Start Time: 12:00 January 1, 0000 12:49 PM ET PriceSmart, Inc. (NASDAQ:PSMT) Q2 2019 Earnings Conference Call April 10, 2019, 12:00 PM ET Company Participants Sherry Bahrambeygui - CEO Maarten Jager - EVP and CFO Conference Call Participants Jon Braatz - Kansas City Capital Ronald Bookbinder - IFS Securities Donatas Uzkurelis - LGM Investments Operator Good day, and welcome to PriceSmart Incorporated Earnings Release Conference Call for the Second Quarter of Fiscal Year 2019, the three and six-month period ...

Financial Data and Key Metrics Changes - Total revenues for Q1 2019 were $779.6 million, an increase of 1.6% year-over-year, including a $9.2 million contribution from the acquired Aeropost business [22][24] - Net merchandising sales were $747.4 million, a slight increase of 0.3% year-over-year, with currency fluctuations negatively impacting sales by 2.6% [23][24] - Net income for Q1 2019 was $14.6 million, or $0.48 per share, down from $22.5 million, or $0.74 per share, in the prior year, impacted by costs associated with the CEO departure and Aeropost [24][25] Business Line Data and Key Metrics Changes - The Central American region experienced a 3% decrease in total merchandise sales and a 4.5% decrease in comparable sales, influenced by economic weakness and currency impacts [26][27] - The Caribbean region saw total merchandise sales growth of 4.8%, with comparable sales slightly negative at -2.2%, driven by strong sales in the US Virgin Islands [28][29] - Colombia reported a 5.8% growth year-over-year in total merchandise sales, with comparable sales growth of 5.4%, despite currency impacts [30] Market Data and Key Metrics Changes - Membership accounts increased by 3.4% to approximately 1.6 million, with membership income up by 2.9% and a renewal rate of 85% [31] - The Central American segment faced a 2.6% decrease in comparable sales due to economic conditions in Costa Rica, Panama, Guatemala, and Nicaragua [27] - The Caribbean segment's currency impact on total and comparable sales was negative 1.4% and -1.2%, respectively [29] Company Strategy and Development Direction - The company aims to drive same-store sales growth by improving core business operations and adhering to the Six Rights of merchandising [20][21] - There is a focus on accelerating digital transformation to adapt to the evolving omnichannel retail environment [21] - The company is exploring new market opportunities and reenergizing a culture of performance and accountability [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged external challenges, including economic, social, and political factors affecting several markets, particularly Nicaragua and Costa Rica [33][81] - The company is optimistic about improving member value through better purchasing strategies and operational efficiencies [34] - The effective tax rate is expected to rise to 37% due to CEO departure impacts and U.S. tax reform timing [46] Other Important Information - The company ended the quarter with cash and cash equivalents of $88.4 million, a decrease of $8.5 million, but cash provided by operating activities improved significantly [52] - Merchandise margins decreased slightly to 14.2%, while total gross margins increased to 16.2% due to higher margins from non-merchandise revenue [40] Q&A Session Summary Question: Has there been traction with Aeropost in December? - Management noted early signs of sales on pricesmart.com and the ability to renew memberships online, indicating progress in integrating Aeropost capabilities [61][62] Question: What is the outlook for Aeropost spending? - Management indicated a measured approach to investments in Aeropost, with plans for additional investments as evaluations continue [65][67] Question: What were the weaker merchandise categories? - Hardlines were identified as a challenging category, with efforts underway to improve vendor relations and logistics [89] Question: What is the impact of the NICA Act on operations in Nicaragua? - Management is closely monitoring the situation in Nicaragua, emphasizing the safety of members and employees as a priority [82] Question: What is the timeline for new club openings? - Management is focused on a new format concept that requires less real estate, with potential openings in late spring [108][109]