, the Canada-based North West Company.
The North West Company’s third-quarter results, released on Wednesday, state that the Cost-U-Less on St. Thomas in the United States Virgin Islands was completely destroyed, and stores on St. Maarten and St. Croix, USVI, were badly damaged.
The 42,535-square-foot Cost-U-Less on St. Thomas will require an entire rebuild – which the company projects to take about 18 months – and the store on St. Croix is operational and running on generator power, the Q3 results state.
The 36,089-square foot Cost-U-Less on St. Maarten is partially open, selling only dry groceries. North West Company CEO Edward Kennedy said during Wednesday’s investor conference call that he expects the store to be fully operational within about nine months.
Additionally, nine Road Town wholesale stores in the British Virgin Islands – which also fall under the North West Company umbrella – were damaged. Six of those stores are operational again, with the remaining three set to reopen within 12-18 months, according to the Q3 results.
All told, the hurricanes negatively affected Q3 sales by US$11.5 million and earnings before interest, income taxes, depreciation and amortization (EBITDA) by US$1.6 million. Overall, sales for the company – which comprises 236 stores throughout Canada, Alaska, the South Pacific and the Caribbean – still increased by 3.3 percent to US$479.3 million over Q3 of 2016. EBITDA decreased by 10.8 percent to US$45.6 million.
“The impact of the store closures in international operations related to hurricanes in the Caribbean was offset by the settlement of a fire insurance claim in Canadian operations,” the North West Company noted.
The North West Company estimated that it will spend about US$21 million in hurricane-related construction costs in 2018, and another US$12 million in 2019.
“Store-based capital expenditures can be impacted by the completion of landlord negotiations, shipment of construction materials to remote markets, and weather-related delays and therefore, their actual amount and timing can fluctuate,” the company added.
The North West Company stated that it expects to recover its rebuilding costs through insurance claims.
However, the company’s St. Thomas operations may suffer losses because its insurance only covers losses from foregone profits for 12 months, Mr. Kennedy said during the conference call.
Looking forward to 2018, the company said that its Cayman Cost-U-Less and other stores not impacted by the hurricanes should perform about the same as they did this year.
But for the impacted stores, “it is uncertain how long it will take for major infrastructure repairs to be completed on these islands and what the economic impacts will be over the medium term as the rebuilding efforts begin,” the company stated.
“The markets will be economically challenged for 1-2 years, and probably longer,” Mr. Kennedy said.