On Jul 15, Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell). On Jul 10, this retail
warehouse stores operator reported soft third quarter 2014 results,
resulting in a major decline in estimates thereafter.
Why the Downgrade?
PriceSmart missed the Zacks Consensus Estimate for revenues in the
third quarter of fiscal 2014 and barely managed to meet the
estimate for earnings. Comps were quite weak during the quarter.
Adjusted earnings of 70 cents per share in the third quarter (ended
May 31, 2014) grew 14.8% from the prior-year quarter as slightly
better margins offset the top-line weakness. Foreign exchange
transaction gains and higher gains from the sale of assets aided
earnings in the quarter.
Total revenue increased 7.6% from the prior-year quarter. Comps
grew 2.9% in the quarter, significantly slower than 6.7% and 7.9%
in the first two quarters of the fiscal year.
Concurrent with the third-quarter results, the company also
released its June comps. Comps growth in the month was the slowest
so far this year.
In fact, comps have been soft in all the months so far this year -
1.0% in June, 2.3% in May, 4.6% in April, 1.9% in March, 5.3% in
February and 8.4% in January. In fact, PriceSmart's comps have been
declining since Oct 2013 - from high teen/low double-digit comps in
2012 and high single-digit in 2013 - due to weak purchasing power
of consumers, and slower economic and retail activity in the
countries where PriceSmart operates.
Estimates have been declining ever since the company released its
third quarter 2014 results. During the last 7 days, the Zacks
Consensus Estimate for fiscal 2014 declined 1.3% to $3.10 per share
while that for 2015 declined 4.2% to $3.43 per share.
Investors interested in the retail sector can consider stocks like
Big Lots Inc.
Burlington Stores, Inc.
Foot Locker, Inc.
). All the three companies hold a Zacks Rank #2 (Buy).
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