PriceSmart's (PSMT) Comps Rise Again, Up 1.1% in August

PriceSmart, Inc.’s PSMT comparable warehouse sales (comps) for the five weeks ended Sep 1, 2019 for 41 warehouse clubs grew 1.1%, thereby marking the third straight month of comps improvement.. This follows an increase of 1.6% and 1.9% in July and June, respectively. However, foreign currency exchange rate fluctuations adversely impacted comps by 2.6%.

It seems that management’s efforts are gradually reaping benefits, as the company had witnessed dismal comps performance in the past. We noted that comps in the months of May, April and March had dropped 0.9%, 0.5% and 1%, respectively.

A clear reflection of the company’s endeavors is visible in the stock’s movement on the bourses. In the past three months, shares of this San Diego, CA-based company have increased roughly 20.7% compared with the industry’s rise of 14.5%.

For the 52-week period ended Sep 1, 2019, comps declined 0.6%. Foreign currency exchange rate fluctuations negatively impacted comps by 3.2%.

Net merchandise sales for the month of August grew 4.5% to $259.9 million from $248.8 million in the year-ago period. However, the metric was adversely impacted by currency rate fluctuations to the tune of $6.5 million or 2.5%. Prior to this, net merchandise sales had increased 2.8%, 3.9%, 0.8%, 0.9% and 0.1% in the months of July, June, May, April and March, respectively.

For the 12 months ended Aug 31, 2019, net merchandise sales grew 1.2% to $3,091.3 million from $3,053.8 million in the year-ago period. Foreign currency exchange rate fluctuations negatively impacted sales by 3.2%.

Wrapping Up

Certainly, PriceSmart’s strategy to sell limited products at low prices helped it generate member loyalty. Moreover, the company’s healthy membership renewal rate reflects its strength. This operator of membership warehouse clubs ended the third quarter with roughly 1.6 million accounts, while membership income grew 2.2%. The renewal rate for the 12-month period (ended May 2019) was 85%.

Moreover, the company has been focusing on adding local and regional distribution centers to augment smooth flow of merchandise. Also, it is experimenting with the new small warehouse club format.

PriceSmart is constructing and plans to open warehouse clubs in San Cristobal, Guatemala and Panama City, Panama, in the fall of 2019. The company also plans to build a new warehouse club in Liberia, Costa Rica, and Bogota, Colombia and open them in the summer and fall of 2020, respectively.

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