PriceSmart(PSMT)

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PriceSmart(PSMT) - 2024 Q1 - Earnings Call Transcript
2024-01-10 18:59
Financial Data and Key Metrics Changes - Total revenues and net merchandise sales exceeded $1.1 billion, with net merchandise sales increasing by 10.7% or 6.8% in constant currency [56] - Adjusted net income increased by 8.6% to $38 million, or an adjusted $1.24 per diluted share compared to $35 million, or $1.12 per diluted share in the prior year [7][21] - Total gross margin from net merchandise sales increased by approximately 9.6% versus the same quarter of the prior fiscal year, with a slight decrease in rate from 16.2% to 16.1% [58] Business Line Data and Key Metrics Changes - In Central America, net merchandise sales increased by 11.3% or 6.4% in constant currency, with a 9.1% increase in comparable net merchandise sales [4] - In Colombia, net merchandise sales increased by 19.3% or 4% in constant currency, while comparable net merchandise sales increased by 7.1% or decreased by 7.2% in constant currency [57] - The health services category, including optical, audiology, and pharmacy, increased over 600% [5] Market Data and Key Metrics Changes - The Caribbean region saw net merchandise sales increase by 6.4% or 8.6% in constant currency, with comparable merchandise sales increasing by 6% or 8.2% in constant currency [19] - Membership accounts grew by 3.8% to 1.82 million accounts, with a 12-month renewal rate of 87.4% [35] Company Strategy and Development Direction - The company is focused on enhancing shopping experiences by filling clubs with merchandise that meets member needs and wants [11] - Plans to open new clubs and remodel existing ones to improve customer experience and operational efficiency [23] - Continued investment in omnichannel shopping options, including the app and website, to drive online sales [62] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with sales and earnings results, highlighting record sales of $511 million in December [32] - The company anticipates further growth opportunities in the digital channel and plans to continue investing in this area [62] - Management noted improvements in inventory management and cash flow, with net cash provided by operating activities totaling $41.1 million [37] Other Important Information - The company raised annual membership fees by $5 for most membership types, expecting to implement similar increases in remaining countries throughout fiscal 2024 [20] - Environmental and social responsibility initiatives include the operation of recycling centers and free eye exams through partnerships [10][39] Q&A Session Summary Question: How could the Colombian market evolve during the year? - Management indicated that the dynamics in Colombia have improved, with positive comparable sales growth in December [66] Question: Have there been any pricing changes in Colombia? - Management confirmed that pricing strategies have remained consistent, with no significant changes [68] Question: What is the status of the membership price increase? - Management confirmed that approximately 25% of the membership fee increases have been implemented by the end of the first quarter [69]
PriceSmart(PSMT) - 2024 Q1 - Quarterly Report
2024-01-09 21:02
PART I - FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The company's unaudited consolidated financial statements for the three months ended November 30, 2023 and 2022 [CONSOLIDATED BALANCE SHEETS](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) The balance sheets detail the company's financial position as of November 30, 2023, and August 31, 2023 Consolidated Balance Sheet Highlights (Amounts in Thousands) | Item | Nov 30, 2023 (Unaudited) | Aug 31, 2023 | | :--- | :--- | :--- | | Total Assets | $2,029,279 | $2,005,608 | | Total Liabilities | $947,035 | $898,565 | | Total Stockholders' Equity | $1,082,244 | $1,107,043 | | Cash and cash equivalents | $174,452 | $239,984 | | Merchandise inventories | $529,898 | $471,407 | | Long-term debt, net of current portion | $99,704 | $119,487 | [CONSOLIDATED STATEMENTS OF INCOME](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) The income statements detail revenues, expenses, and net income for the three months ended November 30, 2023 Consolidated Statements of Income (Three Months Ended Nov 30, Amounts in Thousands, Except Per Share Data) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Total revenues | $1,166,475 | $1,054,806 | | Operating income | $58,213 | $55,527 | | Net income | $38,047 | $32,905 | | Basic net income per share | $1.24 | $1.05 | | Diluted net income per share | $1.24 | $1.05 | [CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) This statement outlines net income and other comprehensive income items like currency translation adjustments Consolidated Statements of Comprehensive Income (Three Months Ended Nov 30, Amounts in Thousands) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Net income | $38,047 | $32,905 | | Other Comprehensive Income (Loss) | $3,580 | $(551) | | Comprehensive income | $41,627 | $32,354 | - Foreign currency translation adjustments positively impacted other comprehensive income by **$3,537 thousand** in Q1 FY2024, a significant improvement from a **negative impact of $885 thousand** in Q1 FY2023[21](index=21&type=chunk) [CONSOLIDATED STATEMENTS OF EQUITY](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) The statements of equity show changes in stockholders' equity for the three months ended November 30, 2023 Consolidated Statements of Equity Highlights (Amounts in Thousands) | Item | Nov 30, 2023 | Aug 31, 2023 | | :--- | :--- | :--- | | Total Stockholders' Equity | $1,082,244 | $1,107,043 | | Retained earnings | $855,606 | $817,559 | | Treasury stock at cost | $(113,748) | $(43,961) | | Shares outstanding | 30,516,876 | 30,976,941 | - The company purchased **$69,972 thousand** of treasury stock during the three months ended November 30, 2023, significantly higher than **$1,300 thousand** in the prior year period[24](index=24&type=chunk) [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section details cash flows from operating, investing, and financing activities for Q1 FY2024 Consolidated Statements of Cash Flows (Three Months Ended Nov 30, Amounts in Thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41,098 | $30,463 | | Net cash used in investing activities | $(30,116) | $(21,493) | | Net cash provided by (used in) financing activities | $(74,509) | $14,719 | | Net increase (decrease) in cash, cash equivalents | $(65,314) | $30,315 | | Cash, cash equivalents and restricted cash at end of period | $186,888 | $281,688 | - Net cash used in financing activities significantly increased to **$74.5 million** in Q1 FY2024, primarily due to substantial treasury stock repurchases, compared to net cash provided of **$14.7 million** in Q1 FY2023[26](index=26&type=chunk) [NOTES TO CONSOLIDATED FINANCIAL STATEMENTS](index=13&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed notes covering accounting policies, revenue, debt, and segment information [NOTE 1 – COMPANY OVERVIEW AND BASIS OF PRESENTATION](index=13&type=section&id=NOTE%201%20%E2%80%93%20COMPANY%20OVERVIEW%20AND%20BASIS%20OF%20PRESENTATION) PriceSmart operates 53 international membership warehouse clubs with a focus on three key growth drivers - As of November 30, 2023, PriceSmart operates **53 warehouse clubs** in 12 countries and one U.S. territory, with a new club planned for Santa Ana, El Salvador in February 2024[31](index=31&type=chunk) - The company's growth strategy is centered on three key drivers: 1) investing in remodeling existing clubs, adding new locations, and opening more distribution centers; 2) increasing membership value; and 3) driving incremental sales via PriceSmart.com and enhanced online, digital, and technological capabilities[32](index=32&type=chunk)[35](index=35&type=chunk) [NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=NOTE%202%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the company's significant accounting policies, including consolidation and tax receivables - The company consolidates wholly-owned subsidiaries and joint ventures where it is the primary beneficiary, accounting for other joint ventures under the equity method[34](index=34&type=chunk)[38](index=38&type=chunk) Restricted Cash (Amounts in Thousands) | Item | Nov 30, 2023 | Aug 31, 2023 | | :--- | :--- | :--- | | Short-term restricted cash | $2,869 | $2,865 | | Long-term restricted cash | $9,567 | $9,353 | | Total restricted cash | $12,436 | $12,218 | - The company maintains significant VAT and income tax receivables, totaling **$40.5 million** and **$42.1 million** respectively as of November 30, 2023, and does not provide allowances against them, believing it will ultimately succeed in refund requests[46](index=46&type=chunk)[49](index=49&type=chunk)[52](index=52&type=chunk) [NOTE 3 – REVENUE RECOGNITION](index=19&type=section&id=NOTE%203%20%E2%80%93%20REVENUE%20RECOGNITION) Revenue is primarily recognized from merchandise sales and membership fees, which are recognized over 12 months - Membership income is recognized ratably over the 12-month term of the membership, with a 60-day full refund policy[93](index=93&type=chunk) - The annual fee for Platinum Memberships increased by **$5** to approximately **$80** in most markets during the first quarter of fiscal year 2024, offering a **2% rebate** on most items up to **$500** annually[96](index=96&type=chunk) Net Merchandise Sales by Category (Three Months Ended Nov 30, Amounts in Thousands) | Merchandise Category | 2023 | 2022 | | :--- | :--- | :--- | | Foods & Sundries | $558,231 | $511,894 | | Fresh Foods | $329,602 | $295,288 | | Hardlines | $132,564 | $115,594 | | Softlines | $54,842 | $54,420 | | Food Service and Bakery | $50,269 | $46,979 | | Health Services | $9,506 | $1,288 | | **Total Net Merchandise Sales** | **$1,135,014** | **$1,025,463** | [NOTE 4 – EARNINGS PER SHARE](index=23&type=section&id=NOTE%204%20%E2%80%93%20EARNINGS%20PER%20SHARE) The company calculates basic net income per share using the two-class method for participating securities Earnings Per Share (Three Months Ended Nov 30, Amounts in Thousands, Except Per Share) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Net income available for distribution | $37,416 | $32,319 | | Basic weighted average shares outstanding | 30,269 | 30,713 | | Diluted average shares outstanding | 30,269 | 30,719 | | Basic net income per share | $1.24 | $1.05 | | Diluted net income per share | $1.24 | $1.05 | [NOTE 5 – STOCKHOLDERS' EQUITY](index=24&type=section&id=NOTE%205%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) This note covers dividends, comprehensive loss, and the completion of the $75 million share repurchase program - No dividends were declared in the first three months of fiscal year 2024, but the company anticipates ongoing semi-annual dividend payments[109](index=109&type=chunk) Accumulated Other Comprehensive Loss (Amounts in Thousands) | Item | Nov 30, 2023 | Sep 1, 2023 | | :--- | :--- | :--- | | Beginning balance | $(163,992) | $(163,992) | | Foreign currency translation adjustments | $3,537 | N/A | | Defined benefit pension plans | $121 | N/A | | Derivative instruments | $(78) | N/A | | Ending balance | $(160,412) | N/A | - The **$75 million** share repurchase program, authorized in July 2023, was successfully completed in Q1 FY2024, resulting in the purchase of approximately **1,007,000 shares** of common stock[115](index=115&type=chunk)[259](index=259&type=chunk) [NOTE 6 – COMMITMENTS AND CONTINGENCIES](index=27&type=section&id=NOTE%206%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This section addresses legal proceedings, tax contingencies, and other significant company commitments - The company is involved in legal proceedings and tax audits, accruing for probable and estimable losses, but believes the final disposition of current matters will not materially adversely affect its financial position[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) - As of November 30, 2023, the company has **$4.7 million** in non-cancelable construction service obligations and has signed a lease for a new facility in Miraflores, Guatemala, expected to be delivered in H1 2025, with estimated future lease payments of **$26.9 million**[129](index=129&type=chunk)[130](index=130&type=chunk) - The company plans to purchase its Via Brasil club building in Panama for approximately **$33.0 million** in Q2 FY2024, which will eliminate a **$12.1 million** lease liability and **$1.4 million** in annual lease payments[130](index=130&type=chunk) [NOTE 7 – DEBT](index=29&type=section&id=NOTE%207%20%E2%80%93%20DEBT) This note details the company's short-term borrowings and long-term debt facilities and maturities Short-term Borrowings (Amounts in Thousands) | Item | Nov 30, 2023 | Aug 31, 2023 | | :--- | :--- | :--- | | Total Amount of Facilities | $171,000 | $166,000 | | Facilities Used | $9,199 | $8,679 | | Facilities Available | $161,801 | $157,624 | | Weighted average interest rate (Uncommitted) | 12.6% | 13.2% | Long-term Debt (Amounts in Thousands) | Item | Nov 30, 2023 | Aug 31, 2023 | | :--- | :--- | :--- | | Current portion of long-term debt | $35,276 | $20,193 | | Long-term debt (net of current portion) | $99,704 | $119,487 | | Total Long-term Debt | $134,980 | $139,680 | - The company was in compliance with all covenants for its short-term and long-term debt facilities as of November 30, 2023[134](index=134&type=chunk)[136](index=136&type=chunk) [NOTE 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=30&type=section&id=NOTE%208%20%E2%80%93%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) PriceSmart uses derivative instruments to hedge interest rate and foreign currency exposure - The company uses interest rate swaps and cross-currency interest rate swaps as cash flow hedges to manage interest rate and foreign currency exposure on U.S. dollar denominated debt in international subsidiaries[138](index=138&type=chunk)[139](index=139&type=chunk)[142](index=142&type=chunk) - Non-deliverable forward foreign-exchange contracts are used to economically hedge exposure to U.S. dollar merchandise inventory expenditures but do not qualify for derivative hedge accounting[143](index=143&type=chunk)[154](index=154&type=chunk) Net Fair Value of Derivatives Designated as Hedging Instruments (Amounts in Thousands) | Item | Nov 30, 2023 | Aug 31, 2023 | | :--- | :--- | :--- | | Net fair value of derivatives | $2,614 | $4,496 | | Net OCI (Other Comprehensive Income) | $1,955 | $3,207 | [NOTE 9 – SEGMENTS](index=34&type=section&id=NOTE%209%20%E2%80%93%20SEGMENTS) PriceSmart operates in four reportable segments: United States, Central America, the Caribbean, and Colombia - The company's reportable segments are United States, Central America, the Caribbean, and Colombia, based on geographic location for management and operational decisions[156](index=156&type=chunk) Segment Revenue from External Customers (Three Months Ended Nov 30, Amounts in Thousands) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | United States Operations | $10,009 | $10,458 | | Central American Operations | $700,567 | $629,079 | | Caribbean Operations | $326,967 | $307,525 | | Colombia Operations | $128,932 | $107,744 | | **Total Revenue from external customers** | **$1,166,475** | **$1,054,806** | Segment Operating Income (Three Months Ended Nov 30, Amounts in Thousands) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | United States Operations | $9,949 | $13,592 | | Central American Operations | $56,902 | $50,130 | | Caribbean Operations | $23,332 | $24,503 | | Colombia Operations | $3,617 | $4,868 | | **Total Operating income** | **$58,213** | **$55,527** | [NOTE 10 – SUBSEQUENT EVENTS](index=35&type=section&id=NOTE%2010%20%E2%80%93%20SUBSEQUENT%20EVENTS) The company evaluated all events subsequent to November 30, 2023, and found none requiring disclosure - No subsequent events requiring disclosure were identified between November 30, 2023, and the issuance date of the consolidated financial statements[160](index=160&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=36&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial condition and operational results for the three months ended November 30, 2023 [Forward-Looking Statements](index=36&type=section&id=Forward-Looking%20Statements) This subsection serves as a cautionary note regarding forward-looking statements subject to risks - The report contains forward-looking statements about future revenues, earnings, cash flows, omni-channel initiatives, and warehouse club openings, which are subject to various risks and uncertainties[163](index=163&type=chunk) [Overview](index=36&type=section&id=Overview) PriceSmart operates 53 warehouse clubs in Central America, the Caribbean, and Colombia - PriceSmart operates 53 warehouse clubs across 12 countries and the U.S. Virgin Islands, with revenues exceeding **$4.4 billion** in fiscal year 2023, serving nearly **two million** membership accounts[165](index=165&type=chunk) - The company sources over half its merchandise regionally and offers 'Member's Selection' private label products, along with new services like optical, audiology, and pharmacy[167](index=167&type=chunk) Number of Warehouse Clubs in Operation | Country/Territory | Nov 30, 2022 | Nov 30, 2023 | Anticipated Openings in CY 2024 | | :--- | :--- | :--- | :--- | | Colombia | 9 | 10 | — | | Costa Rica | 8 | 8 | — | | Panama | 7 | 7 | — | | Dominican Republic | 5 | 5 | — | | Guatemala | 5 | 6 | — | | Trinidad | 4 | 4 | — | | Honduras | 3 | 3 | — | | El Salvador | 2 | 3 | 1 | | Nicaragua | 2 | 2 | — | | Jamaica | 2 | 2 | — | | Aruba | 1 | 1 | — | | Barbados | 1 | 1 | — | | U.S. Virgin Islands | 1 | 1 | — | | **Totals** | **50** | **53** | **1** | [Factors Affecting the Business](index=37&type=section&id=Factors%20Affecting%20the%20Business) The business is influenced by economic trends, foreign currency volatility, and political conditions - Sales and profits are affected by GDP growth, consumer preferences, foreign currency exchange rates, political/social conditions, and competition[174](index=174&type=chunk) - Currency fluctuations significantly impact sales and profit, with **79.5%** of Q1 FY2024 net merchandise sales in non-U.S. dollar currencies, of which **49.7%** were products purchased in U.S. dollars[176](index=176&type=chunk) - The company faces U.S. dollar illiquidity in certain markets, notably Trinidad (**$29.0 million** in local currency cash/investments as of Nov 30, 2023) and Honduras (**$22.8 million** in local currency cash/investments as of Nov 30, 2023), impeding conversion to U.S. dollars[181](index=181&type=chunk)[182](index=182&type=chunk) [Mission and Business Strategy](index=39&type=section&id=Mission%20and%20Business%20Strategy) The mission is to improve lives by delivering quality goods and services at low prices and operating profitably - PriceSmart's mission is to improve lives and businesses through responsible delivery of quality goods and services at the lowest possible prices, while operating profitably and providing a good return to investors[183](index=183&type=chunk) - The strategy includes blending brick-and-mortar appeal with online shopping convenience, enhancing member experience, and leveraging technology for operational efficiencies[183](index=183&type=chunk) [Growth](index=40&type=section&id=Growth) The growth strategy focuses on investing in clubs, increasing membership value, and driving online sales - Growth is driven by investing in remodeling current clubs, adding new locations (e.g., Santa Ana, El Salvador in Feb 2024), and expanding distribution centers (e.g., Panama relocation)[185](index=185&type=chunk) - Increasing membership value through additional services (optical, audiology, pharmacy) and private label 'Member's Selection' brand, which represented **27.2%** of total merchandise sales in Q1 FY2024 (up from **25.9%** YoY)[185](index=185&type=chunk) - Driving incremental sales via PriceSmart.com and enhanced online, digital, and technological capabilities, leveraging data analytics to understand member preferences and expand into new markets[186](index=186&type=chunk) [Financial highlights for the first quarter of fiscal year 2024](index=41&type=section&id=Financial%20highlights%20for%20the%20first%20quarter%20of%20fiscal%20year%202024) Q1 FY2024 highlights include a 10.6% revenue increase and a 15.6% net income increase to $38.0 million Q1 FY2024 Financial Highlights (YoY Changes) | Metric | Change | | :--- | :--- | | Total revenues | +10.6% | | Net merchandise sales | +10.7% | | Net merchandise sales - constant currency | +6.8% | | Comparable net merchandise sales | +8.0% | | Comparable net merchandise sales - constant currency | +4.3% | | Membership income | +11.7% | | Total gross margins | +9.6% | | Selling, general and administrative expenses | +12.1% | | Operating income | +4.8% | | Net income | +15.6% | | Net income per diluted share | +$0.19 | | Adjusted net income | +8.7% | | Adjusted net income per diluted share | +$0.12 | | Adjusted EBITDA | +3.5% | [Non – GAAP (Generally Accepted Accounting Principles) Financial Measures](index=41&type=section&id=Non%20%E2%80%93%20GAAP%20(Generally%20Accepted%20Accounting%20Principles)%20Financial%20Measures) This section defines and reconciles non-GAAP measures used to assess core operating performance [Adjusted Net Income and Adjusted Net Income per Diluted Share](index=42&type=section&id=Adjusted%20Net%20Income%20and%20Adjusted%20Net%20Income%20per%20Diluted%20Share) These non-GAAP measures exclude non-recurring items to provide a clearer view of core operating performance Adjusted Net Income and Per Diluted Share (Three Months Ended Nov 30, Amounts in Thousands, Except Per Share) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Net income as reported | $38,047 | $32,905 | | Aeropost-related write-offs | — | $2,125 | | **Adjusted net income** | **$38,047** | **$35,030** | | Net income per diluted share | $1.24 | $1.05 | | Aeropost-related write-offs (per share) | — | $0.07 | | **Adjusted net income per diluted share** | **$1.24** | **$1.12** | [Adjusted EBITDA](index=42&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA is a non-GAAP measure providing insight into operational profitability Adjusted EBITDA Reconciliation (Three Months Ended Nov 30, Amounts in Thousands) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Net income as reported | $38,047 | $32,905 | | Interest expense | $2,816 | $2,749 | | Provision for income taxes | $18,153 | $16,426 | | Depreciation and amortization | $19,494 | $17,568 | | Interest income | $(2,866) | $(1,157) | | Other expense, net | $2,126 | $4,566 | | Aeropost-related write-offs | — | $2,125 | | **Adjusted EBITDA** | **$77,770** | **$75,182** | [Net Merchandise Sales – Constant Currency and Comparable Net Merchandise Sales – Constant Currency](index=43&type=section&id=Net%20Merchandise%20Sales%20%E2%80%93%20Constant%20Currency%20and%20Comparable%20Net%20Merchandise%20Sales%20%E2%80%93%20Constant%20Currency) These non-GAAP measures exclude foreign currency translation effects to show actual operational growth - Constant currency measures translate current year net merchandise sales and comparable net merchandise sales at prior year monthly average exchange rates to exclude foreign currency translation effects, indicating actual operational growth[193](index=193&type=chunk) [COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 2023 AND 2022](index=43&type=section&id=COMPARISON%20OF%20THE%20THREE%20MONTHS%20ENDED%20NOVEMBER%2030,%202023%20AND%202022) This section compares operational results for Q1 FY2024 versus the same period in FY2023 [Net Merchandise Sales](index=43&type=section&id=Net%20Merchandise%20Sales) Net merchandise sales increased by 10.7% to $1.135 billion in Q1 FY2024, with a positive currency impact Net Merchandise Sales by Segment (Three Months Ended Nov 30, Amounts in Thousands) | Segment | 2023 Amount | % of Net Sales | Increase from Prior Year | % Change | 2022 Amount | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Central America | $686,993 | 60.5% | $69,941 | 11.3% | $617,052 | 60.2% | | Caribbean | $322,141 | 28.4% | $19,277 | 6.4% | $302,864 | 29.5% | | Colombia | $125,880 | 11.1% | $20,333 | 19.3% | $105,547 | 10.3% | | **Total Net Merchandise Sales** | **$1,135,014** | **100.0%** | **$109,551** | **10.7%** | **$1,025,463** | **100.0%** | - Overall net merchandise sales grew by **10.7%** in Q1 FY2024, driven by an **8.2%** increase in transactions and a **2.3%** increase in average ticket, with 53 clubs in operation compared to 50 in the prior year[195](index=195&type=chunk) Impact of Currency Exchange Rates on Net Merchandise Sales (Three Months Ended Nov 30, Amounts in Thousands) | Segment | Net Merchandise Sales (2023) | Net Merchandise Sales - Constant Currency (2023) | Impact of Foreign Currency Exchange | % Impact of Foreign Currency Exchange | | :--- | :--- | :--- | :--- | :--- | | Central America | $686,993 | $656,448 | $30,545 | 4.9% | | Caribbean | $322,141 | $328,829 | $(6,688) | (2.2)% | | Colombia | $125,880 | $109,747 | $16,133 | 15.3% | | **Consolidated total** | **$1,135,014** | **$1,095,024** | **$39,990** | **3.9%** | [Comparable Merchandise Sales](index=44&type=section&id=Comparable%20Merchandise%20Sales) Comparable net merchandise sales increased by 8.0% for the thirteen-week period ended December 3, 2023 Comparable Net Merchandise Sales Growth by Segment (Thirteen Weeks Ended Dec 3, 2023 vs. Dec 4, 2022) | Segment | % Increase in Comparable Net Merchandise Sales (2023) | % Increase/(Decrease) in Comparable Net Merchandise Sales (2022) | | :--- | :--- | :--- | | Central America | 9.1% | 8.0% | | Caribbean | 6.0% | 6.6% | | Colombia | 7.1% | (13.1)% | | **Consolidated comparable net merchandise sales** | **8.0%** | **5.0%** | - Comparable net merchandise sales increased by **8.0%** for the thirteen-week period ended December 3, 2023, with all Central America markets showing positive growth[206](index=206&type=chunk)[207](index=207&type=chunk) Impact of Foreign Currency on Comparable Net Merchandise Sales (Thirteen Weeks Ended Dec 3, 2023) | Segment | Comparable Net Merchandise Sales Growth | Comparable Net Merchandise Sales - Constant Currency Growth/(Decline) | % Impact of Foreign Currency Exchange | | :--- | :--- | :--- | :--- | | Central America | 9.1% | 4.3% | 4.8% | | Caribbean | 6.0% | 8.2% | (2.2)% | | Colombia | 7.1% | (7.2)% | 14.3% | | **Consolidated comparable net merchandise sales** | **8.0%** | **4.3%** | **3.7%** | [Membership Income](index=46&type=section&id=Membership%20Income) Membership income increased by 11.7% in Q1 FY2024, driven by a 3.8% increase in member accounts Membership Income and Accounts by Segment (Three Months Ended Nov 30, Amounts in Thousands) | Segment | Membership Income 2023 | Membership Income 2022 | % Change | Number of Accounts 2023 | Number of Accounts 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Central America | $10,317 | $9,525 | 8.3% | 1,015,756 | 953,660 | 6.5% | | Caribbean | $4,629 | $4,415 | 4.8% | 473,014 | 455,800 | 3.8% | | Colombia | $2,803 | $1,955 | 43.4% | 334,928 | 347,739 | (3.7)% | | **Total** | **$17,749** | **$15,895** | **11.7%** | **1,823,698** | **1,757,199** | **3.8%** | - Membership income increased **11.7%** year-over-year, primarily due to a **3.8%** increase in the total number of Member accounts[216](index=216&type=chunk) - Platinum Membership accounts increased to **9.3%** of the total membership base as of November 30, 2023, up from **7.9%** in the prior year, and the trailing twelve-month renewal rate was **87.4%**[218](index=218&type=chunk)[219](index=219&type=chunk) [Other Revenue](index=47&type=section&id=Other%20Revenue) Other revenue increased by 23.8% in Q1 FY2024, driven by higher incentive fees from co-branded credit cards Other Revenue (Three Months Ended Nov 30, Amounts in Thousands) | Item | 2023 Amount | Increase/(Decrease) from Prior Year | % Change | 2022 Amount | | :--- | :--- | :--- | :--- | :--- | | Miscellaneous income | $3,129 | $732 | 30.5% | $2,397 | | Rental income | $574 | $(19) | (3.2)% | $593 | | **Total Other revenue** | **$3,703** | **$713** | **23.8%** | **$2,990** | - The increase in other revenue was primarily due to a **30.5%** rise in miscellaneous income, driven by higher incentive fee revenue from co-branded credit cards[221](index=221&type=chunk) [Results of Operations](index=48&type=section&id=Results%20of%20Operations) Total revenues increased 10.6% to $1.166 billion, while operating income rose 4.8% to $58.2 million Consolidated Results of Operations (Three Months Ended Nov 30, Amounts in Thousands, Except Percentages) | Item | 2023 | 2022 | Increase/(Decrease) | | :--- | :--- | :--- | :--- | | Net merchandise sales | $1,135,014 | $1,025,463 | $109,551 | | Total gross margin | $182,286 | $166,395 | $15,891 | | Total gross margin percentage | 16.1% | 16.2% | (0.1)% | | Total revenues | $1,166,475 | $1,054,806 | $111,669 | | Total revenue margin percentage | 17.5% | 17.6% | (0.1)% | | Selling, general and administrative | $145,984 | $130,222 | $15,762 | | Selling, general and administrative percentage of total revenues | 12.5% | 12.3% | 0.2% | | Operating income | $58,213 | $55,527 | $2,686 | | Adjusted EBITDA | $77,770 | $75,182 | $2,588 | | Warehouse clubs at period end | 53 | 50 | 3 | | Warehouse club sales floor square feet at period end | 2,600 | 2,484 | 116 | - Total gross margin as a percentage of net merchandise sales decreased by **0.1%** due to the elimination of COVID premiums and reduced liquidity premiums, partially offset by increased food service and bakery margins[225](index=225&type=chunk) - Selling, general and administrative expenses increased by **$15.8 million (12.1%)** and rose by **0.2%** as a percentage of total revenue, primarily due to higher compensation, professional fees, and depreciation[188](index=188&type=chunk)[227](index=227&type=chunk) [Interest Income](index=50&type=section&id=Interest%20Income) Net interest income increased by $1.709 million to $2.866 million due to higher investment yields Interest Income (Three Months Ended Nov 30, Amounts in Thousands) | Item | 2023 Amount | Change | 2022 Amount | | :--- | :--- | :--- | :--- | | Interest income | $2,866 | $1,709 | $1,157 | - Interest income increased by **$1.7 million**, driven by significantly more investments of surplus cash at higher yields[188](index=188&type=chunk)[234](index=234&type=chunk) [Interest Expense](index=50&type=section&id=Interest%20Expense) Net interest expense slightly increased by $0.067 million due to higher rates on long-term borrowings Interest Expense (Three Months Ended Nov 30, Amounts in Thousands) | Item | 2023 Amount | Change | 2022 Amount | | :--- | :--- | :--- | :--- | | Interest expense on loans | $2,898 | $245 | $2,653 | | Interest expense related to hedging activity | $415 | $68 | $347 | | Less: Capitalized interest | $(497) | $(246) | $(251) | | **Net interest expense** | **$2,816** | **$67** | **$2,749** | - Net interest expense slightly increased due to higher interest rates on long-term borrowings outstanding[237](index=237&type=chunk) [Other Expense, Net](index=50&type=section&id=Other%20Expense,%20Net) Other expense, net, decreased by $2.440 million to a net loss of $2.126 million due to lower currency losses Other Expense, Net (Three Months Ended Nov 30, Amounts in Thousands) | Item | 2023 Amount | Change | % Change | 2022 Amount | | :--- | :--- | :--- | :--- | :--- | | Other expense, net | $(2,126) | $2,440 | (53.4)% | $(4,566) | - The primary driver of the decrease in other expense, net, was a **$2.4 million** decrease in total overall foreign currency losses[188](index=188&type=chunk)[241](index=241&type=chunk) [Provision for Income Taxes](index=52&type=section&id=Provision%20for%20Income%20Taxes) The provision for income taxes increased, but the effective tax rate decreased to 32.3% from 33.3% Provision for Income Taxes (Three Months Ended Nov 30, Amounts in Thousands) | Item | 2023 Amount | Change | 2022 Amount | | :--- | :--- | :--- | :--- | | Provision for income taxes | $18,153 | $1,727 | $16,426 | | Effective tax rate | 32.3% | N/A | 33.3% | - The effective tax rate decreased to **32.3%** from **33.3%** primarily due to a comparably favorable net tax impact from recurring items, resulting from fewer valuation allowances on deferred tax assets from foreign tax credits[188](index=188&type=chunk)[243](index=243&type=chunk) [Other Comprehensive Income (Loss)](index=52&type=section&id=Other%20Comprehensive%20Income%20(Loss)) Other comprehensive income was $3.580 million, a significant increase from a loss of $0.551 million Other Comprehensive Income (Loss) (Three Months Ended Nov 30, Amounts in Thousands) | Item | 2023 Amount | Change | % Change | 2022 Amount | | :--- | :--- | :--- | :--- | :--- | | Other Comprehensive Income (Loss) | $3,580 | $4,131 | 749.9% | $(551) | - The significant increase in other comprehensive income was primarily due to foreign currency translation adjustments, driven by the appreciation of the Colombian peso and Costa Rica colón against the U.S. dollar[244](index=244&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=52&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses liquidity, cash flow, capital expenditures, debt, and the share repurchase program [Financial Position and Cash Flow](index=52&type=section&id=Financial%20Position%20and%20Cash%20Flow) Operating activities provided $41.1 million in cash, but financing activities used $74.5 million Cash and Short-term Investments (Amounts in Thousands) | Item | Nov 30, 2023 | Aug 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents, including restricted cash (foreign subsidiaries) | $163,608 | $139,050 | | Cash and cash equivalents, including restricted cash (domestically) | $23,280 | $113,152 | | Total cash and cash equivalents, including restricted cash | $186,888 | $252,202 | | Short-term investments (foreign subsidiaries) | $73,002 | $74,294 | | Short-term investments (domestically) | $15,000 | $16,787 | | Total short-term investments | $88,002 | $91,081 | Summary of Cash Flows (Three Months Ended Nov 30, Amounts in Thousands) | Activity | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $41,098 | $30,463 | $10,635 | | Net cash used in investing activities | $(30,116) | $(21,493) | $(8,623) | | Net cash provided by (used in) financing activities | $(74,509) | $14,719 | $(89,228) | | Net increase (decrease) in cash and cash equivalents | $(65,314) | $30,315 | $(95,629) | - Net cash used in financing activities shifted from a **$14.7 million** provision in Q1 FY2023 to a **$74.5 million** usage in Q1 FY2024, primarily due to treasury stock repurchases and lower proceeds from long-term bank borrowings[250](index=250&type=chunk) [Capital Expenditures](index=54&type=section&id=Capital%20Expenditures) Capital expenditures for Q1 FY2024 totaled $33.3 million, split between maintenance and growth initiatives - Capital expenditures for the three months ended November 30, 2023, were **$33.3 million**, comprising **$13.6 million** for maintenance and **$19.7 million** for growth expenditures (new clubs, supply chain, major remodels)[252](index=252&type=chunk) [Short-Term Borrowings and Long-Term Debt](index=54&type=section&id=Short-Term%20Borrowings%20and%20Long-Term%20Debt) The financing strategy focuses on liquidity and minimizing borrowing costs while maintaining covenant compliance - The company's financing strategy aims to ensure liquidity and access to capital markets while minimizing borrowing costs, funding working capital, capital expenditures, acquisitions, dividends, and debt repayment[253](index=253&type=chunk) [Future Lease and Other Commitments](index=54&type=section&id=Future%20Lease%20and%20Other%20Commitments) The company manages future lease commitments and has new agreements in Guatemala and Panama - The company has signed a new lease agreement for a facility in Guatemala and a promissory agreement to purchase a building in Via Brasil, Panama, with current liquidity expected to cover these commitments[254](index=254&type=chunk) [Derivatives](index=54&type=section&id=Derivatives) The company uses derivative financial instruments to manage interest rate and currency exchange rate risks - Derivative financial instruments are used to manage interest rate and currency exchange rate risks, as further discussed in Note 8[255](index=255&type=chunk) [Off-Balance Sheet Arrangements](index=54&type=section&id=Off-Balance%20Sheet%20Arrangements) PriceSmart does not have any off-balance sheet arrangements with a material effect on its financials - The company has no off-balance sheet arrangements with a material current or future effect on its financial condition or statements[256](index=256&type=chunk) [Repurchase of Common Stock and Reissuance of Treasury Shares Related to Employee Stock Awards](index=54&type=section&id=Repurchase%20of%20Common%20Stock%20and%20Reissuance%20of%20Treasury%20Shares%20Related%20to%20Employee%20Stock%20Awards) Shares are repurchased to cover employee tax obligations and reissued for stock-based compensation - Shares are repurchased upon vesting of restricted stock awards to cover employee tax withholding obligations, and treasury shares are reissued for stock-based compensation programs[257](index=257&type=chunk)[258](index=258&type=chunk) [Share Repurchase Program](index=55&type=section&id=Share%20Repurchase%20Program) The $75 million share repurchase program was completed in Q1 FY2024, with no new plans in place - The **$75 million** share repurchase program was completed in Q1 FY2024, acquiring approximately **1,007,000 shares** of common stock; no new repurchase plans are currently active[259](index=259&type=chunk) Share Repurchase Activity (Three Months Ended Nov 30, Amounts in Thousands, Except Per Share) | Period | Number of Common Shares Acquired | Average Price Paid Per Share | Total Cost of Common Shares Acquired | | :--- | :--- | :--- | :--- | | September 1, 2023 - September 30, 2023 | 221,272 | $75.57 | N/A | | October 1, 2023 - October 31, 2023 | 722,797 | $73.67 | N/A | | November 1, 2023 - November 30, 2023 | — | — | N/A | | **Total** | **944,069** | **$74.12** | **$69,362** | [Critical Accounting Estimates](index=55&type=section&id=Critical%20Accounting%20Estimates) Financial statements require significant management estimates, particularly for taxes and long-lived assets - Management's critical accounting estimates involve significant judgments and assumptions, particularly for income taxes, tax receivables, and long-lived assets, which are inherently uncertain and can materially impact financial results[261](index=261&type=chunk) [Income Taxes](index=55&type=section&id=Income%20Taxes) Income tax expense and deferred tax assets/liabilities are based on management's best estimates - Income tax expense and deferred tax assets/liabilities rely on management's estimates of current and future taxes, involving significant judgment in interpreting tax laws and assessing deferred tax asset recoverability[262](index=262&type=chunk)[263](index=263&type=chunk) [Tax Receivables](index=56&type=section&id=Tax%20Receivables) The company accumulates significant tax receivables and does not provide allowances, believing in their recovery - The company accumulates VAT and income tax receivables due to local collection procedures, often requiring significant refund claims that can take months to years to complete[265](index=265&type=chunk)[266](index=266&type=chunk) - Despite unclear or complex rules, the company has not placed allowances on the recoverability of **$10.9 million** in income tax receivables and **$3.4 million** in deferred tax assets in one country, believing it will ultimately succeed in refund requests[267](index=267&type=chunk)[268](index=268&type=chunk) [Long-lived Assets](index=57&type=section&id=Long-lived%20Assets) Long-lived assets are evaluated quarterly for impairment, with no charges recorded in Q1 FY2024 - Long-lived assets are evaluated quarterly for impairment indicators, with management's judgments based on market and operational conditions and estimates of future cash flows; no impairment charges were recorded in Q1 FY2024[271](index=271&type=chunk) [Seasonality](index=57&type=section&id=Seasonality) The company's business experiences holiday retail seasonality and quarterly fluctuations - Operating results fluctuate quarterly due to holiday retail seasonality, economic/political events, timing of holidays, weather, shipments, product mix, and currency effects on U.S.-sourced products[272](index=272&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=57&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Market risks primarily stem from changes in interest rates and currency exchange rates - Market risks primarily arise from changes in interest rates and currency exchange rates, with no material changes in risk factors since the last annual report[273](index=273&type=chunk) - U.S. dollar illiquidity in markets like Trinidad and Honduras continues to impede the conversion of local currencies to U.S. dollars, affecting the settlement of liabilities and funding operations[274](index=274&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=58&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Disclosure controls and procedures were deemed effective as of November 30, 2023 - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of November 30, 2023[277](index=277&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[278](index=278&type=chunk) PART II - OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=59&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company expects no material adverse effect from legal claims arising in the ordinary course of business - The company is involved in ordinary course legal claims but expects no material adverse effect on its financial position, results of operations, or liquidity[281](index=281&type=chunk) [ITEM 1A. RISK FACTORS](index=59&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the company's risk factors since the last annual report - No material changes to the company's risk factors have occurred since the Annual Report on Form 10-K for FY2023[282](index=282&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=59&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The $75 million share repurchase program was completed in Q1 FY2024, acquiring 1,007,000 shares - The company repurchases shares to cover tax withholding obligations for employee restricted stock awards[283](index=283&type=chunk) - The **$75 million** share repurchase program was successfully completed in Q1 FY2024, resulting in the purchase of approximately **1,007,000 shares** of common stock[283](index=283&type=chunk) Common Stock Repurchase Activity (Quarter Ended Nov 30, 2023, Dollars in Thousands, Except Per Share Data) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | September 1, 2023 - September 30, 2023 | 221,272 | $75.57 | | October 1, 2023 - October 31, 2023 | 722,797 | $73.67 | | November 1, 2023 - November 30, 2023 | — | — | | **Total** | **944,069** | **$74.12** | [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=59&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[285](index=285&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=59&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Mine safety disclosures are not applicable to the company[286](index=286&type=chunk) [ITEM 5. OTHER INFORMATION](index=61&type=section&id=ITEM%205.%20OTHER%20INFORMATION) There is no other information to report under this item - No other information is reported under this item[288](index=288&type=chunk) [ITEM 6. EXHIBITS](index=62&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - The exhibits include organizational documents (Amended and Restated Certificate of Incorporation, Bylaws), Section 302 and 906 certifications, and Inline XBRL documents[289](index=289&type=chunk) [SIGNATURES](index=63&type=section&id=SIGNATURES) The report is duly signed by the Interim CEO and CFO on behalf of PriceSmart, Inc - The report is signed by Robert E. Price, Interim Chief Executive Officer, and Michael L. McCleary, Executive Vice President and Chief Financial Officer, on January 9, 2024[294](index=294&type=chunk)
PriceSmart(PSMT) - 2023 Q4 - Earnings Call Transcript
2023-10-31 20:45
Financial Data and Key Metrics Changes - For fiscal year 2023, total net merchandise sales exceeded $4.3 billion, with a 9% increase or 8.3% in constant currency compared to the prior year [77] - Adjusted net income for fiscal year 2023 was $126.5 million or adjusted $4.06 per diluted share, up from $103.1 million or $3.33 per diluted share in the prior year [8] - Net income for the fourth quarter was $15.4 million or $0.49 per diluted share, down from $23.3 million or $0.75 per diluted share in the same period last year [22] Business Line Data and Key Metrics Changes - In Central America, net merchandise sales increased 13.6% or 7.1% in constant currency, with comparable net merchandise sales up 11.4% or 5.2% in constant currency [4] - In Colombia, net merchandise sales increased 2.1% or 0.1% in constant currency, with comparable net merchandise sales up 2.8% or 0.6% in constant currency [19] - In the Caribbean, net merchandise sales increased 6% or 7.2% in constant currency, with comparable net merchandise sales up 5.8% or 7.2% in constant currency [54] Market Data and Key Metrics Changes - Membership accounts grew 2.5% year-over-year to 1.81 million, with a 12-month renewal rate of 86.9% [5] - The average price per item increased approximately 7.3% year-over-year, while the average items per basket decreased approximately 2.1% [20] - Total omni-channel sales increased 18% as a percentage of net merchandise sales, representing a record 4.9% of net merchandise sales [61] Company Strategy and Development Direction - The company is focused on enhancing its omni-channel shopping options and has begun migrating to a new point-of-sale system to improve efficiencies [11][62] - The company plans to open new clubs in Guatemala and El Salvador, with ongoing remodeling of high-volume clubs [24][59] - The company is committed to leveraging its assets to strengthen membership value and improve merchandise offerings, including health services [3] Management's Comments on Operating Environment and Future Outlook - Management noted that despite specific headwinds, the core business remains strong, with good growth in sales and improved expense ratios [13] - The effective tax rate for fiscal year 2023 was 35.4%, with expectations of around 32% for fiscal year 2024 [57] - Management expressed confidence in the company's strong brand reputation and its ability to build additional services for members [94] Other Important Information - The company recorded a net loss of $1.5 million in total other expenses for the fourth quarter, an improvement from a $3.5 million loss in the same period last year [7] - The company opened a new produce distribution center in Guatemala to enhance fresh produce delivery [10] - The company has initiated a share repurchase program, completing the buyback of approximately 1,007,000 shares for about $75 million [9] Q&A Session All Questions and Answers Question: What would it take for the Company to have a significantly more ambitious store opening plan? - Management indicated that entering another country might be necessary for more aggressive growth [40] Question: How much of a risk is the tax impact seen this quarter? - Management acknowledged the risk but noted that they expect to stabilize the effective tax rate around 32% for fiscal year 2024 [70] Question: What is the impact of the $5 membership fee increase? - Management believes the increase is nominal and that the perceived value of membership will outweigh the fee increase [103] Question: Can you provide an update on the situation in Guatemala and Panama? - Management stated that the situation in Guatemala has calmed down and that any impact on revenues in October was not significant [102]
PriceSmart(PSMT) - 2023 Q4 - Annual Report
2023-10-30 20:05
Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to COMMISSION FILE NUMBER 000-22793 PriceSmart, Inc. (Exact name of registrant as specified in its charter) Delaware 33-0628530 (State or other jurisdi ...
PriceSmart(PSMT) - 2023 Q3 - Earnings Call Transcript
2023-07-11 18:30
PriceSmart, Inc. (NASDAQ:PSMT) Q3 2023 Earnings Conference Call July 11, 2023 12:00 PM ET Company Participants Michael McCleary - Executive Vice President and Chief Financial Officer Robert Price - Interim Chief Executive Officer and Chairman Conference Call Participants Jon Braatz - Kansas City Capital Victor Cardenas - Scotiabank Operator Good afternoon, everyone, and welcome to PriceSmart, Inc.'s Earnings Release Conference Call for the Third Quarter of Fiscal Year 2023, which ended on May 31st, 2023. Af ...
PriceSmart(PSMT) - 2023 Q3 - Quarterly Report
2023-07-10 20:02
PART I - FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Presents PriceSmart, Inc.'s unaudited consolidated financial statements for the three and nine months ended May 31, 2023 [Consolidated Balance Sheets](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Consolidated Balance Sheet Highlights (in thousands) | Account | May 31, 2023 (Unaudited) | August 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$1,933,346** | **$1,808,400** | | Total Current Assets | $847,190 | $773,579 | | Merchandise Inventories | $442,580 | $464,411 | | **Total Liabilities** | **$843,653** | **$817,327** | | Total Current Liabilities | $587,265 | $579,456 | | **Total Stockholders' Equity** | **$1,089,693** | **$991,073** | [Consolidated Statements of Income](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Income Statement Summary (in thousands, except per share data) | Metric | Three Months Ended May 31, 2023 | Three Months Ended May 31, 2022 | Nine Months Ended May 31, 2023 | Nine Months Ended May 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Merchandise Sales | $1,070,263 | $999,011 | $3,211,725 | $2,954,950 | | Total Revenues | $1,096,654 | $1,030,810 | $3,293,649 | $3,044,723 | | Operating Income | $43,052 | $33,762 | $152,379 | $128,101 | | Net Income Attributable to PriceSmart, Inc. | $29,572 | $19,258 | $93,824 | $81,230 | | Diluted EPS | $0.94 | $0.62 | $3.01 | $2.63 | [Consolidated Statements of Comprehensive Income](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) - For the nine months ended May 31, 2023, comprehensive income attributable to PriceSmart was **$119.8 million**, a significant increase from **$70.6 million** in the prior-year period. This was driven by higher net income and a positive foreign currency translation adjustment of **$26.6 million**, compared to a negative adjustment of **$15.1 million** in the same period last year[21](index=21&type=chunk) [Consolidated Statements of Equity](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) - Total stockholders' equity increased from **$991.1 million** at August 31, 2022, to **$1.09 billion** at May 31, 2023. The increase was primarily driven by net income of **$93.8 million** and other comprehensive income of **$26.0 million**, partially offset by dividends paid and treasury stock purchases[26](index=26&type=chunk) [Consolidated Statements of Cash Flows](index=13&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Cash Flow Summary for Nine Months Ended May 31 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $184,681 | $64,311 | | Net cash used in investing activities | ($197,814) | ($61,404) | | Net cash provided by (used in) financing activities | ($13,051) | $11,365 | | Effect of exchange rate changes on cash | $11,183 | ($7,034) | | **Net (decrease) increase in cash** | **($15,001)** | **$7,238** | [Notes to Consolidated Financial Statements](index=16&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) - As of May 31, 2023, the Company operated **51 warehouse clubs** and plans to open **three more**: one in Medellín, Colombia (August 2023), one in Escuintla, Guatemala (fall 2023), and one in Santa Ana, El Salvador (early 2024), which will bring the total to **54 clubs**[33](index=33&type=chunk) - The company faces challenges with tax receivables. In one country, a **$2.3 million** VAT receivable was written off in Q3 FY2023 after an unfavorable court ruling. In two other countries, minimum tax rules based on sales have led to significant income tax receivables totaling **$11.3 million** as of May 31, 2023, which management believes are recoverable[50](index=50&type=chunk)[49](index=49&type=chunk) - In connection with the resignation of CEO Sherry Bahrambeygui, the company recognized a one-time separation charge of approximately **$7.7 million** in Q2 FY2023[84](index=84&type=chunk) - The company is involved in a legal dispute with Click USA Inc. regarding the sale of Aeropost. PriceSmart has determined a settlement is probable and has written off a related receivable of approximately **$0.75 million**[126](index=126&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=39&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Q3 and YTD FY2023 financial performance, focusing on revenue growth, margin improvements, and currency impacts [Overview and Business Strategy](index=39&type=section&id=Overview%20and%20Business%20Strategy) - PriceSmart operates **51 warehouse clubs** in **12 countries** and one U.S. territory, with plans to open **three new clubs** in Colombia, Guatemala, and El Salvador by early 2024[171](index=171&type=chunk)[182](index=182&type=chunk) - The company's growth strategy is focused on three main drivers: - Investing in remodeling existing clubs, adding new locations, and opening more distribution centers - Increasing membership value through expanded services (e.g., optical, audiology), and growing the private label 'Member's Selection' brand - Driving incremental sales via PriceSmart.com and enhancing digital and technological capabilities[195](index=195&type=chunk) [Results of Operations](index=48&type=section&id=Results%20of%20Operations) Net Merchandise Sales Growth by Segment (Q3 FY2023 vs Q3 FY2022) | Segment | Q3 2023 Sales (in thousands) | % of Sales | % Change from Prior Year | | :--- | :--- | :--- | :--- | | Central America | $656,719 | 61.4% | +11.8% | | Caribbean | $311,578 | 29.1% | +7.3% | | Colombia | $101,966 | 9.5% | -15.7% | | **Total** | **$1,070,263** | **100.0%** | **+7.1%** | - For Q3 FY2023, currency fluctuations had a net positive impact of **$14.9 million (1.5%)** on consolidated net merchandise sales. This was driven by appreciation in Costa Rica, offset by a significant devaluation of the Colombian peso, which had a **negative 16.3% impact** on that segment's sales[218](index=218&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk) - Comparable net merchandise sales for the 13 weeks ended June 4, 2023, increased by **5.8%**. On a constant currency basis, the increase was **4.3%**[199](index=199&type=chunk)[230](index=230&type=chunk) - Membership income increased **8.4%** in Q3 FY2023 to **$16.7 million**, driven by a **2.2% increase** in total member accounts to nearly **1.8 million**. The trailing twelve-month renewal rate was **87.1%**[235](index=235&type=chunk)[236](index=236&type=chunk)[239](index=239&type=chunk) - Total gross margin as a percent of net merchandise sales was **15.3%** for Q3 FY2023, an increase of **110 basis points** from the prior year, primarily due to significant markdowns taken in Q3 FY2022 on slow-moving inventory[247](index=247&type=chunk) - Selling, general, and administrative (SG&A) expenses increased **10.7%** in Q3 FY2023 compared to the prior year, driven by higher compensation, travel, professional fees, and a **$2.3 million** VAT receivable write-off[199](index=199&type=chunk)[251](index=251&type=chunk)[296](index=296&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) - Net cash provided by operating activities for the nine months ended May 31, 2023, was **$184.7 million**, a significant increase from **$64.3 million** in the prior-year period, mainly due to favorable changes in working capital[277](index=277&type=chunk) - The company faces U.S. dollar illiquidity in certain markets. In Trinidad, the balance of Trinidad dollar-denominated cash and investments was **$13.5 million** as of May 31, 2023. In Honduras, the central bank began limiting U.S. dollar conversions in Q3 FY2023, affecting the company's ability to convert approximately **$15.9 million** in local currency[190](index=190&type=chunk)[191](index=191&type=chunk)[276](index=276&type=chunk) - On February 3, 2023, the company declared a semi-annual dividend of **$0.46 per share**, payable on August 31, 2023, resulting in a total annual dividend of **$0.92 per share** for fiscal 2023[280](index=280&type=chunk) [Critical Accounting Estimates](index=66&type=section&id=Critical%20Accounting%20Estimates) - Management identifies several critical accounting estimates requiring significant judgment, including Income Taxes, Tax Receivables (VAT and income tax), impairment of Long-lived Assets, and Goodwill[289](index=289&type=chunk)[293](index=293&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) - The company wrote off a **$2.3 million** VAT receivable in Q3 FY2023 following unfavorable court rulings in one country. However, it has not placed an allowance on other significant tax receivables, believing it is more likely than not they will be recovered[296](index=296&type=chunk)[297](index=297&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes in market risk factors since FY2022, with ongoing U.S. dollar illiquidity in Trinidad and new limitations in Honduras - There have been no material changes in market risk factors since the fiscal year 2022 Form 10-K[303](index=303&type=chunk) - The company continues to experience U.S. dollar illiquidity in Trinidad and began facing similar issues in Honduras during Q3 FY2023, which impedes the ability to convert local currencies to U.S. dollars[304](index=304&type=chunk) [Controls and Procedures](index=69&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were effective as of May 31, 2023, with no material changes to internal controls over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period[308](index=308&type=chunk) - There has been no change in internal control over financial reporting during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal controls[309](index=309&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=71&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Ongoing legal claims from ordinary business are not expected to materially affect the company's financial condition or operations - The company states that ongoing legal claims from the ordinary course of business are not expected to have a material adverse effect[313](index=313&type=chunk) [Risk Factors](index=71&type=section&id=ITEM%201A.%20RISK%20FACTORS) Supplements 2022 risk factors with a new risk concerning the CEO transition, highlighting potential disruption and adverse financial impact - A new risk factor was added regarding the transition associated with the resignation of the Chief Executive Officer, effective February 3, 2023[315](index=315&type=chunk) - The company warns that an inadequate leadership transition could cause disruption, loss of institutional knowledge, and adversely affect financial performance and strategic plans[317](index=317&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Details Q3 FY2023 share repurchases for tax withholding, noting no activity under the $75 million stock buyback program - In Q3 FY2023, the Company repurchased **2,394 shares** to cover employees' tax withholding obligations related to vesting of restricted stock[320](index=320&type=chunk)[321](index=321&type=chunk) - No repurchases were made under the authorized **$75 million** Stock Buyback Program during the quarter ended May 31, 2023[321](index=321&type=chunk) [Defaults Upon Senior Securities](index=72&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) None - None reported[322](index=322&type=chunk) [Mine Safety Disclosures](index=72&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Not applicable - Not applicable[323](index=323&type=chunk) [Other Information](index=72&type=section&id=ITEM%205.%20OTHER%20INFORMATION) None - None reported[324](index=324&type=chunk) [Exhibits](index=73&type=section&id=ITEM%206.%20EXHIBITS) Lists exhibits filed with the Form 10-Q, including corporate governance documents, a separation agreement, and required certifications - Lists exhibits filed with the report, including CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents[326](index=326&type=chunk)
PriceSmart(PSMT) - 2023 Q2 - Earnings Call Transcript
2023-04-11 18:29
PriceSmart, Inc. (NASDAQ:PSMT) Q2 2023 Earnings Conference Call April 11, 2023 12:00 PM ET Company Participants Michael McCleary - Executive Vice President and Chief Financial Officer Robert Price - Interim Chief Executive Officer and Chairman Conference Call Participants Hector Maya - Scotiabank Jon Braatz - Kansas City Capital Operator Good afternoon, everyone, and welcome to PriceSmart, Inc.'s Earnings Release Conference Call for the Second Quarter of Fiscal Year 2023, which ended on February 28, 2023. A ...
PriceSmart(PSMT) - 2023 Q2 - Quarterly Report
2023-04-10 20:02
Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to COMMISSION FILE NUMBER 000-22793 PriceSmart, Inc. (Exact name of registrant as specified in its charter) Delaware 33-0628530 (State or ot ...
PriceSmart(PSMT) - 2023 Q1 - Earnings Call Transcript
2023-01-10 19:00
PriceSmart, Inc. (NASDAQ:PSMT) Q1 2023 Earnings Conference Call January 10, 2023 12:00 PM ET Company Participants Michael McCleary - CFO Robert Price - Chairman Conference Call Participants Jon Braatz - Kansas City Capital Hector Maya - Scotiabank Operator Good afternoon, everyone, and welcome to PriceSmart, Inc.'s Earnings Release Conference Call for the First Quarter of Fiscal Year 2023, which ended on November 30th, 2022. After remarks from our Company's representatives Robert Price, Chairman, and Michae ...
PriceSmart(PSMT) - 2023 Q1 - Quarterly Report
2023-01-09 21:10
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 2022 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to COMMISSION FILE NUMBER 000-22793 PriceSmart, Inc. (Exact name of registrant as specified in its charter) Delaware 33-0628530 (State or other jurisdiction o ...